EXHIBIT 10.04
AT HOME CORPORATION
000 XXXXXXXXX XXXXX
XXXXXXXX XXXX, XX 00000
June 4, 1996
To: The Persons Signatory hereto
Reference is made to the Term Sheet attached hereto regarding, among
other things the equity securities of At Home Corporation ("@Home"), the
stockholders agreement among us and certain arrangements relating to the
distribution of the @Home services, all as more fully described in the Term
Sheet.
The Term Sheet contemplates that the agreements contained therein will be
superseded by definitive agreements and instruments which will contain
provisions incorporating and expanding upon the agreements set forth therein,
together with other provisions customary in the case of transactions of this
type, and such other provisions as are reasonable and appropriate in the context
of the transactions contemplated hereby. Notwithstanding the foregoing, the
parties expressly acknowledge and agree that the Term Sheet and this letter will
constitute a binding agreement among them, subject to the terms and conditions
set forth in this letter agreement and the Term Sheet, until such definitive
agreements are executed and delivered. If such definitive agreements are not
executed and delivered within 60 days from the date of this letter agreement,
then the Term Sheet and this letter agreement shall constitute such definitive
agreements. Each party hereto shall use commercially reasonable efforts to
consummate the transactions contemplated by the Term Sheet, including, without
limitation, the satisfaction of the respective conditions to the parties'
obligations to consummate such transactions and the completion of such
definitive agreements. Notwithstanding the foregoing, this letter agreement and
the Term Sheet and the respective obligations of the parties hereunder shall
terminate in the event that the Additional Investors (as defined in the Term
Sheet) shall not have purchased shares hereunder on or before August 15, 1996,
but such termination shall not in any way limit or restrict the right of any
party hereto to pursue any and all of its remedies against any party hereto
which fails to perform any of its obligations or commitments under this letter
agreement or the Term Sheet.
This letter agreement and the Term Sheet attached hereto, shall be
governed by and construed in accordance with the laws of the State of New York
(without regard to its laws pertaining to conflicts of law) applicable to
agreements executed in and to be fully performed entirely in such state.
June 4, 1996
If the foregoing is acceptable to you, please execute the copy of this
agreement in the space below, at which time this instrument will constitute a
binding agreement among us.
Very truly yours,
AT HOME CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx, III
--------------------------
Name: Xxxxxxx X. Xxxxxx, III
Title: President
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June 4, 1996
ACCEPTED AND AGREED
this 4th day of June, 1996
Each of the following executes this letter agreement only in its capacity
as a Stockholder (as defined in the Term Sheet):
TCI INTERNET HOLDINGS, INC. COX TELEPORT PROVIDENCE, INC.
By: /s/Xxxxx X. Xxxxxxx By: /s/Xxxxx X. Xxxxxxx
--------------------------------- ---------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxx X. Xxxxxxx
Title: President and Chief Executive Officer Title: Vice President
COMCAST PC INVESTMENTS, INC. KLEINER, PERKINS, XXXXXXXX
& XXXXX VII
By: KPCB VII Associates, its
General Partner
By: /s/ Xxxxx X. Xxxxxxx By: /s/ L. Xxxx Xxxxx
--------------------------------- ---------------------------
Name: Xxxxx X. Xxxxxxx Name: L. Xxxx Xxxxx
Title: President Title: Partner
KPCB VII FOUNDERS FUND KPCB INFORMATION SERVICES
ZAIBATSU FUND II
By: KPCB VII Associates, By: KPCB VII Associates,
its General Partner its General Partner
By: /s/ L. Xxxx Xxxxx By: /s/ L. Xxxx Xxxxx
--------------------------------- ---------------------------
Name: L. Xxxx Xxxxx Name: L. Xxxx Xxxxx
Title: Partner Title: Partner
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June 4, 1996
ACCEPTED AND AGREED
this 4th day of June, 1996
Each of the following executes this letter agreement only in its capacity
as a Cable Parent (as defined in the Term Sheet):
TCI INTERNET SERVICES, INC. TCI COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------- ---------------------------
Name: Xxxxx X. Xxxxxxx Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Title: President and Chief
Executive Officer Executive Officer
TCI CABLE INVESTMENTS INC. COMCAST CABLE COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxx
--------------------------------- ---------------------------
Name: Xxxxxxx X. Xxxxxxxx Name: Xxxxx X. Xxxxxxx
Title: President Title: Vice Chairman
XXX COMMUNICATIONS, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President
4
EXHIBIT 10.04
AT HOME CORPORATION
TERM SHEET
JUNE 4, 1996
I. GENERAL.
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ISSUER: At Home Corporation ("@Home"), a Delaware corporation, the
stockholders of which are TCI Internet Holdings, Inc., a
Colorado corporation ("TCI Sub") and an indirect wholly
owned subsidiary of Tele-Communications, Inc. ("TCI"), and
certain affiliates of Kleiner, Perkins, Xxxxxxxx & Xxxxx, a
California partnership ("KPCB"). The affiliates (each of
which is a partnership of which KPCB VII Associates, a
California limited partnership, is the general partner) of
KPCB which purchased shares of @Home are hereinafter
referred to collectively as the "KPCB Affiliates" and TCI
Sub and the KPCB Affiliates are hereinafter referred to
collectively as the "Founders."
BUSINESS: @Home was formed primarily to engage in the business of
providing Internet connectivity service and Internet
"backbone" service. It is contemplated that such services
would include (without limitation) (i) direct connectivity
to the Internet through the development, packaging,
marketing and distribution of a suite of branded Internet
connectivity services and certain branded applications,
including one or more custom browsers, for use by
subscribers and information providers, together with
connections to various on-line hosting services (such as
America Online, Prodigy, CompuServe and The Microsoft
Network) and information providers, both in the United
States and internationally (in countries where @Home is
capable of providing such service), (ii) directory services
and navigation services to content created by third parties,
provided, however, that it is not contemplated that @Home
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would itself be a creator of content (other than with
respect to content created as part of @Home's navigation
services (such as the "video xxxxxx" and "templates" for the
creation of navigation home pages), the aggregation and
organization of content created by third parties and
technological assistance to such third party creators), and
(iii) systems for (a) "backbone" transmission, (b) network
management, and (c) billing and associated support functions
(collectively, the "@Home Services"). The @Home Services
will be provided over cable, telephone or other wireline or
wireless delivery systems which would be accessible by
subscribers through personal computers and similar
electronic devices (such as PDAs), set-top boxes, dedicated
game platforms and other network termination devices.
FINANCING: It is presently intended that @Home would commence business
as a private company and initially finance its operations
through strategic
investment by third parties and internally generated working
capital. At the earliest appropriate time (as determined by
the Board of Directors based upon, among other things,
market conditions and @Home's financing requirements), it is
anticipated that @Home would make an initial public offering
("IPO") of its Series A Common Stock and that the Series A
Common Stock would thereafter be listed and traded on a
national securities market.
II. PURCHASE OF SHARES.
------------------
CAPITALIZATION:/*/ Series A Common Stock: 75,000,000 shares authorized; no
shares issued and outstanding.
Series B Common Stock: 7,700,000 shares authorized; no
shares issued and outstanding.
Convertible Participating Preferred Stock, Series K (the
"Series K Preferred Stock"): 693,883 shares authorized;
460,000 shares issued and outstanding, all of which are held
by the KPCB Affiliates.
Convertible Participating Preferred Stock, Series T (the
"Series T Preferred Stock"): 1,540,000 shares authorized;
1,540,000 shares issued and outstanding, all of which are
held by TCI Sub.
Convertible Participating Preferred Stock, Series A (the
"Series A Preferred Stock"): 3,008,730 shares authorized; no
shares issued and outstanding.
Series Preferred Stock (blank check): 10,000,000 shares
authorized; no series designated and no shares issued and
outstanding.
The Series A Common Stock and the Series B Common Stock
(together, the "Common Stock") are identical in all
respects, except that the holders of shares of the Series B
Common Stock (i) generally will be entitled to ten (10)
votes per share on all matters with respect to which the
holders of the Common Stock of @Home are entitled to vote,
while the holders of the shares of Series A Common Stock
will be entitled to one vote per share upon such matters and
(ii) will be entitled to elect the Series B Common Directors
(as defined below). Except as may otherwise be required by
the Delaware General Corporation Law (the "DGCL"), the
holders of the Series A and Series B Common Stock will vote
together as a single class on all matters. Each share of
Series B Common Stock will be convertible at any time at the
option of the holder into one share of Series A Common
Stock.
Prior to the consummation of the purchase of the shares of
Series A Preferred Stock by the Additional Investors
described below, the Amended and Restated Certificate of
Incorporation of @Home will be
amended (as amended, the "Charter") to (i) effect a reverse
split of the authorized and issued shares of Series K and
Series T Preferred Stock on a 10 to 1 basis, (ii) establish
the rights, designations and preferences of the Series A
Preferred Stock, (iii) amend the rights, designations and
preferences of the Series K Preferred Stock and Series T
Preferred Stock to make such rights, designations and
preferences identical to those of the Series A Preferred
Stock, except as otherwise specifically provided herein,
(iv) amend the rights, designations and preferences of the
Series K Preferred Stock to provide that the shares of
Series K Preferred Stock will be convertible only into
Series A Common Stock and (v) amend the rights, designations
and preferences of the Convertible Preferred Stock in
accordance with the provisions set forth opposite the
caption "Rights of Holders of Convertible Preferred Stock
following the IPO." In addition, simultaneously with the
purchase by the Additional Investors, TCI Sub will exchange
(the "TCI Exchange") 770,000 shares of its Series T
Preferred Stock for 770,000 newly-issued shares of Series A
Preferred Stock; the 770,000 shares of Series T Preferred
Stock received by @Home in such exchange shall be cancelled
and shall not be reissued as shares of Series T Preferred
Stock and @Home will thereafter promptly file a certificate
of retirement reducing the number of authorized shares of
Series T Preferred Stock to 770,000 shares. The Series K
Preferred Stock, the Series T Preferred Stock and the Series
A Preferred Stock are herein sometimes referred to
collectively as the "Convertible Preferred Stock." The
shares of Convertible Preferred Stock and the shares of any
series of Series Preferred Stock are hereinafter sometimes
referred to collectively as the "Preferred Stock".
The shares of Series T Preferred Stock will be initially
convertible at the option of the holder into shares of
Series B Common Stock of @Home, at an initial conversion
ratio of 10 shares of Series B Common Stock for each share
of Series T Preferred Stock, subject to anti-dilution
adjustments. The shares of Series K and Series A Preferred
Stock will be initially convertible at the option of the
holder into shares of Series A Common Stock of @Home, at an
initial conversion ratio of 10 shares of Series A Common
Stock for each share of Series K or Series A Preferred
Stock, as the case may be, subject to anti-dilution
adjustments. The anti-dilution adjustments for each series
of Convertible Preferred Stock will be identical (other than
with respect to the series of Common Stock into which such
series of Convertible Preferred Stock is initially
convertible).
The Series Preferred Stock would be issuable, from time to
time, in one or more series, with such designations,
preferences and relative participating, optional or other
special rights, qualifications, limitations or restrictions
as shall be stated in resolutions of the Board of Directors
setting forth the designation thereof or in an amendment to
the Charter establishing the terms of any such series of
Preferred Stock.
Unless the Series K and Series A Directors (each as defined
below) determine by a Supermajority Vote (as defined in
Exhibit A) to the
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contrary, subject to the receipt of any required regulatory
consents or approvals or the filing of any required notices
with any governmental entities and the expiration of any
waiting period related thereto, the holders of all shares of
Series T, Series A and Series K Preferred Stock and any
shares of any series of Series Preferred Stock then
outstanding which are convertible into Common Stock will be
required to convert such shares into shares of Series A
Common Stock or Series B Common Stock (whichever series such
shares are initially convertible into) in connection with
@Home's initial public offering.
No shares of Series B Common Stock shall be issued, except
upon conversion of shares of Series T Preferred Stock or
other shares of Series Preferred Stock (which have been
authorized in accordance with the provisions of Exhibit A)
having the right to convert into shares of Series B Common
Stock.
SECURITIES TO BE
PURCHASED BY
FOUNDERS
AND ADDITIONAL
INVESTORS:
Subject to the satisfaction or waiver of the conditions to
closing specified below, (i) the KPCB Affiliates will
purchase 233,883 additional shares of Series K Preferred
Stock, (ii) TCI Sub will effect the exchange referred to
above of 770,000 shares of Series T Preferred Stock for an
equal number of shares of Series A Preferred Stock and will
purchase an additional 783,000 shares of Series A Preferred
Stock, (iii) Comcast PC Investments, Inc., a wholly owned
subsidiary of Comcast Cable Communications Inc. ("Comcast
Sub") will purchase 727,865 shares of Series A Preferred
Stock and (iv) Cox Teleport Providence, Inc., a wholly owned
subsidiary of Xxx Communications, Inc. ("Cox Sub"), will
purchase 727,865 shares of Series A Preferred Stock. The
purchase price for such shares of Series K or Series A
Preferred Stock, as the case may be, to be purchased shall
be $10 per share. The shares theretofore purchased by the
KPCB Affiliates and TCI Sub (other than the shares delivered
by TCI Sub in the TCI Exchange), together with the
additional shares to be purchased by the KPCB Affiliates and
TCI Sub referred to above (including, without duplication,
the shares received by TCI Sub in the TCI Exchange), shall
be considered to be the aggregate number of shares of
Convertible Preferred Stock originally purchased by such
entity for all purposes herein (including, but not limited
to, the calculation of such entity's "Original Amount").
Each of TCI Sub and KPCB will waive its preemptive rights
under the Stockholders Agreement (as defined below) in
connection with the proposed issuance and sale of shares of
Series A Preferred Stock and the TCI Exchange. The
additional shares purchased by TCI Sub and by the KPCB
Affiliates referred to above and the shares purchased by
Comcast Sub and Cox Sub are herein referred to as the
"Additional Shares." The consummation of the purchases of
Convertible Preferred Stock referred to above (the
"Closing") will occur on a mutually agreed date occurring no
later than the 10th day following the satisfaction or waiver
of the
4
conditions to Closing set forth below (other than any such
conditions which are capable of being satisfied only as of
the Closing), but in no event later than August 15, 1996
(such date, the "Closing Date").
Comcast Sub and Cox Sub are referred to herein collectively
as the "Additional Investors," and individually as an
Additional Investor. TCI Sub, Comcast Sub and Cox Sub are
hereinafter referred to collectively as the "Cable Partners"
and individually as a "Cable Partner." "Cable Parent" shall
mean (i) TCI Internet Services, Inc. ("TCI Services"), TCI
Communications, Inc. and TCI Cable Investments Inc. (TCI
Communications, Inc. and TCI Cable Investments, Inc.
(collectively, "TCIC") and TCI Services collectively being a
single Cable Parent (of which TCI Sub is a wholly owned
subsidiary of TCI Services)), (ii) Comcast Cable
Communications, Inc. ("Comcast Cable"), and (iii) Xxx
Communications, Inc. ("CCI"). TCI, Xxx Enterprises, Inc.
("CEI"), Comcast Corporation ("Comcast") and KPCB are
hereinafter referred to collectively as the "Parents" and
individually as a "Parent". Each Cable Partner,
individually, and the KPCB Affiliates, collectively, are
referred to as a "Stockholder", which term shall also
include any transferee which is a member of such
Stockholder's Stockholder Group acquiring securities in
accordance with the provisions set forth in clause (iii) of
the first sentence of the section captioned "Transfer
Restrictions" contained herein which is, or is required to
become, a party to the Stockholders Agreement. Each
Stockholder and (except as to KPCB) its Cable Parent,
together with their respective Controlled Affiliates, is
hereinafter referred to collectively as a "Stockholder
Group". A chart outlining the foregoing relationships is
attached hereto as Schedule 1. A "Controlled Affiliate" of
any Person shall be any corporation, partnership or other
entity which is Controlled by such Person; provided,
--------
however, that @Home will not be deemed to be a Controlled
-------
Affiliate of any Parent or such Parent's Controlled
Affiliates. The term "Control" shall mean the direct or
indirect power to direct the management and policies of any
Person, whether through the ownership of voting securities,
by contract, management agreement or otherwise.
OWNERSHIP: Assuming consummation of the purchase of Additional Shares
by each of Comcast Sub and Cox Sub, and the purchase of the
Additional Shares by TCI Sub and the KPCB Affiliates, the
ownership of the outstanding equity interests of @Home
(determined after giving effect to the issuance of up to 6.5
million shares of Series A Common Stock or common stock
equivalents to management as incentive compensation (the
"Management Pool Shares")) would be as set forth on Schedule
2 hereto. As a condition to the grant of Management Pool
Shares, certain recipients thereof (who shall (i) be
executive officers of @Home and (ii) hold in the aggregate
no less than 50.1% of the outstanding shares of Series A
Common Stock) will be required to enter into an agreement
with @Home pursuant to which each such holder will agree
(and will agree to cause any transferee of its shares to
agree as a condition of any such transfer) that, with
respect to any matter upon which the vote of the
5
holders of Series A Common Stock is required under Section
242(b) of the DGCL prior to the consummation of @Home's IPO,
such holder will cast all votes attributable to its shares
in the same proportion as the holders of the Convertible
Preferred Stock (or if there are no such shares outstanding,
the Series B Common Stock) cast their votes upon such
matter.
CLOSING CONDITIONS: The obligations of each of @Home, the Founders and the
Additional Investors to consummate the transactions
contemplated hereby are subject to the satisfaction at or
prior to the Closing of each of the following conditions
available to such Person, any or all of which may be waived
in whole or in part by such party, to the extent permitted
by applicable law:
1. Amendment of Charter. The Amended and Restated
--------------------
Certificate of Incorporation of @Home shall have been
amended as contemplated by this Term Sheet, and the
form and terms of such amendments shall be reasonably
satisfactory to each of @Home, the Founders and the
Additional Investors, and the Charter shall have been
filed with the Delaware Secretary of State in
accordance with the DGCL and become effective under the
DGCL.
2. Amendment of By-Laws. The By-Laws of @Home shall have
--------------------
been amended as contemplated by this Term Sheet, and
the form and terms of such amendments shall be
reasonably satisfactory to each of @Home, the Founders
and the Additional Investors.
3. Receipt of Governmental Approvals and Consents. All
----------------------------------------------
governmental consents as are required in connection
with the consummation of the transactions contemplated
hereby as to each of @Home, the Founders and the
Additional Investors shall have been obtained and shall
be in full force and effect and all governmental
filings as are required in connection with the
consummation of such transactions shall have been made,
and all waiting periods, if any, applicable to the
consummation of such transactions imposed by any
governmental entity shall have expired, other than
those which, if not obtained, in force or effect, made
or expired (as the case may be) would not, either
individually or in the aggregate, have a material
adverse effect on the transactions contemplated hereby.
4. No Unsatisfied Conditions. All other conditions herein
-------------------------
with respect to the obligation of each of @Home, the
Founders and the Additional Investors to consummate the
issuance and sale of the shares contemplated hereby
shall have been satisfied or waived by such party.
6
5. Additional Matters. Each person purchasing @Home
------------------
securities hereunder shall have received (i) an
instrument containing such representations and (ii)
such closing certificates, in each case as may be
customary in transactions of this nature.
6. Each of the parties hereto shall have performed all of
its obligations and commitments hereunder including,
without limitation, those required to be performed at
the Closing.
In addition, it shall be a further condition of the
obligations of Cox Sub and Comcast Sub to close that no
actions have been taken by @Home (other than any actions
relating to the amendments to the Charter provided for in
the following paragraph), which actions, if taken after the
Closing, would have required the consent or approval of one
or more of the Additional Investors (as if the Closing had
occurred and such Additional Investors were then
Stockholders) or the .Com Committee, without the consent or
approval of such of TCI Sub, KPCB, Comcast Sub and/or Cox
Sub (or their respective designees on the Board of
Directors) or the .Com Committee as would have been required
had the Closing occurred. Each of TCI Sub and KPCB agrees
to cause @Home not to take any of such actions described in
the previous sentence without such consent or approval (to
the extent required).
Notwithstanding the foregoing, prior to the Closing, TCI Sub
and KPCB shall be entitled to purchase up to 783,000
additional shares of Series T Preferred Stock and 233,883
additional shares of Series K Preferred Stock, respectively,
on the terms described herein (determined after giving
effect to the amendments to the Amended and Restated
Certificate of Incorporation of @Home described herein), the
purchase of which shares shall reduce the obligation of such
parties to purchase shares from @Home at the Closing on a
share-for-share basis and, in the case of TCI Sub, which
shares of Series T Preferred Stock shall be exchanged on a
share-for-share basis as part of the TCI Exchange at the
Closing for shares of Series A Preferred Stock (such
purchase, the "Interim Financing").
III. RIGHTS, DESIGNATIONS AND PREFERENCES OF CONVERTIBLE PREFERRED
--------------------------------------------------------------
STOCK TO BE SET FORTH IN THE CHARTER.
------------------------------------
RANKING: The shares of Convertible Preferred Stock will rank pari
----
passu with the shares of any series of Series Preferred
-----
Stock which is not by its terms made senior to the
Convertible Preferred Stock, and senior to all other classes
and series of capital stock of @Home, with respect to, as
applicable, (y) payments upon the liquidation, dissolution
or winding up of @Home and (z) the payment of dividends or
the making of distributions on, or the repurchase or
redemption of, any other shares of capital stock of @Home.
In addition to the approval right of the holders of
Convertible Preferred Stock to be set forth in the Charter,
the
7
By-Laws of @Home will provide that, without the approval by
a Supermajority Vote of the Series K and Series A Directors
(as defined below) (such approval, a "Supermajority
Approval"), @Home will not create, designate or issue any
class or series of capital stock having voting rights senior
to those of the holders of the Series A Preferred Stock or
Series K Preferred Stock (any such capital stock, the
"Special Voting Stock"). A class or series of capital stock
shall be deemed to be Special Voting Stock if the holders of
such security (x) are entitled to more than one vote per
share when voting with the holders of the Common Stock or
(y) are entitled to vote as a separate class or series upon
any matter presented to stockholders of @Home, other than
(i) as required by Section 242(b) of the DGCL, (ii) with
respect to the creation or issuance of any other class or
series of capital stock which is to rank senior to such
capital stock as to liquidation rights and rights relating
to dividends, distributions, repurchases and redemptions,
(iii) with respect to amendments to the terms or provisions
of such securities, or (iv) such additional matters as would
be customary or appropriate in the context of the issuance
of such class or series of capital stock in a financing
transaction with a third party (as opposed to a strategic
transaction) in light of the circumstances under which such
financing transaction is being consummated. Subject to the
requirements of this paragraph, it is intended that the
Board of Directors would be entitled to create, designate
and issue shares of Series Preferred Stock which rank senior
to or pari passu with the Convertible Preferred Stock as to
---- -----
liquidation rights and rights relating to dividends,
distributions, repurchases and redemptions. Notwithstanding
anything herein contained, no capital stock of @Home, the
issuance of which would, in accordance with Exhibit A,
require a Unanimous Vote of the Series K and Series A
Directors, shall be issued without such Unanimous Vote of
the Series K and Series A Directors.
LIQUIDATION Subject to the rights of any holders of capital stock
PREFERENCE: ranking senior to ("Senior Stock") or pari passu with
---- -----
("Parity Stock") the Convertible Preferred Stock, upon any
liquidation, dissolution or winding up of @Home, the holders
of the Convertible Preferred Stock, with equal priority
among shares of Series A, Series K and Series T Preferred
Stock, shall be entitled to receive from assets available
for distribution to stockholders, before any payment or
distribution to holders of any capital stock which is not
expressly made senior or pari passu with the Convertible
---- -----
Preferred Stock ("Junior Stock"), an amount in cash (and to
the extent sufficient cash is not available for such
payment, property at its fair market value) per share, equal
to the Liquidation Price of a share of Convertible Preferred
Stock as of the date of payment or distribution. The
"Liquidation Price" of any share of Convertible Preferred
Stock as of any date will be the sum of (i) the Issue Price
(which initially will be the $10 per share purchase price of
the Convertible Preferred Stock, and shall be appropriately
adjusted in the event of stock splits, reverse splits or
similar events affecting the Convertible Preferred Stock),
plus (ii) an amount equal to all dividends which have
theretofore been declared on
8
such shares of Convertible Preferred Stock, but which are
unpaid as of the determination date.
DIVIDEND RATE AND
PAYMENT DATES: The dividend rate on the Convertible Preferred Stock, with
equal priority among shares of Series A, Series K and Series
T Preferred Stock, will be 10% per annum of the Issue Price.
Dividends (the "Preferred Dividend") will be payable
quarterly in cash as, when and if declared by the Board of
Directors of @Home (the "Board") in its discretion, and
shall not cumulate. Following the declaration and payment of
the Preferred Dividend for any quarter, and subject to the
provisions of this paragraph, @Home shall be permitted to
declare and pay dividends on any Junior Stock; provided,
however, that in addition to the foregoing quarterly
dividend, the holders of the Convertible Preferred Stock,
with equal priority among shares of Series A, Series K and
Series T Preferred Stock, shall be entitled to receive as an
additional dividend (a "Participating Dividend") the amount
of any dividend or any other distribution which is declared
and paid or made on the Junior Stock. In the event the
Junior Stock receiving such dividend is Common Stock (or
another security which is convertible into or exercisable or
exchangeable for Common Stock), the Participating Dividend
will equal the amount to be paid per share of Common Stock
or equivalent multiplied by the number of shares of Common
Stock into which a share of Convertible Preferred Stock is
then convertible. In the event the Junior Stock receiving
such dividend is a security other than Common Stock (and
which is not convertible into or exercisable or exchangeable
for Common Stock), the amount of the Participating Dividend
shall be an amount per share equal to the dividend to be
paid on each share of Junior Stock multiplied by a fraction,
the numerator of which is the Liquidation Price and the
denominator of which is the lowest of (x) the liquidation
price (if any), (y) the redemption price (if any) and (z)
the issue price (as adjusted for stock splits, stock
dividends and the like), of a share of such Junior Stock.
So long as any shares of Convertible Preferred Stock are
outstanding and dividends on such shares of Convertible
Preferred Stock have not been (or are not contemporaneously)
declared and paid in full for the two immediately preceding
quarters, no dividends shall be declared or paid upon any
Parity Stock; provided, however, that a dividend may be
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declared and paid during any quarter (regardless of whether
such dividends have been paid for any preceding quarter) pro
rata with respect to the Convertible Preferred Stock and
Parity Stock then outstanding such that the amounts of any
dividends declared per share on the Convertible Preferred
Stock and such Parity Stock shall in all cases bear to each
other the same ratio that the Preferred Dividend (assuming
such dividend had been declared by the Board) and, if
applicable, any Participating Dividend per share of
Convertible Preferred Stock for such current quarter and
dividends on shares of such other Parity Stock for
9
such quarter (excluding any accumulated or accrued dividends
on such Parity Stock) bear to each other.
If the Preferred Dividend and any Participating Dividend
have not been declared and paid for the then-current
quarter, then, with respect to such then-current quarter,
@Home shall not (i) declare or pay any dividend on, or make
any distribution with respect to, any Junior Stock or (ii)
repurchase, redeem, or otherwise acquire any shares of
Junior Stock (or options, warrants or other rights to
acquire Junior Stock), other than the repurchase, redemption
or other acquisition of such shares (or options, warrants or
other rights to acquire such shares) from employees,
directors or consultants pursuant to repurchase or
redemption rights contained in the instrument pursuant to
which such securities were originally issued.
VOTING RIGHTS: Holders of Convertible Preferred Stock will be entitled to
notice of and to attend all meetings of stockholders of
@Home. The Charter will provide that, except as otherwise
required by the DGCL, the holders of Convertible Preferred
Stock will be entitled to vote together, as a single class
and on an as-converted basis (in the case of the Series K
and Series A Preferred Stock, into Series A Common Stock,
and in the case of the Series T Preferred Stock, into Series
B Common Stock), with the holders of the Common Stock and
any other series of Series Preferred Stock entitled to vote
thereon upon any matters presented to the holders of the
Common Stock for their approval or consent, including, but
not limited to, the election of directors (other than those
directors to be elected by the holders of the Convertible
Preferred Stock).
RIGHTS OF HOLDERS
OF CONVERTIBLE
PREFERRED STOCK
FOLLOWING THE IPO: The Charter will provide that in the event the Series K and
Series A Directors determine by a Supermajority Vote not to
require all shares of Convertible Preferred Stock to be
converted into Common Stock in connection with the IPO,
then, unless the Series K and Series A Directors have also
determined by a Supermajority Vote not to implement the
following changes in the Convertible Preferred Stock, then
upon the IPO the rights, designations and preferences of the
Convertible Preferred Stock will be changed as follows: (i)
the Liquidation Price of a share of Convertible Preferred
Stock shall be reduced to $.01 per share, and, following the
payment in full of all amounts owing to the holders of
securities (including the Convertible Preferred Stock)
ranking senior to the Common Stock, the holders of the
Convertible Preferred Stock shall be entitled to share
ratably, on an as-converted basis, with the holders of the
Common Stock as to any amounts remaining for distribution to
such holders upon the liquidation, dissolution or winding up
of @Home and (ii) the Preferred Dividend shall be terminated
and cease to exist, and thereafter the holders of
Convertible Preferred Stock shall be entitled only to
receive dividends,
10
on an as-converted basis, when, as and if such dividends are
declared and paid on the Common Stock. Except as provided
above, the other rights, designations and preferences of the
Convertible Preferred Stock set forth herein shall remain
unchanged.
CONVERTIBLE
PREFERRED
STOCK DIRECTORS: So long as there remain outstanding at least 250,000 shares
of Series K Preferred Stock, the holders of the Series K
Preferred Stock shall be entitled to elect one member of the
Board of Directors (the "Series K Director"). So long as
there remain outstanding at least 500,000 shares of the
Series T Preferred Stock, the holders of the Series T
Preferred Stock shall be entitled to elect two members of
the Board of Directors (the "Series T Directors"), provided,
--------
that at any time that there remain outstanding less than
500,000 shares of Series T Preferred Stock, then so long as
there remain outstanding at least 250,000 shares of Series T
Preferred Stock, the holders thereof will be entitled to
elect one Series T Director. The holders of Series A
Preferred Stock shall be entitled to elect a total of five
directors (each, a "Series A Director"); provided, however,
-------- -------
that with respect to Comcast Sub and Cox Sub, each such
holder shall be entitled to elect a director only so long as
it beneficially owns at least 250,000 shares of Series A
Preferred Stock; and provided, further, that TCI Sub shall
-------- -------
be entitled to elect three directors only so long as it
beneficially owns at least 750,000 shares of Series A
Preferred Stock; and if TCI Sub ceases to beneficially own
at least 750,000 shares of Series A Preferred Stock, then it
shall be entitled to elect two directors until such time as
it ceases to beneficially own at least 500,000 shares of
Series A Preferred Stock, and if it thereafter ceases to own
at least 500,000 such shares, it shall be entitled to elect
one director so long as it beneficially owns at least
250,000 shares of Series A Preferred Stock. In the event
that Comcast Sub, Cox Sub or TCI Sub should cease to be
entitled to elect a Series A Director (or, in the case of
TCI Sub, shall become entitled to elect a lesser number of
such directors), then the total number of Series A Directors
shall be appropriately reduced. With respect to the
foregoing Series A Preferred Stock ownership requirements,
the references to Comcast Sub, Cox Sub and TCI Sub as a
holder of Convertible Preferred Stock shall be deemed to
include transferees which are members of their respective
Stockholder Groups. The Charter will also provide that so
long as TCI Sub is entitled to elect a majority of the
Series A Directors, the Series A Directors will be the
Special Directors (as defined below) and will be entitled to
the special approval rights of the Special Directors with
respect to actions by the Board of Directors as described
opposite the caption "Management - Governance." The Series
K Director, the Series T Directors and the Series A
Directors are hereinafter sometimes referred to collectively
as the "Preferred Stock Directors." So long as TCI Sub is
entitled to elect a majority of the Series A Directors to
the Board, the term "Special Directors" as used herein shall
refer exclusively to the Series A Directors. At such time
as TCI Sub is no longer entitled to elect a majority of the
Series A Directors, then so long as TCI Sub beneficially
11
owns securities of @Home constituting a majority of the
outstanding voting power of @Home on an as-converted into
Series A Common Stock or Series B Common Stock (whichever
series into which such shares are initially convertible)
basis and is entitled to elect any Series B Common
Directors, such Series B Common Directors shall be the
"Special Directors." The right of the holders of Convertible
Preferred Stock to elect the Preferred Stock Directors shall
be in addition to their right to vote, on an as-converted
basis (in the case of the Series K and Series A Preferred
Stock, into Series A Common Stock and in the case of the
Series T Preferred Stock, into Series B Common Stock), with
the holders of the Common Stock and any other series of
Series Preferred Stock so entitled to vote, together as a
single class, in the election of all other members of the
Board.
SERIES B COMMON
DIRECTORS: The Charter will provide that at any time following
@Home's IPO at which (x) there are not less than 3,850,000
shares of Series B Common Stock outstanding, (y) there are
no shares of Series T Preferred Stock outstanding and (z)
the holders of the Series A Preferred Stock are not entitled
to elect any Series A Directors, then the holders of the
Series B Common Stock will be entitled to elect (voting as a
separate series) two directors to the Board of Directors
(the "Series B Common Directors"). The right of the holders
of the Series B Common Stock to elect the Series B Common
Directors shall be in addition to their right to vote with
the holders of the Series A Common Stock and any series of
Series Preferred Stock so entitled to vote, together as a
single class, in the election of all other members of the
Board.
SPECIAL CONVERTIBLE
PREFERRED STOCK
VOTING RIGHTS: So long as any shares of Convertible Preferred Stock remain
outstanding, @Home shall not, without first obtaining the
affirmative vote (or, except with respect to clause (iii)
below, the written consent) of the holders of not less than
a majority of the outstanding shares of the Convertible
Preferred Stock, voting together as a single class:
(i) adopt, amend, alter or repeal any provision of the
Charter or any resolution of the Board of Directors
or any other instrument establishing and designating
the Convertible Preferred Stock, any series of Series
Preferred Stock or any Common Stock and determining
the relative rights and preferences thereof, so as to
effect any adverse change in the rights, privileges,
powers or preferences of the holders of the
Convertible Preferred Stock;
(ii) create, designate or issue any capital stock which is
Special Voting Stock;
(iii) (a) consolidate with, or merge with or into, any
person or entity or enter into a binding share
exchange or similar transaction
12
with any person (other than a merger of @Home with a
wholly owned subsidiary thereof which does not effect
a change in the capital stock of @Home), (b) dispose
of assets or properties in one transaction or a
series of related transactions having an aggregate
value in excess of 50% of the fair market value of
the consolidated assets of @Home, or (c) consent to
any liquidation, dissolution or winding up of @Home
or any of its material subsidiaries; or
(iv) (a) declare or pay any dividend on, or make any
distribution to holders of, Junior Stock or equity
securities of any subsidiary of @Home or (b)
purchase, redeem or otherwise acquire for value any
Junior Stock or equity securities of any subsidiary
of @Home or any options, warrants or other rights to
acquire such securities (other than the repurchase by
@Home pursuant to repurchase rights contained in the
instrument pursuant to which such securities were
originally granted of shares of Junior Stock or
options, warrants or other rights to acquire shares
of Junior Stock, issued to employees, directors or
consultants of @Home).
Any approval obtained with respect to any matter described
in clause (iii) above shall not be valid unless such matter
shall have been presented to the holders of the Convertible
Preferred Stock for a vote at a meeting held on not less
than thirty (30) days' prior written notice, which notice
shall have described in detail each such matter to be voted
upon.
ANTI-DILUTION
RIGHTS: The "conversion ratio" of the Convertible Preferred Stock
shall be proportionately adjusted in the event of any stock
split, reverse split, combination, reclassification or
similar event.
IV. REGISTRATION RIGHTS AGREEMENT
-----------------------------
@Home and the Stockholders agree that upon the Closing, the existing
Registration Rights Agreement shall be deemed amended to provide that each
Stockholder and the members of its Stockholder Group shall have the following
rights to require (i) the shares of Series A Common Stock (or other securities)
(the "Conversion Shares") (x) issued or issuable upon conversion of the shares
of Series B Common Stock issuable upon conversion of the shares of Series T
Preferred Stock or (y) issued or issuable upon conversion of the shares of
Series K or Series A Preferred Stock, or (ii) any other shares of Series A
Common Stock (including those shares issued or issuable upon exercise or
conversion of any securities exercisable for or convertible into shares of
Series A Common Stock) howsoever acquired by such Stockholder's Stockholder
Group, to be registered under the Securities Act of 1933, as amended (the
"Securities Act"); provided, that in connection with any sale pursuant to such a
registration, the applicable Stockholder shall be required to convert all shares
to be sold into shares of Series A Common Stock immediately prior to the closing
of such sale:
(i) Commencing on or after the first anniversary of the
closing date of the IPO, TCI Sub shall be entitled to
four demand
13
registrations, Comcast Sub shall be entitled to two
demand registrations, Cox Sub shall be entitled to two
demand registrations, and KPCB shall be entitled to
two demand registrations. Immediately following the
receipt of any request to exercise a demand
registration, @Home shall notify each other
Stockholder, and each such other Stockholder shall be
entitled to join in such demand (the Stockholder
originally initiating such demand (the "Original
Initiating Holder"), together with any other
Stockholders joining therein, are hereinafter referred
to collectively as the "Initiating Holders"). In the
event that any shares requested to be registered are
required to be excluded from such registration, the
determination of the number of shares to be excluded
from each Initiating Holder shall be made pro rata in
relation to the number of shares requested to be
registered. Provided that at least 75% of the shares
requested to be registered by the Original Initiating
Holder are included in such registration, such
Original Initiating Holder shall be deemed to have
utilized one of its demand registration rights in
respect thereof. The Initiating Holders other than the
Original Initiating Holder shall not be deemed to have
exercised a demand right, but instead shall be deemed
to have exercised their piggyback registration rights;
provided, however, that for purposes of determining
-------- -------
the expenses of registration to be paid by the selling
Stockholders, such registration shall be considered a
demand registration. The shares requested to be
registered by the Initiating Holders shall have
priority over the shares requested to be registered by
@Home or by any other holder, in that @Home or such
other holder shall not be permitted to include shares
in such registration if the effect of such inclusion
would be to cause any of the shares requested to be
registered by the Initiating Holders to be excluded
from such registration. @Home shall use its
commercially reasonable efforts to keep the
registration statement with respect to any such demand
registration effective until the first to occur of the
sale of all shares subject to such registration or 120
days following the effectiveness of such registration
statement.
(ii) Subject to the priorities set forth above and to any
"holdback" provisions agreed to between @Home and the
managing underwriter, following the date the IPO is
consummated, the Stockholders will have unlimited
piggyback registration rights with respect to all
primary and secondary registrations of equity
securities of @Home (other than any "shelf
registration" or registrations on Forms S-8 or S-4).
The foregoing registration rights will be subject to
customary terms and conditions, including certain "holdback"
provisions, if so requested by the managing underwriter. So
long as the Original Initiating Holder is seeking to
register not less than 250,000 (the "Minimum Demand
14
Shares") Equivalent Shares (as defined below), then all
expenses of the registrations described in clause (i) above,
including securities and blue sky filing fees, the fees and
disbursements of a single counsel for the selling
stockholders, and printing, accounting and other customary
expenses, shall be borne by @Home; provided, that
--------
underwriting discounts and commissions and any transfer
taxes attributable to the shares sold by the selling
stockholders shall be borne by the stockholders selling
shares in such offering. In the event that the Original
Initiating Holder is seeking to register less than the
Minimum Demand Shares, then all such expenses (as well as
the fees and expenses of counsel to @Home) shall be borne by
such Initiating Holders in proportion to their pro rata
share of the number of shares with respect to which such
Initiating Holders have requested registration. In
connection with any registration pursuant to clause (ii)
above, the stockholders selling shares in such offering
shall pay the underwriting discounts and commissions and any
transfer taxes attributable to the shares sold by the
selling stockholders and shall pay their pro rata share of
the incremental registration filing fees attributable to
their shares being registered, and shall be responsible for
the fees and disbursements of counsel to the selling
stockholders. The term "Equivalent Shares" shall mean
shares of Series A Common Stock theretofore issued upon
conversion of shares of Convertible Preferred Stock (or
Series B Common Stock, as applicable) and shares issuable
upon the conversion of then outstanding shares of
Convertible Preferred Stock (or Series B Common Stock, as
applicable).
Notwithstanding the foregoing, the exercise of a
Stockholder's registration rights hereunder shall be subject
to the other Stockholders' Right of First Offer, unless
specifically exempted therefrom in accordance with the terms
thereof. In addition, notwithstanding the foregoing, TCI
Sub will not be deemed to have exercised a demand
registration right in the event that it makes the IPO
Election (as defined below) in response to an exercise of
the KPCB Put or the Cable Put.
V. MANAGEMENT.
----------
GOVERNANCE: The business of @Home will be managed and controlled by the
Board; subject, however, to the approval rights of the
------- -------
Special Directors specified herein and the special approval
requirements of the Series K and Series A Directors set
forth in Exhibit A. It is anticipated that the Board would
meet quarterly, and/or establish a regular meeting schedule.
The By-laws of @Home will provide that (i) (a) any director
who is an officer or director of, or otherwise affiliated
with or is elected or appointed by, (1) a holder of any
series of Preferred Stock (including the Convertible
Preferred Stock) or an affiliate of such holder or (2) any
holder of more than 5% of the voting power of @Home (on an
as-converted into Common Stock (whichever series such
security is initially convertible into or exercisable or
exchangeable for) basis) or an affiliate of such holder (any
such holder or affiliate referred to in clauses
15
(1) or (2), a "Related Party") must abstain from voting with
respect to a Related Party Transaction involving such
Related Party, and (b) in the event that a majority of the
Special Directors would be required to abstain from voting
on such Related Party Transaction, then the separate
approval of the Special Directors shall not be required with
respect to the taking of any action regarding such Related
Party Transaction and (ii) those matters listed on Exhibit A
hereto must be approved by the percentage of Series K and
Series A Directors specified therein, in accordance with the
By-Laws and the special procedures set forth in Exhibit A.
Any such Related Party Transaction must be approved by a
majority of the Series A Directors, Series T Directors and
Series K Directors not required to abstain from voting with
respect thereto in accordance with the provisions of the
previous sentence. The term "Related Party Transaction"
shall mean any transaction between @Home and a Related
Party; provided, however, that the following transactions
-------- -------
will not be Related Party Transactions: (i) the entering
into and performance under agreements listed on Schedule X
attached hereto; (ii) any transaction or series of related
transactions, that (x) are in the ordinary course of
business, (y) are on arms' length terms, and (z) involve an
aggregate amount that is less than $1,000,000; (iii)
transactions in which all of the Series A Directors would
otherwise be required to abstain, which transaction is
approved by each Cable Partner; (iv) the entering into of
LCO Agreements (as defined below) and other agreements for
the provision of ancillary or related services by @Home,
between a Related Party and its affiliates, on the one hand,
and @Home, on the other hand, provided that the terms of
such LCO Agreements or such other agreements are no more
favorable to such Related Party and its affiliates than the
terms of similar agreements then currently offered by or
generally available from @Home to each other Cable Parent
and its Controlled Affiliates (without regard to the size
(through volume discounts or otherwise) or identity of such
Cable Parent or its ownership of @Home securities); and (v)
the entering into or performance under any .Com Agreement or
Promotional Agreement. For purposes of determining whether
any person is a Related Party, for purposes of the
definition of a Related Party Transaction, and with respect
to the entering into of .Com Agreements or Promotional
Agreements as provided in the following section, the term
"affiliate" shall mean, with respect to any Person, any
other Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under
common control with, such first Person; provided, that (i)
--------
any Person owning, directly or indirectly, in excess of 25%
of the equity interests (on a fully diluted basis) of any
other Person shall be deemed to control such other Person,
(ii) @Home will not be deemed to be an affiliate of any
Parent or such Parent's affiliates and (iii) the Microsoft
Network, L.L.C. ("MSN") will be deemed a Related Party of
TCI Sub so long as an affiliate of TCI Sub retains
substantially all of its current ownership interest in MSN.
16
CONTENT PROVIDER
AGREEMENTS: @Home acknowledges and agrees that its policy and practices
with respect to its willingness to negotiate and enter into
all .Com Agreements and all Promotional Agreements with
content providers that meet @Home's reasonable standards
relating to obscene or offensive material, is one of
openness and non-exclusion, regardless of the identity of
such content provider and its relationship with @Home, and
that it is in the best interest of @Home and its
stockholders for @Home to enter into as many such agreements
as is practicable. The terms and conditions of .Com
Agreements and Promotional Agreements shall not take into
account the identity of the affiliates or associates of such
content provider nor shall the identity of the affiliates or
associates of any such content provider result in either the
exclusion of such content provider or such content provider
gaining promotion at the expense of others. Therefore,
because the Parents and the Cable Parents each have
significant investments in a wide variety of content
providers and do not want such content providers' ability to
obtain carriage and promotion on the @Home Services to be
unfairly advantaged or disadvantaged, the parties have
determined that the entering into of .Com and Promotional
Agreements shall not be considered Related Party
Transactions regardless of the ownership of such content
provider or its relationship with any Stockholder or such
Stockholder's affiliates, but that the entering into of such
agreements shall be governed by the following procedure.
The execution, delivery and performance of any .Com
Agreement or Promotional Agreement between a Related Party
or its affiliates, on the one hand, and @Home or its
affiliates, on the other hand, may be approved by @Home
pursuant to any of the following methods (a) approval by the
authorized officers of @Home (without the approval of the
Board of Directors) to the extent such agreement contains
@Home's standard terms and conditions for agreements of that
sort to the extent such standard terms and conditions exist
(i.e., the applicable @Home "rate card"), (b) approval by a
majority vote of the ".Com Committee" or (c) approval by all
of the Series A Directors. The Cable Parent which is or
whose affiliate is, such Related Party shall be entitled to
select which of the foregoing methods pursuant to which such
approval will be sought, or if more than one method is to be
sought, the priority therefor. The .Com Committee shall be
a committee of the Board and shall consist of (i) the CEO,
(ii) the Series K Director (if any), (iii) Will Hearst and
Xxxxx Xxxxxxxxx (so long as such persons are directors and
are not affiliated with a Cable Parent or any of its
Controlled Affiliates other than @Home), (iv) following the
IPO, those "outside directors" appointed to the .Com
Committee by a Supermajority Vote of the Series A and Series
K Directors, and (v) such other directors as may be approved
from time to time by a Unanimous Vote of the Series A and
Series K Directors. All decisions of the .Com Committee
shall be made in accordance with the policies and provisions
of the preceding paragraph. A Stockholder whose .Com
Agreement or Promotional
17
Agreement has been disapproved by the .Com Committee or the
Board of Directors pursuant to (b) or (c) above, as the case
may be, shall be entitled to a written explanation from the
members of the .Com Committee or the Board of Directors, as
the case may be, voting against such approval. Nothing
contained in this section shall limit the right of the
Directors under applicable law to inspect any .Com
Agreements or Promotional Agreements.
SPECIAL DIRECTORS
APPROVAL RIGHT: The Charter will provide generally that, so long as the
conditions relating to Special Directors set forth opposite
the caption "Convertible Preferred Stock Directors" are
satisfied, any action or approval by the Board of Directors
shall require the approval of both (i) either (x) a majority
of the members of the Board present at a meeting at which
there is a quorum or (y) a written consent to such action
executed by all of the members of the Board of Directors,
and (ii) a majority of the total number of Special
Directors; provided, however, that the approval of the
-------- -------
Special Directors shall not be required in connection with
the approval of (x) any Related Party Transaction in which a
majority of the Special Directors are required to abstain
from voting or (y) any of the actions specified in Exhibit A
(provided that such actions have been approved in accordance
with the other terms set forth herein). Such approval may
be evidenced by the affirmative vote of such Special
Directors (i) at the Board meeting at which such action is
approved, (ii) by written consent of the Board executed by
such Special Directors or (iii) by a separate approval
granted at a meeting of the Special Directors or by written
consent.
References herein to actions approved, taken or consented to
by the Board shall be deemed to refer to actions which have
been approved, taken or consented to by the Board and which
have also received the approval or consent of a majority of
the total number of the Special Directors, to the extent
required.
REVISED BUSINESS
PLAN AND BUDGETS: Prior to the date hereof, the Board has adopted an initial
business plan covering the initial three fiscal years of
@Home, including an actual budget ("Actual Budget") for the
first such fiscal year and projected budgets for the
following two such fiscal years ("Projected Budgets").
Prior to the start of each fiscal year after the first
fiscal year of the initial business plan, management of
@Home will prepare and the Board would approve, a revised
business plan for the succeeding three fiscal years which
would include an Actual Budget for the next fiscal year and
Projected Budgets for each of the two subsequent fiscal
years.
INITIAL BOARD: The By-Laws will specify that @Home will have a Board
consisting of not less than three (3) nor more than fifteen
(15) directors, with the exact number to be specified in a
resolution of the Board. The number of Directors
constituting the entire Board will initially be set at nine
(9), of
18
which eight (8) shall be Preferred Stock Directors. The
parties anticipate that upon the purchase of the shares of
Convertible Preferred Stock by the Additional Investors, the
Board will consist of the following persons:
Series K Director: Xxxx Xxxxx
Series T Directors: Xxx Xxxxxxxxx
Will Hearst
Series A Directors: Xxxxx Xxxxxxx
Xxxxx Xxxxxxx
Xxxxxxx Xxxxxxxx
Comcast Designee
Xxxxx Xxxxxxx
Common Stock Director: Permanent CEO
ADDITIONAL STRATEGIC
INVESTORS: Subject to the pre-emptive rights granted to the
Stockholders, @Home will be permitted to offer and sell
additional equity interests to third party investors,
strategic partners and/or other multiple cable system
operators in order to finance the expansion of the business
of @Home and to provide additional working capital. It is
anticipated that such additional equity interests will
consist of Series A Common Stock or one or more additional
series of Preferred Stock, each of which series of Preferred
Stock would have such rights, powers, privileges and
preferences as determined by the Board, subject to certain
limitations specified herein.
VI. STOCKHOLDERS AGREEMENT MATTERS.
------------------------------
Upon the Closing, the existing stockholders agreement among each of the Founders
and @Home shall be deemed to be amended in accordance with the provisions of
this Term Sheet (as so amended, the "Stockholders Agreement") to include Cox Sub
and Comcast Sub and their respective Stockholder Groups and make such changes to
the original stockholders agreement as are necessary and appropriate to provide
for the inclusion of such additional parties thereto, including, but not limited
to, the following:
TCI CALL: TCI Sub will have the right (the "TCI Call"), exercisable by
written notice (the "Call Notice") during the sixty-day
period following the fifth anniversary of the date of the
execution of this Term Sheet (the "Execution Date") or, if
not previously exercised, exercisable during the sixty-day
period following each subsequent anniversary thereof, to and
including the ninth anniversary of the Execution Date, to
purchase (or to cause its designee to purchase) all, but not
less than all, of the KPCB Constituents' equity interests in
@Home at the Fair Market Value (as defined below) thereof
determined as of the date of the Call Notice. The remaining
Eligible Stockholders (other than any Stockholder exercising
the Cable Put (as defined below) in connection with the
applicable Call Notice) shall have the right (but not the
obligation) to participate with
19
TCI Sub (on a pro rata basis) in the purchase of shares
pursuant to the TCI Call. The term "KPCB Constituents" shall
mean each KPCB Affiliate, any wholly owned subsidiary to
which such KPCB Affiliate shall have transferred its shares
in accordance with the terms hereof and any general or
limited partners to whom such KPCB Affiliate or such
subsidiary shall have transferred shares in accordance with
the terms set forth opposite the caption "Transfer
Restrictions," below.
KPCB PUT: KPCB will have the right, exercisable by written notice (the
"KPCB Put Notice") during the sixty-day period following the
fifth anniversary of the Execution Date or, if not
previously exercised, exercisable during the sixty-day
period following each subsequent anniversary thereof, to and
including the ninth anniversary of the Execution Date, to
require TCI Sub to purchase all, but not less than all, of
the KPCB Constituents' equity interests in @Home at the Fair
Market Value thereof determined as of the date on which the
KPCB Put Notice is delivered to TCI Sub. In addition, in the
event that (x) any of the transactions described in
paragraph (iii) opposite the caption "Special Voting Rights
of Convertible Preferred Stock" have been approved by the
requisite vote(s) of the Convertible Preferred Stock and (y)
on the record date for the determination of stockholders
entitled to vote upon such matter and at the time of the
meeting at which such action is voted upon, the KPCB
Constituents collectively hold not less than 80% of the
aggregate amount of the shares of Series K Preferred Stock
sold to the KPCB Affiliates (including the purchase of
additional shares of Series K Preferred Stock made at the
time of the purchase of Series A Preferred Stock by the
Additional Investors) (as adjusted for stock splits,
recapitalizations and the like) (the "KPCB Original Amount")
and have voted all shares of Series K Preferred Stock held
by them "against" (with any failure to vote or abstention
from voting not considered a vote "against") such
transaction, KPCB will have the right (the "Special KPCB
Put"), exercisable by written notice to TCI Sub not later
than the close of business on the date of the meeting at
which such transactions are voted upon, to require TCI Sub
to purchase all, but not less than all, of the KPCB
Constituents' equity interests in @Home at the Fair Market
Value thereof determined on the date of such meeting. The
right of KPCB to require TCI Sub to purchase such equity
interests in @Home pursuant to this paragraph (including the
Special KPCB Put) is hereinafter referred to as the "KPCB
Put."
Notwithstanding the exercise of the KPCB Put (including the
Special KPCB Put), TCI Sub will be relieved of its
obligation to purchase any securities pursuant to the KPCB
Put (as well as pursuant to any exercise of the Cable Put in
connection therewith) in the event that @Home makes an
initial public offering of its Common Stock in accordance
with the provisions of this paragraph. TCI Sub may elect to
require @Home to make an initial public offering in lieu of
purchasing securities pursuant to the KPCB Put (the "IPO
Election") by delivering written notice to KPCB, each other
Stockholder, and @Home not later than 20
20
business days following the determination of the Fair Market
Value of @Home (the "IPO Election Notice"). Following
delivery of the IPO Election Notice, the Stockholders agree
to use commercially reasonable efforts to cause @Home to
file with the Securities and Exchange Commission (the
"Commission") a registration statement in respect of the
registration of the Series A Common Stock under the
Securities Act. In such case, the Stockholders and @Home
agree to cooperate in all respects with the preparation and
filing of such registration statement with the Commission
and causing such registration statement to become and remain
effective during the time periods specified herein. If (x)
such registration is abandoned before it is declared
effective, (y) a registration statement has not been filed
on or before the 90th day after the delivery of the IPO
Election Notice, or (z) such registration statement is
filed, but the IPO has not been consummated on or before the
183rd day following the date of the IPO Election Notice,
then the IPO Election shall terminate and the KPCB Put
Notice shall be deemed to have been reinstated as of such
date of termination, and TCI Sub shall thereafter be
obligated to purchase the securities pursuant to the KPCB
Put; provided, however, that the minimum period in which
-------- -------
such sale shall be required to be consummated shall be 60
days from the date the KPCB Put Notice is deemed reinstated.
In the event the KPCB Put Notice is deemed reinstated
pursuant to the previous sentence, TCI Sub shall pay to KPCB
and to any Cable Partners which exercise the Cable Put, in
addition to the Fair Market Value of the shares to be
purchased, interest thereon at the prime rate, which shall
accrue from the date of reinstatement of the KPCB Put Notice
to the date immediately preceding the date of consummation
of such sale, and shall be payable upon consummation of such
sale.
In the event TCI Sub elects to purchase (or to cause its
designee to purchase) shares pursuant to the KPCB Put rather
than making an IPO Election, the remaining Eligible
Stockholders (other than any Stockholder exercising the
Cable Put in connection with the applicable KPCB Put Notice)
shall have the right (but not the obligation) to participate
with TCI Sub (on a pro rata basis) in the purchase of shares
pursuant to the KPCB Put; provided, however, that no
-------- -------
exercise of such right of participation shall have the
effect of extending any of the periods set forth in the
preceding paragraph.
CABLE PUT: In connection with the exercise of the TCI Call or the KPCB
Put (other than any exercise of the Special KPCB Put),
Comcast Sub and Cox Sub shall have the right, but not the
obligation, (the "Cable Put") to require TCI Sub to purchase
all, but not less than all, of the equity interests in @Home
held by such Stockholder's Stockholder Group simultaneously
with TCI Sub's purchase from the KPCB Constituents pursuant
to the KPCB Put or the TCI Call in the manner, upon the same
terms and conditions, and under the circumstances described
opposite the captions "TCI Call" and "KPCB Put" (including
TCI Sub's right to be released from its obligation to
purchase by making the IPO Election) by giving
21
written notice to such effect to each other Stockholder
during the ten day period following the giving of the KPCB
Put Notice or the Call Notice.
CONSIDERATION
PAYABLE IN RESPECT
OF TCI CALLOR
KPCB PUT: The purchase price for any equity securities to be purchased
by a Stockholder pursuant to the TCI Call or the KPCB Put
(as well as the Cable Put) shall be payable, at the option
of such Stockholder, in cash or in equity securities of (or
securities convertible into or exercisable for), as
applicable, TCI, in the case of TCI Sub, Comcast, in the
case of Comcast Sub or CCI, in the case of Cox Sub, or, in
any case, any subsidiary thereof; provided that securities
--------
of the same class or series as the class or series of equity
securities to be so issued, or the class or series of
securities which such security is convertible into or
exercisable for, are publicly traded on the Nasdaq National
Market or a national securities exchange at the time of such
delivery. Such equity securities shall be valued at the
average market price thereof over the period of twenty
trading days prior to their delivery. In the event a
Stockholder elects to pay such purchase price by delivering
equity securities, such Stockholder will cause the issuer of
such publicly traded securities to grant to KPCB, for the
benefit of the KPCB Constituents (and to any Cable Partner
exercising the Cable Put in connection therewith and
receiving such equity securities), customary rights with
respect to the registration of such securities under the
Securities Act. Such registration rights shall provide the
KPCB Constituents (and any such Cable Partner exercising the
Cable Put) with two demand registrations, one of which shall
be exercisable such that such registration statement would
be effective no later than the tenth day following the date
of delivery and each of which shall be (i) at the expense of
the applicable issuer and (ii) exercisable by KPCB (or by
any such Cable Partner exercising the Cable Put) with
respect to the registration of not less than 20% of the
equity securities of such issuer issued to KPCB (or to any
such Cable Partner exercising the Cable Put) in payment of
such purchase price; provided, however, that in lieu of
-------- -------
causing such shares to be registered pursuant to such demand
registration, such Stockholder (or the applicable issuer)
shall have the option to purchase all, but not less than
all, of the shares for which registration is requested, at a
price per share equal to the average market price of such
shares over the twenty trading days prior to the delivery of
the demand notice. The purchase price for such equity
securities to be purchased by a designee of a Cable Parent
shall be payable only in cash. In the event that the equity
securities to be purchased by a Stockholder pursuant to the
TCI Call, the KPCB Put or the Cable Put include options,
warrants or other rights to acquire securities of @Home
which require payment of additional consideration in respect
of the exercise thereof, the purchase price of such options,
warrants, or other rights shall equal the Fair Market Value
thereof, less the additional consideration payable in
respect of the exercise thereof.
22
TRANSFER
RESTRICTIONS: Prior to the earliest to occur of (I) the tenth anniversary
of the Execution Date, (II) the fifth anniversary of the
termination of the Restricted Period as to any Cable Parent
and (III) the sixth anniversary of the IPO, no Stockholder
shall assign, transfer, sell, distribute, pledge, encumber
or grant a security interest in (collectively, "Transfer")
its shares of Convertible Preferred Stock or any shares or
securities into which such Convertible Preferred Stock may
be convertible, as applicable, except for (i) a Transfer to
a third party or to members of one or more other
Stockholders' Stockholder Groups, in either case, pursuant
to the Right of First Offer procedure specified below, (ii)
a Transfer of a Controlling Interest (as defined below),
(iii) the Transfer of all, but not less than all, of such
Stockholder's equity interests in @Home to such
Stockholder's Parent or any of such Parent's Controlled
Affiliates, and (iv) in the case of KPCB only, Transfers
from a Stockholder to its general or limited partners (and
if such general or limited partners are partnerships or
limited partnerships, to the constituent general or limited
partners thereof), which Transfers constitute interim or
liquidating distributions to such partners; provided,
--------
however, that in connection with any Transfers pursuant to
clauses (iii) or (iv) above, (A) each transferee shall, as a
condition to such Transfer, become a party to the
Stockholders Agreement and (B) if such transferee ceases to
be a member of such Stockholder's Stockholder Group, such
transferee shall be required to transfer such shares to the
original Stockholder or another member of the original
Stockholder's Stockholder Group; provided, further, that
-------- -------
notwithstanding anything to the contrary contained herein,
(1) no KPCB Constituent which has received shares of
Convertible Preferred Stock in a Transfer permitted pursuant
to clause (iv) above shall make any further Transfer of such
shares unless it shall have first converted all such shares
to be so transferred into Series A Common Stock, and (2)
following both the IPO and the conversion of such shares to
Series A Common Stock, all restrictions upon Transfer set
forth in this Term Sheet shall terminate and cease to be
effective as to any KPCB Constituents which have received or
receive shares in a Transfer permitted pursuant to clause
(iv) above. For purposes of the Transfer Restrictions and
Rights of First Offer set forth herein, a Change of Control
of a Stockholder shall constitute a Transfer of such
Stockholder's shares. For purposes of this Term Sheet, a
"Change of Control of a Stockholder" shall be deemed to have
occurred at such time as such Stockholder's Parent ceases to
own, directly or indirectly, securities constituting a
majority of the outstanding voting power and equity
interests of such Stockholder, other than as a result of a
Qualified Spin Off Transaction. A "Qualified Spin Off
Transaction" shall mean any transaction or series of related
transactions in which (i) a majority of the outstanding
equity interests of the Stockholder are distributed,
directly or indirectly, to the stockholders of the Parent,
(ii) any Person or group of Persons which Controlled the
Parent immediately prior to such transaction Control the
Stockholder (or any successor entity) following such
transaction and (iii) the Persons or group of Persons which
Controlled the Parent immediately prior to such transaction
hold immediately after such transaction, a direct or
indirect proportionate
23
equity interest in such Stockholder of more than 50% of the
proportionate equity interest that such Person or group of
Persons held in the Parent on the record date for such
distribution.
DEEMED TRANSFER: In the event that at any time during the Restricted Period
the number of Exclusive Homes Passed (as defined below) of a
Cable Parent fails to equal or exceed such Cable Parent's
Minimum Exclusive Homes Passed (as defined below), then such
Cable Parent shall be deemed to have made a Transfer (the
"Deemed Transfer") of a number of shares equal to the
Proportionate Transferred Shares (as defined below). Upon
the occurrence of a Deemed Transfer, the Cable Parent of
such Stockholder shall be required to cause the Stockholder
in question to offer to sell to the other Stockholders (on a
pro rata basis) a number of shares owned by such Stockholder
equal to the Proportionate Transferred Shares at a price per
share, payable in cash, equal to the Fair Market Value
thereof (which, if such offer occurs subsequent to the IPO,
shall mean the average trading price of a share of Series A
Common Stock over the twenty trading days ending on the day
prior to the occurrence of such Deemed Transfer). If all
such offered Proportionate Transferred Shares are not
accepted by such other Stockholders, any remaining shares
shall be offered pro rata to Stockholders electing to
purchase in such initial offering. Such other Stockholders
which elect to accept such offer shall purchase such
Proportionate Transferred Shares in accordance with mutually
acceptable procedures which are consistent with the
provisions of this Term Sheet; provided, however, that any
-------- -------
offered Proportionate Transferred Shares which are not
purchased by the Stockholders pursuant to this paragraph
shall thereafter cease to be Proportionate Transferred
Shares for this and any subsequent Deemed Transfer.
Following the first occurrence of circumstances giving rise
to a Stockholder's obligation to offer the Proportionate
Transferred Shares to the other Stockholders, successive
offerings of the Proportionate Transferred Shares shall be
made from time to time in accordance with the provisions of
this section; provided, that any such offering of
Proportionate Transferred Shares otherwise required hereby
shall be deferred until the number of Proportionate
Transferred Shares to be offered, together with any
Proportionate Transferred Shares whose offering has been
previously deferred, constitutes, in the aggregate, an
amount equal to at least 1% of the number of Total Shares
held by such Stockholder's Stockholder Group. For purposes
of the foregoing: (i) "Exclusive Homes Passed" means as of
the date of determination, the sum of (A) the number of
Homes Passed (as defined below) in cable systems of such
Cable Parent or its Controlled Affiliates which are subject
to the Cable Parent Exclusivity Provisions (as defined
below) or which are subject to any agreement requiring that
the Operator (or any other entity of which such Operator is
a Controlled Affiliate) thereof operate such cable system in
accordance with such Cable Parent Exclusivity Provisions
during the Restricted Period and (B) any Homes Passed of
such Cable Parent or its Controlled Affiliate located in an
Operator Territory (or portion thereof) which has been
released from the Cable Parent Exclusivity Provisions or
which is then entitled to be
24
released from such provisions pursuant to the terms of any
LCO Agreement; (ii) "Minimum Exclusive Homes Passed" means a
number of Homes Passed which is equal to 80% of the number
of Homes Passed of the applicable Cable Parent and its
Controlled Affiliates as of the date of this Term Sheet (the
"Base Homes Passed"); and (iii) "Proportionate Transferred
Shares" means a number of Total Shares which is equal to (A)
the aggregate number of Total Shares held by such
Stockholder and its Stockholder Group, multiplied by (B) a
fraction, the numerator of which is the difference between
the Base Homes Passed and the Exclusive Homes Passed, and
the denominator of which is the Base Homes Passed, less (C)
any Total Shares of such Stockholder which have previously
been Proportionate Transferred Shares (whether such shares
were purchased by another Stockholder or released from the
provisions hereof). "Total Shares" shall mean the number of
shares of Convertible Preferred Stock (or shares of Series A
Common Stock or other securities issuable upon the
conversion of such shares of Convertible Preferred Stock)
together with all securities purchased pursuant to the
exercise of such Stockholder's Stockholder Group's pre-
emptive rights with respect thereto.
CONVERSION
RESTRICTIONS: Notwithstanding anything to the contrary contained herein,
prior to any Transfer permitted hereunder, other than
Transfers pursuant to clauses (ii) or (iii) set forth
opposite the caption "Transfer Restrictions" above, the
Stockholder transferring such securities shall be required
to convert any shares of Convertible Preferred Stock or
Series B Common Stock to be transferred into shares of
Series A Common Stock prior to such Transfer. In addition,
TCI Sub or its permitted transferee may convert shares of
Series T Preferred Stock into Series B Common Stock at its
option and without the consent of the other Stockholders,
but neither TCI Sub nor any permitted transferee thereof
shall convert shares of Series B Common Stock to Series A
Common Stock without first offering to exchange (the "Series
B Exchange") with the remaining Cable Partners (on a pro
rata basis) such shares of Series B Common Stock proposed to
be converted for an equal number of shares of Series A
Common Stock.
RIGHT OF FIRST
OFFER: In addition to the right described below opposite the
caption "Special Right of First Offer Procedure Following an
IPO," following the earlier to occur of (i) the fifth
anniversary of the Execution Date and (ii) the termination
of the Restricted Period as to any Cable Parent, each
Stockholder will be entitled to sell all but not less than
all of its equity interest in @Home to an unaffiliated third
party in a bona fide transaction, provided that such selling
Stockholder shall first have offered to sell its equity
interest in @Home to the other Stockholders (on a pro rata
basis) for cash and upon other customary terms and
conditions; provided, however, that the provisions of this
-------- -------
section shall not apply in the case of a Transfer of a
Controlling Interest. If all such offered securities are not
accepted by the other Stockholders, any remaining securities
shall be offered pro rata to Stockholders electing to
purchase in such initial offering. If the other Stockholders
elect to purchase such
25
securities, the selling Stockholder shall not convert such
securities prior to the transfer thereof to the purchasing
Stockholders. In the event that such other Stockholders do
not elect to purchase all of such Stockholder's equity
interest in @Home, then such Stockholder shall be entitled
to sell all, and not less than all, of its equity interest
in @Home to an unaffiliated third party upon terms no more
beneficial to such third party than the terms upon which
such securities were offered to the other Stockholders (such
sale to be consummated within a period of 120 days following
the conclusion of the right of first offer procedure,
subject to extension (not to exceed an additional 60 days)
in connection with the receipt of regulatory approvals which
the purchaser is using commercially reasonable efforts to
obtain). In the event that such securities are to be sold to
an unaffiliated third party, the selling Stockholder will be
required, prior to the consummation of any such sale, to
convert all such securities to be sold into shares of Series
A Common Stock prior to any such sale, subject, however, in
the case of TCI Sub and its permitted transferees to its
obligation to offer to make the Series B Exchange. An
unaffiliated third party purchaser acquiring shares of
Series A Common Stock in accordance with the foregoing
procedures shall acquire such shares free and clear of any
obligations, and shall have no rights under, the
Stockholders Agreement.
For purposes of this Right of First Offer, upon a Change of
Control of a Stockholder, the Parent of such Stockholder
shall be required to cause all of the equity interests in
@Home held by such Stockholder to be offered to the other
Stockholders (on a pro rata basis) prior to the consummation
of the transaction resulting in such Change of Control at a
price equal to the Fair Market Value of such shares, payable
in cash and otherwise in the manner provided by the previous
paragraph, mutatis mutandis.
------- --------
SPECIAL RIGHT OF
FIRST OFFER
PROCEDURE FOLLOWING
AN IPO: In addition to the foregoing, following the first
anniversary of the IPO, a Stockholder shall be entitled to
sell all or a portion of its shares of Series A Common Stock
pursuant to the exercise of its registration rights or an
exemption from registration under the Securities Act
provided it has satisfied its obligations under this
section. In the event a Stockholder elects to exercise its
demand registration right, it shall, simultaneously with the
delivery of its notice to @Home requesting such
registration, offer to sell such shares proposed to be
registered to the other Stockholders on a pro rata basis,
with any shares remaining after the first such offer to be
offered to those Stockholders initially electing to so
purchase. Similarly, any Stockholder electing to exercise
its piggyback registration rights shall be deemed to have
offered to sell those shares for which it has requested
registration in accordance with the same procedure. The
shares shall be deemed to be offered to the other
Stockholders for a price in cash equal to (i) in the case of
a demand registration by any Initiating Holder, the closing
market price of a share of Series A Common Stock on the date
prior to the date the Original
26
Initiating Holder elects to exercise such demand
registration right, and (ii) in the case of a piggyback
registration, the closing market price of a share of Series
A Common Stock on the date prior to the date that the
electing Stockholder elects to exercise its piggyback
registration right, in each case, less the anticipated
underwriting discounts or commissions or brokerage charges
(such market price less the related costs of sale, the "Net
Price"). If the other Stockholders fail to deliver written
notice of acceptance of such offer to purchase all such
offered shares within three business days following such
offer, then the registration of such shares shall proceed.
In the event a Stockholder seeks to sell shares of Series A
Common Stock following the first anniversary of the IPO
pursuant to Rule 144 or any similar exemption from
registration for sales of shares into a public market (an
"Exempt Offering"), then such selling Stockholder shall
first offer to sell such shares to the other Stockholders
(pro rata) at the Net Price (using the closing market price
on the date prior to the date such request is made) per
share, payable in cash, and, in order to exercise their
rights hereunder, such Stockholders shall be required to
deliver written notice of acceptance of such offer by 5:00
p.m. New York time on the business day following the
delivery of the sale notice. Such Stockholders shall be
entitled to accept such offer on a pro rata basis, with any
accepting Stockholders being entitled to purchase their pro
rata portion of any remaining shares. If the other
Stockholders fail to accept such offer to purchase all such
offered shares, then such right of first offer shall be
deemed satisfied and such selling Stockholder may sell such
offered shares in the Exempt Offering without regard to the
actual sale price of such shares, provided that such sale
takes place within five business days of the date the other
Stockholders fail to accept such offer to purchase.
RIGHTS OF
TRANSFEREE: Any third party acquiring shares of Series A Common Stock
from a Stockholder following the conclusion of the Right of
First Offer procedure set forth above shall acquire such
shares free and clear of any rights or obligations under the
Stockholders Agreement.
TAG-ALONG RIGHT: In the event that any Stockholder or group of Stockholders
proposes to sell a Controlling Interest (as defined below)
to an unaffiliated third party, such Stockholder(s) shall be
required, as a condition to such sale, to offer to each
other Stockholder that is an Exclusive Stockholder (as
defined below) or an Eligible Stockholder (as defined below)
the right to participate in such sale (on a pro rata basis)
on the same terms and conditions as were offered by such
unaffiliated third party including, without limitation,
direct and indirect forms of consideration offered by such
unaffiliated third party included in such terms and
conditions. An "Exclusive Stockholder" shall mean a Cable
Partner which is a Stockholder, whose Cable Parent has
complied with at all times since the Execution Date, and
remains in compliance with, the Cable Parent
27
Exclusivity Provisions (without regard to whether the
Restricted Period has ended as to such Cable Partner).
DRAG-ALONG RIGHT: Any group of Stockholders composed of TCI Sub and any other
two Stockholders (so long as such Stockholders are Eligible
Stockholders and neither of such Stockholders is a member of
the same Stockholder Group as the other such Stockholder or
as TCI Sub) which proposes to sell a Controlling Interest in
@Home to any unaffiliated third party shall have the right
to require that each remaining Stockholder participate in
such sale to such third party (on a pro rata basis with
respect to the percentage of its securities to be sold) upon
terms and conditions no less favorable than those obtained
by such selling Stockholders including, without limitation,
direct and indirect consideration offered by such
unaffiliated third party included in such terms and
conditions.
A "Controlling Interest" sale shall mean the sale, in one
transaction or a series of related transactions by one or
more Stockholders and the other members (if any) of their
selling group, of equity securities of @Home which, together
with any equity securities of @Home owned by the purchaser
prior to such transaction or transactions, would result in
such purchaser owning securities representing a majority of
the outstanding voting power of @Home.
PRE-EMPTIVE RIGHTS: In the event that @Home proposes to issue, offer or sell
shares, or securities convertible into or exercisable or
exchangeable for shares (other than (w) in connection with
the exercise or conversion of outstanding securities of
@Home pursuant to the terms thereof, (x) pursuant to a
registered public offering by @Home, (y) in connection with
an acquisition of any assets or business or a joint venture,
business combination or acquisition, or (z) pursuant to
incentive stock plans or agreements for employees, directors
and consultants), of any class or series of its capital
stock, @Home shall first offer to each Eligible Stockholder
the right, on terms no less favorable to it than the terms
on which such shares (or other securities) are to be issued
or sold to third parties, to purchase such number of such
shares (or other securities) as is sufficient to permit it
to maintain its proportionate equity interest in @Home (on a
fully diluted basis).
DETERMINATION OF
FAIR MARKET VALUE: The applicable fair market value of @Home shall be
determined in accordance with the provisions set forth in
the Stockholders Agreement, which will generally provide
that the "Fair Market Value" of @Home will be the price at
which a willing seller would sell and a willing buyer would
buy a comparable business as an ongoing business in an arm's
length transaction (as a sale of all of the stock or, if
applicable, other equity interests), determined as if @Home
were a public company and the Series A Common Stock were
publicly traded and widely held at the time of such
determination and without consideration of any restrictions,
encumbrances or contractual rights relating to the equity
securities
28
thereof and without consideration of the minority voting
position in @Home represented by the Series A Common Stock,
and assuming all of the outstanding stock, or if applicable,
other equity interests are to be sold in a single
transaction. The Fair Market Value will be determined by
agreement of the selling Stockholders and the remaining
Stockholders electing to purchase such shares, or if they
cannot agree, then by a mutually acceptable investment
banking firm (or if the parties cannot agree upon a single
investment banking firm, such Fair Market Value will be
determined by one investment banking firm selected by the
proposed buyer(s) in such transaction and one investment
banking firm selected by the proposed seller(s), and a third
investment banking firm selected by the first two such
investment banking firms). The purchase price of the equity
interest to be purchased shall be an amount equal to the
Fair Market Value of @Home multiplied by the percentage of
the fully diluted equity (which shall include in-the-money
options, warrants and other rights to acquire shares) of
@Home represented by such equity interest. Fair Market Value
will be determined as of the date of the notice which
requires such determination, except in the event of the
exercise of the Special KPCB Put, in which case the Fair
Market Value shall be determined as of the date the matter
in question is approved by the holders of the Convertible
Preferred Stock.
ELIGIBLE
STOCKHOLDER: Except as otherwise provided herein, a Stockholder and its
Stockholder Group will cease to have any rights under the
Stockholders Agreement, but will continue to be subject to
the obligations thereunder, at such time as such Stockholder
and its Stockholder Group cease to own an Attributable
Interest (as defined below) equal to (i) in the case of TCI
Sub, 5,807,500 Equivalent Shares, (ii) in the case of KPCB,
1,734,708 Equivalent Shares, or (iii) in the case of Cox Sub
or Comcast Sub, 1,819,617 Equivalent Shares. Any Stockholder
which is part of a Stockholder Group which possesses rights
under the Stockholders Agreement is herein referred to as an
"Eligible Stockholder." "Attributable Interest" shall mean,
with respect to any Stockholder Group, the sum of, without
duplication, (i) a Stockholder's direct equity economic
interest in equity securities of @Home and (ii) to the
extent the Parent of such Stockholder Group owns equity
securities of @Home indirectly, the sum of such Parent's
indirect equity economic interest in such securities through
one or more unbroken chains of subsidiaries, which interest
shall be quantified in amount by a series of percentage
multiplications commencing with the equity interest in
shares of the subsidiary of such Parent which holds the
equity securities of @Home directly and multiplying that by
the next most proximate equity interest in the entity which
is the parent entity of such subsidiary and multiplying in
turn each succeeding equity interest in the order of their
progression away from the entity directly holding equity
securities of @Home by the result of the immediately
preceding multiplication until the percentage interest of
such Parent in the equity securities of @Home is determined.
29
PERMANENT CEO: The chief executive officer of @Home shall be selected by
the Board of Directors. Each Stockholder will agree to vote
in favor of the election of the chief executive officer to
the Board of Directors of @Home.
SERIES A DIRECTOR
DESIGNEES: So long as a holder of Series A Preferred Stock is entitled
to designate one or more Series A Directors, each
Stockholder owning Series A Preferred Stock agrees that it
shall vote all of its shares of Series A Preferred Stock in
favor of the election (and if the Stockholder designating
such Series A Director requests that such designee be
removed as a director, then in favor of such removal and the
election of a successor designated by such Stockholder) of
the Series A Director designees of the Stockholders holding
Series A Preferred Stock.
UNANIMOUS AND
SUPERMAJORITY
PROVISIONS: Prior to the consummation of @Home's IPO, none of the
actions set forth on Exhibit A hereto shall be taken unless
such action shall have been approved by the requisite
percentage of the Series K and Series A Directors as
provided in Exhibit A. In the event that the taking of any
such action also requires the approval of one or more
classes or series of the capital stock of @Home, each
Stockholder agrees to vote all shares of capital stock of
@Home owned by such Stockholder's Stockholder Group in a
manner consistent with the action approved by the Series K
and Series A Directors. Notwithstanding the foregoing, the
KPCB Affiliates shall be entitled to vote their shares of
Series K Preferred Stock against any of the actions
specified in paragraph (iii) of the matters set forth
opposite the caption "Special Convertible Preferred Stock
Voting Rights". Each Stockholder agrees that, until the
consummation of @Home's IPO, in the event that there are
less than two Series A Directors which are not elected by
TCI or its Controlled Affiliates, it will cause all of its
representatives on the Board of Directors not to vote for or
execute a written consent approving the taking of any action
by @Home with respect to any matter identified on Exhibit A
as requiring a Supermajority Vote unless the taking of such
action by @Home with respect to such matter is approved by
all Series A Directors.
BY-LAWS OF @HOME: In addition to setting forth the Unanimous and Supermajority
Provisions discussed above, the By-Laws of @Home shall also
contain such other provisions as may be reasonably necessary
to protect each Stockholder's rights under the Stockholders
Agreement, including but not limited to, requiring that the
notice of meeting for any Board meeting at which any of the
matters set forth on Exhibit A are to be considered shall so
state and include a reasonably detailed description of the
actions to be considered.
TERMINATION OF
CERTAIN PUT AND
CALL RIGHTS: Unless sooner terminated in connection with the termination
of the Stockholders Agreement, the TCI Call, the KPCB Put,
and the Cable Put will terminate upon the consummation of
@Home's IPO.
30
AMENDMENT TO
STOCKHOLDERS
AGREEMENT FOLLOWING
@HOME IPO: The Stockholders Agreement shall be deemed amended upon
the consummation of @Home's IPO to reflect the following
agreements among the Stockholders:
(i) Directors. In the event that all shares of
---------
Convertible Preferred Stock are required to be
converted into Common Stock in connection with the
IPO, the Stockholders agree that:
(a) each Stockholder shall be entitled to nominate
for election a number of directors equal to the
number of Preferred Stock Directors such
Stockholder was entitled to designate
immediately prior to the IPO, which directors
shall be deemed Series A, Series K or Series T
Directors, as the case may be, for all purposes
under this Term Sheet and under such
Stockholders Agreement, as so amended;
(b) each Stockholder will vote all shares of Common
Stock owned by such Stockholder in favor of the
election of a number of designees of each other
Stockholder equal to the number of Preferred
Stock Directors which such Stockholder was
entitled to designate immediately prior to the
IPO, subject to reduction in such number of
directors to which such Stockholder is entitled
pursuant to subparagraph (c) below; and
(c) the provisions of the Charter relating to the
number of shares of Convertible Preferred Stock
which such Stockholder would be required to
continue to own in order to be entitled to
designate a Preferred Stock Director shall be
incorporated into the Stockholders Agreement so
as to require that such Stockholder continue to
own a number of shares of Common Stock equal to
the number of shares of Common Stock issuable
upon conversion of such shares of Convertible
Preferred Stock in order to maintain its right
to designate such number of directors and, with
respect to any Stockholder entitled to elect
more than one Preferred Stock Director, the
reduction in the number of such Preferred Stock
Directors as a result of dispositions of shares
shall also be appropriately adjusted.
(ii) Supermajority and Unanimous Vote; Required Vote to
--------------------------------------------------
Approve Related Party Transactions. The provisions
----------------------------------
in the Bylaws relating to the requirement that
certain actions be approved by a Supermajority or
Unanimous Vote, and that approval of Related
31
Party Transactions requires a specified vote (the
"Related Party Vote"), shall be terminated, and the
Stockholders Agreement will be amended to provide
that prior to the taking of any action which would
have required a Supermajority or Unanimous Vote, or a
Related Party Vote, the Stockholders will hold a
meeting at which such action would be considered,
with each Stockholder entitled to cast a number of
votes equal to the number of Series A or Series K
Directors (and, if applicable, Series T Directors)
such Stockholder would have been entitled to
designate based upon the number of shares of Series
A, Series K or Series T Preferred Stock such
Stockholder would have owned had such shares of
Convertible Preferred Stock not been converted (such
determination to be based upon the number of shares
of Common Stock beneficially owned by it at such
time), and if such action is approved by the number
of votes which would otherwise be required for
passage upon a Supermajority or Unanimous Vote (or,
if applicable, a Related Party Vote) (assuming that
such Stockholders were then entitled to designate
Series A Directors or Series K Directors), then each
Stockholder shall be required to use its reasonable
best efforts to cause each of its designees on the
Board of Directors to vote in accordance with such
determination (subject to fiduciary duties) and, if
necessary, to vote all of its shares in favor of such
action, and if such action is not so approved, each
Stockholder will use its reasonable best efforts to
cause each of its designees on the Board of Directors
to vote against the taking of such action by @Home
(subject to fiduciary duties) and, if necessary, to
vote all of its shares against such taking of such
action by @Home. The Stockholders Agreement shall
also be amended to provide that after such time as
there are less than two Series A Directors which are
not elected by TCI or its Controlled Affiliates, each
Stockholder thereafter shall be required to use its
reasonable best efforts to cause each of its
designees on the Board of Directors to vote against
any matter that would have required a Supermajority
Vote or a Related Party Vote unless all Cable
Partners shall have consented to the taking of such
action with respect to such matter by @Home. For
purposes of this paragraph, a Stockholder's
"reasonable best efforts" shall include the
replacement of any director designee which does not
vote in accordance with such determination of the
Stockholders.
(iii) Voting Generally. Except as provided above with
----------------
respect to the election of directors and
Supermajority and Unanimous Vote and Related Party
Vote items, following the IPO, each Stockholder shall
be entitled to vote all of its shares of Common Stock
as it shall determine in its sole discretion.
(iv) Other Amendments. The Stockholders Agreement will be
----------------
further amended to reflect any other provisions
contained herein
32
which specifically reference amendments or changes to
the Stockholders Agreement following the IPO.
In all other respects, the Stockholder's Agreement will be
deemed to be ratified and confirmed and will remain
enforceable in accordance with its terms.
In connection with @Home's IPO, the Stockholders agree to
take such other steps as may be reasonably necessary to
ensure that the Board includes at least two independent
directors.
TERMINATION OF
STOCKHOLDERS
AGREEMENT: The Stockholders Agreement will terminate on the twenty-
fifth anniversary of the Execution Date. Notwithstanding the
foregoing, immediately following consummation of the IPO,
all restrictions on transfers by a KPCB Constituent shall be
deemed terminated with respect to transfers by such Person
following the IPO.
VII. MASTER DISTRIBUTION AGREEMENT.
-----------------------------
The Cable Parents and @Home agree to the following terms and conditions relating
to the roll-out of the @Home Services in areas served by cable television
systems owned by the Cable Parents and their respective Controlled Affiliates:
DEFINITIONS: "Affiliated Operator" means an Operator which is a Cable
Parent or a Controlled Affiliate of a Cable Parent.
"@Home Facilities" means all equipment (including owned and
leased facilities), hardware, software and technology to the
Point of Demarcation at each Operator Facility; provided,
--------
however, that any software or technology licensed or leased
-------
by @Home to the Operator for use in the Operator Facilities
or within the customer premises of such Operator shall
remain the property of @Home.
"@Home First Page" means the home page of the @Home Service
as it appears to subscribers upon each start up of the @Home
Service.
"@Home Network" means the @Home Facilities and the
applicable Operator Facilities.
"@Home Specified Remedy" means the actual costs incurred by
@Home in connection with the Network Upgrade, which costs
are directly related to @Home's fulfillment of its
obligation to an Affiliated Operator to make the @Home
Services available to the Offered Homes Passed on the
Projected Commencement Date in accordance with the LCO
Agreement; provided, however, that @Home shall at all times
-------- -------
be required to mitigate any such damages to the extent
reasonably possible following notice to it by an Affiliated
Operator or Cable Parent as to any
34
delay in making the Offered Homes Passed available by the
Projected Commencement Date in accordance with the LCO
Agreement and/or changes to the Master Roll-Out Schedule or
applicable LCO Agreement (including changes of the Projected
Commencement Date) subsequent to the date of adoption of the
Master Roll-Out Schedule or the execution of the LCO
Agreement, as applicable.
"Cable Parent Access Block Right" means the right of a Cable
Parent to block subscriber access to certain information
providers, which are otherwise accessible over the @Home
Service.
"Cable Parent Exclusion Right" means the right of any Cable
Parent to exclude from presentation in the National Area as
presented to the subscribers of such Cable Parent's
Affiliated Operators, promotional activities or
presentations relating to content providers, as set forth in
this Term Sheet.
"Cable System Upgrade" means the construction and upgrade of
the Operator Facilities required in order to distribute the
@Home Services in accordance with the Specifications and
Standards. A cable system which has been upgraded in
accordance with the Specifications and Standards is
hereinafter referred to as an "Upgraded System."
".Com Agreement" means any agreement between @Home (or any
Cable Parent or a Controlled Affiliate acting in the
capacity of a sales agent by and on behalf of @Home pursuant
to a sales agency agreement to be entered into by such Cable
Parent or Controlled Affiliate and @Home, which agreement
will, among other things, specify the terms and conditions
upon which such person may act as a sales agent for @Home,
including specification of the terms upon which such person
may enter into a .Com Agreement on @Home's behalf) and a
content provider which provides (i) physical connectivity
and access to the @Home Network and (ii) for compensation,
if any, to @Home in accordance with its charges therefor.
"Commencement Date" means the date upon which specified
Offered Homes Passed are actually made available for
distribution of the @Home Services.
"Homes Passed" means the number of residential homes that
can be connected to a cable distribution system (provided,
that each residential unit in a multiple dwelling unit shall
be counted as one Home Passed).
"Internet Backbone" means a network which (x) can or does
(i) assign IP addresses or manage IP address assignments for
machines or networks to which it is connected, (ii) accept
or deliver IP datagrams from machines or networks to which
it is connected, or (iii) maintain IP packet traffic to
other machines or networks; and (y) provides IP connectivity
on a regional, national or international basis, provided,
--------
however, that such a
-------
34
network which provides connectivity solely within a single
metropolitan area shall not be deemed an Internet Backbone.
"Internet Backbone Service" means a communications service
provided over an Internet Backbone.
"Internet Service" means a communications service provided
over a network which can or does (i) assign IP addresses or
manage IP address assignments for machines or networks to
which it is connected, (ii) accept or deliver IP datagrams
from machines or networks to which it is connected, or (iii)
maintain IP packet traffic to other machines or networks.
"IP" means the Internet Protocols as defined by the document
titled RFC-791, by Xxxx Xxxxxxx of the University of
-------
Southern California, dated 1981, or subsequent revisions
thereof.
"Local Area" shall mean that portion of the @Home First Page
programmed by the Operator, which portion as to an
Affiliated Operator, shall consist of one browser user
interface button (the "XXX Button") and 50% of the area of
the @Home First Page (or such lesser portion as such
Affiliated Operator shall elect to program).
"Local Content" means any content offering which is
transported primarily on a Local Service.
"Local Service" means a communications service connected,
directly or indirectly, to the Operator's cable system by
means that do not use or require transmission, directly or
indirectly, over an Internet Backbone.
"National Area" shall mean the @Home First Page (other than
the Local Area) and the rest of the @Home web site,
including, without limitation, any thematic pages.
"Network Upgrade" means the construction or upgrade of the
@Home Facilities necessary to connect to a specific Upgraded
System at the Point of Demarcation in order to provide
delivery of the @Home Services, including, but not limited
to, the acquisition of hardware and software required in
order to distribute the @Home Services to such Upgraded
System, all in accordance with the Specifications and
Standards. The portion of the @Home Network which has been
so upgraded is referred to herein as the "Upgraded Network
Portion."
"Non-Pro Rata Roll-Out Budget" means any Roll-Out Budget
which fails to provide an allocation of funds or other
resources for the Network Upgrade reasonably necessary to
provide for the roll-out during the applicable planning
period (such planning period to be not greater than 12
months) (a "Planning Period") of the @Home Services to a
proportionate number of the Qualifying Offered Homes Passed
proposed by a Cable Parent in such Planning Period. The
determination as to
35
whether such roll-out is proportionate to such Cable Parent
shall be made based upon (i) the relationship that the
Qualifying Offered Homes Passed by such Cable Parent bears
to the Qualifying Offered Homes Passed of all such Cable
Parents for such Planning Period and (ii) the relationship
of the projected date for the completion of the applicable
Network Upgrade to the date or dates projected by the
applicable Cable Parent for the availability of the
applicable Qualifying Offered Homes Passed during such
Planning Period.
"Offered Homes Passed" means, without duplication, the
number of Homes Passed which a Cable Parent proposes to
include in the Master Roll-Out Schedule for a given Planning
Period.
"Operator" means the corporation, partnership or other
entity which owns and operates a cable television system
that agrees to distribute the @Home Services in accordance
with the terms of an LCO Agreement.
"Operator Facilities" means the cable television system
facilities in an Upgraded System owned or leased by an
Operator from each Point of Demarcation to and including the
cable modem at the location of each subscriber (whether or
not such cable modem is owned by the Operator); provided,
--------
that Operator Facilities shall not include the ownership of
any software or other intellectual property rights licensed
by @Home to such Operator (other than rights related to such
license).
"Performance Default" shall occur if, as of the indicated
date, the High C Performance Ratio exceeds the product of
(I) two times (II) the TCI Performance Ratio. The "High C
Performance Ratio" shall be the greater of (i) the amount
equal to (x) the aggregate number of Residential Subscribers
to the @Home Service of Comcast Cable and its Controlled
Affiliates, divided by (y) the aggregate number of Homes
Passed by Qualifying Systems owned by Comcast Cable and its
Controlled Affiliates and (ii) the amount equal to (a) the
aggregate number of Residential Subscribers to the @Home
Service of CCI and its Controlled Affiliates, divided by (b)
the aggregate number of Homes Passed by Qualifying Systems
owned by CCI and its Controlled Affiliates, in each such
case as of the end of the calendar month preceding the date
of determination (the Cable Partner with respect to whom
such amount is greater as of the applicable date of
determination being referred to herein as the "High C").
The TCI Performance Ratio shall be an amount equal to (A)
the aggregate number of Residential Subscribers to the @Home
Service of TCI and its Controlled Affiliates, divided by (B)
the aggregate number of Homes Passed by Qualifying Systems
owned by TCI and its Controlled Affiliates, in each case as
of the end of the calendar month preceding the date of
determination.
"Point of Demarcation" means the interface between the
Operator Facilities and the @Home Facilities which interface
shall, unless otherwise agreed, be located on the @Home side
of the cable data router at each applicable cable system
head-end or regional head-end.
36
"Pro Rata Roll-Out Budget" means any Roll-Out Budget which
is not a Non-Pro Rata Roll-Out Budget. "Projected
Commencement Date" means the date specified by a Cable
Parent as the date by which the Cable Parent proposes to
have completed the specified portions of the applicable
Cable System Upgrade and therefore make the related number
of Offered Homes Passed available for distribution of the
@Home Services for inclusion in the Master Roll-Out
Schedule.
"Promotional Agreement" means an agreement entered into
between a content provider and @Home (individually and not
through an agency relationship with a Cable Parent or any of
its Controlled Affiliates) providing for the promotion of
such content or content provider on the @Home Services
(e.g., through button or hot link placement on the browsers,
home pages or theme pages in the National Area, by the @Home
video xxxxxx or otherwise) as @Home and such content
provider shall agree, at which point such promotional
activity shall become a part of the @Home Services, subject,
however, to the Cable Parent Exclusion Right.
"Qualifying Offered Homes Passed" means, without
duplication, Offered Homes Passed located in Qualifying
Systems.
"Qualifying System" means one or more cable television
systems owned by a Cable Parent or any of its Controlled
Affiliates which are contiguous or clustered in an area and
which system or systems represent in the aggregate not less
than 50,000 Homes Passed, or such lesser number as the Board
shall hereafter establish as being the minimum number of
Homes Passed by such related cable systems as is necessary
in order to justify, on an economic and resource allocation
basis, a roll-out of the @Home Services solely to such cable
systems.
"Residential Subscriber" shall mean a residential subscriber
to the @Home Service (i) whose account is 60 days or less
past due, (ii) who has been receiving the @Home Service for
at least 60 consecutive days, and (iii) who has paid for at
least one month's @Home Service at standard rates.
"Restricted Period" means the period of time commencing on
the Execution Date and terminating upon the first to occur
of (w) as to each Cable Parent, the termination of the Cable
Parent Exclusivity Provisions as to such Cable Parent, (x)
the sixth anniversary of the Execution Date and (y) the
effectiveness of any change in law, statute or regulation or
the entering of any adverse judicial decision or injunction
or other action, in each case which materially impairs the
enforceability (in accordance with their respective terms)
of any of the Cable Parent Exclusivity Provisions, @Home
Exclusivity Provisions, MFN Provisions or the Content Tag-
Along Right.
37
"Roll-Out Budget" means that portion of @Home's budget for
any applicable Planning Period relating to the costs and
expenses of the Network Upgrade committed to by @Home in
order to make the @Home Services available for distribution
by the Projected Commencement Dates of those Qualifying
Offered Homes Passed to which @Home is scheduled to commence
distribution within such Planning Period.
"Specifications and Standards" means, collectively, the
specifications and standards for the Operator Facilities and
the technical requirements for distribution of the @Home
Services as set forth in Exhibit C attached hereto.
"TCI Change of Control" shall be deemed to have occurred at
such time as (i) any Person or a group of Persons acting in
concert (including a natural person or any form of business
entity but excluding Xxx Xxxxxxx, Xxxx X. Xxxxxx, their
respective lineal descendants, any estate or trust for
beneficiaries of any of the foregoing or any stockholder
that was a member of the controlling group of stockholders
of TCI as of the date of this Term Sheet, and any employee
stock purchase or similar plan) owns an amount of stock
representing in excess of 50% of the voting power of the
outstanding common stock of TCI and, (ii) as a result of
achieving such ownership, at any time prior to the first
anniversary of achieving such ownership the Persons who were
members of the Board of Directors of TCI as of the date of
achieving such ownership, plus any additional directors not
designated by such Persons or group of Persons described in
clause (i) which are approved by a majority of the directors
who were directors as of the date of achieving such
ownership, no longer constitute a majority of the entire
Board of Directors of TCI.
CREATION OF
MASTER ROLL-OUT
SCHEDULE: In connection with the establishment of @Home's periodic
budget and business plan and the periodic amendments to
@Home's Business Plan contemplated hereby, each Cable Parent
shall deliver to @Home a list of Offered Homes Passed (and
the related cable systems) and Projected Commencement Dates
for such Offered Homes Passed. Such list shall include, by
separate designation, those Offered Homes Passed which are
Qualifying Offered Homes Passed. Thereafter, the Cable
Parents and @Home shall cooperate in good faith to establish
a timetable and schedule in order to coordinate the Cable
System Upgrade plans of each Cable Parent with the Network
Upgrade plans of @Home so as to attempt to make the @Home
Services available to the Offered Homes Passed on or before
the applicable Projected Commencement Date in an efficient
and economical manner; provided, however, that such
-------- -------
timetable and schedule shall be determined (i) by giving
priority to making the @Home Services available to those
Offered Homes Passed which are Qualifying Offered Homes
Passed, (ii) in accordance with the respective
38
Projected Commencement Dates relating to such Qualifying
Offered Homes Passed and (iii) in proportion to the
respective number of Qualifying Offered Homes Passed of such
Cable Parents. The schedule determined and approved by the
Board of @Home in accordance with the foregoing criteria
shall be the "Master Roll-Out Schedule" (together with any
modifications and adjustments within the applicable Planning
Period agreed to by @Home and the applicable Cable Parent
following the adoption of the Master Roll-Out Schedule),
which shall include, for each Cable Partner, specific plans
related to the cable systems to be upgraded, the number of
Offered Homes Passed and Qualifying Offered Homes Passed
therein and the Proposed Commencement Date therefor,
together with such additional information as the parties may
agree. Subject to any subsequent adjustments within the
applicable Planning Period as may be agreed to by the
applicable Cable Parent and @Home, the information set forth
therein (x) as to a Cable Parent, shall constitute its
representation to @Home that such Cable Parent reasonably
believes that the applicable Offered Homes Passed will be
made available for distribution of the @Home Services by the
applicable Projected Commencement Dates, and (y) as to
@Home, shall constitute @Home's agreement to use
commercially reasonable efforts to cause the @Home Network
to be upgraded in such a way as is necessary in order to
cause the @Home Services to be available for distribution to
such Qualifying Offered Homes Passed by the applicable
Projected Commencement Dates.
EXECUTION OF LOCAL
CABLE OPERATOR
DISTRIBUTION
AGREEMENTS: Immediately following the establishment of the Master Roll-
Out Schedule for each Planning Period, each Cable Parent
shall cause those of its Affiliated Operators which own and
operate cable systems serving the Offered Homes Passed which
have a Projected Commencement Date during such Planning
Period to enter into a Local Cable Operator Distribution
Agreement ("LCO Agreement") with @Home. Each such LCO
Agreement shall incorporate therein the relevant matters
from the Master Roll-Out Schedule, including but not limited
to, the number of Offered Homes Passed for such Operator
Territory and the related Projected Commencement Dates. The
terms and provisions of the standard form of LCO Agreement
are set forth in Section VIII hereof.
BUDGETS: @Home will use commercially reasonable efforts to cause the
@Home Services to be available to all Qualifying Offered
Homes Passed of the Cable Parents having Projected
Commencement Dates within such Planning Period and will use
commercially reasonable efforts to comply with the Master
Roll-Out Schedule for such Planning Period.
The adoption of a Non-Pro Rata fRoll-Out Budget shall
require a Supermajority Vote. A Stockholder who has been
treated in a non-pro rata manner with respect to a Roll Out
Budget and has not voted in favor of such Non-Pro Rata Roll-
Out Budget, shall be entitled to a written
39
explanation of such treatment from the Chief Executive
Officer and each director who has voted in favor of such Non
Pro Rata Roll-Out Budget.
In the event a Cable Parent believes that any Roll-Out
Budget approved by a majority of the Board of Directors
constitutes a Non-Pro Rata Roll-Out Budget, such Cable
Parent shall promptly notify the Board of Directors of @Home
of such belie and present evidence of such claim.
CABLE PARENT
EXCLUSIVITY
PROVISIONS: (a) During the Restricted Period, no Cable Parent will, and
each Cable Parent will cause any Person that is or shall
become a Controlled Affiliate not to, directly or indirectly
(i) conduct or engage in any Restricted Business (as defined
below), (ii) participate (whether by means of a management,
advisory, operating, consulting or similar agreement or
arrangement) in any Restricted Business, or (iii) have any
record or beneficial equity interest, either as a principal,
trustee, stockholder, partner, joint venturer or otherwise,
in any Person which so conducts, engages in or participates
in, any Restricted Business. Notwithstanding the foregoing,
(x) this section shall not prevent the beneficial ownership
for investment purposes of 10% or less of any class of
equity securities of any such Person which is registered
under the Exchange Act, (y) this section shall not prevent
any Exempt Acquisition (as defined below), the operation of
any Exempt Restricted Assets (as defined below) or any Non-
Control Acquisition (as defined below) (in each case,
subject to compliance with the other provisions hereof); and
(z) the provisions of this section shall not be applicable
to any Restricted Business in which a Cable Parent or its
Controlled Affiliate engages or participates in, or in which
such Cable Parent or Controlled Affiliate beneficially owns
any equity interests, in each case as of the date hereof,
provided that the level or scope that the level or scope of
--------
such person's engagement, participation or equity ownership
is not increased during the Restricted Period other than in
accordance with instruments or agreements which are in
effect on the date hereof, and provided, further, that the
--------
applicable Cable Parent shall have set forth on Schedule Z
details regarding such level and scope and other matters
regarding such Cable Parent's engagement, participation or
beneficial ownership thereof as of the date hereof. In
addition, the provisions of this section shall not be
applicable with respect to any Operator Territory to the
extent that the Cable Parent Exclusivity Provisions have
been terminated as to such Operator Territory or following
the expiration of the Term (as defined below) of the
applicable LCO Agreement; provided, however, that regardless
-------- -------
of any release of an Operator under an LCO Agreement, the
restrictions set forth in clause (iii) of the first sentence
of this paragraph (a) shall continue to be applicable to
such released Operator for the applicable Restricted Period.
For purposes of this section the term (i) "Non-Control
Acquisition" shall mean any acquisition of beneficial
ownership of equity securities of any Person which are
registered under the Exchange Act, if none of such Cable
Parent or any Controlled Affiliate of such Cable Parent
shall control or be under common control with such
40
Person, (ii) "control" when used with respect to any
specified Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract,
management agreement or otherwise, and the terms
"controlling" and "controlled" shall have meanings
correlative to the foregoing, (iii) "Restricted Business"
shall mean (A) the provision of a residential Internet
Service over the cable television plant or equipment of any
Cable Parent or its Controlled Affiliates at bit rate speeds
greater than 128 kbps whose primary purpose is the provision
to consumers of entertainment, information content,
transactional services or e-mail, chat and news groups or
substantially similar services (a "Consumer Purpose"), (B)
the connection by any Cable Parent or any Controlled
Affiliate thereof of its cable television plant and
equipment directly or indirectly to any Internet Backbone
for a Consumer Purpose at bit rate speeds greater than 128
kbps, or (C) the business of providing or engaging in any
Internet Backbone Service, in each of the above cases of
clauses (A), (B) and (C), (x) other than any such service to
be offered by @Home and (y) within the United States of
America. Notwithstanding the provisions of clauses (A) and
(B) of subsection (iii) of the immediately preceding
sentence, the term "Restricted Business" shall not include:
(i) the creation or aggregation of content; (ii) the
provision by any Cable Parent of telephony services (i.e.,
the provision of conventional telephone service, including
POTS and ISDN) to its subscribers, provided that any use of
or connection to any Internet Service in connection with the
provision of such telephony services shall be (x) pursuant
to a subscriber dial-up of an Internet Service provider and
(y) at bit rate speeds of 128 kbps and below; (iii) the
provision of services which are primarily work-related; (iv)
the provision of any Internet Services not using a Cable
Parent's cable television plant; (v) the provision of any
Internet Service that is a Local Service; (vi) the provision
of services which are primarily utilized to connect students
to schools, colleges and universities; and (vii) the
provision of Internet telephony, Internet video telephony,
or Internet video conferencing.
(b) In the event that, during the Restricted Period, any
Cable Parent or any of its Controlled Affiliates desires to
enter into or conduct any business in the United States
which would not be a Restricted Business but which requires
the utilization or other implementation of both the cable
plant of such Cable Parent or its Controlled Affiliates and
an Internet Backbone Service, then such Cable Parent or its
Controlled Affiliate shall first offer to @Home the
opportunity to provide such Internet Backbone Service in
accordance with the provisions of this paragraph (b);
provided that neither such Cable Parent nor its Controlled
--------
Affiliate shall be obligated to make such offer if the
business to be conducted or entered into would involve
obtaining the Internet Backbone Service from a Person or
group of Persons that is offering to provide such service or
cause such service to be provided only in a package with
other products or services that are integral to such other
business. Notwithstanding the foregoing proviso, nothing
herein contained shall be deemed to modify any Cable
Parent's obligations pursuant to paragraph
41
(a) of this section. Such offer shall include a
specification of the requirements for such Internet Backbone
Service and a good faith estimate of the most favorable
terms and conditions on which such Internet Backbone Service
is available to such Cable Parent or its Controlled
Affiliate from third parties. If @Home proposes to provide
such Internet Backbone Service within a reasonable period of
time following such offer, then, the Cable Parent or its
Controlled Affiliate and @Home will negotiate in good faith
the terms and conditions under which @Home would provide
such Internet Backbone Service. Unless the terms and
conditions upon which @Home is to provide such service
following such negotiation are less favorable to such Cable
Parent or its Controlled Affiliate than those available from
a third party, then such Cable Parent or Controlled
Affiliate shall select @Home to provide such Internet
Backbone Service on such terms and conditions so offered. In
consideration of the Cable Parent's agreement to provide
@Home such opportunity, @Home agrees that it will not
propose to provide such Internet Backbone Service unless it
reasonably believes that it is able to provide the Internet
Backbone Service so requested.
(c) (i) In the event that at any time during the
Restricted Period, a Cable Parent and/or any
Person that is or shall become a Controlled
Affiliate of such Cable Parent, shall acquire
beneficial ownership of at least a majority of the
then outstanding voting power of any Person, which
such Person is not principally engaged in any
Restricted Business, but nonetheless, directly or
indirectly, owns, leases or otherwise operates
facilities (the "Exempt Restricted Assets") which,
if operated independently, would constitute a
Restricted Business (an "Exempt Acquisition"), the
provisions of this subsection (c) shall be
applicable to such Exempt Restricted Assets. In
the event that at any time during the Restricted
Period, a Non-Control Acquisition shall occur and
if at any time during the Restricted Period the
beneficial ownership of equity securities giving
rise thereto shall cease to qualify as a Non-
Control Acquisition for any reason, a "Control
Acquisition" shall have occurred and then the
provisions of this subsection (c) shall be
applicable to the assets and business of the
Person which is the subject of such Control
Acquisition which, if operated independently would
constitute a Restricted Business (the "Control
Restricted Assets," and together with any Exempt
Restricted Assets, the "Restricted Assets").
(ii) In the event of any Exempt Acquisition or any
Control Acquisition, the applicable Cable Parent
will (and will cause any Person which is or shall
become a Controlled Affiliate of such Cable Parent
to) use reasonable commercial efforts to divest
any Restricted Assets so
42
acquired unless such divestiture would be adverse
to the tax structure of any Exempt Acquisition or
Control Acquisition; provided, however, that such
Cable Parent shall be required to use reasonable
commercial efforts to divest such assets within a
reasonable period following the time such
divestiture would not be adverse to the tax
structure of such acquisition, in which event all
parties would reasonably cooperate to cause such
divesture to be accomplished on a tax-efficient
basis. Such reasonable commercial efforts shall be
deemed to include an auction of such Restricted
Assets. Notwithstanding the foregoing, such Cable
Parent will not be required to dispose of such
Restricted Assets if it would not realize the fair
market value thereof (it being agreed that the
fair market value thereof will be computed by
reference to the overall acquisition price in the
Exempt Acquisition or Control Acquisition). The
provisions of clauses (iii), (iv) and (v) of this
subsection (c) shall apply to any such
disposition.
(iii) Such Cable Parent shall not, and shall not
permit any Person which is or shall become a
Controlled Affiliate of such Cable Parent to,
sell, transfer or otherwise dispose of all or any
substantial portion of such Restricted Assets,
unless prior to any such sale, transfer or other
disposition, such Cable Parent shall have offered
by written notice to sell to @Home (or its
Controlled Affiliate) all or such portion of the
Restricted Assets at a specified price (the "Offer
Price") and shall have allowed such offer to
remain open and available for acceptance for a
period of at least 30 calendar days. In the event
that such offer is not accepted within such 30-day
period, such Cable Parent or such Controlled
Affiliate shall be free to offer such Restricted
Assets to any other Person, provided, however,
-------- -------
that such Cable Parent shall not, and shall not
permit any Person which is or shall become a
Controlled Affiliate of such Cable Parent to,
offer to sell, transfer or otherwise dispose of
such Restricted Assets, and shall not sell,
transfer or otherwise dispose of any of such
Restricted Assets, for a price less than the Offer
Price or on terms which are more favorable to such
offeree than the terms on which such Restricted
Assets were offered to @Home, in either case
without first complying again with the provisions
of this clause (iii).
(iv) In the event that @Home shall accept any such
offer described in clause (iii), the closing of
the purchase of the Restricted Assets shall take
place at the principal office of such Cable Parent
on the later of (x) the fifth
43
business day after the expiration of the 30-day
period after the giving of the notice set forth in
clause (iii), and (y) the fifth business day after
the receipt of any required governmental approval
or the expiration or termination of any waiting
period, including any waiting period pursuant to
the HSR Act.
(v) The foregoing provisions of this subsection (c)
shall be applicable to successive transfers or
other dispositions of all or any portion of the
Restricted Assets by such Cable Parent or any
Person which is or shall become a Controlled
Affiliate of such Cable Parent.
The provisions of this section are referred to in this Term
Sheet as the "Cable Parent Exclusivity Provisions." The
obligations under the foregoing Cable Parent Exclusivity
Provisions shall automatically terminate as to the
applicable Operator Territory upon the consummation of the
sale or transfer of such cable television system by a Cable
Parent or its Controlled Affiliate to a third party (other
than a third party which is a Cable Parent or a Controlled
Affiliate of a Cable Parent).
COMCAST
NON-EXCLUSIVITY
PROVISIONS: At any time following the third anniversary of the Execution
Date, Comcast Cable, by 90 days advance written notice to
each other Stockholder and @Home, shall have the right
("Comcast Non-Exclusive Right") to terminate the Cable
Parent Exclusivity Provisions as to itself and its
Controlled Affiliates; provided, that in the event that
Comcast Cable exercises the Comcast Non-Exclusive Right,
@Home shall have the right (the "@Home Repurchase Right") to
repurchase from the Comcast Stockholder Group the Subject
Shares. The term "Subject Shares" shall mean, as of the time
periods specified below, the number of shares of Series A
Preferred Stock (or shares of Series A Common Stock or other
securities issuable upon the conversion of such shares of
Series A Preferred Stock) specified opposite such time
periods, together with the amount of securities which is
proportionate thereto and which were purchased pursuant to
the exercise of the Comcast Stockholder Group's pre-emptive
rights as set forth herein at the applicable Subject Shares
Purchase Price upon the exercise of the Comcast Non-
Exclusive Right during the periods indicated below:
NUMBER OF SHARES OF
DATE OF EXERCISE OF COMCAST SERIES A PREFERRED
NON-EXCLUSIVE RIGHT SUBJECT TO REPURCHASE
------------------------------------ ---------------------
After third anniversary until and 400,326
including fourth anniversary
After fourth anniversary until and 218,360
including fifth anniversary
After fifth anniversary until and 72,786
including sixth anniversary
44
The "Subject Shares Purchase Price" shall mean: (i) $10 per
share of Series A Preferred Stock, (ii) $1 per share of
Series A Common Stock, (iii) the price at which any Subject
Shares purchased pursuant to the Comcast Stockholder Group's
exercise of its pre-emptive rights were originally
purchased, (iv) with respect to any other securities issued
pursuant to the exercise of rights, options or warrants, the
exercise price thereof (together with any consideration paid
in respect of the grant of such option, warrant or right) or
(v) with respect to any securities received as a stock
dividend, the par value thereof. The number of Subject
Shares and the purchase price thereof shall be subject to
appropriate adjustment from time to time in the event of any
stock split, reverse split, stock dividend or other
reclassification of the capital stock of @Home.
The @Home Repurchase Right may only be exercised by @Home in
the event that Comcast Cable exercises the Comcast Non-
Exclusive Right; any other termination of the Cable Parent
Exclusivity Provisions shall not entitle @Home to exercise
the @Home Repurchase Right and such other termination of the
Cable Parent Exclusivity Provisions shall automatically
terminate the @Home Repurchase Right as to all Subject
Shares held by the Comcast Stockholder Group (except to the
extent that the @Home Repurchase Right has been previously
exercised or is then exercisable as to any of such Subject
Shares in connection with the exercise of the Comcast Non-
Exclusive Right). In the event that Comcast elects to
irrevocably terminate its right to exercise the Comcast Non-
Exclusive Right at any time prior to such time as the @Home
Repurchase Right has become exercisable as a result of the
exercise of the Comcast Non-Exclusive Right, it shall
deliver an instrument to such effect to @Home whereupon the
@Home Repurchase Right and Comcast's right to exercise the
Comcast Non-Exclusive Right shall terminate.
Notwithstanding any other provision contained in this Term
Sheet or in the Stockholders Agreement, until the earlier to
occur of (i) such time as none of the Subject Shares would
be subject to the @Home Repurchase Right in the event of an
exercise of the Comcast Non-Exclusive Right or (ii) such
time as Comcast irrevocably terminates its right to exercise
the Comcast Non-Exclusive Right pursuant to the previous
sentence, neither Comcast Sub nor any member of the Comcast
Stockholder Group shall be entitled to Transfer (other than
to another member of the Comcast Stockholder Group that
agrees to be bound by the provisions of this section and the
Stockholders Agreement) any Subject Shares that would be
subject to the @Home Repurchase Right were Comcast Cable to
exercise the Comcast Non-Exclusive Right.
Nothing herein shall limit the right of any member of the
Comcast Stockholder Group to sell shares of Series A
Preferred Stock or Series A Common Stock pursuant to the
provisions under the caption "Tag Along Right" without
regard to whether such shares are Subject Shares,
45
and the @Home Repurchase Right shall terminate as to any
such shares so sold; provided, that the shares sold pursuant
to such tag-along right shall be deemed to be vested shares
that are not Subject Shares to the extent practicable. After
such a sale, the @Home Repurchase Right shall continue as to
any Subject Shares not so sold and the Comcast Non-Exclusive
Right shall remain in effect without modification.
@HOME EXCLUSIVITY
PROVISIONS: Until the later to occur of (i) such time as the applicable
Cable Partner ceases to be an Exclusive Stockholder (except
as a result of the event specified in clause (ii) below) or
(ii) in the event the applicable Cable Partner ceases to be
an Exclusive Stockholder as a direct result of a termination
of the Cable Parent Exclusivity Provisions in connection
with a TCI Performance Default, the sixth anniversary of the
Execution Date, but subject to the requirements of
applicable law and the other terms and conditions of the
Agreement, @Home agrees that neither it nor its Controlled
Affiliates will offer or provide Internet Services (or any
comparable services with comparable capabilities) at bit
rate speeds of greater than 128 kbps to residences in the
geographic area served by the cable systems owned by such
Cable Parent and its Controlled Affiliates other than
through the use of the Operator Facilities of such Cable
Parent and its Controlled Affiliates pursuant to, or as
otherwise contemplated by, this Term Sheet (the "@Home
Exclusivity Provisions"). In addition, the provisions of
this section shall not be applicable with respect to any
Operator Territory to the extent that the @Home Exclusivity
Provisions have been terminated as to such Operator
Territory or following the expiration of the Term (as
defined below) of the applicable LCO Agreement.
NON-PERFORMANCE
OF TCI: In the event that TCI shall be in Performance Default on the
third anniversary of the Execution Date (the "First
Determination Date"), then the applicable Triggering Cable
Parent (as defined below), if any, shall, by written notice
to @Home, TCI and each other Cable Parent, delivered within
60 days of the First Determination Date, be entitled to
terminate the Cable Parent Exclusivity Provisions as to all
Cable Parents and their Controlled Affiliates, such
termination to be effective as of the date of such notice.
In the event that there is a Performance Default on the
First Determination Date but the applicable Triggering Cable
Parent does not elect to terminate the Cable Parent
Exclusivity Provisions within the period specified above,
then following each succeeding anniversary thereafter during
the Restricted Period (each such anniversary, a "Subsequent
Determination Date") upon which TCI shall be in Performance
Default, the applicable Triggering Cable Parent, if an
Eligible Cable Parent, shall have the right, exercisable by
written notice to @Home, TCI and each other Cable Parent,
delivered within 60 days of such Subsequent Determination
Date to terminate the Cable Parent Exclusivity Provisions.
The term "Triggering Cable Parent" shall mean the High C as
of the applicable date of determination or, if one of
Comcast Cable or CCI (a) is no longer an Eligible Cable
Parent or (b) is
46
acquired by TCI, the remaining Eligible Cable Parent or
Cable Parent not acquired by TCI, as the case may be,
between Comcast Cable and CCI. An "Eligible Cable Parent"
shall mean any Cable Parent which is a member of a
Stockholder Group which includes an Eligible Stockholder.
MOST FAVORED
NATIONS
PROVISIONS: Each Cable Parent (as defined below) and its Controlled
Affiliates will be entitled to "most favored nation" ("MFN")
terms and conditions of carriage with respect to the
distribution (which shall not include the distribution or
promotion of a content provider's services) of the @Home
Services and with respect to the terms and conditions of the
Trademark License Agreement (as defined below) and any
Ancillary Services Arrangements (as defined below), in each
case, including all direct and indirect benefits as a result
of a transaction with @Home that are no less favorable than
those offered to any other Operator, individually or
collectively from time to time. Such MFN status shall
require identical treatment of all Cable Parents and their
respective Controlled Affiliates (without regard to the size
(through volume discounts or otherwise) or identity of such
Cable Parent or its ownership of @Home securities) (x) with
respect to the terms of the distribution arrangements
(including the Trademark License Agreement and any Ancillary
Services Arrangements) (other than the duration of any
distribution agreement arising from the provisions of the
Term of the LCO Agreement) granted to any Cable Parent and
its Controlled Affiliates and (y) with respect to all of the
terms of such distribution arrangements provided to third
party providers which are not members of a Stockholder Group
(an "Unaffiliated Third Party"), other than with respect to
(i) whether @Home requires that an unaffiliated Operator
agree to provisions similar to the Cable Parent Exclusivity
Provisions as to the applicable Operator Territory, (ii) the
level of commitment related to the Cable System Upgrade and
the remedies of @Home in the event of any failure to upgrade
such systems by the Projected Commencement Date, (iii)
percentage splits granted to Unaffiliated Third Parties in
the event the Board of @Home, by Supermajority Vote, elects
to increase the percentage split to @Home (in which case the
percentage split to @Home would be so increased with respect
to all future periods with respect to all Operators which
are Cable Parents or Controlled Affiliates of a Cable Parent
with respect to any existing LCO Agreement (regardless of
the existing provisions thereof) or any LCO Agreement
entered into in the future, while the LCO Agreements of
Unaffiliated Third Parties in effect at the time of such
change would not be so affected), and (iv) the duration of
any distribution agreement. In addition, each Cable Parent
and its Controlled Affiliates shall be entitled to MFN
status with respect to the terms of any sales agency
agreement pursuant to which it is authorized to enter into
.Com Agreements on behalf of @Home.
CHANGE OF CONTROL
OF TCI: Following the occurrence of a TCI Change of Control, either
CCI or Comcast Cable, so long as it is an Exclusive
Stockholder, shall be
47
entitled to elect to terminate the Restricted Period as to
all Cable Parents and their Controlled Affiliates by giving
written notice to such effect to each other Stockholder and
@Home, in which case no Cable Parent or its Controlled
Affiliate shall have any remaining obligations under the
Cable Parent Exclusivity Provisions.
CHANGES IN MASTER
ROLL-OUT SCHEDULE: If a Cable Parent determines that it or one of its
Controlled Affiliates will not be able to fulfill its
commitment with respect to the commencement of the
availability of the @Home Services as of the Projected
Commencement Date, it will immediately notify @Home, and, if
such notice is given at least 180 days prior to the
applicable Projected Commencement Date, the Cable Parent may
substitute one or more other cable systems having
substantially the same number of Homes Passed as were
required to be delivered by such date for commencement of
the @Home Services on that Projected Commencement Date,
subject to the approval of @Home, which will not be
unreasonably withheld so long as the substitute systems have
similar characteristics in terms of number of Homes Passed
and will not cause a material increase in @Home's expenses
or have a material adverse impact on @Home's ability to meet
its other commitments under the Master Roll-Out Schedule.
For purposes of the foregoing sentence, the substitution of
any cable systems that are not Qualifying Systems will be
deemed to have such an impact unless such cable systems are
located in an area included in the current Master Roll-Out
Schedule or in which @Home has already commenced offering
the @Home Services. Any changes to the Master Roll-Out
Schedule pursuant to this paragraph shall be incorporated in
the affected LCO Agreements, and the applicable Cable Parent
shall cause the Operator of any such substituted cable
system to enter into an LCO Agreement.
LOCAL CONTENT
PROGRAMMING: Each Operator, as to its cable system, or each Cable Parent,
as to one, several or all cable systems owned by it and its
Controlled Affiliates, shall be entitled to create, author,
promote and otherwise engage in the business related to
Local Content offerings. Within the @Home First Page, each
Affiliated Operator shall be allocated the Local Area. Each
Affiliated Operator or Cable Parent, as the case may be,
shall be entitled to program its Local Area as it shall
determine in its sole discretion, subject only to the Style
Guidelines (as defined below).
@HOME PROGRAMMING: @Home shall be entitled to create, author and promote such
content provider offerings as it shall determine, and shall
have the right to program the National Area in its sole
discretion, subject to the Cable Parent Exclusion Right and
the Cable Parent Access Blocking Right. @Home and each
Cable Parent will use commercially reasonable efforts to
cooperate with each other in the creation of the @Home First
Page (including the coordination of the programming of the
National Area and each Local Area) so as to optimize the
consumer appeal of the @Home web site.
48
EXECUTION OF
PROMOTIONAL
AGREEMENTS AND
EXERCISE OF CABLE
PARENT EXCLUSION
RIGHT: Each Promotional Agreement shall provide that such content
provider's right to presentation on the National Area shall
be subject to the exercise of the Cable Parent's Exclusion
Right. Upon execution of a Promotional Agreement, @Home
shall provide written notice thereof by fax or e-mail to a
designated contact person at each Cable Parent. Such
written notice shall include (i) the identity of the content
provider, (ii) a description outlining in reasonable detail
the content to be offered by such provider, (iii) the
position in the National Area to be assigned to such content
provider, and (iv) an outline of the other terms and
conditions of such Promotional Agreement. Each Cable Parent
will thereafter have the right to exercise its Cable Parent
Exclusion Right with respect to Specified Promotions as to
some or all of its Affiliated Operators distributing the
@Home Service. In order to exercise such right, the Cable
Parent shall deliver reasonable notice of its exercise of
the Cable Parent Exclusion Right to @Home which will become
effective within a reasonable period of time after such
notice.
An exercise of the Cable Parent Exclusion Right shall result
in (x) the exclusion from the National Area of any or all
Specified Promotions (as defined below) with respect to a
Specified Brand (as designated by the applicable Cable
Parent) and (y) the replacement of such promotions (e.g.,
replacement of the excluded "button") by other promotions of
the same type (e.g., replacement of an excluded button with
another button) as selected by @Home.
The term "Specified Promotions" shall mean any or all
promotions in the National Area relating to the Specified
Brand of a content provider (as designated by the applicable
Cable Parent). A "Content Provider Group" shall mean a
content provider that has entered into one or more
Promotional Agreements for the purpose of placing Specified
Promotions in the National Area with respect to a number of
Specified Brands. The term "Specified Brand" means one or
more substantially similar brand names utilized by a content
provider in connection with the promotion of its business
identified by such brand name(s). By way of example, Xxxxxx
Broadcasting System, Inc. ("TBS") and its subsidiaries would
be considered a Content Provider Group; WTBS and TNT would
be considered to be two Specified Brands because they
represent distinct brand names (albeit in the same line of
business). A Cable Parent electing to exercise its Cable
Parent Exclusion Right with respect to WTBS and TNT would be
deemed to have excluded two Specified Promotions to the
extent that it elected to exclude both WTBS and TNT.
Similarly, a Cable Parent electing to exercise its Cable
Parent Exclusion Right with respect to a content provider
which elected to use only one Specified Brand to promote
several related sites using substantially similar brand
names (for example, QVC Diamonds, QVC Clothes, QVC
49
Electronics, etc.) would be deemed to have exercised its
exclusion right with respect to one Specified Brand.
A Cable Parent shall be entitled to exercise its Cable
Parent Exclusion Right from time to time in its sole
discretion. In the event that the number of Specified Brands
excluded by a Cable Parent exceeds its Exclusion Limit, then
the Cable Parent Premium Service Revenue Split shall be
subject to adjustment as provided below. The exercise of the
Cable Parent Exclusion Right with respect to a Specified
Brand will be counted toward the Exclusion Limit regardless
of whether such Cable Parent exercises the exclusion right
with respect to some or all of its Affiliated Operators or
with respect to some or all of the Specified Promotions as
to such Specified Brand. For purposes of the determination
of whether or not a Cable Parent has exceeded its Exclusion
Limit, there shall not be included as Specified Brands (i) a
single Competitor Exclusion (as defined below) or (ii) any
exclusions which are Discretionary Exclusions (as defined
below). A "Competitor Exclusion" shall mean the exclusion of
the Specified Promotion(s) as to a single Specified Brand
provider or service which is a competitor to a content
provider or service which is an affiliate of such Cable
Parent; provided that, if Comcast Cable elects to use its
-------- ----
Competitor Exclusion with respect to Specified Promotions of
the Home Shopping Network, Inc. ("HSN"), such exclusion
shall be deemed to apply to all electronic retailing
businesses of HSN without regard to brand name. A
"Discretionary Exclusion" shall mean an exclusion based upon
(i) such Cable Parent's good faith determination that the
content to be offered constitutes pornographic or other
immoral or overly violent subject matter, (ii) such Cable
Parent's reasonable determination that the content to be
offered may adversely impact an Affiliated Operator's
franchise to deliver cable television service and/or the
@Home Service or (iii) the fact that such promotions relate
to video clips which exceed ten minutes in duration.
The "Exclusion Limit" of each Cable Parent shall be three
Specified Brands, which Specified Brands may be changed by
the applicable Cable Parent at any time upon reasonable
advance notice to @Home. In the event a Cable Parent exceeds
its Exclusion Limit, then during the monthly billing period
in which such Cable Parent has exceeded its Exclusion Limit
the Premium Service Revenue Split (as defined below) between
the Operators that are Controlled Affiliates of such Cable
Parent and @Home shall be adjusted to (x) decrease the
Premium Service Revenue Split to such Operators and (y)
increase the Premium Service Revenue Split to @Home from
such Affiliated Operators in accordance with the following
schedule:
50
The Highest Number by Operator's @Home's
which such Cable Parent's Adjusted Adjusted
Exclusion of Specified Premium Premium
Brands Exceeds its Service Service
Exclusion Limit in a Revenue Revenue
billing month Split Split
------------------------- ----------- --------
1 56% 44%
2 51% 49%
3 45% 55%
4 38% 62%
5 29% 71%
6 17% 83%
7 6% 94%
8+ 0% 100%
In connection with any change to the Premium Service Revenue
Splits which has been approved in accordance with the
provisions of this Term Sheet, the above revenue splits
shall be correspondingly adjusted.
EXECUTION OF .COM
AGREEMENTS AND
EXERCISE OF CABLE
PARENT ACCESS
BLOCKING RIGHT: Each .Com Agreement and Promotional Agreement shall provide
that the content provider's right to connectivity over the
@Home Service to subscribers of any Affiliated Operators
shall be subject to the exercise of the Cable Parent Access
Blocking Right. Upon execution of a .Com Agreement, @Home
or any Cable Parent or Controlled Affiliate acting as a
sales agent on behalf of @Home, shall provide written notice
thereof by fax or e-mail to a designated contact person at
@Home and each other Cable Parent, as applicable. Such
written notice shall include (i) the identity of the content
provider and (ii) a description outlining in reasonable
detail the content to be offered by such provider. Upon
exercise of its Cable Parent Access Blocking Right, such
Cable Parent shall deliver reasonable notice of its exercise
of such right to @Home and the other Cable Parents which
will become effective within a reasonable period of time
after such notice. Subject to the other terms of this
section, such Cable Parent shall thereafter have the right
to block the access by its subscribers of the @Home Service
to (i) any content offering with respect to which such Cable
Parent would have been entitled to exercise its Cable Parent
Exclusion Right as a Discretionary Exclusion (a
"Discretionary Access Exclusion") and (ii) any content
provider which is attempting to provide video clips
exceeding the duration limit set forth in the Specifications
and Standards. The exercise of the Cable Parent Access
Blocking Right shall be the sole responsibility of the Cable
Parent so exercising it (including, but not limited to, the
determination of the technological means to block such
access), and each Cable Parent agrees that its exercise of
such blocking right will be done in such a way that it does
not otherwise interfere in
51
any significant way with the delivery and presentation of
the @Home Service.
Each Cable Parent agrees to indemnify and hold @Home and
each other Stockholder harmless from all damages, costs and
expenses (including reasonable legal fees) incurred by @Home
or each other Stockholder as a result of any claims,
actions, suits or other proceedings (including
investigations related thereto) of any third party or
governmental or regulatory entity (other than a party to a
.Com Agreement or a Promotional Agreement) arising out of or
relating to the exercise by such Cable Parent of the Cable
Parent Access Blocking Right with respect to a Discretionary
Access Exclusion. @Home shall assist the Cable Parent in
the exercise of such Cable Parent Access Blocking Right so
long as @Home is not required to expend substantial effort
in respect thereof.
@Home acknowledges and agrees that each .Com Agreement and
each Promotional Agreement entered into following the
Execution Date will contain a provision in which each
content provider acknowledges and agrees to the existence
and exercise of such Cable Parent Access Blocking Right and
Cable Parent Exclusion Right, and agrees that it will not
xxx or threaten to xxx, or seek or attempt to cause any
person to commence or threaten any governmental or
regulatory action or investigation against @Home or any
Cable Parent as a result of or in connection with the
exercise of the Cable Parent Access Blocking Right or Cable
Parent Exclusion Right.
CONTENT TAG-
ALONG RIGHT: Each Parent agrees that neither it nor any of its Controlled
Affiliates will obtain any Additional Benefit (as defined
below) unless it has complied with the provisions of this
section. In the event that any Parent or its Controlled
Affiliate seeks to enter into a transaction with a third
party in which such Parent or Controlled Affiliate may or
will receive any Additional Benefit as a condition of or as
a result of such third party's entering into a transaction
with @Home, then such Parent or Controlled Affiliate will
provide written notice to each Cable Parent thereof
describing such transaction and the Additional Benefit to be
received by such Parent or Controlled Affiliate. Such
written notice shall also constitute an offer by such Parent
(the "Offeror") to each Cable Parent (each, an "Offeree") to
participate in such transaction upon the same terms and
conditions as the Offeror (which, in the event any such
Additional Benefit is of a limited amount or type, shall
mean the right to participate in such transaction pro rata
based upon each such accepting Offeree's ownership of equity
securities of @Home and otherwise upon the same terms and
conditions as such Offeror), which offer may be accepted by
such Offeree by written notice to such Offeror, each other
Offeree and @Home delivered to such persons not later than
the twentieth business day following the date of receipt of
such notice; provided that the Offeror may require an
earlier response (but not less than five business days
following the receipt of such notice) by so
52
specifying in the written notice to the extent such earlier
response is reasonably necessary.
In the event that it is not reasonably practicable to offer
participation in the Additional Benefit as described above,
the Offeror shall promptly make payments in cash to the
Offerees so that the Offeror and Offeree share in the value
of the Additional Benefit pro rata based solely upon their
respective ownership of equity securities of @Home.
In the event that the consideration to be paid (or
Additional Benefit to be received) by any Offeror in
connection with such transaction is to consist of assets,
securities or other property or services, then the price at
which any Offeree may accept such offer shall be or, if
applicable, the amount of cash payments by the Offeror, the
fair market value of such assets, securities, property or
services, which if the parties are unable to agree, shall be
the appraised value thereof as determined by a mutually
agreed upon investment banking firm. The term "Additional
Benefit" shall mean (i) securities or options, warrants or
rights to acquire securities, (ii) assets or (iii) other
property or benefits of any type, in each case to be
received by a Parent or a Controlled Affiliate thereof in a
transaction between such Parent or Controlled Affiliate and
such third party which transaction is conditioned upon or
otherwise contingent upon such third party's entering into
such transaction with @Home and is upon terms and conditions
which are less favorable to @Home than @Home's regular
charges or other terms for such services, or is otherwise on
terms which are not arm's-length.
The exercise of any rights by a Cable Parent under this
section shall be in addition to any rights that a Cable
Parent may have with respect to the applicable transaction
under the provisions opposite the caption "Most Favored
Nations Provisions."
PARENT UNDERTAKING: Each of TCI, as to TCIC and TCI Services, CEI, as to CCI,
and Comcast, as to Comcast Cable, hereby undertakes that, in
the event that such Parent entity acquires control of any
cable television systems which are not Controlled Affiliates
of the applicable Cable Parent, such Parent will cause such
cable television systems to comply with the terms of this
agreement, including the Cable Parent Exclusivity
Provisions, as if such cable television systems were
parties hereto; provided, that such Parent shall not be
obligated to terminate (other than in accordance with the
terms and provisions of the applicable agreement) the
distribution of any residential Internet Services
distributed by such cable system prior to such time as the
applicable agreement expires or otherwise may be terminated
by such Parent without the incurrence of any material
liability or additional obligations thereunder.
@Home hereby undertakes that, while the @Home Exclusivity
Provisions are in effect, in the event it provides Internet
Services (or any comparable services with comparable
capabilities) at bit rate speeds
53
greater than 128 kbps through arrangements with an alternate
distribution provider (an "Alternative Arrangement") to
residences in a geographic area in which a Cable Parent or
its Controlled Affiliate subsequently acquires a cable
television system that is capable of distributing such
services in the geographic area, @Home will use commercially
reasonable efforts (i) to offer such services through such
cable television system when such system is upgraded in
accordance with the Specifications and Standards and
scheduled for commencement of service on the Master Roll-Out
Schedule and (ii) to terminate @Home's obligations under
such Alternative Arrangements in such geographic area;
provided, that @Home shall not be obligated to terminate
(other than in accordance with the terms and provisions of
the applicable agreement) the distribution of such services
under such Alternative Arrangements in such geographic area
prior to such time as the applicable agreement expires or
otherwise may be terminated by @Home (i) without the
incurrence of any material liability or additional
obligations thereunder and (ii) without any material adverse
impact on the economics to @Home of providing such services
to residences in the geographic area.
OTHER SERVICES: Any broadband local transport services provided by Operator
to @Home as part of the @Home Facilities, including
connectivity to content providers, will be the subject of a
separate agreement between the parties, the terms and
provisions of which (including the compensation payable
thereunder to Operator) shall be mutually agreeable to the
parties.
In addition, to the extent that new and different devices to
connect to the Internet are developed in the future, in the
event that any Cable Parent so requests, @Home and such
Cable Partner agree to enter into good faith negotiations
regarding modifications to the basic terms of the
distribution of the @Home Service as well as modifications
to the @Home Service itself in order to provide connectivity
through such devices upon terms which further the economic
benefits to both @Home and such Cable Partner.
TERM: The Master Distribution Agreement shall terminate as to each
Cable Parent at the end of the Term of the last to terminate
of the LCO Agreements in effect between @Home and such Cable
Parent or its Controlled Affiliates entered into pursuant to
the Master Distribution Agreement (including any extension
or renewal thereof).
54
VIII. TERMS OF LCO AGREEMENTS.
-----------------------
This Section VIII of the Term Sheet is intended to set forth the terms and
conditions of the LCO Agreements to be entered into between @Home and the
Affiliated Operators of the Cable Parents pursuant to which such Affiliated
Operators would distribute the @Home Service. These provisions are also
intended to serve as the basis upon which @Home would seek to negotiate LCO
Agreements with Operators which are not Controlled Affiliates of any Cable
Parent. With respect to LCO Agreements between @Home and such Affiliated
Operators, the following provisions are intended to provide a summary of the
terms and conditions of such LCO Agreements. With respect to LCO Agreements to
be entered into with Operators which are not Controlled Affiliates of any Cable
Parent, however, such terms and conditions are intended to form a basis upon
which @Home may negotiate such agreements, and therefore, subject to the MFN
provisions in the Master Distribution Agreement, @Home may vary such terms and
conditions granted to such Operators from the terms and conditions set forth
below.
A. ROLL-OUT OF THE @HOME SERVICES
OPERATOR TERRITORY: The LCO Agreement will provide that the @Home Services
initially will be made available as and to the extent
provided in the Master Roll-Out Schedule (the relevant
portions of which shall be incorporated into the LCO
Agreement (referred to below as the "Roll-Out Schedule")) in
that portion of the geographic area covered by the LCO
Agreement where Operator is providing cable television
service through Operator's distribution facilities (the
"Operator Territory").
@HOME ROLL OUT
COMMITMENT: @Home will use commercially reasonable efforts to complete
the Network Upgrade in the Operator Territory containing the
Offered Homes Passed set forth in the LCO Agreement on or
before the Projected Commencement Date in accordance with
the applicable provisions of the Roll-Out Schedule (and
thereafter as may be required to make available to Operator
the @Home Services (including at any additional applicable
Point of Demarcation) in connection with the commencement of
the provision of the @Home Services to subscribers in
additional portion(s) of the Operator Territory), in each
case subject to the Operator having completed the Cable
System Upgrade. Subject to the requirements of the Roll-Out
Schedule, @Home and Operator shall negotiate in good faith
and use commercially reasonable efforts to coordinate the
timing of the completion of the Cable System Upgrade and the
Network Upgrade in each applicable portion of the Operator
Territory.
FAILURE BY @HOME
TO ROLL-OUT: In the event that @Home does not complete the Network
Upgrade in the Operator Territory on or prior to the date
which is 120 days after the Projected Commencement Date,
then, Operator shall have the right to terminate the Cable
Parent Exclusivity Provisions as to the Operator Territory.
55
In the event that @Home does not complete the Network
Upgrade in the Operator Territory on or prior to the date
which is 180 days after the Projected Commencement Date,
then, Operator shall have the right to either (x) continue
the election made above and, at such time as the @Home
Services become available for distribution in such area,
distribute the @Home Services in accordance with the terms
of the LCO Agreement (other than the Cable Parent
Exclusivity Provisions as to the Operator Territory) or (y)
terminate the LCO Agreement; provided however, that if
-------- -------
Operator terminates the LCO Agreement and @Home completes
the Network Upgrade in the Operator Territory within the
otherwise applicable Term of such LCO Agreement had such LCO
Agreement not been terminated, Operator may then elect to
reinstate the LCO Agreement (without, however, giving effect
to the Cable Parent Exclusivity Provisions as to the
Operator Territory).
In the event that @Home fails to complete the Network
Upgrade with respect to any portion of the Operator
Territory, then Operator's remedies described above will
only be exercisable with respect to such portion of the
Operator Territory, unless such failure relates to a
material portion of the Operator Territory, in which case
such remedies shall apply to the entire Operator Territory.
The availability of remedies to Operator hereunder shall be
subject to Operator's satisfaction of its obligations set
forth below.
OPERATOR ROLL-OUT
COMMITMENT: Operator will use commercially reasonable efforts to
complete the Cable System Upgrade of the required Operator
Facilities no later than the Projected Commencement Date,
such that the number of Homes Passed in the Operator
Territory capable of receiving the @Home Services equals or
exceeds the number of Homes Passed specified in the Roll-Out
Schedule for the applicable Planning Period, subject to
@Home having completed the Network Upgrade in the applicable
portions of the Operator Territory. Notwithstanding any
other provisions contained herein, upon not less than 180
days notice prior to the Projected Commencement Date, an
Operator may terminate or defer the Projected Commencement
Date without any liability hereunder, as to the portion of
the Operator Territory applicable to such Projected
Commencement Date.
FAILURE BY OPERATOR
TO ROLL-OUT: Subject to the right to terminate or defer the Projected
Commencement Date set forth in the preceding paragraph, in
the event that Operator does not complete the Cable System
Upgrade of the required Operator Facilities on or prior to
the date which is 180 days after the Projected Commencement
Date set forth on the Roll-Out Schedule, then (i) Operator
shall be required to pay to @Home, as liquidated damages and
not as a penalty, the @Home Specified Remedy and (ii) @Home
shall be entitled to terminate its obligations under the
@Home Exclusivity
56
Provisions with respect to those portions of the Operator
Territory where @Home reasonably determines, after
consultation with Operator, that Operator has ceased to use
commercially reasonable efforts to complete the Cable System
Upgrade so as to comply with the Roll-Out Schedule.
To the extent that any failure by Operator to complete a
Cable System Upgrade results from the failure by Operator to
timely obtain any regulatory or third party consent or
approval required on the part of Operator in order to so
complete the Cable System Upgrade in any portion of the
Operator Territory, the obligations of each party under the
LCO Agreement shall be suspended until such time as Operator
obtains any such regulatory or third party consent or
approval; provided, that Operator shall continue to use all
reasonable efforts to obtain any such consent or approval;
and provided further, that (i) the obligations of @Home
under the @Home Exclusivity Provisions with respect to any
affected portion(s) of the Operator Territory shall
terminate to the extent any such suspension lasts for more
than 180 days after the Projected Commencement Date and (ii)
either party shall be entitled to terminate the LCO
Agreement as to the affected portion(s) of the Operator
Territory in the event of any such suspension that lasts for
more than 270 days after the Projected Commencement Date.
EXTENSIONS OF TIME: The time for a party's performance (including any cure
period for a failure to perform) under the LCO Agreement
shall be extended day-for-day by (i) in the event of a
concurrent failure to perform by the other party, the number
of days of any resulting delay in such party's ability to
perform or (ii) the number of days such party's performance
was prevented or delayed by the occurrence of a Force
Majeure Event (as defined below).
SOLE REMEDIES: The remedies described herein will be the sole remedies
available to the parties with respect to a party's failure
to meet its obligations under the Roll-Out Schedule.
TESTING: As soon as practicable following notification by Operator to
@Home that the Cable System Upgrade has been completed in
any designated portion of the Operator Territory, @Home and
Operator shall agree upon a test date for such Operator
Facilities and the applicable @Home Facilities, if any,
which testing shall verify that the applicable Operator
Facilities and, if applicable, @Home Facilities, perform in
accordance with the Specifications and Standards.
COMMENCEMENT OF
SERVICES: Following such testing and the agreement of the parties that
the applicable Operator Facilities and @Home Facilities
comply with the Specifications and Standards, @Home shall
make the @Home Services available to Operator for
distribution by Operator to subscribers in those portions of
the Operator Territory served by such Operator Facilities,
and Operator shall commence offering and providing the @Home
Services to subscribers in such portions of the Operator
Territory.
57
OWNERSHIP AND
MAINTENANCE: As between @Home and Operator, @Home will, at its own
expense, provide, install, maintain, repair, inspect,
replace or remove, operate and control the @Home Facilities
necessary to provide the @Home Services to subscribers in
the Operator Territory up to the Point of Demarcation in
accordance with the Specifications and Standards. As between
@Home and Operator, Operator will, at its own expense,
provide, install, maintain, repair, inspect, replace or
remove, operate and control the Operator Facilities
necessary to distribute the @Home Services from the Point of
Demarcation to subscribers in the Operator Territory in
accordance with the Specifications and Standards.
As between Operator and @Home (i) Operator shall retain full
ownership and operating control of, and will be fully
responsible for operating and maintaining, the Operator
Facilities, and (ii) @Home shall retain full ownership and
operating control of, and will be fully responsible for
operating and maintaining, the @Home Facilities. Subject to
the foregoing, @Home will be responsible for the management
of the @Home Network, including but not limited to, the
collection of data necessary to provide for the billing of
Premium Service Revenues and surveillance over the @Home
Network regarding hardware or software problems or failures.
Notwithstanding the foregoing and subject to all applicable
laws, all subscriber data shall remain the property of the
applicable Operator and @Home shall deliver to Operator, on
a regular basis, all subscriber data relating to subscribers
of the @Home Services located within the Operator Territory
collected by it in the course of its management of the @Home
Network, subject, however, to the right of @Home to
------- -------
aggregate and categorize such subscriber data (i.e., in a
manner which does not identify specific subscribers) for use
in promotional efforts and @Home Network management.
PERFORMANCE
STANDARDS: Operator shall operate and maintain the Operator Facilities
in accordance with the applicable requirements of the
Specifications and Standards. @Home shall operate and
maintain the @Home Facilities so that such facilities are
capable of delivering the @Home Services to Operator for
distribution to subscribers in the Operator Territory in
accordance with the applicable requirements of the
Specifications and Standards.
B. MARKETING; CUSTOMER SERVICE.
MARKETING: Operator and @Home will enter into a Joint Marketing
Agreement which will provide, among other things, that (i)
to the extent that @Home engages in any national marketing
campaign with respect to the @Home Services, @Home shall
provide marketing support of substantially similar quality
and quantity and on no less favorable terms and conditions
to Operator as provided to operators of similarly situated
58
cable systems, (ii) Operator will use commercially
reasonable efforts to cooperate and participate in such
national marketing efforts, and (iii) Operator may engage in
local marketing efforts with respect to @Home and the @Home
Services, and @Home shall use its commercially reasonable
efforts to cooperate and participate in such efforts.
BRANDING: The @Home Services will be marketed and provided by @Home
and Operator under the @Home brands pursuant to the form of
trademark license agreement (the "Trademark License
Agreement") to be entered into between @Home and Operator
(such brands to be used alone or in conjunction with
Operator's "cable" brand), subject to the quality standards
and usage guidelines set forth in such agreement. The @Home
brands will be prominently displayed on the browsers.
HOME PAGE: @Home will provide Operator with a selection of first screen
templates for use in developing and configuring Operator's
local home page and any local "theme" pages. Operator may
customize these templates; provided, that the home page and
any such theme pages comply with the look and feel,
configuration and quality guidelines to be established by
@Home to insure a consistent image and quality standard for
the @Home Services to support national branding of the @Home
Services (the "Style Guidelines").
NATIONAL/LOCAL With the exception of the Local Area (including the XXX
CONTENT: Button), the content received by a subscriber upon startup
of the @Home Services, any thematic linked pages thereto,
the browsers and all related navigation devices shall be
programmed by @Home, and each Operator shall be required to
accept the @Home Services as so programmed (subject,
however, to the Specifications and Standards), including,
but not limited to, any promotional-type content, special
hot-links, video xxxxxx and the content and organization of
such pages, subject, however, to the Cable Parent Exclusion
Right and the Cable Parent Access Blocking Right.
CUSTOMER SERVICE: Operator shall have the exclusive first opportunity to
provide all customer service required in connection with the
provision of the @Home Services to subscribers in the
Operator Territory receiving the @Home Services through the
Operator Facilities.
At Operator's election (pursuant to procedures set forth in
the LCO Agreement), Operator may allocate all or part of
such customer service responsibility to @Home, in which case
@Home may be entitled to compensation from Operator as set
forth below for the provision of such services based on
standard charges established by the LCO Agreement (which
charges shall be based on @Home's cost of providing such
services, plus a reasonable return).
59
C. COMPENSATION AND BILLING.
ALLOCATION OF
BILLING
RESPONSIBILITY: Operator shall be responsible for the billing and collection
of monthly subscription fees (including the allocable
portion of any charges related to bundled services) from
subscribers to the @Home Services in the Operator Territory
which receive the @Home Services through the Operator
Facilities. Notwithstanding the foregoing, as between @Home
and Operator, the collection of fees and charges relating to
the utilization by subscribers of Premium Services shall be
the responsibility of the party contracting with the
applicable provider of such Premium Services regarding the
provision of such services.
PRICING: Operator shall have complete discretion as to the pricing of
the @Home Services and any Premium Services (as to which
Operator is the contracting party) to subscribers in the
Operator Territory receiving the @Home Services through the
Operator Facilities.
COMPENSATION: Operator shall make monthly payments (the "Monthly
Payments") to @Home in respect of each month during the Term
in an amount equal to (i) 35% of aggregate Basic Service
Revenues collected by Operator during such month from the
provision of the @Home Services to subscribers using the
Operator Facilities (the "Basic Service Revenue Split") plus
(ii) 35% of Premium Service Revenues collected by Operator
during such month from the provision of Premium Services to
subscribers accessing such services using the Operator
Facilities (to the extent that Operator is responsible for
the collection of such charges). Exhibit B sets forth the
services @Home shall provide to the Operator in return for
the Basic Service Revenue Split.
The Basic Service Revenue Split is based on the assumption
that Operator will provide Tier I customer service and that
@Home will provide Tier II and Tier III customer service (as
such terms are defined in Exhibit B). To the extent that
such customer service is provided other than in accordance
with the foregoing allocation, and Operator directs @Home to
provide all or any portion of Tier I customer service, @Home
will be entitled to compensation from Operator for the
provision of such services based on standard charges
established by the LCO Agreement, which charges shall be
based on @Home's cost of providing such services plus a
reasonable return. In the event that Operator elects to
perform all or part of Tier II customer service, such
Operator will receive a credit against the amount it would
otherwise owe to @Home pursuant to this paragraph equal to
@Home's cost of providing such services plus a reasonable
return.
@Home shall make payments to Operator on a monthly basis in
an amount equal to 65% of Premium Service Revenues collected
by @Home during such month from the provision of Premium
Services to subscribers in the Operator Territory accessing
such services using the
60
Operator Facilities (to the extent that @Home is responsible
for the collection of such charges).
The percentage of Premium Service Revenues to which Operator
is entitled pursuant to the preceding two paragraphs is
referred to herein as the "Premium Service Revenue Split."
The Premium Service Revenue Split will be subject to
adjustment in accordance with the provisions under the
caption "Execution of Promotional Agreements and Exercise of
Cable Parent Exclusion Right."
As used herein, "Basic Service Revenues" means revenues from
the @Home Services collected by Operator (other than Premium
Service Revenues) including any amounts received by Operator
in respect of the provision of cable modems to subscribers
but excluding any fees collected for installation, and
"Premium Service Revenues" means the net revenues retained
by Operator or @Home, as the case may be, derived from its
performance pursuant to .Com Agreements and Promotional
Agreements, including service fees, content provider
charges, transaction fees, subscriber fees, advertising and
promotional revenue or other transaction value (including
barter payments or advertising avails), from the provision
of the @Home Services to customers in the Operator
Territory.
Notwithstanding the foregoing, any fees or other amounts
received by @Home which relate to the programming of the
National Area, including service fees, content provider
charges, transaction fees, advertising and promotional
revenue or other transaction value (including barter
payments or advertising avails) shall not be included within
the definition of either Basic Service Revenues or Premium
Service Revenues, and @Home shall be entitled to retain all
amounts collected by it in respect of such activities.
The foregoing Basic Service Revenue Split and Premium
Service Revenue Split (collectively the "Revenue Splits")
shall be subject to adjustment from time to time by the
Board of Directors of @Home as provided below:
1. The Revenue Splits to @Home may be decreased by the
Board and increased by a Supermajority Vote of the
Board with respect to all existing LCO Agreements with
an Affiliated Operator and all LCO Agreements to be
entered into with an Affiliated Operator.
2. In connection with the @Home IPO, the Board will review
the Revenue Splits in connection with @Home's
preparations for the IPO.
Notwithstanding the foregoing, any fees or other amounts
received by Operator which relate to, the programming of the
Local Area or the provision of Local Service, including
service fees, content provider
61
charges, transaction fees, advertising and promotional
revenue or other transaction value (including advertising
avails and barter payments) shall not be included within the
definition of either Basic Service Revenues or Premium
Service Revenues, and Operator shall be entitled to retain
all amounts collected by it in respect of such activities;
provided, that @Home shall be entitled to reasonable
compensation for network management services provided by
@Home and any caching and replicating (including, but not
limited to, technical assistance and, if applicable, the
lease of capacity in the @Home Facilities) provided by @Home
with respect to such Local Service in connection with the
provision of such Local Service and/or the connection of
such Local Content provider to the @Home Network (based on
@Home's cost of providing such services, plus a reasonable
return) for such services requested by Operator.
In the event that Operator makes the Operator Facilities
available to @Home in connection with the provision of
Internet Services to large business customers, the revenues
attributable to the provision of such services using
Operator's HFC plant (e.g., "Work @Home" revenues) ("@Work
Service Revenues") shall be allocated 70% to Operator and
30% to @Home.
MONTHLY PAYMENT
PROCEDURES: Not later than 30 days following the last day of each month,
Operator shall deliver to @Home a certificate containing
Operator's calculation of the amount of the Monthly Payment
due to @Home in respect of such month and the basis for such
calculation, which calculation shall have been certified by
an officer or authorized designee of Operator as true and
correct and as having been made in accordance with the
provisions set forth above. Not later than 30 days after
the last day of each month Operator shall deliver to @Home
the Monthly Payment in respect of such month. Operator
shall maintain detailed records relating to the
62
usage of the Premium Services and the calculation of Premium
Service Revenues, and shall permit Operator access to such
records at reasonable times upon reasonable notice to make
copies of such records and to discuss the calculation of the
Premium Service Revenues with officers and employees of
@Home. Operator and @Home shall meet in good faith to
resolve any disagreements regarding the calculations of all
such amounts.
ANCILLARY SERVICES: @Home shall provide Operator with a schedule of its charges
related to the provision by it of ancillary services to
Operators, such as customer support and service, network
management, and Local Service-related fees, which schedule
shall be updated periodically. With respect to those
services which Operator may elect to purchase, Operator
shall notify @Home of such election and agreement to pay
such fees, and @Home shall as soon as practicable thereafter
and as agreed with Operator, commence providing such
services to Operator in accordance with such schedule of
fees. @Home shall xxxx Operator on a regular basis for such
optional services elected by Operator and for those
services, such as fees for network management, which are
required to be purchased by Operator, and Operator shall
remit such payment promptly to @Home. The arrangements
contemplated by the foregoing paragraph are referred to in
this Term Sheet as the "Ancillary Services Arrangements."
Ancillary Service Arrangements do not include those services
specified in Exhibit B that are provided to the Operator in
return for the Basic Service Revenue Split.
TAXES: The billing party agrees to pay any sales, use, gross
receipts, excise or other local, state and federal taxes,
fees or charges, however designated (excluding taxes on the
other party's income) imposed on or based upon the
provision, sale or use of Basic Services, Premium Services
or @Work Service Revenues, if any; provided, that such
amounts will not be included in Basic Service Revenues,
Premium Service Revenues or @Work Service Revenues, but will
be separately stated on each monthly statement to the other
party.
D. MISCELLANEOUS.
REGULATORY: Each party will at its own expense use all commercially
reasonable efforts to obtain all regulatory consents,
authorizations and approvals that are necessary for it to
obtain in connection with its execution and performance of
the LCO Agreement and the provision of the @Home Services
using the Operator Facilities in the Operator Territory.
CONFIDENTIALITY: Each party will, and will cause its respective officers,
directors, employees and advisors to, maintain in confidence
all confidential and proprietary information and data of the
other party ("Confidential Information"), and will not
disclose Confidential Information to any other person,
subject to customary exceptions.
63
INDEMNIFICATION: Each party shall indemnify the other party against, and hold
the other party harmless from, any claim, demand, loss,
damage, liability or expense (including reasonable
attorneys' fees and disbursements) arising out of or
resulting from such party's breach of this Term Sheet or
negligence or intentional act committed in connection with
the transactions contemplated by this Term Sheet.
FORCE MAJEURE: The parties agree that upon the occurrence of events making
a party's timely performance under this Term Sheet
impracticable due to, among other matters, hardware or
software shortages, equipment shortages or failures (in each
case resulting other than from such party's negligence), or
through acts of God or other events beyond its control (a
"Force Majeure Event"), such party's performance of its
obligations hereunder shall be suspended during such period;
provided, that each party shall be obligated to use
commercially reasonable efforts to cure any such failure to
perform as promptly as possible to the extent it relates to
its portion of the @Home Network; and, provided further,
that either party shall be entitled to terminate its
obligations as to the affected portions of the Operator
Territory in the event any such failure to perform is not
cured in all material respects so as to permit the
resumption of the provision of the @Home Services in the
affected portion of the Operator Territory within 180 days.
CONDEMNATION: If all or any portion of the Operator's Facilities are taken
or proposed to be taken for any public or quasi-public
purpose by any governmental authority by the exercise of
right of eminent domain, Operator will so notify @Home, and
will use commercially reasonable efforts to reroute or
replace the affected area in accordance with the
Specifications and Standards within 180 days of the taking.
In the event the affected facilities are not so rerouted or
replaced within such 180 day period, @Home or Operator (but
only to the extent Operator has used commercially reasonable
efforts in accordance with the previous sentence) will be
entitled to terminate its obligations as to the affected
portions of the Operator Territory without further liability
or obligation to either party.
TERM: The term (the "Term") of an LCO Agreement entered into with
any Affiliated Operator (including any Operators which have
entered into LCO Agreements prior to the date such Operator
becomes a Controlled Affiliate, provided that such
Operator's original LCO Agreement does not specify a longer
term) shall begin on the Commencement Date and shall end on
the latest to occur of (i) the third anniversary of the
applicable Commencement Date, (ii) the earlier to occur of
(A) the sixth anniversary of the Execution Date and (B) 90
days following the termination of the Restricted Period as
to the Cable Parent of the applicable Affiliated Operator,
and (iii) 90 days following written notice from the
applicable Stockholder that it has ceased to be an Exclusive
Stockholder; provided, that, at any time following the
effectiveness of its
64
exercise of the Comcast Non-Exclusive Right, Comcast Cable,
by 90 days written notice, shall have the right to terminate
all LCO Agreements entered into by it and its Controlled
Affiliates (in which case either of @Home or Comcast Cable
shall have the right to extend the Term for an additional 90
days by written notice to such effect given to the other
party within 30 days following Comcast Cable's notice of its
exercise of its right pursuant to this proviso). Operator
shall also have the right to renew the term of the LCO
Agreement for an additional period of three years by written
notice to such effect given to @Home not later than 90 days
prior to the end of the Term.
TERMINATION: Each party may terminate the LCO Agreement (i) following a
material breach by the other party that has not been cured
after 30 days written notice thereof (other than a breach
for which the applicable remedies available to the non-
breaching party are otherwise specified by the LCO
Agreement), (ii) upon the occurrence of events specified
herein granting a party the right to terminate such
agreement, or (iii) upon the bankruptcy or insolvency of the
other party.
REPRESENTATIONS: The LCO Agreement shall contain representations and
warranties of the parties that are customary and appropriate
in the context of the transactions contemplated thereby.
IX. GENERAL
-------
REASONABLE
COMMERCIAL
EFFORTS: Any reference in this Term Sheet to an obligation to use
"all commercially reasonable efforts," "reasonable
commercial efforts" or any similar level of effort shall
mean an obligation to use commercially reasonable efforts,
and no difference in the language expressing any such level
of effort shall imply any substantively different
obligation.
AMENDMENTS TO
THIS TERM SHEET: The provisions of this Term Sheet may not be amended,
modified, supplemented or superseded unless approved in
writing by each Stockholder and @Home.
65
EXHIBIT A
---------
SUPERMAJORITY ITEMS
-------------------
The By-Laws of @Home shall provide that no action may be taken with
respect to any of the following matters without the affirmative vote or written
consent of 75% (rounded up to the nearest whole number of Directors) of the
total number of Series K and Series A Directors, voting as a separate class of
Directors (such vote or consent, a "Supermajority Vote"); provided, however,
that any action with respect to the following matters which would also
constitute a Related Party Transaction shall require the affirmative vote or
written consent of 75% (rounded up to the nearest whole number of Directors) (or
two-thirds if there are only three such Directors) of the total number of Series
K, Series T, and Series A Directors not required to abstain with respect to such
matter, voting as a separate class of Directors.
1. The merger, consolidation or other business combination by @Home
or any subsidiary of @Home into or with any other entity, other than any
transaction involving only @Home and/or one or more directly or indirectly
wholly owned subsidiaries of @Home; provided, however, that the provisions of
-------- -------
this paragraph shall not apply to transactions which have been approved in
accordance with paragraphs 2 and 4 below, or which would not otherwise require
approval thereunder.
2. The acquisition (other than an acquisition covered by paragraph 4
below) by @Home or any subsidiary of @Home of any assets or properties
(including stock or other equity interests of a third party) in one transaction
or a series of related transactions, which assets or properties have an
aggregate purchase price or value in excess of twenty percent (20%) of the fair
market value of the consolidated assets of @Home.
3. The disposition by @Home or any subsidiary of @Home of any assets
or properties (including stock or other equity interests of a third party) in
one transaction or a series of related transactions having an aggregate value in
excess of fifty percent (50%) of the fair market value of the consolidated
assets of @Home.
4. The acquisition by @Home or any subsidiary of @Home of any assets
or properties in exchange for or in consideration of the sale or issuance to any
person of capital stock of @Home which sale or issuance would constitute in
excess of 16b% of the fully diluted shares of @Home (on a common stock
equivalent basis) (including such shares to be issued or sold).
5. If a person other than the person previously interviewed by Cox
and Comcast is appointed prior to Closing, the approval of the Chief Executive
Officer and, thereafter, the removal of any Chief Executive Officer and the
appointment of any successor thereto.
6. Any actions resulting in the voluntary dissolution or liquidation
of @Home, or the initiation of any proceedings relating to the voluntary
bankruptcy of @Home.
7. Any amendment to or modification of any provision of the Charter
or By-Laws, other than (a) the filing of any Certificate of Designation or
amendment to the Charter establishing any class or series of preferred stock of
@Home, the establishment, issuance and sale of which would not violate paragraph
8 below, (b) any amendment to or a modification of the Charter which is
necessary in order to implement any action which has been otherwise approved by
a Supermajority Vote, (c) any amendment to the Charter which is reasonably
necessary in connection with @Home's IPO and which does not have an adverse
effect upon a holder of Convertible Preferred Stock which effect is different
from the effect of
such amendment upon other holders of Convertible Preferred Stock and (d) any
amendments to the Charter which are specifically contemplated by the provisions
of the Term Sheet (including in connection with any Interim Financing).
8. The (a) establishment or creation of any additional class of
capital stock or any security having a direct or indirect equity participation
in @Home, (b) sale or issuance of (i) shares of capital stock or securities
having a direct or indirect equity participation in @Home, or (ii) warrants,
options or rights to acquire shares of capital stock or securities having a
direct or indirect equity participation in @Home or securities convertible into
or exchangeable for capital stock or any security having a direct or indirect
equity participation in @Home, in each case, which capital stock or other
security constitutes Special Voting Stock.
9. Any increase in the aggregate number of Management Pool Shares
issued or reserved for issuance to management (including shares reserved for
issuance upon exercise of options, warrants or other rights) pursuant to all
incentive compensation plans (collectively, the "Management Stock Plan") in
excess of an aggregate amount calculated at the time of such proposed increase
equal to (i) 8,000,000, plus (ii) the greater of (x) 0.075 multiplied by the
----
number of shares of Series A Common Stock (or options, warrants or other rights
to acquire shares) issued by @Home subsequent to the closing of the transaction
contemplated by this Term Sheet (other than shares (or options, warrants or
other rights to acquire shares) issued pursuant to the Management Stock Plan or
shares issued upon conversion of shares of Convertible Preferred Stock) and (y)
the number of shares (or options, warrants or other rights to acquire shares)
the issuance of which would represent a dilution of the fully diluted equity of
@Home (including the assumed issuance of all shares in the Management Stock Plan
prior to such increase) of 4% per year from the closing of the transaction
contemplated by this Term Sheet to the date of such proposed increase.
10. (a) The declaration or payment of any dividend on, or the making
of any distribution to holders of, Junior Stock or equity securities of any
subsidiary of @Home (other than a wholly owned subsidiary) or (b) the purchase,
redemption or other acquisition for value of any Junior Stock or equity
securities of any subsidiary of @Home or any options, warrants or other rights
to acquire such securities (other than the repurchase by @Home of shares of
Junior Stock, or options, warrants or other rights to acquire shares of Junior
Stock, issued to employees, directors or consultants pursuant to repurchase
rights contained in the instrument pursuant to which such securities were
originally granted).
11. The adoption of any budget which is or contains a Non-Pro Rata
Roll-out Budget.
12. Any action by @Home which would have the effect of increasing the
percentage of (x) Basic Service Revenues payable by an Operator to @Home or (y)
Premium Service Revenues payable by an Operator to @Home pursuant to @Home's
standard form of LCO Agreement.
13. The appointment of any outside directors to the .Com Committee
following the IPO (other than CEO, the Series K Director, Will Hearst and Xxx
Xxxxxxxxx).
UNANIMOUS ITEMS
---------------
The following items are required to be approved by all of the Series K
and Series A Directors:
1. The incurrence by @Home of any indebtedness for borrowed money
which provides for recourse against a Stockholder without the consent of such
Stockholder.
2
2. The authorization or issuance of any shares of Convertible
Preferred Stock following consummation of the transactions contemplated by this
Term Sheet.
3. Any amendments to or modifications of the items listed on this
Exhibit or the requisite vote or consent for approval thereof.
4. Any increase in the number of Series A or Series K Directors.
5. Any modification of the rights of the holders of the Series A or
Series K Preferred Stock to designate and elect directors, except for any
amendments or modifications contemplated by the Term Sheet.
6. Any amendments to or modifications of any provision of the By-Laws
which set forth the Supermajority Voting and Unanimous Voting provisions set
forth on this Exhibit, except for any amendments or modifications contemplated
by the Term Sheet.
7. The appointment of any directors (other than the CEO, the Series K
Director, Will Hearst, Xxx Xxxxxxxxx or any outside directors) to the .Com
Committee.
8. Any amendment or modification to the Specifications and Standards
which would require the Operator Facilities of any Cable Parent to be capable of
delivering video clips in excess of 10 minutes.
3
EXHIBIT B
@HOME RESPONSIBILITIES
Below is a list of the responsibilities of @Home.
1. NATIONAL BACKBONE AND REGIONAL DATA CENTER
------------------------------------------
a. Provide interconnection of headends/hubs to the RDC. The
expected speed of interconnection will be equal to or greater
than 45 Mbps (DS3) speeds or equivalent bandwidth capable of
creating the same user experience.
b. Connect RDC with the @Home Internet Backbone.
c. Develop the Internet Backbone.
d. Provide network management to include elements of the cable
plant including the cable modem. Also included is the integration
of the network management, provisioning, and subscriber
management systems.
e. Provide technical support for backbone (7x24).
f. Provide outage statistics coming from network management
including, to the extent practicable, real time notification to
the Operator.
g. Provide Quality of Service capability at the backbone level
when available.
2. CONNECTIVITY SERVICES
---------------------
a. Provide Internet IP addresses for @Home service users.
b. Interconnect the @Home backbone to the rest of the Internet
through a high speed connection to certain Network Access Points
(NAPs). The speed of the connection is expected to be equal to
or greater than 45 Mbps.
c. Provide peering agreements for NAP interconnection.
d. Provide Internet mail (IMAP compatible) and chat service
(IRC compatible).
e. Provide connectivity to other on-line hosting services.
f. Provide dial-up access for traveling subscribers at an
additional cost to the subscriber based on usage above a minimum.
3. SOFTWARE
--------
a. Provide client software to include the following:
* Browsers with free upgrades.
* TCP/IP stack (where needed) that is multicast
enabled.
* Application Plug-ins to enhance the surfing
experience (i.e., AVI, Real Audio, VRML viewer).
b. Provide IMAP or POP compatible mail services including an
email server.
c. Provide DNS service.
d. Provide software for caching, replication and proxy servers.
e. Provide single copies of client and server documentation for
training of cable personnel.
f. Provide installation scripts.
g. Provide a customized, broadbanded browser.
4. HARDWARE
--------
a. Provides all hardware required for the @Home broadband
service on @Home's side of the Point of Demarcation as set forth
in the Term Sheet.
b. Authorize, where possible, MSO to purchase hardware
collectively with @Home.
c. Provide necessary hardware for interconnection of
headends/hubs and the RDC and for the routers that enable
connectivity to the Internet at large, including security.
d. Provide project cutover team for new market launches.
e. Integration of HE cable data router and customer modem into
customer network management and provisioning. MSO will cover the
headend modem costs.
5. CONTENT AND MARKETING
---------------------
a. Provide all funds for national marketing in accordance with
the Term Sheet.
b. Provide support and tie-ins for local marketing in
accordance with the Term Sheet.
c. Negotiate all national content agreements.
2
6. CUSTOMER SERVICE
----------------
a. Provide 7X24 technical support for Tier II and Tier III.
b. Provide software and documentation for @Home installation
(including guidelines for modem & AO installation).
c. Provide technical support for MSO technicians.
d. Work with MSO to design and specify the interface for
billing and MSO Tier I customer support.
3
@HOME CUSTOMER SERVICE TIER DESCRIPTIONS
TIER I
------
Tier I customer service is the "front line" of the @Home/MSO product offerings.
The responsibility of Tier I service is to provide information to the customer,
initiation and changes of service, billing inquiries and some low-level trouble
shooting, and frequently asked questions. Tier I will include the following:
. Start, stop and changes of service.
. Determination of service eligibility.
. Product information.
. Provisioning and initial setup script - IP address generation, logins,
email setup, password capturing, etc.
. Service installation and dispatch scheduling and setup.
. Trouble ticket status reporting.
. Initial problem resolution. Tier I will include reasonably simple scripted
troubleshooting (based on script provided by @Home) and cable network
related problem diagnosis.
. Billing and pricing questions.
TIER II
-------
Tier II customer service is the diagnostic and problem resolution layer of the
@Home/MSO customer service offering. In this layer, the symptoms of the
problems are understood and recorded, the problem(s) are determined and action
is taken to resolve problem(s). This group will have advanced technical
troubleshooting skills and tools. Support from this group will include:
. Desktop OS support.
. @Home network information.
. @Home delivered software support.
. Problem diagnosis and resolution.
. Build knowledge base and on-line information systems.
. Handle Web and E-mail support.
4
TIER III
--------
Tier III will provide customer service and network operations support. This
group will handle any call not able to be resolved by Tier II. In addition to
resolving the more difficult customer problems, this group will be doing ongoing
network monitoring.
5
Schedule 1
FOUNDERS ADDITIONAL CABLE CABLE PARENT STOCKHOLDER STOCKHOLDER GROUP
-------- ----- ----- ------ ----------- -----------------
INVESTORS PARTNERS PARENT
--------- -------- ------
TCI Sub Comcast Sub TCI Sub TCI Services and XXX XXX Xxx XXX Xxx, XXX
TCIC Services and TCIC
and their respective
controlled affiliates
KPCB Cox Sub Comcastub Comcast Cable Comc ast Comcast Sub Comcast Sub, Comcast Cable
and their respective
controlled affiliates
Cox Sub CCI CEI Cox Sub Cox Sub, CCI and their respective
controlled affiliates
KPCB KPCB KPCB Affiliates,
Affiliates KPCB and their respective
(collectively) controlled affiliates
Schedule 2
@ HOME EQUITY & VOTING
Investor Series T Percent of Series K Percent of Series A Percent of
Preferred Series T Preferred Series K Preferred Series A
TCI Sub * 770,000.00 100.00% 1,553,000.00 51.62%
KPCB Affiliates ** 693,883.00 100.00% 0.00 0.00%
Comcast Sub 727,865.00 24.19%
Cox Sub 727,865.00 24.19%
Management
Total Shares 770,000.00 100.00% 693,883.00 100.00% 3,008,730.00 100.00%
Shares of Con. Percent of Common Percent of Voting Percent No. of
Pref. Con. Pref. Equivalent Equity Directors
TCI Sub 2,323,000.00 51.94% 23,230,000.00 45.35% 76.77% 5
KPCB Affiliates 693,883.00 15.51% 6,938,883.00 13.55% 5.76% 1
Comcast Sub 727,865.00 16.27% 7,278,650.00 14.21% 6.04% 1
Cox Sub 727,865.00 16.27% 7,278,650.00 14.21% 6.04% 1
Management 6,500,000.00 12.69% 5.39% 1
Total Shares 4,472,613.00 100.00% 51,226,183.00 100.00% 100.00% 9
* Currently owns 15.4 mill.; to be reverse split 10 to 1 and 770,000 shares of
Series T Preferred to be exchanged for Series A Preferred. TCI Sub to buy
additional 783,000 shares of Series A Preferred.
** Currently owns 4.6 mill.; to be reverse split to 460,000; KPCB Affiliates to
purchase additional 233,883 shares; Series K to convert into Series A Common.
Schedule X
1. Master Services Agreement dated August 21, 1995 entered into between
SSDS, Inc. and At Home Corporation concerning the development and system
integration of back office systems for @Home.
2. Invoice issued by AND Interactive Communications Corporation to At Home
Corporation dated December 14, 1995 to provide prototype development of
the @Home user interface.
Exhibit C
Standards and Specifications
I. Objective
This document is to provide a baseline criteria for the @Home Cable
Partners to identify qualified systems for submission to the Master Roll-
Out Schedule.
II. Standards and Specifications
1. Cable network architecture will be based on Hybrid Fiber
Coax; with fiber optic facilities feeding distribution nodes that
revert to coaxial cable in to the home.
2. Bandwidth allocation for the service will be at least one 6
MHz channel in the downstream direction.
3. MSO will test and provide performance information as to the
condition of the plant.
4. MSO will provide a minimum rack space configuration of
three six foot racks for cable data router equipment and servers;
totaling 180" to 200" for this launch configuration.
5. MSO will take reasonable steps to protect the headend from
fire, loss of power, deviations in climate requirements and
intrusion.
6. MSO will not be required to carry video clips in excess of
10 minutes.
Schedule Z
X. Xxx Restricted Businesses
High Speed Internet Access operations in Phoenix, AZ
X. XXX Xxxxxxxxxx Xxxxxxxxxx
Xxx XXX cable system in East Lansing, Michigan is offering consumer
Internet services on a commercial basis. This system has been providing these
services since April of 1995 and currently has a subscriber count of almost
400; 65% of whom are residential users. The service is priced in two tiers;
tier 1 is $44.95 per month on Zenith cable modems and tier 2 is $69.95 on
LANcity cable modems.
C. Comcast Restricted Businesses
Trials in Philadelphia, PA
Sarasota on-line in Sarasota, Florida
Work at home trial in Northern, New Jersey.
Table of Contents
Page
----
I.General1
-------
Issuer1
Business1
Financing2
II.Purchase of Shares2
------------------
Capitalization2
Securities to be Purchased by Founders and Additional Investors5
Ownership7
Closing Conditions8
III.Rights, Designations and Preferences of Convertible Preferred Stock to be
-------------------------------------------------------------------------
Set Forth in the Charter.10
------------------------
Ranking10
Liquidation Preference11
Dividend Rate and Payment Dates12
Voting Rights14
Rights of Holders of Convertible Preferred Stock Following the IPO14
Convertible Preferred Stock Directors15
Series B Common Directors16
Special Convertible Preferred Stock Voting Rights17
Anti-Dilution Rights18
IV. Registration Rights Agreement18
-----------------------------
V.Management.21
----------
Governance21
Content Provider Agreements23
Special Directors Approval Right24
Revised Business Plan and Budgets25
Initial Board25
Additional Strategic Investors26
VI.Stockholders Agreement Matters.26
------------------------------
TCI Call26
KPCB Put27
Cable Put29
Consideration Payable in Respect of TCI Call or KPCB Put30
Transfer Restrictions31
Deemed Transfer32
Conversion Restrictions34
Right of First Offer35
Special Right of First Offer Procedure Following an IPO36
Rights of Transferee37
Tag-Along Right38
Drag-Along Right38
Pre-Emptive Rights39
Determination of Fair Market Value39
Eligible Stockholder40
Permanent CEO41
Series A Director Designees41
Unanimous and Supermajority Provisions41
By-Laws of @Home42
Termination of Certain Put and Call Rights42
Amendment to Stockholders Agreement Following @Home IPO42
Termination of Stockholders Agreement45
VII.Master Distribution Agreement46
-----------------------------
Definitions46
Creation of Master Roll-Out Schedule53
Execution of Local Cable Operator Distribution Agreements54
Budgets54
Cable Parent Exclusivity Provisions55
Comcast Non-Exclusivity Provisions61
@Home Exclusivity Provisions63
Non-Performance of TCI64
Most Favored Nations Provisions64
Change of Control of TCI66
Changes in Master Roll-Out Schedule66
Local Content Programming66
@Home Programming67
Execution of Promotional Agreements and Exercise of Cable Parent
Exclusion Right67
Execution of .Com Agreements and Exercise of Cable Parent Access
Blocking Right70
Content Tag-Along Right72
Parent Undertaking73
Other Services74
VIII.Terms of LCO Agreements75
-----------------------
A.Roll-Out of the @Home Services75
Operator Territory75
@Home Roll Out Commitment:75
Failure by @Home to Roll-Out76
Operator Roll-Out Commitment77
Failure by Operator to Roll-Out77
Extensions of Time78
Sole Remedies78
Testing78
Commencement of Services78
Ownership and Maintenance79
Performance Standards80
X.Xxxxxxxxx; Customer Service.80
Marketing80
Branding80
Home Page80
ii
National/Local Content81
Customer Service81
C.Compensation and Billing.81
Allocation of Billing Responsibility81
Pricing82
Compensation82
Monthly Payment Procedures85
Ancillary Services86
Taxes86
D.Miscellaneous.86
Regulatory86
Confidentiality87
Indemnification87
Force Majeure87
Condemnation87
Term88
Termination88
Representations89
IX.General89
-------
Reasonable Commercial Efforts89
Index of Defined Terms
.Com Agreement47
.Com Committee24
@Home1, 1
@Home Exclusivity Provisions63
@Home Facilities46
@Home First Page46
@Home Network46
@Home Repurchase Right61
@Home Services2
@Home Specified Remedy46
@Work Service Revenues85
Actual Budget25
Additional Benefit73
Additional Investors6
Additional Shares6
affiliate22
Affiliated Operator46
against27, 28
all commercially reasonable efforts89
Alternative Arrangement74
Ancillary Services Arrangements86
Attributable Interest40
backbone1, 2
iii
Base Homes Passed34
Basic Service Revenue Split82
Basic Service Revenues83
Board12
XXX Button48
button68
cable80
Cable Parent6
Cable Parent Access Block Right47
Cable Parent Exclusion Right47
Cable Parent Exclusivity Provisions60
Cable Partner6
Cable Partners6
Cable Put29
Cable System Upgrade47
Call Notice26
CCI7
CEI7
Change of Control of a Stockholder32
Charter3
Closing6
Closing Date6
Comcast7
Comcast Cable6
Comcast Non-Exclusive Right61
Comcast Sub5
Commencement Date47
Commission28
Common Stock3
Competitor Exclusion69
Confidential Information87
Consumer Purpose56
Content Provider Group68
control56
Control 7
Control Acquisition58
Control Restricted Assets58
controlled56
Controlled Affiliate7
controlling56
Controlling Interest38
conversion ratio18
Conversion Shares18
Convertible Preferred Stock4
Cox Sub6
Deemed Transfer32
DGCL3
Discretionary Access Exclusion71
Discretionary Exclusion69
Eligible Cable Parent64
iv
Eligible Stockholder40
Equivalent Shares20
Exclusion Limit69
Exclusive Homes Passed33
Exclusive Stockholder38
Execution Date26
Exempt Acquisition58
Exempt Offering37
Exempt Restricted Assets58
Fair Market Value39
First Determination Date64
Force Majeure Event87
Founders1
front line4
High C50
High C Performance Ratio50
holdback20
Homes Passed47
HSN69
Initiating Holders19
Interim Financing10
Internet Backbone48
Internet Backbone Service48
Internet Service48
XX00
XXX0
IPO Election28
IPO Election Notice28
Junior Stock11
KPCB1
KPCB Affiliates1
KPCB Constituents27
KPCB Original Amount27
KPCB Put28, 29
KPCB Put Notice27
LCO Agreement54
Liquidation Price12
Local Area48
Local Content48
Local Service48
Management Pool Shares7
Management Stock PlanA-2
Master Roll-Out Schedule53
MFN64
Minimum Demand Shares20
Minimum Exclusive Homes Passed34
Monthly Payments82
most favored nation64
Most Favored Nations Provisions73
MSN23
v
National Area49
Net Price37
Network Upgrade49
Non-Control Acquisition56
Non-Pro Rata Roll-Out Budget49
Offer Price59
Offered Homes Passed49
Offeree72
Offeror72
Operator49
Operator Facilities50
Operator Territory75
Original Amount6
Original Initiating Holder19
outside directors24
Parent7
Parents7
Parity Stock11
Participating Dividend12
Performance Default50
Planning Period49
Point of Demarcation50
Preferred Dividend12
Preferred Stock4
Preferred Stock Directors16
Premium Service Revenue Split83
Premium Service Revenues83
Pro Rata Roll-Out Budget50
Projected Budgets25
Projected Commencement Date51
Promotional Agreement51
Proportionate Transferred Shares34
Qualified Spin Off Transaction32
Qualifying Offered Homes Passed51
Qualifying System51
rate card24
reasonable best efforts45
reasonable commercial efforts89
Related Party21
Related Party Transaction22
Related Party Vote43
Residential Subscriber51
Restricted Assets59
Restricted Business56
Restricted Period52
Revenue Splits84
Roll-Out Budget52
Roll-Out Schedule75
Securities Act18
Senior Stock11
vi
Series A Director15
Series A Preferred Stock3
Series B Common Directors16
Series B Exchange35
Series K Director15
Series K Preferred Stock2
Series T Directors15
Series T Preferred Stock3
shelf registration20
Special Directors16
Special KPCB Put28
Special Voting Stock10
Specifications and Standards52
Specified Brand68
Specified Promotions68
Stockholder7
Stockholder Group7
Stockholders Agreement26
Style Guidelines81
Subject Shares61
Subject Shares Purchase Price61
Subsequent Determination Date64
Supermajority Approval10
Supermajority VoteA-1
XXX00
XXX0
TCI Call26, 29
TCI Change of Control52
TCI Exchange4
TCI Services6
TCI Sub1
TCIC6
templates1
Term88
theme80
Total Shares34
Trademark License Agreement80
Transfer31
Transfer Restrictions7, 27
Triggering Cable Parent64
Unaffiliated Third Party65
Upgraded Network Portion49
Upgraded System47
video barker1
Work @Home84
vii
