TERM SHEET
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BETWEEN AT HOME CORPORATION AND
SHAW CABLESYSTEMS LTD. AND ROGERS CABLESYSTEMS LIMITED
March 18, 1997
INTRODUCTION
A. This term sheet sets out the terms under which the parties have agreed that
Shaw Cablesystems Ltd. ('Shaw') and Rogers Cablesystems Ltd. ('Rogers')
will distribute in Canada under the co-brand name Wave@Home or at their
option jointly exercised by Rogers and Shaw under the brand name @Home, a
high speed residential Internet service which shall be created by At Home
Corporation ('@Home'), Rogers and Shaw and which shall be based on the
Residential Internet Service (the 'Service') created and to be provided by
@ Home which includes the @Home division and the @Media division as
described in the Confidential Offering Memorandum (as defined below);
B. The parties acknowledge that Canada offers a unique opportunity which the
parties wish to jointly develop by licensing Rogers and Shaw to create a
service (the 'Wave@Home Service') based on the Service and developing a
business relationship that will ensure the success of the Wave@Home Service
in Canada taking into consideration Canada's unique market, geographic and
regulatory characteristics; and
C. Terms commencing with capital letters and not defined in the body of this
Term Sheet or in any schedule shall bear the meaning ascribed to them in
Schedule 'A' attached hereto.
1.0 EQUITY INVESTMENT
1.1 PURCHASE OF SHARES AND WARRANTS: Rogers and Shaw shall each purchase
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U.S.$15,000,000 of Series C Convertible Preferred Stock (the 'Series C
Shares') of @Home as outlined in the confidential offering memorandum
related to the Series C Shares ('Confidential Offering Memorandum') in
respect of the Series C Shares as amended by a supplementary offering
memorandum providing that each of the Series C Shares shall be convertible
into 20 shares of Series A Common Stock and the purchase price per Series C
Share shall be $200.00. As a result of the purchase of such Series C
Shares, Rogers and Shaw will purchase the warrants as outlined in Schedule
'B' (the 'Warrants'). The stock purchase agreement of the Series C Shares
will provide that such shares are transferable to Canadian MSO's who are
sub-distributors of Wave@Home.
1.2 RESTRICTIONS ON THE TRANSFER OF SERIES C SHARES: The parties recognize
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that restrictions on transfer of the Series C Shares and Series A Shares
into which they may be converted and restrictions on exercise of the
Warrants may be required by U.S. securities laws to enable @Home to fulfill
its financing plans as disclosed to Rogers and Shaw. The parties agree to
negotiate the terms of such restrictions in good faith prior to the closing
with a view to facilitating both @ Home's financing plans and Rogers' and
Shaw's marketing and
distribution plans for the Wave@Home Service, including the entering into
of sub-distribution agreements.
1.3 BOARD REPRESENTATION AND OBSERVER STATUS: As part of the closing
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procedures @Home shall take such actions as are necessary to enable it to
comply with Schedule 'C'.
2.0 GRANT OF LICENSE AND TERMS OF DISTRIBUTION AGREEMENT
2.1 EXCLUSIVE LICENSE: Subject to the proviso set out below, effective at the
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closing contemplated by Section 4 @Home hereby grants, solely for Canada,
to:
(A) Rogers, an exclusive license to distribute, market and promote that
portion of the Service which as contemplated in paragraph A above
forms part of the Wave@Home Service in those jurisdictions in which
Rogers is licensed from time to time by the Canadian Radio-television
and Telecommunications Commission (the 'CRTC') to operate a cable
distribution undertaking;
(B) Shaw, an exclusive license to distribute, market and promote that
portion of the Service which as contemplated in paragraph A above
forms part of the Wave@Home Service in those jurisdictions in which
Shaw is licensed from time to time by the CRTC to operate a cable
distribution undertaking; and
(C) Rogers and Shaw jointly, an exclusive license to distribute, market
and promote directly or through the grant of sub-licenses, that
portion of the Service which as contemplated in paragraph A above
forms part of the Wave@Home Service in Canada in addition to those
jurisdictions referred to in sub-paragraph 2.1(A) and (B) above.
The licenses referred to above are individually referred to as a 'License'
and collectively as the 'Licenses'. The Licenses shall include the
exclusive, nontransferable (except as permitted by this term sheet) right
and license to use all present and future @Home trade marks, technology,
processes, know-how, documentation and techniques together with all related
Intellectual Property Rights as may be developed, owned, acquired or
licensed by @Home and as may be necessary in providing the Wave@Home
Service in accordance with this term sheet and the right to use such trade
marks with any other trade mark owned by Rogers or Shaw, or their sub-
distributors, including the trade mark 'Wave'; all in accordance with
@Home's written trade mark standards and customary licensing guidelines a
copy of which shall be appended to the definitive agreement to be entered
into by the parties as contemplated in paragraph 7.1 below. Provided that,
the exclusivity of the Licenses shall terminate at @Home's option to be
exercised within 90 days of the relevant event (such loss of exclusivity
shall be @Home's sole remedy):
(i) in the case of the License granted to Rogers, if:
1. Rogers fails to reach the number of Homes Passed provided for in
Schedule 'D' attached hereto; or
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** Confidential treatment has been
requested with respect to certain
information contained in this
document. Confidential portions
have been omitted from the public
filing and have been filed
separately with the Securities
and Exchange Commission.
2. of the number of Homes Passed provided for in Schedule 'D' Rogers
has not attained subscribers to the Wave@Home Service equal to the
Penetration Percentage set out in Schedule 'D'
by the end of the relevant year set out opposite thereto;
(ii) in the case of the License granted to Shaw, if:
1. Shaw fails to reach the number of Homes Passed provided for in
Schedule 'D' attached hereto; or
2. of the number of Homes Passed provided for in Schedule 'D' Shaw
has not attained subscribers to the Wave@Home Service equal to the
Penetration Percentage set out in Schedule 'D',
by the end of the relevant year set out opposite thereto;
(iii) [**]
The time for performance of Rogers' and/or Shaw's obligations as set out
above, shall be extended day-for-day by (1) to the extent that such failure
is as a result of a failure by @Home to complete its obligations set out in
this term sheet, the number of days of any resulting delay in Rogers'
and/or Shaw's performance of its obligations set out above; or (2) the
number of days Rogers' or Shaw's performance was prevented or delayed by
the occurrence of a Force Majeure event; or (3) a cure period of six (6)
months following notice by @Home to Rogers or Shaw as applicable in the
event of the failure to meet the levels referred to above. In the event of
a loss of the exclusivity of the License, there shall be a three (3) month
transitional period following such loss of exclusivity during which period
@Home shall not use or license any third party to use the trade mark @Home
but may work with other service providers.
2.2 MASTER ROLL-OUT PLAN: Rogers and Shaw shall distribute the Wave@Home
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Service in accordance with the terms of the Licenses and substantially as
determined by agreement of @Home, Rogers and Shaw in the Master Roll-Out
Plan. The 'Master Roll-Out Plan' means the plan of the parties which sets
forth the first commercial deployment date, the upgrade schedule and the
network architecture to enable the launch of the Wave@Home Service by
Rogers and Shaw. @Home, Rogers and Shaw shall prepare the Master Roll-Out
Plan taking into account the particular characteristics of the Canadian
market which in their respective view is relevant to the distribution of
the Wave@Home Service.
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2.3 SUB-DISTRIBUTION AGREEMENTS: Any agreement entered into by Rogers or Shaw
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(directly or indirectly through an entity controlled by Rogers and Shaw)
with a sub-distributor shall:
(A) be substantially in the standard form of sub-distributor or
affiliation agreement to be approved by the parties hereto and shall
not be altered in any material respect without the prior written
consent of @Home, which consent shall not be unreasonably withheld.
Provided that, such sub-distribution agreements shall be entered into
only with sub-distributors in accordance with sub-distribution
guidelines, which shall be mutually agreed upon by the parties hereto;
(B) provide for such management fees to be paid by such sub-distributor to
Rogers and/or Shaw, as applicable, for establishing and managing the
relationship with such sub-distributor. Such management fee will be
set by the Rogers and Shaw and shall be approved by @Home, acting
reasonably, and shall be sufficient to cover at least Rogers' and
Shaw's costs and investment in connection with such establishment and
management. Rogers and/or Shaw, as applicable, may charge additional
fees to the sub-distributors for additional or incremental services
such as billing or customer support; and
(C) provide that the rights granted to sub-distributors which require
performance by @Home, shall be no greater than the rights granted to
Rogers and Shaw by @Home and that such sub-distributors shall be
subject to performance standards in order to maintain exclusivity.
Rogers and Shaw shall promptly notify @Home of any material breach under
any such sub-distributor or affiliation agreement. Each of Rogers and Shaw
(directly or indirectly through an entity controlled by Rogers and Shaw)
will diligently enforce the provisions of any sub-distributor or
affiliation agreement.
2.4 REGULATORY CONSIDERATIONS: Rogers and Shaw will distribute the Service in
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accordance with all applicable laws, ordinances, regulations and policies
of any governmental agency or regulatory authority having jurisdiction.
The parties acknowledge that Rogers and Shaw are required by the CRTC to
provide access to their respective networks to third party Internet Service
providers. @Home shall provide to each of Rogers and Shaw, as applicable,
at @Home's cost, system upgrades such as introduction of source based
routing to enable Rogers and Shaw to provide such access to such third
parties and Rogers and/or Shaw, as applicable, shall pay a reasonable fee
to @Home for the use of any of @Home's technology related to such system
upgrades by Rogers and/or Shaw to enable them to provide such access to
third parties. Nothing in this paragraph is intended to derogate from any
benefit to which @Home is entitled pursuant to the terms hereof nor from
the obligation of Rogers and Shaw to use its commercially reasonable
efforts to distribute, market and promote the Wave@Home Service.
2.5 RECIPROCAL EXCLUSIVITY: During the term of the exclusivity of the
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respective Licenses, other than the provision of the Wave@Home Service, and
provided that @Home is not in default of its obligation under the Master
Roll-Out Plan, Rogers and Shaw, as applicable,
4
** Confidential treatment has been
requested with respect to certain
information contained in this
document. Confidential portions
have been omitted from the public
filing and have been filed
separately with the Securities
and Exchange Commission.
shall not [**] However, nothing in this paragraph is intended to and
does not restrict either Rogers or Shaw or their sub-distributors from
promoting, over an Internet Backbone, programming and content (such as
Yahoo, YTV Canada Inc. and Canoe). Provided that, the time for performance
of @Home's obligation set out in the Master Roll-Out Plan shall be extended
day-for-day by (1) to the extent that such failure is as a result of a
failure by Rogers and/or Shaw to complete its obligations set out in the
Master Roll-Out Plan; the number of days of any resulting delay in @Home's
performance of its obligations set out in this term sheet; or (2) the
number of days @Home's performance was prevented or delayed by the
occurrence of a Force Majeure event; or (3) a cure period of six (6) months
following notice by Rogers and/or Shaw as applicable in the event of the
failure by @Home to perform its obligations under the Master Roll-Out Plan.
2.6 COVENANTS OF ROGERS AND SHAW: Rogers and Shaw, each individually with
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respect to its own facilities and systems, and severally with respect to
the obligation to include the same in agreements with sub-distributors,
covenant and agree with @Home that it will:
(A) upgrade and maintain its respective HFC plant to enable it to operate
two-way data transmission services in accordance with the Master Roll-
Out Plan and the Standards and Specifications;
(B) acquire, install and maintain cable modem termination system (also
known as a cable data router) and cable modems necessary to provide
the Wave@Home Service;
(C) provide such telecommunications facilities necessary to connect their
respective subscribers to headends and/or fibre nodes, connect such
headends and/or fibre nodes to @Home's Regional Data Centres ('RDC')
in Canada and to connect these RDC's to the nearest POP on the U.S.
side of the border (the 'U.S. POP');
(D) be solely responsible for its customers and will provide in any sub-
distributor agreements that the sub-distributors shall be responsible
for such sub-distributor's customers including responsibility for
billing, installation of the hardware and software required to enable
the customer to receive and use the Wave@Home Service, Tier I Customer
Support and Tier II Technical Support. Provided that Rogers and Shaw
may retain @Home to assist it in providing any of the above services
on terms and at such reasonable fees as the parties shall agree;
(E) allow @Home to co-locate RDC's, proxy servers and related equipment at
such of Rogers' and Shaw's network distribution facilities at no
charge for the use of such space to @Home. Provided that @Home will
use commercially reasonable efforts to optimize space and other
requirements consistent with its practice with its U.S. Cable
Partners;
5
(F) subject to @Home complying with sub-paragraph 2.7(I) provide necessary
modifications to its billing, subscriber management, and network
management systems to adequately interface with @Home's support and
network management system. @Home shall work with Rogers and Shaw to
help them, to at least the same degree as the level of assistance
given by @Home to its U.S. Cable Partners, to minimize their costs for
the foregoing; and
(G) use commercially reasonable, diligent efforts to distribute, market
and promote the Wave@Home Service, on a local, regional and national
level including promoting the Wave@Home Service to potential sub-
distributors.
2.7 COVENANTS OF @HOME: In order to facilitate the distribution of the
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Wave@Home Service by Rogers, Shaw and the sub-distributors, in accordance
with the Master Roll-out Plan, @Home covenants and agrees with each of
Rogers and Shaw that in addition to the grant of the Licenses, it will, in
Canada, subject to the other terms and conditions herein:
(A) grant access to Shaw, Rogers and the sub-distributors and their
respective subscribers customers or content providers to @Home's
broadband network;
(B) install and maintain IP data routers and proxy servers as mutually
agreed upon;
(C) install and maintain that number of RDCs that the parties mutually
agree is required to maximize the efficient use of Rogers', Shaw's and
the sub-distributors' transport infrastructure but in any event such
number of RDC's shall, together with the proxy servers installed,
deliver the same level of performance as enjoyed by the U.S. Cable
Partners;
(D) provide the software necessary for use by and to enable Rogers',
Shaw's and the sub-distributors' Wave@Home subscribers to receive and
use the Wave@Home Service, including the customized Internet browser,
TCP\IP stack and application plug-ins;
(E) provide all of the telecommunications facilities connecting the U.S.
POP to the @Home Network;
(F) provide Tier III Network Support;
(G) provide such general engineering, operations, marketing and
management, consultation and support to Rogers, Shaw and the sub-
distributors when reasonably requested;
(H) provide training programs to train personnel from or determined by
Rogers and Shaw to enable such persons to then train others, provide
scripts and other materials designed to assist Rogers, Shaw and the
sub-distributors with Tier I Customer Support and Tier II Technical
Support;
(I) provide access to @Home's subscriber management systems and the API's
reasonably necessary to automate the exchange of data from such
systems
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to Rogers, Shaw and the sub-distributors (such as IP addresses, log-in
names, computer configuration, etc.) that are necessary for billing
and subscriber management;`
(J) work with Rogers and Shaw to develop network architecture that
minimizes inter-city data transport within Rogers' Shaw's and the sub-
distributors' networks.
In carrying out its obligations @Home shall treat Rogers, Shaw and the sub-
distributors in a manner and with a priority that is equal to that afforded
to its U.S. Cable Partners.
2.8 DUE DILIGENCE AND ACCESS: Following the execution of this term sheet by
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all parties, the parties shall conduct their respective due diligence
review of the assets, operations and the capital structure, as applicable,
of the other. The parties shall coordinate closely with the officers of
the other all such activities and shall conduct any such inquiries with
appropriate discretion and sensitivity to the relationships of the other;
employees, customers, suppliers and distributors. The parties agree to
hold information obtained in confidence in accordance with the terms of the
confidentiality agreement entered into between each of Shaw and Rogers and
@Home and to use the information so obtained only for the purpose of
evaluating efficacy of the transaction contemplated herein. During this
time the parties and their advisors and representatives shall, subject to
confidentiality obligations to third parties, have access during normal
business hours to such of the other's properties, books, contracts,
documents, records and personnel related to the Service and the ability of
any of the parties to fulfill their respective obligations under this term
sheet and the other may reasonably request. In the event that the
transactions contemplated herein are not completed, the parties shall
return all such information in written form and any copies thereof to its
owner, and destroy all notes, working papers and schedules based on such
confidential information. @Home, Rogers and Shaw shall complete their due
diligence within a reasonable time, which shall not exceed 20 business days
following execution of this term sheet by all parties. In the event that
the results of the due diligence conducted by parties gives rise to the
condition set out under paragraphs 4.1(E), 4.2(E) or 4.3(C), the applicable
party shall be entitled to terminate the arrangements contemplated herein.
2.9 STANDARDS AND SPECIFICATIONS: The parties will comply with mutually agreed
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to Specifications and Standards that will include minimum cable plant
performance standards, @Home Network infrastructure standards, and
certification criteria. In particular, Rogers and Shaw will meet certain
minimum requirements for upstream and downstream bandwidth and @Home will
provide for certain minimum caching rates assuming a specified subscriber
level.
2.10 RIGHTS TO PURCHASE FROM @HOME VENDORS: @Home will use reasonable
-------------------------------------
commercial efforts to allow Rogers, Shaw and their sub-distributors to
purchase hardware and software for Wave@Home on an aggregate basis with
@Home and/or the U.S. Cable Partners so that Rogers, Shaw and the sub-
distributors can thereby enjoy advantageous terms and pricing.
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2.11 @MEDIA PROGRAMMING RESPONSIBILITIES: The parties envision that the user
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interface for Wave@Home will feature a Local Area and a National Area as
follows:
(A) Rogers, Shaw or a sub-distributor, as the case may be, will program
the Local Area and all Local Content. Local Content shall consist
solely of content that is intended for a specific geographic area,
such as a city, town, municipality or metropolitan area (a 'Geographic
Area') (for example, a local restaurant guide or real estate listing
service). Shaw and Rogers will program the Local Area only with Local
Content; and
(B) Content that is promoted in more than one Geographic Area will be
included in the National Area. Rogers, Shaw and @Home will jointly
program the National Area and all National Content in accordance with
paragraph 2.12 below. Rogers and Shaw and the sub-distributors will
develop relationships with Canadian content partners to provide
National Content and @Home will utilize its relationships with U.S.
content partners for the same purpose.
2.12 PROGRAMMING THE NATIONAL AREA: The following principles shall apply:
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(A) The parties acknowledge the desire to present a distinctly Canadian
service consistent with the spirit of Canadian cultural policy while
balancing the desire to use as much of the content forming part of the
Service as is possible. Accordingly, Rogers and Shaw at their cost
shall be entitled to modify, augment, or replace National Content
programmed by @Home in order to comply with Canadian law, cultural
policies and/or industry requirements or expectations and to ensure
that it is relevant to the Canadian market. Provided that Rogers and
Shaw shall act reasonably and in good faith in order to minimize such
changes. The principles described in this paragraph 2.12(A) shall be
referred to as the 'Programming Principles';
(B) Rogers and Shaw at their cost may make editorial changes in the
National Area and in the National Content as either of them determines
is appropriate for the Wave@Home Service, consistent with the
Programming Principles. For example, the parties will frequently
change the lead news story, sports scores, weather conditions and
other editorial content appearing on the news, sports and business
guide pages so that it is oriented toward the Canadian market;
(C) Rogers and Shaw at their cost may supplement or replace third party
content provided by @Home as it determines is appropriate for the
Wave@Home Service consistent with the Programming Principles. For
example, Rogers and Shaw may elect to add TSN to supplement or replace
ESPN. Rogers and Shaw will first use commercially reasonable efforts
to supplement such content provided by @Home by adding additional
third party content of its choice. If this approach is inadequate or
is not practical, Rogers and Shaw may replace such content but will
consult with @Home prior to doing so;
(D) @Home shall develop and maintain the underlying user interface and
page templates for the Wave@Home Service (the 'Programming
Structure'). @Home
8
** Confidential treatment has been
requested with respect to certain
information contained in this
document. Confidential portions
have been omitted from the public
filing and have been filed
separately with the Securities
and Exchange Commission.
will use commercially reasonable efforts to make the Programming
Structure as flexible as possible so that Rogers and Shaw can achieve
the Programming Principles without a need for modifications to the
Programming Structure. A change to a Programming Structure would for
example be replacing a shopping page which features an anchor tenant
and four other vendors with a page modified to feature only the anchor
tenant. If Rogers and Shaw believe that such a modification is
necessary to achieve the Programming Principles, Rogers and Shaw will
request that @Home implement the same, at Rogers' and Shaw's cost.
@Home agrees that it will implement such modifications unless such
modifications would jeopardize the technological integrity of the
overall Programming Structure; in which case, @Home shall endeavour to
recommend reasonable alternatives to achieve the goals or satisfy the
concerns of Rogers and Shaw. Such requests for modifications are
anticipated to be infrequent and normally not necessary to achieve the
Programming Principles;
(E) Except as may be otherwise required by any regulatory authority,
Rogers and Shaw will have the limited right to block the promotion of
any programming forming part of the National Content provided by @Home
which is competitive with any form of programming service owned or
controlled by Rogers or Shaw (e.g.: YTV vs. Nickelodeon) without
reference to the Programming Principles; provided however that Rogers
and Shaw may each block the promotion of only two such programs, in
their respective licensed territories, at any given time; and
(F) @Home will make available to Rogers and Shaw the same content platform
technologies that it makes available to its U.S. Cable Partners,
including multi casting and replication technologies. To the extent
that Rogers and Shaw require content platform technologies (such as
advertising insertion tools) that are not required by the U.S. Cable
Partners, @Home will license such content platform technologies to
Rogers and to Shaw on commercially reasonable terms.
2.13 @MEDIA REVENUE: All revenue derived from the Local Area will be retained
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by Rogers, Shaw or the sub-distributor responsible for programming the
Local Area. All revenue derived from the National Area will be allocated
as follows:
(A) The party responsible for generating the revenue from advertising, a
promotional link, an on-line transaction or other @Media services (the
'Additional Revenue') shall retain [**]% of such Additional Revenue as
a sourcing commission. The remaining Additional Revenue (i.e. [**]% of
the Additional Revenue) will be aggregated on a quarterly basis and
allocated in proportion to the Additional Revenue (less the sourcing
commission) generated by each party in that quarter. However, in no
event shall any party be entitled to less than [**]% nor more than
[**]% of the remaining Additional Revenue; and
(B) Revenue from Premium Services will be allocated on a case by case
basis in proportion to the contributions made by each party. 'Premium
Services' are services that require Rogers' and/or Shaw's active
participation in marketing, sales, billing and/or customer support.
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The parties shall reassess the above allocations following the third
anniversary of the execution of this term sheet.
2.14 ADVERTISING PRACTICES:
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(A) Rogers and Shaw shall schedule all advertising content forming part of
the National Area on a non-discriminatory manner and so as to maximize
overall advertising revenue. Rogers and Shaw shall sell advertising
to businesses in Canada for insertion in the Wave@Home Service and
@Home shall sell advertising to businesses in the United States for
insertion in the Wave@Home Service. Rogers and Shaw on the one hand
and @Home on the other shall share leads (for which an appropriate
commission shall be paid) but shall not sell any such advertising to
businesses operating in the other's territory. All sales of
advertising to be inserted in the Wave@Home Service shall be made in
accordance with an advertising rate card for the Wave@Home Service;
and
(B) From time to time Rogers and/or Shaw may bundle advertising on the
Wave@Home Service with other media offerings by entities which it
controls. In such instance, any discount from the applicable rate
card associated with bundling shall be allocated on an equitable
basis.
2.15 RESEARCH & DEVELOPMENT: @Home shall use its commercially reasonable
----------------------
efforts to conduct Canadian based research and development in matters
regarding the Service and the Wave@Home Service.
2.16 BRANDING: The Service will be marketed and distributed by Rogers and Shaw
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under the co-brand 'Wave@Home' or the brand '@Home'. Rogers' and Shaw's
local loop (i.e. the infrastructure required to deliver the Wave@Home
Service to the subscriber from the RDC's) will be referred to as the
'Wave'. Rogers and Shaw and the sub-distributor may use a tag line to
identify Wave@Home as a product of Rogers, Shaw or the sub-distributor.
Rogers and Shaw shall grant to @Home a non-exclusive license to use the
appropriate trade marks owned by either of them to market and promote the
Wave@Home Service. Provided that nothing set out in this paragraph shall
give Rogers or Shaw any ownership rights to the trade mark '@Home'.
2.17 FEES: The following fees shall apply to the Licenses:
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(A) Wave@Home will be offered to Rogers' and Shaw's and their sub-
distributors' subscribers at basic subscription rates (which may be
based on a month-to-month or longer term subscriptions), cable modem
rates, and installation rates determined by Rogers, Shaw and their
sub-distributors in their sole discretion. The basic subscription
rate shall include local loop transport fees and Internet Service
provider fees and may be allocated between local loop transport fees
and Internet Service provider fees in any manner that Rogers and Shaw
deem appropriate subject to any applicable legal requirements relating
to the pricing of these services; and
10
** Confidential treatment has been
requested with respect to certain
information contained in this
document. Confidential portions
have been omitted from the public
filing and have been filed
separately with the Securities
and Exchange Commission.
(B) In consideration of the License granted hereunder and the performance
of @Home's obligations, Rogers and Shaw will pay @Home [**]% (the 'Fee
Percentage') of the Wave@Home basic subscription rate revenue,
including any portion allocated to local loop transport (the
'Wave@Home Services Revenue') billed by Rogers, Shaw and its sub-
distributors. The parties acknowledge that the Wave@Home Service
Revenue is presently set out in the High Speed Internet Access Tariff
filed by each of Rogers and Shaw with the CRTC. The tariffs do not
include installation charges, any sales, use, gross receipts, excise,
franchise or other local, provincial and federal taxes, fees or
charges, however designated (excluding taxes on the other party's
income) imposed on or based upon the provision or use of Wave@Home
Services, management fees described in paragraph 2.3(B), @Media
revenue described in paragraph 2.13, or any incremental fees collected
for additional content or programming or the fees charged for the sale
or rental of cable modems, all of which amounts shall in all cases be
excluded from the calculation of the Wave@Home Service Revenue.
Rogers and Shaw will not and the sub-distribution agreements will
provide that the sub-distributors shall not artificially allocate
costs between the Wave@Home Service Revenue and the other fee
categories excluded above in order to lower Rogers' and Shaw's
payments to @Home. All payments under this term sheet will be net 30
days from the calendar month end; and
(C) Rogers, Shaw or any sub-distributor will be entitled to include the
Wave@Home Service in a bundled offer with other products or services
offered by such party or other ('Bundled Offer') and sold to
subscribers at a single discounted price. If Rogers or Shaw wish to
include that Wave@Home in a Bundled Offer such party may request that
@Home agree that the Wave@Home Service Revenue for the purpose of
section 2.17(B) will be equal to the discounted price for the
Wave@Home Service included in the Bundled Offer. The discounted price
will be determined by dividing (i) the price for the Bundled Offer by
(ii) the sum of the standard price for each service included in the
Bundled Offer and multiplying the resulting percentage by the un-
discounted Wave@Home Service Revenue. @Home will act reasonably in
giving its consent and will take into consideration the likely
benefits of the Wave@Home Service being included in the Bundled Offer.
Failing such consent if Rogers or Shaw proceeds with the Bundled
Offer, the Wave@Home Service Revenue will be calculated without
reference to any discount.
All fees or other payments by one party to the other as contemplated herein
shall be reduced by all statutory withholding obligations imposed on such
party including any taxes required to be withheld pursuant to Canadian or
U.S. laws.
2.18 PERFORMANCE BASED INCREASE IN @HOME SERVICE FEES: The fees payable to
------------------------------------------------
@Home shall be increased in the manner set out in Schedule 'E' attached
hereto.
2.19 TERM: The initial terms of the Licenses and this term sheet (or the
----
definitive distribution agreement if executed and as such supersedes the
term sheet) will be six years. Rogers and Shaw shall each have the right
to renew this agreement for two additional six year
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terms subject to reaching agreement with @Home with respect to the overall
economics of the contractual arrangements for any such renewal period. At
the end of the fifth and eleventh year the parties will review the overall
economics of the contractual arrangements and negotiate in good faith any
amendments sought to the contractual arrangements by any of the parties for
any renewal term.
2.20 TRANSITION PERIOD: If the contractual arrangements set out herein
-----------------
terminate as a result of the:
(A) failure of the parties to reach agreement on the economic terms to
take effect on renewal as contemplated in paragraph 2.19 above, there
will be a twelve month transitional period following such termination
or such shorter period of time as shall be agreed upon by the parties;
and
(B) the breach of one of the parties, and subject to the requirements of
Section 2.1(i), (ii) and (iii), there will be a transition period of
such duration as shall be mutually agreed upon, not to exceed nine
months provided however that the party in breach shall use all its
reasonable commercial efforts to remedy the breach and shall continue
to fulfill its other contractual obligations.
During the transitional periods described above Rogers and Shaw may, but
need not, continue to use the 'Wave@Home' co-brand or '@Home' brand, as the
case may be. During the transition period the parties will otherwise be
bound by their obligations set out in this term sheet including the payment
of fees and the exclusivity obligation of the parties (subject to the right
of the parties to prepare to contract with an alternative provider). In
addition during the transition period, the parties will co-operate and work
together in good faith to effect a smooth and orderly transition from the
facilities, networks, technology and services provided by each of the
parties hereunder to the separate facilities, networks, technology and
services required by each of the parties after the end of the transition
period.
3.0 ADDITIONAL VENTURES
3.1 @HOME COMMERCIAL SERVICES: @Home, Rogers and Shaw will negotiate in good
-------------------------
faith until December 31, 1997 with a view to signing a distribution
agreement granting Rogers and Shaw an exclusive license in Canada covering
@Home's commercial services (such as @Work Remote for telecommuters and
@Work Internet access service). Nothing in this paragraph is intended to
prohibit either party from entering into any arrangement with any other
party to provide such commercial services in Canada. However, in the event
that @Home offers a commercial product with another Internet Service
provider, @Home shall not use '@Home' as the product name for such service
and shall use its good faith efforts to disassociate the @Home name or
trade mark with such service. It being agreed that regardless of the
success of the negotiations regarding these @Home commercial services,
nothing herein shall limit the ability of Rogers and Shaw to distribute,
market and promote the Wave@Home Service to any residence in Canada even if
such customer might also work from his or her residence.
12
4.0 CONDITIONS PRECEDENT TO CLOSING
4.1 The obligation of Rogers to complete the transactions referred to above is
conditional on the following:
(A) the representations and warranties of @Home set out in Part 5 below
shall be true on the closing date as if made at and as of such date;
(B) Obtaining the approval of the board of directors of Rogers on or
before March 17,1997;
(C) No action or proceeding shall be pending or threatened by any person,
company, firm, governmental authority, regulatory body or agency to
enjoin or prohibit the purchase by Rogers or the sale by @Home of the
Series C Shares and the Warrants or the grant of the Licenses to
Rogers;
(D) As part of the closing procedures regarding the transactions
contemplated herein, @Home shall execute and deliver the form of stock
purchase agreement distributed in connection with @Home's Series C
Convertible Preferred Stock offering for the purchase of the Series C
Shares and the Warrants and related documents providing the customary
representations and warranties and covenants generally provided to a
purchaser of shares from an issuer provided that the form of stock
purchase agreement and other definitive documents for the sale and
issuance of the Series C Shares and the Warrants are subject to the
final approval of the Board of Directors of Rogers;
(E) Rogers shall have completed its due diligence to the extent set out in
paragraph 2.8 above and the due diligence shall not have revealed any
fact, matter, omission or misstatement of such a material nature as to
lead a prudent person operating an Internet Service in circumstances
similar to those of Rogers and involved in a transaction such as the
one contemplated herein to conclude in its own best interests, that
the transaction should not be completed; and
(F) Simultaneously with the closing of the transactions set out herein by
Rogers, Shaw shall complete its obligations set out herein.
4.2 The obligation of Shaw to complete the transactions referred to above is
conditional upon:
(A) the representations and warranties of @Home set out in Part 5 below
shall be true on closing date as if made at and as of such date;
(B) Obtaining the approval of the board of directors of Shaw on or before
March 17, 1997;
(C) No action or proceeding shall be pending or threatened by any person,
company, firm, governmental authority, regulatory body or agency to
enjoin or prohibit the
13
purchase by Shaw or the sale by @Home of the Series C Shares and the
Warrants or the grant of the Licenses to Shaw;
(D) As part of the closing procedures regarding the transactions
contemplated herein, @Home shall execute and deliver the form of stock
purchase agreement distributed in connection with @Home's Series C
Convertible Preferred Stock offering for the purchase of the Series C
shares and the Warrants and related documents providing the customary
representations and warranties and covenants generally provided to a
purchaser of shares from an issuer provided that the form of stock
purchase agreement and other definitive documents for the sale and
issuance of the Series C Shares and the Warrants are subject to the
final approval of the Board of Directors of Shaw;
(E) Shaw shall have completed its due diligence to the extent set out in
paragraph 2.8 above and the due diligence shall not have revealed any
fact, matter, omission or misstatement of such a material nature as to
lead a prudent person operating an Internet Service in circumstances
similar to those of Shaw and involved in a transaction such as the one
contemplated herein to conclude in its own best interests, that the
transaction should not be completed; and
(F) Simultaneously with the closing of the transactions set out herein by
Shaw, Rogers shall complete its obligations set out herein.
4.3 The obligation of @Home to complete the transactions referred to above is
conditional upon:
(A) Obtaining the approval of the board of directors of @Home on or before
March 20, 1997;
(B) No action or proceeding shall be pending or threatened by any person,
company, firm, government authority, regulatory body or agency to
enjoin or prohibit the purchase by Rogers or Shaw or the sale by @Home
of the Series C Shares and the Warrants or the grant of the Licenses
to Rogers and Shaw;
(C) @Home shall have completed its due diligence to the extent set out in
paragraph 2.8 above and the due diligence shall not have revealed any
fact, matter, omission or misstatement of such a material nature as to
lead a prudent person operating an Internet Service in circumstances
similar to those of @Home and involved in a transaction such as the
one contemplated herein to conclude in its own best interests, that
the transaction should not be completed;
(D) the representations and warranties of Rogers and Shaw set out in Part
5 below shall be true on the closing date as if made at and as of such
date;
(E) Simultaneously with the closing of the transactions set out herein by
@Home, Rogers and Shaw shall complete their respective obligations set
out herein; and
14
(F) As part of the closing procedures regarding the transaction
contemplated herein, Rogers and Shaw shall execute and deliver the
form of stock purchase agreement distributed in connection with
@Home's Series C Convertible Preferred Stock offering for the purchase
of the Series C Shares and Warrants and related documents providing
customary representations and warranties and covenants generally
provided by a purchaser to an issuer of shares, provided that the
definitive documents for the sale and issuance of the Series C Shares
and related documents of the Warrants are subject to final approval of
@Home's Board of Directors prior to the closing.
4.4 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL OF THE PARTIES: The
-------------------------------------------------------------
obligations of the parties to complete the transactions contemplated herein
is conditional upon the receipt on or before closing of all necessary
approvals from all regulatory authorities having jurisdiction with respect
to the subject matter hereof.
5.0 REPRESENTATIONS AND WARRANTIES
5.1 REPRESENTATIONS AND WARRANTIES OF @HOME: @Home represents and warrants to
---------------------------------------
each of Rogers and Shaw that:
(A) @Home has the power and authority to enter into this term sheet and to
fully perform its respective obligations hereunder, including the
right to grant the Licenses in Canada on the terms set out in this
term sheet;
(B) @Home is not under any contractual or other legal obligation which
will in any way interfere with the full, prompt and complete
performance of its obligations pursuant to this term sheet; and
(C) The @Home Facilities and the Services (collectively called the '@Home
Property') are and will remain the sole and exclusive property of
@Home and its suppliers (and where the @Home Property is the sole and
exclusive property of @Home's suppliers, @Home has the necessary
license to use such property for the purposes contemplated in this
term sheet). @Home's ownership rights include but are not limited to:
1. Intellectual Property Rights held by @Home in the @Home Property;
and
2. All modifications to and derivative works based upon such
Intellectual Property Rights.
5.2 REPRESENTATIONS AND WARRANTIES OF ROGERS AND SHAW: Each of Rogers and Shaw
-------------------------------------------------
severally represent and warrant to @Home that:
(A) Each of Rogers and Shaw has the power and authority to enter into this
term sheet and to fully perform its respective obligations hereunder;
15
(B) Neither Rogers nor Shaw is under any contractual or other legal
obligation which will in any way interfere with the full, prompt and
complete performance of its obligations pursuant to this term sheet;
and
(C) Rogers' and Shaw's facilities and all Intellectual Property Rights
therein are and will remain the sole and exclusive property of each of
Rogers and Shaw, as applicable, and their respective suppliers (and
where the Rogers or Shaw Facilities or Intellectual Property Rights
are the sole and exclusive property of Rogers' or Shaw's suppliers,
Rogers or Shaw has the necessary license to use such Facilities or
Intellectual Property Rights for the purposes contemplated in this
term sheet). Rogers' and Shaw's respective ownership rights include
but are not limited to:
1. Intellectual Property Rights held by Rogers or Shaw, as
applicable, in the facilities;
2. All modifications to and derivative works based upon such
Intellectual Property Rights.
6.0 INDEMNITIES
6.1 INDEMNITY OF @HOME: @Home will defend, indemnify and hold harmless each of
------------------
Rogers and Shaw, their respective affiliated companies and partners and
their respective officers, directors, employees and agents from all
liabilities, damages, costs and expenses (including without limitation,
reasonable counsel fees and expenses) incurred in connection with any third
party claim against Rogers or Shaw relating to the use by either Rogers or
Shaw of the Intellectual Property Rights of @Home which results or may
result in the infringement of any Intellectual Property Rights of any third
party.
6.2 INDEMNITY OF ROGERS AND SHAW: Each of Rogers and Shaw severally only agree
----------------------------
that they shall defend, indemnify and hold harmless @Home, its affiliated
companies and partners and their respective officers, directors, employees
and agents from all liabilities, damages, costs and expenses (including
without limitation, reasonable counsel fees and expenses) incurred in
connection with any third party claim against @Home relating to the use by
@Home of the Intellectual Property Rights of either Rogers or Shaw, which
results or may result in the infringement of any Intellectual Property
Rights of any third party.
6.3 CONSEQUENTIAL DAMAGES: NONE OF THE PARTIES HERETO WILL BE LIABLE TO ANY OF
---------------------
THE OTHER PARTIES FOR ANY INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES
(SUCH AS, BUT NOT LIMITED TO, LOSS OF PROFITS OR REVENUE AND DAMAGE TO OR
LOSS OF PERSON PROPERTY), WHETHER ARISING IN CONTRACT, TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE.
7.0 CLOSING PROCEDURES
7.1 BINDING NATURE OF AGREEMENT: The term sheet is binding on the parties.
---------------------------
The parties shall acting in good faith complete and execute all formal
documentation customary in a transaction of this nature, all of which must
be satisfactory to each of Rogers, Shaw and
16
@Home, acting reasonably, including without limitation, a stock purchase, a
distribution and trade mark licence agreement which shall be consistent
with and reflect the terms of this term sheet and shall contain the usual
covenants, indemnities, warranties and representations with respect to
certain matters affecting @Home, its capital and the Service.
7.2 THE COMPLETION DATE: The transactions contemplated herein shall be
-------------------
completed two business days following the completion of due diligence.
Provided that the parties shall extend the time for completion to enable
the parties to obtain any required approvals.
7.3 STRUCTURES OF THE TRANSACTION: The parties agree that Rogers and Shaw have
-----------------------------
yet to determine the structure of the entity which will conclude the
transactions contemplated herein with @Home. The parties agree to
cooperate with each other to determine and establish the structure entity
which will conclude the transactions contemplated herein in such a manner
so as to enable Rogers and Shaw to minimize the taxes otherwise payable, as
a result of this transaction, by each of them without altering the economic
substance of the transactions to @Home. Rogers and Shaw shall determine
and advise @Home of the proposed structure of the transactions by April 5,
1997. If Rogers and Shaw create a new entity to be owned by them jointly
aimed at exploiting the License referred to in paragraph 2.1(C) or
facilitating the programming of National Content they shall discuss with
@Home its possible equity or warrant participation in such entity.
7.4 ESCROW CLOSING: If it is reasonably determined by a responsible senior
--------------
officer of @Home that the Series C Convertible Preferred Stock offering
proposed by @Home will likely close prior to the date established herein
for completion of due diligence, Rogers and Shaw shall on the date
established pursuant to the stock purchase agreement as the completion
date, purchase the Series C Shares in escrow, by depositing with an escrow
agent, acceptable to all of the parties, an amount equal to the purchase
price for such Series C Shares and the Warrants described in Schedule 'B'
and @Home shall deposit with the same escrow agent the corresponding
certificates for the Series C Shares and Warrants, to be released to the
appropriate party upon completion of due diligence and satisfaction of the
conditions precedent or termination of the contractual obligations set out
herein.
7.5 PUBLIC DISCLOSURE: Each of Rogers, Shaw and @Home shall maintain in
-----------------
confidence the matters referred to in this term sheet and shall not make
any public disclosure, except to the extent required by applicable law,
regulation, or policies of any governmental or regulatory authority
(including the TSE and applicable U.S. securities exchanges) of the terms
of this term sheet without the consent of the other, such consent not to be
unreasonably withheld. The parties shall consult with each other regarding
the wording of all press announcements.
7.6 ASSIGNMENT: Except as otherwise provided in this term sheet, (i) each of
----------
Rogers and Shaw may assign their respective rights and obligations, in
whole or in part, under this term sheet to one of their wholly-owned direct
or indirect subsidiaries or to an entity owned jointly by Rogers and Shaw
(whether now existing or created subsequent to the date of this term sheet)
and (ii) @Home may assign its rights and obligations, in whole or
17
in part, under this term sheet to a wholly owned direct or indirect
Canadian subsidiary created subsequent to the date of this term sheet but,
if such assignment takes place, the assignor shall continue to be liable to
the other parties hereunder for any default in the performance of the
assignee. This term sheet shall not otherwise be assignable by any party
hereto.
7.7 ENUREMENT: The term sheet shall be binding upon and shall enure to the
---------
benefit of and be enforceable by Rogers, Shaw and @Home and their
respective successors and Rogers' and Shaw's permitted assigns.
7.8 NOTICES: Any notice, direction or other instrument required or permitted
-------
to be given or made hereunder shall be in writing and shall be sufficiently
given or made if delivered in person to the address set forth below or if
telecopied or sent by other means of recorded electronic communication
confirmed by delivery as soon as practicable or if dispatched, fees
prepaid, by overnight courier.
Notices to @Home shall be addressed as follows:
At Home Corporation
425 Broadway
Redwood City, CA 94063
Attention: Tom Jermoluk, Chairman and CEO
Fax: 415-944-8500
with a copy to:
David Pine, General Counsel
Fax: 415-944-8500
Notices to Rogers shall be addressed as follows:
Rogers Cablesystems Limited
Suite 6400 Scotia Plaza
40 King Street W
Toronto, Ontario
Attention: Chief Executive Officer
With a copy to: David Miller, Vice-President Law and General Counsel
Fax: 416-864-2395
18
Notice to Shaw shall be addressed as follows:
Shaw Cablesystems Ltd.
Suite 900, 630 - 3rd Avenue S.W.
Calgary, Alberta
T2P 4L4
Attention: The President
with a copy to:
Margot M. Micallef, Corporate Counsel
Fax: (403) 750-4531
Any notice, direction or other communication so given or made shall be
deemed to have been given or made and to have been received on the day of
delivery, if delivered, or on the day of sending if sent by telecopier or
other means of recorded electronic communications (provided such day of
delivery or sending is a business day and, if not, then on the first
business day thereafter). Either party hereto may change its address for
notice to the other party by notice given in the manner aforesaid.
7.8 GOVERNING LAW: This term sheet and the rights and obligations of the
-------------
parties hereto shall be governed and construed in accordance with the laws
of the Province of Ontario.
7.10 COUNTERPART: This term sheet may be signed in counterparts that together
-----------
shall be deemed to constitute one valid and binding document with effect
from the date the last of the counterpart copies is signed and returned in
accordance with the delivery provisions set out below and delivery of the
counterparts may be effected by means of facsimile transmission.
19
7.11 TERMINATION: The contractual obligations set out in this term sheet shall
-----------
terminate and be of no further force and effect if the conditions
precedents set out herein are not satisfied or waived on or before June 15,
1997.
AT HOME CORPORATION
PER:
/s/ Thomas A. Jermoluk
-------------------------------
/s/ David G. Pine
-------------------------------
ROGERS CABLESYSTEMS LIMITED
PER:
/s/ David Samuel
-------------------------------
/s/ David Miller
-------------------------------
SHAW CABLESYSTEMS LTD.
PER:
/s/ Michael D. [ILLEGIBLE]
-------------------------------
/s/ R.D. [ILLEGIBLE]
-------------------------------
20
SCHEDULE A
DEFINITIONS
To the extent not inconsistent with this term sheet, terms with initial capital
letters not defined in the body of the term sheet shall have the meaning set
forth below. All references to 'MSO' in the term sheet and these definitions
shall refer to each of Rogers, Shaw, and the sub-distributors, as applicable.
1. Definitions
(a) '@HOME FIRST PAGE' means the first page of the Wave@Home Service
user interface as it appears to subscribers upon the 'start up' of the Wave@Home
Service.
(b) 'DATA-READY CABLE SYSTEM' means the construction or upgrade of MSO
Facilities to allow distribution of Wave@Home Service in accordance with the
Specifications and Standards.
(c) 'FACILITIES' means any and all facilities, equipment, and
technology that is owned, leased or licensed by a party hereto that is necessary
to deliver the Wave@Home Service.
(d) 'FORCE MAJEURE' event means any of the following events: (i) the
failure of any equipment or software under the control of a person, firm or
entity not affiliated with such party; (ii) fire, flood, earthquake, or other
natural disaster; (iii) a change in law or governmental regulation; or (iv) any
other cause beyond the reasonable control of such party. In any such case, the
parties' time for performance under the term sheet, to the extent affected by
any of the foregoing, will be correspondingly extended.
(e) 'HOMES PASSED' means the number of residential dwelling units that
are or can be connected to the MSO's Data-Ready Cable System. For the purposes
of this paragraph, a residential dwelling unit 'can be connected' to the MSO's
Data-Ready Cable System if the residential dwelling unit is located within 250
feet of an upgraded data-ready distribution line. Each residential unit in a
multiple dwelling unit shall be counted as one Home Passed.
(f) 'IP' means the Internet Protocols as defined by the document
titled RFC-91, by John Postell of the University of Southern California, dated
1981, or subsequent revisions thereof.
(g) 'INTELLECTUAL PROPERTY RIGHTS' means all patent rights, copyright
rights (including, but not limited to, rights in music and audiovisual works and
moral rights), trademark rights, trade secret rights, and any other intellectual
property rights recognized by the law of each applicable jurisdiction.
(h) 'INTERNET BACKBONE' means a wireline or wireless network which:
(i) can or does (a) assign IP addresses or manage IP address assignments for
machines or networks
to which it is connected, (b) accept or deliver IP datagrams from machines or
networks to which it is connected, or (c) maintain IP packet traffic to other
machines or networks; and (ii) provides IP connectivity on a regional, national
or international basis.
(i) 'INTERNET SERVICE' means any information, entertainment or
communication service provided over an Internet Backbone regardless of the
method by which it is accessed by the user (i.e. personal computer, set top box,
television, hand held device, etc.).
(j) 'LOCAL AREA' shall mean that area (or channel(s)) of the @Home
First Page customarily designated by @Home for programming by an MSO.
(k) 'LOCAL CONTENT' means any and all content that may be accessed on-
line by customers through the Local Area.
(l) 'NATIONAL AREA' shall mean that area (or channel(s)) of the @Home
First Page other than the Local Area.
(m) 'NATIONAL CONTENT' means any and all content that may be accessed
on-line by customers through the National Area.
(n) 'RESIDENTIAL INTERNET SERVICE' means an Internet Service that is
sold to residential subscribers; even if such subscribers might also work from
their residences.
(o) 'SPECIFICATIONS AND STANDARDS' means, collectively, the
specifications and standards for the MSO Facilities and the @Home Facilities and
the technical requirements for distribution of the Wave@Home Service, as are
mutually agreed to in writing by Rogers, Shaw and @Home.
(p) 'TIER I CUSTOMER SUPPORT,' 'TIER II TECHNICAL SUPPORT,' and 'TIER
III NETWORK SUPPORT' shall have the meaning set forth in Schedule 'A-1' attached
hereto.
(q) 'U.S. CABLE PARTNERS' means any of Comcast PC Investments, Inc.,
Cox Teleport Providence, Inc., and TCI Internet Holdings, Inc.
2
SCHEDULE B
----------
SUMMARY OF TERMS
----------------
WARRANTS TO PURCHASE SERIES C CONVERTIBLE PREFERRED STOCK
Issuer: At Home Corporation, a Delaware corporation (the 'Company').
Assumptions: The following terms assume (a) the purchase by each of
Rogers and Shaw of US $15,000,000 of the Company's Series C
Preferred Stock ('Series C Preferred Stock') at $200 per
share in connection with the issuance of the Warrants
described below and (b) that each share of Series C
Preferred Stock shall, as presently constituted, be
convertible into 20 shares of Series A Common Stock of the
Company ('Series A Common Stock') at an effective price of
$10 per share of Series A Common Stock. If Rogers or Shaw
purchases less than $15,000,000 of Series C Preferred Stock
each, the number of shares subject to the Warrants will be
reduced as may be agreed by the parties.
Exercise Price: The Exercise Price of each Warrant shall equal the original
issue price of the Series C Preferred Stock ($200 per share
of Series C Preferred Stock, which is equivalent to $10 per
share of Series A Common Stock), and shall be appropriately
adjusted to maintain a constant total exercise price in the
event such Warrant becomes exercisable for Series A Common
Stock or some other series or class of the Company's capital
stock.
Purchase Price: The purchase price of each Warrant shall be 0.01% of the
aggregate Exercise Price of such Warrant. Such purchase
price shall be paid in cash at the Closing.
Warrants: Warrant 1: Rogers and Shaw will each be granted such
---------
number of warrants so as to entitle each of Rogers and Shaw
to purchase shares of Series C Preferred Stock convertible
into 650,000 shares of Series A Common Stock ('Warrant 1').
Warrant 2: Rogers and Shaw will each be granted such number
---------
of warrants so as to entitle each of Rogers and Shaw to
purchase shares of Series C Preferred Stock convertible into
80,000 shares of Series A Common Stock ('Warrant 2').
Warrant 3: Rogers and Shaw will each be granted such number
---------
of warrants so as to entitle each of Rogers and Shaw to
purchase shares of Series C Preferred Stock convertible into
270,000 shares of Series A Common Stock ('Warrant 3').
** Confidential treatment has been
requested with respect to certain
information contained in this
document. Confidential portions
have been omitted from the public
filing and have been filed
separately with the Securities
and Exchange Commission.
The foregoing Warrants, which represent the right to
purchase shares of Series C Preferred Stock that are
convertible into an aggregate of 2,000,000 shares of Series
A Common Stock, are collectively referred to as the
'Warrants.' The number of shares of Series A Common Stock
that are issuable upon exercise of a Warrant and conversion
of the Series C Preferred Stock are referred to as 'Series A
Common Stock equivalent shares.'
Exercisability: Warrant 1: Each Warrant 1 will become exercisable with
---------
respect to that number of Series A Common Stock equivalent
shares equal to the product of [**] Notwithstanding the
foregoing, each Warrant 1 shall become fully exercisable in
any event on the seventh anniversary of issuance thereof.
Warrant 2: Each Warrant 2 shall become exercisable with
---------
respect to [**] Notwithstanding the foregoing, each Warrant
2 will become fully exercisable in any event on the seventh
anniversary of issuance thereof.
Warrant 3: Each Warrant 3 shall become exercisable with
---------
respect to that number of shares equal to the product of
[**] Notwithstanding the foregoing, each Warrant 3 shall
become fully exercisable in any event on the seventh
anniversary of issuance thereof.
Term: Each Warrant will expire sixty days after the seventh
anniversary of issuance of the Warrant.
Transfer Warrants (and underlying Series C Preferred Stock and
Restrictions: Series A Common Stock) will not be transferable until the
earlier of June 4, 2001 or the closing date of the Company's
IPO, subject to
2
exceptions for transfers to controlled affiliates or
transfers in connection with liquidation of an Investor. If
the IPO has not occurred on or before June 4, 2001, any
transfer by an Investor will be subject to a right of first
offer in favor of the Company or the Company's assignee
until the earlier of June 4, 2006 or the IPO.
Notwithstanding the foregoing two sentences each Warrant 1,
Warrant 2 and Warrant 3 (and the underlying Series C
Preferred Stock or Series A Common Stock) may be transferred
free of such restrictions, subject to compliance with
applicable securities laws, in minimums of 1,000 shares of
Series C Preferred Stock (20,000 shares of Series A Common
Stock), to up to six Additional Canadian MSOs who are
'accredited investors' within the meaning of Regulation D
under the U.S. Securities Act of 1933, as amended.
Transferees will be bound by the transfer restrictions.
Underwriter Lockup: The shares issued directly or indirectly upon exercise of
the Warrants will be subject to an underwriter lockup of up
to one year following the IPO and if transferred to such
Additional Canadian MSO such shares shall be transferred
subject to such lockup.
Registration Shares of Series A Common Stock issued upon conversion of
Rights: Series C Preferred Stock issued upon exercise of the
Warrants by the original holders of the Warrants shall have
the same registration rights provided to the other holders
of Series C Preferred Stock. Such registration rights will
be transferable only to persons acquiring at least 25% of
the number of shares of Series C Preferred Stock originally
issuable upon exercise of the Warrants issued to Rogers or
Shaw, respectively, plus the number of shares of Series C
Preferred Stock purchased by Rogers or Shaw, respectively,
at the closing.
Effect of Conversion
of Series C
Preferred Stock: Upon any conversion of all outstanding shares of
Series C Preferred Stock into shares of Series A Common
Stock, whether as a result of the Company's initial public
offering or otherwise, each Warrant shall thereafter be
exercisable (but shall remain subject o the exercisability
conditions described above) only for shares of Series A
Common Stock as if the then-unexercised portion of such
Warrant were exercised for shares of Series C Preferred
Stock and such shares were immediately converted into Series
A Common Stock at the rate of 20 shares of Series A Common
Stock per share of Series C Preferred Stock.
Regulatory If any Warrant holder or holder of Series C Preferred
Compliance: Stock issued upon exercise of any Warrant, or in the case of
a mandatory conversion of the Series C Preferred Stock, such
holder or the Company, reasonably believes that exercise of
the Warrant or
3
conversion of such Series C Preferred Stock would be subject
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
any relevant Canadian antitrust legislation and the rules
and regulations thereunder (the 'Antitrust Law') prior to
such exercise or conversion and following such holder's
notice to the Company of such holder's intention to exercise
or convert or the Company's notice to such holder of such a
mandatory conversions, the Company and such holder shall
promptly use commercially reasonable efforts to comply with
any applicable requirements under the Antitrust Law relating
to filing and furnishing of information to the Federal Trade
Commission, the Antitrust Division of the Department of
Justice and Canadian antitrust authorities. Each of the
Company and such holder shall bear and pay any costs or
expenses that it incurs in compliance with this requirement.
Definitions: 'Upgraded Homes Passed' means the number of residential
dwelling units that are or can be connected to the MSO's
Data-Ready Cable System (as defined in the term sheet for
distribution of the Wave@Home Service). For purposes of this
paragraph, a residential dwelling unit 'can be connected' to
the MSO's Data-Ready Cable System if the residential
dwelling unit is located within 250 feet of an upgraded
data-ready distribution line. Each residential unit in a
multiple dwelling unit shall be counted as one Upgraded Home
Passed.
4
SCHEDULE A-1
WAVE@HOME CUSTOMER SERVICE TIER DESCRIPTIONS
Tier I Customer Support
-----------------------
Tier I customer service is the 'front line' of the Wave@Home Service. All
customer inquiries initially will be directed to Tier I customer service
representatives ('CSRs').
The tasks listed below are typically provided by Tier I CSRs. However, if the
MSO delegates Tier I service responsibility to @Home, MSO and @Home will review
these tasks to determine whether MSO can perform some of these functions without
the assistance of @Home technical service representatives ('TSRs').
Providing information about the Wave@Home Service.
Determining service eligibility (i.e. correct geographic location and
computer configuration) of potential subscribers.
Providing support for Data and RF technicians during the installation
process at the subscriber's home.
Processing all start, stop and change requests for the Wave@Home Service.
Establishing IP addresses, logins, email, passwords, and related customer
identifications and other records for use by @Home and MSO as permitted by
the Agreement.
Addressing billing and pricing questions.
Responding to all customer problems relating to basic desktop support:
-----
. All desktop hardware and software support will be handled by Tier
I CSRs.
. Such support will be provided via email, phone and on-site
visits.
. By way of example, all known 'bugs', operating system
configuration issues, and @Home software installation and upgrade
questions would be handled by Tier I CSRs.
. MSO and @Home anticipate that in excess of 80% of all customer
calls relating to desktop problems will be resolved by Tier I
CSRs without the assistance of Tier II TSRs.
Maintaining trouble ticket status reports and cataloging customer problems
and problem resolutions.
Tier II Technical Support
-------------------------
Tier II customer service is the advanced diagnostic and problem resolution layer
of the Wave@Home Service and includes the tasks set forth below. Tier II TSRs
are not responsible for answering initial customer inquiries but may from time-
to-time have customer calls transferred to them. The tasks listed below are
typically provided by Tier II TSRs:
Collecting network information and informing Tier I CSRs of service outages
caused by network problems.
Providing advanced desktop support by assisting Tier I CSRs with
--------
approximately 20% of the customer calls that require additional problem
diagnosis and resolution.
Developing and maintaining an on-line information system for Tier I CSRs.
Tier III Network Support
------------------------
Tier III customer service will address Tier II escalations from TSRs relating to
network problems and perform ongoing network monitoring and maintenance. Tier
III technicians will not interact with subscribers directly.
2
SCHEDULE C
BOARD REPRESENTATIONS:
TCI Internet Holdings, Inc. ('TCI Sub') (on behalf of itself and the 'TCI'
Stockholder Group' as defined in the Company's Stockholders' Agreement dated as
of August 1, 1996) will enter into a voting agreement with Rogers and Shaw,
pursuant to which TCI Sub on behalf of the TCI Stockholder Group will agree to
vote any shares of @Home they may own in favour of and use commercially
reasonable best efforts to cause to be elected and maintained in office one
Common Stock Director nominated jointly by Rogers and Shaw, so long as Rogers
and/or Shaw continues to offer the Wave@Home Service on an exclusive basis in
accordance with their distribution agreement with the company and (ii) Rogers
and Shaw collectively beneficially own at least 2,000,000 Series A Common Shares
or that number of Series C Shares which upon conversion will equal at least
2,000,000 Series A Common Shares; and (b) in addition to the shares described in
subparagraph (a) above, any one of the following:
1. 500,000 Series A Common Shares; or
2. That number of Series C Shares which upon conversion will equal at
least 500,000 Series A Common Shares; or
3. That number of Warrants which upon conversion will (immediately or if
converted into Series C Shares upon conversion of those shares) equal
at least 500,000 Series A Common Shares.
The party that continues to hold the exclusive license contemplated in either
paragraph 2.1(A) or 2.1(B) of the term sheet shall have the right to designate
the Board nominee. If both Rogers and Shaw hold both of the exclusive licenses
referred to above, they shall determine their board nominee in such manner as
they may determine.
In addition, so long as Rogers and Shaw have the right to a Board nominee under
the preceding paragraph and both Rogers and Shaw continue to hold the exclusive
licenses referred to above, they shall also have the joint right to designate a
single observer who will have the right to receive notice of an attend and
participate in the discussion in all meetings of the Board of Directors of the
Company.
** Confidential treatment has been
requested with respect to certain
information contained in this
document. Confidential portions
have been omitted from the public
filing and have been filed
separately with the Securities
and Exchange Commission.
SCHEDULE D
EXCLUSIVITY
1. In order to retain the exclusivity of the license granted to Rogers in
Paragraph 2.1 (A) of the Term Sheet, Rogers shall reach the number of Homes
Passed (HHP) and the Penetration Percentages set out in Table 1 and Table 3.
YEAR TOTAL CABLED % REBUILT HOMES PASSED YE PENETRATION
END HOMES PERCENTAGE
-------------------------------------------------------------------------------
1999 2,774,000 [**]% [**] [**]%
-------------------------------------------------------------------------------
2000 2,816,000 [**]% [**] [**]%
-------------------------------------------------------------------------------
2001 2,856,000 [**]% [**] [**]%
-------------------------------------------------------------------------------
2002 2,901,000 [**]% [**] [**]%
-------------------------------------------------------------------------------
TABLE 1: ROGERS HHP AND PENETRATION PERCENTAGE TARGETS
2. In order to retain the exclusivity of the license granted to Shaw in
Paragraph 2.1 (B) of the Term Sheet, Shaw shall reach the number of Homes Passed
and the Penetration Percentages set out in Table 2 and Table 3.
YEAR TOTAL CABLED % REBUILT HOMES PASSED YE PENETRATION
END HOMES PERCENTAGE
-------------------------------------------------------------------------------
1999 2,029,000 [**]% [**] [**]%
-------------------------------------------------------------------------------
2000 2,060,000 [**]% [**] [**]%
-------------------------------------------------------------------------------
2001 2,091,000 [**]% [**] [**]%
-------------------------------------------------------------------------------
2002 2,122,000 [**]% [**] [**]%
-------------------------------------------------------------------------------
TABLE 2: SHAW HHP AND PENETRATION PERCENTAGE TARGETS
YEAR ROGERS INCREMENTAL YE SHAW INCREMENTAL YE
END HOMES PASSED PENETRATION HOMES PASSED PENETRATION
PERCENTAGE PERCENTAGE
--------------------------------------------------------------------------------
1999 [**] [**]% [**] [**]%
--------------------------------------------------------------------------------
2000 [**] [**]% [**] [**]%
--------------------------------------------------------------------------------
2001 [**] [**]% [**] [**]%
--------------------------------------------------------------------------------
2002 [**] [**]% [**] [**]%
--------------------------------------------------------------------------------
TABLE 3: INCREMENTAL HHP AND PENETRATION PERCENTAGE TARGETS
3. Provided that, in determining if Rogers and/or Shaw, as applicable, has
reached the number of Homes Passed and the Penetration Percentages set out in
Table 3, the following shall apply:
(a) that number of Homes Passed and Penetration Percentages reached by Rogers
in excess of those numbers and percentages set out in Table 1, and reached
by Shaw in excess of those numbers and percentages set out in Table 2,
shall be attributed to the numbers of Homes Passed and Penetration
Percentages for the purpose of determining compliance with Table 3; and
(b) that number of Homes Passed and Penetration Percentages reached by the sub-
distributors or others in Canada (whether or not their relationship with
@Home is direct or indirect) shall be attributed to the number of Homes
Passed and Penetration Percentages set out in Table 3 as if 60% of such
Homes Passed and 60% of such Penetration Percentages reached by such
persons were reached by Rogers and as if 40% of such Homes Passed and 40%
of such Penetration Percentages reached by such persons were reached by
Shaw; and
(c) if after making the calculations set out in sub-paragraph 3 (a) and (b)
above, it is determined that either Rogers or Shaw has satisfied the
performance obligations set out in, the case of Rogers in Tables 1 and 3,
and in the case of Shaw in Tables 2 and 3, but the other has not, that
number of Homes Passed and the Penetration Percentage in excess of the
targets imposed shall be attributed to such of the parties who has failed
to meet the required number of Homes Passed and Penetration Percentages;
and
(d) further, homes which are fully 2way capable or telco return capable will be
included as if such homes were Homes Passed, and any subscriber to the
WAVE@Home Service, whether on 2way cable or telco return, will be counted
as a subscriber to the WAVE@Home Service, for the purpose of calculating
the Penetration Percentages set out in Table 3.
4. The number of Homes Passed above will be adjusted for any system divestiture
by Rogers or Shaw over the course of the term of the term sheet or any renewal
thereof. The % Rebuilt specified in Tables 1 and 2 above will remain constant in
the event of any system divestiture. In the event of a substantial divestiture,
Rogers and Shaw will use all reasonable efforts to appoint such purchaser as a
subdistributor of the WAVE@Home Service in the purchased systems.
** Confidential treatment has been
requested with respect to certain
information contained in this
document. Confidential portions
have been omitted from the public
filing and have been filed
separately with the Securities
and Exchange Commission.
SCHEDULE E
PERFORMANCE BASED PAYMENTS TO @HOME
(1) The performance based payments to @Home will be based on actual year-over-
year growth in monthly average subscriber penetration in excess of the
year-over-year monthly average subscriber growth contained in the WAVE Base
Case set out below. These performance payments will be calculated
separately for Rogers and Shaw. Subject to the limits in section 3 below,
@Home will receive a one-time payment of $[**] for each WAVE@Home
subscriber above the WAVE Year-Over-Year Target Subscriber growth
contemplated in the WAVE Base Case for the years 2000, 2001 and 2002.
WAVE BASE CASE
-------------------------------------------------------------------------------
YEAR WAVE MONTHLY AVERAGE WAVE YEAR-OVER-YEAR
PENETRATION ASSUMPTIONS TARGET SUBSCRIBER GROWTH
-------------------------------------------------------------------------------
1999 [**]% --
-------------------------------------------------------------------------------
2000 [**]% [**]%
-------------------------------------------------------------------------------
2001 [**]% [**]%
-------------------------------------------------------------------------------
2002 [**]% [**]%
-------------------------------------------------------------------------------
(2) Two sample performance payment calculations for the year 2001 are
calculated below for illustrative purposes only.
EXAMPLE 1
[**]
EXAMPLE 2
[**]
** Confidential treatment has been
requested with respect to certain
information contained in this
document. Confidential portions
have been omitted from the public
filing and have been filed
separately with the Securities
and Exchange Commission.
[**]
(3) This performance payment will be subject to each of the following
conditions:
[**]
(4) The performance payment, if any, will be paid by April 30 of the year
following the year in which the performance payment is earned.
(5) Monthly average subscribers will be determined by adding the total number
of subscribers at the end of each month in the relevant year and dividing
the total by 12.
All amounts are in Canadian dollars.
Term Sheet - At Home Corp., Shaw Cablesystems Ltd. and Rogers Cablesystems Ltd.
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