<PAGE>
As filed with the Securities and Exchange Commission on October 13, 2000
Registration No. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AT HOME CORPORATION
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 7370 77-0408542
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
---------------
450 Broadway Street
Redwood City, California 94063
(650) 556-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------
Megan W. Pierson, Esq.
General Counsel
At Home Corporation
450 Broadway Street
Redwood City, California 94063
(650) 556-5000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------
Copies to:
<TABLE>
<S> <C>
Stephanie I. Splane, Esq. Dennis R. DeBroeck, Esq.
David J. Johnson, Jr., Esq. Katherine Tallman Schuda, Esq.
O'Melveny & Myers LLP Fenwick & West LLP
275 Battery Street, Suite 2600 Two Palo Alto Square
San Francisco, California 94111 Palo Alto, California 94306
(415) 984-8700 (650) 494-0600
</TABLE>
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after the effective time of the merger described
herein (the "Merger").
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Maximum Proposed Maximum
Title Of Each Class Amount To Be Offering Price Aggregate Amount Of
Of Securities To Be Registered Registered(1) Per Share Offering Price(2) Registration Fee(2)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A Common Stock, par value $0.01 per share.. 12,275,382 $0.001 $7,765.44 $2.05
------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
(1) Represents the estimated maximum number of shares of the Series A common
stock of At Home Corporation that may be issued pursuant to the Merger.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(2) under the Securities Act based on one-third of the par
value of Pogo's common stock and Pogo's preferred stock as of the latest
practicable date.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
[EXCITE@HOME LOGO]
[POGO LOGO TO COME]
Dear Pogo Stockholder:
Pogo.com Inc. has entered into an agreement and plan of merger with At Home
Corporation, also known as Excite@Home, under which Excite@Home will acquire
Pogo and its business. Pogo is requesting your vote, as a stockholder, on a
proposal to approve the merger agreement and transactions associated with the
merger. Upon completion of the merger, each outstanding share of Pogo common
stock and Pogo preferred stock will be converted into shares of Excite@Home
Series A common stock. Each outstanding option and warrant to purchase Pogo
common stock or preferred stock will be assumed by Excite@Home and converted
into an option or warrant to purchase shares of Excite@Home Series A common
stock.
The number of shares of Excite@Home Series A common stock you will receive
will be determined by multiplying the number of shares of Pogo stock you hold
by an exchange ratio. The exchange ratio is based upon an assumed valuation of
Pogo of approximately $125,000,000 and will depend upon the actual number of
shares, options and warrants of Pogo outstanding at the time of the merger,
the average closing price of Excite@Home's Series A common stock, as reported
on Nasdaq for the 10 consecutive trading days before the merger, and other
factors. Excite@Home Series A common stock is listed on the Nasdaq National
Market under the symbol "ATHM." The calculation of the exchange ratio is
discussed in detail in the accompanying information statement/prospectus. The
actual exchange ratio will not be determined until the merger becomes
effective.
Each Pogo stockholder at the time of the merger may also be entitled to
receive additional shares of Excite@Home Series A common stock that may be
issued upon the satisfaction of revenue performance requirements and the
continuation of employment of specified key executives of Pogo. The maximum
value of each of the two contingent payments is $12,500,000. These contingent
payments are more fully described in the accompanying information
statement/prospectus.
Holders of Pogo voting stock as of the record date, , 2000, are
entitled to vote on the proposal. We have enclosed an information
statement/prospectus discussing the proposal for which your approval is
requested. Your board of directors believes that the merger is in your best
interests and recommends that you vote for the proposal. Also enclosed is a
form of action by written consent so you can vote on the proposal. Please
complete, sign and date the enclosed written consent and return it to us as
soon as possible, but no later than , 2000, in the enclosed stamped
envelope that has been provided.
Before making your decision whether to approve the merger, we encourage you
to carefully consider the "Risk Factors" beginning on page 17 of the
information statement/prospectus and to carefully read all of the documents
included or incorporated by reference in the information statement/prospectus.
Thank you for your cooperation.
Very truly yours,
_____________________________________
Erick Hachenburg
President and Chief Executive
Officer
Neither the United States Securities and Exchange Commission nor any state
securities commission has approved or disapproved the Excite@Home common stock
to be issued in the merger or determined if this information
statement/prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
The information statement/prospectus is dated October , 2000 and is
expected to be first mailed to stockholders on , 2000.
<PAGE>
SOURCES OF ADDITIONAL INFORMATION
This information statement/prospectus incorporates important business and
financial information about Excite@Home that is not included or delivered with
this document. Such information is available without charge to Pogo
stockholders upon written or oral request. Contact Excite@Home, 450 Broadway
Street, Redwood City, California 94063, Attn: Investor Relations. Excite@Home's
telephone number is (650) 556-5000.
To obtain timely delivery of requested documents, you must request them no
later than , 2000.
Also see "Where You Can Find More Information" in this information
statement/prospectus.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE EXCITE@HOME/POGO MERGER.................... 1
SUMMARY.................................................................... 5
Selected Historical Financial Information of Excite@Home................. 12
Selected Historical Financial Data of Pogo............................... 13
Market Price and Dividend Information.................................... 14
Cautionary Statement Concerning Forward-Looking Statements............... 16
RISK FACTORS............................................................... 17
Risks Related to the Merger.............................................. 17
Risks Related to Excite@Home's Business.................................. 19
Risks Related to Pogo's Business......................................... 35
THE VOTE OF THE POGO STOCKHOLDERS.......................................... 43
Vote by Written Consent; Pogo Record Date and Outstanding Shares......... 43
Pogo Vote Required....................................................... 43
Share Ownership of Management and Certain Stockholders................... 43
Pogo's Expenses of Solicitation of Consents.............................. 43
Voting on Pogo's Proposal................................................ 43
Appraisal Rights of Dissenting Pogo Stockholders......................... 44
THE MERGER................................................................. 49
Background of the Merger................................................. 49
Excite@Home's Reasons for the Merger..................................... 51
Pogo's Reasons for the Merger............................................ 52
Recommendation of Pogo's Board of Directors.............................. 53
Interests of Executive Officers, Directors and Affiliates................ 53
Completion and Effectiveness of the Merger............................... 54
Treatment of Pogo Common Stock, Preferred Stock, Options and Warrants.... 54
Exchange of Pogo Stock Certificates for Excite@Home Stock Certificates... 55
Escrow Arrangements and Stockholder Agent................................ 56
Accounting Treatment of the Merger....................................... 56
Regulatory Approvals..................................................... 56
Material Federal Income Tax Considerations............................... 56
Appraisal Rights......................................................... 59
Restrictions on Sales of Shares by Affiliates of Excite@Home and Pogo.... 59
Operations Following the Merger.......................................... 59
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
THE MERGER AGREEMENT................................................................ 60
General........................................................................... 60
Exchange of Shares................................................................ 60
Additional Contingent Payments.................................................... 60
Treatment of Pogo Options and Warrants............................................ 60
Appraisal Rights.................................................................. 61
Representations and Warranties.................................................... 61
Conduct of Business Before Completion of the Merger............................... 62
Director and Officer Indemnification.............................................. 63
No Solicitation................................................................... 63
Convertible Bridge Note........................................................... 64
Nasdaq Listing.................................................................... 64
Charter Documents of the Surviving Corporation.................................... 64
Fees and Expenses of the Merger................................................... 64
Conditions to Completion of the Merger............................................ 64
Termination....................................................................... 65
Payment of Termination Fee........................................................ 66
Extension, Waiver and Amendment of the Merger Agreement........................... 67
OTHER AGREEMENTS.................................................................... 68
Voting Agreements................................................................. 68
Escrow Agreement.................................................................. 68
Employment Agreements............................................................. 68
DESCRIPTION OF EXCITE@HOME.......................................................... 70
DESCRIPTION OF POGO................................................................. 72
EXISTING RELATIONSHIP OF EXCITE@HOME AND POGO....................................... 74
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF POGO............ 75
COMPARISON OF STOCKHOLDER RIGHTS.................................................... 77
Classes of Stock.................................................................. 77
Voting............................................................................ 78
Special Meeting of Stockholders................................................... 78
Record Date for Determining Stockholders.......................................... 78
Number of Directors............................................................... 79
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Election of Directors.................................................. 79
Removal of Directors................................................... 80
Board of Directors Vacancies........................................... 80
Special Meetings of the Board of Directors............................. 81
Conversion Rights...................................................... 81
Share Dividends........................................................ 82
Indemnification........................................................ 82
Limitation on Liability................................................ 83
Dividends/Distributions................................................ 83
Liquidation............................................................ 84
Amendment of Certificate of Incorporation.............................. 84
Amendment of Bylaws.................................................... 85
Stockholder Voting With Respect to Mergers............................. 85
Appraisal and Dissenters' Rights....................................... 86
Stockholder Approval of Certain Business Combinations.................. 87
Inspection of Stockholders' List....................................... 88
LEGAL MATTERS............................................................ 89
EXPERTS.................................................................. 89
DOCUMENTS INCORPORATED BY REFERENCE IN THIS INFORMATION
STATEMENT/PROSPECTUS.................................................... 89
WHERE YOU CAN FIND MORE INFORMATION...................................... 90
ANNEX A AGREEMENT AND PLAN OF MERGER..................................... A-1
ANNEX B ESCROW AGREEMENT................................................. B-1
ANNEX C IRREVOCABLE PROXY AND VOTING AGREEMENT........................... C-1
ANNEX D SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW.............. D-1
ANNEX E CHAPTER 13 OF THE CALIFORNIA CORPORATIONS CODE................... E-1
</TABLE>
iii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE EXCITE@HOME/POGO MERGER
Q: What is the merger?
A: In the merger, a wholly owned subsidiary of At Home Corporation, or
Excite@Home, named Pogo Acquisition Corp., or Merger Sub, will be merged
with Pogo. Merger Sub will survive the merger as a wholly owned subsidiary
of Excite@Home and will change its name to "Pogo.com Inc."
For a more complete description of the merger, see the section entitled
"The Merger" on page 49.
Q: What will Pogo stockholders receive in the merger?
A: Upon completion of the merger, each share of Pogo common stock and Pogo
preferred stock then outstanding will be converted into shares of
Excite@Home Series A common stock. The number of shares of Excite@Home
Series A common stock Pogo stockholders will receive will be determined by
multiplying the number of shares of Pogo capital stock that are issued and
outstanding by an exchange ratio. The exchange ratio will equal:
. the quotient obtained by dividing (a) $125,000,000 minus (1) the amount
by which Pogo's trade accounts payable and accrued expenses, excluding
some specific items, exceed $5,000,000 and (2) all amounts paid by Pogo
to redeem its Series A-2 preferred stock by (b) the sum of the number of
shares of Pogo common stock and Pogo preferred stock (excluding its
Series A-2 preferred stock) outstanding immediately before the merger
plus the number of shares of Pogo stock that are issuable upon exercise
of all Pogo options and warrants outstanding immediately before the
merger, excluding new options for up to 5,000,000 shares of Pogo common
stock that may be issued by Pogo before the merger and excluding any
shares of Series D preferred stock of Pogo issued upon the conversion of
a convertible bridge note issued by Pogo to Excite@Home; divided by
. the average of the closing prices of Excite@Home Series A common stock as
reported by Nasdaq for the 10 consecutive trading days ending on the last
full trading day immediately before the merger becomes effective.
In addition to the shares of Excite@Home Series A common stock to be issued
to each Pogo stockholder of record at the effective time of the merger as
outlined above, each Pogo stockholder may be entitled to receive
additional, pro rata payments, in the form of additional shares of
Excite@Home Series A common stock, that are contingent upon: (i) the
satisfaction of revenue performance requirements for the six months
following the closing and (ii) the continuation of the employment of
specified key executives of Pogo until October 15, 2001. The maximum value
of each of the two contingent payments is $12,500,000. Each contingent
payment is more fully described in the merger agreement that is attached as
Annex A to this information statement/prospectus.
Upon the completion of the merger, each option to purchase Pogo common
stock and each warrant to purchase Pogo common stock or preferred stock
that is outstanding immediately prior to the merger will be assumed by
Excite@Home and converted into an option or a warrant to purchase a number
of shares of Excite@Home Series A common stock equal to the number of
shares of Pogo stock subject to the option or warrant multiplied by the
exchange ratio. The post-merger exercise price of each converted Pogo
option or warrant will be its pre-merger exercise price divided by the
exchange ratio.
1
<PAGE>
Excite@Home's stock price is volatile. As an example, the following table
sets forth, as of the end of each of the last 12 months, the closing sale
price per share of Excite@Home Series A common stock on Nasdaq.
<TABLE>
<CAPTION>
Closing Sale Price Per Share of
Date Excite@Home Series A Common Stock
---- ---------------------------------
<S> <C>
September 29, 2000...................... $14.13
August 31, 2000......................... 14.56
July 31, 2000........................... 14.00
June 30, 2000........................... 20.75
May 31, 2000............................ 18.50
April 28, 2000.......................... 18.63
March 31, 2000.......................... 32.94
February 29, 2000....................... 34.31
January 31, 2000........................ 36.05
December 31, 1999....................... 42.88
November 30, 1999....................... 48.50
October 29, 1999........................ 37.38
</TABLE>
The following table provides hypothetical calculations of the exchange ratio
as if the merger had become effective on June 30, 2000, on August 30, 2000,
the date on which the merger agreement was signed, and on October , 2000,
the most recent date before the mailing of this information
statement/prospectus for which the closing price was available. These
calculations are provided as examples only, and the actual exchange ratio
cannot be determined until the completion of the merger. For purposes of
calculating these hypothetical exchange ratios, we have made the following
assumptions:
. Pogo's trade accounts payable and accrued expenses do not exceed $5
million.
. Pogo pays approximately $1.3 million to redeem the Series A-2
preferred stock.
. The number of shares of Pogo common stock and Pogo preferred stock
outstanding, plus shares of Pogo voting stock issuable under
outstanding options and warrants is approximately 24 million.
Based on these assumptions, the following table shows the hypothetical
exchange ratios and equivalent price per share of Pogo common stock and Pogo
preferred stock.
<TABLE>
<CAPTION>
10-day average
closing price Equivalent price per share
of Excite@Home Hypothetical of Pogo common stock and
Date Series A common stock exchange ratio Pogo preferred stock
---- --------------------- -------------- --------------------------
<S> <C> <C> <C>
June 30, 2000........... $19.19 0.2686 $5.15
August 30, 2000......... $14.14 0.3644 $5.15
October , 2000......... $ $
</TABLE>
The actual exchange ratio and the number of shares of Excite@Home's Series A
common stock to be issued to Pogo's stockholders cannot be established at
this time. The assumptions are hypothetical and the variables affecting the
actual exchange ratio are likely to change before the merger becomes
effective.
Q: Will a portion of the shares issued in the merger be placed in escrow?
A: Yes. At the closing of the merger, Excite@Home and Pogo will enter into an
escrow agreement. At that time, 10% of the shares of the Excite@Home Series
A common stock otherwise deliverable upon the merger to each holder of Pogo
stock will be deposited in escrow. The escrow shares will be available to
provide a fund against which Excite@Home may assert indemnification claims
for losses resulting from breaches or inaccuracies of Pogo's
representations, warranties, agreements or covenants in the merger agreement
and against specific copyright infringement claims.
2
<PAGE>
Escrowed shares that are not needed to satisfy indemnification claims made
within one year after the effective time of the merger will be distributed
to the former Pogo stockholders. For a more complete description of the
escrow arrangements, see the section entitled "Other Agreements--Escrow
Agreement" on page 68.
Q: What are the Pogo stockholders being asked to approve?
A: The Pogo stockholders are being asked to approve the merger agreement, the
escrow agreement, the merger and the related transactions, which are
collectively sometimes referred to in this information statement/prospectus
as the proposal. By approving this proposal, you will also be approving the
appointment of Erick Hachenburg as your agent with respect to
indemnification matters and with respect to any issues relating to
additional contingent payments that may be made by Excite@Home.
Q: Does the board of directors of Pogo recommend voting in favor of the
proposal?
A: Yes. After careful consideration, Pogo's board of directors recommends that
its stockholders vote for the proposal.
For a more complete description of the recommendation of Pogo's board of
directors, see the section entitled "The Merger--Recommendation of Pogo's
Board of Directors" on page 53.
Q: Are there risks I should consider in deciding whether to vote for the
merger?
A: Yes. We have set out under the heading "Risk Factors" beginning on page 17
of this information statement/prospectus a number of risk factors that you
should carefully consider before voting.
Q: What do I need to do now?
A: You are urged to read this information statement/prospectus carefully,
including all of the annexes, and to consider how the merger will affect you
as a stockholder. You may also want to review the documents referenced under
"Where You Can Find More Information" on page 90.
Q: Who is entitled to vote and what percentage of the Pogo stockholder vote is
required to approve the proposal?
A: Holders of Pogo common stock and Pogo preferred stock, other than Series A-2
preferred stock, as of the close of business on the record date, ,
2000, will be entitled to vote on the merger. The Pogo common stock and the
Pogo preferred stock, other than the Series A-2 preferred stock, are
sometimes referred to in this information statement/prospectus as the Pogo
voting stock.
Under applicable law and under Pogo's charter documents, the affirmative
vote of holders of at least a majority of the shares of Pogo common stock,
voting separately as a class, and the holders of at least a majority of the
Pogo preferred stock, other than the Series A-2 preferred stock, voting
separately as a class, is required to approve the merger. In addition, it is
a condition to the completion of the merger that the holders of at least 86%
of the outstanding shares of Pogo voting stock will have approved the merger
agreement, the escrow agreement, the merger and the related transactions.
The parties to the merger agreement could waive this condition.
Q: How do I vote?
A: Complete and mail your signed written consent in the enclosed return
envelope as soon as possible, but not later than , 2000. If you
return your signed written consent but fail to mark whether you are voting
for or against the proposal, your shares will be voted for approval of the
proposal.
3
<PAGE>
Q: Should I send in my Pogo stock certificates now?
A: No. When the merger is completed, Excite@Home's exchange agent will mail to
Pogo stockholders a letter of transmittal and instructions for use in
surrendering Pogo stock certificates in exchange for Excite@Home stock
certificates. When you deliver your Pogo stock certificates to the exchange
agent along with an executed letter of transmittal and any other required
documents, your Pogo stock certificates will be canceled and you will
receive Excite@Home stock certificates representing the number of whole
shares of Excite@Home Series A common stock to which you are entitled under
the merger agreement, plus cash for any fractional shares.
Q: When will I be able to sell my shares?
A: Upon completion of the merger, all shares of Excite@Home common stock
received by Pogo stockholders in connection with the merger will be
tradeable on Nasdaq, except for the 10% that will be deposited in escrow. If
a stockholder is considered an affiliate of Pogo or Excite@Home under the
Securities Act, in order to sell shares, that stockholder must comply with
the resale provisions of Rule 145(d) under the Securities Act or as
otherwise permitted under the Securities Act.
Q: When do you expect the merger to be completed?
A: Excite@Home and Pogo are working toward completing the merger as soon as
practicable after the Pogo stockholders approve the proposal. We hope to
complete the merger by the end of 2000.
Q: Will I recognize a gain or loss on the transaction?
A: Excite@Home and Pogo expect that if the merger is completed, you will not
recognize gain or loss for federal income tax purposes, except that you will
recognize gain or loss with respect to any cash received for any fractional
shares. You are urged to consult your own tax advisor to determine your
particular tax consequences.
For a more complete description of the tax consequences of the merger, see
the section entitled "The Merger--Material Federal Income Tax
Considerations" on page 56.
Q: Am I entitled to dissenters' or appraisal rights?
A: If the merger occurs, Pogo stockholders who do not vote their Pogo shares in
favor of the merger may be entitled to dissenters' and appraisal rights
under Delaware and California law. Holders of options or warrants to
purchase Pogo stock will not be entitled to appraisal rights.
For a more complete description of dissenters' or appraisal rights, see the
section entitled "The Vote of Pogo Stockholders--Appraisal Rights of
Dissenting Pogo Stockholders" on pages 44 to 48.
Q: Whom should I contact with questions?
A: If you have more questions about the merger, Pogo stockholders should
contact:
Pogo.com Inc
300 California Street, Suite 800
San Francisco, CA 94104
Attn: Investor Relations
Phone: (415) 778-3581
You may also obtain additional information about Excite@Home from documents
filed with the Securities and Exchange Commission by following the
instructions in the section entitled "Where You Can Find More Information"
on page 90.
4
<PAGE>
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the terms of the merger,
you should read carefully this entire document and the documents to which we
have referred you. See "Where You Can Find More Information" on page 90. We
have included page references parenthetically to direct you to a more complete
description of the topics in this summary.
Unless the context otherwise requires, the terms "we," "us," "our" and
"Excite@Home" refer to At Home Corporation, a Delaware corporation. @Home,
Excite, Excite@Home, Excite Network, MatchLogic and the @ball logo are our
trademarks and are registered in certain jurisdictions. Other trademarks and
tradenames appearing in this information statement/prospectus are the property
of their respective holders. Information contained in the web sites of
Excite@Home and Pogo does not constitute part of this information
statement/prospectus.
The Companies (pages 70 and 72)
AT HOME CORPORATION
450 Broadway Street
Redwood City, California 94063
(650) 556-5000
www.excitehome.net
Excite@Home is the leading provider of broadband online services. As of June
30, 2000, we had approximately 1.8 million worldwide subscribers to our @Home
service, which provides high-speed Internet access to consumers utilizing the
cable television infrastructure. We have long-term agreements with many of the
largest cable companies in North America to carry the @Home service.
Approximately 28 million of the 59 million homes in our North American cable
footprint were served by upgraded two-way cable capable of carrying our @Home
service as of June 30, 2000. We also have agreements with cable partners in
Australia, Belgium, Germany, Japan and the Netherlands to provide the @Home
service in those countries under exclusive, seven-year arrangements. We
recently announced an agreement with UPC and its parent company,
UnitedGlobalCom, to form a joint venture to be named Excite Chello, which would
combine UPC's chello broadband subsidiary with our assets and operations
outside North America, including our international joint ventures and wholly
owned subsidiaries.
We expanded our media and advertising services in 1999 by acquiring Excite,
a leading consumer Internet destination, MatchLogic, a subsidiary of Excite
specializing in targeted advertising services, Bluemountain.com, an online
greeting card service, and other media properties that deliver entertainment,
shopping and information services to our users. The Excite Network encompasses
all of our web properties and offers comprehensive search, news and
information, shopping, community and communications services that can be
customized and personalized to users' preferences. @Home 2000, a broadband
version of our Excite Internet service available to @Home subscribers in North
America, features a custom browser utilizing the latest multimedia and security
features incorporating the personalization capabilities of Excite with
multimedia content made possible by a high-speed connection.
MatchLogic's services complement the Excite Network by providing targeted
advertising services including online campaign management and marketing of
online data. Our recent acquisition of DataInsight will enhance our ability to
provide e-commerce and online marketing relationship management services. Our
@Work service provides end-to-end managed connectivity for businesses over
cable, DSL and other digital communications lines connected to our private
network and also provides web hosting and development of e-commerce solutions.
@Work also offers Internet content providers and delivery networks, such as
iBEAM,
5
<PAGE>
Akamai and Microcast, direct access to our broadband subscribers by connecting
their data centers into our network, putting data closer to our broadband users
and bypassing the public Internet.
POGO.COM INC.
300 California Street, Suite 800
San Francisco, California 94104
(415) 778-3500
www.pogo.com
Pogo is a leading provider of family games and interactive leisure time
activities on the Internet. Pogo provides its games through its own site at
pogo.com and through a network of distribution partner sites. Pogo currently
features over 30 games, including card games, board games, free casino games,
puzzle games, trivia games and arcade games and is developing additional
popular and easy-to-play games for its service.
The Merger (page 49)
In the merger, a wholly owned subsidiary of Excite@Home, or Merger Sub, will
merge with Pogo, and as a result, Merger Sub will be the surviving corporation
of the merger. The separate existence of Pogo will terminate when the merger
becomes effective. If the merger becomes effective, each share of Pogo common
stock and Pogo preferred stock then outstanding will be converted into shares
of Excite@Home Series A common stock.
The number of shares of Excite@Home Series A common stock you will receive
will be determined by multiplying the number of shares of Pogo capital stock
you hold by an exchange ratio. The exchange ratio will equal:
. the quotient obtained by dividing (a) $125,000,000 minus (1) the amount
by which Pogo's trade accounts payable and accrued expenses, excluding
some specific items, exceed $5,000,000 and (2) all amounts paid by Pogo
to redeem its Series A-2 preferred stock by (b) the sum of the number of
shares of Pogo common stock and Pogo preferred stock (excluding its
Series A-2 preferred stock) outstanding immediately before the merger
plus the number of shares of Pogo stock that are issuable upon exercise
of all Pogo options and warrants outstanding immediately before the
merger, excluding new options for up to 5,000,000 shares of Pogo common
stock that may be issued by Pogo before the merger and excluding any
shares of Series D preferred stock of Pogo issued upon the conversion of
a convertible bridge note issued by Pogo to Excite@Home; divided by
. the average of the closing prices of Excite@Home Series A common stock as
reported by Nasdaq for the 10 consecutive trading days ending on the last
full trading day immediately before the merger becomes effective.
In addition to the shares of Excite@Home Series A common stock to be issued
to each Pogo stockholder of record at the effective time of the merger as
outlined above, each Pogo stockholder may be entitled to receive additional,
pro rata payments, in the form of additional shares of Excite@Home Series A
common stock, that are contingent upon: (i) the satisfaction of revenue
performance requirements for the six months following the closing and (ii) the
continuation of the employment of specified key executives of Pogo until
October 15, 2001. The maximum value of each of the two contingent payments is
$12,500,000. Each contingent payment is more fully described in the merger
agreement that is attached as Annex A to this information statement/prospectus.
Upon the completion of the merger, each option to purchase Pogo common stock
and each warrant to purchase Pogo common stock or preferred stock that is
outstanding immediately prior to the merger will be assumed by Excite@Home and
converted into an option or a warrant to purchase a number of shares of
Excite@Home Series A common stock equal to the number of shares of Pogo stock
subject to the option or
6
<PAGE>
warrant multiplied by the exchange ratio. The post-merger exercise price of
each converted Pogo option or warrant will be its pre-merger exercise price
divided by the exchange ratio.
The agreement and plan of merger, or merger agreement, is attached to this
information statement/ prospectus as Annex A. Excite@Home and Pogo encourage
you to read the merger agreement carefully.
Reasons for the Merger (pages 51 and 53)
The merger will provide both Excite@Home and Pogo with a number of potential
benefits, including:
. opportunities to strengthen Excite@Home's ability to offer and develop
key broadband consumer interactive games and related entertainment
applications;
. development of new broadband advertising products that may appeal to
advertisers and may result in greater revenue opportunities for
Excite@Home;
. opportunities to cross-sell the @Home service to Pogo users and to
provide Pogo greater access to the customer base of Excite@Home which may
lead to increased distribution of both companies' services both in the
United States and internationally; and
. potential synergies from the combination of the financial, technological,
sales and marketing and human resources of Excite@Home and Pogo, which
will allow for the continued development and expansion of Pogo's game
services.
The merger will also provide Pogo's stockholders publicly tradeable
securities having a value that represents a premium over the last price paid by
independent investors for shares of Pogo's stock.
The potential benefits of the merger may not be achieved. See the sections
entitled "Risk Factors--Risks Related to the Merger" on page 17, "The Merger--
Excite@Home's Reasons for the Merger" on page 51 and "The Merger--Pogo's
Reasons for the Merger" on page 52.
Conditions to the Completion of the Merger (page 64)
The completion of the merger is subject to the prior satisfaction of a
number of conditions including the following:
. the merger agreement, the escrow agreement, the merger and the related
transactions will have been approved by holders of at least 86% of the
outstanding shares of Pogo voting stock;
. all government approvals will have been obtained, including the
expiration of the applicable waiting periods under the antitrust laws,
and no law or order preventing the completion of the merger may have been
enacted or may be pending;
. the executives of Pogo specified in the merger agreement will have
entered into employment agreements with Pogo;
. all outstanding indebtedness under the convertible bridge note executed
by Pogo in favor of Excite@Home will have been converted into Series D
preferred stock of Pogo;
. Pogo will have delivered a notice of redemption to the holders of the
Series A-2 preferred stock of Pogo and deposited an amount of funds
sufficient for the redemption with a bank or trust company;
. the representations and warranties of Pogo and Excite@Home in the merger
agreement will be true and correct, except to the extent that any failure
of the representations and warranties of a party to be true and correct
will not have a material adverse effect on that party;
7
<PAGE>
. each of Pogo and Excite@Home will have complied in all material respects
with its agreements in the merger agreement;
. each of Pogo and Excite@Home will have received written opinions from its
legal counsel to the effect that the merger will qualify as a tax-free
reorganization for federal income tax purposes; and
. each of Pogo and Excite@Home will have executed an escrow agreement with
an agreed upon escrow agent.
Vote Required for Approval (page 43)
Under applicable law and under Pogo's charter documents, the affirmative
vote of holders of at least a majority of the shares of Pogo common stock,
voting separately as a class, and the holders of at least a majority of the
Pogo preferred stock other than the Series A-2 preferred stock, voting
separately as a class, is required to approve the merger. It is a condition to
the completion of the merger that the holders of 86% of the outstanding shares
of Pogo voting stock will have approved the merger agreement, the escrow
agreement, the merger and the related transactions.
In connection with the execution of the merger agreement, a group of Pogo
stockholders collectively holding % of the outstanding shares of Pogo
common stock and % of the outstanding shares of Pogo preferred stock and
% of Pogo's outstanding common stock and outstanding preferred stock on a
combined basis, as of the record date, have entered into voting agreements with
Excite@Home, pursuant to which these stockholders have agreed to vote their
shares to approve the merger agreement, the escrow agreement, the merger and
the related transactions. In addition, Excite@Home owns shares of Pogo
preferred stock that represent approximately 10% of the outstanding shares of
Pogo voting stock.
Escrow and Indemnification (page 68)
Ten percent of the total number of shares of Excite@Home Series A common
stock otherwise deliverable upon the effective time of the merger to each
holder of Pogo voting stock will be placed in escrow to secure the
indemnification obligations of the stockholders of Pogo. Accordingly, Pogo
stockholders might not receive up to 10% of the initial merger consideration to
which they would otherwise be entitled.
The escrow agreement provides that the Pogo stockholders will indemnify
Excite@Home for damages Excite@Home suffers as a result of any inaccuracy or
breach by Pogo of any representation or warranty, any material breach by Pogo
of any covenant contained in the merger agreement, and specific copyright
infringement claims. Pogo stockholders will not be required to indemnify
Excite@Home unless the aggregate claim for damages exceeds $500,000, but if
this threshold is met, Pogo stockholders will be liable for all damages
incurred up to the value of the shares placed in escrow, in accordance with the
escrow agreement.
The shares deposited in the escrow fund will remain available to compensate
Excite@Home for one year from the date of the closing of the merger. If a claim
is asserted prior to the one-year anniversary of the closing and the claim has
not been resolved by the one-year anniversary, shares will remain in the escrow
fund in an amount sufficient to satisfy the claim until the claim has been
resolved, even if the one-year period has elapsed. The escrow fund will serve
as Excite@Home's exclusive remedy for damages for which Excite@Home is entitled
to indemnification under the escrow agreement, other than damages arising from
fraudulent or intentional acts. The form of escrow agreement is attached as an
exhibit to the merger agreement and is attached as Annex B to this information
statement/prospectus.
8
<PAGE>
Termination of the Merger Agreement (page 65)
The merger agreement may be terminated by the parties' mutual consent. In
addition, subject to qualifications, the merger agreement may be terminated by
either of the parties under any of the following circumstances:
. if the conditions to completion of the merger become incapable of being
satisfied, so long as the terminating party did not prevent the
satisfaction by breaching specified provisions of the merger agreement;
. if the merger is not completed by December 31, 2000, so long as the
terminating party did not prevent completion of the merger by breaching
specified provisions of the merger agreement;
. if a final governmental injunction or order prohibiting the merger is
issued and is not appealable; or
. if a statute, rule, regulation or order is enacted or issued by a
governmental entity that makes the merger illegal.
Excite@Home may also terminate the merger agreement if the board of directors
of Pogo withdraws its approval or recommendation of the merger.
Termination Fee (page 66)
Pogo will be obligated to pay Excite@Home a termination fee of $4.5 million
if Excite@Home terminates the merger agreement for any of the following
reasons:
. the board of directors of Pogo withdraws its approval or recommendation
of the merger;
. Pogo stockholders do not approve the merger; or
. Pogo materially breaches the no solicitation provision of the merger
agreement.
In these circumstances, Pogo will also be obligated to reimburse Excite@Home
for actual out-of-pocket fees and expenses incurred by Excite@Home in
connection with the merger or enforcement of rights under the merger agreement.
No Solicitation (page 63)
Until the merger is completed or the merger agreement is terminated, Pogo
has agreed, with limited exceptions, not to solicit, initiate or encourage an
alternative acquisition proposal. Pogo's board of directors may decide not to
recommend the merger to Pogo's stockholders if Pogo's board of directors
determines in good faith that it cannot, consistent with its fiduciary duties,
recommend the merger because Pogo has received an alternative unsolicited
acquisition proposal that, if completed, would provide greater value to Pogo
stockholders than the merger. Pogo has agreed to promptly inform Excite@Home of
any alternative acquisition proposal and to inform Excite@Home of the status
and details of any alternative acquisition proposal.
Accounting Treatment of the Merger (page 56)
Excite@Home intends to account for the merger as a purchase for financial
accounting purposes, under generally accepted accounting principles.
9
<PAGE>
Interests of Executive Officers, Directors and Affiliates (page 53)
In considering the recommendation of Pogo's board of directors, you should
be aware that officers, directors and affiliates of Pogo have interests in the
merger that are different from, or in addition to, those of stockholders
generally. For example:
. upon the closing of the merger, the vesting of options to purchase an
aggregate of approximately 1 million shares of Pogo voting stock held by
directors and officers of Pogo will accelerate;
. some officers of Pogo will enter into employment agreements with the
surviving corporation, which will provide employment benefits not
available to other stockholders;
. the largest stockholder of Pogo, Liberty Digital, Inc., is controlled by
AT&T, which also owns a controlling interest in Excite@Home;
. the second largest stockholder of Pogo, Kleiner Perkins Caufield & Byers,
is also a minority stockholder of Excite@Home and has representatives on
the boards of directors of both Pogo and Excite@Home; and
. Excite@Home is the third largest stockholder of Pogo.
As a result of the interests above, Pogo's officers, directors and
affiliates could be more likely to vote in favor of the proposal than
stockholders without these interests.
Convertible Bridge Note (page 64)
Pogo has entered into a convertible bridge note, dated August 4, 2000, with
Excite@Home, pursuant to which Pogo has borrowed $5 million. Excite@Home has
agreed that, at the request of Pogo, Excite@Home will loan Pogo up to an
additional $1.3 million to fund the redemption of Pogo's Series A-2 preferred
stock. In addition, from November 1, 2000 until the effective time of the
merger, Excite@Home has agreed to loan to Pogo, if requested by Pogo, up to
$1.8 million per month, as long as Pogo is meeting its operating budget. The
loans will have the same terms as the convertible bridge note and will be
evidenced by amending the convertible bridge note to reflect the additional
loans. All amounts outstanding under the convertible bridge note, as amended,
will be converted into shares of Series D preferred stock of Pogo that will be
canceled immediately before the effective time of the merger.
Appraisal Rights (page 44)
Although Pogo is a Delaware corporation, Pogo may be subject to appraisal
rights under both Delaware and California law, which differ in some respects.
Pogo stockholders who do not vote in favor of the merger may be entitled to
exercise appraisal or dissenters' rights in the merger. The surviving
corporation will honor the rights of any Pogo stockholder who properly
exercises and perfects these rights under either state's applicable law.
Regulatory Approvals (page 56)
The merger is subject to antitrust laws. Excite@Home and Pogo have made the
required filings with the Department of Justice and the Federal Trade
Commission. The Department of Justice, the Federal Trade Commission, another
branch of federal or state government, or a private person, may challenge the
merger at any time before or after its completion.
Material Federal Income Tax Considerations (page 56)
We have attempted to structure the merger so that, in general, Excite@Home,
Excite@Home's stockholders, Pogo and Pogo's stockholders will not recognize
gain or loss for federal income tax purposes in
10
<PAGE>
connection with the merger, except for cash payments received by Pogo
stockholders instead of fractional shares. It is a condition to the merger that
both Excite@Home and Pogo receive written opinions from their respective legal
counsel to the effect that the merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code. However, tax
opinions are not binding on the IRS and there can be no assurance that the IRS
will not successfully assert a contrary opinion.
Tax matters are very complicated, and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your tax
advisor for a full understanding of the tax consequences of the merger to you.
Comparison of Stockholder Rights (page 77)
The rights of investors of Pogo as stockholders of Excite@Home after the
merger will be governed by Excite@Home's certificate of incorporation and
bylaws. Those rights significantly differ from the current rights of Pogo
stockholders under Pogo's certificate of incorporation and bylaws.
Market Price Information (page 14)
Shares of Excite@Home Series A common stock are listed on the Nasdaq
National Market. On August 30, 2000, the last full trading day prior to the
public announcement of the proposed merger, Excite@Home's Series A common stock
closed at $14.63 per share. On October , 2000, Excite@Home's Series A common
stock closed at $ per share. The common stock of Pogo is not traded on an
established public trading market. The companies urge you to obtain current
market quotations for the Excite@Home Series A common stock.
This summary may not contain all of the information that is important to
you. You should carefully read this entire document and the other documents
included or incorporated by reference in this information statement/prospectus
for a more complete understanding of the merger. In particular, you should read
the documents attached to this information statement/prospectus, including the
merger agreement, which is attached as Annex A, and the form of escrow
agreement, which is attached as Annex B.
11
<PAGE>
Selected Historical Financial Information of Excite@Home
You should also read "Excite@Home's Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Excite@Home's consolidated
financial statements and the notes to those statements, included in
Excite@Home's most recent 10-K, as amended, audited by Ernst & Young LLP, which
is incorporated by reference in this information statement/prospectus.
Consolidated statement of operations and balance sheet data as of and for the
year ended December 31, 1999 includes the results of operations and financial
condition of Excite, Inc., which was acquired on May 28, 1999. Therefore,
comparisons of results of operations and financial condition for periods prior
to and subsequent to the acquisition of Excite, Inc. are not indicative of
future results. In addition, historical results are not necessarily indicative
of future results. Selected financial data as of and for the period from
inception on March 28, 1995 to December 31, 1995 are not presented because
financial condition and results of operations as of and for that period were
insignificant. Share and per share data have been adjusted to reflect a two-
for-one stock split effective June 1999.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1999 1998 1997 1996
----------- --------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Historical Consolidated Statement of Operations
Data:
Revenues(1)..................................... $ 336,955 $ 48,045 $ 7,437 $ 676
Costs and expenses(2):
Operating costs............................... 143,056 46,965 22,459 6,969
Product development and engineering........... 54,805 17,009 11,984 6,312
Sales and marketing........................... 130,725 18,091 11,863 6,368
General and administrative.................... 30,276 12,429 10,365 6,054
Cost and amortization of distribution
agreements................................... 291,967 101,385 9,264 --
Amortization of goodwill, intangible assets
and deferred compensation and other
acquisition-related costs.................... 1,157,009 2,578 -- --
----------- --------- -------- --------
Loss from operations............................ (1,470,883) (150,592) (58,750) (25,027)
Interest and other income, net.................. 10,253 6,413 3,033 514
Realized gain on investment..................... 12,566 -- -- --
Equity share of losses of affiliates............ (9,574) -- -- --
----------- --------- -------- --------
Net loss........................................ $(1,457,638) $(144,179) $(55,717) $(24,513)
=========== ========= ======== ========
Net loss per share--basic and diluted........... $ (4.61) $ (0.63) $ (0.27) $ (0.13)
=========== ========= ======== ========
Shares used in per share calculation............ 316,441 228,479 207,086 192,240
=========== ========= ======== ========
</TABLE>
--------
<TABLE>
<S> <C> <C> <C> <C>
Supplemental Consolidated Statement of
Operations Data:
(1) Revenues from related parties.............. $ 28,821 $ 10,458 $ 2,948 $ 634
========== ========= ========= =========
(2) Depreciation and amortization included in
costs and expenses, excluding amortization
of distribution agreements and acquisition-
related amounts............................ $ 49,467 $ 15,029 $ 8,913 $ 1,903
========== ========= ========= =========
Loss from operations before cost and
amortization of distribution agreements and
costs and amortization related to
acquisitions................................... $ (21,097) $(46,449) $(49,504) $(25,027)
========== ========= ========= =========
<CAPTION>
December 31,
----------------------------------------
1999 1998 1997 1996
---------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Historical Consolidated Balance Sheet Data:
Cash and cash equivalents and short-term
investments.................................... $ 525,223 $ 419,289 $ 120,379 $ 16,770
Working capital................................. 389,023 390,324 101,390 10,573
Distribution agreements, net of accumulated
amortization................................... 313,772 186,247 163,345 --
Total assets.................................... 9,104,279 780,631 323,928 33,388
Convertible debentures.......................... 736,294 229,344 -- --
Capital lease obligations, less current portion
and other long-term liabilities................ 57,552 14,356 15,735 5,654
Stockholders' equity............................ 8,067,017 493,866 282,407 18,317
</TABLE>
12
<PAGE>
Selected Historical Financial Data of Pogo
The following selected historical financial data of Pogo is being provided
to assist in analyzing the financial aspects of the merger. The selected
statement of operations data set forth below for the period from June 9, 1995
(inception) to March 31, 1996 and for the fiscal years ended March 31, 1997,
1998 and 1999 and the nine months ended December 31, 1999 and the selected
balance sheet data as of March 31, 1996, 1997, 1998 and 1999 and December 31,
1999 have been derived from the financial statements of Pogo not included in
this information statement/prospectus. The historical results are not
necessarily indicative of results to be expected for any future period. In
December 1999, Pogo changed its fiscal year end from March 31 to December 31.
<TABLE>
<CAPTION>
Period from
Nine Months Fiscal Year Ended March Inception
Ended 31, (June 9, 1995)
December 31, ---------------------------- through
1999 1999 1998 1997 March 31, 1996
------------ -------- -------- -------- ---------------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Historical Statement of Operations
Data:
Net revenues.......................... $ 3,005 $ 3,168 $ 3,663 $ 1,072 $ --
Cost of revenues...................... 1,789 2,437 4,177 3,252 --
Gross profit.......................... 1,216 731 (514) (2,180) --
Operating expenses:
Sales and marketing................. 5,860 3,136 2,090 3,140 378
Engineering and product
development........................ 3,605 4,776 5,738 12,787 5,913
General and administrative.......... 757 349 623 1,441 740
Acquired in-process technology...... -- -- -- -- 441
---------- -------- -------- -------- --------
Total operating expenses.............. 10,222 8,261 8,451 17,368 7,472
---------- -------- -------- -------- --------
Loss from operations.................. (9,006) (7,530) (8,965) (19,548) (7,472)
Other income (expense), net(1)........ 3,876 (466) (789) (254) 16
---------- -------- -------- -------- --------
Net loss.............................. $ (5,130) $ (7,996) $ (9,754) $(19,802) $ (7,456)
========== ======== ======== ======== ========
Basic and diluted net loss per share.. $ (3.29) $ (38.68) $(488.31) $(975.76) $(502.12)
========== ======== ======== ======== ========
Shares used in calculating net loss
per share(2)......................... 1,561,329 206,714 19,975 20,294 14,849
========== ======== ======== ======== ========
<CAPTION>
March 31,
December 31, ---------------------------------------------
1999 1999 1998 1997 1996
------------ -------- -------- -------- ---------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Historical Balance Sheet Data:
Cash and cash equivalents............. $ 9,698 $ 23,628 $ 718 $ 487 $ 9,546
Working capital (deficit)............. 15,381 20,360 (3,816) (5,957) 8,229
Total assets.......................... 23,017 27,287 3,853 5,126 11,748
Long-term obligations, including
redeemable preferred stock, less
current portion...................... 1,302 1,403 9,955 2,936 4,997
Accumulated deficit................... (50,138) (45,008) (37,012) (27,258) (7,456)
Total stockholders' equity/(deficit).. 17,663 22,128 (10,975) (4,123) 5,036
</TABLE>
--------
(1) Other income for the 9 months ended December 31, 1999 includes
approximately $3 million from a fee received in connection with the early
termination of a facility lease.
(2) Share data for periods prior to July 7, 1998 have been adjusted for
comparison purposes to reflect a 250-to-1 reverse split of Pogo's common
stock effected on that date. Share data also excludes the assumed
conversion of convertible preferred stock, outstanding warrants and stock
options because all such securities are anti-dilutive for all periods
presented.
13
<PAGE>
Market Price and Dividend Information
Excite@Home
Excite@Home Series A common stock has traded on the Nasdaq National Market
under the symbol "ATHM" since July 11, 1997, the date of its initial public
offering. The table below sets forth the high and low closing sales prices of
Excite@Home Series A common stock on the Nasdaq National Market for the periods
indicated. The quotations represent interdealer quotations, without adjustments
for retail mark ups, mark downs, or commissions, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Excite@Home
Series A
Common Stock
-------------
High Low
------ ------
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
First Quarter............................................... $19.06 $10.25
Second Quarter.............................................. 28.63 14.88
Third Quarter............................................... 27.47 11.75
Fourth Quarter.............................................. 42.38 17.25
Fiscal Year Ending December 31, 1999:
First Quarter............................................... 81.75 37.25
Second Quarter.............................................. 99.00 39.00
Third Quarter............................................... 59.63 33.13
Fourth Quarter.............................................. 59.75 36.69
Fiscal Year Ending December 31, 2000:
First Quarter............................................... 44.88 26.75
Second Quarter.............................................. 33.19 15.88
Third Quarter............................................... 20.94 12.88
Fourth Quarter (through )............................
</TABLE>
Recent Closing Prices
The following table shows the closing prices per share of Excite@Home Series
A common stock on Nasdaq on August 30, 2000, the last full trading day prior to
the public announcement of the proposed merger, and on October , 2000, the
most recent trading day before the printing of this information statement/
prospectus for which the closing price was available. The table also shows the
10-day average closing price of Excite@Home Series A common stock, and the
hypothetical exchange ratios and equivalent per share prices for Pogo voting
stock on these dates, which are based on the assumptions described on page 2 of
this information statement/prospectus. The actual exchange ratio cannot be
determined at this time. The assumptions are hypothetical and the variables
affecting the actual exchange ratio are likely to change before the merger
becomes effective.
<TABLE>
<CAPTION>
10-day average
Closing price closing price Equivalent price
of Excite@Home of Excite@Home Hypothetical per share of
Series A common stock Series A common stock exchange ratio Pogo voting stock
--------------------- --------------------- -------------- -----------------
<S> <C> <C> <C> <C>
August 30, 2000......... $14.63 $14.14 0.3644 $5.15
October , 2000......... $ $ $
</TABLE>
Because the market prices of Excite@Home Series A common stock may fluctuate
significantly, the exchange ratio and the number of shares of Excite@Home
Series A common stock Pogo stockholders will receive upon the closing of the
merger may increase or decrease significantly before the merger. We urge Pogo
stockholders to obtain current market quotations for Excite@Home Series A
common stock.
14
<PAGE>
Dividend Information
Excite@Home has not paid any cash dividends on its common stock and
currently intends to retain any future earnings for use in its business.
Excite@Home does not anticipate that any cash dividends will be declared or
paid on the Series A common stock in the foreseeable future.
Pogo
The common stock of Pogo is not traded on an established public trading
market.
Dividend Information
Pogo has never declared or paid any cash dividends on its capital stock and
currently intends to retain any future earnings for use in its business. Pogo
does not anticipate that any cash dividends will be declared or paid in the
foreseeable future.
15
<PAGE>
Cautionary Statement Concerning Forward-Looking Statements
Excite@Home and Pogo believe this document contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are subject to risks and uncertainties and are based
on the beliefs and assumptions of management of Excite@Home and Pogo, based on
information currently available to each company's management. When we use words
such as "believes," "expects," "anticipates," "intends," "plans," "estimates,"
"should," "likely" or similar expressions, we are making forward-looking
statements. Forward-looking statements include the information concerning
possible or assumed future results of operations of Excite@Home set forth under
"Summary," "Risk Factors," "The Merger--Background of the Merger," "The
Merger--Excite@Home's Reasons for the Merger," "The Merger--Pogo's Reasons for
the Merger," "The Merger--Recommendation of Pogo's Board of Directors,"
"Description of Excite@Home" and "Description of Pogo."
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. The future results and stockholder values
of Excite@Home or Pogo may differ materially from those expressed in the
forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict. Stockholders
are cautioned not to put undue reliance on any forward-looking statements. For
those statements, we claim the protection of the safe harbor for forward-
looking statements contained in the Private Securities Litigation Reform Act of
1995.
For a discussion of some of the factors that may cause actual results to
differ materially from those suggested by the forward-looking statements,
please read carefully the information under "Risk Factors." In addition to the
risk factors and other important factors discussed elsewhere in the documents
which are incorporated by reference into this information statement/prospectus,
you should understand that the following important factors could affect the
future results of Excite@Home and could cause results to differ materially from
those suggested by the forward-looking statements:
. increased competitive pressures, both domestically and internationally,
which may affect use of Excite@Home's and Pogo's services and impede
Excite@Home's ability to maintain its market share and pricing goals;
. changes in user attitude towards the services provided by Excite@Home and
Pogo;
. Excite@Home's ability to integrate the operations of Pogo into its
operations;
. technical failures in the network, software or hardware systems of
Excite@Home or Pogo that cause interruptions of service or a decease in
responsiveness to our Internet sites;
. changes in United States and global financial and equity markets,
including significant interest rate fluctuations, which may increase the
cost of external financing for Excite@Home's operations;
. changes in laws or regulations, third party relations and approvals,
decisions of courts, regulators and governmental bodies which may
adversely affect Excite@Home's and Pogo's business or ability to compete;
and
. other risks and uncertainties as may be detailed from time to time in
Excite@Home's public announcements and Securities and Exchange Commission
filings.
This list of factors that may affect future performance and the accuracy of
forward-looking statements is illustrative but by no means exhaustive.
16
<PAGE>
RISK FACTORS
The merger involves a high degree of risk. By voting in favor of the merger,
Pogo stockholders will be choosing to invest in Excite@Home Series A common
stock. An investment in Excite@Home Series A common stock involves a high
degree of risk. You should carefully consider the following risk factors
relating to the merger before you decide whether to approve the merger
agreement, the escrow agreement, the merger and the related transactions. You
should also consider the other information in this information statement/
prospectus and the additional information in Excite@Home's other reports on
file with the SEC and incorporated by reference in this information
statement/prospectus. See "Where You Can Find More Information."
Unless the context otherwise requires, the terms "we," "us," "our" and
"Excite@Home" refer to At Home Corporation.
Risks Related to the Merger
Excite@Home and Pogo may not achieve the benefits they expect from the merger.
Excite@Home and Pogo will need to successfully execute a number of post-
merger tasks in order to realize any benefits or synergies from the merger. Key
tasks include:
. integrating the on-line game operations of the two companies;
. retaining and assimilating the key personnel of Pogo;
. successfully marketing the existing products and services of each company
to the other company's users and customers;
. developing new services that utilize the assets of both companies;
. maintaining existing relationships with partners and establishing new
partner relationships; and
. maintaining uniform standards, controls, procedures and policies.
The successful execution of these post-merger tasks will involve
considerable risk and may not be successful. These risks include:
. the potential disruption of each company's ongoing business and
distraction of its management;
. the difficulty of incorporating acquired technology and rights in the
combined companies products and services;
. unanticipated expenses relating to technology integration;
. the impairment of relationships with customers, users and employees as a
result of any problems with the integration of services and personnel;
. potential conflicts in sponsor, distributor, advertising or content
relationships; and
. potential unknown liabilities associated with the acquired business.
If the combined company does not succeed in addressing these risks or any
other problems encountered in connection with the merger, it may not achieve
the benefits it expects from the merger.
Failure to complete the merger could negatively affect Excite@Home's and
Pogo's operating results.
If the merger is not completed for any reason, Excite@Home and Pogo may
experience a number of adverse consequences, including the following:
. the price of Excite@Home Series A common stock may decline to the extent
that the current market price of Excite@Home Series A common stock
reflects a market assumption that the merger will be completed;
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. an adverse reaction for investors and potential investors of both
companies, reducing the value of their stock and their future financing
opportunities; and
. the parties' costs related to the merger, including legal and accounting
fees, will be paid even if the merger is not completed.
Failure to complete the merger could negatively affect Pogo's ability to
enter into alternative transactions.
If the merger is terminated and Pogo determines to seek another merger or
business combination, Pogo might not be able to find a partner at an
attractive price. In addition, while the merger agreement is in effect, Pogo
is prohibited from soliciting, initiating, encouraging or entering into
extraordinary transactions, such as a merger, sale of assets or other business
combination, with any party other than Excite@Home. As a result of this
prohibition, Pogo will be precluded from discussing potential transactions
should the merger not occur, and may lose an opportunity for a transaction
with another potential partner at a favorable price if the merger is not
completed.
The merger could harm key third party relationships.
The proposed merger may harm the present and potential relationships of
Excite@Home and Pogo with consumers, distribution partners and other third
parties with whom they have relationships. Uncertainties following the merger
may cause these parties to delay decisions regarding these relationships. Any
changes in these relationships could harm the surviving company's business.
Pogo's advertisers and distribution partners may, in response to the
announcement of the merger, delay or defer decisions concerning Pogo. Pogo
could experience a decrease in expected revenue as a consequence of
uncertainties associated with the merger.
The announcement of the merger agreement could result in loss of employees
before completion of the merger.
Employees of a company are often uncertain as to their future employment
during the period between the time the company enters into a merger agreement
and the time the merger is completed. Although incentives provided by Pogo
during this period may mitigate this effect, it is possible that employees
will seek employment elsewhere. Whether or not the merger occurs, Pogo may not
be able to retain some of its key employees. If any of Pogo's key employees
leave, its business, results of operations and financial condition could
suffer.
Officers, directors and affiliates of Pogo have different interests from
yours that may influence them to support or approve the merger.
Officers, directors and affiliates of Pogo have interests that are
different from, or are in addition to, those of Pogo stockholders generally.
These interests include:
. the acceleration of the vesting of options to purchase an aggregate of
approximately 1 million shares of Pogo common stock held by directors and
officers of Pogo;
. some officers of Pogo will become employees of the surviving corporation;
. the two largest stockholders of Pogo are affiliated with Excite@Home; and
. Excite@Home is the third largest stockholder of Pogo.
As a result, the officers, directors and affiliates could be more likely to
vote to approve the proposal than Pogo stockholders who do not have these
interests.
A portion of the Excite@Home Series A common stock to be received by the Pogo
stockholders will be placed in escrow and may not be delivered to the Pogo
stockholders.
The merger agreement provides that 10% of the Excite@Home Series A common
stock the Pogo stockholders are otherwise entitled to receive upon the merger
will be deposited in an escrow account to secure
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the indemnification obligations of Pogo stockholders under the escrow
agreement. Accordingly, Pogo stockholders might not receive up to 10% of the
initial merger consideration to which they would otherwise be entitled as a
result of the indemnification provisions in the merger and escrow agreements.
Issuance of additional shares of Excite@Home may reduce Excite@Home's share
price.
In connection with the merger, Excite@Home will issue new shares of its
Series A common stock to current Pogo stockholders. The total number of shares
will not be determined until the exchange ratio is determined. The actual
exchange ratio will depend upon the price of Excite@Home Series A common stock,
which may fluctuate significantly. If contingent payments are made, additional
shares of Excite@Home Series A common stock will be issued. The issuance of
additional shares of Excite@Home Series A common stock in the merger and in
connection with any contingent payment will dilute Excite@Home's results of
operations on a per share basis. This dilution could reduce the market price of
Excite@Home Series A common stock unless and until the combined company
achieves revenue growth or cost savings and other business economies sufficient
to offset the effect of the issuance of additional shares. There can be no
assurance that Excite@Home will achieve revenue growth, cost savings or other
business economies from the merger.
Pogo stockholders may exercise dissenters' rights.
Under both Delaware and California law regarding dissenting stockholders'
appraisal rights, Pogo stockholders who do not vote in favor of the merger may
be entitled to exercise dissenting stockholders' appraisal rights. If the
merger occurs, then Pogo stockholders who do not vote their Pogo shares in
favor of the merger may have the right to demand cash for their Pogo shares
instead of Excite@Home Series A common stock. The amount of cash to be paid to
the dissenting Pogo stockholders could be significant, which could harm the
surviving corporation's financial position. It is a condition to the merger
that the holders of 86% of Pogo stock vote their shares in favor of the merger.
Risks Related to Excite@Home's Business
Our quarterly operating results may fluctuate.
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:
. subscriber growth rates and prices charged by our cable partners;
. the level of usage of the Internet in general and portal web sites in
particular;
. the introduction of new products or services by us or our competitors;
. demand for Internet advertising;
. pricing changes for Internet-based 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;
. the amount and timing of capital expenditures and other costs relating to
the expansion of our operations;
. the timing of marketing expenditures to promote our brands;
. costs incurred with respect to acquisitions;
. integration of new services, features and functionally with existing
services;
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. seasonality 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.
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 June 30, 2000, we had an accumulated deficit of $3,030
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 $2,955 million since
inception. In addition, we currently intend to increase capital expenditures
and operating expenses in order to expand our network and market and provide
our broadband services to potential subscribers. As a result of our
acquisitions of Excite, iMALL, Bluemountain.com and other companies, we
anticipate that we will incur substantial non-cash charges including charges
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.
We may fail to integrate our business and technologies with the business and
technologies of companies we have recently acquired or may acquire.
We have completed several acquisitions recently, and 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. In addition, we may
be unable to identify future acquisition targets and we may be unable to
complete future acquisitions on reasonable terms. 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; and
. the impairment of relationships with employees and customers as a result
of the integration of new management personnel.
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Recently acquired businesses may not be successful.
Our recently acquired companies are in an early stage of development and
have 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 do not purchase goods or
services advertised on Bluemountain.com in sufficient quantities.
During 2000, we have acquired Kendara, Inc., Worldprints.com International,
Inc., DataInsight, Inc. and Join Systems, Inc. We have agreed to acquire Pogo
and we may acquire other companies in the near future. 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.
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. Filter software may prevent 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 and plan to continue to make 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 accounted for under the equity method of
investment. 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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Excite Chello, our new international joint venture with UPC and
UnitedGlobalCom, is an unproven business and may not achieve revenue and
subscriber growth targets.
In July 2000, we agreed with UPC and its parent company, UnitedGlobalCom
(together, the "United Group"), to form a joint venture, to be named Excite
Chello, which would combine UPC's chello broadband subsidiary with our assets
and operations outside North America. We have agreed to invest approximately
$94 million in this joint venture. Excite Chello will be equally owned and
jointly controlled by Excite@Home and the United Group. We will account for
our investment in Excite Chello under the equity method, and we will record
our share of the net losses of the new joint venture, which will likely be
higher than our share of net losses that we have taken to date on the joint
ventures to be contributed. The expected higher losses are due to the
accelerated expansion of international operations. Although we have announced
intentions to publicly offer shares in Excite Chello at a future date, a
number of factors may prevent the consummation of an initial public offering,
including adverse changes in the financial markets, in general economic
conditions, or in the operations of the new joint venture. Excite Chello will
be a new business, and its ability to achieve revenue and subscriber growth
targets is unproven. Excite Chello will face many of the same risks facing our
company. In addition, Excite Chello faces 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.
This transaction is not yet completed. The closing of this transaction is
subject to several conditions, including regulatory approval, obtaining third
party consents and contributions by the joint venture partners.
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.
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Even to the extent that these claims do not result in material liability,
investigating and defending these claims could harm our business.
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 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 in respect of our
indebtedness when due. As of June 30, 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.
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 2,500 employees at June
30, 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.
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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; and
. 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, which could
increase the cost of transmitting data 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 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 our headquarters is located.
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
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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 stockholders. 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 our executive management team have
resigned, and our Chief Executive Officer has announced his intention to resign
this position. Although we have replaced most of these employees, the new
employees have generally not had previous experience working with each other or
other members of our executive management team. The risk of attracting and
retaining qualified employees is compounded by the fact that we are controlled
by AT&T, 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 Related 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 the level of consumer or commercial
acceptance that we have forecasted. 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.
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. Some companies 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,
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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' infrastructures 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 is 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 adopted interface standards known as DOCSIS for hardware and software to
support the delivery of data services over the cable infrastructure utilizing
compatible cable modems. Some of our cable partners have chosen to delay
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. For example, the supply of certain key components required
in the manufacture of cable modems was severely constrained during the first
half of 2000 when a key parts supplier experienced a factory fire. 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 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 channels such as retail and pre-installment by
personal computer manufacturers.
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. Additionally, the success
of self-installable cable modems depends on our ability to deploy systems that
allow customers to self-provision the @Home service through online and other
means. If two-way cable modems do not become quickly available in outlets
other than through cable television companies, if they cannot be installed
easily by consumers, or if customers are not able to initiate the @Home
service themselves, 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 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. If we or our cable
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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 prior to the expiration of our exclusivity
agreements. 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 United States Court of Appeals has
decided in two of its circuits that cable broadband services are
telecommunications services subject to regulation at the federal level.
As a result, local and state jurisdictions in these two circuits are
prevented from imposing third-party access or carriage requirements for
cable broadband service. It is possible, however, that local
jurisdictions in other circuits may try to impose similar requirements in
the future. Since the circuit court decisions that have been made to date
are not binding on other circuits, courts in other circuits could decide
that their local jurisdictions have the right to impose third-party
access requirements. In addition, local jurisdictions could try to impose
similar requirements under various other legal theories.
. Other litigation. In November 1999, a class action was filed 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 this
litigation. Any of these outcomes could harm our business. In addition,
others could initiate litigation on similar legal theories in the future.
. 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.
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. MediaOne Group, which was
recently acquired by AT&T, 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. These advanced services are offered by a number of Internet
service providers in conjunction with local exchange carriers, which may
result in additional marketing, installation and customer service
resources for DSL.
. 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!.
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. Cable and fiber-optic system over-builders. We compete with companies
that have obtained franchises from local authorities to build their own
coaxial cable and fiber-optic networks to deliver bundled
telecommunications services to residential customers. These companies,
such as RCN Corp., act as exclusive providers of broadband Internet,
phone and cable television services over their own advanced local network
infrastructure. Although these systems have been built in limited
geographic areas to date, widespread availability of bundled services by
system over-builders would represent significant competition against our
services.
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 stockholder, AT&T, has a substantial ownership
interest in Time Warner and Road Runner due to AT&T's recent acquisition of
MediaOne. This relationship among America Online, AT&T, Time Warner and Road
Runner creates further uncertainties about which cable markets we will be able
to serve and under what terms. The proposed merger would also give America
Online, the largest dial-up Internet service provider, the ability to utilize
Road Runner's technology as a basis for leveraging its marketing 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 have entered into new distribution agreements with AT&T, Comcast
and Cox, 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 plants in the United States and in some
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international markets have been upgraded to two-way hybrid fiber coaxial
cable, and even less are capable of high-speed two-way transmission. As of
June 30, 2000, approximately 47% 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.
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 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, a court may
not allow us to proceed under the terms of the letter agreement or we may have
to pay damages, either of which could seriously harm our business.
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;
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. 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, AT&T, Comcast and Cox have agreed to use
Excite@Home 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.
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 United
States 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.
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
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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 are controlled by AT&T, and our interests may not always align with AT&T's
interests.
AT&T controls approximately 74% of our voting power. Currently, six of our
ten directors are directors, officers or employees of AT&T or its affiliates.
AT&T currently owns all 86.6 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 a majority of our board of directors.
Therefore, we are subject to both board and stockholder voting control by AT&T.
It is possible that AT&T's objectives will diverge from what our 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 30.9
million shares of our Series A common stock at an average price of $2.20 per
share were exercisable as of June 30, 2000.
Under our new agreements with our principal cable partners, we granted
warrants to AT&T, Comcast and Cox to purchase an aggregate of 72.2 million
shares of our Series A common stock and 27.9 million shares of our Series B
common stock, each at 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. We will amortize the fair values
of these warrants to operations over the respective terms of the new
distribution agreements.
To the extent that our cable partners become eligible to and exercise their
warrants, our stockholders will experience substantial dilution. We also may
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 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., which have announced initiatives to develop web services or partner
with web companies; and
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. 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 other 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 other 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 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 on 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 on 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
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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 our web sites. We have no guarantees that
we will recoup 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 Pogo's Business
Pogo has not been and may never be profitable.
Pogo has incurred significant operating expenses since it was formed in
1995. In the first six months of 2000, Pogo incurred a net loss of
approximately $11.8 million. In the nine months ended December 31, 1999, Pogo
incurred a net loss of approximately $5.1 million. For the fiscal year ended
March 31, 1999, Pogo incurred a net loss of approximately $8 million. As of
December 31, 1999, Pogo had an accumulated deficit of $50.1 million. Pogo may
never achieve profitability.
If advertisers do not continue or increase their usage of the Internet as an
advertising medium, Pogo's revenue would decline.
Since 1999, Pogo has derived, and expects to continue to derive,
substantially all of its revenue from the sale of advertising on its web site
and on the web pages of distribution partners that feature Pogo's games.
However, the prospects for continued demand and market acceptance of Internet
advertising are uncertain. If advertisers do not continue or increase their
usage of the Internet, Pogo's revenue would decline. As the Internet evolves,
advertisers may find Internet advertising to be less attractive or effective
than traditional methods of advertising and may not continue to allocate funds
for Internet advertising. Moreover, advertisers that have traditionally relied
on other advertising media may not advertise on the Internet.
The process of managing advertising to users of a large, high-traffic web
site, such as Pogo's web site, is complex. Advertisers seek to target their
Internet advertising to a large base of users with specific demographic
characteristics. They also seek to measure the effectiveness of their
advertising. Currently, there are no widely accepted standards for measuring
the effectiveness of Internet advertising, and standards may not develop
sufficiently to support Internet advertising as a significant advertising
medium. Advertisers may choose not to advertise on Pogo's web site or may pay
less for advertising if they believe that it is not possible to target, track
and measure the delivery of advertisements reliably. Available filter software
programs limit or remove advertising from the user's monitor. Widespread
adoption of software products such as these could reduce Pogo's ability to
target advertising and lead advertisers to choose not to advertise on the
Internet. In addition, legal initiatives related to privacy concerns, if
successful, could prevent or limit Pogo's ability to track the delivery of
advertisements and the demographics of its user base.
Many of Pogo's customers have limited operating histories, are unprofitable
and may not be able to meet their payment obligations, which could harm Pogo's
revenue.
Several of Pogo's customers have limited operating histories and have not
achieved profitability. Pogo believes that this will be true of other customers
in the future. In the past, some of Pogo's customers have
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failed to pay for advertising on Pogo's service on a timely basis. If one or
more of Pogo's customers is unable or refuses to pay for the advertising
placed on Pogo's services, or pays more slowly than Pogo anticipates, Pogo's
quarterly and annual results of operations could be harmed and Pogo's business
could suffer.
If Pogo's advertising arrangements are terminated or are not renewed, Pogo's
revenue will decline.
To date, Pogo has derived a majority of its revenue from advertising for
Internet-related companies. If online marketing budgets of these companies
decrease as a result of changing economic conditions or for any other reason,
Pogo's revenues will decrease. Pogo expects this trend to continue
indefinitely. In the quarter ended June 30, 2000, advertising by online
casinos made up approximately 25% of Pogo's revenue. Any decrease in the
marketing budgets of these online casinos as a result of regulations imposed
on online gaming or for any other reason, would cause Pogo's revenues to
decline. If Pogo fails to obtain new advertisers and retain existing
advertisers, Pogo's revenue would decline. Most of Pogo's advertising sales
are made under short-term agreements. As a result, many of Pogo's advertising
customers could cancel these agreements, change their advertising expenditures
or buy advertising from Pogo's competitors on relatively short notice and
without penalty. Due the fact that Pogo expects to derive most of its future
revenue from advertising arrangements, these short-term agreements expose Pogo
to competitive pressures and potentially severe fluctuations in its financial
results.
Some of Pogo's advertising agreements provide that Pogo will only receive
revenue if users respond to an advertisement. These types of arrangements
usually do not provide guaranteed revenue to Pogo, although placement of these
ads reduces Pogo's advertising inventory available for other types of
advertising and could cause Pogo to lose revenue overall.
If Pogo does not continue to attract and retain users, Pogo may not be able
to compete for advertisers, which would cause its revenue to decline.
Pogo currently derives substantially all of its revenue from advertisers
who purchase advertising space on Pogo's network of web sites. Pogo must
continue to attract and retain users to compete for advertising revenue. If
Pogo fails to attract and retain more users, its revenue will decline. In any
particular month, many of Pogo's registered users do not visit Pogo's service
on the Internet. New users may visit Pogo's service out of curiosity and later
discontinue using Pogo's service. In addition, it is easy for users to go to
competing sites. Any steps that Pogo takes to maintain or improve its
retention of users may not succeed. If Pogo is unable to expand and retain its
user base, the demand for advertising on its service may decrease, which would
cause its revenue to decline.
If Pogo fails to maintain its key third party distribution relationships, it
may not be able to grow its business.
Pogo depends upon third party distribution relationships with media and
Internet companies to develop Pogo's user base and to increase the
distribution and visibility of Pogo's games. Pogo's distribution agreements
typically require distribution partners to feature Pogo's games on their high-
traffic web sites. Pogo's distribution partners may not view their
relationships with Pogo as significant to their own business and may not
continue their commitment to Pogo in the future. Any party to a distribution
agreement with Pogo may fail to perform its contractual obligation to Pogo. In
addition, most of Pogo's distribution agreements have terms of one year or
less or can be terminated by either party with little notice. Some of these
third parties could become competitors to Pogo or obtain the services of
Pogo's competitors, upon termination of their agreement with Pogo. Pogo may
not be able to develop new strategic relationships that expand its business.
If Pogo fails to maintain its key strategic relationships, it may not be able
to attract additional users. Specifically, Pogo's distribution arrangement
with Netscape terminated on or about September 23, 2000, and Pogo expects that
this termination may reduce Pogo's overall usage and advertising impressions.
In addition, Pogo's distribution agreement with iWon.com, which accounted for
approximately 19% of Pogo's advertising impressions in July 2000, comes up for
renewal in November 2000. If Pogo and iWon are not able to renew this
agreement, Pogo's usage and advertising impressions might decline and Pogo's
business may be harmed.
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Pogo's distribution agreements with Snap and About.com contain terms that
will allow these online services to terminate their distribution relationships
with Pogo upon or in connection with the merger. Pogo's distribution agreement
with Go Network may not be assignable to the surviving corporation of the
merger. The termination of these agreements could reduce Pogo's usage and
advertising impressions and could harm the business of Pogo.
Pogo could lose users, advertisers and revenue to competitors.
There are many companies that provide web sites and online destinations
targeted to audiences seeking various forms of games and leisure-time content.
Pogo competes with all of these companies for visitor traffic and advertising
dollars. This competition is intense and is expected to increase significantly
in the future as the number of online game and leisure-time services continues
to grow. Pogo's success will depend upon the perceived value of its content
relative to other available entertainment alternatives, both online and
elsewhere. Increased competition could result in:
. price reductions and lower profit margins;
. lower advertising rates;
. loss of visitors or visitors spending less time on Pogo's service;
. reduced page views or advertising impressions; and
. loss of market share.
Pogo and many other providers of Internet services have entered into
distribution, co-branding, content and other strategic partner arrangements
with Internet service providers, online service providers, providers of web
browsers, operators of high-traffic web sites and other businesses. The purpose
of these arrangements is to increase traffic and page views, which may make web
sites more attractive to advertisers, and may also make it less convenient for
consumers to access competing services. To the extent Pogo's competitors are
able to enter into successful strategic relationships, these competitors could
experience increases in traffic and page views, or the traffic and page views
on Pogo's service could remain constant or decline, either of which could harm
Pogo's business by making competitors' services appear more attractive to
advertisers.
Many of Pogo's current and potential competitors have significantly greater
financial, technical, marketing, sales, editorial and other resources than Pogo
does. Pogo's competitors may develop content and other offerings that are
superior to Pogo's or that achieve greater market acceptance. Competitors also
may be able to:
. undertake more extensive marketing campaigns for their brands and
services;
. adopt more aggressive advertising pricing policies;
. use superior technology platforms to deliver their products and services;
and
. make more attractive offers to potential employees, distribution
partners, advertisers and third party content providers.
Pogo also competes with traditional media, such as newspapers, magazines,
radio and television for advertisers and advertising revenue. If advertisers
perceive the Internet or Pogo's service to be a limited or an ineffective
advertising medium, they may be reluctant to devote a portion of their
advertising budgets to Pogo's service.
Technical problems with either Pogo's internal or its outsourced computer and
communications systems could interrupt its service, resulting in decreased
customer satisfaction, the possible loss of users and advertisers and a
decline in revenue.
Pogo's operations depend on its ability to maintain its server and
networking hardware and software systems in effective working order. Any system
failure that causes an interruption in Pogo's service or a
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decrease in responsiveness of its service, could result in reduced user
traffic and reduced revenue. Pogo's service must accommodate a high volume of
traffic and deliver frequently updated information. Pogo may not be able to
expand its systems to accommodate its growing user base. In addition, Pogo's
telecommunications providers must provide the necessary data communications
capacity in the time frame Pogo requires. From time to time in the past,
unanticipated problems affecting Pogo's systems have caused slower response
times and interruptions in Pogo's services. Pogo's insurance policies may not
adequately compensate Pogo for any loses that may occur due to any failures or
interruption in its systems.
Pogo's service resides on computer systems located in the San Francisco Bay
Area and there is no backup system at any other location. Fire, earthquakes,
power loss, water damage, telecommunications failures, vandalism and other
malicious acts, and similar events, may damage Pogo's computer systems and
interrupt service. Internet users depend upon Internet service providers,
online service providers and other web site operators for access to Pogo's
service. These providers have had interruptions in their services for hours
and, in some cases, days, due to system failures unrelated to Pogo's systems.
Future interruptions of this type are beyond Pogo's control to prevent, but
could be attributed to Pogo, which could harm Pogo's reputation.
Because many of Pogo's games feature prizes, the failure of the software
systems used by Pogo to recognize winning entries and notify prize winners
could result in user dissatisfaction and could lead to claims for unawarded
prizes. Any of these claims could impair Pogo's reputation and could result in
reductions in usage and revenue.
If Pogo does not adapt to evolving Internet technologies and user demands,
Pogo could become less competitive.
Pogo must adapt to rapidly evolving Internet technologies and new platforms
by continually enhancing its existing services and introducing new services to
address users' changing demands. Pogo expects to incur substantial costs in
modifying its services and infrastructure and in recruiting and hiring
experienced technology personnel to adapt to changing technology affecting
providers of online services. If Pogo cannot hire the necessary personnel or
adapt to these changes in a timely manner or at all, Pogo will not be able to
meet its users' demands for increasingly sophisticated entertainment and will
become less competitive. For example, Pogo has invested and may continue to
invest significant resources in the development of games for new platforms,
including the wireless platform. These games may not achieve market acceptance
and may not generate revenue to offset Pogo's expenses in developing and
implementing these games.
Pogo may have to litigate to protect its intellectual property rights, or to
defend claims that it has infringed the rights of others, which could subject
Pogo to significant liability and be time consuming and expensive.
Pogo relies upon a combination of copyright, trademark, service mark and
trade secret protection and contractual obligations with employees and third
parties to protect its intellectual property rights. The steps Pogo has taken
to protect is intellectual property may not be adequate and third parties may
infringe or misappropriate Pogo's intellectual property. The validity,
enforceability and scope of protection of intellectual property in Internet-
related industries are uncertain and still evolving. Pogo's software systems
are proprietary to Pogo. Others may be able to develop similar technologies.
If this occurs, Pogo may have to litigate to protect its intellectual property
rights. These difficulties could disrupt Pogo's ongoing business, increase its
expenses and distract its management's attention from the operation of its
business. Most of the games available on Pogo's service, including card games,
board games and free casino games, are not based on proprietary information,
but are in the public domain, and the concepts underlying these games may not
be protectible under intellectual property laws.
Effective trademark, service mark, copyright and trade secret protection
may not be available in every country in which Pogo's content is made
available online. If Pogo were prevented from using its trademarks, it would
need to reimplement its web site and rebuild its brand identity with its
customers and users. This would increase Pogo's operating expenses
substantially.
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From time to time Pogo has received, and may in the future receive, notices
of claims of infringement of other parties' proprietary rights. Pogo may have
to litigate to defend claims that it has infringed the intellectual property
rights of others. Any claim of this type could subject Pogo to significant
liability, be time consuming and expensive, divert management's attention,
require the change of Pogo's trademarks and the alteration of content, require
Pogo to redesign its service or require Pogo to pay damages or enter into
royalty or licensing agreements. These royalty or licensing agreements, if
required, might not be available on acceptable terms or at all. If a successful
claim of infringement were made against Pogo and Pogo could not develop non-
infringing intellectual property or license the infringed or similar
intellectual property on a timely and cost-effective basis, Pogo might be
unable to continue operating its business as planned.
Pogo has received a letter from Hasbro Interactive, Inc. identifying three
of Pogo's arcade games that Hasbro alleges infringe its proprietary rights.
Pogo has agreed to indemnify Excite@Home against claims for copyright
infringement relating to the offering of these three games.
Pogo's ability to implement its business strategy and its ultimate success
depend upon continued growth in the use of the Internet and the ability of the
Internet infrastructure to support this growth.
Pogo's business strategy depends upon continued growth in the use of the
Internet and increasing the number of users who visit its web site. A decrease
in the growth of Internet usage would impede Pogo's ability to implement its
business strategy and its ultimate success.
If the Internet continues to experience significant growth in the number of
users, frequency of use and amount of data transmitted, the Internet
infrastructure might not be able to support the demand placed on it or the
performance or reliability of the Internet might be adversely affected. Web
sites have experienced interruptions in service as a result of outages and
other delays occurring throughout the Internet network infrastructure. If these
outages or delays occur frequently in the future, Internet usage, as well as
the usage of Pogo's service, could grow more slowly than expected or decline.
In addition, other issues concerning the use of the Internet, including
security, reliability, cost, privacy and quality of service, remain unresolved.
Concerns regarding these issues may affect the growth of the use of the
Internet. Because Pogo's revenue ultimately depends upon Internet usage
generally as well as on its service, Pogo's business may suffer if Internet
usage declines or grows more slowly than expected.
Pogo may be sued regarding privacy concerns, subjecting Pogo to significant
liability and expense.
Pogo could face liability relating to the collection and use of personal
data about users of its service, as well as the misuse of this personal data,
such as unauthorized marketing. The Federal Trade Commission and state agencies
have been investigating various 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 Untied
States federal and various state legislatures have enacted and proposed new
laws that restrict the collection and use of information about Internet users.
In particular, in 1998, the United States Congress enacted the Children's
Online Privacy Protection Act of 1998. Pogo depends upon collecting personal
information from its users and the regulations promulgated under this law have
made it more difficult for Pogo to collect personal information from some of
the users of its web site. Pogo could incur additional expenses if new laws or
regulations regarding the use of personal information are introduced or if its
privacy practices are investigated. Furthermore, the European Union recently
adopted a directive addressing data privacy that may limit the collection and
use of information regarding Internet users. This directive and regulations
enacted by other countries may limit Pogo's ability to target advertising or to
collect and use information internationally.
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Gaming and sweepstakes laws and regulations that are subject to differing
interpretations apply to Pogo's games and could adversely affect Pogo's
ability to grow its business.
Pogo operates online games of skill and chance that are regulated in many
jurisdictions. In addition, in some instances, Pogo rewards prizes to the
participants. The selection of prize winners is sometimes based on chance,
although none of Pogo's games requires any form of monetary payment. The laws
and regulations that govern Pogo's games and drawings, however, are subject to
legislative and regulatory action in many of the jurisdictions in which Pogo
offers its games. Pogo could be subject to differing and inconsistent laws and
regulations with respect to the services it offers. If that were to happen,
Pogo may find it necessary to eliminate, modify or cancel components of its
services that could result in additional development costs and the possible
loss of revenue. If Pogo fails to comply with gaming and sweepstakes laws, it
may become subject to fines and penalties.
If the United States adopts legislation restricting offshore casinos, Pogo may
lose revenue or may become subject to additional regulation.
For the quarter ended June 30, 2000, advertising of offshore casino sites
constituted approximately 25% of Pogo's revenue. The United States Congress is
currently considering legislation that would prohibit the offering of offshore
casino gambling in the United States. If this legislation is adopted, Pogo may
be required to modify its agreements with offshore casino advertisers, and
these advertisers may be much less likely to purchase advertising on Pogo's
service, which would cause a decrease in revenue.
In addition, the proposed legislation may penalize companies that are
determined to be aiding in the operation of offshore casino sites or that
encourage the use of those sites by United States residents. In that case, Pogo
could be liable for criminal or civil penalties if it does not modify or
terminate advertising arrangements with online casinos.
Pogo might have to expend significant capital or other resources to protect
its service from unauthorized access, computer viruses and other disruptive
problems.
Internet and online service providers have in the past experienced, and may
in the future experience, interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. Pogo could be affected by computer viruses, electronic
break-ins from unauthorized users or other similar disruptions or attempts to
penetrate Pogo's online security systems. Pogo might be required to expend
significant capital or other resources to protect against the threat of
security breaches or to alleviate problems caused by these breaches.
Nevertheless, Pogo's security measures might be circumvented. Eliminating
computer viruses and alleviating other security problems may also require
interruptions, delays or cessation of service to users accessing web pages that
deliver Pogo's content. In addition, a party who circumvents Pogo's security
measures could misappropriate proprietary information or cause interruptions in
its operations.
Information displayed on and communication through Pogo's service could expose
Pogo to significant liability and expense.
Pogo makes content available on its web site and on the web sites of its
advertisers and distribution partners. The availability of this content could
result in claims against Pogo based on a variety of theories, including
defamation, obscenity, negligence, copyright or trademark infringement. These
types of claims have been brought, sometimes successfully, against Internet
companies and print publications in the past, and the potential liability
associated with these claims is significant. Pogo could also be subjected to
claims based upon the online content that is accessible from its web site
through links to other web sites or through content and materials that may be
posed in chat rooms or bulletin boards. Pogo does not verify the accuracy of
the information supplied by third-party content providers. The law in these
areas is unclear. As a result, Pogo is unable to predict the potential extent
of its liability. Its insurance may not cover potential claims of this type, or
may not be adequate.
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Future regulation of the Internet may slow its growth, resulting in decreased
demand for Pogo's services and increased costs of doing business.
Changes in the legal and regulatory environment that pertains to the
Internet could slow its growth, which would decrease demand for Pogo's
services and increase its costs of doing business. Pogo expects more stringent
laws and regulations relating to the Internet to be enacted due to the
increasing popularity and use of the Internet and other online services. New
and existing laws and regulations could address a variety of issues,
including:
. user privacy and expression;
. taxation and pricing;
. the rights and safety of children;
. consumer protection;
. cross-border commerce;
. intellectual property; and
. information security.
Currently, Pogo may be subject to Sections 5 and 12 of the Federal Trade
Commission Act, which regulate advertising in all media, including the
Internet, and require advertisers to have substantiation for advertising
claims before disseminating advertisements. The Federal Trade Commission
recently brought several actions charging deceptive advertising via the
Internet, and is actively seeking new cases involving advertising via the
Internet.
Pogo may also be subject to the provisions of the recently enacted
Communications Decency Act which, among other things, imposes substantial
monetary fines and/or criminal penalties on anyone who distributes or displays
certain prohibited material over the Internet or knowingly permits a
telecommunications device under its control to be used for this purpose.
In addition, several telecommunications companies and local telephone
carriers 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. If this were to
occur, the costs of communicating on the Internet could increase
substantially, which could decrease the use of the Internet.
Finally, the applicability to the Internet and other online services of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve. Any new legislation or regulation, the application
of laws and regulations from jurisdictions whose laws do not currently apply
to Pogo's business, or the application of existing laws and regulations to the
Internet and other online services could also increase Pogo's costs of doing
business, discourage Internet communications and reduce demand for Pogo's
services.
If Pogo does not continue to develop its brand, it may not be able to retain
users or advertisers or achieve its revenue goals.
Pogo believes that it must further develop its brand in order to grow its
user base and attract advertisers. Pogo uses a combination of web-based
marketing and trade marketing to promote its brand. If Pogo fails to market
its brand effectively, its user base and revenues would decline.
Pogo's success in enhancing its brand depends on its ability to develop and
host popular, well-designed games that appeal to a broad consumer base. If
Pogo's services are not perceived to appeal to a large audience or to be of
high quality, users may discontinue their use of Pogo's services, advertisers
may find Pogo a less attractive venue for advertising and Pogo's revenues
could decline.
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The loss of key personnel may harm Pogo's ability to grow its business.
The future success of Pogo depends in part on the continued service of key
management personnel and on Pogo's ability to attract, retain and motivate
skilled employees. Competition for engineering, design, sales and marketing
personnel is intense, and Pogo may be unable to attract or retain employees.
The employment of Pogo's employees is "at will" and can be terminated at any
time. The loss of the services of any key employees and the failure to attract
and retain other qualified employees would harm Pogo's ability to develop and
manage its business.
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THE VOTE OF THE POGO STOCKHOLDERS
Vote by Written Consent; Pogo Record Date and Outstanding Shares
Pogo stockholders as of the close of business on the record date,
, 2000, will be asked to approve the merger agreement, the escrow
agreement, the merger, and the related transactions by written consent. As of
the close of business on the record date, there were shares of Pogo common
stock and shares of Pogo preferred stock outstanding and entitled to vote,
held of record by approximately stockholders.
Pogo expects that holders of Pogo's preferred stock will agree to convert
automatically each outstanding share of Pogo preferred stock into one share of
Pogo common stock immediately before the merger becomes effective.
The merger agreement is attached to this information statement/prospectus as
Annex A. See the sections entitled "The Merger" on page 49 and "The Merger
Agreement" on page 60.
Pogo Vote Required
Under applicable law and under Pogo's charter documents, the affirmative
vote of the holders of at least a majority of the outstanding shares of Pogo
common stock and at least a majority of the outstanding shares of Pogo
preferred stock, voting as separate classes, is required to approve and adopt
the merger agreement and approve the merger. In addition, it is a condition to
the completion of the merger that the holders of at least 86% of the
outstanding shares of Pogo voting stock will have approved the merger
agreement, the escrow agreement, the merger and the related transactions. Pogo
stockholders are entitled to cast one vote per share of Pogo common stock or
preferred stock, other than Series A-2 preferred stock, owned as of the record
date. The holders of Series A-2 preferred stock are not entitled to vote on the
proposal.
Share Ownership of Management and Certain Stockholders
On the record date, directors, executive officers and affiliates of Pogo as
a group beneficially owned a total of approximately million shares of Pogo
common stock and approximately million shares of Pogo preferred stock, or
approximately % of the shares of Pogo common stock and % of the Pogo
preferred stock outstanding on that date. Directors, executive officers, their
affiliates and others beneficially owning, collectively, approximately
million shares of Pogo common stock and approximately million shares of
Pogo preferred stock, or approximately % of Pogo common stock and % of
Pogo preferred stock outstanding on the record date have executed voting
agreements with Excite@Home, under which they have agreed to vote their shares
of Pogo stock to approve the proposal. In addition, Excite@Home owns
approximately 10% of the outstanding Pogo voting stock. See "Other Agreements--
Voting Agreements."
Pogo's Expenses of Solicitation of Consents
Pogo will pay the expenses of soliciting written consent of the stockholders
of Pogo. Following the original mailing of the written consent and other
soliciting materials, Pogo and its agents also may solicit written consents by
mail, telephone, telegraph or in person.
Voting on Pogo's Proposal
You are requested to complete, date and sign the accompanying written
consent in order to approve the merger agreement, the escrow agreement, the
merger and the related transactions. Please promptly return your signed written
consent in the enclosed envelope or mail it to legal counsel to Pogo, c/o
Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California 94306,
Attn: Pamela Sergeeff, Esq. Please return all written consents by no later than
, 2000. If you return your signed written consent but fail to mark
whether you are voting for or against the proposal, your shares will be voted
for the proposal.
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Appraisal Rights of Dissenting Pogo Stockholders
Background
If the merger occurs, then under state laws regarding dissenting
stockholders' appraisal rights, Pogo stockholders who do not vote their Pogo
shares in favor of the merger may have the right to demand cash for their Pogo
shares instead of Excite@Home Series A common stock. Holders of options or
warrants to purchase Pogo stock will not be entitled to appraisal rights.
Shares of Pogo common stock and Pogo preferred stock will not be converted
into Excite@Home Series A common stock if the holder of the shares validly
exercises and perfects statutory appraisal rights with respect to the shares.
When and if the holder of those shares withdraws the demand for appraisal or
otherwise becomes legally ineligible to exercise appraisal rights, then the
shares will be automatically converted into shares of Excite@Home Series A
common stock on the same basis as all other Pogo shares are converted in the
merger.
Pogo is a Delaware corporation, thus, the availability of dissenting
stockholders' appraisal rights for Pogo stockholders is determined by Delaware
law. Due to the location of a majority of Pogo stockholders in California and
Pogo's other contacts with the State of California, however, Section 2115 of
the California Corporations Code provides that California law regarding
dissenting stockholders' appraisal rights may also apply to Pogo stockholders
in the merger. Summaries of both Delaware and California law regarding
dissenting stockholders' appraisal rights are provided below. Neither Delaware
nor California law expressly addresses the question of which law applies in
this situation. Pogo and Excite@Home have decided that Pogo stockholders will
be permitted to exercise dissenters' appraisal rights under either Delaware or
California law, except to the extent that a court or applicable legal authority
rules otherwise.
Appraisal Rights Under Delaware Law
When the merger becomes effective, stockholders of Pogo who comply with the
procedures of Section 262 of the Delaware General Corporation Law, or Section
262, will potentially be entitled to a judicial appraisal of the fair value of
their shares, exclusive of any element of value arising from the accomplishment
or expectation of the merger, and to receive from the surviving corporation
payment of the fair value of their shares in cash.
The following is a brief summary of the statutory procedures that a
stockholder of Pogo must follow to perfect appraisal rights under the Delaware
General Corporation Law. This summary is not intended to be complete and is
qualified in its entirety by reference to Section 262, the text of which is
included as Annex D to this information statement/prospectus. Any Pogo
stockholder considering demanding appraisal is advised to consult legal
counsel.
To exercise dissenters' appraisal rights under Delaware law, a stockholder
must be the stockholder of record of the shares of Pogo stock as to which
appraisal rights are to be exercised on the date that the written demand for
appraisal described below is made, and the stockholder must continuously hold
these shares through the effective time of the merger.
Pogo stockholders electing to exercise their appraisal rights under Section
262 must take the following actions:
. The stockholder must not vote in favor of approval of the merger. A vote
by a Pogo stockholder against approval of the merger is not required in
order for that stockholder to exercise appraisal rights. If a Pogo
stockholder returns a signed written consent but does not specify a vote
against approval of the merger, then the written consent will be voted
for approval of the merger, which will have the effect of waiving that
stockholder's appraisal rights.
. The stockholder must also deliver a written demand for appraisal to Pogo
within twenty days after the date on which this information
statement/prospectus is mailed to the stockholder. This written demand
must be separate from any written consent or voting against approval of
the merger. Voting against
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approval of the merger or failing to vote with respect to approval of
the merger will not constitute a demand for appraisal within the meaning
of Section 262. A stockholder's failure to make the written demand
within this 20-day period under Delaware law as described above, will
constitute a waiver of appraisal rights.
A Pogo stockholder who elects to exercise appraisal rights must mail or
deliver the written demand for appraisal to:
Pogo.com Inc.
300 California Street, Suite 800
San Francisco, California 94104
Attn: Tyler Cozzens
The written demand for appraisal must specify the stockholder's name and
mailing address and the number of shares of Pogo common stock and Pogo
preferred stock covered by the demand, and must state that the stockholder is
demanding appraisal of its Pogo shares in accordance with Section 262.
Within 10 days after the effective time of the merger, the surviving
corporation must provide notice of the date of effectiveness of the merger to
all Pogo stockholders who have timely delivered written demands for appraisal
and not voted for approval of the merger agreement. Each Pogo stockholder of
record who is eligible to exercise appraisal rights under Delaware law and who
has timely delivered a written demand for appraisal to Pogo and not voted for
approval of the merger will be referred to in this section as a dissenting
stockholder.
Within 120 days after the effective time of the merger, any dissenting
stockholder will be entitled, upon written request, to receive from the
surviving corporation a statement of the aggregate number of Pogo shares not
voted in favor of approval of the merger and with respect to which demands for
appraisal have been received by Pogo, and the aggregate number of holders of
those shares. This statement must be mailed to the dissenting stockholder
within 10 days after Pogo receives the dissenting stockholder's written
request or within 10 days after expiration of the period for delivery of
demands for appraisal, whichever is later.
Within 120 days after the effective time of the merger, either the
surviving corporation or any dissenting stockholder may file a petition in the
Delaware Court of Chancery demanding a determination of the value of each
share of Pogo common stock and Pogo preferred stock of all dissenting
stockholders. If a petition for an appraisal is timely filed, then after a
hearing on the petition, the Delaware Court of Chancery will determine which
of the Pogo stockholders are entitled to appraisal rights and will then
appraise the shares of Pogo common stock and Pogo preferred stock owned by
those stockholders, by determining the fair value of the shares, exclusive of
any element of value arising from the accomplishment or expectation of the
merger, together with the fair rate of interest to be paid, if any, on the
amount determined to be the fair value. If no petition for appraisal is filed
with the Delaware Court of Chancery by the surviving corporation or any
dissenting stockholder within 120 days after the effective time of the merger,
then dissenting stockholders' rights to appraisal will cease and they will be
entitled only to receive shares of Excite@Home Series A common stock in the
merger. The surviving corporation has no obligation to file a petition. Any
Pogo stockholder who desires a petition to be filed is advised to file it on a
timely basis. No petition timely filed in the Delaware Court of Chancery
demanding appraisal will be dismissed as to any Pogo stockholder without the
approval of the Delaware Court of Chancery, and this approval may be
conditioned on any terms the Delaware Court of Chancery deems just.
The cost of the appraisal proceeding may be determined by the Delaware
Court of Chancery and charged against the parties as the court deems equitable
in the circumstances. Upon application of a dissenting stockholder, the court
may order that all or a portion of the expenses incurred by any dissenting
stockholder in connection with the appraisal proceeding, including reasonable
attorney's fees, and the fees and expenses of experts, be charged pro rata
against the value of all shares entitled to appraisal. In the absence of this
determination or assessment, each party bears its own expenses. A dissenting
stockholder who has timely demanded appraisal in compliance with Section 262
will not, after the effective time of the merger, be entitled
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to vote the Pogo stock subject to the demand for any purpose or to receive
dividends or other distributions on the Pogo stock, except for dividends or
other distributions payable to stockholders of record at a date before the
effective time of the merger.
At any time within 60 days after the effective time of the merger, any
dissenting stockholder will have the right to withdraw the stockholder's demand
for appraisal and to accept the right to receive shares of Excite@Home Series A
common stock in the merger on the same basis as other Pogo stockholders. After
this 60-day period, a dissenting stockholder may withdraw his or her demand for
appraisal only with the consent of the surviving corporation.
Appraisal Rights Under California Law
Although Pogo is incorporated in the State of Delaware due to the location
of a majority of its stockholders and Pogo's other contacts with the State of
California, the provisions of the California Corporations Code relating to the
rights of dissenting stockholders in a merger may apply to the merger.
When the merger becomes effective, stockholders of Pogo who do not vote in
favor of the merger and comply with the procedures prescribed in Chapter 13 of
the California Corporations Code, or Chapter 13, may be entitled to a judicial
appraisal of the fair market value of their shares, which, for purposes of the
exercise of appraisal rights under California law, is determined as of the day
before the first announcement of the terms of the merger, excluding any
appreciation or depreciation in consequence of the merger, and to require
Excite@Home to purchase the stockholder's shares for cash at the fair market
value.
The following is a brief summary of the statutory procedures that must be
followed by a stockholder of Pogo in order to dissent from the merger and
perfect appraisal rights under the California Corporations Code. This summary
is not intended to be complete and is qualified in its entirety by reference to
Chapter 13, the text of which is included as Annex E to this information
statement/prospectus. Any Pogo stockholder considering exercising dissenters'
rights is advised to consult legal counsel.
To exercise dissenters' appraisal rights under California law, a Pogo
stockholder must be entitled to vote on the proposal to approve the merger, or
be a transferee of record of shares held by such a stockholder. Under Chapter
13, appraisal rights can only be exercised with respect to shares of Pogo stock
that are outstanding on the record date.
If the merger is approved by Pogo's stockholders, but any Pogo stockholders
do not vote in favor of the merger, then within 10 days after the date of the
approval of the merger by Pogo's stockholders, the surviving corporation will
mail to each Pogo stockholder who did not vote in favor of the merger a notice
of approval of the merger, together with a copy of Sections 1300, 1301, 1302,
1303 and 1304 of the California Corporations Code, a statement of the price
determined by the surviving corporation to represent the fair market value of
dissenting shares, and a brief description of the procedure to be followed if
the stockholder desires to exercise dissenters' appraisal rights under
California law. The statement of the fair market value of the Pogo stock in the
notice of approval will constitute an offer by the surviving corporation to
purchase at that price any shares of Pogo stock for which dissenters' appraisal
rights are perfected.
A stockholder of Pogo wishing to require the surviving corporation to
purchase the stockholder's Pogo shares under Chapter 13 must take the following
actions:
. The stockholder must not vote in favor of approval of the merger. If a
Pogo stockholder returns a signed written consent but does not specify a
vote against approval of the merger, then the written consent will be
voted for approval of the merger, which will have the effect of waiving
that stockholder's appraisal rights.
. The stockholder must make written demand upon the surviving corporation
to have it purchase those shares for cash at their fair market value. The
demand must be made by a person who was a stockholder
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of record on the record date, must state the number and class of
dissenting shares held of record by the dissenting stockholder and must
contain a statement of what the stockholder claims to be the fair market
value of the shares as of August 30, 2000. The statement of fair market
value by the stockholder will constitute an offer by the stockholder to
sell the shares to the surviving corporation at the specified price. The
written demand must be received by the surviving corporation within 30
days after the date on which the notice of the approval of the merger by
Pogo's stockholders is mailed to the stockholder. If the stockholder's
demand is not received by the surviving corporation within this 30-day
period, then the stockholder will forfeit all appraisal rights.
. The stockholder must also submit to the surviving corporation within 30
days after the date on which the notice of approval of the merger by
Pogo's stockholders is mailed to the stockholder, at the surviving
corporation principal office or the office of its transfer agent, the
certificates representing any shares of Pogo stock with respect to which
demand for purchase is being made, to be stamped or endorsed with a
statement that the shares are dissenting shares.
Written demands, notices or other communications concerning the exercise of
dissenters' rights should be addressed to:
Excite@Home
450 Broadway Street
Redwood City, California 94063
Attn: General Counsel
Under California law, a dissenting stockholder may not withdraw a demand
for payment of the fair market value of the stockholder's dissenting shares in
cash unless Excite@Home consents.
If the stockholder and the surviving corporation agree that the shares of
Pogo stock as to which the stockholder is seeking appraisal rights are
dissenting shares, and also agree upon the price to be paid to purchase the
shares, then the dissenting stockholder is entitled to the agreed price plus
interest at the legal rate on judgments under California law from the date of
the merger agreement. Any agreements fixing the fair market value of any
dissenting shares as between the surviving corporation and any dissenting
stockholder must be filed with the secretary of the surviving corporation.
However, if the surviving corporation denies that the stockholder's shares
qualify as dissenting shares eligible for purchase under Chapter 13, or the
surviving corporation and the stockholder fail to agree upon the fair market
value of the shares, then the stockholder may, within six months after the
date on which Pogo mailed to the stockholder the notice of approval of the
merger by Pogo's stockholders, but not thereafter, file a complaint in the
California Superior Court requesting the court to determine whether the
stockholder's shares are eligible for repurchase upon the exercise of
appraisal rights, the fair market value of the shares, or both, or may
intervene in any action pending on such a complaint.
If the court is requested to determine the fair market value of the shares,
it shall appoint one or more impartial appraisers to determine the fair market
value of the shares. However, if the appraisers cannot determine the fair
market value within 10 days of their appointment or within a longer time
determined by the court, then the court will determine the fair market value.
If the court determines that the stockholder's shares qualify as dissenting
shares, then following the determination of their fair market value the
surviving corporation will be obligated to pay the dissenting stockholder the
fair market value of the shares, as so determined, plus interest thereon at
the legal rate from the date on which judgment is entered. Payment on this
judgment will be due upon the endorsement and delivery to the surviving
corporation of the certificates for the shares as to which the appraisal
rights are being exercised.
The costs of the appraisal action, including reasonable compensation to the
appraisers appointed by the court, will be allocated among the surviving
corporation and dissenting stockholders as the court deems equitable. If the
appraisal of the fair market value of the shares, however, exceeds the price
offered by the
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surviving corporation, then the surviving corporation will pay the costs. If
the fair market value of the shares awarded by the court exceeds 125% of the
price offered by the surviving corporation for the shares in the notice of
approval of the merger by Pogo's stockholders, then the court may in its
discretion include attorneys' fees, fees of expert witnesses and interest in
the costs payable by the surviving corporation.
Written Demands
A written demand for appraisal must state the identity of the stockholder of
record making the demand and that the stockholder intends to demand appraisal
of the stockholder's shares. The demand should also state whether it is
submitted under Delaware or California law. A demand for appraisal should be
signed by or for the Pogo stockholder of record, fully and correctly, as that
stockholder's name appears on the stockholder's stock certificate. If Pogo
common stock or Pogo preferred stock is owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, the demand should be
signed by the fiduciary. If Pogo common stock or Pogo preferred stock is owned
of record by more than one person, as in a joint tenancy or tenancy in common,
the demand should be signed by or for all joint owners. An authorized agent,
including an agent for two or more joint owners, should sign the demand for
appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising the demand,
the agent is acting on behalf of the record owner.
Material Differences Between Delaware and California Law on Appraisal Rights
As noted above there are several differences between the laws of Delaware
and California with respect to dissenting stockholders' appraisal rights. These
differences include, but are not limited to the following:
. Under Delaware law, in order to exercise dissenters' appraisal rights, a
stockholder must deliver a written appraisal demand within 20 days after
the date on which this information statement/prospectus is mailed to the
stockholder. By comparison, under California law a stockholder who has
not voted in favor of the merger is not required to deliver a written
appraisal demand until 30 days after the date on which the notice of the
approval of the merger by Pogo's stockholders is mailed to the
stockholder.
. Under Delaware law, Excite@Home or a dissenting stockholder must file a
petition for an appraisal of dissenting shares within 120 days after the
effective time of the merger to exercise appraisal rights. By comparison,
under California law, if the parties do not agree on the status of shares
as dissenting shares or their fair market value, the stockholder has
until six months after the date on which the notice of approval of the
merger by Pogo's stockholders was mailed to the stockholder to file a
complaint in the California Superior Court requesting a determination of
these matters.
Stockholders of Pogo considering whether to seek appraisal should bear in
mind that the fair value of their Pogo common stock and Pogo preferred stock
determined under Section 262 or Chapter 13 could be more than, the same as, or
less than the value of the right to receive shares of Excite@Home Series A
common stock in the merger. Also, the surviving corporation reserves the right
to assert in any appraisal proceeding that the "fair value" of the Pogo common
stock and Pogo preferred stock is less than the value of the shares of
Excite@Home Series A common stock to be issued in the merger.
The process of dissenting and exercising appraisal rights requires strict
compliance with technical prerequisites. Any stockholder who fails to comply
with the requirements of Section 262 of the Delaware General Corporation Law,
which is attached as Annex D to this information statement/prospectus, or
Chapter 13 of the California Corporations Code, which is attached as Annex E to
this information statement/prospectus, will forfeit the rights to dissent from
the merger and exercise appraisal rights and will receive shares of Excite@Home
Series A common stock. Pogo stockholders wishing to dissent should consult with
their own legal counsel in connection with compliance with applicable sections
of Delaware or California law.
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THE MERGER
This section of the information statement/prospectus describes some aspects
of the proposed merger. While Excite@Home and Pogo believe that the description
covers the material terms of the merger and the related transactions, this
summary may not contain all of the information that is important to you. You
should read this entire document and the other documents referred to in this
information statement/prospectus carefully for a more complete understanding of
the merger. In addition, important business and financial information about
Excite@Home is incorporated by reference into this information
statement/prospectus. See "Documents Incorporated by Reference in this
Information Statement/Prospectus." You may obtain the information incorporated
by reference into this information statement/prospectus without charge by
following the instructions in the section entitled "Where You Can Find More
Information."
Background of the Merger
Since April 1998, Pogo and Excite, Inc. which was acquired by Excite@Home in
May 1999, have had many contacts at the management, technical, finance and
marketing levels regarding the implementation of a distribution agreement
between Excite and Pogo. In addition, on March 31, 1999, Excite invested in
Pogo. See "Existing Relationship of Excite@Home and Pogo."
On June 8, 2000, at a meeting of the board of directors of Pogo, the
management of Pogo and members of the board discussed various financing
alternatives and the possibility of being acquired to allow Pogo to continue to
grow its business.
On June 10, 2000, Erick Hachenburg, the Chief Executive Officer of Pogo,
contacted Mark Stevens, Executive Vice President of Corporate and Business
Development of Excite@Home, to inquire if Excite@Home had an interest in
acquiring Pogo. Pogo also contacted representatives of other companies to
discuss joint business opportunities and potential business combinations or
strategic partnerships between these companies and Pogo.
On June 19, 2000, Mr. Stevens contacted Mr. Hachenburg to initiate an
exploratory discussion about furthering the strategic relationship between Pogo
and Excite@Home.
On July 3, 2000, Mr. Hachenburg and Byron Smith, Excite@Home's Executive
Vice President, Consumer Broadband Services, spoke by telephone regarding
Excite@Home's games strategy and Pogo's potential role in that strategy.
On July 9, 2000, Mr. Hachenburg and other members of Pogo's executive staff
met with Christopher Wofford, Peter Negulescu, David Houston and other members
of Excite@Home's management team at Pogo's offices in San Francisco,
California. At that meeting, the representatives of Pogo provided an overview
of Pogo's business and service. The parties also discussed the status of their
distribution relationship and the potential mutual benefits of a more extensive
relationship between the two companies. At that time, however, no agreement was
reached on pursuing a combination more formally.
On July 11, 2000, Mr. Hachenburg and other members of Pogo's executive staff
attended a meeting with Richard Gingras, Peter Negulescu, Kenneth Pate and
other representatives of Excite@Home at the offices of Excite@Home in Redwood
City, California. At this meeting, Pogo and Excite@Home continued their
discussion of Excite@Home's strategies and the opportunities for Pogo to
support Excite@Home's strategies.
On July 12, 2000, Mr. Hachenburg and Nilesh Lakhani, Pogo's Chief Financial
Officer, met with members of Excite@Home's finance department regarding Pogo's
financial condition.
On July 13, 2000, Excite@Home contacted Pogo requesting a meeting to
initiate discussions relating to a possible combination. On that date, Pogo and
Excite@Home entered into a Mutual Non-Disclosure Agreement.
On July 14, 2000, Mr. Hachenburg and Mr. Wofford had a telephone
conversation regarding the possible combination of the companies.
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On July 17, 2000, the board of directors of Pogo met to discuss the status
of discussions with Excite@Home as well as possible alternative financing and
strategic transactions with other companies. The board authorized Mr.
Hachenburg to continue exploratory discussions with multiple parties, including
Excite@Home, with whom discussions were then in progress, in an effort to
maximize the value to be received by Pogo stockholders in any transaction.
Between July 17, 2000 and July 28, 2000, Excite@Home and its outside legal
and financial advisors conducted a preliminary due diligence review of Pogo.
During this period, Mr. Hachenburg continued to negotiate with executives of
other companies regarding the terms, including the consideration to Pogo
stockholders, of a potential business combination transaction with these
companies.
On July 20, 2000, Mr. Hachenburg, Mr. Lakhani and a group of outside
consultants retained by Excite@Home met at Pogo's offices in San Francisco to
discuss Pogo's business and to respond to requests for information. From July
20 to July 27, 2000, this group of consultants also conducted a review of
Pogo's corporate and financial records.
On July 20, 2000, Mr. Lakhani, Tyler Cozzens, Pogo's Vice President of
Corporate Development, and Lesley Mansford, Pogo's Vice President of Marketing,
met with Tom Perez, the Director of Mergers and Acquisitions Human Resources of
Excite@Home, to discuss employee benefits and related transitional matters.
On July 22, 2000, Mr. Negulescu, Mr. Houston, Jim Diaz, Hilleary Hoskinson
and Faith Sedlin of Excite@Home met with Mr. Hachenburg, Greg Harper, Ms.
Mansford and Mark Mitchell of Pogo. At that meeting, the members of Pogo
management presented the representatives of Excite@Home with an overview of
Pogo's services, business strategy and sales and marketing plans.
On July 25, 2000, Mr. Hachenburg and Mr. Smith met regarding the status of
due diligence and potential benefits from a combination of the two companies.
Between July 28, 2000 and August 1, 2000, the management teams of
Excite@Home and Pogo conducted extensive negotiation sessions regarding the
terms and conditions of an agreement relating to the possible combination
between the companies. During this period, Mr. Hachenburg requested that each
of the leading potential acquirers of Pogo submit its "best offer" in order for
the board to evaluate whether to proceed with a transaction with the party, or
any business combination transaction.
On July 31, 2000, the board of directors of Pogo met to discuss the progress
of negotiations with Excite@Home and the status of the responses from other
potential acquirors. The board of directors of Pogo authorized the management
of Pogo to continue negotiating the terms of a possible combination.
On August 1, 2000, the board of directors of Pogo, together with the senior
management of Pogo and its legal advisors, held an extensive discussion
evaluating the relative merits of the potential combinations, including the
valuation and volatility risks relating to each company's stock and the likely
timing of, and risks to, closing each transaction. The board of directors of
Pogo agreed that the Excite@Home proposal constituted a superior transaction,
and approved the execution of a final term sheet with Excite@Home, including
exclusivity provisions that restricted Pogo from soliciting acquisition offers
from third parties.
On August 1, 2000, Pogo and Excite@Home signed a term sheet setting forth
the proposed terms of the acquisition of Pogo by Excite@Home. The term sheet
also contained exclusivity provisions in order to permit the parties to conduct
further due diligence and to negotiate a definitive merger agreement. Under the
term sheet, Pogo agreed not to solicit acquisition offers from third parties
before September 1, 2000, and Excite@Home agreed to provide a $5 million loan
under a convertible bridge note to Pogo to fund its operations. After they
signed the term sheet, Pogo and Excite@Home began negotiating the definitive
merger agreement.
On August 4, 2000, Pogo received a check in the amount of $5 million from
Excite@Home and issued a convertible bridge note in the same amount to
Excite@Home.
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On August 7, 2000, Mr. Hachenburg and the other members of Pogo's executive
team met in San Francisco with Byron Smith and other representatives of
Excite@Home regarding synergies and integration of Pogo with Excite@Home.
On August 8, 2000, Mr. Hachenburg met with Mr. Smith, Mr. Negulescu and Mr.
Houston at Excite@Home's offices in Redwood City regarding the progress of
discussions and strategic benefits of the proposed combination. In addition,
Excite@Home's outside legal counsel delivered to Pogo and its outside legal
counsel drafts of a merger agreement and ancillary agreements.
On August 9, 2000, officers of Pogo and Excite@Home and their legal counsel
met at the San Francisco offices of Excite@Home's legal counsel to negotiate
the merger agreement.
From August 9, 2000 through August 30, 2000, the companies and their
respective counsel met several times and conducted multiple telephone
conferences to negotiate the terms of the merger agreement and the related
agreements. Also during this period, Pogo's management spoke with a group of
Pogo's stockholders concerning the voting agreements.
On August 12, 2000, the committee designated by the board of directors of
Pogo met to discuss the progress of negotiations and to provide guidance to
Pogo's management on the negotiation of the definitive agreement.
On August 15, 2000, the board of directors of Pogo held a meeting at which
Mr. Hachenburg described to the board the status of negotiations, including the
material terms that had been negotiated by the parties since the signing of the
term sheet. Mr. Hachenburg also discussed the operations of Pogo before and
after the completion of the merger.
On August 16, 2000, Excite@Home's board of directors held a meeting and
discussed the terms and conditions of the proposed merger and the merger
agreement. At that meeting, Excite@Home's board unanimously voted to approve
the merger agreement.
On August 17, 2000, the board of directors of Pogo held a meeting at which
Mr. Hachenburg and Pogo's counsel presented a further update regarding the
status of negotiations and at which management of Pogo received instruction
from the board regarding the negotiations.
On August 28, 2000, the board of directors of Pogo met to discuss the terms
and conditions of the proposed merger and the merger agreement. At that
meeting, the board of Pogo voted to approve the terms of the merger agreement
and authorized management to execute the agreement.
On the afternoon of August 30, 2000, the merger agreement, the voting
agreements and forms of the other ancillary agreements were finalized and the
merger agreement and voting agreements were executed. The terms of the merger
were announced in a joint press release that was issued before the opening of
the stock market on August 31, 2000.
Excite@Home's Reasons for the Merger
The board of directors of Excite@Home carefully considered whether to
approve the merger and the merger agreement. In making it decision, the board
of directors identified several potential benefits of the merger that it
believes will contribute to the success of the combined company. These
potential benefits include, among other things:
. strengthening Excite@Home's ability to offer and develop key broadband
consumer interactive entertainment applications;
. providing Excite@Home with opportunities for developing new broadband
advertising products designed to result in an increase in click-throughs
and higher advertising revenues for Excite@Home, as a result of the
intermission and advertising breaks in Pogo's interactive games; and
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. providing Excite@Home with opportunities to cross-sell the @Home service
to Pogo users.
Based on these and other strategic factors, the Excite@Home board of
directors determined that approval of the merger agreement and the merger were
in the best interests of Excite@Home and its stockholders. Accordingly, the
board of directors voted unanimously to approve the merger.
Pogo's Reasons for the Merger
The decision of the Pogo board of directors to enter into the merger
agreement and to recommend that Pogo stockholders approve the merger agreement,
the escrow agreement, the merger and the related transactions was the result of
the Pogo board's careful consideration of a range of strategic alternatives,
including potential business combinations with companies other than
Excite@Home, and the pursuit of a long-term independent business strategy for
Pogo that might involve additional financing and an initial public offering of
its stock.
During the course of its deliberations, the board of directors of Pogo
considered, with the assistance of management and legal counsel, a number of
factors that the board of directors believes make the merger attractive to
Pogo's stockholders and could contribute to the success of the surviving
corporation.
The value of the shares of Excite@Home Series A common stock that the Pogo
stockholders will receive in the merger, as calculated on the date the merger
agreement was signed, represents a premium over the last price paid by
independent investors who purchased shares of Pogo's preferred stock. The board
of directors of Pogo also believes that the price offered by Excite@Home
compares favorably to the current market valuations of other companies in
Pogo's industry.
To date, there has been no public market for the shares of Pogo's capital
stock, and all outstanding shares are subject to restrictions on resale imposed
by securities laws. By contrast, Excite@Home's Series A common stock is
publicly traded on Nasdaq and the shares of Excite@Home Series A common stock
to be issued to Pogo's stockholders in the merger will be tradable on Nasdaq.
The merger may allow Pogo's stockholders to achieve liquidity of their
investment sooner than they might otherwise have been able.
Pogo faces increasing competition from other game and media companies for
users and for online advertising fees. Pogo believes that a combination with a
larger company with the resources of Excite@Home may provide a number of
competitive advantages, including broader distribution and the ability to
establish long-term relationships with new advertising clients. By combining
with Excite@Home, Pogo may also reduce the risks associated with seeking
additional financing and pursuing its revenue goals as an independent company.
Pogo believes that the merger will offer the stockholders of the combined
company the potential benefits described above under the heading "The Merger--
Excite@Home's Reasons for the Merger." In addition, the merger would provide
Pogo access to Excite@Home's greater financial, technological and human
resources to continue to develop Pogo's service and greater sales and marketing
resources to help promote those services more broadly. Pogo also believes that
the merger may create an opportunity for Pogo's games to be featured in new
services and new platforms of Excite@Home.
Following the merger, Pogo may have greater access to the customer base of
Excite@Home, including the residential consumer audience, and may benefit from
increased distribution of Pogo's services both in the United States and
internationally.
Under the terms of the merger agreement, Pogo will be allowed to maintain
its strategic direction and keep most of its assets, management team and
employees together for a period of time after the closing of the merger. Pogo
believes that this continuity will help to make the combination with
Excite@Home more successful and increase the likelihood of Pogo's stockholders
receiving the additional contingent payments.
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In addition, Pogo's board of directors considered a number of potentially
negative factors relating to the merger, including the following:
. by becoming a part of a much larger company, Pogo will have less autonomy
and independence in setting its strategic goals;
. the fixed value of the consideration to be issued in the merger to Pogo's
stockholders, option holders and warrant holders;
. the risk that the potential benefits of the merger may not be realized;
. the provisions of the merger agreement requiring 10% of the shares to be
held in escrow to satisfy potential indemnity claims;
. the possibility that the contingent payments would not be earned or paid
to Pogo's stockholders;
. the risk that Pogo may find it more difficult to attract and retain
skilled employees;
. the risk that management's attention may be diverted from Pogo's business
operations; and
. the other risks described in this information statement/prospectus under
"Risk Factors."
This discussion of factors considered by the Pogo board of directors is not
intended to be exhaustive, but is intended to include the material factors
considered. The Pogo board of directors did not find it practical to and did
not quantify or otherwise assign relative weight to the specific factors
considered and individual directors may have given different weight to
different factors.
Recommendation of Pogo's Board of Directors
After carefully evaluating these factors, both positive and negative, the
board of directors of Pogo has determined that the merger is in the best
interests of Pogo and its stockholders. The Pogo board of directors recommends
that you vote for the approval of the merger agreement, the escrow agreement,
the merger and the related transactions.
Interests of Executive Officers, Directors and Affiliates
In considering the recommendation of the Pogo board of directors with
respect to the approval of the proposal, Pogo stockholders should be aware of
the interests that various executive officers, directors and affiliates of
Excite@Home and Pogo have in the merger. The boards of directors of Excite@Home
and Pogo were aware of these conflicts and considered them when approving the
merger. These interests are different from and in addition to your and their
interests as stockholders. These include:
Interests of Affiliates
Liberty Digital, Inc., the largest stockholder of Pogo, is controlled by
AT&T. AT&T also controls approximately 74% of Excite@Home's voting power and
has the right to appoint a majority of the board of directors of Excite@Home.
Kleiner Perkins Caufield & Byers, the second largest stockholder of Pogo, is
a minority stockholder in Excite@Home. Kleiner Perkins has one representative
on Pogo's board of directors and has two representatives on Excite@Home's board
of directors, including the vice chairman.
Excite@Home is the third largest stockholder of Pogo.
See "Securities Ownership of Certain Beneficial Owners and Management of
Pogo" and "Documents Incorporated by Reference in this Information
Statement/Prospectus."
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Stock Options; Acceleration
Pogo's stock option agreements with employees provide that, upon completion
of the merger, an additional 25% of the shares subject to options or issued
upon exercise of options will become vested. In addition, if the employment of
any stockholder or option holder is terminated for any reason, other than for
cause, within six months following the merger, then an additional 25% of the
shares subject to the option or issued upon exercise of an option will vest
immediately before termination of employment.
Pogo will issue options to purchase up to 5 million shares of its common
stock before the effective time of the merger. Those additional options will
vest over a four-year period. The vesting of these options will not accelerate
as a result of the merger and these options are excluded from the calculation
of the exchange ratio.
The options of the independent directors of Pogo, Charles Wu and Scott
Kauffman, will accelerate and the options will become vested in full before the
merger.
The offer letter of employment between Pogo and Nilesh Lakhani, the Chief
Financial Officer of Pogo, provides that Mr. Lakhani's option to purchase
shares of Pogo common stock will accelerate and will become vested as to an
additional 50% of his shares before the completion of the merger. In addition,
if Mr. Lakhani terminates his employment for good reason or is terminated by
Pogo for any reason, other than for cause, within six months following the
merger, Mr. Lakhani's option to purchase shares of Pogo common stock will
accelerate and become vested as to the remaining 50% of his shares immediately
prior to the termination of his employment. Mr. Lakhani will also be entitled
to a lump sum severance payment equal to six months' salary. Pogo and
Excite@Home have agreed that Mr. Lakhani will be terminated following the
merger and that he will receive full acceleration of his options and the lump
sum severance payment.
Employment Agreements
As a condition to the closing of the merger, Erick Hachenburg, David King,
William Lipa, and at least two of Nicholas Rush, Lesley Mansford, Mark Mitchell
and Greg Harper, all of whom are current executive officers of Pogo, will have
entered into employment agreements that provide for their continued employment
with the surviving corporation of the merger and other benefits. See "Other
Agreements--Employment Agreements."
Completion and Effectiveness of the Merger
The merger will be completed when all of the conditions to completion of the
merger are satisfied or waived, including the approval of the merger by the
stockholders of Pogo. The merger will become effective upon the filing of
certificate of merger in the office of the Secretary of State of the State of
Delaware.
Treatment of Pogo Common Stock, Preferred Stock, Options and Warrants
Treatment of Pogo common stock and preferred stock. With the exception of
dissenting shares, if the merger becomes effective, each share of Pogo common
stock and Pogo preferred stock then outstanding will be converted into shares
of Excite@Home Series A common stock. The number of shares of Excite@Home
Series A common stock you will receive will be determined by multiplying the
number of shares of Pogo capital stock you hold by an exchange ratio. The
exchange ratio will equal:
. the quotient obtained by dividing (a) $125,000,000 minus (1) the amount
by which Pogo's trade accounts payable and accrued expenses (excluding
capital lease obligations, principal and accrued interest on the
convertible bridge note, employee severance payments payable in
connection with the merger and fees incurred by Pogo in connection with
the merger, merger agreement and related transactions), exceed $5,000,000
and (2) all amounts paid by Pogo to redeem its Series A-2 preferred stock
by (b) the sum of the number of shares of Pogo common stock and Pogo
preferred stock (excluding its Series A-2 preferred stock) outstanding
immediately before the merger plus the number of shares of Pogo stock
that are issuable upon exercise of all Pogo options and warrants
outstanding
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immediately before the merger, excluding new options for up to 5,000,000
shares of Pogo common stock that may be issued by Pogo before the merger
and excluding any shares of Series D preferred stock of Pogo issued upon
the conversion of a convertible bridge note issued by Pogo to Excite@Home;
divided by
. the average of the closing prices of Excite@Home Series A common stock as
reported by Nasdaq for the 10 consecutive trading days ending on the last
full trading day immediately before the day the merger becomes effective.
The actual exchange ratio will not be determined until the merger becomes
effective. For hypothetical examples of the calculation of the exchange ratio,
see page 2.
Treatment of Pogo Options and Warrants. Upon the completion of the merger,
each option to purchase Pogo common stock and each warrant to purchase Pogo
common stock or preferred stock that is outstanding immediately prior to the
merger will be assumed by Excite@Home and converted into an option or a warrant
to purchase a number of shares of Excite@Home Series A common stock equal to
the number of shares of Pogo stock subject to the option or warrant multiplied
by the exchange ratio. The post-merger exercise price of each converted Pogo
option or warrant will be its pre-merger exercise price divided by the exchange
ratio.
Additional contingent payments. In addition to the shares of Excite@Home
Series A common stock to be issued to Pogo stockholders as described above, the
holders of Pogo voting stock may receive additional shares of Excite@Home
Series A common stock under two separate contingent payments. One is based on
the surviving corporation's revenue for the six months after the merger and the
other is based on the surviving corporation's retention of five key executives
until October 15, 2001. The maximum value of each of these two contingent
payments is $12.5 million and the number of shares to be distributed to Pogo's
stockholders will be based upon the average closing prices of Excite@Home's
Series A common stock for 10 consecutive trading days before the determination
of each contingent payment. Each Pogo stockholder of record at the effective
time of the merger will receive a pro rata portion of each contingent payment
if made.
(1) Revenue contingent payment. The revenue contingent payment will
depend on the surviving corporation's actual revenue for the six-month
period beginning on the first day of the month immediately following the
merger and will be determined as follows:
(i) if the surviving corporation's actual revenues for the six-month
period exceed its target revenues of $16,593,389, subject to certain
adjustments, the payment will be $12.5 million.
(ii) if the surviving corporation's actual revenues for the six-
month period are less than 100%, but more than 80% of the target
revenues, the amount of the payment will be determined by multiplying
$12.5 million by a fraction. The numerator of the fraction will be the
surviving corporation's actual revenues divided by its target revenues
minus 0.80. The denominator of the fraction will be 0.20.
(iii) if the surviving corporation's actual revenues for the six-
month period are less than 80% of its target revenues, the payment will
be $0.
(2) Executive contingent payment. If Erick Hachenburg and at least four
of David King, William Lipa, Nicholas Rush, Lesley Mansford, Mark Mitchell
and Greg Harper are still employed by the surviving corporation as of
October 15, 2001, then the executive contingent payment will be
$12.5 million.
Each of these contingent payments is more fully described in the merger
agreement that is attached as Annex A to this information statement/prospectus.
Exchange of Pogo Stock Certificates for Excite@Home Stock Certificates
When the merger is completed, Excite@Home's exchange agent will mail to Pogo
stockholders a letter of transmittal and instructions for surrendering Pogo
stock certificates in exchange for Excite@Home stock
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certificates. When you deliver your Pogo stock certificates to the exchange
agent along with an executed letter of transmittal and any other required
documents, your Pogo stock certificates will be canceled and you will receive
stock certificates representing the number of whole shares of Excite@Home
Series A common stock to which you are entitled under the merger agreement,
plus any cash instead of fractional shares.
Do not submit your Pogo stock certificates for exchange unless and until you
receive the transmittal instructions and a letter of transmittal from the
exchange agent.
Escrow Arrangements and Stockholder Agent
By approving the merger, the Pogo stockholders will authorize the creation
of the escrow fund, the terms of the escrow agreement and the appointment of
Erick Hachenburg as their agent with respect to indemnification matters and
with respect to any issues relating to any additional contingent payments that
may be payable by Excite@Home. A total of 10% of the initial Excite@Home Series
A common stock otherwise deliverable to the Pogo stockholders upon the merger
will be deposited in the escrow fund. The purpose of the escrow fund is to
indemnify Excite@Home in the event of a breach of the representations and
warranties and agreements in the merger agreement and against specific
copyright infringement claims. The escrow fund will serve as Excite@Home's
exclusive remedy for damages for which Excite@Home is entitled to
indemnification under the escrow agreement, other than damages arising from
fraudulent or intentional acts.
Accounting Treatment of the Merger
Excite@Home intends to account for the merger as a purchase for financial
reporting and accounting purposes, under generally accepted accounting
principles. After completion of the merger, the results of operations of Pogo
will be included in the consolidated financial statements of Excite@Home. The
purchase price will be allocated to Pogo's assets and liabilities based on the
fair values of the assets acquired and the liabilities assumed. Any excess of
cost over fair value of the net tangible assets of Pogo acquired will be
recorded on Excite@Home's balance sheet as goodwill and other intangible assets
and will be amortized on Excite@Home's statement of operations by charges to
operations under generally accepted accounting principles. These allocations
will be made based upon valuations and other studies that have not yet been
finalized.
Regulatory Approvals
The merger is subject to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act. The merger may not be completed until required information
and materials are furnished to the Antitrust Division of the Department of
Justice and the Federal Trade Commission, and the applicable waiting period has
expired or been terminated. On September 26, 2000, Excite@Home and Pogo filed
the required information and materials with the Department of Justice and the
Federal Trade Commission.
The Antitrust Division of the Department of Justice or the Federal Trade
Commission may challenge the merger on antitrust grounds either before or after
expiration of the waiting period. Accordingly, at any time before or after the
completion of the merger, either the Antitrust Division of the Department of
Justice or the Federal Trade Commission could take action under the antitrust
laws. Additionally, at any time before or after the completion of the merger,
any state or other person could take action under the antitrust laws to enjoin
the merger, even if the waiting period has expired or been terminated.
Neither Excite@Home nor Pogo is aware of any other material governmental or
regulatory approval required for completion of the merger, other than the
effectiveness of this registration statement, compliance with applicable
corporate law of Delaware and California, and compliance with applicable state
"blue sky" laws.
Material Federal Income Tax Considerations
The following discussion summarizes the material federal income tax
consequences of the merger. This discussion is based on currently existing
provisions of the Internal Revenue Code of 1986, as amended, which
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is referred to in this information statement/prospectus as the Internal Revenue
Code, existing Treasury regulations and current administrative rulings and
court decisions, all of which are subject to change. Any such change, which may
or may not be retroactive, could alter the tax consequences to Excite@Home,
Pogo or Pogo stockholders.
Pogo stockholders should be aware that this discussion does not deal with
all federal income tax considerations that may be relevant to particular Pogo
stockholders that are subject to special rules or that may be important in
light of such stockholders' individual circumstances, such as stockholders who:
. are dealers in securities or foreign currency;
. are subject to the alternative minimum tax provisions of the Internal
Revenue Code;
. are foreign persons or entities;
. are financial institutions or insurance companies;
. are tax-exempt organizations;
. do not hold their Pogo shares as capital assets;
. acquired their shares in connection with any stock option or stock
purchase plans or in other compensatory transactions; or
. hold Pogo capital stock as part of an integrated investment, including a
"straddle" or "conversion" transaction, pledge against currency risk, or
constructive sale, comprised of shares of Pogo capital stock and one or
more other positions.
In addition, the following discussion does not address:
. tax consequences of the merger under foreign, state or local tax laws;
. tax consequences of transactions effectuated before, after or
concurrently with the merger (whether or not any such transactions are
undertaken in connection with the merger) including any transaction in
which Pogo shares are acquired or Excite@Home shares are disposed of; or
. tax consequences to holders of options, warrants or similar rights to
acquire Pogo capital stock, including the assumption by Excite@Home of
outstanding options and subscriptions to acquire Pogo capital stock.
Pogo stockholders are urged to consult their own tax advisors as to the
specific tax consequences of the merger, including the applicable federal,
state, local and foreign tax consequences of the merger.
Completion of the merger is conditioned on receipt of tax opinions by Pogo
and Excite@Home from their respective counsel, Fenwick & West LLP and O'Melveny
& Myers LLP, to the effect that the merger will constitute a "reorganization"
within the meaning of the Internal Revenue Code. If Excite@Home does not
receive a tax opinion from O'Melveny & Myers LLP, then the condition will be
satisfied if Fenwick & West LLP renders a tax opinion to Excite@Home.
Similarly, if Pogo does not receive a tax opinion from Fenwick & West LLP, then
the condition will be satisfied if O'Melveny & Myers renders a tax opinion to
Pogo. The tax opinions are subject to certain assumptions, limitations and
qualifications, and will be based upon representations received from
Excite@Home, Merger Sub and Pogo to support the opinions, and in other
documents related to Excite@Home, Merger Sub and Pogo.
The following material federal income tax consequences generally will result
from the merger constituting a reorganization within the meaning of the
Internal Revenue Code:
. Pogo stockholders will not recognize any gain or loss solely upon receipt
in the merger of Excite@Home common stock in exchange for Pogo capital
stock, except to the extent of cash received in lieu of fractional shares
of Excite@Home common stock and Pogo stockholders that exercise their
dissenters' rights.
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. The aggregate tax basis of the Excite@Home common stock received by a
Pogo stockholder in the merger, including any fractional shares of
Excite@Home common stock not actually received, should be the same as the
aggregate tax basis of the surrendered Pogo capital stock.
. The holding period for the Excite@Home common stock received by a Pogo
stockholder in the merger should include the period for which the
surrendered Pogo capital stock was considered to be held, provided that
the Pogo capital stock so surrendered is held as a capital asset at the
time of the merger.
. A Pogo stockholder receiving cash instead of a fractional share will
recognize gain or loss with respect to such payment measured by the
difference, if any, between the amount of cash received and the basis in
the fractional share.
. The return of any escrow shares to Excite@Home in satisfaction of an
indemnification claim is not expected to result in the recognition of
gain or loss but is instead expected to be treated as an adjustment to
the exchange terms of the merger agreement. Accordingly, the basis of
Excite@Home Series A common stock received in the merger by holders of
escrow shares would be adjusted.
. The receipt of any additional shares of Excite@Home common stock should
be characterized as an adjustment to the exchange terms of the merger
agreement. Accordingly, the receipt of additional shares of Excite@Home
Series A common stock pursuant to the contingent share arrangements
should not result in the recognition of gain or loss for federal income
tax purposes, and the basis of each share of Excite@Home Series A common
stock received in the merger by holders of additional shares would be
adjusted.
. A Pogo stockholder who exercises dissenters' rights will generally
recognize gain or loss for federal income tax purposes, measured by the
difference between the amount of cash received and the holder's basis in
the Pogo shares, provided that the stockholder exercising dissenters'
rights owns no shares of Pogo stock (either actually or constructively
within the meaning of Section 318 of the Internal Revenue Code)
immediately after the merger.
. Holders of Pogo Series A-2 preferred stock that receive cash from Pogo in
redemption of their Series A-2 preferred stock prior to the merger and
that own no shares of Pogo common stock, either actually or
constructively within the meaning of Section 318 of the Internal Revenue
Code, immediately after the transaction should recognize gain or loss
with respect to such payment measured by the difference, if any, between
the amount of cash received and their bases in the Series A-2 preferred
stock. Holders of Series A-2 preferred stock are urged to consult their
own tax advisers regarding the tax consequences of the redemption of
their Series A-2 preferred stock.
. Neither Excite@Home, Merger Sub nor Pogo should recognize gain or loss
solely as a result of the merger.
Excite@Home and Pogo will not request a ruling from the Internal Revenue
Service in connection with the merger, and the tax opinions will not be binding
upon the IRS. The IRS is therefore not precluded from successfully asserting a
contrary position. A successful IRS challenge to the reorganization status of
the merger as a result of a failure to meet any of the requirements of a
reorganization would result in Pogo stockholders recognizing taxable gain or
loss with respect to each share of Pogo capital stock surrendered equal to the
difference between their bases in such shares and the fair market value, as of
the date the merger is completed, of the Excite@Home common stock received in
the merger. In such event, a stockholder's aggregate basis in the Excite@Home
common stock so received would equal its fair market value as of the date the
merger is completed and the stockholder's holding period for such stock would
begin the day after the merger.
Although Excite@Home and Pogo will receive tax opinions to the effect that
the merger will constitute a reorganization, a recipient of shares of
Excite@Home Series A common stock could recognize gain to the extent that those
shares were considered to be received in exchange for services or property
other than solely Pogo capital stock. All or a portion of such gain may be
taxable as ordinary income. A Pogo stockholder also could be required to
recognize gain to the extent such stockholder was treated as receiving,
directly or indirectly, consideration other than Excite@Home Series A common
stock in exchange for Pogo stock.
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Certain non-corporate Pogo stockholders may be subject to backup withholding
at a 31% rate on cash payments received in connection with the merger. Backup
withholding will not apply, however, to a Pogo stockholder who (a) furnishes a
correct taxpayer identification number and certifies that he, she or it is not
subject to backup withholding on the substitute Form W-9 or successor form, (b)
provides a certification of foreign status on Form W-8 or successor form, or
(c) is otherwise exempt from backup withholding. Pogo stockholders will be
required to attach a statement containing certain information required by the
IRS concerning their participation as a stockholder in the merger to their
federal income tax returns for the taxable year in which the merger occurs.
Pogo stockholders are urged to consult their own tax advisers regarding any
information reporting and backup withholding requirements.
Appraisal Rights
If the merger occurs, Pogo stockholders who do not vote their shares in
favor of the merger may be entitled to dissenters' and appraisal rights under
Delaware and California rights.
For a further discussion of Pogo stockholders' possible rights to appraisal,
including summaries of both Delaware and California law, see "The Vote of the
Pogo Stockholders--Appraisal Rights of Dissenting Pogo Stockholders."
Restrictions on Sales of Shares by Affiliates of Excite@Home and Pogo
All shares of Excite@Home Series A common stock to be issued to Pogo
stockholders in the merger will be registered under the Securities Act. These
shares will be transferable under the Securities Act, except for shares of
Excite@Home Series A common stock issued to any person who is an affiliate of
either Excite@Home or Pogo, as that term is defined under the Securities Act.
Persons who may be deemed to be affiliates include individuals or entities that
control, are controlled by, or are under common control of either company and
may include some of their officers and directors, as well as their principal
stockholders. Affiliates may sell their shares of Excite@Home Series A common
stock acquired in the merger in transactions permitted by the resale provisions
of Rule 145(d) under the Securities Act or as otherwise permitted under the
Securities Act.
Operations Following the Merger
After completion of the merger, Pogo will continue its operations as a
wholly owned subsidiary of Excite@Home. The stockholders of Pogo will become
stockholders of Excite@Home, and their rights as stockholders will be governed
by the Excite@Home amended and restated certificate of incorporation, the
Excite@Home bylaws and the laws of the State of Delaware. See "Comparison of
Stockholder Rights."
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THE MERGER AGREEMENT
This section of the information statement/prospectus describes the merger
agreement. While Excite@Home and Pogo believe that the description covers the
material terms of the merger agreement, this summary may not contain all of the
information that is important to you. The merger agreement is attached to this
information statement/prospectus as Annex A and Excite@Home and Pogo urge you
to read it carefully.
General
If the Pogo stockholders have approved the merger and the other conditions
to the merger have been satisfied or waived, a wholly owned subsidiary of
Excite@Home named Pogo Acquisition Corp., or Merger Sub, will be merged with
Pogo. Merger Sub will survive the merger as a wholly owned subsidiary of
Excite@Home and will change its name to "Pogo.com Inc."
Exchange of Shares
With the exception of dissenting shares, each issued and outstanding share
of Pogo common stock, Series A preferred stock, Series B preferred stock,
Series C preferred stock, and Series D preferred stock, referred to in this
information statement/prospectus as Pogo voting stock, will be converted into
shares of Excite@Home Series A common stock. The number of shares of
Excite@Home Series A common stock you will receive will be determined by
multiplying the number of shares of Pogo capital stock you hold by the exchange
ratio which will be determined as described under "The Merger--Treatment of
Pogo Common Stock, Preferred Stock, Options and Warrants."
Additional Contingent Payments
In addition to the shares of Excite@Home Series A common stock to be issued
to each holder of Pogo voting stock of record at the effective time of the
merger as described above, each holder of Pogo voting stock may receive
additional, pro rata payments, in the form of additional shares of Excite@Home
Series A common stock, as described under "The Merger--Treatment of Pogo Common
Stock, Preferred Stock, Options and Warrants." By approving the merger, Pogo
stockholders will authorize the appointment of Erick Hachenburg as their agent
with respect to any issues relating to the contingent payments.
Treatment of Pogo Options and Warrants
Upon the completion of the merger, each option to purchase Pogo common stock
and each warrant to purchase Pogo common stock or preferred stock that is
outstanding immediately prior to the merger will be assumed by Excite@Home and
converted into an option or a warrant to purchase a number of shares of
Excite@Home Series A common stock equal to the number of shares of Pogo stock
subject to the option or warrant multiplied by the exchange ratio. The post-
merger exercise price of each converted Pogo option or warrant will be its pre-
merger exercise price divided by the exchange ratio.
Excite@Home and Pogo have agreed that Pogo may grant employees of Pogo new
options for up to 5,000,000 shares of Pogo common stock to be issued by Pogo
before the merger. These additional stock options will vest over a four-year
period, with not more than 25% vesting at the end of the first year and the
remainder vesting at 2.083% per month thereafter. The vesting of the additional
Pogo stock options will not accelerate in connection with the merger agreement
and the transactions contemplated thereby. Excite@Home and Pogo will agree upon
the specific allocation among Pogo employees prior to the closing of the
merger. These new stock options will not be considered outstanding for purposes
of calculating the exchange ratio for the merger.
Excite@Home has agreed to file a registration statement on Form S-8 to
register the shares of Excite@Home Series A common stock issuable upon exercise
of assumed stock options as soon as practicable following the closing date and
in any event within 20 business days after the closing date, and will use its
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reasonable efforts to maintain the effectiveness of such registration statement
consistent with Excite@Home's practice with similar registration statements
related to employee stock plans for Excite@Home's employees.
Appraisal Rights
If any Pogo stockholder asserts dissenters' or appraisal rights under
California or Delaware law, Pogo must promptly notify Excite@Home of the claim
or demand. Excite@Home will have the right to participate in all negotiations
and proceedings with respect to any claim or demand. The surviving corporation
will not, except with the prior written consent of Excite@Home, make any
payment, evaluation or appraisal with respect to, or settle or offer to settle,
any claim or demand for payment.
Representations and Warranties
Pogo made representations and warranties in the merger agreement regarding
aspects of its organization, capital structure, financial statements, authority
to enter into the merger agreement, and the absence of brokers and financial
advisors. Pogo also made other customary representations and warranties,
relating to, among other things:
. its financial statements and absence of undisclosed material liabilities;
. changes in its business since June 30, 2000;
. regulatory approvals required for completion of the merger;
. title to property it owns or leases;
. various aspects of its intellectual property;
. its rights to its games on its web site;
. environmental matters;
. litigation or investigations pending or threatened against it or to which
it is a party;
. its taxes and tax obligations;
. its employee benefit plans;
. ""excess parachute payments" to employees;
. transactions with its affiliates;
. its compliance with applicable laws;
. its material contracts and compliance with them;
. voting requirements to approve the merger agreement;
. material contractual restrictions on its business;
. its accounting records and compliance with generally accepted accounting
principles;
. its insurance;
. dividends and other distributions;
. its bank accounts; and
. the accuracy of information it provided to be included in any filings
with a governmental entity having jurisdiction over the merger or the
transactions contemplated thereby.
In the merger agreement, Excite@Home also made representations and
warranties regarding aspects of its organization, capital structure, financial
statements, authority to enter into the merger agreement, and the
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absence of brokers and financial advisors. In addition, Excite@Home represented
and warranted as to the validity of the Series A common stock to be issued in
connection with the merger, the accuracy and completeness of documents and
reports filed by Excite@Home with the SEC, and the operation of Merger Sub.
The representations and warranties in the merger agreement are detailed and
not easily summarized. You are urged to carefully read the sections of the
merger agreement entitled "Representations and Warranties of Pogo" and
"Representations and Warranties of Parent."
Conduct of Business Before Completion of the Merger
Pogo has agreed that until the earlier of the termination of the merger
agreement or the completion of the merger, Pogo will, unless Excite@Home
consents in writing, carry on its business in the ordinary course and will use
reasonable efforts to preserve intact its present business organizations, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, providers, and others with which it
has business dealings. In particular, subject to some exceptions, Pogo will
not, among other things:
. declare, set aside or pay any dividends or other distributions on any of
its capital stock;
. purchase, redeem (other than the redemption of the Series A-2 preferred
stock) or acquire any of its capital stock, except pursuant to any
agreement that permits the repurchase of unvested shares or the
cancellation of options;
. issue, or authorize the issuance of, additional shares of its capital
stock or securities convertible into capital stock, other than (i) the
issuance of Pogo common stock upon the exercise of options or warrants,
(ii) the conversion of the convertible bridge note payable to Excite@Home
or the Pogo preferred stock in accordance with their terms, (iii) the
grants of options to new employees to purchase up to a maximum of 500,000
shares of Pogo common stock, and (iv) the issuance to lenders, equipment
leasing companies, landlords or otherwise in the ordinary course of
business of Pogo common stock or warrants to purchase up to a maximum of
100,000 shares;
. amend or otherwise modify the terms of any such options or warrants;
. amend its certificate of incorporation or bylaws, except as necessary to
authorize a sufficient number of shares of capital stock in order to
enable the conversion of any currently outstanding security of Pogo to be
converted into or exercised for shares of Pogo stock;
. acquire or agree to acquire interests in other entities or assets that
are material to its business;
. mortgage or otherwise encumber any of its assets;
. incur or guarantee any indebtedness, sell debt securities or enter into
any "keep well" agreement;
. make any loans, advances or capital contributions to, or investments in,
any person or entity other than Pogo;
. make or agree to make any new capital expenditures in excess of $100,000
individually, or $1 million in the aggregate;
. dispose of or permit to lapse its rights to intellectual property;
. make or rescind any election relating to taxes, settle any claims or
lawsuits related thereto, or change its method of reporting income or
deductions for federal income tax purposes;
. other than in the ordinary course of business consistent with past
practice, pay or discharge any liabilities or claims, except for (i)
liabilities reflected on its financial statements, and (ii) redemption of
the Series A-2 preferred stock;
. enter into any new employment agreements or increase compensation to
officers, directors or employees, other than in the ordinary course of
business, pay any pension amounts not authorized by
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the existing pension plan, or commit to any additional compensation
structures or other employee benefits;
. other than in the ordinary course of business, terminate, amend or modify
any material contracts;
. grant exclusive marketing or other exclusive rights for a period in
excess of 90 days;
. execute any operating lease in excess of $100,000; or
. authorize or agree to take any of the above actions.
The agreements related to the conduct of Pogo's business in the merger
agreement are complicated and not easily summarized. You are urged to carefully
read the section of the merger agreement entitled "Covenants Relating to
Conduct of Business."
Director and Officer Indemnification
For six years after the merger, the surviving corporation will maintain
provisions on indemnification in its certificate of incorporation and bylaws at
least as favorable to the officers and directors as those set forth in Pogo's
certificate of incorporation and bylaws. For six years after the merger,
Excite@Home and the surviving corporation will indemnify the officers and
directors of Pogo prior to the effective time of the merger against all losses,
legal expenses, claims, damages, liabilities, judgments, or amounts paid in
settlement in respect to any claim, action, suit or proceeding, whether
criminal, civil, administrative or investigative based on or arising out of or
relating to the fact that such person is or was a director or officer of Pogo
and arising out of acts or omissions occurring on or after July 1, 2000 and on
or prior to the effective time of the merger to the extent (i) indemnification
is permitted by law and (ii) the claim does not arise out of an act or omission
by the officer or director that (1) constituted a breach of a duty of loyalty
to Pogo or its stockholders, (2) taken in bad faith or involved intentional
misconduct or a knowing violation of a law, or (3) related to any transaction
in which the officer derived an improper personal benefit.
No Solicitation
Until the merger is completed or the merger agreement is terminated, Pogo
has agreed to cease any activities, discussions or negotiations with any
parties concerning an acquisition proposal. An acquisition proposal is any
proposal for a merger or other business combination involving Pogo or any
proposal or offer to acquire any securities, or a substantial portion of the
assets, of Pogo. Pogo has agreed further that it will not:
. solicit, initiate, or encourage the submission of any acquisition
proposal;
. participate in any discussions regarding or furnish any person any
information with respect to and acquisition proposal or any inquiry that
may reasonably be expected to lead to an acquisition proposal; and
. enter into any other transaction pursuant to an acquisition proposal.
Pogo's board of directors may decide not to recommend that Pogo stockholders
approve the merger if Pogo receives a bona fide acquisition proposal that
Pogo's board of directors concludes, in good faith, would, if completed, result
in a transaction that would provide greater value to Pogo stockholders than the
proposed merger. In addition, the Pogo board of directors must also conclude,
after consultation with outside counsel, that it would be inconsistent with its
fiduciary duties to recommend the merger to Pogo stockholders in light of the
superior proposal. This determination by Pogo's board of directors does not
relieve Pogo of its obligation to submit the merger for approval by Pogo
stockholders.
Pogo has agreed to inform promptly Excite@Home, orally and in writing, of
any acquisition proposal, including the identity of the person or group making
the acquisition proposal and the material terms of the acquisition proposal.
Pogo has agreed to keep Excite@Home informed of the status and details of any
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acquisition proposal and to notify Excite@Home if Pogo's board of directors
determines to withdraw its recommendation of the merger as a result of a
superior proposal.
Convertible Bridge Note
Pogo has entered into a convertible bridge note, dated August 4, 2000, with
Excite@Home, pursuant to which Pogo has borrowed $5 million. Excite@Home has
agreed that, at the request of Pogo, Excite@Home will loan Pogo up to an
additional $1.3 million to fund the redemption of the Series A-2 preferred
stock. In addition, from November 1, 2000 until the effective time of the
merger, Excite@Home has agreed to loan to Pogo, if requested by Pogo, up to
$1.8 million per month, as long as Pogo is meeting its operating budget. The
loans will have the same terms as the convertible bridge note and will be
evidenced by amending the convertible bridge note to reflect the additional
loans. All amounts outstanding under the convertible bridge note, as amended,
will be converted into shares of Series D preferred stock of Pogo that will be
canceled immediately before the effective time of the merger.
Nasdaq Listing
Excite@Home has agreed to apply for listing on Nasdaq of the shares of
Excite@Home Series A common stock issuable to holders of Pogo voting stock and
stock options and warrants.
Charter Documents of the Surviving Corporation
The certificate of incorporation of Merger Sub as in effect immediately
before the effective time will become the certificate of incorporation of the
surviving corporation, except that the name will be changed to "Pogo.com Inc."
The bylaws of Merger Sub will become the bylaws of the surviving corporation.
Fees and Expenses of the Merger
If the merger is completed, Excite@Home will pay up to $425,000 of Pogo's
fees and expenses incurred in connection with the merger agreement and the
merger.
Conditions to Completion of the Merger
The obligations of Excite@Home and Pogo to complete the merger are subject
to the satisfaction or waiver of each of the following conditions:
. in addition to the requirement under applicable law and Pogo's charter
documents that the merger agreement be approved by a majority of the
outstanding shares of Pogo common stock, voting separately as a class,
and by the holders of a majority of the outstanding shares of Pogo
preferred stock (excluding the Series A-2 preferred stock), voting
separately as a class, the merger agreement, the escrow agreement, the
merger and the related transactions will have been approved by at least
86% of the outstanding shares of Pogo voting stock;
. Excite@Home, Pogo and Pogo Acquisition Corp. will have timely obtained
from the relevant governmental entities all authorizations, consents,
waivers or approvals, if any, necessary for completion of or in
connection with the merger and the transactions contemplated by the
merger agreement, except for such authorizations, consents, waivers or
approvals the failure to obtain would not have a material adverse effect;
. the SEC will have declared the registration statement on Form S-4
registering the issuance of Excite@Home Series A common stock in the
merger effective and will not have issued any stop order, injunction or
similar impediment related thereto;
. no law or order prohibiting or preventing the merger or other
transactions contemplated by the merger agreement, or otherwise impairing
the business of Pogo as currently conducted, will have been enacted,
entered, issued, promulgated or enforced by any governmental entity;
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. all outstanding indebtedness owed by Pogo to Excite@Home under the
convertible bridge note will have been converted to Series D preferred
stock of Pogo; and
. the escrow agreement will have been executed by Excite@Home, Pogo, the
stockholder agent, and the escrow agent.
Pogo's obligations to complete the merger are subject to the satisfaction or
waiver by it of each of the following additional conditions:
. the representations and warranties of Excite@Home and Merger Sub in the
merger agreement will be true and correct as of the closing date, except
to the extent the failure to be true and correct would not have a
material adverse effect with respect to Excite@Home, and Excite@Home and
Merger Sub will have performed and complied in all material respects with
all covenants, obligations and conditions of the merger agreement
required to be performed and complied with by them as of the effective
time, and Excite@Home and Merger Sub will have delivered a certificate to
that effect;
. Pogo will have received a legal opinion from counsel to Excite@Home; and
. Pogo will have received a written opinion from its counsel to the effect
that the merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
Excite@Home's obligations to complete the merger are subject to the
satisfaction or waiver by it of each of the following additional conditions:
. Erick Hachenburg, David King, William Lipa and at least two of Nicholas
Rush, Lesley Mansford, Mark Mitchell and Greg Harper will remain employed
by Pogo as of the closing date;
. Pogo will have delivered to Excite@Home a balance sheet as of the end of
the last calendar month preceding the closing date for which a regularly
prepared balance sheet is available together with a schedule itemizing
the financial information necessary to determine the exchange ratio;
. the representations and warranties of Pogo in the merger agreement shall
be true and correct as of the closing date, except to the extent the
failure to be true and correct would not have a material adverse effect
with respect to Pogo, and Pogo will have performed and complied in all
material respects with all covenants, obligations and conditions of the
merger agreement required to be performed and complied with by them as of
the effective time, and Pogo will have delivered a closing certificate to
that effect;
. Excite@Home and Merger Sub will have received a legal opinion from
counsel to Pogo;
. Excite@Home will have received a written opinion from its counsel to the
effect that the merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code; and
. Pogo will have delivered to the holders of its Series A-2 preferred stock
an appropriate notice of redemption to redeem all outstanding shares of
Series A-2 preferred stock, and Pogo will have deposited with a bank or
trust company sufficient cash to redeem such shares, together with
irrevocable instructions and authority to pay the redemption price to the
holders of Pogo's Series A-2 preferred stock.
Termination
At any time before the effective time, the merger agreement may be
terminated by the mutual written consent of Excite@Home and Pogo.
At any time before the effective time, the merger agreement may be
terminated by either party under any of the following circumstances:
. if the conditions to each party's obligations to effect the merger set
forth in Section 8.1 of the merger agreement become incapable of being
satisfied, so long as (i) the terminating party did not prevent
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satisfaction by breaching its covenants or obligations under the merger
agreement in any material respect or by a material breach of any of its
representations or warranties, and (ii) the other party performed its
obligations under the merger agreement and did not breach its
representations and warranties in any manner that would have a material
adverse effect on such party;
. if the merger is not completed by December 31, 2000, so long as (i) the
terminating party did not prevent completion of the merger by breaching
its covenants or obligations under the merger agreement in material
respect or by a material breach of any of its representations or
warranties, and (ii) the other party performed its obligations under the
merger agreement and did not breach its representations and warranties in
any manner that would have a material adverse effect on such party;
. if a final governmental injunction or order prohibiting the merger is
issued and is not appealable; or
. if a statute, rule, regulation or order is enacted or issued that makes
the merger illegal.
Excite@Home may terminate the merger agreement if:
. the board of directors of Pogo withdraws its approval or recommendation
of the merger agreement or the merger or has resolved to take such
action; or
. any of the additional conditions to the obligations of Excite@Home
becomes incapable of being satisfied, so long as Excite@Home did not
prevent satisfaction by breaching its covenants or obligations under the
merger agreement in any material respect or by a material breach of any
of its representations or warranties and Pogo performed its obligations
under the merger agreement and did not breach its representations and
warranties in any manner that would have a material adverse effect on
Pogo.
Pogo may terminate the merger agreement if any of the additional conditions
to the obligations of Pogo becomes incapable of being satisfied, so long as
Pogo did not prevent satisfaction by breaching its covenants or obligations
under the merger agreement in material respect or by a material breach of any
representation or warranty thereunder, and Excite@Home and Merger Sub performed
their obligations under the merger agreement in all material respects and did
not breach their representations and warranties in any manner that would have a
material adverse effect on them.
If either Excite@Home or Pogo terminates the merger agreement as set forth
above,
. the merger agreement will become void and have no effect;
. each party will be responsible for their own fees and expenses incurred
in connection with the merger, the merger agreement and the transactions
related to the merger; and
. Excite@Home and Pogo must consult with each other prior to the issuance
of any press release or other public statement.
Payment of Termination Fee
If the merger agreement is terminated for any of the following reasons, Pogo
will be obligated to pay Excite@Home a termination fee of $4.5 million:
. the board of directors of Pogo withdraws its approval or recommendation
of the merger agreement or the merger;
. the Pogo stockholders do not approve the merger agreement or the merger;
or
. Pogo materially breaches the no solicitation provision in the merger
agreement.
If the merger agreement is terminated for any of these reasons, Pogo will
also reimburse Excite@Home for actual out-of-pocket fees and expenses of
Excite@Home in connection with the merger, merger agreement and in the
enforcement of rights under the merger agreement.
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Extension, Waiver and Amendment of the Merger Agreement
Excite@Home and Pogo may agree to amend the merger agreement at any time,
except, that, after Pogo stockholders approve the merger, no amendment will be
made that requires further approval of the stockholders of Pogo, subject to
some conditions.
Either of Excite@Home or Pogo may extend the other's time for the
performance of any of the obligations or other acts under the merger agreement,
waive any inaccuracies in the other's representations and warranties and waive
compliance by the other with any of the agreements or conditions contained in
the merger agreement.
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OTHER AGREEMENTS
Voting Agreements
As a condition to the merger agreement, Excite@Home required some
stockholders of Pogo to sign voting agreements. These voting agreements require
these persons or entities to vote all of the shares of Pogo capital stock
beneficially owned by them in favor of the merger agreement, the escrow
agreement, the merger and the related transactions and against any proposal in
opposition to or competition with the merger. Each of these stockholders also
granted Excite@Home an irrevocable proxy to vote the stockholder's shares of
Pogo voting stock. The stockholders who entered into voting agreements,
collectively, beneficially owned % of the outstanding Pogo common stock and
% of the outstanding Pogo preferred stock as of the record date.
Each Pogo stockholder who is a party to a voting agreement agreed not to
sell or transfer the Pogo stock beneficially owned or subsequently acquired by
that person until the termination of the voting agreement. The voting
agreements will terminate at the earlier of the effective time of the merger or
the date the merger agreement is terminated pursuant to its terms.
The form of the voting agreement is attached as Annex C to this information
statement/prospectus.
Escrow Agreement
Under the merger agreement and the escrow agreement, once a damage threshold
of $500,000 has been exceeded, the Pogo stockholders will indemnify Excite@Home
for any and all damages Excite@Home suffers as a result of any inaccuracy or
breach by Pogo of any representation or warranty, any material breach by Pogo
of any covenant contained in the merger agreement, and certain copyright
infringement claims. Ten percent of the total number of shares of Excite@Home
Series A common stock otherwise deliverable upon the effective time of the
merger to each holder of Pogo voting stock will be placed in escrow to secure
indemnification obligations of the stockholders of Pogo. The shares deposited
in the escrow fund will remain available to compensate Excite@Home for one year
from the date of the closing of the merger. If a claim is asserted prior to the
one year anniversary of the closing and the claim has not been resolved by the
one year anniversary, shares will remain in the escrow fund in an amount
sufficient to satisfy such claim until such claim has been resolved, even if
the one year period has elapsed.
The total liability of the Pogo stockholders for their indemnification
obligations under the escrow agreement will not exceed the value of the shares
held in escrow. That value will be determined based on the average of the
closing price of Excite@Home Series A common stock as reported on Nasdaq during
the ten consecutive trading days immediately before the effective time of the
merger. The limitations on indemnification contained in the merger agreement do
not limit Excite@Home's remedies for any intentional or fraudulent breaches of
the representations, warranties or covenants of Pogo.
By approving the merger agreement and its related transactions, the Pogo
stockholders will authorize the appointment of Erick Hachenburg as their agent
with respect to indemnification matters and with respect to any issues relating
to any additional contingent payments that may be made by Excite@Home. Under
the escrow agreement, the stockholder agent is authorized to give and receive
notices and communications, execute stock powers, authorize, or object to,
delivery of Excite@Home Series A common stock or other property from the escrow
fund in satisfaction of Excite@Home's indemnity claims, and to enter into
settlements and compromises, or demand the arbitration of, such indemnity
claims.
The form of escrow agreement is attached as Annex B to this information
statement/prospectus.
Employment Agreements
It is a condition to closing that Erick Hachenburg, David King, William
Lipa, and at least two of Nicholas Rush, Lesley Mansford, Mark Mitchell and
Greg Harper will have entered into employment
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agreements. Each employment agreement will set forth the employee's position,
duties, scope of employment and compensation with Excite@Home. Under the terms
of these employment agreements, each of these employees will be an at-will
employee.
For 24 months after the effective time of the merger, or until the
termination of the employee by Excite@Home without cause or termination by the
employee with good reason, whichever is earlier, each employee with an
employment agreement will agree not to:
. engage in any activity or business involving interactive games and
supporting game systems;
. be or become an officer, director, stockholder, owner, corporate
affiliate, salesperson, co-owner, partner, trustee, promoter, founder,
technician, engineer, analyst, employee, agent, representative, investor
or lender, consultant, advisor or manager of or to, or otherwise acquire
or hold any interest in or otherwise engage in the providing of services
to any person or entity that, at the effective time or, to the extent
permitted by applicable law, engages in a business involving interactive
games and supporting game systems; or
. authorize his or her name to be used in connection with a business
involving interactive games and supporting game systems.
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DESCRIPTION OF EXCITE@HOME
Excite@Home is the leading provider of broadband online services. As of June
30, 2000, we had approximately 1.8 million worldwide subscribers to our @Home
service, which provides high-speed Internet access to consumers utilizing the
cable television infrastructure. We also expect to offer the @Home service over
digital subscriber lines (DSL) in partnership with Rhythms NetConnections. The
@Home service offers an "always on" connection with speeds many times faster
than 56 kilobits-per-second dialup modems and features a scalable, distributed,
intelligent private network designed to avoid bottlenecks frequently
encountered on the public Internet. Elements of this advanced data network
include a national, optical fiber Internet protocol backbone, regional data
centers and local caching servers. We intend to leverage our broadband
connectivity services to deliver a comprehensive broadband experience to our
customers, including entertainment and media, information, communications and
other services.
We have long-term agreements with many of the largest cable companies in
North America to carry the @Home service. Our agreements provide that we are
the exclusive provider of broadband Internet connectivity through at least June
2002 with respect to AT&T, Cox and Comcast, and through various dates from 2002
to 2006 with respect to other cable partners. We have agreed with Cox, Comcast
and AT&T to terms that will extend our relationship with these cable partners
on a favorable but non-exclusive basis through 2006 and in the case of AT&T,
through 2008. Under the new agreements, we have issued to these cable partners
warrants for an estimated 100 million shares of our common stock and AT&T has
obtained voting control over all board actions. Including our DSL agreement
with Rhythms NetConnections, the footprint of our @Home service was
approximately 74 million homes in North America as of June 30, 2000.
Approximately 28 million of the 59 million homes in our North American cable
footprint were served by upgraded two-way cable capable of carrying our @Home
service as of June 30, 2000.
We also have agreements with cable partners in Australia, Belgium, Germany,
Japan and the Netherlands to provide the @Home service in those countries under
exclusive, seven-year arrangements. The @Home service has been commercially
launched in Australia, Belgium, the Netherlands and Japan with a launch planned
in Germany later in 2000. We recently announced an agreement with UPC and its
parent company, UnitedGlobalCom, to form a joint venture to be named Excite
Chello, which would combine UPC's chello broadband subsidiary with our assets
and operations outside North America, including our international joint
ventures and wholly owned subsidiaries. Excite Chello is expected to have a
footprint of over 30 million homes outside North America under long-term
contracts including our 13.5 million home international footprint.
We expanded our media and advertising services in 1999 by acquiring Excite,
a leading consumer Internet destination, MatchLogic, a subsidiary of Excite
specializing in targeted advertising services, Bluemountain.com, an online
greeting card service, and other media properties that deliver entertainment,
shopping and information services to our users. Our other acquisitions,
including Webshots in 1999 and Kendara and Worldprints in 2000 will enable us
to deliver enhanced Internet-based information and shopping, community and
photo services to our users. The Excite Network encompasses all of our web
properties and offers comprehensive search, news and information, shopping,
community and communications services that can be customized and personalized
to users' preferences. Additionally, Excite provides web site content services
such as web site development.
We intend to utilize the intellectual property, knowledge and capabilities
that we have obtained through our acquisitions to create new and comprehensive
Internet services that take advantage of personalization, multi-location access
and the speed of broadband to deliver a compelling experience to Internet users
worldwide. Our @Home 2000 service is a significant step toward our goal of
delivering this experience. @Home 2000 is currently available to @Home
subscribers in North America and features a custom browser utilizing the latest
multimedia and security features and a broadband version of the Excite service
incorporating the personalization capabilities of Excite with multimedia
content made possible by a high-speed connection. @Home 2000 has enabled us to
increase the rate at which we form strategic partnerships with online providers
of broadband-enabled services and content, including content delivery networks,
streaming audio and video entertainment and information services, gaming and
online entertainment networks, and Internet advertisers. In
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addition, since the Excite Network is the basis for the @Home 2000 service,
Excite users can effortlessly integrate the broadband platform into their
existing routines. Since a broadband connection is not always available to our
customers, we offer Internet-based services using handheld wireless devices
through our recent introduction of Excite Mobile and we also offer a free
dialup Internet service called FreeLane powered by Excite. These services
enable customers to access our online offerings from multiple locations and
represent additional opportunities to raise awareness for our broadband online
services.
MatchLogic's services complement the Excite Network by providing targeted
advertising services including online campaign management and marketing of
online data. Our recent acquisition of DataInsight will enhance our ability to
provide e-commerce and online marketing relationship management services.
Utilizing our online advertising space on the Excite Network, the MatchLogic
and DataInsight marketing databases and our marketing program development and
management expertise, we are able to create comprehensive marketing campaigns
for advertisers interested in reaching or targeting users of the Excite
Network, @Home subscribers and potential subscribers in our upgraded cable
footprint, our anonymous behavioral profiles or our opt-in e-mail profiles.
Our @Work service provides end-to-end managed connectivity for businesses
over cable, DSL and other digital communications lines connected to our private
network and also provides web hosting and development of e-commerce solutions.
@Work also offers Internet content providers and delivery networks, such as
iBEAM, Akamai and Microcast, direct access to our broadband subscribers by
connecting their data centers into our network, putting data closer to our
broadband users and bypassing the public Internet. These content delivery
networks have agreed to pay us for bandwidth usage based on the amount of their
customers' content that flows to our subscribers across our backbone. These
relationships are expected to benefit both the content delivery networks and
@Home subscribers by optimizing the delivery of broadband content. Our
subscriber growth and the introduction of @Home 2000 have resulted in
substantial increases in traffic across our network, which is expected to
benefit our strategy of selling bandwidth. We are also developing information
and e-commerce services for small and medium-size businesses, including our
recently formed joint venture with Dow Jones to develop Work.com, a
comprehensive Internet portal for businesses. Additionally, we acquired iMALL
in 1999 to provide comprehensive e-commerce solutions and hosting services for
businesses. We recently integrated these services into the Excite Network under
ExciteStores and enhanced them with the introduction of Freetailer, a free
online storefront appealing to startup e-commerce businesses that cannot
afford, and do not yet need, fee-based solutions. iMALL also develops e-
commerce solutions for third parties, such as the design and development of e-
commerce payment gateways.
The Excite Chello joint venture is intended to combine our international
operations and assets with those of chello broadband in order to realize
anticipated synergies between our respective services, create economies of
scale and secure funding for aggressive international expansion. The initial
funding of Excite Chello will consist of up to 400 million Euros, of which our
share is 100 million Euros. Excite Chello will be equally owned and jointly
controlled by Excite@Home and UPC/UnitedGlobalCom. We expect to account for our
investment in Excite Chello under the equity method and record our share of the
net losses of the new joint venture. In addition to contributing our @Home
operations in five countries, we plan to contribute our Excite-branded portal
sites with locally sourced content in Australia, Canada, France, Germany,
Italy, Japan, the Netherlands, Spain, Sweden and the United Kingdom. These
assets and operations are generally managed through joint venture operations
with local partners in each country.
For a further description of Excite@Home, please see the documents relating
to Excite@Home listed under "Documents Incorporated by Reference in this
Information Statement/Prospectus," including our Annual Report on Form 10-K/A
for the fiscal year ended December 31, 1999.
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DESCRIPTION OF POGO
Pogo is a leading provider of family games and interactive leisure time
activities on the Internet. Pogo provides its games through its own site at
pogo.com and through a network of distribution partner sites. Pogo currently
features over 30 games, including card games, board games, free casino games,
puzzle games, trivia games and arcade games and is developing additional
popular and easy-to-play games for its service.
In May 1998, Pogo launched its first group of interactive family games in
the games channel on the excite.com web site and shortly thereafter began
providing games through other web portals and online services. Today, Pogo's
games are distributed on Excite, iWon.com, the Go Network, Snap, Real Networks,
@Home, Road Runner, WebCrawler, iVillage, Alloy, The Station, Talk City,
Entertaindom, About.com, Nokia.com and Lycos-U.K. In September 1999, Pogo
launched its own branded games site at pogo.com and changed the company name
from T E Network, Inc. to Pogo.com Inc. In July 2000, the pogo.com web site
accounted for approximately 50% of Pogo's total advertising impressions and the
remainder of Pogo's advertising impressions were displayed to users visiting
Pogo's partner sites.
Since launching its first group of family games in May 1998, Pogo has
experienced substantial growth in usage. Total usage of Pogo's games has grown
from approximately 10.0 million hours in January 2000 to 19.9 million hours in
July 2000.
Pogo derives substantially all of its revenue from the sale of
advertisements on its network of sites. For advertisements displayed on the
pogo.com web site, Pogo retains 100% of the advertising revenue, while for
advertisements featured on the sites of Pogo's distribution partners, Pogo
typically pays a distribution fee equal to a percentage of the revenue derived
from advertising on the particular distribution partner site. Pogo also derives
a small amount of revenue from programming fees and hosting of games for
smaller web sites.
Pogo seeks to deliver a variety of advertising products to generate multiple
revenue streams, and Pogo has committed significant resources to building an
advertising sales force and developing the technical support for a variety of
online advertising products. Pogo's service and the underlying technology have
been designed to provide a flexible advertising environment. Pogo believes that
its online game service provides an effective medium for advertising for
several reasons, including the following:
. Pogo's service is sticky, which means that it keeps users engaged for
relatively long periods;
. family games, much like television, are a popular leisure time activity
in which an advertising message can be integrated into the experience;
and
. because family games are offered on the Internet and require
registration, Pogo and its advertisers have the ability to target
advertising messages to specific demographic groups.
Through distribution relationships with Excite, iWon, the Go Network, CNet
and others, Pogo has built a broad distribution network for its games. Pogo
commingles the players of its games from the pogo.com site and from all of its
distribution partner sites into a single game community in which a user from
one distribution partner's web site may play games with a user from another
distribution partner's web site or from the pogo.com web site. As a result,
Pogo offers each new distribution partner critical mass at the time of launch
and allows users who access the games from different sites to interact with a
larger community of players.
Pogo has committed significant resources to development of its brand, and
seeks to enhance brand awareness through targeted online advertising, co-
marketing relationships with distribution partners and other marketing and
public relations efforts. In 1999, Pogo launched a branded games site at
www.pogo.com in order to increase brand awareness. Pogo also offers community-
building features and services, including chat among users playing on different
co-branded sites, player rankings and recognition of players who win prizes.
Pogo also communicates to its member through newsletters and e-mail updates.
Pogo competes with a number of other game services on the Internet. Portals
and online services such as Yahoo!, Microsoft Network and Lycos have either
developed or acquired their own game offerings. In addition,
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Electronic Arts has launched EA.com, a service that features both entertainment
software titles and family games and has an exclusive distribution agreement
with America Online, and Hasbro Interactive is developing Games.com, which is
expected to offer popular branded games and other family games. Sony has
launched The Station, which offers popular game shows and branded board games,
and Warner Brothers' has launched Entertaindom, which also offers similar
content. Although Pogo currently distributes its family games on The Station
and Entertaindom, Sony and Warner Brothers could terminate or fail to renew the
distribution agreements with Pogo. Uproar Inc. also offers online game shows
and family games. In addition, Pogo may compete with a number of other lotto
and prize web sites, including iWon.com and Freelotto.com.
Many of Pogo's competitors have more financial, marketing and engineering
resources than Pogo and may be able to develop their services more quickly or
more effectively than Pogo. In addition, these competitors may have the
advantage of being able to promote their games on their high-traffic web
properties or through offline marketing campaigns.
Pogo was incorporated in Delaware in June 1995 under the name T E Network,
Inc. and changed its name to Pogo.com Inc. in October 1999. In 1996 Pogo
commercially launched an online game service that charged monthly subscription
fees to members in exchange for the right to play popular, graphics-intensive
entertainment software games licensed from third parties. Pogo discontinued
this service in 1999. As of September 30, 2000, Pogo had 117 employees, most of
who work at Pogo's executive offices in San Francisco, California. Pogo also
has sales offices in New York, Los Angeles, Chicago and Dallas.
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EXISTING RELATIONSHIP OF EXCITE@HOME AND POGO
Since April 1998, Pogo and Excite, Inc., which was acquired by Excite@Home
in May 1999, have had many contacts at the management, technical, finance and
marketing levels regarding the implementation of the agreements between Excite
and Pogo, including discussions regarding integration of technology,
introduction of new games, payment of distribution fees, ongoing promotional
activities and advertising opportunities on Excite.
In April 1998, Pogo entered into a Content License and Co-Branded Area
Agreement with Excite, under which Pogo provided family games on Excite's games
channel. In March 1999, Pogo and Excite entered into a Premier Game Provider
Agreement, which amended the prior license agreement and made Pogo the premier
provider of family games on the Excite service through March 2002. Pogo paid
Excite $2 million for advertising, promotion and linking on Excite's service
for one year, Pogo also paid Excite $2 million as a non-refundable advance
against distribution fees payable to Excite during the term of the agreement.
Under the agreement, Pogo also agreed to provide notice to Excite if Pogo
entered into discussions with a third party that Pogo reasonably believed would
result in a change of control of Pogo.
In March 1999, Excite acquired 2 million shares of Pogo's Series D preferred
stock, at a price of $8 million, and a warrant to purchase 500,000 additional
shares of Pogo's Series D preferred stock. Since March 1999, Excite or
Excite@Home has had the right to appoint an observer to attend meetings of
Pogo's board of directors. Excite@Home's observer ceased attending Pogo's board
meetings in June 2000.
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SECURITIES OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF POGO
The following table sets forth information, as of September 30, 2000, known
to Pogo with respect to the beneficial ownership of Pogo capital stock by:
. each stockholder known by Pogo to be the beneficial owner of more than 5%
of Pogo's capital stock;
. each director;
. our chief executive officer and our other four most highly compensated
executive officers whose salary and bonus exceeded $100,000 for the year
ended December 31, 1999; and
. all current directors and executive officers as a group.
Applicable percentage ownership in the following table is based on
20,910,053 shares of Pogo capital stock, consisting of 4,748,141 shares of
common stock, 1,887,900 shares of Series A preferred stock, 4,376,714 shares of
Series B preferred stock, 2,809,860 shares of Series C preferred stock and
7,087,438 shares of Series D preferred stock outstanding as of September 30,
2000. The table treats as outstanding, for purposes of calculating each
specific stockholder's percent ownership, all shares subject to options and
warrants held by the stockholder that are exercisable within 60 days after
September 30, 2000. Unless otherwise indicated below, the persons and entities
named in the table have sole voting and sole investment power with respect to
all shares beneficially owned, subject to community property laws where
applicable. Unless otherwise indicated, the address of each of the individuals
listed in this table is c/o Pogo.com Inc., 300 California Street, Suite 800,
San Francisco, California 94104.
<TABLE>
<CAPTION>
Shares of
Shares of Preferred
Common Stock Percent of Stock Percent of
Beneficially Outstanding Beneficially Outstanding
Name of Beneficial Owner Owned Common Stock Owned Preferred Stock
------------------------ ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Liberty Digital, Inc.(1)..................... 0 * 3,750,000 23.2%
Russell Siegelman
Kleiner Perkins Caufield & Byers(2)......... 18,832 * 2,447,040 15.1%
At Home Corporation(3)....................... 0 * 2,500,000 15.0%
Joo-Hock Chua
Vertex Investment (II) Ltd.(4).............. 4,993 * 1,862,124 11.5%
Techno-Venture Co., Ltd.(5).................. 0 * 1,479,849 9.2%
Erick Hachenburg............................. 1,169,500 24.6% 0 *
William Lipa(6).............................. 622,092 13.1% 116,482 *
David King(7)................................ 621,607 13.1% 92,997 *
Greg Harper(8)............................... 515,280 10.9% 7,112 *
Leslie Mansford.............................. 250,000 5.3% 0 *
Scott Kauffman(9)............................ 32,500 * 0 *
Charles Wu(10)............................... 32,500 * 0 *
All executive officers and directors as a
group (12 persons).......................... 4,192,304 87.1% 4,525,755 28.0%
</TABLE>
--------
* Represents beneficial ownership of less than 1%.
(1) Represents shares of Pogo's Series D preferred stock. The address of
Liberty Digital, Inc. is 12312 West Olympic Boulevard, Los Angeles,
California 90064. These shares are held of record by Liberty TE, Inc.
(2) The share number includes 18,361 shares of common stock, 328,367 shares of
Series A preferred stock, 1,092,321 shares of Series B preferred stock,
721,426 shares of Series C preferred stock, 243,750 shares of Series D
preferred stock and 20 shares of common stock issuable upon exercise of a
warrant held of record by Kleiner Perkins Caufield & Byers VII, L.P. It
also includes 471 shares of common stock, 8,420 shares of Series A
preferred stock, 28,008 shares of Series B preferred stock, 18,498 shares
of
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Series C preferred stock and 6,250 shares of Series D preferred stock
held of record by KPCB Information Sciences Zaibatsu Fund II, L.P. Mr.
Siegelman is a director of Pogo.com and a general partner of KPCB VII
Associates, L.P., which is the general partner of Kleiner Perkins
Caufield & Byers VII, L.P. and KPCB Information Sciences Zaibatsu Fund
II, L.P. Each fund disclaims beneficial ownership of the shares held by
the other. Additionally, Mr. Siegelman disclaims beneficial ownership of
the shares held by these funds, except to the extent of his pecuniary
interest. The address of Mr. Siegelman and the funds he represents is
2750 Sand Hill Road, Menlo Park, California 94025.
(3) The share number includes 2,000,000 shares of Series D preferred stock
and 500,000 shares of Series D preferred stock issuable upon exercise of
a warrant held of record by Excite@Home. The share number excludes shares
subject to issuance upon conversion of the convertible bridge note dated
August 4, 2000, as it may be amended, between Pogo.com Inc. and At Home
Corporation. The address of Excite@Home is 450 Broadway Street, Redwood
City, California 94063.
(4) The share number includes 3,978 shares of common stock, 223,330 shares of
Series A preferred stock, 1,043,206 shares of Series B preferred stock
and 20 shares of common stock issuable upon exercise of a warrant held of
record by Vertex Investment (II) Ltd.; 470,588 shares of Series C
preferred stock held of record by Vertex Technology Fund Ltd.; 125,000
shares of Series D preferred stock held of record by Vertex Technology
Fund (II) Ltd.; and 995 shares of common stock held of record by HWH
Investment Pte. Ltd. Mr. Chua is a director of Pogo.com and Senior Vice
President of Vertex Management Pte. Ltd., which is the general partner of
Vertex Investment (II) Ltd., Vertex Technology Fund Pte. Ltd., Vertex
Technology Fund Ltd. and HWH Investment Pte. Ltd. Each fund disclaims
beneficial ownership of the shares held by the other. Additionally, Mr.
Chua disclaims beneficial ownership of the shares held by these funds,
except to the extent of his pecuniary interest therein. The address of
Mr. Chua and the funds he represents is Three Lagoon Drive, Suite 220,
Redwood City, California 94065.
(5) The share number includes 666,974 shares of Series C preferred stock held
of record by Techno VII (B) L.P.; 666,974 shares of Series C preferred
stock held of record by Techno VIII L.P.; and 145,901 shares of Series C
preferred stock held of record by Techno VII (A) L.P. Each fund disclaims
beneficial ownership of the shares held by the other. The address of
these funds is 15-5 Ichibancho, Chiyoda-ku, Ichibancho NN Building, Tokyo
102-0082 Japan.
(6) Includes 116,482 shares of Series A preferred stock.
(7) Includes 92,997 shares of Series A preferred stock.
(8) Includes 7,112 shares of Series A preferred stock.
(9) Represents shares subject to an option that becomes exercisable in full
upon a change of control. Mr. Kauffman is a director of Pogo.
(10) Represents shares subject to an option that becomes exercisable in full
upon a change of control. Mr. Wu is a director of Pogo.
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COMPARISON OF STOCKHOLDER RIGHTS
This section of the information statement/prospectus describes some
differences between the rights of holders of Pogo capital stock and Excite@Home
capital stock. While Excite@Home believes that the description covers the
material differences between the two, this summary may not contain all of the
information that is important to you. You should carefully read this entire
document and the other documents to which Excite@Home and Pogo refer for a more
complete understanding of the differences between being a stockholder of Pogo
and being a stockholder of Excite@Home. You may obtain the information
incorporated by reference into this information statement/prospectus without
charge by following the instructions in the section entitled "Where You Can
Find More Information."
After the merger, the stockholders of Pogo will become stockholders of
Excite@Home. Due to the fact that Pogo and Excite@Home are both Delaware
corporations, the Delaware General Corporation Law, or the DGCL, will continue
to govern the rights of Pogo stockholders. Although Pogo is organized under the
laws of the State of Delaware, it is still subject to various provisions of the
California Corporations Code, or the CCC, due to the location of a majority of
Pogo stockholders in California and due to Pogo's other contacts with the State
of California. Section 2115 of the CCC specifies those provisions that apply to
Pogo. Some of the provisions of the CCC that apply to Pogo are discussed below.
The rights of Pogo stockholders are also governed by its amended and
restated certificate of incorporation and its amended and restated bylaws. Upon
completion of the merger, the rights of Pogo stockholders who become
Excite@Home stockholders will be governed by the certificate of incorporation
and bylaws of Excite@Home. The following paragraphs summarize differences
between the rights of Excite@Home stockholders and Pogo stockholders under the
certificates of incorporation and bylaws of Excite@Home and Pogo, as well as
material differences between applicable California and Delaware law that may
affect the interests of Pogo stockholders.
Classes of Stock
Excite@Home
The Excite@Home certificate of incorporation provides for two classes of
capital stock: common stock and preferred stock. The common stock is divided
into two series: the Series A common stock and the Series B common stock. The
preferred stock is divided into 3 series: Series A non-voting convertible
preferred stock, Series B non-voting convertible preferred stock, and Series C
non-voting convertible preferred stock. The Excite@Home certificate of
incorporation also provides for additional preferred stock which is
undesignated as to a specific series. Excite@Home's board of directors is
empowered to cause additional shares of preferred stock to be issued from time
to time in one or more series, and the board of directors may fix the number of
shares of each series and the designation, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions relating to each series.
Pogo
The Pogo certificate of incorporation provides for two classes of capital
stock: common stock and preferred stock. The preferred stock is divided into 5
series: Series A preferred stock, Series A-2 preferred stock, Series B
preferred stock, Series C preferred stock and Series D preferred stock. Holders
of each series of voting preferred stock have rights, preferences and
privileges that are superior to those of the Pogo common stock. These include
liquidation preferences, dividend preferences, additional voting rights and
antidilution protection, among other things. The Series A-2 preferred stock
also has redemption rights specified in Pogo's certificate of incorporation.
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Voting
Excite@Home
Holders of Excite@Home Series A common stock have the right to one vote for
each share of Series A common stock held, and holders of Excite@Home Series B
common stock have the right to 10 votes for each share of Series B common stock
held, on all matters presented to the Excite@Home stockholders.
The Excite@Home certificate of incorporation provides that, except to the
extent otherwise provided in the resolution(s) providing for the issuance of
any series of preferred stock, the holders of shares of the series of preferred
stock have no voting rights except as provided by the DGCL. Further, unless
otherwise expressly provided in the certificate of designations for a series of
preferred stock, no consent or vote of the holders of shares of preferred stock
is required to amend the Excite@Home certificate of incorporation to increase
or decrease the number of authorized shares of preferred stock or any series of
preferred stock.
Pogo
Holders of Pogo preferred stock, with the exception of the Series A-2
preferred stock, vote together as a single class on an as-converted to common
stock basis and, except as described below, not as separate classes. Holders of
Pogo common stock and voting preferred stock have the right to one vote for
each share of common stock held on an as-converted to common stock basis. The
shares of Series A-2 preferred stock are not entitled to a vote, except as
provided by the DGCL. Further, the consent or vote of a majority of the holders
of shares of voting preferred stock is required to amend the Pogo certificate
of incorporation, increase or decrease the number of authorized shares of
preferred stock, authorize any new series of preferred stock or take other
actions specified in the certificate of incorporation. Under Section 1201 of
the CCC, holders of Pogo preferred stock and Pogo common stock vote as separate
classes on a vote to approve the terms of a merger.
Special Meetings of Stockholders
Excite@Home
Under the DGCL, a special meeting of stockholders may be called by the board
of directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. The Excite@Home bylaws provide that special
meetings of the stockholders may be called by a majority of the members of the
board of directors then in office or upon written request of the holders of not
less than 10% of the total voting power of the outstanding capital stock of
Excite@Home entitled to vote at the meeting.
Pogo
The Pogo bylaws provide that special meetings of the stockholders may be
called by a majority of the members of the board of directors then in office or
by the chief executive officer or upon written request of the holders of not
less than 25% of the total voting power of the outstanding capital stock of
Pogo entitled to vote at the meeting.
Record Date for Determining Stockholders
Excite@Home
The Excite@Home bylaws provide that the board of directors may fix a record
date which:
. in the case of determination of stockholders entitled to vote at any
meeting of stockholders or adjournment of any meeting, must not be more
than 60 nor less than 10 days before the date of the meeting;
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. in the case of determination of stockholders entitled to express consent
to corporate action in writing without a meeting, must not be more than
10 days from the date upon which the resolution fixing the record date is
adopted by the board of directors; and
. in the case of any other action, must not be more than 60 days prior to
the action.
Pogo
The Pogo bylaws provide that the board of directors may fix a record date
which must not be more than 60 nor less than 10 days before the date of the
meeting, nor more than 60 days prior to the action to which the record date
relates, in the case of determination of stockholders entitled to:
. vote at any meeting of stockholders;
. notice of any adjournment of any meeting;
. express consent to corporate action in writing without a meeting;
. receive payment of any dividend or other distribution or allotment of any
rights;
. exercise any rights in respect to any change, conversion or exchange of
stock; or
. notice for the purpose of any other lawful action.
Number of Directors
Excite@Home
The Excite@Home certificate of incorporation provides that so long as there
are not less than 10 million shares of Series B common stock outstanding, the
board of directors shall consist of not fewer than seven and not more than
seventeen directors, with the exact number to be specified by the board of
directors. If the number of shares of Series B common stock is less than
10 million shares, the minimum number of directors will be three. The total
number of directors may not be less than the total number of directors that the
holders of Series A and Series B common stock are entitled to elect plus any
directors that the holders of any series of preferred stock, voting as a
separate series, are entitled to elect.
Pogo
The Pogo bylaws provide that the board of directors will consist of not
fewer than five and not more than ten directors, with the number currently
fixed at seven. The number of members of the board of directors may be
increased or decreased at any time by vote of a majority of the directors then
in office.
Election of Directors
Excite@Home
The Excite@Home certificate of incorporation provides that:
. so long as there are at least 10 million shares of Series B common stock
outstanding, the holders of Series B common stock, voting separately as a
single series, will be entitled to elect the smallest number of directors
which constitutes a majority of the entire board of directors;
. if holders of Series B common stock are entitled to elect any directors,
then so long as there are any shares of Series A common stock
outstanding, the holders of Series A common stock, voting separately as a
single series, will be entitled to elect two directors, which must not be
(1) an officer, other than a Vice Chairman, of, or employed by,
Excite@Home or its subsidiaries or (2) an affiliate or associate of Cox
Enterprises, Inc., Comcast Corporation or AT&T Broadband, LLC, or any of
their affiliates, other than Excite@Home and its subsidiaries; and
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. any remaining directors will be elected by the holders of the Series A
common stock, Series B common stock, and any series of preferred stock
entitled to vote, voting together as one class.
Pogo
The Pogo certificate of incorporation provides that:
. the holders of the Series A preferred stock and the Series B preferred
stock, voting together as a class, are entitled to elect two directors;
. the holders of the Series D preferred stock, voting as a class, are
entitled to elect one director; and
. the holders of common stock, voting together with the holders of the
voting preferred stock voting on an as-converted to common stock basis
are entitled to elect any remaining directors.
In addition, Section 708 of the CCC provides that unless the certificate of
incorporation or bylaws expressly eliminate cumulative voting, stockholders
entitled to vote at any election of directors, may cumulate votes. This means
they can give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the stockholder's
shares are normally entitled, or distribute the stockholder's votes among as
many candidates as the stockholder thinks fit, so long as at least one
stockholder has given notice, prior to the voting, of such stockholder's intent
to cumulate his or her votes at the meeting. Pogo's certificate of
incorporation and bylaws do not expressly eliminate cumulative voting.
Removal of Directors
Excite@Home
The DGCL provides that for corporations such as Excite@Home, which neither
have cumulative voting nor a classified board of directors, any director or the
entire board may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors. The
Excite@Home certificate of incorporation provides that any director elected by
the holders of Series A common stock or Series B common stock may be removed
from office without cause solely by the vote of the holders of a majority of
the outstanding shares of the series of common stock that elected the director.
Pogo
The Pogo bylaws provide that any director or the entire board may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors. Under the CCC, however, no
director of a corporation whose board of directors is unclassified (such as
Pogo) may be removed, unless the entire board of directors is removed, if the
votes cast against removal would be sufficient to elect the director in an
election involving cumulative voting. In addition, Section 303 of the CCC
provides that for removal of a director without cause, if a series or class of
stockholders, voting as a class or series, are entitled to elect one or more
directors, then any director so elected may be removed only by the vote of the
holders of the shares of that class or series. In addition, Section 304 of the
CCC provides that a superior court may, at the suit of stockholders holding at
least 10% of the number of outstanding shares of any class, remove from office
any director in case of fraudulent or dishonest acts or gross abuse of
authority, among other things.
Board of Directors Vacancies
Excite@Home
Under the DGCL, vacancies and newly created directorships may be filled by a
majority of the directors then in office, even though less than a quorum,
unless (i) otherwise provided in the certificate of incorporation or bylaws of
the corporation or (ii) the certificate of incorporation directs that a
particular class is to elect the director, in which case any other directors
elected by the class, or a sole remaining director, may fill the vacancy. The
Excite@Home certificate of incorporation further states that any vacancy in the
office of a
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director elected by the holders of Series A common stock or Series B common
stock common stock will be filled by the vote of the holders of a majority of
the shares of the series of common stock that originally elected the director.
If there is a vacancy in the office of one of the two directors elected by the
holders of Series A common stock, the remaining director elected by the holders
of Series A common stock will have the power to fill the vacancy.
Pogo
The Pogo certificate of incorporation states that any vacancy among the
directors to be elected by any class or series of Pogo voting preferred stock
or common stock may be filled only with the written consent of the holders of a
majority of shares of the class or series entitled to elect the directors. If
the vacancy is not filled by the board of directors in this manner, a meeting
of stockholders to fill the vacancy may be called upon the request of the
holders of at least 25% of the shares of the class or series entitled to elect
the director.
Under Section 305(c) of the CCC, if, after filling any vacancy by the
directors, the number of directors then in office who have been elected by
stockholders constitute less than a majority of the entire number of directors,
then any stockholder or group of stockholders representing a total of 5% or
more of the total number of shares of voting capital stock then outstanding may
call a special meeting of stockholders to elect the entire board of directors.
Special Meetings of the Board of Directors
Excite@Home
The Excite@Home bylaws provide that the chairman of the board or a majority
of the members of the board of Excite@Home may, upon written request, call a
special meeting of the board of directors. The bylaws require that written
notice of the time and place of the meeting be given at least ten days before
the meeting if the notice is mailed, or at least three days before the meeting
if notice is given by other means, unless the notice requirement is waived in
writing by each member of the board of directors. Any and all business may be
transacted at a special meeting of the board of directors without specification
of the business in the notice.
Pogo
The Pogo bylaws provide that special meetings of the board of directors may
be called by the chief executive officer, secretary, or on the written request
of two or more directors, or by one director in the event that there is only
one director in office. The bylaws require that written notice of the meeting
be given at least three days before the meeting if the notice is mailed, or at
least two days before the meeting if notice is given by other means. Any and
all business may be transacted at a special meeting of the board of directors
and the notice or waiver of notice need not specify the purposes of the
meeting.
Conversion Rights
Excite@Home
The Excite@Home certificate of incorporation provides that each share of
Series B common stock is convertible at any time, at the option of the holder,
into one share of Series A common stock and shares of Series A common stock are
not convertible into any other series or class of capital stock.
Pogo
The Pogo certificate of incorporation provides that each share of Series A
preferred stock, Series B preferred stock, Series C preferred stock and Series
D preferred stock is convertible at any time, at the option of the holder, into
shares of common stock. Each share of preferred stock, except for the Series A-
2 preferred stock, is convertible into one share of common stock, subject to
adjustment as provided in the certificate of
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incorporation. The Series A-2 preferred stock is not convertible into common
stock at the option of the holder but upon the closing of an underwritten
initial public offering of Pogo, the Series A-2 preferred stock converts
automatically into shares of common stock with a value of $1.00 for each share
of Series A-2 preferred stock.
Share Dividends
Excite@Home
The Excite@Home certificate of incorporation provides that if a distribution
in the form of securities of Excite@Home is paid to the holders of Series A
common stock or Series B common stock, the distribution must be made only by
one of the following methods:
. Excite@Home may distribute shares of Series A common stock to holders of
Series A common stock and Series B common stock to holders of Series B
common stock on an equal per share basis;
. Excite@Home may distribute any other class or series of securities of
Excite@Home, on an equal per share basis to holders of Series A common
stock and Series B common stock, with certain restrictions; and
. Excite@Home may not reclassify, subdivide or combine any series of common
stock without reclassifying, subdividing or combining all other series of
common stock on an equal per share basis.
Pogo
The Pogo certificate of incorporation does not have a similar provision
restricting distributions in the form of securities of Pogo.
Indemnification
Excite@Home
The Excite@Home certificate of incorporation provides that its directors and
officers will be indemnified to the fullest extent authorized by Delaware law
against all expenses, liabilities and losses reasonably incurred by that person
in connection with any action, proceeding or suit brought against that person
by reason of the fact that he or she is or was a director or officer of
Excite@Home or is or was serving at the request of Excite@Home as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or similar entity.
Under Delaware law, Excite@Home is not permitted to indemnify its officers
or directors if the expenses, liability and losses incurred are the result of
the individual's negligence or misconduct; the person must have acted in good
faith and in a manner the person believed to be not opposed to the best
interest of the corporation.
The DGCL provides that a corporation will indemnify the expenses incurred by
any director, officer, employee or agent that has been successful on the merits
or otherwise in defense of any action, suit or proceeding. The DGCL further
provides that indemnification may be made by a corporation upon a determination
that indemnification of a former or present director, officer, employee or
agent is proper because that person acted in good faith and in a manner the
person believed to be in or not opposed to the best interest of the
corporation. This determination must be made by (i) a majority vote of
disinterested directors, even if less than a quorum, (ii) a committee of
disinterested directors designated by a majority vote of the disinterested
directors, even if less than a quorum, (iii) independent legal counsel in a
legal opinion if there are no disinterested directors or (iv) the stockholders.
Pogo
Delaware law relating to indemnification is similar to California law except
that under the CCC, which is applicable to Pogo: (i) court approval is required
to provide indemnification for expenses incurred in derivative
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actions that are settled; (ii) it appears more likely that a corporation could
provide indemnification of amounts paid in settling a derivative suit; (iii)
the standard of conduct as to when indemnification is permitted includes
actions reasonably believed to be in the best interests of the corporation, not
just those actions reasonably believed to be not opposed to the best interests
of the corporation; and (iv) indemnification of expenses is required whenever
an individual has successfully defended an action, but only if a judgment was
rendered on the merits of the action.
Limitation on Liability
Excite@Home
The DGCL permits corporations to adopt a provision in their certificate of
incorporation eliminating the liability of a director to the corporation or its
stockholders for monetary damages for breach of the director's fiduciary duty
of care. The Excite@Home certificate of incorporation provides that, to the
fullest extent permitted by the DGCL, a director of Excite@Home will not be
liable to Excite@Home or any of its stockholders for monetary damages for
breach of fiduciary duty as a director.
Pogo
The Pogo certificate of incorporation provides that, to the fullest extent
permitted by the DGCL, a director of Pogo will not be liable to Pogo or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director. However, the DGCL permits somewhat broader elimination of liability
than the CCC. Section 316 of the CCC does not permit the elimination of
monetary liabilities of a director where the liability relates to improper
distributions to stockholders.
Dividends/Distributions
Excite@Home
Subject to any restrictions contained in a corporation's certificate of
incorporation, the DGCL generally provides that a corporation may declare and
pay dividends out of surplus, defined as net assets minus stated capital, or,
when no surplus exists, out of net profits for the fiscal year in which the
dividend is declared or for the preceding fiscal year. Dividends may not be
paid out of net profits if the capital of the corporation is less than the
amount of capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets. The Excite@Home
certificate of incorporation provides that dividends will be payable only if,
as and when declared by the board of directors out of the assets legally
available for distribution. The Excite@Home certificate of incorporation
provides that whenever a dividend is paid to the holders of one series of
common stock, the other series of common stock must receive a dividend.
Pogo
Under the CCC, any distribution of corporate assets to shareholders,
including dividends and repurchases of shares, are limited either to: (i)
retained earnings; or (ii) an amount that would leave the corporation with
assets, exclusive of goodwill, capitalized research and development expenses
and deferred charges, equal to at least 1 times its liabilities (not including
deferred taxes, deferred income and other deferred credits) and with current
assets, as defined, at least equal to its current liabilities, or one times its
current liabilities if the average pretax and pre-interest earnings for the
preceding two fiscal years were less an the average interest expense for such
years. There are exceptions to these rules for repurchases under employee stock
plans. Additionally, a corporation cannot make a distribution if, as a result
of such distribution, the corporation would likely be unable to meet its
liabilities as they come due or if such distribution would impair certain
preference rights of the holders of preferred stock.
The Pogo certificate of incorporation provides that dividends are payable
only if, as and when declared by the board of directors out of the assets
legally available for such distribution. The Pogo certificate of incorporation
provides that holders of shares of Pogo voting preferred stock are entitled to
receive dividends
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prior to and in preference to any declaration or payment of any dividend on the
Series A-2 preferred stock or the common stock of Pogo. No dividend may be paid
to the holders of voting preferred stock or common stock unless and until any
and all shares of Series A-2 preferred stock have been fully redeemed, and all
accumulated unpaid dividends on the Series A-2 preferred stock have been fully
paid.
Liquidation
Excite@Home
Under the DGCL, a dissolution must be consented to in writing by
stockholders holding 100% of the total voting power or the dissolution must be
initiated by the board of directors and approved by the holders of a majority
of the outstanding voting shares of the corporation. The Excite@Home
certificate of incorporation provides that in the event of a liquidation,
dissolution or winding up of Excite@Home, whether voluntary or involuntary,
after payment of any amounts owed to creditors subject to preferences of any
outstanding preferred stock, and any preferential amounts, the holders of
Series A common stock, Series B common stock and the holders of any class or
series of preferred stock then outstanding shall share equally, on a share for
share basis on an as converted to common stock basis, in the assets of
Excite@Home remaining for distribution to its stockholders.
Pogo
Under the CCC, shareholders holding 50% or more of the total voting power
may authorize a corporation's dissolution, with or without the approval of the
corporation's board of directors, and this right may not be modified by the
articles of incorporation. The Pogo certificate of incorporation provides that
in the event of a liquidation, dissolution or winding up of Pogo, whether
voluntary or involuntary, the holders of preferred stock will be entitled to
receive, out of the assets of Pogo, the liquidation preferences for each share
of preferred stock then held by them before any payment shall be made or any
assets distributed to the holders of common stock. After payment of the
preferential amounts to the holders of preferred stock, any remaining assets of
Pogo must be distributed ratably to the holders of common stock of Pogo.
Amendment of Certificate of Incorporation
Excite@Home
Under the DGCL, unless the certificate of incorporation or bylaws provide
otherwise, amendments of the certificate of incorporation generally require the
approval of the holders of a majority of the outstanding shares entitled to
vote. The DGCL provides that if any amendment would increase or decrease the
number of authorized shares of any class or series or the par value of such
shares or would adversely affect the shares of such class or series, a majority
of the outstanding shares of that class or series would have to approve the
amendment.
Pogo
The CCC provides that if any amendment would increase or decrease the number
of authorized shares of any class or series or the par value of such shares or
would adversely affect the shares of such class or series, a majority of the
outstanding shares of that class or series would have to approve the amendment.
Nevertheless, unlike the DGCL, the CCC provides that, for a corporation with
outstanding shares held of record by 100 or more persons, any provision
relating to amendment of the certificate of incorporation:
. cannot require a vote higher than 66 2/3%;
. must be approved by at least as large a proportion of the outstanding
shares as the supermajority provision requires; and
. automatically expires after two years unless renewed by a shareholder
vote.
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Pogo's certificate of incorporation provides that as long as any of the
voting preferred stock of Pogo is outstanding, that the approval of a majority
of the holders of the total number of shares of voting preferred stock then
outstanding will be required to amend the certificate of incorporation with
respect to:
. a merger or sale of Pogo;
. the creation of a new series of preferred stock;
. increasing the authorized number of shares of any existing series of
preferred stock;
. a recapitalization of Pogo;
. increasing the authorized number of directors above nine;
. a redemption, purchase or other acquisition of any capital stock of Pogo;
. the payment or declaration of any dividend or distribution on any shares
of common stock; and
. any amendment to the protective provisions in the certificate of
incorporation.
In addition, Pogo's certificate of incorporation provides that as long as
225,000 shares of the Series A-2 preferred stock are outstanding, that the
approval of a majority of the holders of the total number of shares of Series
A-2 preferred stock then outstanding is required to amend the certificate of
incorporation with respect to the authorization or issuance of any equity
security, except for bridge loans or other financings approved by the board of
directors, which would have a liquidation preference prior to or on parity with
that of the Series A-2 preferred stock.
Amendment of Bylaws
Excite@Home
The Excite@Home bylaws provide that the board of directors or stockholders
holding not less than 66 2/3% of the total voting power of the then outstanding
capital stock of Excite@Home entitled to vote may adopt, amend or repeal the
bylaws.
Pogo
The board of directors is authorized to make, alter or repeal Pogo's bylaws.
The bylaws may also be amended in accordance with the DGCL, which provides that
the stockholders entitled to vote have the power to adopt, amend or repeal the
bylaws.
Stockholder Voting With Respect to Mergers
Excite@Home
Excite@Home follows the requirements of the DGCL which generally requires
that a majority of the stockholders of the merging corporations approve
statutory mergers. The DGCL does not require a stockholder vote of the
surviving corporation in a merger, unless the corporation provides otherwise in
its certificate of incorporation, if:
. the merger agreement does not amend the existing certificate of
incorporation;
. each share of the corporation outstanding before the merger is an
identical outstanding or treasury share of the surviving corporation
after the merger; and
. the number of shares to be issued by the surviving corporation in the
merger does not exceed 20% of the shares of the corporation outstanding
immediately prior to the merger.
The DGCL generally does not require class voting, except in certain
transactions involving an amendment to the certificate of incorporation that
adversely affects a specific class of shares.
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Pogo
The certificate of incorporation of Pogo requires that as long as any shares
of Pogo voting preferred stock are outstanding, the holders of at least a
majority of the total number of shares of voting preferred stock of Pogo then
outstanding must approve a merger of Pogo.
In addition to the requirements of the DGCL, Chapter 12 of the CCC requires
the approval of a majority of the shares of (i) an acquiring corporation in
share-for-share reorganizations, (ii) the acquiring and acquired corporations
in sale-of-assets reorganizations and (iii) a parent corporation whose equity
securities are being issued or transferred in connection with specified
corporate reorganizations, all subject to exceptions, whereas the DGCL does
not. The CCC generally requires a vote of all outstanding shares voting in the
aggregate and by class when a vote is required in connection with these
transactions, whereas Delaware law generally does not require class voting in
connection with these transactions.
Appraisal and Dissenters' Rights
Excite@Home
Under the DGCL, a stockholder of a corporation participating in specified
major corporate transactions may, under varying circumstances, be entitled to
appraisal or dissenters' rights under which such stockholder may receive cash
in the amount of the fair market value of the shares instead of the
consideration the stockholder would otherwise receive in the transaction.
Under the DGCL, appraisal rights are not available
. with respect to the sale, lease or exchange of all or substantially all
of the assets of a corporation;
. with respect to a merger or consolidation by a corporation the shares of
which are either listed on a national securities exchange or are held of
record by more than 2,000 holders if the stockholders receive only shares
of the surviving corporation or shares of any other corporation which are
either listed on a national securities exchange or held of record by more
than 2,000 holders, plus cash in lieu of fractional shares; or
. to stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the
merger.
Pogo
Neither the DGCL or CCC regarding appraisal rights expressly addresses the
question of which state law applies with regard to appraisal rights, and
therefore Pogo and Excite@Home believe that Pogo stockholders may be permitted
to exercise dissenters' appraisal rights under either the DGCL or CCC, except
to the extent that a court or applicable legal authority rules otherwise. A
summary of both the sections of the DGCL and the CCC regarding dissenting
stockholders' appraisal rights and the differences between Delaware and
California law on appraisal rights are provided in the section entitled "The
Vote of the Pogo Stockholders--Appraisal Rights of Dissenting Pogo
Stockholders" and the text of Section 262 of the DGCL and Chapter 13 of the
CCC, which are attached as Annex D and Annex E to this information
statement/prospectus.
Stockholder Approval of Certain Business Combinations
Excite@Home
Section 203 of the DGCL prohibits a Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for three years
following the date that the person becomes an interested stockholder. With
certain exceptions, an interested stockholder is a person or group who or which
owns 15% or more of the corporation's outstanding voting stock, including any
rights to acquire stock under an option, warrant, agreement, arrangement or
understanding, or upon the exercise of conversion or exchange rights, and
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stock with respect to which the person has voting rights only, or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the corporation's voting stock at any time within the previous three years. For
purposes of Section 203, the term "business combination" is defined broadly to
include:
. mergers with or caused by the interested stockholder;
. sales or other dispositions to the interested stockholder, except
proportionately with the corporation's other stockholders, of assets of
the corporation or a subsidiary equal to 10% or more of the aggregate
market value of the corporation's consolidated assets or its outstanding
stock;
. the issuance or transfer by the corporation or a subsidiary of stock of
the corporation or the subsidiary to the interested stockholder, except
for transfers in a conversion or exchange or a pro rata distribution or
certain other transactions, none of which increase the interested
stockholder's proportionate ownership of any class or series of the
corporation's or the subsidiary's stock; or
. receipt by the interested stockholder, except proportionately as a
stockholder, directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the
corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if:
. prior to the date on which the person becomes an interested stockholder
the board of directors approves either the business combination or the
transaction which resulted in the person becoming an interested
stockholder;
. the interested stockholder owns 85% of the corporation's voting stock
upon completion of the transaction which made him an interested
stockholder, excluding from the 85% calculation shares owned by directors
who are also officers of the target corporation and shares held by
employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer; or
. on or after the date the person becomes an interested stockholder, the
board approves the business combination and it is also approved at a
stockholder meeting by 66 2/3% of the voting stock not owned by the
interested stockholder.
Section 203 only applies to Delaware corporations that have a class of
voting stock that is listed on a national securities exchange, are quoted on an
inter-dealer quotation system such as Nasdaq or are held of record by more than
2,000 stockholders. A Delaware corporation may elect not to be governed by
Section 203 by a provision in its original certificate of incorporation or an
amendment to the certificate or to the bylaws, which amendment must be approved
by majority stockholder vote and may not be further amended by the board of
directors. Excite@Home has elected not to be governed by Section 203, and these
provisions do not apply to it. However, Excite@Home could choose to amend its
certificate of incorporation in the future and elect to be governed by Section
203.
Pogo
The CCC does not have a provision comparable to Section 203 of the DGCL. The
CCC does however, provide that holders of nonredeemable common stock must
receive nonredeemable common stock in a merger of the corporation with a holder
of more than 50% but less than 90% of such common stock or such holder's
affiliate, unless all of the holders of such common stock consent to the
transaction or it is approved by the California Department of Corporations at a
"fairness hearing." This provision of the CCC may have the effect of making a
"cash-out" merger by a majority shareholder more difficult to accomplish.
The CCC also provides that, except in certain circumstances, when a tender
offer or a proposal for a reorganization or for a sale of assets is made by an
interested party (generally a controlling or managing party of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to
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the shareholders must be delivered to shareholders. Furthermore, if a tender of
shares or vote is sought pursuant to an interested party's proposal, and a
later proposal is made by another party at least ten days prior to the date for
acceptance of the interested party proposal, then the shareholders must be
informed of the later offer and be afforded a reasonable opportunity to
withdraw any vote, consent or proxy, or to withdraw any tendered shares.
Inspection of Stockholders' List
Excite@Home
The DGCL allows any stockholder to inspect the stockholders' list for a
purpose reasonably related to that person's interest as a stockholder, upon
written demand under oath stating the purpose of the request. The Excite@Home
bylaws allow any stockholder to inspect the stockholder list at least 10 days
prior to annual meeting of stockholders.
Pogo
In addition to allowing any stockholder to inspect a corporation's
shareholder list for a purpose reasonably related to such person's interest as
a stockholder, the CCC provides that a shareholder or shareholders holding 5%
or more of a corporation's shares, or who hold 1% or more of a corporation's
shares after it is a public company and has filed a Schedule 14A with the SEC
relating to the election of directors, have an absolute right to inspect and
copy the corporation's shareholder list.
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LEGAL MATTERS
The validity of the shares of Excite@Home Series A common stock offered in
connection with the merger will be passed upon by counsel to Excite@Home,
O'Melveny & Myers LLP, San Francisco, California. Legal matters pertaining to
federal income tax consequences in connection with the merger will be passed
upon for Pogo by its counsel, Fenwick & West LLP, Palo Alto, California. Legal
matters pertaining to federal income tax consequences in connection with the
merger will be passed upon for Excite@Home by O'Melveny & Myers LLP.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedules included in our Annual Report on Form 10-K,
as amended, for the year ended December 31, 1999, as set forth in their report,
which is incorporated by reference in this information statement/prospectus and
elsewhere in the registration statement. Our financial statements and schedules
are incorporated by reference in reliance on Ernst & Young LLP's report, given
on their authority as experts in accounting and auditing.
DOCUMENTS INCORPORATED BY REFERENCE
IN THIS INFORMATION STATEMENT/PROSPECTUS
This information statement/prospectus incorporates documents by reference
that are not presented in or delivered with this document.
All documents filed by Excite@Home under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act, after the date of this information
statement/prospectus and before the completion of the merger are incorporated
by reference into and to be a part of this information statement/prospectus
from the date of filing of those documents.
You should rely only on the information contained in this document or that
is referred to in this document. Excite@Home and Pogo have not authorized
anyone to provide you with information that is different.
We incorporate by reference each of the following documents, which have been
filed by Excite@Home with the Securities and Exchange Commission:
. Excite@Home's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1999;
. Excite@Home's Quarterly Reports on Form 10-Q for the three-months periods
ended March 31, 2000 and June 30, 2000;
. Excite@Home's Current Reports on form 8-K, filed on April 3, 2000, June
2, 2000 and June 29, 2000;
. Excite@Home's Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934, filed on May 26, 2000;
. the description of Excite@Home's Registration Statement on Form 8-A,
filed on June 13, 1997; and
. all other documents filed by Excite@Home under Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act after the date hereof and before
the consummation of the merger.
This information statement/prospectus may contain information that updates,
modifies or is contrary to information in one or more documents incorporated by
reference in this information statement/prospectus. Reports filed by
Excite@Home with the Securities and Exchange Commission after the date of this
information statement/prospectus may also contain information that updates,
modifies or is contrary to information in this information statement/prospectus
or in documents incorporated by reference in this information statement/
prospectus. You should review these subsequently filed reports.
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WHERE YOU CAN FIND MORE INFORMATION
The documents incorporated by reference into this information
statement/prospectus are available from Excite@Home upon request. Excite@Home
will provide a copy of any and all of the information that is incorporated by
reference into this information statement/prospectus not including exhibits to
the information unless those exhibits are specifically incorporated by
reference into this information statement/prospectus, to you, without charge,
upon written or oral request. You should make any request for documents by
October , 2000 to ensure timely delivery of the documents.
Requests for documents relating to Excite@Home should be directed to: At
Home Corporation, 450 Broadway Street, Redwood City, CA 94063, Attn: Investor
Relations.
Excite@Home files reports, proxy statements and other information with the
Securities and Exchange Commission. Copies of these materials may be inspected
and copied at the public reference facilities maintained by the Securities and
Exchange Commission:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street Suite 1400 New York, New York 10048
Washington, DC 20549 Chicago, IL 60661
</TABLE>
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the Securities and Exchange Commission,
450 Fifth Street, NW, Washington, DC 20549 or by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains a web site that contains reports, proxy statements and other
information regarding Excite@Home. The address of the Securities and Exchange
Commission web site is http://www.sec.gov. Copies of these materials may also
be inspected at The National Association of Securities Dealers, 1735 K Street,
NW, Washington, DC 20006.
Excite@Home has filed a registration statement under the Securities Act with
the Securities and Exchange Commission with respect to Excite@Home's Series A
common stock to be issued to Pogo stockholders in the merger. This information
statement/prospectus constitutes the prospectus of Excite@Home filed as part of
the registration statement. This information statement/prospectus does not
contain all of the information set forth in the registration statement because
certain parts of the registration statement are omitted as provided by the
rules and regulations of the Securities and Exchange Commission. You may
inspect and copy the registration statement at any of the addresses listed
above.
If you have any questions about the proposal, please call Pogo's investor
relations group at (415) 778-3581.
You should rely only on information contained or incorporated by reference
in this information statement/prospectus or any supplement we provide to you.
We have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not making an offer to sell the Excite@Home
Series A common stock in any jurisdiction where the offer or sale is not
permitted.
You should not assume that the information appearing in this information
statement/prospectus or any supplement is accurate as of any date other than
the date on the front of the documents. Our business, financial condition,
results of operations and other information may have changed since that date.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
Dated as of August 30, 2000
Among
AT HOME CORPORATION,
POGO ACQUISITION CORP.,
POGO.COM INC.
and
THE STOCKHOLDER AGENT
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS..................................................... A-7
ARTICLE II THE MERGER..................................................... A-10
2.1 The Merger........................................................ A-10
2.2 Closing........................................................... A-10
2.3 Effective Time.................................................... A-10
2.4 Effects of the Merger............................................. A-11
2.5 Certificate of Incorporation and Bylaws........................... A-11
(a) Certificate of Incorporation.................................. A-11
(b) Bylaws........................................................ A-11
2.6 Directors and Officers............................................ A-11
(a) Directors..................................................... A-11
(b) Officers...................................................... A-11
2.7 Additional Actions................................................ A-11
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES....................... A-11
3.1 Effect on Capital Stock........................................... A-11
(a) Capital Stock of Sub.......................................... A-11
(b) Cancellation of Treasury Stock and Parent Owned Stock......... A-11
(c) Conversion of Pogo Voting Stock............................... A-11
(d) Treatment of Warrants......................................... A-12
(e) Treatment of Stock Options.................................... A-12
(f) Continuation of Vesting and Repurchase Rights................. A-12
(g) Certain Parent Adjustments.................................... A-13
(h) Cancellation of Pogo Stock, Stock Options and Warrants........ A-13
3.2 Exchange of Certificates.......................................... A-13
(a) Exchange Agent................................................ A-13
(b) Exchange Procedure............................................ A-13
(c) Distributions with Respect to Unexchanged Shares.............. A-14
(d) No Further Ownership Rights in Pogo Stock..................... A-14
(e) No Fractional Shares.......................................... A-14
(f) Termination of Exchange Fund.................................. A-15
(g) No Liability.................................................. A-15
(h) Withholding Rights............................................ A-15
(i) Investment of Exchange Fund................................... A-15
3.3 Dissenters' Rights................................................ A-15
3.4 Escrow Fund....................................................... A-15
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(continued)
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3.5 Additional Contingent Payments................................... A-16
(a) Revenue Contingent Payment................................... A-16
(b) Executive Retention Contingent Payment....................... A-16
(c) Form of Payment.............................................. A-17
(d) Effect of Certain Terminations............................... A-17
(e) Parent Covenants Regarding Pogo's Operations................. A-17
(f) Acceleration for Breach of Certain Parent Covenants.......... A-18
(g) Appointment and Authority of Stockholder Agent............... A-18
(h) Disputes Concerning Contingent Payments...................... A-19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF POGO......................... A-20
4.1 Organization, Standing and Corporate Power....................... A-20
4.2 Subsidiaries..................................................... A-20
4.3 Capital Structure................................................ A-20
4.4 Authority: Noncontravention...................................... A-21
4.5 Financial Statements; Changes; Contingencies..................... A-22
4.6 Information Supplied............................................. A-24
4.7 Litigation; Administrative Proceedings........................... A-24
4.8 Taxes............................................................ A-24
4.9 Employee Benefits................................................ A-25
4.10 Qualified Plans.................................................. A-26
4.11 Title IV Plans................................................... A-26
4.12 Multiemployer Plans; Retirement Welfare Plans.................... A-26
4.13 No Excess Parachute Payments..................................... A-26
4.14 Permits; Compliance with Applicable Laws......................... A-27
4.15 Brokers.......................................................... A-28
4.16 Contracts........................................................ A-28
4.17 Title to Properties.............................................. A-29
4.18 Voting Requirements.............................................. A-29
4.19 Noncompetition................................................... A-29
4.20 Intellectual Property............................................ A-29
4.21 Games............................................................ A-30
4.22 Minute Books..................................................... A-30
4.23 Accounting Records; Internal Controls............................ A-30
4.24 Insurance........................................................ A-31
4.25 Dividends and Other Distributions................................ A-31
4.26 Certain Interests................................................ A-31
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(continued)
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4.27 Bank Accounts, Powers, etc..................................... A-31
4.28 Disclosure..................................................... A-31
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT...................... A-31
5.1 Organization, Standing and Corporate Power..................... A-31
5.2 Capital Structure; Merger Shares............................... A-31
5.3 Authority; Noncontravention.................................... A-32
5.4 SEC Documents; Financial Statements............................ A-32
5.5 Interim Operations of Sub...................................... A-33
5.6 No Brokers..................................................... A-33
5.7 Reorganization................................................. A-33
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS.................... A-33
6.1 Conduct of Business: Actions................................... A-33
(a) Conduct of Business by Pogo............................... A-33
6.2 No Solicitation................................................ A-35
(a) Acquisition Proposals..................................... A-35
(b) Notice of Inquiry and Notice of Withdrawal of Board
Recommendation............................................ A-36
ARTICLE VII ADDITIONAL AGREEMENTS....................................... A-36
7.1 Meeting of Pogo Stockholders; S-4 Registration................. A-36
(a) Meeting of Pogo Stockholders.............................. A-36
(b) S-4 Registration Statement................................ A-36
(c) Pogo Information and Review............................... A-37
(d) Notifications............................................. A-37
7.2 Access to Information; Confidentiality......................... A-37
7.3 Reasonable Efforts; Notification; Cooperation.................. A-37
(a) Actions to Be Taken....................................... A-37
(b) Notice of Change.......................................... A-37
(c) Cooperation; Best Efforts................................. A-38
7.4 Stock Option Plans............................................. A-38
7.5 Additional Pogo Stock Options.................................. A-38
7.6 Fees and Expenses.............................................. A-38
7.7 Public Announcements........................................... A-38
7.8 Conveyance Taxes............................................... A-38
7.9 Employment Agreements.......................................... A-38
7.10 Nasdaq Listing................................................. A-39
7.11 Pogo Voting Agreements......................................... A-39
7.12 S-8 Registration Statement..................................... A-39
</TABLE>
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TABLE OF CONTENTS
(continued)
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7.13 Bridge Note.................................................... A-39
7.14 Pogo 401(K) Plan............................................... A-39
7.15 Pogo Stockholder Agent......................................... A-39
7.16 Indemnification of Officers and Directors...................... A-39
7.17 Officer's Certificates for Tax Opinions........................ A-40
ARTICLE VIII CONDITIONS PRECEDENT....................................... A-40
8.1 Conditions to Each Party's Obligations to Effect the Merger.... A-40
(a) Stockholder Approval...................................... A-40
(b) Approvals................................................. A-41
(c) S-4 Registration Statement................................ A-41
(d) No Orders; Legal Proceedings.............................. A-41
(e) Conversion of Bridge Note................................. A-41
(f) Escrow Agreement.......................................... A-41
8.2 Additional Conditions to Obligations of Parent................. A-41
(a) Consents Under Agreements................................. A-41
(b) Executive Retention....................................... A-41
(c) Pogo Closing Date Report.................................. A-41
(d) Representations and Warranties and Covenants of Pogo...... A-41
(e) Opinion of Counsel........................................ A-42
(f) Tax Opinion............................................... A-42
(g) Redemption of SeriesA-2 Preferred......................... A-42
8.3 Additional Conditions to Obligations of Pogo................... A-42
(a) Representations and Warranties and Covenants of Parent and
Sub....................................................... A-42
(b) Opinion of Counsel........................................ A-42
(c) Tax Opinion............................................... A-42
ARTICLE IX SURVIVAL..................................................... A-43
9.1 Survival of Representations.................................... A-43
9.2 Remedies....................................................... A-43
ARTICLE X TERMINATION, AMENDMENT AND WAIVER............................. A-43
10.1 Termination by Mutual Consent.................................. A-43
10.2 Termination by Either Pogo or Parent........................... A-43
10.3 Termination by Parent.......................................... A-43
10.4 Termination by Pogo............................................ A-43
10.5 Termination by Parent upon Withdrawal of Board Recommendation.. A-44
10.6 Effect of Termination.......................................... A-44
10.7 Amendment...................................................... A-44
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TABLE OF CONTENTS
(continued)
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10.8 Extension; Waiver................................................ A-44
10.9 Termination Fee and Expenses..................................... A-44
ARTICLE XI GENERAL PROVISIONS............................................. A-44
11.1 Notices......................................................... A-44
11.2 Interpretation.................................................. A-45
11.3 Counterparts.................................................... A-45
11.4 Entire Agreement; No Third-Party Beneficiaries.................. A-45
11.5 Governing Law................................................... A-46
11.6 Assignment...................................................... A-46
11.7 Enforcement..................................................... A-46
11.8 Severability.................................................... A-46
</TABLE>
A-6
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated and made and
entered into as of August 30, 2000 by and among AT HOME CORPORATION, a Delaware
corporation ("Parent"), POGO ACQUISITION CORP., a Delaware corporation that is
a direct wholly owned subsidiary of Parent ("Sub"), POGO.COM INC., a Delaware
corporation ("Pogo"), and solely for purposes of Sections 3.5 and 7.15 and
Articles X and XI hereof, Erick Hachenburg, as Stockholder Agent.
RECITALS
A. The respective Boards of Directors of Parent and Pogo have approved the
merger of Pogo with and into Sub (the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL").
B. The Merger requires the approval of the stockholders of Pogo in
accordance with their applicable voting rights as stated in Section 4.18 (the
"Pogo Stockholder Approval").
C. For accounting purposes, the parties hereto intend that the Merger will
be accounted for under the purchase method of accounting.
D. For federal income tax purposes, the parties intend that the Merger
qualify as a tax-free reorganization within the meaning of Section 368(a)(1)(A)
and (a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code"),
whereby the stockholders of Pogo will receive common stock of Parent in
exchange for their shares of stock of Pogo.
E. Concurrently with the execution of this Agreement and as an inducement to
Parent to enter into this Agreement, the Principal Stockholders (as defined
herein) of Pogo have entered into voting agreements with Parent in the form of
Exhibit A hereto (the "Pogo Voting Agreements") pursuant to which such
stockholders have, among other things, agreed to vote their shares of Pogo
Stock (as defined in Section 4.3) in favor of the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the above-recited facts and the
representations, warranties, agreements and conditions contained in this
Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms as used in this Agreement shall have the following
meanings:
1.1 Certain Definitions.
(a) "Additional Pogo Options" has the meaning given such term in
Section 7.5.
(b) "affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first Person.
(c) "Bridge Note" means that certain Convertible Promissory Note,
dated August 4, 2000, in the principal amount of $5,000,000 (as such
principal amount may be increased pursuant to Section 7.13) executed by
Pogo in favor of Parent.
(d) "Bridge Note Shares" means any and all shares of Series D
Preferred (as defined in Section 4.3(a) issued upon conversion of the
Bridge Note.
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(e) "business" means, when used in connection with Parent, Pogo, or
the Surviving Corporation, the business and operations of such party
considered together as a whole and is deemed to collectively include
the following incidents of such business: income, cash flow,
operations, condition (financial or other), employee base, assets and
properties, goodwill and intangibles.
(f) "Cause" means, with respect to a Pogo Key Executive (i) gross
negligence or willful misconduct by such Pogo Key Executive in the
performance of such Pogo Key Executive's duties to the Surviving
Corporation which, in the case of gross negligence, results in material
harm to the reputation or business of the Surviving Corporation and
which, in the case of either gross negligence or willful misconduct,
has not been cured after the Board of Directors of the Surviving
Corporation has given such Pogo Key Executive a written notice
specifically identifying the alleged gross negligence or willful
misconduct and such Pogo Key Executive has been provided a period of
thirty days to cure any alleged gross negligence or willful misconduct;
(ii) the commission by such Pogo Key Executive of an act of fraud with
respect to the Surviving Corporation or the theft or embezzlement by
such Pogo Key Executive of any material assets, properties or
proprietary information of the Surviving Corporation or the wrongful
and willful disclosure by such Pogo Key Executive of any confidential
and proprietary information of the Surviving Corporation; or (iii) the
conviction of, or a plea of nolo contendere by, such Pogo Key Executive
for (1) a felony or (2) a crime involving moral turpitude causing
material harm to the reputation, business and affairs of the Surviving
Corporation. No act or failure to act by the Pogo Key Executive shall
be considered "willful" if done or omitted by the Pogo Key Executive in
good faith with reasonable belief that the Pogo Key Executive's action
or omission was lawful and in the best interests of the Surviving
Corporation.
(g) "Parent Common Stock" means Parent Series A Common Stock, par
value $0.01 per share.
(h) "Excess Amount" means the amount, if any, by which Pogo's
current trade accounts payable and accrued expenses (excluding capital
lease obligations, principal and accrued interest due under the Bridge
Note (including any increase in principal and interest pursuant to
Section 7.13), employee severance payments payable in connection with
the Merger and fees and expenses incurred by Pogo in connection with
this Agreement, the Merger and the transactions contemplated hereby)
exceed $5,000,000 as determined and set forth on the Closing Date
Report delivered pursuant to Section 8.2(c).
(i) "Good Reason" means, with respect to a Pogo Key Executive, any
of the following events or conditions which occur and are not cured by
the Surviving Corporation within thirty (30) days after the Surviving
Corporation's receipt of written notice from such Pogo Key Executive of
such occurrence: (i) a reduction in such Pogo Key Executive's title or
a material reduction in the scope of such Pogo Key Executive's
responsibilities, duties or authority; (ii) the assignment to such Pogo
Key Executive of any duties or responsibilities that are materially
inconsistent with such Pogo Key Executive's title and position; (iii) a
reduction in such Pogo Key Executive's base salary or target bonus;
(iv) the failure of any successor of the Surviving Corporation to
assume the terms of such Pogo Key Executive's employment relationship
with the Surviving Corporation; (v) a relocation of such Pogo Key
Executive's primary work location outside of the counties of San Mateo
and San Francisco, California; (vi) a change in the reporting
relationship of such Pogo Key Executive (other than Erick Hachenburg)
that results in such Pogo Key Executive reporting to any individual
other than (1) Erick Hachenburg, as president of the Surviving
Corporation and senior vice president of Parent, or (2) a successor to
the position of senior vice president of Parent who has been designated
by Erick Hachenburg in consultation with Parent and the management team
of the Surviving Corporation, or (3) solely in the event that the
employment of Mr. Hachenburg is terminated for Cause or Disability (as
such terms are defined in Mr. Hachenburg's employment agreement with
the Surviving Corporation), any other successor senior vice president
of Parent; or (vii) solely with respect to Erick Hachenburg, the
appointment of a successor to the position of president of the
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Surviving Corporation and senior vice president of Parent who has not
been designated by Erick Hachenburg in consultation with Parent and the
management team of the Surviving Corporation; provided, however, that
the appointment of a successor president of the Surviving Corporation
and senior vice president of Parent which occurs as a result of a
termination of Erick Hachenburg's employment for Cause or Disability
(as defined in Erick Hachenburg's employment agreement with the
Surviving Corporation) shall not constitute, with respect to Mr.
Hachenburg, "Good Reason." The occurrence of any event or condition
described in clause (i), (ii) or (iii) above will be determined on the
basis of the terms of the employment agreement or employment offer
letter entered into by such Pogo Key Executive with the Surviving
Corporation as of the Effective Time.
(j) "Material Adverse Effect" means, when used, with reference to
Parent, Pogo, or the Surviving Corporation, as the case may be, any
event, change, inaccuracy, circumstance or effect that is, individually
or in the aggregate, materially adverse to the business of such party;
provided that in no event will (i) conditions affecting the industry
generally in which Parent or Pogo operate or the economy generally,
(ii) any effect resulting from the public announcement, pendency or
consummation of this Agreement or the Merger, (iii) any change in the
market price of Parent Common Stock, or (iv) with respect to Pogo, any
event, change or effect described in the Pogo Disclosure Schedule or,
with respect to Parent, any event, change or effect described in the
Parent Disclosure Schedule, constitute, in and of itself, a Material
Adverse Effect.
(k) "Measurement Period" means the six-month period commencing on
the first day of the month immediately following the Closing Date (the
"Start Date") and ending on the last day of the month in which the 180-
day anniversary of the Start Date occurs (the "End Date").
(l) "Number of Shares of Pogo Voting Stock" means the number of
shares of Pogo Voting Stock (other than shares of Series A-2 Preferred
to be redeemed in full prior to the Effective Time and any Bridge Note
Shares) that are issued and outstanding immediately before the
Effective Time on a fully diluted basis with, for the purposes of such
calculation, each Stock Option (excluding the Additional Pogo Options)
and each Warrant outstanding and unexercised immediately before the
Effective Time being deemed to have been fully exercised immediately
prior to the Effective Time for the total number of shares of Pogo
Voting Stock subject to such Stock Option or Warrant, as the case may
be. No shares of Series A-2 Preferred and no Bridge Note Shares shall
be included in the Number of Shares of Pogo Voting Stock.
(m) "Person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other
entity.
(n) "Pogo Actual Revenues" means the sum of (i) the total gross
cumulative revenue reported by Pogo during the Measurement Period,
minus any allowances for bad debt in excess of three percent of
revenues ("Allowances") directly attributable to the reported revenue
for the Measurement Period plus (ii) the total gross cumulative revenue
reported by Parent for the Measurement Period (exclusive of revenue
described in the preceding clause (i)) where Pogo and Parent have
jointly developed or collaborated with respect to the products or
services (including without limitation ad sale services) which are
responsible for the identifiable revenue, minus any Allowances, in each
case determined in accordance with GAAP, as applied as of the date
hereof to Parent and as interpreted and applied as of the date hereof
by Parent's accountants and independent auditors. The parties agree
that Pogo's revenue recognition practices with respect to distribution
agreements are consistent with those applied by Parent as of the date
hereof.
(o) "Pogo Key Executives" means Erick Hachenburg, Dave King, Bill
Lipa, Nicholas Rush, Lesley Mansford, Mark Mitchell and Greg Harper.
(p) "Pogo Stock" has the meaning given such term in Section 4.3(b).
(q) "Pogo Target Revenues" means $16,543,389, subject to the
provisions of Section 3.5(a) of this Agreement.
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(r) "Pogo Voting Stock" means the Common Stock, Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, in each case of Pogo. The Pogo Voting Stock does not
include the Series A-2 Preferred.
(s) "Pogo Voting Stock Amount Per Share" means the quotient obtained
by dividing (i) One Hundred Twenty-Five Million Dollars ($125,000,000)
minus the Excess Amount, if any, and minus the Series A-2 Redemption
Amount by (ii) the Number of Shares of Pogo Voting Stock.
(t) "Principal Stockholders" means Liberty TE, Inc., Kleiner Perkins
Caufield & Byers, Vertex Funds, and the Pogo Key Executives (excluding
Mark Mitchell, Lesley Mansford and Nicholas Rush).
(u) "Pro Rata Share" means, as to any stockholder of Pogo, the ratio
(i) the numerator of which is equal to the total number of outstanding
shares of Pogo Voting Stock owned or held by such stockholder
immediately prior to the Effective Time and (ii) the denominator of
which is equal to the total number of shares of Pogo Voting Stock that
are outstanding immediately prior to the Effective Time.
(v) "Retention Measure Date" means the earlier of (a) October 15,
2001 and (b) 360 days after the Closing Date.
(w) "Series A-2 Redemption Amount" means the aggregate dollar amount
paid by Pogo to redeem the Series A-2 Preferred prior to the Effective
Time.
(x) "Series A-2 Preferred" has the meaning given such term in
Section 4.3(a).
(y) "Stock Options" has the meaning given such term in Section
4.3(b) and shall include without limitation the Additional Pogo
Options.
(z) "Warrants" has the meaning given such term in Section 4.3(b).
Other capitalized terms used in this Agreement and not defined in this
Article I have the meanings given such terms elsewhere in this Agreement.
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, Pogo will be merged with and
into Sub at the Effective Time (as defined below). Upon the Effective Time, the
separate corporate existence of Pogo will cease and Sub will continue as the
surviving corporation of the Merger (the "Surviving Corporation") and will
succeed to and assume all the rights and obligations of Pogo and of Sub in
accordance with the DGCL.
2.2 Closing. The closing under this Agreement will take place at 10:00 a.m.,
local time, on a date to be specified by the parties, which will be no later
than the second business day after satisfaction or waiver of the conditions set
forth in Article VIII (the "Closing Date"), at the offices of O'Melveny & Myers
LLP, 275 Battery Street, San Francisco, California 94111, unless another time,
date or place is agreed to in writing by Parent and Pogo.
2.3 Effective Time. Upon the terms and subject to the conditions set forth
herein, on the Closing Date, Sub and Pogo shall execute and deliver a
certificate of merger conforming to the requirements of Section 251 of the DGCL
(the "Certificate of Merger"), and, as soon as practicable thereafter, Sub and
Pogo shall file, or cause to be filed, the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with the applicable
provisions of the DGCL. The Merger shall become effective (the "Effective
Time") upon the filing of the Certificate of Merger or at such later time as
may be agreed upon by Parent and Pogo in writing at or prior to the Closing
Date and designated in the Certificate of Merger.
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2.4 Effects of the Merger. The Merger will have the effects set forth in the
applicable provisions of the DGCL.
2.5 Certificate of Incorporation and Bylaws.
(a) Certificate of Incorporation. The certificate of incorporation of
Sub in effect immediately prior to the Effective Time will be the
certificate of incorporation of the Surviving Corporation (except that the
name of the Surviving Corporation shall be changed to "Pogo.com Inc."),
until thereafter amended as provided therein or by applicable law.
(b) Bylaws. The bylaws of Sub in effect immediately prior to the
Effective Time will be the bylaws of the Surviving Corporation as of the
Effective Time, until thereafter amended as provided therein or by
applicable law.
2.6 Directors and Officers.
(a) Directors. At the Effective Time, the persons listed on Schedule 2.6
of the Parent Disclosure Schedule will be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified.
(b) Officers. At the Effective Time, the persons listed on Schedule 2.6
of the Parent Disclosure Schedule will be the officers of the Surviving
Corporation, until the earlier of their resignation or until their
respective successors are duly elected and qualified, as the case may be.
2.7 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation determines or is advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are reasonably necessary
or desirable to vest, perfect or confirm in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or
assets of Sub or Pogo or otherwise to carry out this Agreement, the officers
and directors of the Surviving Corporation will have the power and authority to
execute and deliver, in the name and on behalf of Sub or Pogo, all such proper
deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of Sub or Pogo, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
3.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger
and without any further action on the part of Parent, Sub, Pogo or the holders
of any shares of Pogo Voting Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub that is
issued and outstanding immediately before the Effective Time will be
converted into and exchanged for one (1) fully paid and nonassessable share
of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each share of
Pogo Voting Stock that is owned by Pogo and each share of Pogo Voting Stock
that is owned by Parent, Sub or any other subsidiary of Parent immediately
before the Effective Time (including any Bridge Note Shares) will
automatically be canceled and retired without any conversion thereof and no
consideration will be delivered with respect thereto. From the date of this
Agreement until the earlier to occur of (i) the Effective Time or (ii) the
termination of this Agreement, neither Parent, Sub, nor any other existing
or future subsidiary of Parent shall assign, sell or transfer any share or
shares of Pogo Voting Stock owned by it.
(c) Conversion of Pogo Voting Stock. Subject to the provisions of
Section 3.4 and the Escrow Agreement attached as Exhibit B hereto, each
share of Pogo Voting Stock (other than shares to be
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canceled in accordance with Section 3.1(b), and shares held by Dissenting
Stockholders (as defined in Section 3.3)) that is issued and outstanding
immediately prior to the Effective Time shall be converted into: (i) the
right to receive the number of fully paid and nonassessable shares of
Parent Common Stock equal to the quotient (calculated to the fourth decimal
place) obtained by dividing (1) the Pogo Voting Stock Amount Per Share by
(2) the average of the closing prices of Parent Common Stock as reported by
the National Association of Securities Dealers Automated Quotation system
("Nasdaq") during the ten consecutive trading-day period ending on the last
full trading day immediately preceding the Effective Time (the "Exchange
Ratio"), subject to the provisions of Section 3.2(e) in regard to
fractional shares; and (ii) the right to receive the Contingent Payments in
shares of Parent Common Stock in accordance with the provisions of Section
3.5 and cash in lieu of fractional shares in accordance with Section
3.2(e).
(d) Treatment of Warrants. At the Effective Time, each Warrant that is
issued and outstanding immediately prior to the Effective Time will be
assumed by Parent and converted into a warrant to purchase a number of
shares of Parent Common Stock equal to the respective number of shares of
Pogo Stock issuable upon the exercise of such Warrant multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of
Parent Common Stock, at an exercise price per share of Parent Common Stock
determined by dividing the respective exercise price per share at which
shares of Pogo Stock may be purchased upon exercise of such Warrant
immediately prior to the Effective Time by the Exchange Ratio, rounded up
to the nearest whole cent, and upon such other terms and conditions as are
contained in each such Warrant. As soon as practicable after the Effective
Time, Parent will issue to each holder of an assumed Warrant a notice
describing the foregoing assumption of such Warrant by Parent.
(e) Treatment of Stock Options. At the Effective Time, each Stock Option
that is issued and outstanding immediately prior to the Effective Time will
be assumed by Parent and converted into an option to purchase a number of
shares of Parent Common Stock equal to the respective number of shares of
Pogo Voting Stock issuable upon exercise of such Stock Option multiplied by
the Exchange Ratio, rounded down to the nearest whole number of shares of
Parent Common Stock, at an option price per share of Parent Common Stock
determined by dividing the respective option price per share at which
shares of Pogo Stock may be purchased upon exercise of such Stock Option by
the Exchange Ratio, rounded up to the nearest whole cent, and upon such
other terms and conditions as are contained in each such Stock Option
(including terms of any stock option or other plan incorporated into the
terms of such Stock Option). At the Effective Time, all Stock Option Plans
(as defined in Section 4.3) will be assumed by Parent which will thereupon
have administrative and amendment authority with respect thereto and with
respect to the Stock Option, subject in each case to the terms and
conditions of each plan and each outstanding Stock Option, and Pogo will
thereupon have no continuing administrative or amendment authority with
respect to such plans or the Stock Options. As soon as practicable after
the Effective Time, Parent will issue to each holder of an assumed Stock
Option a notice describing the foregoing assumption of such Stock Option by
Parent. It is intended that Stock Options assumed by Parent will qualify
following the Effective Time as incentive stock options as defined in
Section 422 of the Internal Revenue Code to the extent the Stock Options
qualified as incentive stock options immediately before the Effective Time
and the provisions of this Section 3.1(e) will be applied consistent with
such intent.
(f) Continuation of Vesting and Repurchase Rights. If any shares of Pogo
Voting Stock outstanding immediately prior to the Effective Time or
issuable upon the exercise of Stock Options or Warrants (i) are unvested or
are subject to a repurchase right or other condition providing that such
shares may be forfeited or repurchased by Pogo upon any termination of the
stockholder's employment, directorship or other relationship with Pogo
(and/or any affiliate of Pogo) under the terms of any restricted stock
purchase agreement or other agreement with Pogo or (ii) subject to a
contractual restriction on the transfer of such shares (collectively
"Restricted Pogo Stock"), then the shares of Parent Common Stock issued
upon the conversion of such Restricted Pogo Stock upon the Merger will
continue to be subject to the same vesting provisions (including existing
acceleration provisions), repurchase rights, risk forfeitures, restrictions
on transfer or other conditions, as applicable, immediately following the
Effective Time as they were subject to immediately prior to the Effective
Time, provided, however, if there is any right of acceleration of
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vesting either due to the Merger or events that occur thereafter, full
effect will be given to such provisions, and the certificates representing
such shares of Parent Common Stock shall accordingly be marked with
appropriate legends noting such restrictions. Notwithstanding anything
herein to the contrary, no right of first refusal on the part of Pogo to
purchase any shares of Pogo Stock that is in effect immediately prior to
the Effective Time shall survive the Merger or be effective following the
Effective Time with respect to any shares of Parent Common Stock that are
issued in the Merger or that are issuable upon the exercise of any warrant
or stock option to purchase Parent Common Stock that is issued in the
Merger. Pogo shall take all actions that may be reasonably necessary to
ensure that, from and after the Effective Time, Parent shall be entitled to
exercise any rights with respect to the Restricted Pogo Stock following the
Effective Time that Pogo would have been entitled to exercise.
(g) Certain Parent Adjustments. If, before the Effective Time, Parent
should split or combine the Parent Common Stock, or pay a stock dividend or
other stock distribution in Parent Common Stock, then the Exchange Ratio
will be appropriately adjusted to reflect such split, combination, dividend
or other distribution.
(h) Cancellation of Pogo Stock, Stock Options and Warrants. As of the
Effective Time, all shares of Pogo Stock that were outstanding immediately
prior to the Effective Time, Warrants and Stock Options will no longer be
outstanding and will automatically be canceled and retired and will cease
to exist, and the holders of certificates and other instruments previously
evidencing such shares of Pogo Stock, Warrants or Stock Options will cease
to have any rights with respect thereto except (i) as otherwise expressly
provided in Sections 3.1(c), (d) and (e) and Section 3.5, and (ii) except
as provided by law, including any rights of Dissenting Stockholders (as
such term is defined in Section 3.3)to require the Surviving Corporation to
purchase their shares in accordance with applicable law. Certificates
previously representing shares of Pogo Stock will be exchanged for
certificates representing whole shares of Parent Common Stock issued in
consideration therefor upon the surrender of such certificates in
accordance with the provisions of Section 3.2, without interest. No
fractional share of Parent Common Stock will be issued, and, in lieu
thereof, a cash payment will be made pursuant to Section 3.2(e).
3.2 Exchange of Certificates.
(a) Exchange Agent. Parent will deposit, or will cause to be deposited,
with a third party specified by Parent and reasonably acceptable to Pogo as
the exchange agent for the Parent Common Stock (the "Exchange Agent") as of
the Effective Time (or otherwise when requested by the Exchange Agent from
time to time in order to effect any exchange pursuant to Section 3.2), for
the benefit of the holders of shares of Pogo Voting Stock, for exchange in
accordance with this Article III through the Exchange Agent, certificates
representing the shares of Parent Common Stock issuable pursuant to Section
3.1 in exchange for the outstanding shares of Pogo Voting Stock (such
certificates representing shares of Parent Common Stock, together with any
dividends or distributions with respect thereto, being collectively
referred to as the "Exchange Fund"). The Exchange Agent will, pursuant to
irrevocable instructions, deliver the Parent Common Stock contemplated to
be issued pursuant to Section 3.1 out of the Exchange Fund. Except as
contemplated by Section 3.2(e), the Exchange Fund will not be used for any
other purpose.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, but in no event later than 15 days thereafter, Parent will
instruct the Exchange Agent to mail to each holder of a certificate or
certificates which immediately before the Effective Time represented
outstanding shares of Pogo Voting Stock, other than shares held by
Dissenting Stockholders (such certificates are collectively referred to as
the "Certificates") (i) a letter of transmittal (which will specify that
delivery will be effected, and risk of loss and title to the Certificates
will pass, only upon proper delivery of the Certificates to the Exchange
Agent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Parent
Common Stock. Upon surrender of Certificates for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Exchange
Agent, the holder of the Certificate or Certificates will be entitled to
receive in exchange therefor (subject to the provisions of Section 3.4 and
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the Escrow Agreement) a certificate evidencing that number of whole shares
of Parent Common Stock which such holder has the right to receive in
respect of the rights formerly evidenced by such Certificate or
Certificates (after taking into account the provisions of this Agreement
and all shares of Pogo Voting Stock then held of record by such holder),
cash in lieu of fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 3.2(e) and any dividends or other
distributions to which such holder is entitled pursuant to Section 3.2(c),
and the Certificate so surrendered will forthwith be canceled. In the event
of a transfer of ownership of Pogo Voting Stock which is not registered in
the transfer records of Pogo, a certificate representing the proper number
of shares of Parent Common Stock may be issued to a Person other than the
Person in whose name the Certificate so surrendered is registered, if such
Certificate, accompanied by all documents required to evidence and effect
such transfer, is properly endorsed or otherwise in proper form for
transfer and the Person requesting such payment pays any transfer or other
taxes required by reason of the issuance of shares of Parent Common Stock
to a Person other than the registered holder of such Certificate or
establishes to the satisfaction of Parent that such tax has been paid or is
not applicable. Until surrendered as contemplated by Section 3.2, each
Certificate (other than in respect of shares held by Dissenting
Stockholders) will be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
evidencing whole shares of Parent Common Stock, cash in lieu of any
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 3.2(e) and any dividends or other distributions to
which such holder is entitled pursuant to Section 3.2(c) and the contingent
rights to receive Contingent Payments pursuant to Section 3.5. No interest
will be paid or will accrue on any cash payable pursuant to Sections 3.2(c)
or 3.2(e).
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Parent Common Stock with a record date after the Effective Time will be
paid to the holder of any unsurrendered Certificate, and no cash payment in
lieu of fractional shares will be paid to any such holder pursuant to
Section 3.2(e), in each case until the surrender of such Certificate in
accordance with this Article III. Subject to the effect of applicable
escheat laws, following surrender of such Certificate, each holder of the
certificate representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, will be paid (i) at the time of such
surrender, the amount of any such cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 3.2(e) and the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions, with a record date
after the Effective Time but before such surrender and with a payment date
subsequent to such surrender, payable with respect to such whole shares of
Parent Common Stock.
(d) No Further Ownership Rights in Pogo Stock. All shares of Parent
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article III (including any cash paid
pursuant to Sections 3.2(c) or 3.2(e) will be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
Pogo Voting Stock, theretofore represented by such Certificates, except for
the right to receive Contingent Payments, if any, under Section 3.5. At the
Effective Time, the stock transfer books of Pogo will be closed, and
thereafter there will be no further registrations or transfers of shares of
Pogo Voting Stock that were outstanding immediately prior to the Effective
Time or the exercise or conversion of the Stock Options or Warrants that
were outstanding immediately prior to the Effective Time on the records of
Pogo. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, Parent or the Exchange Agent for any reason, they
will be canceled and exchanged as provided in Article III.
(e) No Fractional Shares.
(i) No Certificates or scrip representing fractional shares of
Parent Common Stock will be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of Parent.
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(ii) Each holder of shares of Pogo Voting Stock issued and
outstanding at the Effective Time who would otherwise be entitled to
receive a fractional share of Parent Common Stock upon surrender of
stock certificates for exchange pursuant to this Article III (after
taking into account all shares of Pogo Voting Stock then held by such
holder) will receive, in lieu thereof, cash in an amount equal to the
value of such fractional shares (which value will be the average of the
closing prices of Parent Common Stock used to compute the Exchange
Ratio in Section 3.1(c)), which will be equal to the fraction of a
share of Parent Common Stock that would otherwise be issued.
(iii) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Certificates with respect to
any fractional share interests, the Exchange Agent will promptly pay
such amounts to such holders of Certificates subject to and in
accordance with the terms of Section 3.2(c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of Certificates for six months after
the Effective Time will be delivered to Parent, upon demand, and any
holders of Certificates who have not theretofore complied with this Article
III will thereafter look only to Parent for the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock to which
they are entitled.
(g) No Liability. None of Parent, Sub, Pogo or the Exchange Agent will
be liable to any holder of shares of Pogo Stock, Warrants or Stock Options
for any shares of Parent Common Stock (or dividends or distributions with
respect thereto) or cash from the Exchange Fund that has been delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
(h) Withholding Rights. Parent or the Exchange Agent will be entitled to
deduct and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of Certificates such amounts as Parent or the
Exchange Agent, as the case may be, is required under the Code or any
provision of state, local or foreign tax law to deduct and withhold with
respect to the making of payments hereunder. To the extent that amounts are
so withheld by Parent or the Exchange Agent, such withheld amounts will be
treated for all purposes of this Agreement as having been paid to the
holder of the Certificates in respect of which such deduction and
withholding have been made by Parent or the Exchange Agent.
(i) Investment of Exchange Fund. The Exchange Agent will invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments will be paid to
Parent.
3.3 Dissenters' Rights. If any Dissenting Stockholder (as defined below) is
entitled to (or demands or asserts entitlement to) require Pogo to purchase the
stockholder's shares pursuant to Section 262 of the DGCL, and, if applicable,
Chapter 13 of the California Corporations Code, Pogo will give Parent prompt
written notice thereof and Parent will have the right to participate in all
negotiations and proceedings with respect to any such claims or demand. Pogo
will not, except with the prior written consent of Parent, which shall not be
unreasonably withheld, or except as may be required under applicable law,
voluntarily make any payment, evaluation or appraisal with respect to, or
settle or offer to settle, any claim or demand for payment. If any Dissenting
Stockholder fails to perfect or will have effectively withdrawn or lost the
right to dissent or have an appraisal, the shares held by the stockholder will
thereupon be entitled to be surrendered in exchange for the Parent Common Stock
at the Exchange Ratio and for the right to receive Contingent Payments in
accordance with Section 3.5, and otherwise in accordance with Article II.
"Dissenting Stockholder" means any Pogo stockholder entitled under applicable
law to exercise appraisal or dissenters' rights, who delivers a written demand
to Pogo and has otherwise duly exercised appraisal or dissenters' rights under,
and duly satisfied the other requirements of, Section 262 of the DGCL, and, if
applicable, Chapter 13 of the California Corporations Code.
3.4 Escrow Fund. As security for the accurateness and completeness of Pogo's
representations and warranties contained herein and performance of Pogo's
covenants and agreements in this Agreement and the
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indemnity provided by the holders of Pogo Stock in the Escrow Agreement to be
entered into on the Closing Date in substantially the form attached hereto as
Exhibit B (the "Escrow Agreement"), Parent will be entitled to withhold from
delivery in accordance with Section 3.2, and the holders of Pogo Voting Stock
will be deemed to have received and deposited with Greater Bay Trust Company or
another independent party specified by Parent and reasonably acceptable to Pogo
as Escrow Agent (the "Escrow Agent"), the number of shares of Parent Common
Stock equal to ten percent (10%) of the shares actually issued in exchange for
Pogo Voting Stock at the Effective Time in accordance with and subject to the
rights of the holders of Pogo Voting Stock under the terms of the Escrow
Agreement (the "Escrow Shares") without any act of any holder of Pogo Voting
Stock. The Escrow Shares will be withheld from each holder of Pogo Voting Stock
on a pro rata basis. Such deposit will constitute an escrow fund (the "Escrow
Fund") to be governed by the terms set forth in the Escrow Agreement. The
holders of Pogo Voting Stock will be entitled to (i) receive and retain any and
all dividends and other distributions paid in respect of the Escrow Shares,
provided that any distributions in the form of additional shares of capital
stock of Parent will constitute Escrow Shares and be deposited in the Escrow
Fund, and (ii) exercise any and all voting and other consensual rights
pertaining to the Escrow Shares, all in accordance with their respective pro
rata interest in the Escrow Shares.
3.5 Additional Contingent Payments. In addition to the shares of Parent
Common Stock to be paid to holders of Pogo Voting Stock in respect of their
outstanding shares of Pogo Voting Stock pursuant to Section 3.1(c), each holder
of Pogo Voting Stock shall be entitled, on and subject to the terms of this
Agreement (including, without limitation, the provisions of this Section 3.5),
to receive as additional consideration the following:
(a) Revenue Contingent Payment. Upon and subject to the satisfaction of
the revenue performance requirements set forth in this Section 3.5(a), each
holder of Pogo Voting Stock shall be entitled to receive as additional
consideration for such holder's shares of Pogo Voting Stock such
stockholder's Pro Rata Share of the Revenue Contingent Payment. "Revenue
Contingent Payment" means (i) if Pogo Actual Revenues are equal to or
greater than Pogo Target Revenues, Twelve Million Five Hundred Thousand
Dollars ($12,500,000), (ii) if Pogo Actual Revenues are less than 100% of
Pogo Target Revenues but greater than 80% of Pogo Target Revenues, an
amount equal to the product obtained by multiplying (1) Twelve Million Five
Hundred Thousand Dollars ($12,500,000) by (2) a fraction (x) the numerator
of which is (Pogo Actual Revenues divided by Pogo Target Revenues) minus
0.80 and (y) the denominator of which is 0.20; and (iii) if Pogo Actual
Revenues are equal to or less than 80% of Pogo Target Revenues, $0. The
parties acknowledge that Pogo's distribution agreement with Netscape/ICQ is
not likely to continue after the Closing Date. The parties agree that if
the Netscape/ICQ distribution agreement is terminated, Pogo Target Revenues
will be $15,385,352; provided that if the Surviving Corporation enters into
new distribution agreements generated primarily by Parent after the Closing
Date, the new revenues generated from such distribution agreements shall
not be included in Pogo's Actual Revenues unless and until such new
revenues exceed $1,158,037. Parent will cause its accountants to determine
within 30 days after the End Date, the Pogo Actual Revenues, and within
fifteen days after the determination of the Pogo Actual Revenues, Parent
shall give written notice of such determination (including reasonable
detail demonstrating the calculation thereof) to the Stockholder Agent and
shall make any Revenue Contingent Payment due under this Section 3.5(a).
(b) Executive Retention Contingent Payment. If at least five (5) of the
Pogo Key Executives are still employed by the Surviving Corporation as of
the Retention Measure Date and one of the five (5) is Erick Hachenburg,
then each holder of Pogo Voting Stock shall be entitled to receive as
additional consideration for such holder's shares of Pogo Voting Stock such
stockholder's Pro Rata Share of Twelve Million Five Hundred Thousand
Dollars ($12,500,000), such payment being referred to herein as the
"Executive Retention Contingent Payment." If any Pogo Key Executive, after
the Closing Date and before the Retention Measure Date, is terminated by
the Surviving Corporation without Cause or terminates his or her employment
for Good Reason, or dies or becomes disabled, then such Pogo Key Executive
shall be deemed to continue to be employed by the Surviving Corporation for
purposes of this Section 3.5(b). If the Executive Retention Contingent
Payment is payable pursuant to this Section 3.5(b), the shares of
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Parent Common Stock to be issued in payment thereof shall be issued as of
the Retention Measure Date and the certificates representing such shares
shall be delivered to the stockholders within fifteen days after the
Retention Measure Date. Parent shall deliver written notice to the
Stockholder Agent promptly following the Retention Measure Date as to
whether the Executive Retention Contingent Payment shall be paid.
(c) Form of Payment. All amounts, if any, payable to the holders of Pogo
Voting Stock in respect of the Revenue Contingent Payment and Executive
Retention Contingent Payment (collectively, the "Contingent Payments")
shall be paid by Parent in shares of Parent Common Stock. For purposes of
this Section 3.5, each share of Parent Common Stock shall be deemed to have
a value equal to the average of the daily closing prices of the Parent
Common Stock as reported on the Nasdaq for the ten (10) consecutive trading
day period ending three trading days (i) before the End Date, in respect to
the Revenue Contingent Payment and (ii) before the Retention Measure Date,
in respect to the Executive Retention Contingent Payment, prior to the date
of issuance of Parent Common Stock as payment of the Contingent Payment;
provided, however, that no certificates representing fractional shares of
Parent Common Stock shall be issued as payment for the Contingent Payments.
In lieu of any such fractional shares, each holder of Pogo Voting Stock who
otherwise would be entitled to receive a fractional share of Parent Common
Stock shall be entitled to receive from Parent a cash payment equal to such
fraction multiplied by the closing price of Parent Common Stock on the
applicable issuance date.
(d) Effect of Certain Terminations. Notwithstanding the foregoing
provisions of this Section 3.5, in the event that, on or prior to the End
Date (i) Parent terminates the employment of any Pogo Key Executive without
Cause or any Pogo Key Executive terminates his or her employment for Good
Reason and (ii) as of the date of such termination, the Surviving
Corporation has achieved, on a cumulative basis for the portion of the
Measurement Period ended as of such date of termination, an amount of Pogo
Actual Revenues equal to seventy percent (70%) of the product obtained by
multiplying the Pogo Target Revenues by a fraction, the numerator of which
is the number of days from the Start Date until the date of such
termination, and the denominator of which is the number of days in the
Measurement Period, then the Revenue Contingent Payment shall become due
and payable in full on the End Date.
(e) Parent Covenants Regarding Pogo's Operations. As a material
inducement to Pogo to enter into this Agreement, and in order to afford
holders of Pogo Voting Stock a full and fair opportunity to receive the
Contingent Payments, Parent hereby agrees that, during the time period
beginning on the Closing Date and ending on the End Date (the "Transition
Period"), Parent hereby covenants and agrees with Pogo and holders of Pogo
Voting Stock that, at all times during the Transition Period, Parent shall:
(i) allow the Surviving Corporation, as determined by the Surviving
Corporation's executive management, to manage and control the day-to-
day operations and strategic direction of the Surviving Corporation's
business (including but not limited to, all aspects of the Surviving
Corporation's products, games, services, ad products and supporting
technology) and to incur expenses in connection therewith, provided
that the Surviving Corporation will not exceed the total expenses
provided for in the Surviving Corporation's Operational Budget
(including without limitation expenses for costs of sales and capital
expenditures) dated July 7, 2000 (previously provided to and approved
by Parent) (such budget subject to the modifications set forth in
Section 3.5(e)(i) of the Pogo Disclosure Schedule (as hereinafter
defined) and being hereinafter referred to as the "Surviving
Corporation Operational Budget");
(ii) ensure the Surviving Corporation has funding to pay all costs
and expenses provided for in the Surviving Corporation Operational
Budget during the Transition Period, which expenses Parent acknowledges
may be reallocated by the Surviving Corporation, in the discretion of
its executive management, within and between departments;
(iii) allow the Surviving Corporation, through the Surviving
Corporation's executive management, subject to Parent's reasonable
approval, to recruit, hire, employ, manage, retain and terminate
employees and to compensate such employees through salaries, bonuses,
commissions and
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other incentive-based compensation arrangements, including but not
limited to setting incentive-based commissions for Pogo's employees
that are tied to achievement by Pogo of the Pogo Target Revenues during
the Measure Period, provided that Pogo will not exceed the total
expenses provided for in Surviving Corporation Operational Budget;
(iv) not dissolve or liquidate the Surviving Corporation, nor sell
or cause the Surviving Corporation to sell, transfer or otherwise
dispose of any of the Surviving Corporation's assets other than in the
ordinary course of Pogo's business consistent with Pogo's past
practices, nor merge or consolidate the Surviving Corporation with
another entity or sell, distribute or otherwise dispose of the capital
stock of the Surviving Corporation;
(v) not relocate the Surviving Corporation's physical offices or
operations;
(vi) continue to provide the Surviving Corporation with placement on
Parent's site at least as prominent as currently provided and
consistent with the terms and provisions of the Premier Game Provider
Agreement dated March 31, 1999 between Parent and Pogo;
(vii) ensure that with respect to any transactions between Parent
(or any of its affiliates) and the Surviving Corporation in which the
Surviving Corporation has agreed to undertake new or additional
responsibilities or obligations at the request of Parent (or any such
affiliate), the revenue attributable to the Surviving Corporation shall
be determined on terms no less favorable than if such transaction had
been on an arm's length basis with an independent third party; provided
that the Surviving Corporation shall not be obligated to enter into any
such transactions;
(viii) reasonably consider any written proposals submitted by Pogo
to expand the operational and strategic relationship between Parent and
Pogo or to jointly pursue operational or strategic initiatives; and
(ix) not take any action to interfere with Pogo's revenue contracts
or to discourage customers, employees, suppliers or other business
associates of Pogo from continuing to maintain their business
relationship with Pogo as in effect on the date of this Agreement.
(f) Acceleration for Breach of Certain Parent Covenants. In the event
that Parent breaches any of its covenants set forth in clauses (i) through
(vii) of Section 3.5(e), and the Stockholder Agent reasonably believes that
such failure will result in a reduction of Pogo Actual Revenues, then the
Stockholder Agent may deliver a written notice to Parent indicating the
nature of Parent's breach of its covenants and if Parent fails to cure the
breach of such covenants within 15 days after receipt of such notice, then
the Revenue Contingent Payment shall become immediately due and payable.
(g) Appointment and Authority of Stockholder Agent. By voting in favor
of the Merger, each of the Pogo stockholders is approving the designation
of, and designates, Erick Hachenburg as the representative of the Pogo
stockholders (the "Stockholder Agent") and as the attorney-in-fact and
agent for and on behalf of each Pogo stockholder with respect to any
dispute resolution related to the Contingent Payments and the taking by the
Stockholder Agent of any and all actions and the making of any decisions
required or permitted to be taken by the Stockholder Agent under this
Agreement or the Escrow Agreement, including without limitation the
exercise by the Stockholder Agent of the power to: (i) agree to, negotiate,
enter into settlements and compromises of, demand arbitration of, comply
with the orders of courts and awards of arbitrators with respect to such
disputes; (ii) initiate any dispute regarding the Contingent Payments or
this Section 3.5 or the Escrow Agreement, arbitrate, resolve, settle or
compromise any dispute regarding the Contingent Payments or the provisions
of this Section 3.5 or the Escrow Agreement; and (iii) take all actions
necessary in the judgment of the Stockholder Agent for the accomplishment
of the foregoing. The Stockholder Agent will have authority and power to
act on behalf of each Pogo stockholder with respect to the disposition,
settlement or other handling of all disputes and all other rights or
obligations arising under the Contingent Payments or otherwise under this
Section 3.5 or the Escrow Agreement. The Pogo stockholders will be bound by
all actions taken and all documents executed by the Stockholder Agent in
connection with any dispute related to the Contingent Payments or the
Escrow
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Agreement. The Pogo stockholders hereby acknowledge and agree that (i) in
performing the functions specified in this Agreement or the Escrow
Agreement, the Stockholder Agent will not be liable to any Pogo stockholder
in the absence of willful misconduct or fraud on the part of the
Stockholder Agent; and (ii) any claims against the Stockholder Agent shall
be properly asserted against the Stockholder Agent only in the Stockholder
Agent's capacity as the Stockholder Agent and shall not be asserted against
the Stockholder Agent in his individual capacity or against Pogo. Any out-
of-pocket costs and expenses reasonably incurred by the Stockholder Agent
in connection with actions taken pursuant to the terms of Section 3.5(h) or
the Escrow Agreement (including, without limitation, the hiring of legal
counsel and incurring of legal fees and costs) will be paid by the holders
of Pogo Voting Stock to the Stockholder Agent pro rata in proportion to
their respective Pro Rata Share.
(h) Disputes Concerning Contingent Payments.
(i) If at any time, the Stockholder Agent believes Parent has
breached any of its covenants or obligations under Section 3.5(e), the
Stockholder Agent may send written notice of such breach to Parent
which notice shall indicate the nature of such breach. Within 20
business days following each of (i) the delivery of the notice
regarding Revenue Contingent Payment in accordance with Section 3.5(a)
and (ii) the delivery of the notice regarding the Executive Retention
Contingent Payment in accordance with Section 3.5(b), the Stockholder
Agent will deliver written notice to Parent indicating whether the
Stockholder Agent accepts or disputes Parent's determination of the
applicable Contingent Payment including the calculation of Pogo Actual
Revenues, if applicable. If the Stockholder Agent delivers to Parent
written notice disputing any matter related to either Contingent
Payment, including a written notice asserting a breach by Parent of any
of its covenants or obligations contained in Section 3.5(e), then
within ten (10) business days after receipt of such notice to Parent, a
designee of Parent and the Stockholder Agent shall meet to attempt to
resolve such dispute. If final resolution of such dispute through a
definitive written agreement is not reached within thirty (30) business
days after receipt of such notice, then Parent, Pogo, (and the Pogo
stockholders) agree that any dispute between the parties related to the
Contingent Payments will be submitted to a mandatory, final and binding
arbitration before J.A.M.S./ENDISPUTE or its successor ("J.A.M.S."),
governed by the United States Arbitration Act, 9 U.S.C., Section 1 et
seq. and that any such arbitration will be conducted in Santa Clara
County, California. Either the Stockholder Agent or Parent may commence
the arbitration process called for by this Agreement by filing a
written demand for arbitration with J.A.M.S. and giving a copy of such
demand to the other. The arbitration will be conducted in accordance
with the provisions of J.A.M.S.'s Streamlined Arbitration Rules and
Procedures in effect at the time of filing of the demand for
arbitration. The parties will cooperate with J.A.M.S. and with each
other in promptly selecting an arbitrator from J.A.M.S.'s panel of
neutrals, and in scheduling the arbitration proceedings in order to
fulfill the provisions, purposes and intent of this Agreement. The
parties covenant that they will participate in the arbitration in good
faith. The provisions of this Section 3.5(h) may be enforced by any
court of competent jurisdiction, and the party seeking enforcement
shall be entitled to an award of all costs, fees, and expenses,
including attorney's fees, to be paid by the party against whom
enforcement is ordered. Judgment upon the award rendered by the
arbitrator may be entered in any court having competent jurisdiction.
(ii) Payment of Costs. Parent on the one hand, and Pogo stockholders
(through the Stockholder Agent as provided in Section 3.5(g) of this
Agreement), on the other hand, will bear the expense of any deposits
and advances required by the arbitrator in equal proportions; provided,
however, that Parent shall advance such amounts subject to recovery of
such advances as an addition or offset to any award in the arbitration.
The arbitrator will award to the prevailing party, as determined by the
arbitrator, all reasonable costs, fees and expenses related to the
arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party.
If such an award would result in manifest injustice, however, the
arbitrator may apportion such costs, fees and expenses between the
parties in such a manner as the arbitrator deems just and equitable.
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(iii) Burden of Proof. Except as may be otherwise expressly provided
herein, for any dispute related to any Contingent Payments submitted to
arbitration hereunder, the burden of proof will be as it would be if
such dispute were litigated in a civil judicial proceeding governed by
California law exclusively.
(iv) Award. Upon the conclusion of any arbitration proceedings
hereunder, the arbitrator will render findings of fact and conclusions
of law based on the provisions of this Agreement and a final written
arbitration award setting forth the basis and reasons for any decision
reached (the "Final Award") and will promptly deliver such documents to
the Stockholder Agent and Parent, together with a copy of the Final
Award signed by the arbitrator. The Final Award will constitute a
conclusive determination of all issues regarding the dispute in
question, binding upon the Pogo stockholders, the Stockholder Agent and
Parent, and will include an affirmative statement to such effect;
provided, however, that the arbitrator shall not make any decision or
Final Award that is in conflict with this Agreement. The Final Award
rendered by the arbitrator may be entered as a judgment in any court
having competent jurisdiction.
(v) Timing. The Stockholder Agent, Parent and the arbitrator will
use diligent efforts to conclude each arbitration pursuant to this
Section 3.5(h) as promptly as reasonably possible.
(vi) Terms of Arbitration. The arbitrator chosen in accordance with
these provisions will not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the provisions of
this Agreement.
(vii) Exclusive Remedy. Except as specifically otherwise provided in
this Agreement, arbitration conducted in accordance with this Agreement
will be the sole and exclusive remedy of the parties for any dispute
arising pursuant to Section 3.5(h) of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF POGO
Except as set forth on the disclosure schedule delivered by Pogo to Parent
prior to the execution of this Agreement (the "Pogo Disclosure Schedule")
(provided that any particular item on such Pogo Disclosure Schedule shall be
deemed to qualify only the particular Section of this Article IV for which such
item is referenced), Pogo represents and warrants to Parent and Sub as follows:
4.1 Organization, Standing and Corporate Power. Pogo is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Pogo is duly qualified or
licensed to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, except where
its failure to be so qualified or licensed would not have a Material
Adverse Effect on Pogo. Pogo has delivered to Parent complete and correct
copies of its certificate of incorporation and bylaws, in each case as
amended to the date of this Agreement. Pogo is not a registered or
reporting company under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Section 4.1 of the Pogo Disclosure Schedule sets
forth a list of all of the jurisdictions where Pogo is qualified to do
business.
4.2 Subsidiaries. Pogo does not own, directly or indirectly, any capital
stock or other ownership interest in any corporation, partnership, joint
venture or other entity or serve as a general partner of any other entity.
4.3 Capital Structure.
(a) The authorized capital stock of Pogo consists of 24,500,000
shares of Common Stock, $.001 par value (the "Pogo Common Stock"), and
19,867,900 shares of Preferred Stock, $.001 par value (the "Pogo
Preferred Stock") of which 1,887,900 shares have been designated Series
A Preferred
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Stock ("Series A Preferred"), 2,250,000 shares have been designated
Series A-2 Preferred Stock ("Series A-2 Preferred"), 4,900,000 shares
have been designated Series B Preferred Stock ("Series B Preferred"),
2,830,000 shares have been designated Series C Preferred Stock ("Series
C Preferred"), and 8,000,000 shares have been designated Series D
Preferred Stock ("Series D Preferred").
(b) At the date of this Agreement (i) 4,718,737 shares of Pogo
Common Stock are issued and outstanding; (ii) 1,887,900 shares of
Series A Preferred, 1,207,073 of Series A-2 Preferred, 4,376,714 shares
of Series B Preferred, 2,809,860 shares of Series C Preferred and
7,087,438 shares of Series D Preferred are issued and outstanding;
(iii) warrants to purchase 6,126 shares of Pogo Common Stock ("Common
Stock Warrants"), 476,571 shares of Series B Preferred ("Series B
Warrants"), 14,706 shares of Series C Preferred ("Series C Warrants")
and 598,750 shares of Series D Preferred ("Series D Warrants";
collectively, the "Warrants") are outstanding; and (iv) an aggregate of
5,850,000 shares of Pogo Common Stock have been reserved and authorized
for issuance upon exercise of stock options to purchase shares of Pogo
Common Stock ("Stock Options") under the stock option plans identified
in Section 4.3(b) of the Pogo Disclosure Schedule (the "Stock Option
Plans"), of which options to purchase a total of 1,171,818 shares of
Pogo Common Stock are outstanding. Pogo has reserved a sufficient
number of shares of Pogo Common Stock for issuance upon conversion of
the Pogo Preferred Stock, and upon exercise of the Warrants. Each of
the Warrants may be exercised for the number of shares at the price per
share set forth in Section 4.3(b) of the Pogo Disclosure Schedule. The
issued and outstanding shares of Pogo Preferred Stock and Pogo Common
Stock are referred to herein as the "Pogo Stock".
(c) Except as set forth above, at the date of this Agreement no
shares of capital stock or other equity or voting securities of Pogo
were issued, reserved for issuance or outstanding. There are no
outstanding stock appreciation rights of Pogo and no outstanding
limited stock appreciation or similar rights or other rights to receive
or redeem for cash options, warrants or derivative securities of Pogo.
All outstanding shares of Pogo Stock are, and all shares which may be
issued upon the exercise of Stock Options and Warrants prior to the
Effective Time will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and, except as set forth in Section 4.3(c)
of the Pogo Disclosure Schedule, not subject to preemptive rights.
Except for the Bridge Note or as otherwise set forth in Section 4.3 of
the Pogo Disclosure Schedule, there are no bonds, debentures, notes or
other indebtedness of Pogo having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any
matters on which stockholders of Pogo may vote. Set forth on Schedule
4.3(c) to the Pogo Disclosure Schedule is a true and complete list of
all outstanding Stock Options as of the date of this Agreement,
including (i) the name of the option holder, (ii) the number of shares
subject to the Stock Options, (iii) the number of vested and unvested
shares subject to such Stock Options and the vesting schedule thereof,
and (iv) the exercise price. Except as set forth in this Section 4.3(c)
and on Schedule 4.3(c) of the Pogo Disclosure Schedule, as of the date
hereof there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any
kind to which Pogo is a party or by which it is bound obligating Pogo
to issue, deliver or sell, or cause to be issued, delivered or sold,
additional equity or voting securities of Pogo or obligating Pogo to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. Except
as set forth in this Section 4.3(c) and on Schedule 4.3(c) of the Pogo
Disclosure Schedule, there are no outstanding contractual or other
obligations of Pogo to repurchase, redeem or otherwise acquire any
shares of capital stock (or options or warrants or other rights to
acquire any such shares) of Pogo.
4.4 Authority: Noncontravention.
(a) Pogo has the requisite corporate power and authority to enter
into this Agreement and, subject to Pogo Stockholder Approval of this
Agreement and the Merger, to consummate the transactions contemplated
by this Agreement. The execution and delivery of this Agreement by Pogo
and the consummation by Pogo of the transactions contemplated by this
Agreement have been duly
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authorized by all necessary corporate action on the part of Pogo,
subject to Pogo Stockholder Approval of this Agreement and the Merger.
This Agreement has been duly executed and delivered by Pogo and,
assuming the due authorization, execution and delivery by all the other
parties hereto, constitutes a valid and binding obligation of Pogo,
enforceable against Pogo in accordance with its terms subject to the
effect of laws of general application relating to bankruptcy,
insolvency and the relief of debtors and to rules of law governing
specific performance, injunctive relief or other equitable remedies.
(b) Subject only to Pogo Stockholder Approval of this Agreement and
the Merger, except as set forth in Section 4.4 of the Pogo Disclosure
Schedule, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not: conflict
with, or result in any violation of or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation, acceleration or augmentation of any
material obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of
Pogo under, (i) the certificate of incorporation or bylaws of Pogo,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, or
material lease or other material agreement, instrument, permit,
concession, franchise or license applicable to Pogo or its properties
or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, conflict with or violate
(x) any judgment, order or decree, or (y) any material statute, law,
ordinance, rule or regulation, in each case applicable to Pogo or its
properties or assets. No material consent, approval, order or
authorization of, or registration, declaration or filing with, any
federal, state or local government or any court, administrative or
regulatory agency or commission or other governmental authority or
agency, domestic or foreign (a "Governmental Entity"), is required by
Pogo in connection with the execution and delivery of this Agreement by
Pogo or the consummation by Pogo of the transactions contemplated by
this Agreement, except for (1) the filing of the Certificate of Merger
together with the required officers' certificates with the Delaware
Secretary of State and appropriate documents with the relevant
authorities of other states in which Pogo is qualified to do business
(2) any filing required under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended (the "HSR Act") and termination of
the applicable waiting period thereunder, and (3) any other such
consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required to be made by Pogo under
federal securities laws.
(c) At the Effective Time, the execution, delivery and performance
of this Agreement and the Escrow Agreement by the Stockholder Agent
will be duly authorized by all necessary action on the part of the Pogo
stockholders.
4.5 Financial Statements; Changes; Contingencies.
(a) Pogo has delivered to Parent audited balance sheets for Pogo for
Pogo's two fiscal years ended March 31, 1998 and 1999, and an unaudited
balance sheet for the nine months ended December 31, 1999, the related
statements of operations, changes in stockholders' equity and changes
in financial position and cash flows for the periods then ended. The
foregoing audited financial statements have been audited by Ernst &
Young LLP, whose reports thereon are included with such financial
statements. All such financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis ("GAAP") (except for changes, if any, required by GAAP
and disclosed therein). Such statements of operations and cash flows
present fairly in all material respects the results of operations,
changes in stockholders' equity and cash flows of Pogo for the
respective periods covered, and the balance sheets present fairly in
all material respects the financial position of Pogo as of their
respective dates. Pogo has made available to Parent copies of each
management letter or other letter delivered to Pogo by its auditors in
connection with such financial statements or relating to any review by
its auditors of the internal controls of Pogo during the period from
April 1, 1997 through the date hereof, and has made available for
inspection all reports and working papers produced or developed by its
auditors or management in connection with
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their examination of such financial statements, as well as all such
reports and working papers for prior periods for which any tax
liability of Pogo has not been finally determined or barred by
applicable statutes of limitations. Since December 31, 1999, there has
been no change in any of the significant accounting policies, practices
or procedures of Pogo.
(b) Pogo has delivered to Parent an unaudited balance sheet for Pogo
at June 30, 2000 and the related unaudited statement of operations and
cash flows and changes in stockholders' equity for the period then
ended. Such interim financial statements have been prepared in
conformity with GAAP applied on a consistent basis except for changes,
if any, required by GAAP and disclosed therein and except that the
interim financial statements do not contain any footnotes. The
unaudited statements of operations and cash flows for the six month
period ended June 30, 2000 present fairly the results of operations of
Pogo for the period covered, and the unaudited June 30, 2000 balance
sheet presents fairly the financial position of Pogo as of its date, in
each case subject to normal year-end adjustments, which are not
reasonably expected to be material in amount or significance. At the
date of such June 30, 2000 balance sheet, Pogo did not have any
material liability (actual, contingent or accrued), except as provided
in Section 4.5(b) of the Pogo Disclosure Schedule that, in accordance
with GAAP, should have been shown or reflected therein but was not.
(c) Since December 31, 1999, Pogo has carried on its business in the
ordinary course. Except as disclosed in Section 4.5(b) of the Pogo
Disclosure Schedule or in connection with the transactions contemplated
by this Agreement and the other agreements attached as exhibits hereto,
since June 30, 2000, there has not been, occurred or arisen: (i) any
agreement, condition, action or omission which would be required under
GAAP to be addressed in notes to audited financial statements, (ii) any
strike or other labor dispute involving Pogo's employees, (iii) any
casualty, loss, damage or destruction (whether or not covered by
insurance) of any material property of Pogo, (iv) any amendments or
changes in the certificate of incorporation or bylaws of Pogo, (v) any
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any
of Pogo's capital stock, (vi) any split, combination or
reclassification of any of capital stock of Pogo or any issuance or the
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of Pogo's capital stock, (vii)
any granting by Pogo to any officer or employee of Pogo (1) of any
increase in compensation, except in the ordinary course of business
consistent with prior practice or as was required under any Pogo
employment agreements (a list of all such employment agreements being
set forth in Section 4.5(c) of the Pogo Disclosure Schedule) or (2) any
increase in severance or termination pay, except as was required under
employment, severance or termination agreements in effect as of June
30, 2000 listed on Section 4.5(c) of the Disclosure Schedule; (viii)
any license, transfer or grant of a right under the Pogo Intellectual
Property (as defined in Section 4.20 below) (other than those licensed,
transferred or granted in the ordinary course of Pogo's business
consistent with its past practices); (ix) any incurrence, creation or
assumption by Pogo of (1) any Liens on any of the assets or properties
of Pogo (other than liens with respect to taxes that are not yet due
and payable, contractor's liens and liens reflected on the latest
audited and unaudited balance sheets of Pogo provided to Parent), (2)
any obligation or liability other than those incurred in the ordinary
course of business consistent with past practices or any indebtedness
for borrowed money (other than the Bridge Note) or (3) any contingent
liability as a guarantor or surety with respect to the obligations of
others; (x) any acceleration or release of any vesting condition to the
right to exercise any option, warrant or other right to purchase or
otherwise acquire any shares of Pogo's capital stock, or any
acceleration or release of any right to repurchase shares of Pogo's
capital stock upon the stockholder's termination of employment or
services with Pogo or pursuant to any right of first refusal; (xi)
purchase, license, sale, assignment or other disposition or transfer,
or any agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of the assets,
properties or goodwill of Pogo other than in the ordinary course of
Pogo's business consistent with its past practice; or (xii) making by
Pogo of any loan, advance or capital contribution to, or any investment
in, any officer, director or stockholder of Pogo or any firm or
business Parent in which any such person had a direct or indirect
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material interest at the time of such loan, advance, capital
contribution or investment, except normal compensation and expense
allowances payable to officers, directors or employees and except loans
to employees provided for under existing agreements set forth in
Section 4.5(c) of the Pogo Disclosure Schedule made in connection with
the purchase of stock of Pogo upon exercise of Stock Options.
(d) Pogo has no material liabilities, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, except
liabilities that (i) are reflected or disclosed in the most recent of
the financial statements referred to in paragraphs (a) or (b) of this
Section 4.5, (ii) were incurred after December 31, 1999 in the ordinary
course of business consistent with past practice, (iii) are incurred
under the Bridge Note from Parent, or (iv) are set forth in Section
4.5(d) of the Pogo Disclosure Schedule.
(e) All receivables of Pogo, reflected on the June 30, 2000 balance
sheet represent services actually provided in the ordinary course of
business, and are current and fully collectible net of any reserves
reflected on such balance sheet (which reserves are adequate and were
calculated on a basis consistent with GAAP and Pogo's past practices).
Pogo has delivered to Parent a complete and accurate aging list of all
receivables of Pogo as of the date of this Agreement.
4.6 Information Supplied. None of the information supplied or to be
supplied by or on behalf of Pogo for inclusion in any document or
application filed with any Governmental Entity having jurisdiction over, or
in connection with, the transactions contemplated by this Agreement did
contain, or at the respective times such information is or was delivered,
will contain, any untrue statement of a material fact regarding Pogo, or
omitted or will omit to state any material fact regarding Pogo required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. If
Pogo becomes aware that any of such information regarding Pogo at any time
subsequent to delivery and before the Closing Date is or becomes untrue or
misleading in any material respect Pogo will promptly notify Parent in
writing of such fact and the reason for such change. All documents required
to be filed by Pogo with any Governmental Entity in connection with this
Agreement or the transactions contemplated by this Agreement will comply in
all material respects with the provisions of applicable law.
4.7 Litigation; Administrative Proceedings. Except as disclosed in
Section 4.7 of the Pogo Disclosure Schedule, there is no suit, action,
investigation, proceeding with local, state or federal administrative
agencies, claim involving workers compensation relating to classes of
employees, audit or proceeding pending or, to the knowledge of Pogo,
threatened against Pogo, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Pogo.
4.8 Taxes.
(a) Except as set forth in Section 4.8 of the Pogo Disclosure
Schedule, Pogo has timely filed all federal, state, local and foreign
tax returns and reports required to be filed by it through the date
hereof and will timely file all such returns and reports required to be
filed on or before the Effective Time. All such returns and reports are
and will be true, complete and correct in all material respects. Pogo
has paid and discharged all taxes due from it, other than such taxes as
are being contested in good faith by appropriate proceedings or are
adequately reserved for on Pogo's unaudited financial statements
referred to in Section 4.5(b) or as set forth in Section 4.8 of the
Pogo Disclosure Schedule. Pogo's most recent unaudited financial
statements referred to in Section 4.5(b) properly reflect in accordance
with GAAP all taxes payable by Pogo for all taxable periods and
portions thereof through the date of such financial statements.
Adequate provision has been made in the books and records of Pogo, and
to the extent required by GAAP in the financial statements referred to
in Section 4.5 above or delivered to Parent, for all taxes whether or
not due and payable and whether or not disputed.
(b) No claim or deficiency for any taxes has been asserted or
assessed or, to the knowledge of Pogo, been proposed or threatened, by
the Internal Revenue Service (the "IRS") or any other taxing authority
or agency against Pogo. No requests for waivers of the time to assess
any taxes are pending.
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No audit or other examination relating to any taxes concerning or
attributable to Pogo is in progress and Pogo has not been notified of
any request for any audit or other examination.
(c) No tax liens are currently in effect against any assets of Pogo
other than liens which arise by operation of law for taxes not yet due
and payable. There is not in effect any waiver by Pogo of any statute
of limitations with respect to any taxes or any extension of time for
filing any tax return of Pogo which has not been filed, and Pogo has
not consented to extend to a date later than the date of this Agreement
the period in which any tax may be assessed or collected by any taxing
authority.
(d) Pogo has complied (and until the Effective Time will comply) in
all material respects with all applicable laws, rules and regulations
relating to the payment and withholding of taxes (including, without
limitation, withholding of taxes pursuant to Sections 1441 and 1442 of
the Code or similar provisions under any foreign law) and have, within
the time and in the manner prescribed by law, withheld from employee
wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under all applicable laws.
(e) Pogo is not a party to any tax-sharing or allocation agreement.
Pogo does not owe any amount under any tax-sharing or tax allocation
agreement.
(f) Pogo (1) has not been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common
parent of which was Pogo) or (2) has no liability for the taxes of any
person (other than Pogo) under Treasury Regulation Section 1.1502-6 (or
any similar provision of state, local, or foreign law) as a transferee
or successor, by contract, or otherwise.
(g) Pogo has not elected to be treated as a consenting corporation
under Section 341(f) of the Code. Pogo has not made any payments, is
not obligated to make any payments, nor is it a party to any agreement
that under certain circumstances could obligate it to make any payments
that will not be deductible under Section 280G of the Code. Pogo has
disclosed on its federal income tax returns all positions taken therein
that could give rise to a substantial understatement of federal income
tax within the meaning of Section 6662 of the Code.
(h) To Pogo's knowledge, Pogo has not taken or agreed to take any
action nor does Pogo have any knowledge of any fact or circumstance
that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(i) Pogo has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(2). Pogo has
never been a party to any transaction intended to qualify under Section
355 of the Code.
(j) As used in this Agreement, "taxes" means all federal, state,
local and foreign income, property, sales, excise and other taxes, of
any nature whatsoever (whether payable directly or by withholding),
together with any interest and penalties, additions to tax or
additional amounts imposed with respect thereto, and "tax return" means
any return, declaration, report, claim for refund, or information
return or statement relating to taxes, including any schedule or
attachment thereto, and including any amendment thereof. For the
purposes of this Section 4.8 and with respect solely to federal income
taxes, references to Pogo includes former subsidiaries of Pogo for the
periods during which any such corporations were included in the
consolidated federal income tax return of Pogo.
4.9 Employee Benefits.
(a) Section 4.9 of the Pogo Disclosure Schedule lists all director,
independent contractor and employee benefit plans and collective
bargaining, employment or severance agreements to which Pogo is bound
(collectively, "Benefit Plans"), including without limitation any
"employee benefit plan" within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Pogo has delivered
to Parent true and complete copies of all material documents and
summary plan descriptions with respect to such plans, agreements and
arrangements, or summary descriptions of any such plans, agreements or
arrangements not otherwise in writing.
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(b) All plans referred to in Section 4.9(a) are and have been
maintained in material compliance with the applicable provisions of
ERISA (as amended through the date of this Agreement), the regulations
thereunder, and all other laws applicable with respect to all such
employee benefit plans, agreements and arrangements. Pogo has performed
all of its material obligations under all such plans, agreements and
arrangements. There are no actions (other than routine claims for
benefits) pending or to Pogo's knowledge threatened against such plans
or their assets, or arising out of such plans, agreements or
arrangements, and to Pogo's knowledge no facts exist which could give
rise to any such actions.
(c) Except as specified in Section 4.9 of the Pogo Disclosure
Schedule, each of the plans, agreements or arrangements can be
terminated by Pogo within a period of 30 days following the Effective
Time, without payment of any additional material amounts or the
additional vesting or acceleration of any such benefits.
4.10 Qualified Plans.
(a) Section 4.10 of the Pogo Disclosure Schedule lists all "employee
pension benefit plans" (within the meaning of Section 3(2) of ERISA)
that are also stock bonus, pension or profit-sharing plans within the
meaning of Section 401(a) of the Code.
(b) Each such plan referred to in Section 4.10(a) is qualified in
form and operation under Section 401(a) of the Code and each trust
under each such plan is exempt from tax under Section 501(a) of the
Code. To the knowledge of Pogo, (i) no event has occurred that will or
could give rise to disqualification or loss of tax-exempt status of any
such plan or trust under such sections, (ii) no event has occurred that
will or could subject any such plans to tax under Section 511 of the
Code, and (iii) no prohibited transaction (within the meaning of
Section 4975 of the Code) or party-in-interest transaction (within the
meaning of Section 406 of ERISA) has occurred with respect to any of
such plans for which an exemption is not available.
(c) Pogo has delivered to Parent for each such plan copies of the
following documents: (i) the Form 5500 filed for such plan in each of
the most recent two plan years, including, but not limited to, all
schedules thereto and financial statements with attached opinions of
independent accountants (if any), and (ii) the most recent
determination, opinion, notification or advisory letter from the IRS
with respect to such plan (if any).
4.11 Title IV Plans. No plan listed in Section 4.9 or 4.10 of the Pogo
Disclosure Schedule is subject to Title IV of ERISA.
4.12 Multiemployer Plans; Retirement Welfare Plans. No plan listed in
Section 4.9 or 4.10 of the Pogo Disclosure Schedule is a "multiemployer
plan" (within the meaning of Section 3(37) of ERISA). Pogo has not
contributed to or had an obligation to contribute to any multiemployer
plan. Except to the extent required under Section 4980B of the Code (or
other comparable state law), no plan listed in Section 4.9 or 4.10 of the
Pogo Disclosure Schedule provides health or welfare benefits (through
purchase of insurance or otherwise) for any retired or former employee of
Pogo or its subsidiaries or affiliates.
4.13 No Excess Parachute Payments. Except as disclosed in Section 4.13
of the Pogo Disclosure Schedule, any amount that could be received (whether
in cash or property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer or
director of Pogo or any of its affiliates (as defined in Section 1.1(a))
who is a "disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any employment, severance or
termination agreement, other compensation arrangement or Benefit Plan
currently in effect would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code or
within the meaning of Proposed Treasury Regulation 1.280G-1).
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4.14 Permits; Compliance with Applicable Laws.
(a) Pogo owns, holds or possesses all material licenses, franchises,
permits, privileges, immunities, approvals and other authorizations
from Governmental Entities that are necessary to entitle it to own or
lease, operate and use its assets and to carry on and conduct its
business substantially as currently conducted ("Permits"). Section 4.14
of the Pogo Disclosure Schedule sets forth a list and brief description
of each Permit, except for such incidental licenses, permits and other
authorizations which would be readily obtainable by any qualified
applicant without undue burden in the event of any lapse, termination,
cancellation or forfeiture thereof. Complete and correct copies of all
the Permits have heretofore been delivered by Pogo to Parent. Pogo has
fulfilled and performed its material obligations under each of the
Permits, and no event has occurred or condition or state of facts
exists which constitutes or, after notice or lapse of time or both,
would constitute a material breach or default under any Permit or which
permits or, after notice or lapse of time or both, would permit
revocation or termination of any Permit. No notice of cancellation,
suspension, revocation, or default or of any dispute concerning any
Permit, or of any event, condition or state of facts described in the
preceding sentence, has been received by, or is known to, Pogo; and
each of the Permits held by Pogo is valid, subsisting and in full force
and effect. Pogo has not made any fraudulent misrepresentations in
connection with any judicial or regulatory proceedings or actions
before any Governmental Entity.
(b) Pogo is, and has been, and each of Pogo's former subsidiaries,
while subsidiaries of Pogo, was, in compliance in all material respects
with all applicable Environmental Laws. The term "Environmental Laws"
means any federal, state, local or foreign statute, code, ordinance,
rule, regulation, policy, guideline, permit, consent, approval,
license, judgment, order, writ, decree, injunction or other
authorization, including the requirement to register underground
storage tanks, relating to (i) emissions, discharges, releases or
threatened releases of Hazardous Material (as defined below) into the
environment, including, without limitation, into ambient air, soil,
sediments, land surface or subsurface, buildings or facilities, surface
water, groundwater, publicly owned treatment works, septic systems or
land or (ii) the generation, treatment, storage, disposal, use,
handling, manufacturing, transportation or shipment of Hazardous
Material.
(c) During the period of ownership or operation by Pogo of any of
its operations or its current or previously owned or leased properties,
there have been no releases of Hazardous Material in, on, under or
affecting such properties or any surrounding site. To the knowledge of
Pogo, before the period of ownership or operation by Pogo of any of its
current or previously owned or leased properties, (i) no Hazardous
Material was generated, treated, stored, disposed of, used, handled or
manufactured at, or transported, shipped or disposed of from, such
current or previously owned or leased properties, except for the use,
storage and transportation of small quantities of substances that are
regularly used as office supplies or cleaning supplies, of the nature
and in the amounts commonly used in office buildings of this type, and
then in compliance with applicable Environmental Laws and in accordance
with prudent business practices and good hazardous materials storage
and handling practices; and (ii) there were no releases of Hazardous
Material in, on, under or affecting any such property or any
surrounding site. The term "Hazardous Material" means (i) hazardous or
toxic materials, contaminants, constituents, medical wastes, hazardous
or infectious wastes and hazardous substances as those terms are
defined in the following statutes and their implementing regulations:
the Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq.,
the Comprehensive Environmental Response, Compensation and Liability
Act, as amended by the Superfund Amendments and Reauthorization Act, 42
U.S.C. (S) 9601 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et
seq. and the Clean Air Act, 42 U.S.C. (S) 7401 et seq., (ii) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable laws as "hazardous" or "toxic," or by any other formulation
intended to define, list or classify substances by reason of
deleterious properties such as ignitibility, corrosivity, reactivity,
radioactivity, carcinogenicity, reproductive toxicity or "EP toxicity,"
(iii) petroleum, including drilling fluids,
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crude oil and any fractions thereof, (iv) natural gas, synthetic gas
and any mixtures thereof, produced waters and other wastes associated
with the exploration, development, or production of crude oil, natural
gas or geothermal energy, (v) asbestos and/or asbestos-containing
material and (vi) polychlorinated biphenyls ("PCBs") or materials or
fluids containing PCBs in excess of 50 ppm.
(d) Pogo is, and has been, and each of Pogo's former subsidiaries,
while subsidiaries of Pogo, was, in compliance in all material respects
with all other applicable laws and regulations (including all
applicable lottery or other gaming regulations).
4.15 Brokers. Except as set forth in Section 4.15 of the Pogo Disclosure
Schedule, no broker, investment banker, financial advisor or other Person,
is entitled to any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Pogo.
4.16 Contracts. Section 4.16 of the Pogo Disclosure Schedule lists each
contract (by date and parties signatory thereto to which Pogo or any of its
assets is subject or by which any thereof is bound) that is material to the
business of Pogo (collectively, the "Material Contracts"). Each contract of
Pogo that fits within one of the following categories shall be deemed to be
a Material Contract: each contract that (i) after June 30, 2000 obligates
Pogo to pay an amount of $100,000 or more; (ii) has an unexpired term as of
June 30, 2000 in excess of one year and has annual commitments in excess of
$50,000; (iii) represents a contract upon which the business of Pogo is
substantially dependent; (iv) provides for an extension of credit in excess
of $100,000; (v) limits or restricts the ability of Pogo to (x) compete or
(y) conduct its business in any material respect; (vi) provides for a
guaranty or indemnity by Pogo other than standard indemnities made in the
ordinary course of business of Pogo; (vii) grants a power of attorney,
agency or similar authority to another Person or entity on behalf of Pogo;
(viii) confers on a third party a right of first refusal on the sale or
transfer of any material properties or assets of Pogo; (ix) contains a
right or obligation of any affiliate, officer or director of Pogo (other
than stock option agreements disclosed in Section 4.3 of the Pogo
Disclosure Schedule); (x) relates to the acquisition or disposition, of a
material portion of Pogo's assets (whether or not such agreement has been
fully performed); (xi) contains a covenant not to compete with Pogo
(provided, for this purpose, licenses granted by Pogo subject to
restrictions on use of the licensed property will not be considered to be
covenants not to compete); (xii) evidences indebtedness for money borrowed
by Pogo (other than trade payables in the ordinary and usual course of
business); (xiii) represents a material relationship with any dealer,
distributor, OEM ("original equipment manufacturer"), VAR ("value added
reseller"), sales representative or similar agreement under which any third
party is authorized to sell, sublicense, lease, distribute, market or take
orders for, any product, service or technology of Pogo; (xiv) provides for
the development or license of any material software, content (including
without limitation textual content and visual, photographic or graphics
content), technology or intellectual property for (or for the benefit or
use of) Pogo, or provides for the purchase or license of any material
software, content (including without limitation textual content and visual
or graphics content), technology or intellectual property, (or for the
benefit or use of) Pogo, which software, content, technology or
intellectual property is in any manner used or incorporated (or is
contemplated by Pogo to be used or incorporated in connection with any
aspect or element of any product, service or technology of Pogo (other than
software generally available to the public at a per copy license fee of
less than $500 per copy); (xv) relates to the employment of any officer,
employee or consultant of Pogo which is not terminable within 30 days by
Pogo without cost or liability; (xvi) involves a material commitment by
Pogo to develop any new technology, to deliver any software currently under
development or to enhance or customize any software; and (xvii) provides
for the license (other than in the ordinary course of business), or the
purchase, sale, transfer or encumbrance of any of the Pogo Intellectual
Property. True, correct and complete copies of the Material Contracts,
including all amendments and supplements, have been delivered to Parent.
Each Material Contract is valid and Pogo has duly performed all of its
material obligations under each Material Contract to which Pogo is a party
to the extent that such obligations to perform have accrued, and no
material breach or default, alleged material breach or default, or event
which would (with the passage of time, notice or both) constitute a
material breach or default
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thereunder by Pogo has occurred, or as a result of this Agreement or its
performance will occur. There are no agreements, arrangements or
commitments of any character (contingent or otherwise) pursuant to which
any Person is or may be entitled to receive any payment based on the
revenues, earnings or financial performance of Pogo or assets or calculated
in accordance therewith (other than ordinary course payments or commissions
to sales representatives of Pogo based upon revenues generated by them
without augmentation as a result of the transactions contemplated hereby).
4.17 Title to Properties.
(a) Pogo does not own and has not owned, directly or indirectly, any
real property or any interest therein, other than leasehold interests.
Pogo has good and marketable title to, or valid leasehold interests in,
each of the properties and assets listed on Section 4.17 of the Pogo
Disclosure Schedule, subject only to Liens for taxes not yet due and
payable.
(b) Pogo has complied in all material respects with the terms of all
leases to which it is a party and under which it is in occupancy of
real property, and all such leases are in full force and effect and to
Pogo's knowledge no defaults (by landlord or tenant) exist thereunder.
True and complete copies of each of the leases in effect with respect
to the leased properties of Pogo have been delivered to Parent before
the date hereof and, other than as set forth on Section 4.17 of the
Disclosure Schedule, no consents or approvals are required to be
obtained with respect to the Merger or the use, occupancy or operation
of the leased properties following the Effective Time.
4.18 Voting Requirements. "Pogo Stockholder Approval" consisting of (i)
the approval of the holders of a majority of the shares of Pogo Common
Stock, voting separately as a class, and (ii) the approval of the holders
of a majority of the shares of the Pogo Preferred Stock, other than the
shares of Series A-2 Preferred, voting separately as a class, are the only
votes of the holders of any class or series of Pogo Stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
4.19 Noncompetition. Pogo is not, and after the Effective Time neither
the Surviving Corporation nor Parent will be (solely by reason of any
agreement to which Pogo is a party prior to the Effective Time), subject to
any noncompetition or material contractual restriction on its business as
currently conducted.
4.20 Intellectual Property.
(a) Schedule 4.20 of the Pogo Disclosure Schedule contains a true
and correct list of all the patents, patent applications, registered
trademarks or pending trademark applications, service marks, registered
trade names, domain names, and registered copyrights owned by Pogo.
Pogo owns, or possesses adequate and enforceable licenses or other
rights to use, all patents, trade secrets, inventions, processes,
technology, software, trademarks, service marks, trade names, domain
names, and copyrightable content (collectively, the "Pogo Intellectual
Property") necessary to conduct the business of Pogo as currently
conducted and such ownership, licenses or rights will not be terminated
or materially impaired by consummation of the Merger. Pogo has not
received any written or oral claim or notice from any person or entity
that its rights in, to and under the Pogo Intellectual Property
conflict with or infringe on the rights of any other Person. To the
knowledge of Pogo, its rights in, to and under the Pogo Intellectual
Property do not conflict with or infringe on the rights of any other
Person. No legal action or proceeding has been initiated, asserted or
is pending, nor, to the knowledge of Pogo, has any legal action or
proceeding been threatened, against Pogo either based upon or
challenging or seeking to deny or restrict its use of any of the Pogo
Intellectual Property. To Pogo's knowledge, no other Person is using
the Pogo Intellectual Property in a manner that infringes on the rights
of Pogo, nor has it made any written or oral claim or notice to such
effect.
(b) Pogo owns or rightfully possesses (i) the source code and object
code for its existing website infrastructure (the "Software"), and (ii)
all commentary, explanations, specifications, documentation,
proprietary information, test programs and program specifications,
compiler and assembler descriptions of proprietary or third party
system utilities, and descriptions of system/program
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generation and programs not owned by Pogo but required for use or
support, relating to the Software that are reasonably necessary for
Parent to maintain and enhance the Software.
(c) Except as disclosed in Section 4.20(c) of the Pogo Disclosure
Schedule, Pogo has not, directly or indirectly (i) licensed any of the
Pogo Intellectual Property in source code form to any party, (ii)
entered into any agreement requiring Pogo to license or otherwise
provide future versions, upgrades or enhancements of the Pogo
Intellectual Property in source code form or (iii) entered into any
exclusive agreements relating to the Pogo Intellectual Property that
grant exclusive rights in such Pogo Intellectual Property to any party.
To the knowledge of Pogo, except as set forth in Section 4.20(c) of the
Pogo Disclosure Schedule, no Person other than Pogo has a copy
(electronic or otherwise) of the source code (other than in HTML form
posted on Pogo's website) of any Software and any copies of Pogo's
source codes previously in the possession of any other Person have been
destroyed or returned to Pogo.
(d) Each employee, consultant and independent contractor of Pogo has
executed a proprietary information and inventions agreement. Except as
disclosed in Section 4.20(e) of the Pogo Disclosure Schedule, no
current or former employee, consultant or independent contractor of
Pogo: (i) has excluded works or inventions made prior to his or her
employment with Pogo from his or her assignment of inventions pursuant
to such employee, consultant or contractor's proprietary information
and inventions agreement; (ii) to Pogo's knowledge, is in material
violation of any term or covenant of any employment contract, patent
disclosure agreement, invention assignment agreement, non-disclosure
agreement, noncompetition agreement or any other contract or agreement
with any other party by virtue of such employee's, consultant's, or
independent contractor's being employed by, or performing services for,
Pogo or using trade secrets or proprietary information of others; or
(iii) to Pogo's knowledge, has developed any technology, software or
other copyrightable, patentable, or otherwise proprietary work for Pogo
that is subject to any agreement under which such employee, consultant
or independent contractor has assigned or otherwise granted to any
third party any rights (including without limitation the Pogo
Intellectual Property) in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work or any Pogo
Intellectual Property related thereto. The employment of any employee
of Pogo or the use by Pogo of the services of any consultant or
independent contractor, to Pogo's knowledge, does not subject Pogo to
any intellectual property infringement liability to any third party.
(e) Pogo has taken all reasonably necessary and appropriate steps to
protect and preserve the confidentiality of all of the trade secrets
within Pogo Intellectual Property not otherwise protected by patents,
patent applications or copyright ("Confidential Material").
4.21 Games. Section 4.21 of the Pogo Disclosure Schedule lists all games
that are currently distributed by Pogo as of the date of this Agreement.
Except as otherwise set forth in Section 4.21 of the Pogo Disclosure
Schedule, Pogo owns or possesses all necessary rights to produce and
display such games on its website. Except pursuant to a license, Pogo is
not using in any of the games listed in Section 4.21 of the Pogo Disclosure
Statement any works or inventions made by any current or former employee,
consultant or independent contractor of Pogo, which the current or former
employee, consultant or independent contractor has excluded from his or her
assignment of inventions pursuant to such employee, consultant or
contractor's proprietary information and inventions agreement.
4.22 Minute Books. The minute books of Pogo accurately reflect all
actions and proceedings taken to date by the respective stockholders,
boards of directors and committees of Pogo, and such minute books contain
true and complete copies of the charter documents of Pogo and all related
amendments.
4.23 Accounting Records; Internal Controls. Pogo has records that
accurately and validly reflect its transactions, and accounting controls
sufficient to insure that such transactions are (i) executed in accordance
with management's general or specific authorization and (ii) recorded in
conformity with GAAP so as to maintain accountability for assets.
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4.24 Insurance. Pogo has, and at all times during the past three years
has had, policies of insurance and bonds of the type and in the amounts
normally carried by comparably sized companies (covering the assets,
business, properties, operations, employees of Pogo), and all of the
insurance policies and bonds maintained by Pogo are in full force and
effect. Section 4.24 of the Pogo Disclosure Schedule lists all insurance
policies and bonds maintained by Pogo. Pogo is not in default under any
such policy or bond. Pogo has timely filed claims with its insurers with
respect to all material matters and occurrences for which it believes it
has valid claims to coverage. All insurance policies currently maintained
by Pogo are in full force and effect and Pogo has no reason to expect that
such policies cannot be renewed on comparable terms following consummation
of the transactions contemplated by this Agreement (subject to such
entities' continuing compliance with the applicable terms thereof and any
right of insurers to terminate without cause), and Pogo has received no
notice or other indication from any insurer or agent of any intent to
cancel or not so renew any of such insurance policies.
4.25 Dividends and Other Distributions. There has been no dividend or
other distribution of assets, whether consisting of money, property or any
other thing of value, or securities declared, issued or paid by Pogo
subsequent to the date of the most recent financial statements described in
Section 4.5(b).
4.26 Certain Interests. Except as set forth in Section 4.26 of the Pogo
Disclosure Schedule, no affiliate of Pogo nor any officer or director of
Pogo, nor associate of any such individual, has any material interest in
any material asset used in or pertaining to the business of Pogo; no such
Person is indebted or otherwise obligated to Pogo; and Pogo is not indebted
or otherwise obligated to any such Person, except for amounts due under
normal arrangements (including stock options) applicable to all employees
generally as to salary or reimbursement of ordinary business expenses not
unusual in amount or significance and except for stock options granted to
such persons. Except as set forth in Section 4.26 of the Pogo Schedule, the
consummation of the transactions contemplated by this Agreement will not
(either alone, or upon the occurrence of any act or event, or with the
lapse of time, or both) result in any benefit or payment (severance or
other) arising or becoming due from Pogo or the successors or assigns of
any thereof to any Person without the prior written consent of Parent.
4.27 Bank Accounts, Powers, etc. Section 4.27 of the Pogo Disclosure
Schedule lists each bank, trust company, savings institution, brokerage
firm, mutual fund or other financial institution with which Pogo has an
account or safe deposit box and the names and identification of all Persons
authorized to draw thereon or to have access thereto, and lists the names
of each Person holding powers of attorney or agency authority with respect
to such accounts from Pogo and a summary of the terms thereof.
4.28 Disclosure. No representation or warranty by Pogo contained in this
Agreement, and no statement contained in the Pogo Disclosure Schedule, or
in any certificate delivered to or to be delivered by or on behalf of Pogo
pursuant to this Agreement contains or will contain any untrue statement of
a material fact or omit or will omit to state any material fact necessary,
in light of the circumstances under which it was or will be made, in order
to make the statements herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to Pogo as follows:
5.1 Organization, Standing and Corporate Power. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate
power and authority to carry on its business as now being conducted.
5.2 Capital Structure; Merger Shares. The authorized capital stock of
Parent and the issued and outstanding shares and options to purchase shares
of Parent is set forth in Section 5.2 of the disclosure schedule delivered
to Pogo by Parent prior to the execution of this Agreement (the "Parent
Disclosure Schedule"). The shares of Parent Common Stock to be issued
pursuant to the Merger have been duly
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authorized and, when issued to the holders of Pogo Voting Stock, shall be
validly issued, fully paid and nonassessable, and free and clear of any
liens or encumbrances created by actions of Parent and not subject to
preemptive rights.
5.3 Authority; Noncontravention. Each of Parent and Sub has the
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been
duly executed and delivered by Parent and Sub and, assuming the due
authorization, execution and delivery by the other parties hereto,
constitutes a valid and binding obligation of each such party, enforceable
against each such party in accordance with its terms subject to the effect
of laws of general application relating to bankruptcy, insolvency and the
relief of debtors and to rules of law governing specific performance,
injunctive relief or other equitable remedies. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of Parent or Sub
under (i) the certificates of incorporation or bylaws of Parent or Sub,
(ii) subject to the governmental filings and other matters referred to in
the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or Sub or their
respective properties or assets or (iii) any material instrument, agreement
or contract to which Parent is a party or by which any of its material
assets or properties is bound which has been filed as an exhibit to the
Parent SEC Documents (as hereinafter defined). No consent, approval, order
or authorization of, or registration, declaration or filing with any
Governmental Entity is required by Parent or Sub in connection with the
execution and delivery of this Agreement or the consummation by Parent, as
the case may be, of any of the transactions contemplated by this Agreement,
except for (1) the filing with the SEC of such reports under Sections
13(a), 13(d) and 16(a) of the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated by this Agreement;
(2) the filing of the Certificate of Merger with the Delaware Secretary of
State and appropriate documents with the relevant authorities of other
states in which Pogo is qualified to do business; (3) termination of the
applicable waiting period under the HSR Act; (4) any filings, permits or
consents required under applicable state and federal securities laws,
including the filing of the Application (as defined in Section 7.1) and the
issuance of the Permit following the holding of the Hearing or subject to
the conditions of Section 7.1(e), the filing and effectiveness of the S-4
Registration Statement; (5) such filings as may be required by the Nasdaq
Stock Market; and (6) such other consents, approvals, orders,
authorizations, registrations, declarations and filings, including under
the "takeover" or "blue sky" laws of various states.
5.4 SEC Documents; Financial Statements. Since January 1, 1999, Parent
has timely filed with the SEC all reports and forms and other documents
required to be filed by Parent with the SEC pursuant to the Securities Act
of 1933, as amended (the "Securities Act") or the Exchange Act and the
rules and regulations of the SEC promulgated thereunder (the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Parent SEC Documents
and none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Parent included in the Parent SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the financial position of Parent as of the
dates thereof and the results of its operations and cash flows for the
periods
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then ended. Except as set forth in the Parent SEC Documents filed prior to
the date of this Agreement and publicly available and as set forth in
Schedule 5.4 of the Parent Disclosure Schedule and except for liabilities
and obligations incurred in the ordinary course of business consistent with
past practice since the date of the most recent balance sheet included in
the Parent SEC Documents, neither Parent nor any of its subsidiaries has
any liabilities which are, individually or in the aggregate, material to
the business, results of operations or financial condition of Parent and
its subsidiaries taken as a whole (whether accrued, absolute, contingent or
otherwise) required by GAAP to be set forth on a balance sheet of Parent
and its consolidated subsidiaries or in the notes thereto.
5.5 Interim Operations of Sub.
(a) Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business
activities and has conducted its operations only as contemplated
hereby.
(b) As of the date hereof and at the Effective Time, except for
obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement, Sub has not and will not have incurred, directly or
indirectly, through any subsidiary, any obligations or liabilities or
engaged in any business activities of any type of kind whatsoever or
entered into any agreements or arrangements with any person.
5.6 No Brokers. No broker investment banker, financial advisor or other
Person, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Parent.
5.7 Reorganization. Except as set forth below in this Section 5.7,
Parent makes no representations or warranties to Pogo, any stockholder of
or other holder of Pogo securities regarding whether the Merger will
qualify as a tax-free plan of reorganization under the Code, or any of the
tax consequences to any Pogo stockholder or such holder of this Agreement,
the Merger or any of the other transactions or agreements contemplated
hereby, and Pogo acknowledges that Pogo and each stockholder of Pogo is
relying solely on their own tax advisors in connection with this Agreement,
the Merger and the other transactions contemplated by this Agreement. To
Parent's knowledge, Parent has not taken or agreed to take any action, and
has no knowledge of any fact or circumstance that is reasonably likely to
prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code. Parent intends to continue the business of
Pogo following the Merger.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Business: Actions.
(a) Conduct of Business by Pogo. During the time period beginning on
the date of this Agreement and ending on the earlier of the Effective
Time or the termination of this Agreement, Pogo will (except as may be
consented to by Parent in writing) carry on its businesses in the
ordinary course and use reasonable efforts to preserve intact its
current business organizations, keep available the services of its
current officers and employees and preserve its relationships with
customers, suppliers, providers and others having business dealings
with it. Without limiting the generality of the foregoing, between the
date of this Agreement and the earlier of the Effective Time or the
termination of this Agreement, except as contemplated by this Agreement
or as consented to in writing by Parent, Pogo will not:
(i) (1) declare, set aside or pay (whether in cash, stock,
property, or otherwise) any dividends on, or make any other
distributions in respect of, any of its capital stock, (2) split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (3) purchase,
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redeem (other than the redemption of the Series A-2 Preferred) or
otherwise acquire any shares of capital stock of Pogo or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities, except pursuant to any agreement
that permits the repurchase of unvested shares or the cancellation
of options;
(ii) other than the issuance of Pogo Common Stock upon the
exercise of Stock Options or Warrants, the conversion of the Bridge
Note or upon the conversion of the Pogo Preferred Stock outstanding
on the date of this Agreement in accordance with their present terms
and except for the issuance of the Additional Pogo Options and the
issuance to new employees in the ordinary course of business of
options to purchase a maximum of 500,000 shares of Pogo Common Stock
at a price no less than the fair market value as of the date of
grant and subject to Pogo's standard four-year vesting schedule, and
except for issuances of Pogo Common Stock or warrants for Pogo
Common Stock up to a maximum of 100,000 shares at a price no less
than the fair market value as of the date of issuance to lenders,
equipment leasing companies, landlords or otherwise in the ordinary
course of business, (1) issue, deliver, sell, award, pledge, dispose
of or otherwise encumber or authorize or propose the issuance,
delivery, grant, sale, award, pledge or other encumbrance (including
limitations in voting rights) or authorization of, any shares of its
capital stock, any other equity or voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, equity or voting securities or convertible
securities, or (2) amend or otherwise modify the terms of any such
rights, warrants or options;
(iii) amend its certificate of incorporation, bylaws or other
comparable charter or organizational documents except to increase
the authorized number of shares of its capital stock to the extent
necessary to enable any currently outstanding security of Pogo
(including the Bridge Note) to be converted into or exercised for
shares of Pogo Stock in accordance with the terms of such security;
(iv) acquire or agree to acquire (for cash or shares of stock or
otherwise) (1) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture, association
or other business organization or division thereof or (2) any
material assets except purchases of equipment, supplies and other
items in the ordinary course of business consistent with past
practice;
(v) mortgage or otherwise encumber or subject to any Lien, or
sell, lease, exchange or otherwise dispose of any of, its properties
or assets, except for sale leaseback arrangements and other sales of
its properties or assets in the ordinary course of business
consistent with past practice;
(vi) (1) incur any indebtedness for borrowed money (other than
with respect to capital equipment leases) or guarantee any such
indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Pogo,
guarantee any debt securities of another Person, enter into any
"keep well" or other agreement to maintain any financial statement
condition of another Person or enter into any arrangement to extend
its credit or having the economic effect of any of the foregoing, or
(2) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Pogo, excluding
advances to employees for expenses incurred in the ordinary course
of business and loans to employees to purchase stock upon the
exercise of Stock Options pursuant to agreements in effect on the
date hereof and disclosed in the Pogo Disclosure Schedule;
(vii) make or agree to make any new capital expenditures
(including capital equipment leases) which, individually, exceed
$100,000 or which, in the aggregate, exceed $1,000,000;
(viii) dispose of or permit to lapse any material right in Pogo
Intellectual Property;
(ix) make or rescind any express or deemed election relating to
taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy
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relating to taxes, or change any of its methods of reporting income
or deductions for federal income tax purposes from those employed in
the preparation of its federal income tax return for the taxable
year ending December 31, 1999, except, as may be required by
applicable law;
(x) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the redemption of the Series A-2 Preferred
Stock of Pogo and other than the payment, discharge or satisfaction,
in the ordinary course of business consistent with past practice, of
liabilities reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of Pogo
for the fiscal year ended December 31, 1999 or incurred in the
ordinary course of business consistent with past practice;
(xi) (1) increase the rate or terms of compensation payable or to
become payable generally to any of Pogo's directors, officers,
employees or independent contractors, except in the ordinary course
of business or as required by the terms of existing agreements, (2)
pay or agree to pay any pension, retirement allowance or other
benefit not provided for by (or in a manner or at a time not
provided in) any existing pension plan, Benefit Plan or employment
agreement described in the Pogo Disclosure Schedule, (3) commit
itself to any additional pension, profit sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock
appreciation right, performance or incentive program, group
insurance, severance pay, continuation pay, termination pay,
retirement or other employee benefit plan, agreement or arrangement,
or increase the rate or terms of any plan or benefit arrangement,
(4) enter into any employment agreement with or for the benefit of
any Person or (5) increase the rate of compensation under or
otherwise change the terms of any existing employment agreement;
(xii) except in the ordinary course of business consistent with
past practice and to the extent such action would not materially
impair the business of Pogo, modify, amend, renew, fail to renew or
terminate any Material Contract to which Pogo is a party or waive,
release or assign any material rights or claims or enter into any
new Material Contract;
(xiii) accelerate, amend or change the period of exercisability
or vesting of options or other rights granted under its stock plans
or authorize cash payments in exchange for any options or other
rights granted under any of such plans;
(xiv) transfer to any person or entity any rights to its
Intellectual Property other than pursuant to license arrangements,
which are either non-exclusive or have exclusivity provisions not in
excess of 90 days, entered into in the ordinary course of business
consistent with past practice;
(xv) enter into or amend any agreements pursuant to which any
other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of its products or
technology except where such exclusive rights do not exceed a period
of 90 days;
(xvi) enter into any operating lease in excess of $100,000; or
(xvii) authorize any of, or commit or agree to take any of, the
foregoing actions.
6.2 No Solicitation.
(a) Acquisition Proposals. In light of the consideration given by
the Board of Directors of Pogo before the execution of this Agreement
to, among other things, the transactions contemplated hereby and to
various alternatives to the transactions contemplated by this
Agreement, Pogo agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any proposed
Acquisition Proposal (as defined below) and will cause any stockholder,
officer, director or employee of, or any investment banker, attorney or
other advisor or representative of it to cease and terminate such
activities, discussions or negotiations. Pogo further agrees that it
will not, nor will it authorize any stockholder,
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officer, director or employee of, or any investment banker, attorney or
other advisor or representative of, Pogo to, (i) solicit or initiate,
or encourage the submission of, any Acquisition Proposal, or,
participate in any discussions or negotiations regarding, or furnish to
any Person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal or (ii) enter into any Other Transaction (as defined below);
provided, however, that if (1) Pogo receives an unsolicited bona fide
Acquisition Proposal, which proposal identifies a price or range of
values to be paid for the outstanding securities or all or
substantially all of the assets of Pogo, (2) the Board of Directors of
Pogo determines in good faith that such proposal would, if consummated,
result in a transaction that would provide greater value to the holders
of the Pogo Stock than the Merger (a "Superior Proposal") and the party
making the Acquisition Proposal has demonstrated that the funds
necessary for it to consummate the Other Transaction contemplated by
the Acquisition Proposal are reasonably likely to be available, and (3)
the Board of Directors of Pogo determines in good faith, after
consultation with outside counsel, that it would be inconsistent with
its fiduciary duties to Pogo stockholders to recommend the Merger in
light of such Superior Proposal, then the Board of Directors of Pogo
may determine not to recommend the Merger to the stockholders of Pogo
at the Pogo Stockholders Meeting (as hereinafter defined); provided
further, however, that nothing in this Section 6.2 shall impair Pogo's
obligation to hold the Pogo Stockholders Meeting to approve the Merger.
For purposes of this Agreement "Acquisition Proposal" means any
proposal (whether or not in writing and whether or not delivered to
Pogo's stockholders generally) for a merger, consolidation, purchase of
assets, tender offer or other business combination involving Pogo or
any proposal or offer to acquire in any manner, directly or indirectly,
an equity interest in, any voting securities of, or a substantial
portion of the assets of Pogo, other than in furtherance of the
transactions contemplated by this Agreement (any such transaction, an
"Other Transaction"). Pogo will not, directly or indirectly, release
any third party from any confidentiality agreement.
(b) Notice of Inquiry and Notice of Withdrawal of Board
Recommendation. Pogo will promptly advise Parent orally and in writing
of any Acquisition Proposal, the material terms and conditions of such
Acquisition Proposal, and the identity of the Person making any such
Acquisition Proposal. Pogo will keep Parent informed of the status and
details of any such Acquisition Proposal. Pogo shall also promptly
notify Parent if its Board of Directors determines as a result of a
Superior Proposal to withdraw its recommendation of the Merger.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Meeting of Pogo Stockholders; S-4 Registration.
(a) Meeting of Pogo Stockholders. Pogo will take all action
necessary in accordance with Delaware law (and, to the extent
applicable, California law) and its certificate of incorporation and
bylaws to convene a meeting of the stockholders of Pogo (the "Pogo
Stockholders Meeting") as promptly as practicable after the S-4
Registration Statement has been declared effective to consider and vote
upon the approval of this Agreement, the Escrow Agreement and the
Merger. Pogo will consult with Parent regarding the date of the Pogo
Stockholders Meeting and will not postpone or adjourn (other than for
the absence of a quorum) the Pogo Stockholders Meeting without the
consent of Parent. Except as permitted in Section 6.2 hereof, Pogo's
Board of Directors shall recommend approval of this Agreement and the
Merger and shall use its best efforts to solicit from holders of Pogo
Stock votes or consents in favor of the Merger and will take all other
action necessary or advisable to secure the vote or consent of holders
of Pogo Stock required to effect the Merger.
(b) S-4 Registration Statement. Parent shall (with Pogo's diligent
cooperation) prepare and file with the Securities and Exchange
Commission (the "SEC"), as promptly as practicable, a registration
statement on Form S-4 (or such other or successor form as shall be
appropriate) which complies with
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applicable SEC requirements (the "S-4 Registration Statement") to
register under the Securities Act the issuance of all shares of Parent
Common Stock to be issued pursuant to Sections 3.1(c) and 3.1(d) and
all shares of Parent Common Stock which may be issued in payment of the
Contingent Payments pursuant to Section 3.5 hereof. Parent shall use
its commercially reasonable best efforts to cause the S-4 Registration
Statement to become effective as soon thereafter as practicable.
(c) Pogo Information and Review. Pogo shall furnish all information
concerning itself to Parent as Parent may reasonably request in
connection with the preparation of the S-4 Registration Statement. Pogo
will review the S-4 Registration Statement and any amendments thereto
so that each will not, to the knowledge of Pogo, at the time the S-4
Registration Statement or any such amendment is filed with the SEC or
at the time the S-4 Registration Statement is declared effective,
contain any untrue statement of a material fact relating to Pogo or
omit to state any material fact relating to Pogo required to be stated
therein or necessary in order to make the statements therein relating
to Pogo, in light of the circumstances under which they were made, not
misleading. If at any time any event or information is discovered by
Pogo which Pogo should reasonably expect would be required to be set
forth in an amendment to the S-4 Registration Statement, Pogo will
promptly inform Parent.
(d) Notifications. Parent shall notify Pogo promptly of the receipt
of any comments from the SEC or its staff and of any requests by the
SEC or its staff for amendments or supplements to the S-4 Registration
Statement and will supply Pogo with copies of all correspondence
between Parent and any of its representatives, on the one hand, and the
SEC or its staff on the other hand, with respect to the S-4
Registration Statement or the Merger. If at any time there shall occur
any event that should be set forth in an amendment to the S-4
Registration Statement, the Company and Pogo shall cooperate in
promptly preparing and filing such amendment.
7.2 Access to Information; Confidentiality. Pogo will afford to Parent,
and to the officers, employees, accountants, counsel, financial advisers
and other representatives of Parent, reasonable access during normal
business hours during the period before the Effective Time to all its
properties, books, contracts, commitments, personnel and records and,
during such period, Pogo will furnish promptly to Parent, all information
concerning its business, properties and personnel as Parent may reasonably
request. Except as required by law, each of Parent and Pogo will hold, and
will cause its respective officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
confidential information in accordance with the Mutual Non-Disclosure
Agreement, dated July 13, 2000, between Parent and Pogo. However, the
parties do not need written authorization to disclose or make copies of (or
stamp confidential) Confidential Information to or for its employees,
advisors or agents assisting in the consummation of the transactions
contemplated by this Agreement.
7.3 Reasonable Efforts; Notification; Cooperation.
(a) Actions to Be Taken. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to
use reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most-expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the making of all necessary registrations and
filings (including filings with Governmental Entities), (ii) the
obtaining of all necessary consents, approvals or waivers from third
parties, and (iii) the execution and delivery of any additional
instruments or documents as may be necessary or reasonably requested by
the other party to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
(b) Notice of Change. Pogo will give prompt notice to Parent, and
Parent will give prompt notice to Pogo, of (i) any representation or
warranty made by it contained in this Agreement becoming untrue or
inaccurate in any respect if the facts or circumstances causing such
representation and warranty to become untrue or inaccurate have or
would be reasonably expected to have a
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Material Adverse Effect on such party or (ii) the failure by it to
comply with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this
Agreement, provided, however, that no such notification will affect the
representations, warranties, covenants or agreements of the parties or
the conditions to the obligations of the parties under this Agreement.
(c) Cooperation; Best Efforts. Parent and Pogo will use their
respective commercially reasonable best efforts to consummate by
October 31, 2000, the Merger and other transactions contemplated by
this Agreement and any ancillary agreements in accordance with the
terms hereof. Each party will cooperate (and, if necessary, Parent will
cause Sub to cooperate) in any action necessary or advisable to
facilitate such consummation.
7.4 Stock Option Plans. All Stock Options will be converted as of the
Closing Date as set forth in Section 3.1(e), all Stock Option Plans will be
assumed by Parent, and the provisions in any other Benefit Plan providing
for the issuance, transfer or grant of any capital stock of Pogo or any
right or interest in respect of any capital stock of Pogo will be deleted
or will terminate as of the Closing Date. Parent agrees to take such
actions as are necessary for the conversion of the Stock Options as
contemplated by Section 3.1(e), including the reservation, issuance,
registration under the Securities Act and listing of Parent Common Stock.
7.5 Additional Pogo Stock Options. Pogo will grant to employees of Pogo
prior to Effective Time, options to acquire 5,000,000 shares of Pogo Common
Stock (the "Additional Pogo Options"). The Additional Pogo Options shall
vest over a four-year period, with not more than 25% vesting at the end of
the first year and the remainder vesting at 2.083% per month thereafter.
The vesting of the Additional Pogo Options shall not accelerate in
connection with the transactions contemplated by this Agreement, including
without limitation the Merger. The specific allocation among Pogo employees
of the options to be granted in accordance with this Section 7.5 shall be
mutually agreed upon by Parent and Pogo prior to the Closing Date.
7.6 Fees and Expenses. If the Merger is not consummated, all fees and
expenses incurred in connection with the Merger and this Agreement and the
transactions contemplated hereby and thereby will be the obligation of the
party incurring such fees and expenses. If the Merger is consummated, then
Parent shall pay the fees and expenses of Pogo incurred in connection with
this Agreement and the Merger in an amount not to exceed $425,000.00;
provided that Parent receives invoices in reasonable detail evidencing such
fees and expenses.
7.7 Public Announcements. Pogo and Parent will consult with each other
before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Merger, and
Pogo will not issue any such press release or make any such public
statement without Parent's prior written consent. The parties agree that
the initial press release to be issued with respect to the transactions
contemplated by this Agreement will be in the form agreed to by Parent and
Pogo.
7.8 Conveyance Taxes. Parent and Pogo will cooperate in the preparation,
execution and filing of all notifications, returns, questionnaires,
applications or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes,
any transfer, recording, registration and other fees, and any similar taxes
which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the
Effective Time. All such taxes and expenses will be borne by Parent.
7.9 Employment Agreements. On or prior to the closing, the Surviving
Corporation will enter into employment agreements, effective upon the
Effective Time, with Erick Hachenburg, Dave King, Bill Lipa, and at least
two other Pogo Key Executives of Pogo substantially in the form of Exhibit
C.
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7.10 Nasdaq Listing. Parent agrees to promptly apply for listing on
Nasdaq, subject to official notice of issuance of the shares of Parent
Common Stock issuable to holders of Pogo Voting Stock and Stock Options and
Warrants pursuant to this Agreement.
7.11 Pogo Voting Agreements. As of the date of this Agreement, each
Principal Stockholder shall have executed and delivered a Pogo Voting
Agreement to Parent.
7.12 S-8 Registration Statement. Parent will file a registration
statement on Form S-8 to register the shares of Parent Common Stock
issuable upon exercise of assumed Stock Options as soon as practicable
following the Closing Date and in any event within 20 business days after
the Closing Date, and will use its reasonable efforts to maintain the
effectiveness of such registration statement consistent with Parent's
practice with similar registration statements related to employee stock
plans for Parent's employees.
7.13 Bridge Note. The parties agree that, notwithstanding anything in
the Bridge Note to the contrary, the Bridge Note (as it may be amended to
increase the principal amount thereof in accordance with this Section
7.13), including all interest accrued thereon, shall be converted into
shares of Pogo Voting Stock in accordance with the terms of the Bridge Note
no later than immediately prior to the Effective Time. Parent hereby agrees
that at the request of Pogo prior to the Effective Time, Parent will loan
to Pogo an additional amount equal to the Series A-2 Redemption Amount but
in no event to exceed $1,300,000 in order to fund Pogo's redemption of the
Series A-2 Preferred. In addition, on or after November 1, 2000 until the
Effective Time, Parent shall make additional loans to Pogo, if requested by
Pogo, in amounts not to exceed $1,800,000 per month; provided that Pogo as
of the date of any such requested loan shall be in compliance with the
Surviving Corporation Operational Budget and provided further that Pogo
shall not request more than one such loan per month. Any additional loans
made by Parent to Pogo in accordance with this Section 7.13 shall be made
on the same terms as the Bridge Note in existence on the date hereof and
Pogo and Parent hereby agree that any such loans shall be evidenced by
amending the Bridge Note to reflect the additional loan.
7.14 Pogo 401(K) Plan. If requested by Parent, Pogo shall, prior to the
Closing Date, adopt a resolution of its Board of Directors terminating the
Pogo 401(K) Plan.
7.15 Pogo Stockholder Agent. In the event the Merger, this Agreement and
the Escrow Agreement are approved by the stockholders of Pogo, effective
upon such vote, and without further act of any stockholder, Erick
Hachenburg shall be appointed as agent and attorney-in-fact (the
"Stockholder Agent") for each stockholder of Pogo (except such
stockholders, if any, as shall have perfected their appraisal or
dissenters' rights under the DGCL or California Code, if applicable), for
purposes of this Agreement and the Escrow Agreement with full power and
authority to enter into the Escrow Agreement and to act on behalf of the
stockholders of Pogo in connection with the consummation of the
transactions contemplated by this Agreement and the Escrow Agreement.
7.16 Indemnification of Officers and Directors.
(a) The certificate of incorporation and the bylaws of the Surviving
Corporation shall contain provisions with respect to indemnification
and exculpation from liability no less favorable than the provisions
set forth in Pogo's certificate of incorporation and bylaws on the date
of this Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in
any manner that would adversely affect the rights thereunder of
individuals who on or prior to the Effective Time were directors,
officers, employees or agents of Pogo, unless such modification is
required by law.
(b) In addition to the indemnification provisions to be contained in
the certificate of incorporation and bylaws of the Surviving
Corporation in accordance with Section 7.16(a), for six (6) years from
and after the Effective Time, Parent and the Surviving Corporation
shall, to the fullest extent permitted by applicable law, indemnify and
hold harmless the individuals who on or prior to the Effective Time
were officers or directors of Pogo (collectively, the "Pogo
Indemnitees") against all losses, Expenses (as hereinafter defined),
claims, damages, liabilities, judgments, or amounts paid
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in settlement in respect to any claim, action, suit or proceeding,
whether criminal, civil, administrative or investigative based on or
arising out of or relating to the fact that such person is or was a
director or officer of Pogo and arising out of acts or omissions
occurring on or after July 1, 2000 and on or prior to the Effective
Time (including, without limitation, in respect of acts or omissions in
connection with this Agreement and the transactions contemplated
hereby) to the fullest extent that Pogo would have been permitted under
the DGCL and its certificate of incorporation and bylaws in effect on
the date hereof to indemnify such person (an "Indemnifiable Claim");
provided that notwithstanding the foregoing, nothing in this Section
7.17 shall require the Surviving Corporation or Parent to provide the
foregoing indemnification to a Pogo Indemnitee: (i) to any extent that
such indemnification is limited or not permitted by applicable law; or
(ii) to any extent that such indemnification involves a claim for
indemnification for an act or omission of such Pogo Indemnitee that (1)
constituted a breach of such Pogo Indemnitee's duty of loyalty to Pogo
or its stockholders, (2) was not taken in good faith by such Pogo
Indemnitee or involved intentional misconduct or a knowing violation of
law on the part of such Pogo Indemnitee, or (3) related to any
transaction from which such Pogo Indemnitee derived an improper
personal benefit. Parent and the Surviving Corporation shall advance to
Pogo Indemnitees all Expenses incurred in connection with any
Indemnifiable Claim promptly after receipt of reasonably detailed
statements therefor; provided, that the Pogo Indemnitee to whom
Expenses are to be advanced provides a written undertaking to repay
such advances if it is ultimately determined that such Pogo Indemnitee
is not entitled to indemnification from the Surviving Corporation. In
the event any Indemnifiable Claim is asserted or made within such six-
year period, then all rights to indemnification and advancement of
Expenses in respect of any such Indemnifiable Claim shall continue in
full force and effect until such Indemnifiable Claim is finally
disposed of or all judgments, orders, decrees or other rulings in
connection with such Indemnifiable Claim are fully satisfied. For the
purposes of this Section 7.17, "Expenses" shall include reasonable
attorneys' fees and all other costs, charges and expenses paid or
incurred in connection with investigating, defending, being a witness
in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in any Indemnifiable Claim.
(c) Notwithstanding the foregoing provisions of Section 7.17,
neither Parent nor the Surviving Corporation shall be obligated to
indemnify any person with respect to any amounts paid from the Escrow
Fund in satisfaction of an indemnification claim made by Parent or any
other Indemnified Person pursuant to the provisions of the Escrow
Agreement.
7.17 Officer's Certificates for Tax Opinions. Each of Pogo and Parent
shall deliver an Officer's Certificate substantially in the forms of
Exhibit F-1 and F-2, respectively, pursuant to which each of Pogo and
Parent shall make reasonable and customary representations (to the extent
they can provide true and correct responses) for reliance by counsel to
Pogo and Parent for the purpose of rendering the tax opinions referenced in
Sections 8.2(f) and 8.3(c).
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or before the Closing Date of the following
conditions:
(a) Stockholder Approval. The Merger, the Escrow Agreement and this
Agreement and the transactions contemplated hereby (including without
limitation the appointment of the Stockholder Agent as contemplated
herein and in the Escrow Agreement) shall have been approved by not
less than 86% of the outstanding shares of Pogo Voting Stock and
otherwise in accordance with Section 4.18.
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(b) Approvals. Other than the filing of the Certificate of Merger in
accordance with the DGCL, all material authorizations, consents,
waivers, orders or approvals required to be obtained, and all filings,
notices or declarations required to be made, by Parent, Sub and Pogo
before the consummation of the Merger and the transactions contemplated
hereunder will have been obtained from, and made with, all required
Governmental Entities, including under the HSR Act, and such other
authorizations, consents, waivers, orders or approvals as may be
required under the Securities Act and state Blue Sky laws except for
such authorizations, consents, waivers, orders, approvals, filings,
notices or declarations the failure to obtain or make which would not
have a Material Adverse Effect, at or after the Effective Time, on Pogo
or Parent or on the effectiveness of the Merger.
(c) S-4 Registration Statement. The S-4 Registration Statement
registering the issuance of the shares of Parent Common Stock issuable
pursuant to this Agreement (including without limitation the Contingent
Payments) shall have been declared effective by the SEC and shall then
be effective and not subject to any stop order, injunction or similar
impediment.
(d) No Orders; Legal Proceedings. No law or order shall have been
enacted, entered, issued, promulgated or enforced by any governmental
entity, nor shall any action have been instituted and remain pending or
have been threatened and remain so by any governmental entity at what
would otherwise be the Closing Date, which prohibits or restricts or
would (if successful) prohibit or restrict the transactions
contemplated by this Agreement or which would not permit the business
of Pogo as presently conducted to continue unimpaired following the
Closing Date.
(e) Conversion of Bridge Note. All outstanding indebtedness under
the Bridge Note, including all interest accrued thereon, shall have
been fully converted into Bridge Note Shares.
(f) Escrow Agreement. The Escrow Agreement shall have been executed
and delivered by Parent, Pogo, the Stockholder Agent and the Escrow
Agent thereunder.
8.2 Additional Conditions to Obligations of Parent. The obligations of
Parent to effect the Merger also are subject to the following conditions:
(a) Consents Under Agreements. Pogo shall have obtained the
consents, approvals or waivers listed in Section 8.2(a) of the Pogo
Disclosure Schedule.
(b) Executive Retention. As of the Closing Date, at least five of
the Pogo Key Executives shall remain employed by Pogo and three of
those executives shall be Erick Hachenburg, Dave King and Bill Lipa.
(c) Pogo Closing Date Report. Pogo shall have delivered to Parent a
balance sheet as of the end of the last calendar month preceding the
Closing Date for which a regularly prepared balance sheet is available
but in no event shall such balance sheet be more than 40 days old,
together with a schedule itemizing Pogo's current trade accounts
payable and accrued expenses, capital lease obligations, the amount of
principal and accrued interest due on the Bridge Note, employee
severance payments to be paid in connection the Merger and the fees and
expenses of Pogo incurred in connection with this Agreement, the Merger
and transactions contemplated hereby and the calculation of the Excess
Amount, if any (such balance sheet, together with such schedule, being
the "Closing Date Report"). The Closing Date Report shall be certified
as true and correct in all material respects by the chief financial
officer of Pogo, in his capacity as an officer of Pogo and not in his
individual capacity.
(d) Representations and Warranties and Covenants of Pogo. The
representations and warranties of Pogo herein contained (as qualified
by the Pogo Disclosure Schedule) shall be true at the Closing Date with
the same effect as though made at such time (except for those
representations and warranties which address matters as of a particular
date which shall be true and correct as of such date), except to the
extent the failure of such representations and warranties to be true
and correct shall not individually or in the aggregate have a Material
Adverse Effect with respect to Pogo. Pogo
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shall have in all material respects performed all obligations and
complied with all covenants and conditions required by this Agreement
to be performed or complied with by Pogo at or prior to the Closing
Date, and Pogo shall have delivered to Parent and Sub a certificate in
form and substance satisfactory to Parent and Sub, dated the Closing
Date, to such effect.
(e) Opinion of Counsel. Parent and Sub shall receive at the Closing
from Fenwick & West, LLP, counsel to Pogo, an opinion dated the Closing
Date, in form and substance substantially as set forth in Exhibit D
attached hereto.
(f) Tax Opinion. Parent shall have received a written opinion from
its counsel, O'Melveny & Myers LLP, and Pogo shall have received a
written opinion from its counsel, Fenwick & West LLP, each in form and
substance reasonably satisfactory to the party receiving the opinion,
to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code, which opinion may contain
reasonable qualifications and assumptions; provided, however, that if
such counsel to Parent does not render such opinion, then this
condition shall nonetheless be deemed to be satisfied if counsel to
Pogo renders such an opinion to Parent.
(g) Redemption of Series A-2 Preferred. Pogo shall have delivered to
the holders of the Series A-2 Preferred a notice of redemption to
redeem all of the outstanding Series A-2 Preferred, specifying a
redemption date prior to the Effective Time and shall have deposited
cash sufficient to redeem all of the outstanding Series A-2 Preferred
with a bank or trust company, together with irrevocable instructions
and authority to pay the redemption price to the holders of the Series
A-2 Preferred upon surrender of their certificates, all of the
foregoing in accordance with Pogo's certificate of incorporation.
8.3 Additional Conditions to Obligations of Pogo. The obligations of
Pogo to effect the Merger are also subject to the following condition:
(a) Representations and Warranties and Covenants of Parent and
Sub. The representations and warranties of Parent and Sub herein
contained (as qualified by the Parent Disclosure Schedule) shall be
true at the Closing Date with the same effect as though made at such
time (except for those representations and warranties which address
matters as of a particular date which shall be true and correct as of
such date), except to the extent the failure to be true and correct
shall not individually or in the aggregate have a Material Adverse
Effect with respect to Parent. Parent and Sub shall have in all
material respects performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed or
complied with by Parent and/or Sub prior to the Closing Date, and
Parent and Sub shall have delivered to Pogo a certificate in form and
substance satisfactory to Pogo, dated the Closing Date, to such effect.
(b) Opinion of Counsel. Pogo shall receive at the Closing from in-
house counsel to Parent an opinion dated the Closing Date, in form and
substance substantially as set forth in Exhibit E attached hereto.
(c) Tax Opinion. Pogo shall have received a written opinion from its
counsel, Fenwick & West LLP, and Parent shall have received a written
opinion from its counsel, O'Melveny & Myers LLP, each in form and
substance reasonably satisfactory to the party receiving the opinion,
to the effect that the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code, which opinion may contain
reasonable qualifications and assumptions; provided, however, that if
such counsel to Pogo does not render such opinion, then this condition
shall nonetheless be deemed to be satisfied if counsel to Parent
renders such an opinion to Pogo.
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ARTICLE IX
SURVIVAL
9.1 Survival of Representations. All representations and warranties of
the parties contained in this Agreement, as modified by the Pogo Disclosure
Schedule and Parent Disclosure Schedule, will survive the Merger solely for
the purpose of determining whether any Escrow Shares will be distributed to
the holders of Pogo Voting Stock in accordance with the Escrow Agreement.
The right to assert a claim for a breach of any representation or warranty
contained in this Agreement and/or to assert a claim for indemnification in
accordance with the Escrow Agreement will expire on the first anniversary
date of the Effective Time.
9.2 Remedies. The existence of this Article IX, the rights and
restrictions set forth herein and in the Escrow Agreement do not limit any
other potential remedies and rights of Parent with respect to any
intentional or fraudulent breaches of the representations and warranties of
Pogo, or any intentional and willful breach by Pogo of any covenants or
agreements of Pogo contained in this Agreement.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination by Mutual Consent. This Agreement may be terminated by
the mutual written consent of Parent and Pogo at any time before the
Effective Time, whether before or after the Pogo Stockholder Approval has
been obtained.
10.2 Termination by Either Pogo or Parent. This Agreement may be
terminated by either Pogo or Parent at any time before the Effective Time
if (a) any condition in Section 8.1 becomes incapable of being satisfied;
(b) the Effective Time has not occurred by December 31, 2000; (c) there
shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or (d) there shall be any statute,
rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity that would make
consummation of the Merger illegal; provided, however, that notwithstanding
the foregoing, a party may not terminate this Agreement pursuant to the
provisions of clause (a) or clause (b) of this Section 10.2 if: (i) the
inability to satisfy a condition in Section 8.1 or the failure of the
Effective Time to occur by December 31, 2000 has proximately resulted from
the failure of such party to perform any of its obligations or covenants
under this Agreement in any material respect, or the material breach of a
representation or warranty made by such party in this Agreement; and (ii)
the other party has performed its obligations and covenants under this
Agreement in all material respects and the representations and warranties
of such other party have not been breached in any respect that would have a
Material Adverse Effect on such party as of the date of termination.
10.3 Termination by Parent. This Agreement may be terminated by Parent
at any time before the Effective Time if any condition in Section 8.2
becomes incapable of being satisfied; provided, however, that
notwithstanding the foregoing, Parent may not terminate this Agreement
pursuant to the provisions of this Section 10.3 if the inability to satisfy
a condition in Section 8.2 has proximately resulted from (a) the failure of
Parent or Sub to perform any of its obligations or covenants under this
Agreement in any material respect, or the material breach of a
representation or warranty made by Parent or Sub in this Agreement; and (b)
Pogo has performed its obligations and covenants under this Agreement in
all material respects and the representations and warranties of Pogo under
this Agreement have not been breached in any respect that would have a
Material Adverse Effect on Pogo.
10.4 Termination by Pogo. This Agreement may be terminated by Pogo at
any time before the Effective Time if any condition in Section 8.3 becomes
incapable of being satisfied; provided, however, that notwithstanding the
foregoing, Pogo may not terminate this Agreement pursuant to the provisions
of this Section 10.4 if the inability to satisfy a condition in Section 8.3
has proximately resulted from (a) the failure of Pogo to perform any of its
obligations or covenants under this Agreement in any material
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respect, or the material breach of a representation or warranty made by
Pogo in this Agreement that has a Material Adverse Effect on Pogo; and (b)
Parent and Sub have performed their respective obligations and covenants
under this Agreement in all material respects and the representations and
warranties of Parent and Sub under this Agreement have not been breached in
any respect that would have a Material Adverse Effect on Parent or Sub.
10.5 Termination by Parent upon Withdrawal of Board Recommendation. This
Agreement may be terminated by Parent if the Board of Directors of Pogo or
any committee thereof shall have withdrawn its approval or recommendation
of the Merger or this Agreement or shall have resolved to take such action
in accordance with Section 6.2.
10.6 Effect of Termination. In the event of termination of this
Agreement by either Pogo or Parent as provided in this Article X, this
Agreement will forthwith become void and have no effect, without any
liability or obligation on the part of Parent or Pogo, other than the
provisions of Sections 7.6 and 7.7, which will survive termination.
10.7 Amendment. This Agreement may be amended by the parties at any time
before or after Pogo Stockholder Approval; provided, however, that after
Pogo Stockholder Approval there will not be made any amendment that by law
requires further approval by the stockholders of Pogo, such as an amendment
that would (a) alter or change the amount or kind of shares, securities,
cash, property or rights to be received in exchange for or on conversion of
all or any of the shares of any class or series thereof of Pogo, (b) alter
or change any term of the certificate of incorporation of the Surviving
Corporation to be effected by the Merger or (c) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of Pogo capital stock,
without the further approval of such stockholders. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
10.8 Extension; Waiver. At any time before the Effective Time, the
parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso
of Section 10.7, waive compliance with any of the agreements or conditions
contained in this Agreement. Except as otherwise required by law, (i) any
agreement on the part of a party to any such extension or waiver will be
valid only if set forth in an instrument in writing, signed on behalf of
such party and (ii) the failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise will not constitute a
waiver of those rights.
10.9 Termination Fee and Expenses. If this Agreement is terminated or
the Merger is not consummated in accordance with the terms of this
Agreement (a) as a result of a termination by Parent pursuant to Section
10.5 or (b) because of the failure to obtain Pogo Stockholder Approval or
(c) because of a material breach by Pogo of Section 6.2, then as the sole
and exclusive remedy of Parent, Pogo will pay to Parent the sum of
$4,500,000 in cash (the "Termination Fee"). In addition, upon any such
termination referred to above, Pogo also will reimburse Parent (not later
than one business day after submission of statements therefor) for actual
out-of-pocket fees and expenses incurred by Parent or on its behalf in
connection with the transactions contemplated by this Agreement (including,
without limitation, all reasonable fees and expenses paid to accountants
and legal counsel) and any fees and expenses incurred by Parent in the
collection of amounts or enforcement of rights hereunder.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed
given upon (i) receipt of a facsimile transmission, (ii) confirmed delivery
by a standard overnight carrier or when delivered by hand or (iii) the
expiration of five business days after the day when mailed in the United
States by certified or registered mail, postage
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prepaid, addressed at the following addresses (or at such other address for
a party as will be specified by like notice):
(a) If to Parent:
At Home Corporation
450 Broadway
Redwood City, California 94603
Facsimile: (650) 556-3430
Attention: General Counsel
with a copy to:
O'Melveny & Myers LLP
275 Battery Street
San Francisco, California 94111
Facsimile: (415) 984-8701
Attention: Stephanie I. Splane, Esq.
(b) If to Pogo:
Pogo.com Inc.
300 California Street, Suite 800
San Francisco, California 94104
Facsimile: (415) 778-3512
Attention: Erick Hachenburg
with a copy to:
Fenwick & West, LLP
Two Palo Alto Square
Palo Alto, California 94306
Facsimile: (650) 494-1417
Attention: Dennis R. DeBroeck, Esq.
11.2 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference is to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes"
and "including" are used in this Agreement, they are deemed to be followed
by the words "without limitation." For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires, (i) the terms defined include the plural as well as the singular,
(ii) all accounting terms not otherwise defined herein have the meanings
assigned under GAAP, and (iii) the words "herein," "hereof' and "hereunder"
and other words of similar import refer to this Agreement as a whole and
not to any particular Article, Section, or other subdivision.
11.3 Counterparts. This Agreement may be executed in one or more
counterparts (including facsimile), all of which are considered one and the
same agreement and will become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
11.4 Entire Agreement; No Third-Party Beneficiaries. This Agreement and
the Pogo Voting Agreements (and any other documents and instruments
referred to herein or therein) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and,
except (after the Effective Time) for the provisions of Article III and
Sections 7.4 and 6.6, are not intended to confer upon any Person other than
the parties hereto any rights or remedies hereunder.
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11.5 Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of California, regardless of the
laws that might otherwise govern under applicable principles of conflict of
laws.
11.6 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement will be assigned, in whole or in part,
by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
11.7 Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached.
The parties accordingly agree that the parties (i) will be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the State of California or in
California state court and (ii) will waive, in any action for specific
performance, the defense of adequacy of a remedy at law, this being in
addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any federal court located in the
State of California or any California state court if any dispute arises out
of the Agreement or any of the transactions contemplated by this Agreement,
(ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and
(iii) agrees that it will not bring any action relating to this Agreement
in any court other than a federal or state court sitting in the State of
California.
11.8 Severability. If any term, provision, covenant or restriction
herein is held by a court of competent jurisdiction or other authority to
be invalid, void or unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement will remain in full force and effect and will in no way be
affected, impaired or invalidated.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized or other duly
authorized representatives, all as of the date first written above.
AT HOME CORPORATION,
a Delaware corporation
/s/ Mark Stevens
By: _________________________________
Mark Stevens
EVP
POGO ACQUISITION CORP.,
a Delaware corporation
/s/ Mark Stevens
By: _________________________________
Mark Stevens
President
POGO.COM INC.,
a Delaware corporation
/s/ Erick Hachenburg
By: _________________________________
Erick Hachenburg
President and Chief Executive
Officer
STOCKHOLDER AGENT
/s/ Erick Hachenburg
_____________________________________
Erick Hachenburg
A-47
<PAGE>
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ANNEX B
ESCROW AGREEMENT
Dated as of , 2000
Among
AT HOME CORPORATION,
POGO.COM INC.,
ESCROW AGENT
and,
STOCKHOLDER AGENT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
B-1
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is dated as of , 2000, and
is entered into by and among AT HOME CORPORATION, a Delaware corporation
("Parent"), POGO.COM INC., a Delaware corporation ("Pogo"),
[ ], as Escrow Agent (the "Escrow Agent"), and Erick Hachenburg
as agent (the "Stockholder Agent") for the holders of Pogo Voting Stock (as
defined in the Merger Agreement) listed on Schedule 1 (the "Stockholders").
BACKGROUND
A. The respective Boards of Directors of Parent and Pogo have approved the
merger of POGO ACQUISTION CORP., a Delaware corporation that is a direct
wholly-owned subsidiary of Parent ("Sub"), with Pogo, with Sub as the surviving
corporation (the "Merger"), upon the terms and subject to the conditions set
forth in that certain Agreement and Plan of Merger, dated August 30, 2000,
among Parent, Pogo, Sub and the Stockholder Agent (the "Merger Agreement").
B. It is a condition precedent to the consummation of the Merger that
Parent, Pogo and the Stockholder Agent enter into this Agreement as security
for the accurateness and completeness of the representations and warranties of
Pogo made in the Merger Agreement and the performance of the covenants and
agreements made by Pogo in the Merger Agreement and the indemnity provided by
the Stockholders in this Agreement. Unless otherwise defined in this Agreement,
capitalized terms used herein will have the same meanings ascribed to them in
the Merger Agreement.
AGREEMENT
In consideration of the covenants and agreements contained in this Agreement
and the Merger Agreement, the parties hereby agree as follows:
ARTICLE I
ESCROW FUND; INDEMNITY
1.1 Establishment of Fund. As security for the accuracy of the
representations and warranties of Pogo contained in the Merger Agreement and
the performance in all material respects of the covenants and agreements made
by Pogo in the Merger Agreement and the indemnity provided by the Stockholders
in this Agreement, the Stockholders will be deemed to have deposited with
Escrow Agent an aggregate amount of ten percent (10%) of the shares of Parent
Common Stock issued to them in the Merger at the Effective Time pursuant to
Section 3.1 of the Merger Agreement (the "Escrow Shares"), without any act of
any Stockholder. Solely for purposes of distribution of the Escrow Shares upon
termination of this Agreement, each Stockholder will be deemed to have
contributed that number of the total number of Escrow Shares multiplied by a
fraction the numerator of which is the number of shares of Parent Common Stock
such Stockholder is entitled to receive in the Merger at the Effective Time
pursuant Section 3.1 of the Merger Agreement and the denominator of which is
the total number of shares of Parent Common Stock all the Stockholders are
entitled to receive in the Merger at the Effective Time pursuant to Section 3.1
of the Merger Agreement, rounded down to the nearest whole share, as indicated
on Schedule 1 to this Agreement. Such shares will be registered in the name of
each Stockholder with attached stock powers executed in blank by the
Stockholder Agent, and will be deposited with the Escrow Agent, such total
deposit, together with any dividends or other distributions payable in capital
stock of Parent with respect to the Escrow Shares (the "Escrow Amount"), to
constitute an escrow fund (the "Escrow Fund") to be governed by the terms set
forth in this Agreement. The Stockholders will not have the right to substitute
other property for the Escrow Shares.
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<PAGE>
1.2 Indemnity. The Stockholders hereby agree to indemnify each of Parent,
Sub, Pogo, and any director, officer, employee, agent or representative of
Parent and Sub (collectively, the "Indemnitees" and individually, an
"Indemnitee") for all losses, damages, liabilities, causes of action, claims,
and costs and expenses (including costs of investigation and reasonable
attorneys' fees and costs) (collectively, "Claims" and individually, a "Claim")
of Indemnitees suffered by or asserted against any of the Indemnitees following
the Closing Date resulting from, relating to or arising out of (i) any
inaccuracy or breach of any of the representations or warranties of Pogo in the
Merger Agreement as qualified by the Pogo Disclosure Schedule, (ii) any failure
by Pogo to perform or breach in any material respect any of the agreements and
covenants of Pogo contained in the Merger Agreement or (iii) any Claim incurred
by the Surviving Corporation to Hasbro Interactive, Inc. and its subsidiary
Atari Interactive, Inc. for copyright infringement relating to Pogo's offering
and distribution of its classic arcade games, Void, Tank Hunter and Doomsday,
prior to the Effective Time. Notwithstanding anything to the contrary contained
herein, only when Claims totaling a cumulative aggregate of $500,000 (the
"Threshold Amount") have been incurred by Indemnitees may such Indemnitees make
any claim, demand or request to the Stockholder Agent for payments pursuant to
the Stockholders' indemnification obligations hereunder, provided that
Stockholders shall then, subject to the terms of this Agreement, be liable to
indemnify the Indemnitees hereunder for the full amount of all Claims. The
Stockholders' entire liability for the indemnity hereunder and otherwise under
the Merger Agreement (except as set forth in Section 9.2 of the Merger
Agreement) shall be limited to the Escrow Amount and the Indemnitee's sole
recourse shall be against the Escrow Fund.
1.3 Claims for Indemnification. Whenever any Claim for indemnification
arises under this Agreement, the party entitled to indemnification (the
"Indemnified Party") will promptly notify the Stockholder Agent of the Claim in
writing, which notice shall include the facts constituting the basis for such
Claim and, if then determinable, the amount of such Claim in reasonable detail.
A failure to notify or to give such notice to the Stockholder Agent will not
prejudice the rights of the Indemnified Party under this Agreement unless the
Stockholders are prejudiced by such failure and then only to the extent the
Stockholders are prejudiced by such failure. The Indemnified Party may not
settle or compromise any Claim by a third-party for which it is entitled to
indemnification hereunder without the prior written consent of the Stockholder
Agent (which consent will not be unreasonably withheld).
1.4 Stockholder Agent's Option to Control Defense. In connection with any
Claim giving rise to indemnity under this Agreement resulting from or arising
out of any claim or legal proceeding by a party who is not a party to this
Agreement (a "Third-Party Claim"), the Stockholder Agent will have the right
(but not the obligation), at its sole option, to assume and control the defense
of any such Third-Party Claim with legal counsel of the Stockholder Agent's
choice that is reasonably satisfactory to the affected Indemnified Party. If
the Stockholder Agent elects to assume and control the defense, then the
Indemnified Party will be entitled to participate in (but not control) the
defense of any such Third-Party Claim, with its own counsel and at its own
expense. If, within ten (10) business days after notification thereof, the
Stockholder Agent does not assume the defense of any such claim or litigation
resulting from a Claim, the Indemnified Party may defend against such claim or
litigation, in such manner as it may deem reasonably appropriate, including,
but not limited to, settlement of such claim or litigation; provided, however,
that the Indemnified Party shall not enter into any settlement of such Third-
Party Claim without the prior written consent of the Stockholder Agent (which
consent shall not be unreasonably withheld). The liability of the Stockholders
will be conclusively established by such settlement made by the Indemnified
Party in compliance with the preceding sentence, the amount of such liability
to include, but not be limited to, both the settlement consideration and the
reasonable costs and expenses, including reasonable attorneys' fees, incurred
by the Indemnified Party in effecting such settlement.
1.5 Exclusive Remedy. The Stockholders' liability for the indemnity set
forth herein shall be strictly limited to the Escrow Amount and the
Indemnitee's sole recourse and exclusive remedy for any matter, event or
circumstance for which indemnity may be had hereunder shall be against the
Escrow Fund as provided in this Agreement; provided, that nothing in the
foregoing provisions or any other provision of this Agreement shall limit any
other potential remedies and rights of Indemnitees as set forth in Section 9.2
of the Merger Agreement.
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ARTICLE II
TERM
The Escrow Fund will remain in existence during the period of time (the
"Escrow Period") commencing at the Effective Time and ending on the first
anniversary of the Effective Time.
ARTICLE III
PROTECTION OF ESCROW FUND
The Escrow Agent will hold the Escrow Fund during the Escrow Period, will
treat such fund as a trust fund in accordance with the terms of this Agreement
and not as the property of the Indemnitees and will hold and dispose of the
Escrow Fund only in accordance with the terms hereof.
ARTICLE IV
DISTRIBUTIONS AND VOTING
4.1 Splits; Distributions; Dividends. Any shares of Parent Common Stock or
other equity securities of Parent issued or distributed by Parent (including
shares issued upon a stock split) ("New Shares") in respect to shares of Parent
Common Stock that are included in the Escrow Fund and have not been released
from the Escrow Fund pursuant to Article VIII will be deposited with the Escrow
Agent and added to the Escrow Fund and become a part thereof. New Shares issued
in respect of shares of Parent Common Stock that have been released from the
Escrow Fund will not be added to the Escrow Fund but will be distributed to the
recordholders thereof by Parent. Cash dividends on Parent Common Stock and
other dividends by Parent not payable in stock or securities of Parent will be
distributed to the recordholders thereof by Parent and will not become subject
to the Escrow Fund.
4.2 Voting Rights. Each Stockholder will have full voting rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund by
such Stockholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Parent Common Stock).
ARTICLE V
CLAIMS UPON ESCROW FUND
5.1 Claims Procedure. If an Indemnitee has a Claim under Article I, such
Indemnitee may make a claim upon the Escrow Fund on or before the last day of
the Escrow Period by delivering to the Escrow Agent and the Stockholder Agent a
written certificate signed by an officer of Parent (an "Officer's
Certificate"):
(i) stating that an Indemnitee has paid or accrued or reasonably
anticipates that it or they will have to pay or accrue a Claim or Claims
and that such Indemnitee is therefore entitled to indemnity pursuant to
Article I, and
(ii) specifying in reasonable detail the individual items of the Claims,
the date each such item was paid or accrued, the amount of such Claim or
the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant to which such item is
related.
Subject to the provisions of Article VI and Article VII hereof, the Escrow
Agent will, not earlier than 30 days after receipt of such Officer's
Certificate, upon which Escrow Agent may conclusively rely, deliver to Parent
out of the Escrow Fund, as promptly as practicable, the portion of the Escrow
Amount in the Escrow Fund equal to such Claims, but only if the Stockholder
Agent has not objected to such Claims pursuant to Article VI (provided,
however, that with respect to Claims Indemnitees reasonably anticipate they
will have to pay or accrue, such amounts will not be delivered to Parent by the
Escrow Agent until such time as the Indemnitee actually must pay or accrue such
Claims as certified in an additional succeeding Officer's Certificate delivered
to Escrow Agent).
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<PAGE>
5.2 Value of Escrow Shares. For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the Escrow Fund
as indemnity pursuant to a Claim made in accordance with Section 5.1, each
share of Parent Common Stock will be valued at the average of the closing
prices of such stock as reported by the National Association of Securities
Dealers Automated Quotation System ("Nasdaq") during the ten consecutive
trading day period ending on the last full trading day immediately preceding
the Effective Time.
ARTICLE VI
OBJECTIONS TO CLAIMS
At the time of delivery of any Officer's Certificate to the Escrow Agent, a
duplicate copy of such certificate will be delivered by Parent to the
Stockholder Agent and for a period of thirty (30) days after receipt of such
Officer's Certificate, the Escrow Agent will make no delivery of shares of
Parent Common Stock pursuant to Article V hereof. After the expiration of such
thirty (30) day period, the Escrow Agent will make delivery of the Escrow
Amount in the Escrow Fund in accordance with Article V hereof, provided,
however, that no such delivery shall be made if the Stockholder Agent objects
to the Claim made in the Officer's Certificate in a written notice (an
"Objection Notice"), that is delivered to the Escrow Agent and Parent before
the expiration of such 30-day period.
ARTICLE VII
RESOLUTION OF CONFLICTS
7.1 Agreement of the Parties. In the event the Stockholder Agent objects in
writing to the indemnity of an Indemnitee or Indemnitees in respect of any
Claim or Claims made in any Officer's Certificate pursuant to Article VI
hereof, the Stockholder Agent and Parent will promptly attempt in good faith to
agree upon the rights of the respective parties with respect to each of such
Claims. If the Stockholder Agent and Parent so agree, joint written
instructions setting forth such agreement will be prepared and signed by each
of Parent and the Stockholder Agent and will be furnished to the Escrow Agent.
The Escrow Agent will be entitled to rely on any such joint instructions and to
distribute the Escrow Amount from the Escrow Fund in accordance with the terms
thereof.
7.2 Arbitration. If, within 30 days after the Objection Notice to such Claim
or Claims has been delivered to the Escrow Agent and Parent, no such agreement
has been reached pursuant to Section 7.1, either Parent or the Stockholder
Agent may demand arbitration of the Claim unless the amount of the damage or
loss is at issue in pending litigation with a third-party in a Third-Party
Claim, in which event arbitration will not be commenced until such Third-Party
Claim is settled or resolved, or Parent and the Stockholder Agent agree to
arbitration with respect to such Third-Party Claim; and, in either such event,
the matter will be settled by arbitration conducted by a single, mutually
agreed upon arbitrator. The decision of the arbitrator so selected as to the
validity and amount of any Claim in such Officer's Certificate will be binding
and conclusive upon the parties to this Agreement and the Stockholders;
provided, however, that the arbitrator shall not amend this Agreement or make
any decision or award that is in conflict with the provisions of this Agreement
(including, but not limited to, such provisions as may relate to the limitation
of the Stockholders' liability to the Escrow Amount) and notwithstanding
anything in Article VI hereof, the Escrow Agent will be entitled to act in
accordance with such decision and make or withhold delivery of the Escrow
Amount out of the Escrow Fund in accordance therewith. In the event Parent and
the Stockholder Agent do not agree on the selection of an independent
arbitrator, each party shall nominate its own independent arbitrator, which two
arbitrators shall, in turn, select another independent third-party who shall
serve as the arbitrator.
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7.3 Judgment; Fees and Expenses of Arbitration. Judgment upon any award
rendered by the arbitrator may be entered in any court having jurisdiction. Any
such arbitration will be held in San Mateo County, California under the
commercial arbitration rules of the American Arbitration Association then in
effect. For purposes of this Article VII, in any arbitration hereunder in which
any Claim or the amount thereof stated in the Officer's Certificate at issue,
the Indemnitee or Indemnitees with respect to such Claim or amount and Parent
will be deemed to be the "Non-Prevailing Party" if the arbitrator's award is
less than one-half the amount claimed by the Indemnitee in the Officer's
Certificate for such Claim; otherwise the Stockholders will be deemed to be the
Non-Prevailing Party. The Non-Prevailing Party to an arbitration will pay its
own expenses, the fees of the arbitrator, the administrative fee of the
American Arbitration Association, and the expenses, including without
limitation, reasonable attorney's fees and costs incurred by the other party to
the arbitration. If the Stockholders are the Non-Prevailing Party, the
Indemnitees will be entitled to recover such expenses solely from the Escrow
Fund.
ARTICLE VIII
DISTRIBUTION UPON TERMINATION OF ESCROW PERIOD
Promptly following termination of the Escrow Period, the Escrow Agent will
deliver to the Stockholders all of the Escrow Amount in the Escrow Fund that
(based on a per share price as set forth in Section 5.2 of this Agreement) is
in excess of any amount required to satisfy any unsatisfied Claims specified in
any Officer's Certificate theretofore delivered to the Escrow Agent on or
before the last day of the Escrow Period with respect to facts or circumstances
existing on or before the expiration of the Escrow Period, as such amount is
indicated in writing to the Escrow Agent by Parent in such Officer's
Certificate, and subject to the objection of the Stockholder Agent and the
subsequent dispute resolution of the matter as provided in Article VII hereof.
As soon as all such Claims have been resolved as evidenced by a written joint
instructions from Parent and the Stockholder Agent to the Escrow Agent, the
Escrow Agent will deliver to the Stockholders all of the remaining Escrow
Amount in the Escrow Fund to the extent such amount is not required to satisfy
such Claims. Deliveries of shares of Parent Common Stock and other property in
the Escrow Fund to the Stockholders pursuant to this Article VIII will be made
in proportion to their original contribution to the Escrow Fund and Parent
shall use its commercially reasonable efforts to have certificates representing
such shares of Parent Common Stock delivered to the Stockholders in accordance
with their respective interests therein as promptly as practicable.
ARTICLE IX
AGENT OF THE STOCKHOLDERS
9.1 Appointment of Agent. The Stockholders, by their approval of this
Agreement and the Merger Agreement, have approved the indemnification and
escrow terms set forth in this Agreement, including the deposit of Escrow
Shares by Stockholders as provided in Article I hereof, and approved the
selection and authorization of Erick Hachenburg as the representative of the
Stockholders (the "Stockholder Agent") with respect to the provisions set forth
in this Agreement. By virtue of the approval of this Agreement and the Merger
Agreement by the Stockholders, Stockholder Agent will be constituted and
appointed as agent and attorney-in-fact for the Stockholders to give and
receive notices and communications, execute stock powers in blank to be
attached to the shares of Parent Common Stock deposited in the Escrow Fund, to
authorize delivery to Parent of Parent Common Stock or other property from the
Escrow Fund in satisfaction of Claims by Indemnitees, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
and demand dispute resolution pursuant to Article VIII hereof and comply with
orders of courts and awards of arbitrators with respect to such Claims, and to
take all actions necessary or appropriate in the judgment of the Stockholder
Agent for the accomplishment of the foregoing. Such agency of the Stockholder
Agent may be changed by the Stockholders upon not less than thirty (30) days
prior written notice to Parent and the Escrow
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Agent; provided that such Stockholder Agent may not be removed unless
Stockholders who hold a majority in interest of the Escrow Shares agree to such
removal and to the identity of the substituted Stockholder Agent. No bond will
be required of any Stockholder Agent. Notices or communications to or from the
Stockholder Agent will constitute notice to or from each of the Stockholders.
9.2 Stockholder Agent Fees and Expenses. The Stockholders agree to pay, on a
pro rata basis, all costs and expenses, including those of any legal counsel or
other professional retained by the Stockholder Agent, in connection with the
acceptance or administration of the Stockholder Agent's duties hereunder.
9.3 Stockholder Agent Acts Binding. A decision, act, consent or instruction
of the Stockholder Agent will constitute a decision of all the Stockholders,
and will be final, binding and conclusive upon each of the Stockholders, and
the Escrow Agent and the Indemnitees may rely upon any decision, act, consent
or instruction of the Stockholder Agent as being the decision, act, consent or
instruction of each and all of the Stockholders. The Escrow Agent and the
Indemnitees are hereby relieved from any liability to any Person for acts done
by them in accordance with such decision, act, consent or instruction of the
Stockholder Agent.
9.4 Replacement of Stockholder Agent. In the event of the death or permanent
disability of the Stockholder Agent, or his resignation or removal as the
Stockholder Agent, a successor Stockholder Agent will be elected by a majority
vote of the Stockholders, with each Stockholder to be given a vote equal to its
proportionate percentage of the Escrow Shares pursuant to a procedure to be
mutually agreed upon among the Stockholders. The Stockholders will cause to be
delivered to Parent prompt written notice of such election of a successor
Stockholder Agent. Pending the election of a successor Stockholder Agent, the
Stockholder, other than a Stockholder that is affiliated with Parent prior to
the Effective Time, holding the largest number of outstanding shares of Pogo
Stock as of the Effective Time will act as the interim Stockholder agent. Each
interim and successor Stockholder Agent will have all the power, authority,
rights, obligations, duties and privileges conferred by this Agreement upon the
original Stockholder Agent and the term "Stockholder Agent" as used herein will
be deemed to then mean any interim or successor Stockholder Agent.
ARTICLE X
ESCROW AGENT'S DUTIES
10.1 Limited Obligations. The Escrow Agent will be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Stockholder Agent and approved by the Escrow Agent, and may rely
and will be protected in relying or refraining from acting on any instrument
reasonably believed to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent will not be liable for any act done
or omitted hereunder as Escrow Agent while acting in good faith and in the
exercise of its reasonable judgment and any act done or omitted by the Escrow
Agent pursuant to the advice of counsel will be conclusive evidence of such
good faith.
10.2 Instructions Governing Escrow Agent. The Escrow Agent is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court or arbitrator(s) pursuant to Article VII hereof. In case the Escrow
Agent obeys or complies with any such order, judgment or decree of any court or
arbitrator(s) pursuant to Article VII hereof, the Escrow Agent will not be
liable to any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
10.3 Limitation on Liabilities.
(a) The Escrow Agent will not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
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(b) The Escrow Agent will not be liable for the expiration of any rights
under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
(c) In performing any duties under this Agreement, the Escrow Agent will
not be liable to any party for damages, losses, or expenses, except for
gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent may consult with legal counsel (including Parent's legal
counsel) in connection with its duties under this Agreement and will be
fully protected for any act taken or omitted to be taken in accordance with
the advice of such counsel.
(d) If any controversy arises between the parties to this Agreement, or
with any other party, concerning the subject matter of this Agreement or
its terms and conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow
Agent may hold all Escrow Shares then in the Escrow Fund and may wait for
settlement of any such controversy in accordance with this Agreement or by
final legal or arbitration proceedings.
(e) In no event will the Escrow Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including, but not
limited to, lost profits).
10.4 Escrow Agent Fees. All fees of the Escrow Agent for performance of its
duties hereunder will be borne by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent will be considered
compensation for ordinary services as contemplated by this Agreement. If the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any service not provided for in this Agreement or if the parties
request a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to this escrow or its subject matter, the Escrow Agent will be
reasonably compensated by Parent for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned thereby.
10.5 Indemnity of Escrow Agent. Parent and the Stockholders agree jointly
and severally to indemnify and hold the Escrow Agent harmless against any and
all losses, claims, damages, liabilities, and expenses, including reasonable
costs of investigation, counsel fees, and disbursements that may be imposed on
the Escrow Agent or incurred by the Escrow Agent in connection with the
performance of its duties under this Agreement, including, but not limited to,
any litigation or arbitration arising from this Agreement or involving its
subject matter. Such joint and several liability shall not diminish the right
of either Parent or the Stockholder Agent to pursue the other for payment of
such losses, claims, damages, liabilities and expenses, which shall be shared
equally by Parent and the Stockholder Agent; provided, however, that if the
Escrow Agent is the prevailing party in connection with any claim or action
initiated by a Stockholder or Stockholders, then Parent shall be entitled to
pursue such Stockholder or Stockholders, respectively, for payment of the full
amount of such losses, claims, damages, liabilities and expenses
10.6 Resignation. The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to Parent and the Stockholder Agent;
provided, however, that no such resignation will become effective until the
appointment of a successor Escrow Agent which will be accomplished as follows:
Parent will appoint a successor Escrow Agent within thirty (30) days after
receiving such notice, which appointment will be subject to approval of the
Stockholder Agent which approval will not be unreasonably withheld. If Parent
and the Stockholder Agent fail to agree upon a successor Escrow Agent within
such time, the Escrow Agent will have the right to appoint a successor Escrow
Agent authorized to do business in the State of California. The successor
Escrow Agent will execute and deliver an instrument accepting such appointment
and it will, without further acts, be vested with all the estates, properties,
rights, powers and duties of the predecessor Escrow Agent as if originally
named as Escrow Agent. Thereafter, the predecessor Escrow Agent will be
discharged from any further duties and liability under this Agreement.
10.7 Survival. The obligations of Parent and the Stockholders for
indemnification and compensation of the Escrow Agent will survive expiration of
the Escrow Period and termination of this Agreement.
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ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be deemed given
upon (i) receipt of a facsimile transmission, (ii) confirmed delivery by a
standard overnight carrier or when delivered by hand or (iii) the expiration of
five business days after the day when mailed in the United States by certified
or registered mail, postage prepaid, addressed at the following addresses (or
at such address for a party as will be specified by like notice):
(a) If to Parent or Sub:
At Home Corporation
450 Broadway
Redwood City, California 94603
Facsimile: (650) 556-5100
Attention: General Counsel
a copy to:
O'Melveny & Myers LLP
275 Battery Street, 26th Floor
San Francisco, California 94109
Facsimile: (415) 984-8701
Attention: Stephanie I. Splane, Esq.
(b) If to Pogo:
Pogo.com Inc.
300 California Street, Suite 800
San Francisco, California 94104
Facsimile: (415) 778-3512
Attention: Chief Executive Officer
with a copy to:
Fenwick & West, LLP
Two Palo Alto Square
Palo Alto, California 94306
Facsimile: (650) 494-1417
Attention: Dennis R. DeBroeck, Esq.
(c) If to a Stockholder or the Stockholders Agent:
________________________________
________________________________
________________________________
Facsimile: _____________________
Attention: _____________________
(d) If to the Escrow Agent:
________________________________
________________________________
________________________________
Facsimile: _____________________
Attention: _____________________
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<PAGE>
11.2 Interpretation. When a reference is made in this Agreement to a
Subsection, Section, or Schedule, such reference is to a Subsection or Section
of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" and
"including" are used in this Agreement, they are deemed to be followed by the
words "without limitation." For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, (i) the
terms defined include the plural as well as the singular, (ii) all accounting
terms not otherwise defined herein have the meanings assigned under GAAP, and
(iii) the words "herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section, Subsection or other subdivision.
11.3 Counterparts. This Agreement may be executed in one or more
counterparts (including facsimile), all of which are considered one and the
same agreement and will become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
11.4 Entire Agreement. This Agreement and the Merger Agreement (and any
other documents and instruments referred to herein or therein) constitute the
entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement and are not intended to confer upon any Person other than the parties
hereto, the Stockholders and any Indemnitee rights or remedies hereunder.
11.5 Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of California, without regard to
principles of conflict of laws.
11.6 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement will be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
11.7 Enforcement. The parties agree that irreparable damage would occur if
any of the provisions of this Agreement were not performed in accordance with
its specific terms or were otherwise breached. The parties accordingly agree
that the parties (i) will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any federal court of the United States located
in the State of California or in California state court and (ii) will waive, in
any action for specific performance, the defense of adequacy of a remedy at
law, this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (i) consents to
submit itself to the personal jurisdiction of any federal court located in the
State of California or any California state court if any dispute arises out of
the Agreement or any of the transactions contemplated by this Agreement, (ii)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and (iii) agrees that it
will not bring any action relating to this Agreement in any court other than a
federal or state court sitting in the State of California.
11.8 Severability. If any term, provision, covenant or restriction herein is
held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable or against its regulatory policy, the remainder of the
terms, provisions, covenants and restrictions of this Agreement will remain in
full force and effect and will in no way be affected, impaired or invalidated.
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B-10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized or other duly
authorized representatives, all as of the date first written above.
AT HOME CORPORATION,
a Delaware corporation
By: _________________________________
Title: ______________________________
POGO.COM INC.,
a Delaware corporation
By: _________________________________
Title: ______________________________
ESCROW AGENT
By: _________________________________
Title: ______________________________
STOCKHOLDER AGENT
By: _________________________________
Title: ______________________________
B-11
<PAGE>
Schedule 1
<TABLE>
<CAPTION>
Pogo
Stockholder Shares to be Contributed
----------- ------------------------
<S> <C>
</TABLE>
B-12
<PAGE>
ANNEX C
IRREVOCABLE PROXY AND VOTING AGREEMENT
This Irrevocable Proxy and Voting Agreement ("Agreement") is made and
entered into as of August 30, 2000, among AT HOME CORPORATION, a Delaware
corporation ("At Home"), POGO.COM INC., a Delaware corporation ("Pogo"), and
the undersigned stockholder ("Stockholder") of Pogo.
Recitals
A. Pogo, At Home and Pogo Acquisition Corp., a direct wholly owned
subsidiary of At Home incorporated under the laws of Delaware ("Sub"), have
entered into an Agreement and Plan of Merger of even date herewith (the "Merger
Agreement"), which provides for the merger (the "Merger") of Sub with Pogo,
with Sub being the surviving corporation of the Merger. Pursuant to the Merger,
shares of capital stock of Pogo will be converted into capital stock of At Home
in the manner set forth in the Merger Agreement.
B. As of the date of this Agreement, Stockholder is the record holder and
beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of such number of shares (the "Shares")
of the outstanding capital stock of Pogo as is indicated on the final page of
this Agreement.
C. Pogo and At Home desire that Stockholder agree, and Stockholder is
willing to agree, not to transfer or otherwise dispose of any of the Shares, or
any other shares of capital stock of Pogo acquired by Stockholder after the
date of this Agreement and prior to the Expiration Date (as defined in Section
1.1 below), except as otherwise permitted hereby, and to vote the Shares and
any other such shares of capital stock of Pogo so as to facilitate consummation
of the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Stockholder agrees not to transfer, sell,
exchange, pledge or otherwise dispose of or encumber any of the Shares or any
New Shares as defined in Section 1.2 below or any interest therein (including
the granting of a proxy to any person), or to make any offer or agreement
relating thereto, at any time prior to the Expiration Date, unless the
transferee agrees in writing to be bound by the terms of this Agreement, in
which case such transfer, sale, exchange, pledge or other disposition or
encumbrance shall be permitted. As used herein, the term "Expiration Date"
shall mean the earlier to occur of (i) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the Merger
Agreement and (ii) such date as the Merger Agreement shall be terminated
pursuant to Article X thereof.
1.2 Additional Purchases. Stockholder agrees that any shares of capital
stock of Pogo that Stockholder purchases or with respect to which Stockholder
otherwise acquires beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) after the date of this Agreement and prior to the
Expiration Date ("New Shares") shall be subject to the terms and conditions of
this Agreement to the same extent as if they constituted Shares.
2. Voting. During the period commencing on the date of this Agreement and
ending on the Expiration Date, Stockholder will vote or cause to be voted all
shares of capital stock of Pogo owned of record or beneficially owned or held
in any capacity by Stockholder or under Stockholder's control, by proxy or
otherwise, in favor of the Merger and other transactions provided for in or
contemplated by the Merger Agreement and against any Opposing Proposal (as
defined below). An "Opposing Proposal" means a
C-1
<PAGE>
proposal brought to the vote of Pogo stockholders to approve (a) an Acquisition
Proposal (as defined in Section 6.2 of the Merger Agreement) with a party other
than At Home and its affiliates or (b) a transaction, agreement or other action
that, if undertaken or performed by Pogo, would constitute a material breach by
Pogo of its obligations under the Merger Agreement or that would preclude
fulfillment of an unwaived condition precedent under Article VIII of the Merger
Agreement to At Home's or Pogo's obligation to consummate the Merger, or (c)
the liquidation or winding up of Pogo. Stockholder hereby revokes any other
proxy granted by Stockholder and irrevocably appoints At Home, during the term
of this letter agreement, as proxy for and on behalf of Stockholder to vote
(including, without limitation, the taking of action by written consent) such
shares, for Stockholder and in its name, place and stead for the matters and in
the manner contemplated by this Section 2. This proxy is irrevocable. The
provisions of this Section shall apply only to a Stockholder's voting of such
Stockholder's shares of Pogo stock and shall not apply to the vote of a member
of Pogo's Board of Directors in his or her capacity as a director of Pogo.
3. Representations, Warranties and Covenants of Stockholder. Stockholder
hereby represents, warrants and covenants as follows:
3.1 Ownership of Shares. Stockholder (i) is the beneficial owner of the
Shares, and (ii) has full power and authority to make, enter into and carry out
the terms of this Agreement.
3.2 No Solicitations. Prior to the Expiration Date, Stockholder will not,
and will not permit any entity under Stockholder's control to: (i) become a
"participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act) in favor of an Opposing Proposal or otherwise encourage
or assist any party in taking or planning any action that would compete with,
restrain or otherwise serve to interfere with or inhibit the timely
consummation of the Merger in accordance with the terms of the Merger
Agreement; (ii) initiate a Stockholder's vote or action by written consent of
Pogo Stockholders with respect to an Opposing Proposal; or (iii) become a
member of a "group" (as such term is used in Section 13(d) of the Exchange Act)
with respect to any voting securities of Pogo that attempts to obtain approval
of an Opposing Proposal. The provisions of this Section 3.2 shall not apply to
actions taken by Stockholder in his or her capacity as a director of Pogo.
4. Additional Documents. Stockholder hereby covenants and agrees to execute
and deliver any additional documents necessary, in the reasonable opinion of At
Home or Pogo, as the case may be, to carry out Stockholder's obligations under
this Agreement.
5. Termination. This Agreement (including the proxy granted herein) shall
terminate and shall have no further force or effect as of the Expiration Date.
6. Miscellaneous.
6.1 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
6.2 Binding Effect and Assignment. This Agreement and all of the provisions
hereby shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the
parties without prior written consent of the other.
6.3 Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
C-2
<PAGE>
6.4 Specific Performance; Injunctive Relief. The parties hereto acknowledge
that At Home will be irreparably harmed and that there will be no adequate
remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to At Home upon any such violation, At
Home shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to At Home at
law or in equity.
6.5 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and sufficient if delivered in person, by cable,
telegram or telex, or sent by mail (registered or certified mail, postage
prepaid, return receipt requested) or overnight courier (prepaid) to the
respective parties as follows:
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C-3
<PAGE>
If to Pogo:
Pogo.com Inc.
300 California Street, Suite 800
San Francisco, California 94104
Facsimile: (415) 778-3512
Attention: Erick Hachenburg
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Facsimile: (650) 494-1417
Attention: Dennis R. DeBroeck, Esq.
If to At Home:
At Home Corporation
450 Broadway
Redwood City, California 94603
Facsimile: (650) 556-5100
Attention: General Counsel
With a copy to:
O'Melveny & Myers LLP
275 Battery Street
San Francisco, California 94111
Telecopy: (415) 984-8701
Attention: Stephanie I. Splane, Esq.
If to Stockholder, to the address set forth on the signature page hereof.
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
6.6 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of Delaware.
6.7 Entire Agreement. This Agreement contains the entire understanding of
the parties in respect of the subject matter hereof, and supersedes all prior
negotiations and understandings between the parties with respect to such
subject matter.
6.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
6.9 Effect of Headings. The section headings herein are for convenience only
and shall not affect the construction of interpretation of this Agreement.
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C-4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Irrevocable Proxy and
Voting Agreement to be duly executed on the day and year first above written.
[STOCKHOLDER]
_____________________________________
Name: _______________________________
By: _________________________________
Title: ______________________________
Shares beneficially owned:
shares of [Common Stock]
shares of [Series Preferred
Stock]
Stockholder's Address for Notice
_____________________________________
_____________________________________
_____________________________________
Attention: __________________________
Telephone: __________________________
Telecopy: ___________________________
ACKNOWLEDGED AND AGREED:
POGO.COM INC.
By: _________________________________
Title: ______________________________
AT HOME CORPORATION
By: _________________________________
Title: ______________________________
C-5
<PAGE>
ANNEX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
262. APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to Section 228 of this title shall be entitled to an appraisal
by the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation' the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock any thing except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that is such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the
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<PAGE>
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder's written request for such a statement is received
by the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
D-3
<PAGE>
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder's certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this Sate or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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<PAGE>
ANNEX E
CHAPTER 13 OF THE CALIFORNIA CORPORATIONS CODE
DISSENTERS' RIGHTS
Section 1300. Reorganization or short-form merger; dissenting shares;
corporate purchase at fair market value; definitions
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each shareholder of the corporation entitled to
vote on the transaction and each shareholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their fair market
value the shares owned by the shareholder which are dissenting shares as
defined in subdivision (b). The fair market value shall be determined as of the
day before the first announcement of the terms of the proposed reorganization
or short-form merger, excluding any appreciation or depreciation in consequence
of the proposed action, but adjusted for any stock split, reverse stock split
or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of National Market System of the [Nasdaq] Stock
Market, and the notice of meeting of shareholders to act upon the
reorganization summarizes this section and Sections 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any shares
with respect to which there exists any restriction on transfer imposed by
the corporation or by any law or regulation; and provided, further, that
this provision does not apply to any class of shares described in
subparagraph (A) or (B) if demands for payment are filed with respect to 5
percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
Section 1301. Notice to holders of dissenting shares in reorganizations;
demand for purchase; time; contents
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
E-1
<PAGE>
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such
sections. The statement of price constitutes an offer by the corporation to
purchase at the price stated any dissenting shares as defined in subdivision
(b) of Section 1300, unless they lose their status as dissenting shares under
Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such price.
Section 1302. Submission of share certificates for endorsement; uncertificated
securities
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110
was mailed to the shareholder, the shareholder shall submit to the corporation
at its principal office or at the office of any transfer agent thereof, (a) if
the shares are certificated securities, the shareholder's certificates
representing any shares which the shareholder demands that the corporation
purchase, to be stamped or endorsed with a statement that the shares are
dissenting shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are uncertificated
securities, written notice of the number of shares which the shareholder
demands that the corporation purchase. Upon subsequent transfers of the
dissenting shares on the books of the corporation, the new certificates,
initial transaction statement, and other written statements issued therefor
shall bear a like statement, together with the name of the original dissenting
holder of the shares.
Section 1303. Payment of agreed price without interest; agreement fixing fair
market value; filing; time of payment
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the
fair market value of any dissenting shares as between the corporation and the
holders thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
Section 1304. Action to determine whether shares are dissenting shares or fair
market value; limitation; joinder; consolidation; determination
of issues; appointment of appraisers
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares
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<PAGE>
as dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152) or
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
Section 1305. Report of appraisers; confirmation; determination by court;
judgment; payment; appeal; costs
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed
by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time
as may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which
any dissenting shareholder who is a party, or who has intervened, is entitled
to require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for
the shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of
Section 1301).
Section 1306. Prevention of immediate payment; status as creditors; interest
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
Section 1307. Dividends on dissenting shares
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
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<PAGE>
Section 1308. Rights of dissenting shareholders pending valuation; withdrawal
of demand for payment
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A
dissenting shareholder may not withdraw a demand for payment unless the
corporation consents thereto.
Section 1309. Termination of dissenting share and shareholder status
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice
of the approval by the outstanding shares or notice pursuant to subdivision
(i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
Section 1310. Suspension of right to compensation or valuation proceedings;
litigation of shareholders' approval
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
Section 1311. Exempt shares
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
Section 1312. Right of dissenting shareholder to attack, set aside or rescind
merger or reorganization; restraining order or injunction;
conditions
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
E-4
<PAGE>
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-
form merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand
payment of cash for the shareholder's shares pursuant to this chapter. The
court in any action attacking the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded shall not restrain or enjoin the consummation of the transaction
except upon 10 days' prior notice to the corporation and upon a determination
by the court that clearly no other remedy will adequately protect the
complaining shareholder or the class of shareholders of which such shareholder
is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to shareholders of the controlled party,
and (2) a person who controls two or more parties to a reorganization shall
have the burden of proving that this transaction is just and reasonable as to
the shareholders of any party so controlled.
E-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN INFORMATION STATEMENT/PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and executive officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities, including
reimbursement for expenses incurred arising under the Securities Act.
As permitted by the Delaware General Corporation Law, Excite@Home's
certificate of incorporation, as amended, includes a provision that eliminates
the personal liability of its directors to Excite@Home or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability:
. for any breach of the director's duty of loyalty to the corporation or
its stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law; and
. for any transaction from which the director derived an improper personal
benefit.
As permitted by the Delaware General Corporation Law, Excite@Home's
certificate of incorporation, as amended, further provides:
. for mandatory indemnification, to the fullest extent permitted by
applicable law, for any person who is or was a director or officer, or
. is or was serving at the request of Excite@Home as a director, officer,
employee or agent of another corporation or of a partnership, joint
venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by
this person;
. that Excite@Home's obligation to indemnify any person who was or is
serving at Excite@Home's request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust,
enterprise or nonprofit entity must be reduced by any amount the person
may collect as indemnification from the other corporation, partnership,
joint venture, trust, enterprise or nonprofit entity;
. that Excite@Home must advance to all indemnified parties the expenses
(including attorneys' fees) incurred in defending any proceeding
provided that indemnified parties (if they are directors or officers)
must provide Excite@Home an undertaking to repay the advances if
indemnification is determined to be unavailable;
. that the rights conferred in the certificate of incorporation are not
exclusive; and
. that Excite@Home may not retroactively amend the certification of
incorporation provisions relating to indemnity.
Excite@Home entered into indemnity agreements with certain of its current
directors and executive officers to give such directors and executive officers
additional contractual assurances regarding the scope of the indemnification
set forth in its certificate of incorporation and to provide additional
procedural protections. The indemnification provision in Excite@Home's
certificate of incorporation and in these indemnification agreements may be
sufficiently broad to permit indemnification of its directors and officers for
liabilities arising under the Securities Act. Excite@Home has also obtained
directors' and officers' liability insurance that includes coverage for
securities matters.
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<PAGE>
Reference is made to the following documents regarding relevant
indemnification provisions described above and elsewhere herein:
. Fifth Amended and Restated Certificate of Incorporation; and
. Form of Indemnification Agreement entered into between Excite@Home and
each of its directors and executive officers (incorporated by reference
to Exhibit 10.09 to Excite@Home's registration statement on Form S-1
(File No. 333-27323) declared effective by the Commission on July 11,
1997).
Excite@Home has entered into various merger agreements and related
registration rights agreements in connection with its acquisitions of and
mergers with various companies, and purchase agreements and related
registration rights agreements in connection with its issuances of convertible
notes, under which the parties to those agreements have agreed to indemnify
Excite@Home and its directors, officers, employees and controlling persons
against specified liabilities, including liabilities arising under the
Securities Act, the Exchange Act or other federal or state laws.
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<PAGE>
ITEM 21. EXHIBITS.
The following items are filed as part of, or are incorporated by reference
into, this registration agreement:
<TABLE>
<CAPTION>
Filed
Incorporated by Reference Herewith
------------------------------------ --------
Exhibit Filing
Number Exhibit Description Form File No. Exhibit Date
------- ------------------- --------- --------- ------- --------
<C> <S> <C> <C> <C> <C> <C>
2.01 Agreement and Plan of X
Merger dated August 30,
2000 among At Home
Corporation, Pogo.com
Inc., Pogo Acquisition
Corp. and Erick
Hachenburg, as the
stockholder agent (filed
as Annex A hereto).
4.01 Form of certificate of S-1 333-27323 4.05 03/31/99
At Home Corporation's
Series A common stock.
4.02 Indenture, dated 10-K -- 10.38 03/31/99
December 28, 1998,
between At Home
Corporation and State
Street Bank and Trust
Company of California,
N.A., as trustee
(contains form of note).
4.03 Registration Rights 10-K -- 10.39 03/31/99
Agreement, dated
December 28, 1998,
between At Home
Corporation and Merrill
Lynch & Co., Merrill
Lynch, Pierce, Fenner &
Smith Incorporated,
Morgan Stanley & Co.
Incorporated and Goldman
Sachs & Co.
4.04 Indenture, dated as of S-3 333-32228 4.03 03/10/00
December 1, 1999, by At
Home Corporation to
State Street Bank and
Trust Company of
California, N.A., as
trustee (contains form
of note).
4.05 Registration Rights S-3 333-32228 4.04 03/10/00
Agreement, dated
December 1, 1999,
between At Home
Corporation and Morgan
Stanley & Co.
Incorporated, Goldman
Sachs & Co., Deutsche
Bank Securities Inc.,
Donaldson Lufkin &
Jenrette Securities
Corporation, Hambrecht &
Quist LLC and BankBoston
Robertson Stephens Inc.
4.06 Third Amended and S-1 333-27323 4.01 05/16/97
Restated Registration
Rights Agreement, dated
April 11, 1997, among At
Home Corporation and the
parties indicated
therein.
4.07 Amended and Restated S-1 333-27323 4.04 06/20/97
Stockholders' Agreement,
dated August 1, 1996,
among At Home
Corporation and the
parties indicated
therein, as amended on
May 15, 1997.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Filed
Incorporated by Reference Herewith
------------------------------ --------
Exhibit File Filing
Number Exhibit Description Form No. Exhibit Date
------- ------------------- -------- ---- ------- --------
<C> <S> <C> <C> <C> <C> <C>
4.08 Letter Agreement and Term 8-K -- 10.01 10/22/97
Sheet, dated as of October
2, 1997 and amended as of
October 10, 1997, among At
Home Corporation,
Cablevision Systems
Corporation, CSC Parent
Corporation, Comcast
Corporation, Cox
Enterprises, Inc.,
Kleiner Perkins Caufield &
Byers and
Tele-Communications, Inc.
4.09 Letter Agreement, dated AT&T 13D -- 13 4/23/99
April 7, 1999, among
At Home Corporation, AT&T
Corp., Tele-Communications,
Inc., Cox Communications,
Inc. and Cox@Home, Inc.
5.01 Legality opinion of
O'Melveny & Myers LLP
together with consent (to
be filed by amendment).
8.01 Form of Tax Opinion of X
O'Melveny & Myers LLP.
8.02 Form of Tax Opinion of X
Fenwick & West LLP.
10.01 Form of Voting Agreement X
(filed as Annex C hereto).
10.02 Form of Escrow Agreement X
(filed as Annex B hereto).
23.01 Consent of Ernst & Young X
LLP, Independent Auditors.
23.02 Consent of O'Melveny & X
Myers LLP as to Form of Tax
Opinion.
23.03 Consent of Fenwick & West X
LLP as to Form of Tax
Opinion.
23.04 Consent of O'Melveny &
Myers LLP (contained in
Exhibit 5.01 to be filed by
amendment).
24.01 Power of Attorney X
(contained on signature
page).
99.01 Form of written consent (to
be filed by amendment).
</TABLE>
ITEM 22. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement;
II-4
<PAGE>
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(2) The undersigned registrant undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) The undersigned registrant undertakes that that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the registrant
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the other Items of the applicable form.
(4) The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (b) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) The undersigned registrant undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective time of the registration statement through
the date of responding to the request.
(6) The undersigned registrant undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
registrant, At Home Corporation, certifies that its has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-4 and has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Redwood City, California, on the
13th day of October, 2000.
At Home Corporation
By: /s/ George Bell
-----------------------------------
George Bell
Chief Executive Officer
Chairman
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of At Home Corporation hereby
severally constitute and appoint Mark A. McEachen, our true and lawful
attorney, with full power to him singly, to sign for us and in our names in the
capacities indicated below, any amendments to this registration statement, and
generally to do all things in our names and on our behalf in such capacities to
enable At Home Corporation to comply with the provisions of the Securities Act
of 1933, as amended, and all the requirements of the Securities Exchange
Commission.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on behalf
of registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
Principal Executive Officer:
<S> <C> <C>
/s/ George Bell Chairman and Chief October 13, 2000
______________________________________ Executive Officer
George Bell
Principal Financial and Accounting Officer:
/s/ Mark A. McEachen Executive Vice President October 13, 2000
______________________________________ and Chief Financial
Mark A. McEachen Officer
Additional Directors:
/s/ William R. Hearst III Director October 13, 2000
______________________________________
William R. Hearst III
/s/ C. Michael Armstrong Director October 13, 2000
______________________________________
C. Michael Armstrong
/s/ John C. Petrillo Director October 13, 2000
______________________________________
John C. Petrillo
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
Additional Directors:
<S> <C> <C>
/s/ Mohan Gyani Director October 13, 2000
______________________________________
Mohan Gyani
/s/ Frank Ianna Director October 13, 2000
______________________________________
Frank Ianna
/s/ Daniel E. Somers Director October 13, 2000
______________________________________
Daniel E. Somers
Director
______________________________________
Richard Roscitt
Director
______________________________________
Edward S. Rogers
/s/ Thomas A. Jermoluk Director October 13, 2000
______________________________________
Thomas A. Jermoluk
/s/ Mark A. McEachen October 13, 2000
*By: _________________________________
Mark A. McEachen
Attorney-in-fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Filed
Incorporated by Reference Herewith
------------------------------------ --------
Exhibit Filing
Number Exhibit Description Form File No. Exhibit Date
------- ------------------- --------- --------- ------- --------
<C> <S> <C> <C> <C> <C> <C>
2.01 Agreement and Plan of X
Merger dated August 30,
2000 among At Home
Corporation, Pogo.com
Inc., Pogo Acquisition
Corp. and Erick
Hachenburg, as the
stockholder agent (filed
as Annex A hereto).
4.01 Form of certificate of S-1 333-27323 4.05 03/31/99
At Home Corporation's
Series A common stock.
4.02 Indenture, dated 10-K -- 10.38 03/31/99
December 28, 1998,
between At Home
Corporation and State
Street Bank and Trust
Company of California,
N.A., as trustee
(contains form of note).
4.03 Registration Rights 10-K -- 10.39 03/31/99
Agreement, dated
December 28, 1998,
between At Home
Corporation and Merrill
Lynch & Co., Merrill
Lynch, Pierce, Fenner &
Smith Incorporated,
Morgan Stanley & Co.
Incorporated and Goldman
Sachs & Co.
4.04 Indenture, dated as of S-3 333-32228 4.03 03/10/00
December 1, 1999, by At
Home Corporation to
State Street Bank and
Trust Company of
California, N.A., as
trustee (contains form
of note).
4.05 Registration Rights S-3 333-32228 4.04 03/10/00
Agreement, dated
December 1, 1999,
between At Home
Corporation and Morgan
Stanley & Co.
Incorporated, Goldman
Sachs & Co., Deutsche
Bank Securities Inc.,
Donaldson Lufkin &
Jenrette Securities
Corporation, Hambrecht &
Quist LLC and BankBoston
Robertson Stephens Inc.
4.06 Third Amended and S-1 333-27323 4.01 05/16/97
Restated Registration
Rights Agreement, dated
April 11, 1997, among At
Home Corporation and the
parties indicated
therein.
4.07 Amended and Restated S-1 333-27323 4.04 06/20/97
Stockholders' Agreement,
dated August 1, 1996,
among At Home
Corporation and the
parties indicated
therein, as amended on
May 15, 1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Filed
Incorporated by Reference Herewith
------------------------------ --------
Exhibit File Filing
Number Exhibit Description Form No. Exhibit Date
------- ------------------- -------- ---- ------- --------
<C> <S> <C> <C> <C> <C> <C>
4.08 Letter Agreement and Term 8-K -- 10.01 10/22/97
Sheet, dated as of October
2, 1997 and amended as of
October 10, 1997, among At
Home Corporation,
Cablevision Systems
Corporation, CSC Parent
Corporation, Comcast
Corporation, Cox
Enterprises, Inc.,
Kleiner Perkins Caufield &
Byers and
Tele-Communications, Inc.
4.09 Letter Agreement, dated AT&T 13D -- 13 4/23/99
April 7, 1999, among
At Home Corporation, AT&T
Corp., Tele-Communications,
Inc., Cox Communications,
Inc. and Cox@Home, Inc.
5.01 Legality opinion of
O'Melveny & Myers LLP
together with consent (to
be filed by amendment).
8.01 Form of Tax Opinion of X
O'Melveny & Myers LLP.
8.02 Form of Tax Opinion of X
Fenwick & West LLP.
10.01 Form of Voting Agreement X
(filed as Annex C hereto).
10.02 Form of Escrow Agreement X
(filed as Annex B hereto).
23.01 Consent of Ernst & Young X
LLP, Independent Auditors.
23.02 Consent of O'Melveny & X
Myers LLP as to Form of Tax
Opinion.
23.03 Consent of Fenwick & West X
LLP as to Form of Tax
Opinion.
23.04 Consent of O'Melveny &
Myers LLP (contained in
Exhibit 5.01 to be filed by
amendment).
24.01 Power of Attorney X
(contained on signature
page).
99.01 Form of written consent (to
be filed by amendment).
</TABLE>
