As filed with the Securities and Exchange Commission on November 18, 2002
Registration No. 333-__________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AT&T COMCAST CORPORATION
(Exact name of Registrant as specified in its charter)
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Pennsylvania 4841 27-0000798
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
(215) 665-1700
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-----------------------------------
Arthur R. Block
Senior Vice President
1500 Market Street
Philadelphia, Pennsylvania 19102-2148
(215) 665-1700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------------------------
Copies to:
Bruce K. Dallas, Esq.
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, California 94025
Tel: (650) 752-2000
Fax: (650) 752-2111
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Approximate date of commencement of proposed sale to the public: From time
to time after effectiveness of this Registration Statement upon conversion of
convertible debt securities.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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CALCULATION OF REGISTRATION FEE
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Title Of Each Class Of Proposed Maximum Amount of
Securities To Be Registered(1) Aggregate Offering Price(2) Registration Fee(2)
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Class A Special common stock,
par value $0.01 per share
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Total $939,864,118 $86,468
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(1) This registration statement relates to issuances of AT&T Comcast
Corporation Class A Special common stock, par value $0.01 per share, upon
the conversion of Zero Coupon Convertible Debentures Due December 19, 2020
(the "Debentures") originally issued by Comcast Corporation.
(2) The registration fee has been calculated pursuant to Rule 457(f) based on
the average of the high and low prices reported on the New York Stock
Exchange as of November 13, 2002 of the Debentures eligible for
conversion, and has been estimated solely for the purpose of calculating
the amount of the registration fee.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS DATED NOVEMBER 18, 2002
16,801,588 Shares
AT&T COMCAST CORPORATION
Class A Special Common Stock
-----------------------------------
This prospectus relates to the issuance from time to time of up to a total
of 16,801,588 shares of our Class A Special common stock, par value $0.01 per
share, upon the conversion of outstanding Zero Coupon Convertible Debentures
Due December 19, 2020 issued by Comcast Corporation, referred to in this
prospectus as the "Debentures."
On and after November 18, 2002, AT&T Comcast will change its name to
"Comcast Corporation" and the former Comcast Corporation will change its name
to "Comcast Holdings Corporation." In this prospectus, we refer to AT&T Comcast
and Comcast by their existing names.
On November 15, 2002, the issue price plus accrued original issue discount
on the Debentures was $798.14, representing an accreted conversion price of
$55.98 per share of our Class A Special common stock. On November 15, 2002, the
last reported sale price of our Class A Special common stock on The Nasdaq
National Market was $25.43, or approximately 45% of the accreted conversion
price. Investors are cautioned that, based upon the current market price of our
Class A Special common stock, exercising their right to convert the Debentures
would cause an immediate and substantial economic loss.
We will not receive any proceeds from the issuance of shares of Class A
Special common stock upon conversion of Debentures.
Our Class A Special common stock is admitted for trading on The Nasdaq
National Market under the symbol "CMCSK." On November 15, 2002, the last
reported sale price for shares of our Class A Special common stock on a
when-issued basis under the symbol "COMCV" was $25.43.
Investing in our Class A Special common stock involves risks. See "Risk
Factors" beginning on page 8, as well as "Where You Can Find More Information"
beginning on page 42 for information on how to obtain copies of our filings
with the Securities and Exchange Commission incorporated by reference in this
prospectus discussing other risks.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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This date of this prospectus is , 2002
TABLE OF CONTENTS
Page
AT&T COMCAST...................................................................2
Selected Financial Data of AT&T Comcast........................................4
Selected Financial Data of Comcast.............................................5
RISK FACTORS...................................................................8
Risks Relating to the AT&T Comcast Transaction.................................8
Risks Relating to Our Business.................................................9
MARKET PRICES AND DIVIDENDS...................................................15
DESCRIPTION OF OUR CLASS A SPECIAL COMMON STOCK AND OTHER CAPITAL STOCK.......16
DESCRIPTION OF THE DEBENTURES.................................................20
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.......................33
DESCRIPTION OF AT&T COMCAST TRANSACTION.......................................34
The Separation and Distribution Agreement.....................................36
The Tax Sharing Agreement.....................................................39
The Ancillary Agreements......................................................40
The QUIPS Exchange............................................................41
The Cross Guarantees..........................................................42
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS..............................42
WHERE YOU CAN FIND MORE INFORMATION...........................................42
LEGAL MATTERS.................................................................44
EXPERTS.......................................................................44
FINANCIAL STATEMENTS.........................................................F-1
You should rely only on information contained in this prospectus. No one
is authorized to provide you with information that is different from that
contained in this prospectus. We do not intend the contents of any websites
referred to in this prospectus to be part of this prospectus.
We are offering to sell, and are seeking offers to buy, our Class A
Special common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
its date regardless of the time of delivery of this prospectus or of any sale
of the Class A Special common stock.
We refer to AT&T Comcast Corporation in this prospectus as "AT&T Comcast"
or "we," "us," "our" or comparable terms. We refer to Comcast Corporation as
"Comcast," Comcast Cable Communications, Inc. as "Comcast Cable," AT&T
Broadband Corp. as "Broadband," MediaOne Group, Inc. as "MediaOne," and AT&T
Broadband, LLC (formerly known as Tele-Communications, Inc.) as "TCI."
1
AT&T COMCAST
AT&T Comcast was formed by Comcast and AT&T in the belief that combining
the strengths of the Comcast business with the broadband business of AT&T would
create the world's premier broadband company.
AT&T Comcast is principally involved in three lines of business through
its wholly owned subsidiaries Comcast and AT&T Broadband Corp., referred to in
this prospectus as Broadband:
o Cable--through the development, management and operation of broadband
communications networks and regional sports programming networks,
o Commerce--through QVC, its electronic retailing subsidiary, and
o Content--through its consolidated subsidiaries, Comcast-Spectacor, E!
Entertainment Television, The Golf Channel and Outdoor Life Network, and
through its other programming investments.
The transactions which created AT&T Comcast were consummated on November
18, 2002 in several steps. First, AT&T transferred to Broadband substantially
all the assets, liabilities and businesses represented by AT&T Broadband Group,
which was the integrated broadband business of AT&T Corp. Second, AT&T spun off
Broadband to its shareholders. Third, Comcast and Broadband each merged with a
different, wholly owned subsidiary of ours, and Comcast and AT&T shareholders
received our shares.
With the consummation of the AT&T Comcast transaction, we have become one
of the nation's largest broadband communications businesses, providing cable
television, high-speed cable Internet services and communications services over
one of the most extensive broadband networks in the country.
At or for the six month period ended June 30, 2002, the AT&T Broadband
Group owned and operated cable systems aggregating approximately 13.26 million
analog video subscribers, had approximately $5.0 billion in combined revenue,
had approximately $14.7 billion in net loss, had debt of approximately $21.9
billion, and had investments in companies, joint ventures and partnerships,
including Time Warner Entertainment Company, L.P., Insight Midwest, L.P. and
Texas Cable Partners, L.P. The table below sets forth the approximate
percentage of consolidated revenue, operating income (loss), net loss, assets
and indebtedness of AT&T, giving prior effect to the split-off of the AT&T
Wireless Services Group, that were attributable to each of AT&T Broadband Group
and AT&T excluding the AT&T Broadband Group at or for the six month period
ended June 30, 2002 and the year ended December 31, 2001. The table should be
read in the context of the financial and other information set forth and
incorporated by reference in this prospectus.
% of % of AT&T % of % of
AT&T Operating % of AT&T AT&T AT&T
Revenue Income/Loss Net Loss* Assets Debt
-------- ----------- --------- ------ -----
AT&T Broadband Group
At or for the year ended December 31, 2001.... 19.3% (111.4)% 61.0% 62.4% 43.5%
At or for the six month period ended June 30,
2002........................................ 20.6% 124.3% 107.6% 59.3% 50.8%
AT&T Corp. (excluding AT&T Broadband Group)**
At or for the year ended December 31, 2001.... 81.2% 211.4% (1.9)% 37.7% 56.5%
At or for the six month period ended June 30,
2002........................................ 80.1% (23.9)% (7.6)% 41.1% 49.2%
- -------------------------------
* Based on net loss from continuing operations before extraordinary gain and
cumulative effect of accounting change.
** Includes AT&T Business Services Group and AT&T Consumer Services Group and
excludes Liberty Media Group and AT&T Wireless Services Group.
For a description of the business, financial condition and results and
other important information regarding Comcast and Broadband, see our and
Comcast's filings with the SEC incorporated by reference in this prospectus.
For a description of certain continuing obligations and risks related to the
AT&T Comcast transaction, see "Description of the AT&T Comcast Transaction,"
and "Risks Relating to the AT&T Comcast Transaction" as well
2
as our and Comcast's filings with the SEC incorporated by reference in this
prospectus. For instructions on how to find copies of these and our other
filings incorporated by reference in this prospectus, see "Where You Can Find
More Information."
We are a Pennsylvania corporation incorporated in 2001. Our principal
executive office is located at 1500 Market Street, Philadelphia, Pennsylvania
19102-2148. Our telephone number is (215) 665-1700. The address of our web site
is www.comcast.com. The information on our web site is not part of this
prospectus.
3
SELECTED FINANCIAL DATA OF AT&T COMCAST
Our balance sheet data below as of September 30, 2002 and December 31,
2001 was derived from our unaudited balance sheet as of September 30, 2002 and
our audited balance sheet as of December 31, 2001. From the date of our
inception on December 7, 2001 through September 30, 2002, we had no operations.
As of September 30, As of December
2002 31, 2001
------------------- --------------
(Dollars in millions)
Balance Sheet Data (at period ended): $ -- $ --
Assets........................... -- --
Stockholders' equity............. -- --
4
SELECTED FINANCIAL DATA OF COMCAST
The consolidated selected financial data of Comcast below for the nine
months ended September 30, 2002 and 2001 were derived from the unaudited
condensed consolidated financial statements of Comcast, and the consolidated
selected financial data of Comcast for the years ended December 31, 2001, 2000,
1999, 1998 and 1997 were derived from the audited consolidated financial
statements of Comcast.
Nine Months Ended
September 30, Years Ended December 31,
---------------------- ------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
--------- --------- --------- --------- --------- --------- ---------
(Dollars in millions, except per share amounts)
Statement of Operations Data:
Revenues(1)...................... $ 8,086.1 $ 6,971.5 $ 9,674.2 $ 8,218.6 $ 6,529.2 $ 5,419.0 $ 4,700.4
Operating income (loss).......... 1,330.0 (412.0) (746.2) (161.0) 664.0 557.1 466.6
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting change............. (222.9) 545.1 225.6 2,045.1 780.9 1,007.7 (182.9)
Discontinued operations(2)....... 335.8 (31.4) (25.6)
Extraordinary items(6)........... (1.5) (23.6) (51.0) (4.2) (30.2)
Cumulative effect of accounting
change........................ 384.5 384.5
Net income (loss)................ (222.9) 929.6 608.6 2,021.5 1,065.7 972.1 (238.7)
Basic earnings (loss) for
common stockholders per
common share(3)
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting change............. $ (.23) $ .58 $ .24 $ 2.27 $ 1.00 $ 1.34 $ (.29)
Discontinued operations(2)....... .45 (.04) (.04)
Extraordinary items(6)........... (.03) (.07) (.01) (.04)
Cumulative effect of accounting
change........................ .40 .40
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)................ $ (.23) $ .98 $ .64 $ 2.24 $ 1.38 $ 1.29 $ (.37)
========= ========= ========= ========= ========= ========= =========
Diluted earnings (loss) for
common stockholders per
common share(3)
Income (loss) from continuing
operations before
extraordinary items and
cumulative effect of
accounting change............. $ (.23) $ .56 $ .23 $ 2.16 $ .95 $ 1.25 $ (.29)
Discontinued operations(2)....... .41 (.03) (.04)
Extraordinary items(6)........... (.03) (.06) (.01) (.04)
Cumulative effect of accounting
change........................ .40 .40
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)................ $ (.23) $ .96 $ .63 $ 2.13 $ 1.30 $ 1.21 $ (.37)
========= ========= ========= ========= ========= ========= =========
Cash dividends declared per
common share(3)............... $ .0467 $ .0467
Balance Sheet Data (at period
end):
Total Assets..................... $35,777.3 $38,781.4 $38,260.5 $35,744.5 $28,685.6 $14,710.5 $11,234.3
Working capital.................. 400.1 (217.2) 1,454.6 1,670.9 4,771.6 2,497.0 13.6
Long-term debt................... 9,927.9 11,494.8 11,741.6 10,517.4 8,707.2 5,464.2 5,334.1
Stockholders' equity............. 13,941.6 14,838.8 14,473.0 14,086.4 10,341.3 3,815.3 1,646.5
Supplementary Financial Data:
Operating income before
depreciation and
amortization(4)............... $ 2,500.6 $ 2,027.7 $ 2,701.8 $ 2,470.3 $ 1,880.0 $ 1,496.7 $ 1,293.1
Net cash provided by (used in)(5)
Operating activities(6).......... 2,000.2 1,582.6 1,229.5 1,219.3 1,249.4 1,067.7 844.6
Financing activities............. (1,052.4) 1,219.8 1,476.3 (271.4) 1,341.4 809.2 283.9
Investing activities(6).......... (728.0) (2,795.5) (3,007.3) (1,218.6) (2,539.3) (1,415.3) (1,045.8)
- --------------------
(1) Comcast's consolidated statement of operations for the years ended
December 31, 2001, 2000, 1999, 1998 and 1997 reflect franchise fees
collected from cable subscribers as a reduction of the related franchise
fee expense included within selling, general and administrative expenses.
Upon adoption of EITF 01-14 "Income Statement Characterization of
Reimbursements Received for `Out-of-Pocket' Expenses Incurred," on January
1, 2002, Comcast reclassified such amounts to revenues. The effect of the
reclassification on the statement of operations for the years ended
December 31, 2001, 2000, 1999, 1998 and 1997 would be to increase revenues
and selling,
5
general and administrative expenses by $192.3 million, $152.3 million,
$105.6 million, $94.7 million and $72.8 million, respectively.
(2) In July 1999, Comcast sold Comcast Cellular Corporation to SBC
Communications, Inc. Comcast Cellular is presented as a discontinued
operation for all periods presented.
(3) Adjusted for Comcast's two-for-one stock split in the form of a 100% stock
dividend in May 1999.
(4) Operating income before depreciation and amortization is commonly referred
to in Comcast's businesses as "operating cash flow." Operating cash flow
is a measure of a company's ability to generate cash to service its
obligations, including debt service obligations, and to finance capital
and other expenditures. In part due to the capital intensive nature of
Comcast's businesses and the resulting significant level of non-cash
depreciation and amortization expense, operating cash flow is frequently
used as one of the bases for comparing businesses in Comcast's industries,
although Comcast's measure of operating cash flow may not be comparable to
similarly titled measures of other companies. Operating cash flow is the
primary basis used by Comcast's management to measure the operating
performance of Comcast's businesses. Operating cash flow does not purport
to represent net income or net cash provided by operating activities, as
those terms are defined under generally accepted accounting principles,
and should not be considered as an alternative to those measurements as an
indicator of Comcast's performance.
(5) Represents net cash provided by (used in) operating activities, financing
activities and investing activities as presented in Comcast's consolidated
statement of cash flows.
(6) The items below relating to the nine months ended September 30, 2001 have
been reclassified to be consistent with the presentation in the September
30, 2002 financial information resulting from Comcast's adoption of SFAS
145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment for FASB
Statement No. 13, and Technical Corrections," on April 1, 2002:
o Losses resulting from debt extinguishments of $1.5 million have
been reclassified from extraordinary items to interest expense.
o Cash flows of $367.1 million from purchases, sales and maturities
of trading securities have been reclassified from investing
activities to operating activities.
6
Comcast adopted Statement of Financial Accounting Standards No. 142
"Goodwill and Intangible Assets," referred to in this prospectus as SFAS No.
142, on January 1, 2002. Upon adoption of SFAS No. 142, Comcast no longer
amortizes goodwill and other indefinite lived intangible assets, which consist
of cable and sports franchise rights. The following pro forma financial
information for the nine months ended September 30, 2001, and for the years
ended December 31, 2001, 2000 and 1999, is presented as if SFAS No. 142 was
adopted as of January 1, 1999 (amounts in millions, except per share data):
Nine Months
Ended
September Years Ended December 31,
30, ------------------------------------
2001 2001 2000 1999
---------- --------- --------- ---------
Net Income
As reported............................................. $ 929.6 $ 608.6 $ 2,021.5 $ 1,065.7
Amortization of goodwill............................. 233.8 334.8 303.5 128.5
Amortization of equity method goodwill............... 13.0 15.0 15.2 4.4
Amortization of franchise rights..................... 813.3 1,083.7 858.1 258.3
--------- --------- --------- ---------
As adjusted............................................. $ 1,989.7 $ 2,042.1 $ 3,198.3 $ 1,456.9
========= ========= ========= =========
Income before extraordinary items and cumulative effect
of accounting change, as adjusted................... $ 1,605.2 $ 1,659.1 $ 3,221.9 $ 1,507.9
========= ========= ========= =========
Basic EPS
As reported............................................. $ 0.98 $ 0.64 $ 2.24 $ 1.38
Amortization of goodwill............................. 0.25 0.35 0.34 0.17
Amortization of equity method goodwill............... 0.01 0.02 0.02 0.01
Amortization of franchise rights..................... 0.86 1.14 0.96 0.35
--------- --------- --------- ---------
As adjusted............................................. $ 2.10 $ 2.15 $ 3.56 $ 1.91
========= ========= ========= =========
Diluted EPS
As reported............................................. $ 0.96 $ 0.63 $ 2.13 $ 1.30
Amortization of goodwill............................. 0.24 0.35 0.32 0.16
Amortization of equity method goodwill............... 0.01 0.02 0.02 0.01
Amortization of franchise rights..................... 0.85 1.12 0.90 0.31
--------- --------- --------- ---------
As adjusted............................................. $ 2.06 $ 2.12 $ 3.37 $ 1.78
========= ========= ========= =========
7
RISK FACTORS
An investment in our Class A Special common stock involves a number of
risks. You should consider the following information about these risks, as well
as the other information included in and incorporated by reference in this
prospectus. Among the information incorporated by reference, in particular you
should consider the risk factors discussed in our and Comcast's filings with
the SEC.
Risks Relating to the AT&T Comcast Transaction
We may fail to realize the anticipated benefits of the AT&T Comcast
transaction.
The AT&T Comcast transaction combined two companies that have previously
operated separately. We expect to realize cost savings and other financial and
operating benefits as a result of the AT&T Comcast transaction. However, we
cannot predict with certainty when these cost savings and benefits will occur,
or the extent to which they actually will be achieved. There are a large number
of systems that must be integrated, including management information,
purchasing, accounting and finance, sales, billing, payroll and benefits, and
regulatory compliance. The integration of Comcast and Broadband will also
require substantial attention from management. The diversion of management
attention and any difficulties associated with integrating Comcast and
Broadband could have a material adverse effect on our operating results.
We will have to abide by restrictions to preserve the tax treatment of the
AT&T Comcast transaction.
Because of the limitations imposed by Section 355(e) of the Internal
Revenue Code of 1986, as amended, referred to as the "Code" in this prospectus,
and by the separation and distribution agreement under which AT&T transferred
to Broadband substantially all the assets, liabilities and businesses
represented by AT&T Broadband Group and then spun off Broadband to its
shareholders, our ability and the ability of Broadband to engage in certain
acquisitions, redeem stock or issue equity securities will be limited for a
period of 25 months following the Broadband spin-off. See "Description of the
AT&T Comcast Transaction--Post-Spin-Off Transactions." These restrictions may
limit our ability to issue equity securities to satisfy our financing needs or
to acquire businesses or assets.
We and our subsidiaries have significant debt and debt-like obligations
and may not maintain investment-grade credit ratings.
After completion of the AT&T Comcast transaction, we and our subsidiaries
have a significant amount of debt and debt-like obligations. Our credit rating
and the credit ratings of our subsidiaries may in the future be lower than the
current or historical credit ratings of Comcast, AT&T's principal broadband
subsidiaries and their respective subsidiaries. In addition, it is possible
that we or any of our subsidiaries that issue debt may not obtain or maintain
an investment-grade credit rating. Differences in credit ratings would affect
the interest rates charged on financings, as well as the amounts of
indebtedness, types of financing structures and debt markets that may be
available to us and our subsidiaries. In addition, the failure of certain of
our subsidiaries to maintain certain credit ratings until at least February 16,
2003 could trigger put rights on the part of holders of up to approximately
$4.8 billion of debt as of the date of this prospectus, which would require us
to obtain additional financing. Accordingly, a downgrade in our or any of our
subsidiaries existing credit ratings or failure by us and our subsidiaries to
maintain investment-grade credit ratings could have a material adverse effect
on our operating results and on the value of our common stock.
Atypical governance arrangements may make it more difficult for our
shareholders to act.
In connection with the AT&T Comcast transaction, we implemented a number
of governance arrangements that are atypical for a large, publicly held
corporation. A number of these arrangements relate to the election of our
Board. The term of our Board will not expire until our 2004 annual meeting of
shareholders. Since our shareholders will not have the right to call special
meetings of shareholders or act by written consent and our directors may be
removed only for cause, our shareholders will not be able to replace our
initial Board members prior to that meeting. After our 2004 annual meeting of
shareholders, our directors will be elected annually. Even then, however, it
will be
8
difficult for one of our shareholders, other than BRCC Holdings LLC or a
successor entity controlled by Brian L. Roberts, to elect a slate of directors
of its own choosing to our Board. Brian L. Roberts, through his control of BRCC
Holdings LLC or a successor entity, holds a 33 1/3% nondilutable voting
interest in our stock. In addition, we adopted a shareholder rights plan upon
completion of the AT&T Comcast transaction that prevents any holder of our
stock, other than any holder of our Class B common stock, or any of such
holder's affiliates, from acquiring our stock representing more than 10% of the
voting power with respect to us without the approval of our Board.
In addition to the governance arrangements relating to our Board, Comcast
and AT&T agreed to a number of governance arrangements which will make it
difficult to replace our senior management. Upon completion of the AT&T Comcast
transaction, C. Michael Armstrong, Chairman of the Board and CEO of AT&T,
became our Chairman of the Board and Brian L. Roberts, President of Comcast,
became our CEO and President. After the 2005 annual meeting of our
shareholders, Brian L. Roberts will also be our Chairman of the Board. Prior to
the sixth anniversary of our 2004 annual meeting of shareholders, unless Brian
L. Roberts ceases to be our Chairman of the Board or CEO prior to such time,
our Chairman of the Board and CEO will be able to be removed only with the
approval of at least 75% of our entire Board. This supermajority removal
requirement makes it unlikely that C. Michael Armstrong or Brian L. Roberts
will be removed from their management positions.
Our principal shareholder has considerable influence over our operations.
Brian L. Roberts has significant control over our operations through his
control of BRCC Holdings LLC, which as a result of its ownership of all
outstanding shares of our Class B common stock holds a nondilutable 33 1/3% of
the combined voting power of our stock and also has separate approval rights
over certain material transactions involving us. In addition, Brian L. Roberts
is our CEO and President and will, together with our Chairman of the Board,
comprise the Office of the Chairman, our principal executive deliberative body.
The performance of AT&T Broadband Group prior to the Broadband spin-off
may not be representative of the results of Broadband without the other AT&T
businesses and therefore is not a reliable indicator of its future results.
AT&T Broadband Group was a fully integrated business unit of AT&T, and as
a result the financial information of AT&T Broadband Group incorporated by
reference in this prospectus was derived from the consolidated financial
statements and accounting records of AT&T and reflects certain assumptions and
allocations. The financial position, results of operations and cash flows of
Broadband without the other AT&T businesses could differ from those that would
have resulted had its business operated with the other AT&T businesses.
Risks Relating to Our Business
Our actual financial position and results of operations may differ
significantly and adversely from the pro forma amounts incorporated by
reference in this prospectus.
Our actual financial position and results of operations may differ,
perhaps significantly and adversely, from the pro forma information
incorporated by reference in this prospectus due to a variety of factors,
including access to additional information, changes in value not currently
identified and changes in operating results between the date of the pro forma
financial data and the date on which the AT&T Comcast transaction was
completed.
In addition, in many cases each of Comcast and AT&T Broadband Group had
long-term agreements, in some cases with the same counterparties, for the same
services and products, such as programming, billing services and interactive
programming guides. Comcast and AT&T Broadband Group could not disclose the
terms of many of these contracts to each other because of confidentiality
provisions included in these contracts or other legal restrictions. For this
and other reasons, it is not clear, in the case of certain services and
products, whether after completion of the AT&T Comcast transaction each of the
existing agreements continues to apply only to the operations to which they
have historically applied or whether instead one of the two contracts will
apply to the operations of both companies and the other contract will be
terminated. Since these contracts often differ significantly in their terms,
resolution of these contractual issues could cause our actual financial
position and results of operations to differ significantly and adversely from
the pro forma amounts reflected in the pro forma financial information
incorporated by reference in this prospectus.
9
Programming costs are increasing and we may not have the ability to pass
these increases on to our customers, which would materially adversely affect
our cash flow and operating margins.
Programming costs are expected to be our largest single expense item. In
recent years, the cable and satellite video industries have experienced a rapid
increase in the cost of programming, particularly sports programming. This
increase is expected to continue, and we may not be able to pass programming
cost increases on to our customers. The inability to pass these programming
cost increases on to our customers would have a material adverse impact on our
cash flow and operating margins. In addition, as we upgrade the channel
capacity of our systems and add programming to our basic, expanded basic and
digital programming tiers, we may face increased programming costs, which, in
conjunction with the additional market constraints on our ability to pass
programming costs on to our customers, may reduce operating margins.
We also will be subject to increasing financial and other demands by
broadcasters to obtain the required consent for the transmission of broadcast
programming to our subscribers. We cannot predict the financial impact of these
negotiations or the effect on our subscribers should we be required to stop
offering this programming.
We face a wide range of competition in areas served by our cable systems,
which could adversely affect our future results of operations.
Our cable communications systems compete with a number of different
sources which provide news, information and entertainment programming to
consumers. We compete directly with program distributors and other companies
that use satellites, build competing cable systems in the same communities we
serve or otherwise provide programming and other communications services to our
subscribers and potential subscribers. In addition, federal law now allows
local telephone companies to provide directly to subscribers a wide variety of
services that are competitive with cable communications services. Some local
telephone companies provide, or have announced plans to provide, video services
within and outside their telephone service areas through a variety of methods,
including broadband cable networks. Additionally, we will be subject to
competition from telecommunications providers and Internet service providers,
known as ISPs, in connection with offerings of new and advanced services,
including telecommunications and Internet services. This competition may
materially adversely affect our business and operations in the future. In
addition, any increase in vacancy rates in multi-dwelling units has
historically adversely impacted subscriber levels and is expected to do so in
the future. Subscriber levels also have historically demonstrated seasonal
fluctuations, particularly in markets that include major universities. The
failure of seasonal fourth quarter increases to offset decreases would
adversely affect subscriber levels.
We have substantial capital requirements which may require us to obtain
additional financing that may be difficult to obtain.
We expect that for some period of time our capital expenditures will
exceed, perhaps significantly, our net cash provided by operating activities.
This may require us to obtain additional financing. We may not be able to
obtain or to obtain on favorable terms the capital necessary to fund the
substantial capital expenditures described above that are required by our
strategy and business plan. A failure to obtain necessary capital or to obtain
necessary capital on favorable terms could have a material adverse effect on us
and result in the delay, change or abandonment of our development or expansion
plans.
Historically, AT&T Broadband Group's capital expenditures significantly
exceeded its net cash provided by operations. For the year ended December 31,
2001 and the six months ended June 30, 2002, AT&T Broadband Group's capital
expenditures exceeded its net cash provided by operations by $3.5 billion and
$0.4 billion, respectively. In addition, for the year ended December 31, 2001,
Comcast's capital expenditures exceeded its net cash provided by operating
activities by $952 million.
We anticipate that we will upgrade a significant portion of our broadband
systems over the coming years and make other capital investments, including
with respect to our advanced services. In 2002, we anticipate that Broadband
and Comcast's cable division will incur capital expenditures of approximately
$4.2 billion and $1.3 billion, respectively. We are expected to incur
substantial capital expenditures in the years following completion of the AT&T
Comcast transaction. However, the actual amount of the funds required for
capital expenditures cannot be determined with precision at this time. Capital
expenditures are expected to be used to acquire equipment, such as set-top
boxes, cable modems and telephone equipment, and to pay for installation costs
for additional video and
10
advanced services customers. In addition, capital is expected to be used to
upgrade and rebuild network systems to expand bandwidth capacity and add
two-way capability so that it may offer advanced services. There can be no
assurance that these amounts will be sufficient to accomplish the planned
system upgrades, equipment acquisitions and expansion.
Comcast and Broadband also have commitments under certain of their
franchise agreements with local franchising authorities to upgrade and rebuild
certain network systems. These commitments may require capital expenditures in
order to avoid default and/or penalties.
Some of our subsidiaries are subject to long-term exclusive agreements
that may limit their future operating flexibility and materially adversely
affect our financial results.
Some of the entities formerly attributed to AT&T Broadband Group which are
now our subsidiaries are subject to long-term agreements relating to
significant aspects of their operations, including long-term agreements for
video programming, audio programming, electronic program guides, billing and
other services. For example, AT&T Broadband Group's predecessor, TCI, and AT&T
Broadband Group's subsidiary, Satellite Services, Inc., are parties to an
affiliation term sheet with Starz Encore Group, an affiliate of Liberty Media,
which extends to 2022 and provides for a fixed price payment, subject to
adjustment for various factors including inflation, and may require Broadband
to pay two-thirds of Starz Encore Group's programming costs above levels
designated in the term sheet. Satellite Services, Inc. also entered into a
ten-year agreement with TV Guide in January 1999 for interactive program guide
services, which designates TV Guide Interactive as the interactive programming
guide for Broadband systems. Furthermore, a subsidiary of Broadband is party to
an agreement that does not expire until December 31, 2013 under which it
purchases certain billing services from an unaffiliated third party. The price,
terms and conditions of the Starz Encore term sheet, the TV Guide agreement and
the billing agreement may not reflect the current market and if one or more of
these arrangements continue to apply to Broadband after completion of the AT&T
Comcast transaction, they may materially adversely impact our financial
performance.
By letter dated May 29, 2001, AT&T Broadband Group disputed the
enforceability of the excess programming pass through provisions of the Starz
Encore term sheet and questioned the validity of the term sheet as a whole.
AT&T Broadband Group also has raised certain issues concerning the uncertainty
of the provisions of the term sheet and the contractual interpretation and
application of certain of its provisions to, among other things, the
acquisition and disposition of cable systems. In July 2001, Starz Encore Group
filed a lawsuit seeking payment of the 2001 excess programming costs and a
declaration that the term sheet is a binding and enforceable contract. In
October 2001, AT&T Broadband Group and Starz Encore Group agreed to stay the
litigation until August 31, 2002 to allow the parties time to continue
negotiations toward a potential business resolution of this dispute. The court
granted the stay on October 30, 2001. The terms of the stay order allow either
party to petition the court to lift the stay after April 30, 2002 and to
proceed with the litigation. AT&T Broadband Group and Starz Encore Group agreed
to extend the stay of the litigation and the court extended the stay to and
including January 31, 2003, with a requirement that the parties attempt to
mediate the dispute.
On March 13, 2002, AT&T Broadband Group informed CSG Systems, Inc. that
AT&T Broadband Group was considering the initiation of an arbitration against
CSG relating to a Master Subscriber Management System Agreement that the two
companies entered into in 1997. Pursuant to the Master Agreement, CSG provides
billing support to AT&T Broadband Group. On May 10, 2002, AT&T Broadband Group
filed a demand for arbitration against CSG before the American Arbitration
Association. On May 31, 2002, CSG answered AT&T Broadband Group's arbitration
demand and asserted various counterclaims. On June 21, 2002, CSG filed a
lawsuit against Comcast in federal court located in Denver, Colorado asserting
claims related to the Master Agreement and the pending arbitration. On November
4, 2002, CSG withdrew its complaint against Comcast so the parties could pursue
settlement talks without prejudice to refile its complaint if settlement talks
are unsuccessful. In the event that this process results in the termination of
the Master Agreement, Broadband may incur significant costs in connection with
its replacement of these customer care and billing services and may experience
temporary disruptions to its operations.
We are subject to regulation by federal, state and local governments which
may impose costs and restrictions.
The federal, state and local governments extensively regulate the cable
communications industry. We expect that court actions and regulatory
proceedings will refine the rights and obligations of various parties,
including the
11
government, under the Communications Act of 1934, as amended. The results of
these judicial and administrative proceedings may materially affect our
business operations. Local authorities grant Comcast and Broadband franchises
that permit them to operate their cable systems. We will have to renew or
renegotiate these franchises from time to time. Local franchising authorities
often demand concessions or other commitments as a condition to renewal or
transfer, which concessions or other commitments could be costly to obtain.
We will be subject to additional regulatory burdens in connection with the
provision of telecommunications services, which could cause us to incur
additional costs.
We will be subject to risks associated with the regulation of our
telecommunications services by the FCC and state public utilities commissions,
or PUCs. Telecommunications companies, including companies that have the
ability to offer telephone services over the Internet, generally are subject to
significant regulation. This regulation could materially adversely affect our
business operations.
Our competition may increase because of technological advances and new
regulatory requirements, which could adversely affect our future results of
operations.
Numerous companies, including telephone companies, have introduced Digital
Subscriber Line technology, known as DSL, which provides Internet access to
subscribers at data transmission speeds greater than that of modems over
conventional telephone lines. We expect other advances in communications
technology, as well as changes in the marketplace, to occur in the future.
Other new technologies and services may develop and may compete with services
that cable communications systems offer. The success of these ongoing and
future developments could have a negative impact on our business operations.
In addition, over the past several years, a number of companies, including
telephone companies and ISPs, have asked local, state, and federal governmental
authorities to mandate that cable communications operators provide capacity on
their broadband infrastructure so that these and others may deliver Internet
and other interactive television services directly to customers over these
cable facilities. Some cable operators have initiated litigation challenging
municipal efforts to unilaterally impose so-called "open access" requirements.
The few court decisions dealing with this issue have been inconsistent.
Moreover, in connection with their review of the AOL-Time Warner merger, the
FCC and the Federal Trade Commission imposed "open access," technical
performance and other requirements related to the merged company's Internet and
Instant Messaging platforms. The FCC recently concluded in a regulatory
proceeding initiated by it to consider "open access" and related regulatory
issues that cable modem service, as it is currently offered, is properly
classified as an interstate information service that is not subject to common
carrier regulation but remains subject to the FCC's jurisdiction. The FCC is
seeking public comment regarding the regulatory implications of this
conclusion, including, among other things, whether it is appropriate to impose
"open access" requirements on these services or whether consumers will be able
to obtain a choice of ISPs without government intervention.
A number of cable operators have reached agreements to provide
unaffiliated ISPs access to their cable systems in the absence of regulatory
requirements. Recently, Comcast reached an "access" agreement with United
Online and Broadband reached an "access" agreement with each of Earthlink,
Internet Central, Connected Data Systems, Galaxy Internet Services and Connect
Plus International. Under the terms of the exchange agreement that Comcast and
AT&T have executed with Microsoft, now that the AT&T Comcast transaction has
been consummated, we will be required, with respect to each such agreement with
another ISP, to offer Microsoft an "access" agreement on terms no less
favorable than those provided to the other ISP with respect to the specific
cable systems covered under the agreement with the other ISP. Notwithstanding
the foregoing, there can be no assurance that regulatory authorities will not
impose "open access" or similar requirements on us as part of an industry-wide
requirement. Such requirements could have a negative impact on our business
operations.
We, through Broadband, have substantial economic interests in joint
ventures in which we have limited management rights.
AT&T Broadband Group was a partner in several large joint ventures, such
as Time Warner Entertainment, Texas Cable Partners and Kansas City Cable
Partners, in which it had a substantial economic interest but did not have
substantial control with regard to management policies or the selection of
management. These joint ventures may be managed in a manner contrary to our
best interests, and the value of our investment, through Broadband, in
12
these joint ventures may be affected by management policies that are determined
without our input or over our objections. AT&T Broadband Group had cable
partnerships with each of AOL Time Warner, Insight Communications, Adelphia
Communications, Midcontinent and US Cable. Materially adverse financial or
other developments with respect to a partner could adversely impact the
applicable partnership.
On June 25, 2002, three cable partnerships between subsidiaries of AT&T
and subsidiaries of Adelphia Communications Corporation commenced bankruptcy
proceedings by the filing of chapter 11 petitions in the Bankruptcy Court for
the Southern District of New York at about the same time that other Adelphia
entities filed for bankruptcy. These partnerships are: Century-TCI California
Communications, L.P. (in which Broadband holds a 25% interest through a
wholly-owned subsidiary and which as of December 31, 2001 had an aggregate of
approximately 775,000 subscribers in the greater Los Angeles, California area),
Parnassos Communications, L.P. (in which Broadband holds a 33.33% interest
through a wholly owned subsidiary) and Western NY Cablevision, L.P. (in which
Broadband holds a 33.33% interest through a wholly-owned subsidiary and which
as of December 31, 2001 had, together with Parnassos Communications, L.P., an
aggregate of approximately 470,000 subscribers in Buffalo, New York and the
surrounding areas). We cannot predict what the outcome of these proceedings
will be on any of the partnerships and the proceedings may have a material
adverse impact on the partnerships. AT&T Broadband Group recorded an impairment
charge through net losses related to equity investments of $143 million, net of
taxes of $90 million, in connection with the bankruptcy proceedings of the
Adelphia partnerships.
We, through Comcast and Broadband, face risks arising from their and
AT&T's relationship with At Home Corporation.
Through a subsidiary, AT&T owns approximately 23% of the outstanding
common stock and 74% of the voting power of the outstanding common stock of At
Home Corporation, which filed for bankruptcy protection on September 28, 2001.
Until October 1, 2001, AT&T appointed a majority of At Home's directors and it
now appoints none.
Since September 28, 2001, some creditors of At Home have threatened to
commence litigation against AT&T relating to the conduct of AT&T or its
designees on the At Home Board in connection with At Home's declaration of
bankruptcy and At Home's subsequent aborted efforts to dispose of some of its
businesses or assets in a bankruptcy court-supervised auction, as well as in
connection with other aspects of AT&T's relationship with At Home. On May 1,
2002, At Home filed a proposed plan of liquidation pursuant to Chapter 11 of
the U.S. Bankruptcy Code, which, as modified on June 18, 2002, among other
things, provides that all claims and causes of action of the bankrupt estate of
At Home against AT&T and other shareholders will be transferred to a
liquidating trust owned ratably by the bondholders of At Home and funded with
at least $12 million, and as much as $17 million, to finance the litigation of
those claims. The plan was approved by the bankruptcy court on August 15, 2002
and became effective on or about October 1, 2002. On November 7, 2002, a
complaint was filed by the bondholders liquidating trust against AT&T and
certain of its senior officers alleging various breaches of fiduciary duties,
misappropriation of trade secrets and other causes of action in connection with
the transactions in March 2000 described below, and prior and subsequent
alleged conduct on the part of the defendants. Any liabilities resulting from
this lawsuit would be shared equally between AT&T and Broadband.
In addition, purported class action lawsuits have been filed in California
state court on behalf of At Home shareholders against AT&T, At Home, Comcast
and former directors of At Home. The lawsuits claim that the defendants
breached fiduciary obligations of care, candor and loyalty in connection with a
transaction announced in March 2000 in which, among other things, AT&T, Cox and
Comcast agreed to extend existing distribution agreements, the At Home Board
was reorganized, and AT&T agreed to give Cox and Comcast rights to sell their
At Home shares to AT&T. These actions have been consolidated by the court. At
the request of At Home's bondholders, on September 10, 2002, the bankruptcy
court ruled that the claims asserted in these actions belong to At Home's
bankruptcy estate, not its shareholders, that the actions must be dismissed,
and that the claims in the actions are to be prosecuted by the At Home
bondholders liquidating trust under the confirmed Chapter 11 plan. The order
remains subject to appeal. The liability for these lawsuits would be shared
equally between AT&T and Broadband.
On September 23, 2002, the Official Committee of Unsecured Bondholders of
At Home filed suit in the United States District Court for the District of
Delaware against Comcast, Cox, Brian L. Roberts in his capacity as a director
of At Home, and other corporate and individual defendants. The complaint seeks
alleged "short-swing"
13
profits under Section 16(b) of the Securities and Exchange Act in connection
with At Home put options Comcast and Cox entered into with AT&T. The complaint
alleges a total of at least $600 million in damages in the aggregate from
Comcast and Cox in connection with this claim. The complaint also seeks damages
in an unspecified amount for alleged breaches of fiduciary duty by the
defendants in connection with transactions entered into among AT&T, At Home,
Comcast and Cox. Comcast believes this suit is without merit and intends to
vigorously defend itself in the action.
In March 2002, three purported class actions were filed in the United
States District Court for the Southern District of New York against, among
others, AT&T and certain of its senior officers alleging violations of the
federal securities laws in connection with disclosures made by At Home in the
period from March 28, 2000 through August 28, 2001. These actions have been
consolidated. On November 8, 2002, a consolidated class action complaint was
filed in this action. Any liabilities resulting from this lawsuit would be
shared equally between AT&T and Broadband.
As part of a portfolio of lease and project financing assets Broadband
assumed in connection with the acquisition of MediaOne, Broadband is the lessor
of some airplanes under leveraged leases to US Airways Group. Under a leveraged
lease, the assets are secured with debt, which is non-recourse to Broadband. On
August 11, 2002, US Airways filed for Chapter 11 bankruptcy protection. In
connection with the bankruptcy filing, US Airways can reject or reaffirm its
leases. Broadband does not know if the leases will be rejected or reaffirmed.
If the leases are rejected and the non-recourse debtholder forecloses on the
assets, Broadband could incur an after-tax loss of approximately $35 to $45
million (based on June 30, 2002 balances).
14
MARKET PRICES AND DIVIDENDS
Our Class A Special common stock is admitted for trading on The Nasdaq
National Market under the ticker "CMCSK." The high and low last reported sale
prices for our shares of Class A Special common stock during the period from
October 30, 2002, when the shares of Class A Special common stock began trading
on a when issued basis under the symbol "COMCV," through November 15, 2002 were
$26.54 and $23.24, respectively, and no dividends were paid during that period.
Prior to the completion of the AT&T Comcast transaction, Comcast's Class A
Special common stock was admitted for trading on The Nasdaq National Market
under the symbol "CMCSK." The following table sets forth, for the periods
indicated, the high and low last reported sales price of Comcast's Class A
Special common stock and dividends paid on such shares, as adjusted for
Comcast's two-for-one stock split in the form of a 100% stock dividend in May
1999.
For current price information, you should consult publicly available
sources.
Dividends
Calendar Period High Low Paid
--------------- --------- --------- ---------
1999
First Quarter...................................$ 38.56 $ 29.63 $ .0117
Second Quarter.................................. 42.00 29.44
Third Quarter................................... 41.56 32.63
Fourth Quarter.................................. 56.50 35.69
2000
First Quarter...................................$ 54.56 $ 38.31
Second Quarter.................................. 44.19 29.75
Third Quarter................................... 41.06 31.06
Fourth Quarter.................................. 43.94 34.00
2001
First Quarter...................................$ 45.88 $ 38.69
Second Quarter................................... 45.50 39.50
Third Quarter.................................... 43.31 32.51
Fourth Quarter................................... 40.18 35.19
2002
First Quarter...................................$ 37.33 $ 29.65
Second Quarter.................................. 32.15 22.33
Third Quarter................................... 25.12 16.80
Fourth Quarter (through November 15, 2002)...... 26.24 16.93
15
DESCRIPTION OF OUR CLASS A SPECIAL COMMON STOCK AND OTHER CAPITAL STOCK
The following is a description of the material terms of our capital stock.
The following description is qualified by reference to the terms of our charter
and bylaws, which are included as exhibits to the registration statement of
which this prospectus is a part.
Authorized Capital Stock
Our authorized capital stock consists of 7.5 billion shares of Class A
common stock, 7.5 billion shares of Class A Special common stock, 75 million
shares of Class B common stock and 20 million shares of preferred stock.
Class A Common Stock
Class A Common Stock Outstanding. The outstanding shares of our Class A
common stock as of the completion of the AT&T Comcast transaction were duly
authorized, validly issued, fully paid and nonassessable.
Voting Rights. On all matters submitted for a vote of holders of all
classes of our voting stock, holders of our Class A common stock in the
aggregate hold 66 2/3% of the aggregate voting power of our capital stock as of
completion of the AT&T Comcast transaction.
Each share of our Class A common stock has the number of votes equal to a
quotient the numerator of which is the excess of (1) the Total Number of Votes
(as defined below in this paragraph) over (2) the sum of (A) the Total Number
of B Votes (as defined below in this paragraph) and (B) the Total Number of
Other Votes (as defined below in this paragraph) and the denominator of which
is the number of outstanding shares of our Class A common stock. "Total Number
of Votes" on any record date is equal to a quotient the numerator of which is
the Total Number of B Votes on such record date and the denominator of which is
the B Voting Percentage (as defined below in this paragraph) on such record
date. "Total Number of B Votes" on any record date is equal to the product of
(1) 15 and (2) the number of outstanding shares of our Class B common stock on
such record date. "Total Number of Other Votes" on any record date means the
aggregate number of votes to which holders of all classes of our capital stock
other than holders of our Class A common stock and our Class B common stock are
entitled to cast on such record date in an election of directors. "B Voting
Percentage" on any record date means the portion (expressed as a percentage) of
the total number of votes to which all holders of our Class B common stock are
entitled to cast on such record date in an election of directors. Initially,
the B Voting Percentage will be 33 1/3%. Based on the number of shares of our
Class A common stock and our Class B common stock estimated to be outstanding
as of completion of the AT&T Comcast transaction each share of our Class A
common stock had approximately 0.2 of a vote upon completion of the AT&T
Comcast transaction.
If the number of shares of our Class A common stock or our Class B common
stock outstanding is reduced for any reason (e.g., by repurchase or, in the
case of our Class B common stock only, conversion), the aggregate voting power
of the applicable class of our capital stock will be proportionately reduced.
If additional shares of our Class A common stock or our Class B common stock
are issued, the relative aggregate voting power of the two classes of our
common stock will change (based on the principle that each share of our Class B
common stock will be entitled to 15 times the vote of each share of our Class A
common stock) to the extent such issuance is disproportionate as between the
relative number of shares of the two classes outstanding prior to the issuance,
but the combined aggregate voting power of the two classes of stock will remain
constant at approximately 38 47/100% (except to the extent there has been a
reduction in the aggregate voting power of either class of stock as described
in the preceding sentence).
Approval Rights. Except as required by law, holders of our Class A common
stock have no specific approval rights over any of our corporate actions.
Conversion Rights. The shares of our Class A common stock will not be
convertible into shares of any other class of our capital stock.
Preemptive Rights. The holders of our Class A common stock will have no
preemptive rights to purchase, subscribe for or otherwise acquire any unissued
or treasury shares or other securities.
16
Class B Common Stock
Class B Common Stock Outstanding. The outstanding shares of our Class B
common stock as of the completion of the AT&T Comcast transaction were duly
authorized, validly issued, fully paid and nonassessable.
Voting Rights. Subject to the next sentence, on all matters submitted for
a vote of holders of all classes of our voting stock, holders of our Class B
common stock in the aggregate will hold 33 1/3% of the aggregate voting power
of our capital stock, regardless of the number of shares of our Class A common
stock or any other class of our capital stock outstanding at any time. If the
number of shares of our Class B common stock outstanding is reduced for any
reason (e.g., by repurchase or conversion), the aggregate voting power of our
Class B common stock will be proportionately reduced.
Each share of our Class B common stock will have 15 votes.
Approval Rights. Holders of our Class B common stock will have an approval
right over (1) any merger of us with another company or any other transaction,
in each case that requires our shareholders approval under applicable law, or
any other transaction that would result in any person or group owning shares
representing in excess of 10% of the aggregate voting power of the resulting or
surviving corporation, or any issuance of securities (other than pursuant to
director or officer stock option or purchase plans) requiring our shareholders
approval under the rules and regulations of any stock exchange or quotation
system; (2) any issuance of our Class B common stock or any securities
exercisable or exchangeable for or convertible into our Class B common stock;
and (3) charter amendments (such as a charter amendment to opt in to any of the
Pennsylvania antitakeover statutes) and other actions (such as the adoption,
amendment or redemption of a shareholder rights plan) that limit the rights of
holders of our Class B common stock or any subsequent transferee of our Class B
common stock to transfer, vote or otherwise exercise rights with respect to our
capital stock.
Conversion Rights. Each share of our Class B common stock will be
convertible into one share of our Class A common stock, our Class A Special
common stock.
Preemptive Rights. The holders of our Class B common stock will have no
preemptive rights to purchase, subscribe for or otherwise acquire any unissued
or treasury shares or other securities.
Class A Special Common Stock
Class A Special Common Stock Outstanding. The outstanding shares of our
Class A Special common stock as of the completion of the AT&T Comcast
transaction were duly authorized, validly issued, fully paid and nonassessable.
Voting Rights. Except as required by law, holders of our Class A Special
common stock are not be entitled to vote. When holders of our Class A Special
common stock are entitled to vote by applicable law, each share of our Class A
Special common stock has the same number of votes as each share of our Class A
common stock.
Approval Rights. Except as required by law, holders of Class A Special
common stock have no specific approval rights over any corporate actions.
Conversion Rights. The shares of our Class A Special common stock are not
convertible into shares of any other class of our capital stock.
Preemptive Rights. Holders of our Class A Special common stock have no
preemptive rights to purchase, subscribe for or otherwise acquire any unissued
or treasury shares or other securities.
Preferred Stock
Preferred Stock Outstanding. No shares of our preferred stock were
outstanding as of completion of the AT&T Comcast transaction.
Blank Check Preferred Stock. Under the our charter, our Board has the
authority, without shareholder approval, to create and issue one or more series
of preferred stock, without par value, in whole or fractional shares,
17
with full, limited, multiple, fractional, or no voting rights, and with such
designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights, and other special or relative rights
as it so chooses. Acting under this authority, our Board could create and issue
a class or series of preferred stock with rights, privileges or restrictions,
and adopt a shareholder rights plan, having the effect of discriminating
against an existing or prospective holder of securities as a result of that
shareholder beneficially owning or commencing a tender offer for a substantial
amount of our voting capital stock. One of the effects of authorized but
unissued and unreserved shares of capital stock may be to render more difficult
or discourage an attempt by a potential acquiror to obtain control of us by
means of a merger, tender offer, proxy contest or otherwise, and thereby
protect the continuity of our management. The issuance of such shares of
capital stock may have the effect of delaying, deferring or preventing a change
in control of us without any further action by our shareholders.
Pursuant to the authority described in the preceding paragraph, the AT&T
Comcast Board has designated a series of preferred stock in connection with the
adoption of our shareholder rights plan described below. See "--Description of
AT&T Comcast Shareholder Rights Plan."
Dividend Rights
Holders of our Class A common stock, Class A Special common stock, and
Class B common stock will be entitled to receive, from time to time, when, as
and if declared, in the discretion of our Board, such cash dividends as our
Board may from time to time determine, out of such funds as are legally
available therefor, in proportion to the number of shares held by them,
respectively, without regard to class.
Holders of our Class A common stock, Class A Special common stock, and
Class B common stock will also be entitled to receive, from time to time, when,
as and if declared by our Board, such dividends of our stock or other property
as our Board may determine, out of such funds as are legally available
therefor. However, stock dividends on, or stock splits of, any class of common
stock will not be paid or issued unless paid or issued on all classes of our
common stock, in which case they will be paid or issued only in shares of that
class; provided, however, that stock dividends on, or stock splits of, our
Class B common stock may also be paid or issued in shares of our Class A
Special common stock.
Rights Upon Liquidation
In the event of any liquidation, dissolution or winding up (either
voluntary or involuntary) of us, holders of our Class A common stock, Class A
Special common stock, and Class B common stock will be entitled to receive our
assets and funds in proportion to the number of shares held by them,
respectively, without regard to class.
Mergers, Consolidations, Etc.
Our charter provides that if in a transaction such as a merger,
consolidation, share exchange or recapitalization holders of each class of our
common stock outstanding on completion of the AT&T Comcast transaction do not
receive the same consideration for each of their shares of our common stock
(i.e., the same amount of cash or the same number of shares of each class of
stock issued in the transaction in proportion to the number of shares of our
common stock held by them, respectively, without regard to class), holders of
each such class of our common stock will receive "mirror" securities (i.e.,
shares of a class of stock having substantially equivalent rights as the
applicable class of our common stock).
Transfer Agent and Registrar
EquiServe is the transfer agent and registrar for our common stock.
Stock Exchange Listings
The shares of our Class A common stock and Class A Special common stock
outstanding as of completion of the AT&T Comcast transaction or issued upon
conversion of any Debentures have been admitted for trading on The Nasdaq
National Market.
18
Description Of AT&T Comcast Shareholder Rights Plan
The following description of the material terms of a rights agreement with
respect to a shareholder rights plan which we entered into in connection with
the completion of the AT&T Comcast transaction is qualified by reference to the
terms of the rights agreement, which is included as an exhibit to the
registration statement of which this prospectus is a part.
The Rights. The rights agreement provides for the declaration by our Board
of a dividend of one preferred stock purchase right (the "Rights") for each
outstanding share of our Class A common stock, Class A Special common stock,
and Class B common stock. The dividend will be payable to holders of record as
of the close of business on the record date selected by our Board, which date
will be no later than ten days after the closing date of the AT&T Comcast
transaction.
The Rights will not entitle holders to any rights of our shareholders,
such as voting and dividend rights, but the rights agreement will include
standard antidilution provisions to protect the effectiveness of the Rights.
The transferability and exercisability of the Rights will depend on
whether a "Distribution Date" has occurred. A Distribution Date generally means
the earlier of (1) the tenth day after a public announcement that any person or
group has become an "Acquiring Person" and (2) the tenth business day after the
date of the commencement of a tender or exchange offer by any person that could
result in such person becoming an Acquiring Person. An Acquiring Person
generally means any person or group (other than any holder of our Class B
common stock or any of such holder's affiliates) who becomes the beneficial
owner of our voting capital stock that represents 10% or more of the total
number of votes that holders of our capital stock are entitled to cast with
respect to any matter presented for a shareholder vote.
Transferability. Prior to the Distribution Date, (1) the Rights will be
evidenced by the certificates of the relevant underlying common stock and the
registered holders of the common stock shall be deemed the registered holders
of the associated Rights and (2) the Rights will be transferable only in
connection with transfers of shares of the underlying common stock. After the
Distribution Date, the rights agent will mail separate certificates evidencing
the Rights to each holder of the relevant underlying common stock as of the
close of business on the Distribution Date. Thereafter, the Rights will be
transferable separately from the common stock.
Exercisability. The Rights will not be exercisable prior to the
Distribution Date. After the Distribution Date, but prior to the occurrence of
an event described below under "--`Flip In' Feature" or "--`Flip Over'
Feature," each Right will be exercisable to purchase for a price equal to
approximately five times the market price for a share of our Class A common
stock at the time of adoption of the shareholder rights plan one one-thousandth
of a share of our Series A Participating Cumulative Preferred Stock.
"Flip In" Feature. If any person becomes an Acquiring Person, each holder
of a Right, except for the Acquiring Person or certain affiliated persons, will
have the right to acquire, instead of one one-hundredth of a share of our
Series A Participating Cumulative Preferred Stock, a number of shares of our
Class A common stock, in each case having a market value equal to twice the
exercise price of the Right. For example, if an initial purchase price of $200
were in effect on the date that the flip in feature of the Rights were
exercised, any holder of a Right, except for the person that has become an
Acquiring Person or certain affiliated persons, could exercise his or her Right
by paying to us $200 in order to receive shares of our Class A common stock
having a value equal to $400.
"Exchange" Feature. At any time after a person becomes an Acquiring Person
(but before any person becomes the beneficial owner of our voting capital stock
representing 50% or more of the total number of votes which holders of our
capital stock are entitled to cast with respect to any matter presented for a
shareholder vote), our Board may exchange all or some of the Rights, except for
those held by any Acquiring Person or certain affiliated persons, for our Class
A common stock at an exchange ratio of one share of our Class A common stock
for each Right. Use of this exchange feature means that eligible Rights holders
would not have to pay cash before receiving shares of our Class A common stock.
"Flip Over" Feature. If, after a person becomes an Acquiring Person, (1)
we are involved in a merger or other business combination in which we are not
the surviving corporation or any of our common stock is exchanged for other
securities or assets or (2) we and/or one or more of our subsidiaries sell or
transfer assets or earning power
19
aggregating 50% or more of the assets or earning power of us and/or our
subsidiaries, then each Right will entitle the holder, except for any Acquiring
Person or certain affiliated persons, to purchase a number of shares of common
stock of the other party to the transaction having a value equal to twice the
exercise price of the Right.
Redemption of Rights. Our Board may redeem all of the Rights at a price of
$0.001 per Right at any time prior to the time that any person becomes an
Acquiring Person. The right to exercise will terminate upon redemption, and at
that time, holders of the Rights will have the right to receive only the
redemption price for each Right they hold.
Amendment of Rights. At any time before a person becomes an Acquiring
Person, the terms of the rights agreement may be amended in any respect by us
without the approval of holders of the Rights. However, after the date any
person becomes an Acquiring Person, the rights agreement may not be amended in
any manner that would adversely affect the interests of holders of the Rights
(other than any person who has become an Acquiring Person and certain
affiliated persons) or cause the Rights to be redeemable at that time.
Expiration of Rights. If not previously exercised or redeemed, the Rights
will expire on the tenth anniversary of the completion of the AT&T Comcast
transaction, unless earlier exchanged or redeemed.
Anti-Takeover Effects. The Rights have anti-takeover effects. Once the
Rights have become exercisable, in most cases they will cause substantial
dilution to a person who attempts to acquire or merge with us. Accordingly, the
existence of the Rights may deter potential acquirors from making a takeover
proposal or a tender offer. The Rights should not interfere with any merger or
other business combination approved by the our Board because the Board may
either redeem the Rights or amend the rights agreement so that a transaction it
approves would not cause the Rights to become exercisable.
Taxation. The dividend of the Rights will not be taxable to our
shareholders, but shareholders may recognize taxable income if the Rights
become exercisable as set forth above.
Series A Preferred Stock. In connection with the creation of the Rights,
our Board authorized the issuance of shares of our preferred stock designated
as our Series A Participating Cumulative Preferred Stock. We will design the
dividend, liquidation, voting and redemption features of our Series A
Participating Cumulative Preferred Stock so that the value of one-thousandth of
a share of our Series A Participating Cumulative Preferred Stock approximates
the value of one share of our Class A common stock. Shares of our Series A
Participating Cumulative Preferred Stock will be purchasable only after the
Rights have become exercisable. The rights of our Series A Participating
Cumulative Preferred Stock as to dividends, liquidation and voting, and in the
event of mergers or consolidations, are protected by customary antidilution
provisions.
DESCRIPTION OF THE DEBENTURES
The Debentures were issued under an indenture dated as of June 15, 1999
executed by Comcast and the trustee. The Debentures are subject to the terms of
the indenture, as well as the terms made part of the indenture by reference to
the Trust Indenture Act of 1939, as amended. Although we have summarized
selected provisions of the Debentures and the indenture below, this summary is
not complete and is qualified in its entirety by reference to the Debentures,
the indenture, and the terms made part of the indenture by reference to the
Trust Indenture Act. A copy of the forms of the Debentures and indenture have
been filed as exhibits to the registration statement of which this prospectus
is a part.
The indenture does not limit the aggregate principal amount of indebtedness
which may be issued under it. The indenture also provides that debt may be
issued from time to time in one or more series. The Debentures constitute a
separate series under the indenture.
General
The Debentures are general unsecured obligations of Comcast. The aggregate
principal amount at maturity outstanding of Debentures as of November 18, 2002
was $1,178,513,000. The Debentures will mature on December 19, 2020. The
Debentures rank on a parity with all of Comcast's other unsecured and
unsubordinated indebtedness.
20
The Debentures were offered and sold at a discount from their value at
maturity. Comcast initially issued the Debentures at a price to investors of
$779.41 per Debenture. Over time, the amount payable on each Debenture will
increase in value until it reaches its maturity value of $1,000 on December 19,
2020. The Debentures were issued only in denominations of $1,000 payable at
maturity and multiples of $1,000 payable at maturity.
As and from the AT&T Comcast transaction, you have the option to convert
your Debentures, so long as specified conditions are met, into shares of AT&T
Comcast's Class A Special common stock at a conversion rate of 14.2566 shares
of Class A Special common stock per Debenture. All references to Class A
Special common stock in the following description refer to shares of AT&T
Comcast's Class A Special common stock.
As of November 15, 2002, the conversion rate of 14.2566 was equivalent to
an accreted conversion price of $55.98 per share of our Class A Special common
stock. The conversion rate is subject to adjustment if some events occur.
Holders may surrender Debentures for conversion at any time prior to maturity,
unless previously redeemed, but only if the closing sale price of our Class A
Special common stock is greater than 110% of the accreted conversion price for
at least 20 trading days of the 30 trading days prior to conversion. Upon
conversion, you will receive only shares of our Class A Special common stock.
You will not receive any cash payment for the accrued original issue discount
to the conversion date.
Interest
Comcast will not pay cash interest on the Debentures unless Comcast elects
to do so following a tax event as described below. You should be aware that
original issue discount accruing for the period you hold the Debentures must be
included in your gross income for federal income tax purposes. Original issue
discount is generally the difference between the adjusted issue price and the
$1,000 principal amount of the Debenture at maturity.
Redemption Rights
On or after December 19, 2005, Comcast can redeem for cash all or part of
the Debentures at any time, upon not less than 15 nor more than 60 days notice
by mail to holders of Debentures, for a price equal to the issue price per
Debenture plus accrued original issue discount at a rate of 1.25% per annum
compounded semi-annually to the date of redemption, on the basis of a 360-day
year consisting of twelve 30-day months. Comcast can also elect to pay cash
interest on the Debentures upon the occurrence of some tax events described
below instead of accruing original issue discount. See "--Tax Event."
The table below shows redemption prices of Debentures at December 19,
2005, at each following December 19 prior to maturity and at maturity on
December 19, 2020. The prices reflect the accrued original issue discount
calculated through each date. The redemption price of a Debenture redeemed
between these dates would include an additional amount reflecting the
additional original issue discount accrued since the immediately preceding date
in the table to the actual redemption date.
Accrued Original
Debenture Issue Discount Redemption
Redemption Date Issue Price Price Price
- ------------------------------ ----------- ---------------- ----------
December 19, 2005............. $779.41 $ 50.11 $829.52
December 19, 2006............. 779.41 60.51 839.92
December 19, 2007............. 779.41 71.04 850.45
December 19, 2008............. 779.41 81.70 861.11
December 19 2009.............. 779.41 92.50 871.91
December 19, 2010............. 779.41 103.43 882.84
December 19, 2011............. 779.41 114.50 893.91
December 19, 2012............. 779.41 125.71 905.12
December 19, 2013............. 779.41 137.06 916.47
December 19, 2014............. 779.41 148.55 927.96
December 19, 2015............. 779.41 160.19 939.60
December 19, 2016............. 779.41 171.97 951.38
21
Accrued Original
Debenture Issue Discount Redemption
Redemption Date Issue Price Price Price
- ------------------------------ ----------- ---------------- ----------
December 19, 2017............. 779.41 183.90 963.31
December 19, 2018............. 779.41 195.98 975.39
December 19, 2019............. 779.41 208.21 987.62
December 19, 2020............. 779.41 220.59 1,000.00
From and after the date a tax event occ urs and Comcast elects to pay cash
interest at 1.25% per year on the Debentures instead of accruing original issue
discount, the principal amount for redemptio n will be restated, and will be
calculated by adding the issue price and the original issue discount which had
accrued up until the date on which Comcast exercises the option to commence
paying cash interest.
If Comcast decide to redeem fewer than all of the outstanding Debentures,
the trustee will select the Debentures to be redeemed by lot, on a pro rata
basis or by another method the trustee considers fair and appropriate. If the
trustee selects a portion of your Debentures for partial redemption and you
convert a portion of the same Debentures, the converted portion will be deemed
to be from the portion selected for redemption. Each Debenture will be redeemed
in whole.
Conversion Rights
You have the right to convert each Debenture into 14.2566 shares of Class
A Special common stock so long as the conditions described below are met. You
may convert a Debenture into shares of Class A Special common stock at any time
until the close of business on the last business day prior to December 19,
2020. If a Debenture has been called for redemption, you will be entitled to
convert the Debenture until the close of business on the business day
immediately preceding the date of redemption. You may convert fewer than all of
your Debentures so long as the Debentures converted are a multiple of $1,000
principal amount.
Holders may surrender Debentures for conversion into Class A Special
common stock only if the closing sale price of the Class A Special common stock
is greater than 110% of the accreted conversion price per share for at least 20
trading days of the 30 trading days prior to conversion. The accreted
conversion price as of any day will equal the sum of the issue price of a
Debenture plus the accrued original issue discount for the Debenture, with that
sum divided by the number of Class A Special Common shares issuable upon
conversion of a Debenture on that day. Even if the market price contingency
described above has not occurred, the Debentures may be surrendered for
conversion:
o to the extent Comcast has called the Debentures for redemption.
Debentures called for redemption may be surrendered for conversion
from the date of notice of the redemption until the close of business
on the redemption date.
o if (a) Comcast elects to make a distribution to all stockholders that
would result in an adjustment to the conversion rate under the third
or fourth bullet of the second paragraph below and that, in the case
of the fourth bullet, has a per share value equal to more than 15% of
the closing price of the Class A Special common stock on the day
preceding the declaration date for the distribution and (b) Comcast
does not provide that holders of the Debentures may participate in
the distribution. Debentures may be surrendered for conversion at any
time from and after the declaration date for the distribution until
the business day immediately prior to its ex-dividend date or until
Comcast announces that the distribution will not take place.
o if Comcast is party to a consolidation, merger or binding share
exchange pursuant to which the Class A Special common stock will be
converted into cash, securities or other property. Debentures may be
surrendered for conversion at any time from and after the date which
is 15 days prior to the anticipated effective date of the transaction
until 15 days after the actual date of the transaction and, at the
effective time of the transaction, the right to convert the
Debentures into Class A Special common stock will be changed into a
right to convert them into the kind and amount of cash, securities or
other property which the holder would have received if the holder had
converted the Debentures immediately prior to the
22
transaction. If the transaction also constitutes a change in control,
the holder will be able to require Comcast to purchase all or a
portion of the holder's Debentures as described under "--Change in
Control."
On November 15, 2002, the issue price plus accrued original issue discount
on the Debentures was $798.14, representing an accreted conversion price of
$55.98 per share of our Class A Special common stock. On November 15, 2002, the
last reported sale price of the Class A Special common stock on The Nasdaq
National Market was $25.43, or approximately 45% of the accreted conversion
price, and investors exercising their right to convert the securities would
have incurred an immediate and substantial economic loss.
You will not receive any cash payment representing accrued original issue
discount upon conversion of a Debenture. Instead, upon conversion Comcast will
deliver to you a fixed number of shares of Class A Special common stock and any
cash payment to account for fractional shares. The cash payment for fractional
shares will be based on the closing price of Class A Special common stock on
the trading day immediately prior to the conversion date. Delivery of shares of
our Class A Special common stock will be deemed to satisfy Comcast's obligation
to pay the principal amount of the Debenture, including accrued original issue
discount. Accrued original issue discount will be deemed paid in full rather
than canceled, extinguished or forfeited. Comcast will not adjust the
conversion ratio to account for the accrued original issue discount.
The conversion rate will be subject to adjustment upon the following
events:
o issuance of shares of Class A Special common stock as a dividend or
distribution on the Class A Special common stock;
o subdivision or combination of the outstanding Class A Special common
stock;
o issuance to all stockholders of rights or warrants that allow the
holders to purchase shares of Class A Special common stock at less
than the current market price; provided that no adjustment will be
made if holders of the Debentures may participate in the transactions
on a basis and with notice that the Comcast board of directors
determines to be fair and appropriate or in some other cases;
o distribution to all stockholders of debt or other assets but
excluding distributions of rights and warrants described above and
all-cash distributions; provided that no adjustment will be made if
holders of the Debentures may participate in the transactions;
o the distribution to all or substantially all stockholders of all-cash
distributions in an aggregate amount that, together with (1) any cash
and the fair market value of any other consideration payable in
respect of any tender offer by Comcast or any of its subsidiaries for
shares of Class A Special common stock consummated within the
preceding 12 months not triggering a conversion price adjustment and
(2) all other all-cash distributions to all or substantially all
stockholders made within the preceding 12 months not triggering a
conversion price adjustment, exceeds an amount equal to 12.5% of the
market capitalization of the common stock on the business day
immediately preceding the day on which the distribution is declared;
and
o the purchase of shares of Class A Special common stock pursuant to a
tender offer made by Comcast or any of its subsidiaries to the extent
that the same involves aggregate consideration that, together with
(1) any cash and the fair market value of any other consideration
payable in respect of any tender offer by Comcast or any of its
subsidiaries for shares of Class A Special common stock consummated
within the preceding 12 months not triggering a conversion price
adjustment and (2) all-cash distributions to all or substantially all
stockholders made within the preceding 12 months not triggering a
conversion price adjustment, exceeds an amount equal to 12.5% of the
market capitalization of the common stock on the expiration date of
the tender offer.
If Comcast were to adopt a stockholders rights plan under which it issued
rights providing that each share of Class A Special common stock issued upon
conversion of the Debentures at any time prior to the distribution of separate
certificates representing the rights will be entitled to receive the rights,
there shall not be any adjustment to
23
the conversion rate as a result of:
o the issuance of the rights;
o the distribution of separate certificates representing the rights;
o the exercise or redemption of the rights in accordance with any
rights agreement; or
o the termination or invalidation of the rights.
Comcast may increase the conversion rate as permitted by law for at least
20 days, so long as the increase is irrevocable during the period. Comcast is
not required to adjust the conversion rate until adjustments greater than 1%
have occurred.
If you submit your Debentures for conversion after Comcast has elected to
exercise its option to pay interest instead of accruing original issue discount
between a record date and the opening of business on the next interest payment
date (except for Debentures or portions of Debentures called for redemption on
a redemption date occurring during the period from the close of business on a
record date and ending on the opening of business on the first business day
after the next interest payment date, or if this interest payment date is not a
business day, the second business day after the interest payment date), you
must pay funds equal to the interest payable on the converted principal amount.
Repurchase Right
You have the right to require Comcast to repurchase the Debentures on
December 19, 2002, December 19, 2003, December 19, 2005, December 19, 2010 and
December 19, 2015. Comcast will be required to repurchase any outstanding
Debenture for which you deliver a written repurchase notice to the paying
agent. This notice must be delivered during the period beginning at any time
from the opening of business on the date that is 20 business days prior to the
relevant repurchase date until the close of business on the fifth day prior to
the repurchase date. If the repurchase notice is given and withdrawn during the
period, Comcast will not be obligated to repurchase the related Debentures.
Comcast's repurchase obligation will be subject to some additional conditions.
Also, Comcast's ability to satisfy its repurchase obligations may be affected
by the factors described in "Risk Factors" under the caption "Risks Related to
the AT&T Comcast Transaction."
The repurchase price payable will be equal to the issue price plus accrued
original issue discount through the repurchase date. The repurchase prices of a
Debenture as of each of the repurchase dates will be:
o $799.08 per Debenture on December 19, 2002;
o $809.10 per Debenture on December 19, 2003;
o $829.52 per Debenture on December 19, 2005;
o $882.84 per Debenture on December 19, 2010; and
o $939.60 per Debenture on December 19, 2015.
Comcast may choose to pay the repurchase price for the December 19, 2003
and 2005 repurchases in cash or shares of Class A Special common stock, or a
combination of cash and shares of Class A Special common stock. Comcast may pay
the repurchase price for the December 19, 2002, 2010 and 2015 repurchases in
cash only. For a discussion of the tax treatment of a holder receiving cash,
shares of Class A Special common stock or any combination thereof, see "Certain
United States Federal Income Tax Considerations."
If Comcast has previously exercised its option to pay cash interest
instead of accruing original issue discount on the Debentures following a tax
event, the repurchase price will be equal to the restated principal amount plus
the
24
accrued and unpaid interest that accrued from the date Comcast exercised its
option through the repurchase date. See "--Tax Event."
If Comcast chooses to pay the repurchase price in whole or in part in
shares of Class A Special common stock or a combination of cash and shares of
Class A Special common stock, Comcast will be required to give notice on a date
not less than 20 business days prior to each repurchase date to all holders at
their addresses shown in the register of the registrar, and to beneficial
owners as required by applicable law (i.e., if no notice is given, Comcast will
pay the repurchase price with cash), stating among other things:
o whether Comcast will pay the repurchase price of the Debentures in
cash, in shares of Class A Special common stock, or any combination
thereof, specifying the percentages of each;
o if Comcast elect to pay all or part in shares of Class A Special
common stock, the method of calculating the market price of the Class
A Special common stock; and
o the procedures that holders must follow to require Comcast to
repurchase their Debentures.
Your notice electing to require Comcast to repurchase your Debentures must
state:
o if certificated Debentures have been issued, the Debenture
certificate numbers, or if not certificated, your notice must comply
with appropriate DTC procedures;
o the portion of the principal amount at maturity of Debentures to be
repurchased, in multiples of $1,000;
o that the Debentures are to be repurchased by Comcast pursuant to the
applicable provisions of the Debentures; and
o in the event Comcast elects, pursuant to the notice that Comcast is
required to give, to pay the repurchase price in shares of Class A
Special common stock, in whole or in part, but the repurchase price
is ultimately to be paid to the holder entirely in cash because any
of the conditions to payment of the repurchase price or portion of
the repurchase price in shares of Class A Special common stock is not
satisfied prior to the close of business on the fifth day prior to
the repurchase date, as described below, whether the holder elects:
o to withdraw the repurchase notice as to some or all of the
Debentures to which it relates, or
o to receive cash in respect of the entire repurchase price
for all Debentures or portions of Debentures subject to the
repurchase notice.
If the holder fails to indicate the holder's choice with respect to the
election described in the final bullet point above, the holder will be deemed
to have elected to receive cash in respect of the entire repurchase price for
all Debentures subject to the repurchase notice in these circumstances. For a
discussion of the tax treatment of a holder receiving cash instead of shares of
Class A Special common stock, see "Certain United States Federal Income Tax
Considerations."
You may withdraw any repurchase notice by a written notice of withdrawal
delivered to the paying agent prior to the close of business on the fifth day
prior to the repurchase date. The notice of withdrawal must state:
o the principal amount at maturity of the withdrawn Debentures;
o if certificated Debentures have been issued, the certificate numbers
of the withdrawn Debentures, or if not certificated, your notice must
comply with appropriate DTC procedures; and
o the principal amount at maturity, if any, which remains subject to
the repurchase notice.
If Comcast elects to pay the repurchase price, in whole or in part, in
shares of Class A Special common stock,
25
the number of shares to be delivered by Comcast will be equal to the portion of
the repurchase price to be paid in Class A Special common stock divided by the
market price of one share of Class A Special common stock as determined by
Comcast in its repurchase notice. Comcast will pay cash based on the market
price for all fractional shares.
The "market price" means the average of the sale prices of the Class A
Special common stock for the five trading day period ending on the third
business day prior to the applicable repurchase date (if the third business day
prior to the applicable repurchase date is a trading day, or if not, then on
the last trading day prior to the third business day), appropriately adjusted
to take into account the occurrence, during the period commencing on the first
of the trading days during the five trading day period and ending on the
repurchase date, of some events that would result in an adjustment of the
conversion rate with respect to the Class A Special common stock.
The "sale price" of the Class A Special common stock on any date means the
reported last sale price per share of Class A Special common stock (or if no
reported last sale price is available, the average of the bid and ask prices
or, if there is more than one bid or ask price, the average of the average bid
and the average ask prices) on the date as reported in composite transactions
by the Nasdaq System.
Because the market price of the Class A Special common stock is determined
prior to the applicable repurchase date, holders of Debentures bear the market
risk with respect to the value of the Class A Special common stock to be
received from the date the market price is determined to the repurchase date.
Comcast may pay the repurchase price or any portion of the repurchase price in
shares of Class A Special common stock only if the information necessary to
calculate the market price is published in a daily newspaper of national
circulation.
Upon determination of the actual number of shares of Class A Special
common stock to be paid upon redemption of the Debentures, Comcast will issue a
press release containing this information or publish the information on its Web
site on the World Wide Web or through such other public medium as Comcast may
use at that time.
A holder must either effect book-entry transfer or deliver the Debenture,
together with necessary endorsements, to the office of the paying agent after
delivery of the repurchase notice to receive payment of the repurchase price.
You will receive payment on the repurchase date or the time of book-entry
transfer or the delivery of the Debenture. If the paying agent holds money or
securities sufficient to pay the repurchase price of the Debenture on the
business day following the repurchase date, then:
o the Debenture will cease to be outstanding;
o original issue discount (or, if the Debentures have been converted to
interest-bearing Debentures following a tax event, interest) will
cease to accrue; and
o all other rights of the holder will terminate.
This will be the case whether or not book-entry transfer of the Debenture is
made or whether or not the Debenture is delivered to the paying agent.
Comcast will comply with the provisions of Rule 13e-4 and any other tender
offer rules under the Securities Exchange Act which may be applicable at the
time. Comcast will file Schedule TO or any other schedule required in
connection with any offer by it to repurchase the Debentures at your option.
Ranking
The Debentures will constitute senior debt and will rank equally with all
of Comcast's unsecured and unsubordinated debt and will rank senior to any
future subordinated indebtedness of Comcast.
Comcast currently conducts substantially all its operations through its
subsidiaries, and its subsidiaries generate substantially all of its operating
income and cash flow. As a result, distributions or advances from its
subsidiaries are the principal source of funds necessary to meet its debt
service obligations. Contractual provisions or laws, as well
26
as its subsidiaries' financial condition and operating requirements, may limit
Comcast's ability to obtain cash from its subsidiaries that it requires to pay
its debt service obligations, including payments on the Debentures. In
addition, holders of the Debentures will have a junior position to the claims
of creditors of Comcast's subsidiaries on their assets and earnings.
Tax Event
Comcast has the option to elect to pay cash interest on the Debentures
from and after the date a tax event (as defined below) occurs instead of
accruing original issue discount. The principal amount, which will be restated,
will be calculated by adding the issue price and the original issue discount
which had accrued up until the date on which Comcast exercises the option. This
restated principal amount will be the amount due at maturity. If Comcast elects
this option, interest will be based on a 360-day year comprised of twelve
30-day months. Interest will accrue from the option exercise date and will be
payable semiannually on June 19 and December 19.
A tax event occurs when Comcast receives an opinion from an experienced
independent tax counsel stating that, as a result of either:
o any amendment, change or announced prospective change in the laws or
regulations of the United States or any of its political subdivisions
or taxing authorities of the United States; or
o any amendment, change, interpretation or application of the laws or
regulations by any legislative body, court, government agency or
regulatory authority,
there is more than an insubstantial risk that interest, including original
issue discount, payable on the Debentures either
o would not be deductible on a current accrual basis; or
o would not be deductible under any other method,
in whole or in part, by us for United States federal income tax purposes.
Change in Control
If Comcast undergoes a change in control, you will have the option to
require it to purchase your Debentures 35 business days after the change in
control. Comcast will pay a purchase price equal to the initial issue price
plus accrued original issue discount through the purchase date or, if Comcast
has elected to pay cash interest on the Debentures following a tax event, the
restated principal amount plus accrued and unpaid interest through the purchase
date. You may require Comcast to purchase all or any part of the Debentures so
long as the principal amount at maturity of the Debentures being purchased is a
multiple of $1,000.
The AT&T Comcast transaction constituted a change in control. You have the
option to require Comcast to purchase your Debentures on January 9, 2003.
A change in control will also occur in the following situations:
o any person or group (other than Comcast, its subsidiaries or any
Permitted Holder, as defined below) after the first issuance of
Debentures becomes the beneficial owner of our voting stock
representing more than 50% of the total voting power of all of our
classes of voting stock entitled to vote generally in the election of
the members of our board of directors; or
o Comcast consolidates with or merges into another person (other than a
subsidiary), Comcast sells, conveys, transfers or leases its
properties and assets substantially as an entirety to a person (other
than a subsidiary), or
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o any person (other than a subsidiary) consolidates with or merges with
or into our company, and our outstanding common stock is reclassified
into, exchanged for or converted into the right to receive any other
property or security,
provided that none of these circumstances will be a change in control if, after
a transaction, the persons that beneficially owned our voting stock immediately
prior to the transaction beneficially own, in substantially the same
proportion, shares with a majority of the total voting power of all outstanding
voting securities of the surviving or transferee person that are entitled to
vote generally in the election of that person's board of directors; unless, in
each case, at least 80% of the consideration, other than cash payments for
fractional shares, in the transaction or transactions constituting the change
in control, consists of shares of voting common stock of the person that are,
or upon issuance will be, traded on a national securities exchange or approved
for trading on an established automated over-the-counter trading market in the
United States.
A "Permitted Holder" means (i) Mr. Brian L. Roberts, his spouse or
children, any trust for his benefit or the benefit of his spouse or children,
or any corporation or partnership in which the direct and beneficial owner of
all of the equity interest is he or his spouse or children or any trust for the
benefit of him, his heirs, executors, administrators or personal
representatives upon his death or upon his incompetency or disability for
purposes of the protection and management of his assets, and (ii) any person or
group controlled by each or any of the persons referred to in clause (i). For
purposes of this definition "beneficially own," "beneficial owner" and
"beneficial ownership" shall have the meaning as defined pursuant to Rules
13d-3 and 13d-5 under the Exchange Act (except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether the right is exercisable immediately or only after the passage
of time, upon the happening of an event or otherwise).
You must deliver a written notice to the paying agent prior to the close
of business on the business day prior to the date on which the Debentures are
to be repurchased to exercise the repurchase right upon a change in control.
This notice must specify the Debentures submitted for repurchase. You may
withdraw the notice by delivering a written notice of withdrawal to the paying
agent before the same date.
Within 15 business days after a change in control, Comcast will publish
and mail to the trustee and to each holder of the Debentures a written notice
of the change in control which specifies the terms and conditions and the
procedures required for exercise of a holder's right to require us to purchase
its Debentures.
If a change in control were to occur, Comcast may not have enough funds to
pay the change in control repurchase price. In addition, Comcast has, and may
in the future incur, other indebtedness with similar change in control
provisions permitting its holders to accelerate or to require Comcast to
repurchase its indebtedness upon the occurrence of similar events or on some
specified dates. If Comcast fails to repurchase the Debentures when required
following a change in control, Comcast will be in default under the indenture
whether or not repurchase is permitted by the related subordination provisions.
Merger and Sales of Assets by Comcast
The indenture provides that Comcast may not consolidate with or merge with
or into any other person or convey, transfer or lease its properties and assets
substantially as an entirety to another person, unless among other items:
o the resulting, surviving or transferee person (if other than Comcast)
is organized and existing under the laws of the United States or any
state thereof;
o the person assumes all obligations of Comcast under the Debentures
and the indenture; and
o Comcast or the successor person shall not immediately thereafter be
in default under the indenture.
Events of Default
The following are events of default with respect to the Debentures:
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o Comcast's failure for 30 days to pay any interest on the Debentures
(after any election by Comcast to pay cash interest on the Debentures
following a tax event);
o Comcast's failure to pay principal of the Debentures at maturity (or,
if Comcast has elected to pay cash interest on the Debentures
following a tax event, the restated principal amount), issue price,
accrued original discount, redemption price, repurchase price or
change in control price, when the same becomes due and payable;
o Comcast's failure to comply with any of its covenants or agreements
in the Debentures or the indenture (other than an agreement or
covenant that Comcast has included in the indenture solely for the
benefit of other series of debt securities) for 90 days after written
notice by the trustee or by the holders of at least 25% in principal
amount of all outstanding debt securities affected by that failure;
o some events involving bankruptcy, insolvency or reorganization of
Comcast.
The trustee may withhold notice to the holders of the Debentures of any
default or event of default (except in any payment on the Debentures) if the
trustee considers it in the interest of the holders of the Debentures to do so.
If an event of default for the Debentures occurs and is continuing, the trustee
or the holders of at least 25% in principal amount of the Debentures (or, in
some cases, 25% in principal amount of all debt securities under the indenture
affected, voting as one class) may require Comcast to pay the issue price plus
accrued original issue discount on the Debentures. If an event of default
relating to some events of bankruptcy, insolvency or reorganization occurs, the
issue price plus accrued original issue discount on the Debentures will become
immediately due and payable without any action on the part of the trustee or
any holder. The holders of a majority in principal amount of the outstanding
Debentures (or of all debt securities under the indenture affected, voting as
one class) may in some cases rescind this accelerated payment requirement. If
Comcast exercises its option to pay interest instead of accruing original issue
discount on the Debentures following a tax event, the declaration of
acceleration referred to above will make the restated principal amount plus
accrued and unpaid interest immediately payable.
A holder of Debentures may pursue any remedy under the indenture only if:
o the holder gives the trustee written notice of a continuing event of
default for the Debentures;
o the holders of at least 25% in principal amount of the outstanding
Debentures make a written request to the trustee to pursue the
remedy;
o the holder offers to the trustee indemnity reasonably satisfactory to
the trustee;
o the trustee fails to act for a period of 60 days after receipt of
notice and offer of indemnity; and
o during that 60-day period, the holders of a majority in principal
amount of the Debentures do not give the trustee a direction
inconsistent with the request.
This provision does not, however, affect the right of a holder of Debentures to
sue for enforcement of any overdue payment.
In most cases, holders of a majority in principal amount of the
outstanding Debentures (or of all debt securities affected, voting as one
class) may direct the time, method and place of
o conducting any proceeding for any remedy available to the trustee;
and
o exercising any trust or power conferred on the trustee not relating
to or arising under an event of default.
The indenture requires us to file with the trustee each year a written
statement as to our compliance with the covenants contained in the indenture.
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Modification and Waiver
Comcast may amend or supplement the indenture if the holders of a majority in
principal amount of the outstanding debt securities of all series affected by
the amendment or supplement (acting as one class) consent to it. Without the
consent of the holder of each Debenture, however, no modification may:
o reduce the amount of Debentures whose holders must consent to an
amendment, supplement or waiver;
o reduce the rate of or change the time for payment of interest on the
Debenture;
o reduce the principal of the Debenture or change its stated maturity;
o reduce any premium payable on the redemption of the Debenture or
change the time at which the Debenture may or must be redeemed;
o change any obligation to pay additional amounts on the Debenture;
o make payments on the Debenture payable in currency other than as
originally stated in the Debenture;
o impair the holder's right to institute suit for the enforcement of
any payment on the Debenture;
o make any change in the percentage of principal amount of Debentures
necessary to waive compliance with some provisions of the indenture
or to make any change in this provision for modification;
o waive a continuing default or event of default regarding any payment
on the Debentures; or
o adversely affect the conversion or repurchase provisions of the
Debentures.
Comcast may amend or supplement the indenture or waive any provision of it
without the consent of any holders of Debentures in some circumstances,
including:
o to cure any ambiguity, omission, defect or inconsistency;
o to provide for the assumption of our obligations under the indenture
by a successor upon any merger, consolidation or asset transfer;
o to provide for uncertificated Debentures in addition to or in place
of certificated Debentures or to provide for bearer Debentures;
o to provide any security for or guarantees of the Debentures;
o to comply with any requirement to effect or maintain the
qualification of the indenture under the Trust Indenture Act of 1939;
o to add covenants that would benefit the holders of Debentures or to
surrender any rights Comcast has under the indenture;
o to add events of default with respect to the Debentures; or
o to make any change that does not adversely affect any outstanding
Debentures of any series in any material respect.
The holders of a majority in principal amount of the outstanding
Debentures (or of all debt securities affected, voting as one class) may waive
any existing or past default or event of default with respect to those debt
securities.
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Those holders may not, however, waive any default or event of default in any
payment on any Debenture or compliance with a provision that cannot be amended
or supplemented without the consent of each holder affected.
Defeasance
When we use the term defeasance, we mean Comcast's discharge from some or
all of its obligations under the indenture. If Comcast deposits with the
trustee funds or government securities sufficient to make payments on the
Debentures on the dates those payments are due and payable, then, at Comcast's
option, either of the following will occur:
o Comcast will be discharged from our obligations with respect to the
Debentures ("legal defeasance") or
o the related events of default will no longer apply to Comcast
("covenant defeasance").
If Comcast defeases the Debentures, the holders of the Debentures will not
be entitled to the benefits of the indenture, except for Comcast's obligations
to register the transfer or exchange of Debentures, replace stolen, lost or
mutilated Debentures or maintain paying agencies and hold moneys for payment in
trust. In the case of covenant defeasance, Comcast's obligation to pay
principal, premium and interest on the Debentures will also survive.
Comcast will be required to deliver to the trustee an opinion of counsel
that the deposit and related defeasance would not cause the holders of the
Debentures to recognize income, gain or loss for federal income tax purposes.
If Comcast elects legal defeasance, that opinion of counsel must be based upon
a ruling from the United States Internal Revenue Service or a change in law to
that effect.
Governing Law
The indenture and the Debentures will be governed by, and construed in
accordance with, the law of the State of New York, without regard to conflicts
of laws principles.
Trustee
The Bank of New York, as successor in interest to Bank of Montreal Trust
Company, is the trustee, registrar and paying agent.
If an event of default occurs and is continuing, the trustee will be
required to use the degree of care and skill of a prudent man in the conduct of
his own affairs. The trustee will become obligated to exercise any of its
powers under the indenture at the request of any of the holders of any
Debentures only after those holders have offered the trustee indemnity
reasonably satisfactory to it.
If the trustee becomes one of Comcast's creditors, it will be subject to
limitations in the indenture on its rights to obtain payment of claims or to
realize on some property received for any such claim, as security or otherwise.
The trustee is permitted to engage in other transactions with Comcast. If,
however, it acquires any conflicting interest, it must eliminate that conflict
or resign.
Form, Exchange, Registration and Transfer
Comcast issued the Debentures in registered form, without interest
coupons. Comcast will not charge a service charge for any registration of
transfer or exchange of the Debentures. Comcast may, however, require the
payment of any tax or other governmental charge payable for that registration.
Debentures will be exchangeable for other Debentures, for the same total
principal amount and for the same terms but in different authorized
denominations in accordance with the indenture. Holders may present Debentures
for registration of transfer at the office of the security registrar or any
transfer agent Comcast designates. The security registrar or transfer agent
will effect the transfer or exchange when it is satisfied with the documents of
title and identity of the person making the request.
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Comcast has appointed the trustee as security registrar for the
Debentures. Comcast may at any time rescind that designation or approve a
change in the location through which any registrar acts. Comcast is required to
maintain an office or agency for transfers and exchanges in each place of
payment. Comcast may at any time designate additional registrars for the
Debentures.
In the case of any redemption, the security registrar will not be required
to register the transfer or exchange of any Debenture either:
o during a period beginning 15 business days prior to the mailing of
the relevant notice of redemption and ending on the close of business
on the day of mailing of the notice, or
o if the Debentures have been called for redemption in whole or in
part, except the unredeemed portion of any Debenture being redeemed
in part.
Payment and Paying Agents
Payments on the Debentures will be made in U.S. dollars at the office of the
trustee. At Comcast's option, however, it may make payments by check mailed to
the holder's registered address or, with respect to global Debentures, by wire
transfer. Comcast will make interest payments to the person in whose name the
Debenture is registered at the close of business on the record date for the
interest payment.
The trustee will be designated as Comcast's paying agent for payments on
Debentures. Comcast may at any time designate additional paying agents or
rescind the designation of any paying agent or approve a change in the office
through which any paying agent acts.
Subject to the requirements of any applicable abandoned property laws, the
trustee and paying agent shall pay to Comcast upon written request any money
held by them for payments on the Debentures that remain unclaimed for two years
after the date upon which that payment has become due. After payment to
Comcast, holders entitled to the money must look to Comcast for payment. In
that case, all liability of the trustee or paying agent with respect to that
money will cease.
Book-Entry System
The Debentures will be represented by one or more Global Securities (each a
"Global Security"). Each Global Security will be deposited with, or on behalf
of, DTC and be registered in the name of a nominee of DTC. Except under
circumstances described below, the Debentures will not be issued in definitive
form.
Upon the issuance of a Global Security, DTC will credit on its book-entry
registration and transfer system the accounts of persons designated by the
underwriter with the respective principal amounts of the Debentures represented
by the Global Security. Ownership of beneficial interests in a Global Security
will be limited to persons that have accounts with DTC or its nominee
("participants") or persons that may hold interests through participants.
Ownership of beneficial interests in a Global Security will be shown on, and
the transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to interests of persons other
than participants). The laws of some states require that some purchasers of
securities take physical delivery of the securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
So long as DTC or its nominee is the registered owner of a Global Security, DTC
or its nominee, as the case may be, will be considered the sole owner or holder
of the Debentures represented by that Global Security for all purposes under
the indenture. Except as provided below, owners of beneficial interests in a
Global Security will not be entitled to have Debentures represented by that
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of Debentures in definitive form and will not be
considered the owners or holders thereof under the indenture. Principal and
interest payments, if any, on Debentures registered in the name of DTC or its
nominee will be made to DTC or its nominee, as the case may be, as the
registered owner of the relevant Global Security. Neither Comcast, the trustee,
any paying agent or the registrar for the Debentures will have any
responsibility or liability for any aspect of the records relating to nor
payments made on account of beneficial
32
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial interests.
Comcast expects that DTC or its nominee, upon receipt of any payment of
principal or interest, if any, will credit immediately participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the relevant Global Security as shown on the records
of DTC or its nominee. Comcast also expects that payments by participants to
owners of beneficial interests in a Global Security held through these
participants will be governed by standing instructions and customary practices,
as is the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of the
participants.
If DTC is at any time unwilling or unable to continue as a depositary and a
successor depositary is not appointed by Comcast within 90 days, Comcast will
issue Debentures in definitive form in exchange for the entire Global Security
for the Debentures. In addition, Comcast may at any time and in its sole
discretion determine not to have Debentures represented by a Global Security
and, in such event, will issue Debentures in definitive form in exchange for
the entire Global Security relating to the Debentures. In any such instance, an
owner of a beneficial interest in a Global Security will be entitled to
physical delivery in definitive form of Debentures represented by the Global
Security equal in principal amount to the beneficial interest and to have the
Debentures registered in its name. Debentures so issued in definitive form will
be issued as registered Debentures in denominations of $1,000 and multiples
thereof, unless otherwise specified by Comcast.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
considerations to U.S. holders (as described below) and non-U.S. holders (as
described below) relating to acquisition of our Class A Special common stock in
exchange for the Debentures. This discussion is limited to holders who acquired
shares of Class A Special common stock in exchange for the Debentures as
capital assets.
This discussion does not contain a complete analysis of all the potential
tax considerations relating to the acquisition of our Class A Special common
stock in exchange for the Debentures. In particular, this discussion does not
address all tax considerations that may be important to you in light of your
particular circumstances (such as the alternative minimum tax provisions) or
under certain special rules. Special rules may apply, for instance, to certain
financial institutions, insurance companies, tax-exempt organizations,
partnerships or other entities classified as partnerships for U.S. federal
income tax purposes, dealers in securities, persons who hold Debentures or
shares of our Class A Special common stock as part of a hedge, conversion or
constructive sale transaction, or straddle or other integrated or risk
reduction transaction, or persons who have ceased to be United States citizens
or to be taxed as resident aliens. In addition, the discussion does not apply
to holders of Debentures or shares of our Class A Special common stock which
are partnerships. This discussion also does not address the tax consequences
arising under the laws of any foreign, state or local jurisdiction.
This discussion is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury Regulations, and judicial
decisions and administrative interpretations thereunder, as of the date hereof,
all of which are subject to change or different interpretations, possibly with
retroactive effect.
PLEASE CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
YOU OF ACQUIRING OUR SHARES OF CLASS A SPECIAL COMMON STOCK IN EXCHANGE FOR THE
DEBENTURES, INCLUDING THE EFFECT AND APPLICABILITY OF STATE, LOCAL OR FOREIGN
TAX LAWS.
As used herein, the term "U.S. holder" means a holder of a Debenture that
is, for U.S. federal income tax purposes:
o a citizen or resident of the United States;
o a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or
33
organized in or under the laws of the United States or of any
political subdivision thereof; or
o an estate or trust the income of which is subject to U.S. federal
income taxation regardless of its source.
The term U.S. holder also includes certain former citizens and residents
of the United States.
As used herein, the term "Non-U.S. holder" means a holder of a Debenture
that is, for U.S. federal income tax purposes:
o an individual who is classified as a nonresident alien;
o a foreign corporation; or
o a nonresident alien fiduciary of a foreign estate or trust.
Tax Treatment of Exchange of Debentures for Shares of Class A Special Common
Stock
U.S. Holders. A U.S. holder's exchange of a Debenture for our Class A
Special common stock will be a taxable event. You will recognize gain or loss
equal to the difference between (i) the fair market value of the shares of our
Class A common stock and any cash in lieu of fractional shares received in the
exchange and (ii) your adjusted tax basis in the Debenture. Your adjusted tax
basis in a Debenture will generally equal your cost of the Debenture increased
by any OID and market discount previously included in income with respect to
such Debenture. Gain or loss realized on the exchange of a Debenture for our
Class A Special common stock will generally be capital gain or loss and will be
long-term capital gain or loss if the Debenture is held for more than one year.
You should consult your tax advisors regarding the treatment of capital gains
(which may be taxed at lower rates than ordinary income for taxpayers who are
individuals) and losses (the deductibility of which is subject to limitations).
Non-U.S. Holders. You generally will not be subject to U.S. federal income
tax on gain realized on the exchange of a Debenture for shares of our Class A
Special common stock unless:
o you are an individual present in the United States for 183 days or
more in the year of such sale, exchange or redemption and either (A)
you have a "tax home" in the United States and certain other
requirements are met, or (B) the gain from the disposition is
attributable to an office or other fixed place of business in the
United States;
o in the case of an amount which is attributable to OID, you do not
meet certain conditions for exemption from U.S. federal withholding
tax; or
o the gain is effectively connected with your conduct of a United
States trade or business.
In addition, you may be subject to U.S. federal tax on gain realized on the
exchange of a Debenture for shares of our Class A Special common stock if
either AT&T Comcast or Comcast is a U.S. real property holding corporation
under the "FIRPTA" rules adopted in 1980. Generally, a corporation is a U.S.
real property holding corporation if the fair market value of its U.S. real
property interests, as defined in the Code and applicable regulations, equals
or exceeds 50% of the aggregate fair market value of its worldwide real
property interests and its other assets used or held for use in a trade or
business. Neither AT&T Comcast nor Comcast has determined whether it currently
is a U.S. real property holding corporation or whether it will become one in
the future.
DESCRIPTION OF AT&T COMCAST TRANSACTION
The following summary of our continuing obligations under the terms of the
merger agreement for the AT&T Comcast transaction is qualified by reference to
the merger agreement, as amended, which is included as an exhibit to the
registration statement of which this prospectus is a part.
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Governance Arrangements.
Our Board of Directors. Our Board has twelve members, five of whom were
designated at time of the AT&T Comcast transaction by Comcast from the
then-existing Comcast Board and five of whom were designated by AT&T from the
then-existing AT&T Board and two of whom were independent persons jointly
designated by Comcast and AT&T. At all times, our Board will consist of a
majority of independent persons. Except for pre-approved designees, the
individuals designated by each of Comcast and AT&T were mutually agreed upon by
Comcast and AT&T. Ralph J. Roberts, Brian L. Roberts, Sheldon M. Bonovitz,
Julian A. Brodsky and Decker Anstrom were the pre-approved Comcast director
designees and C. Michael Armstrong was a pre-approved AT&T director designee.
All of the initial director designees will hold office until the 2004 annual
meeting of our shareholders, which will be held in April 2004. After this
initial term, our entire Board will be elected annually. Brian L. Roberts,
through his control of BRCC Holdings LLC or a successor entity, will hold a 33
1/3% nondilutable voting interest in our stock.
Management. Under the Merger Agreement, C. Michael Armstrong, AT&T's
Chairman of the Board, will be our Chairman of the Board until the 2005 annual
meeting of our shareholders and will serve as non-executive Chairman of the
Board from April 1, 2004 until the 2005 annual meeting of our shareholders.
Thereafter, Brian L. Roberts will be the Chairman of the Board. Removal of the
Chairman of the Board will require the vote of at least 75% of the entire AT&T
Comcast Board until the earlier to occur of (1) the date on which neither C.
Michael Armstrong nor Brian L. Roberts is Chairman of the Board and (2) the
sixth anniversary of the 2004 annual meeting of our shareholders.
Upon completion of the AT&T Comcast transaction, Brian L. Roberts,
Comcast's President, became the CEO of AT&T Comcast. Brian L. Roberts will also
be President for as long as he is the CEO. Removal of the CEO requires the vote
of at least 75% of our entire Board until the earlier of the date when Brian L.
Roberts is not the CEO and the sixth anniversary of the 2004 annual meeting of
shareholders.
We will also have an Office of the Chairman comprised of the Chairman of
the Board and the CEO until the earlier to occur of (1) the 2005 annual meeting
of our shareholders and (2) the date on which C. Michael Armstrong ceases to be
the Chairman of the Board. The Office of the Chairman will be our principal
executive deliberative body with responsibility for corporate strategy, policy
and direction, governmental affairs and other significant matters.
Our initial senior officers have been designated by Brian L. Roberts in
consultation with C. Michael Armstrong;
Our charter provisions that implement the foregoing governance
arrangements may not be amended or changed except with the approval of at least
75% of our entire Board until the earlier to occur of (1) the date on which
Brian L. Roberts is no longer serving as Chairman of the Board or CEO and (2)
the sixth anniversary of the 2004 annual meeting of our shareholders.
BRCC Holdings LLC will hold shares of our Class B common stock
constituting 33 1/3% of the combined voting power of our common stock. Brian L.
Roberts has sole voting power over membership interests representing a majority
of the voting power of all BRCC Holdings LLC equity.
Employee Benefits Matters; Indemnification and Insurance.
In the merger agreement, we agreed to honor the terms of all Broadband
employee benefit plans and arrangements and to pay and provide the benefits
required thereunder, recognizing that the AT&T Comcast transaction is a change
in control under the plans, and to provide, until December 31, 2003, to
employees of Broadband and its subsidiaries (other than those subject to
collective bargaining obligations or agreements) aggregate employee benefits
and compensation that are substantially comparable in the aggregate to those
provided by Broadband and its subsidiaries as of the completion of the AT&T
Comcast transaction, other than benefits provided under severance or separation
plans of Broadband or its subsidiaries. Until December 31, 2003, we have agreed
to continue certain severance plans of Broadband and its subsidiaries without
adverse change.
We have also agreed to special severance arrangements for AT&T executive
officers that became employees of Broadband prior to consummation of the AT&T
Comcast merger transaction. Based on currently available
35
information, if all such executive officers were terminated without cause
immediately following completion of the AT&T Comcast transaction, they would
receive severance payments approximately equal in the aggregate to $44,700,000.
The Separation and Distribution Agreement
The following summary of the separation and distribution agreement, as
amended, is qualified in its entirety by reference to the complete text of the
agreement which is incorporated by reference in this prospectus.
Assignment. AT&T assigned and transferred to Broadband all of AT&T's and
its subsidiaries' right, title and interest in all of the assets of AT&T's
broadband business which are not already held by Broadband or a Broadband
subsidiary. The assets comprising AT&T's broadband business are generally
determined in the following manner:
o Assets reflected in the Broadband Group balance sheet dated as of
December 31, 2000 are assets of AT&T's broadband business, except as
described below.
o Assets reflected in the AT&T Communications balance sheet dated as of
December 31, 2000 are assets of AT&T's communications business,
except as described below.
o Certain assets are specifically assigned to AT&T's broadband business
regardless of whether or not they are reflected in the Broadband
Group balance sheet dated as of December 31, 2000.
o Certain assets are specifically assigned to AT&T's communications
business regardless of whether or not they are reflected in the AT&T
Communications balance sheet dated as of December 31, 2000.
o Assets that are not reflected in the Broadband Group balance sheet or
the AT&T Communications balance sheet, in each case dated as of
December 31, 2000, or specifically assigned to AT&T's broadband
business or AT&T's communications business are assigned to the
business to which they primarily relate.
Assumption. At the same time as the assignment, Broadband will assume all
of the liabilities of AT&T's broadband business that are not already
liabilities of Broadband or a Broadband subsidiary. The liabilities of AT&T's
broadband business are generally determined in the following manner:
o Liabilities reflected in the Broadband Group balance sheet dated as
of December 31, 2000 are liabilities of AT&T's broadband business,
except as described below.
o Liabilities reflected in the AT&T Communications balance sheet dated
as of December 31, 2000 are liabilities of AT&T's communications
business, except as described below.
o Certain liabilities are specifically assigned to AT&T's broadband
business regardless of whether or not they are reflected in the AT&T
Broadband Group balance sheet dated as of December 31, 2000.
o Certain liabilities are specifically assigned to AT&T's
communications business regardless of whether or not they are
reflected in the AT&T Communications balance sheet dated as of
December 31, 2000.
o Certain liabilities such as liabilities arising out of the AT&T
Comcast transaction or involving At Home or AT&T Wireless (to the
extent AT&T is not indemnified by AT&T Wireless for such liabilities)
are divided evenly between AT&T's broadband business and AT&T's
communications business regardless of whether or not they are
reflected in the Broadband Group balance sheet or the AT&T
Communications balance sheet, in each case dated as of December 31,
2000.
o Liabilities that are not reflected in the Broadband Group balance
sheet or the AT&T Communications balance sheet, in each case dated as
of December 31, 2000, or specifically assigned to AT&T's broadband
business or AT&T's communications business are assigned to the
business to which they primarily relate.
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The separation occurred on November 18, 2002, immediately prior to the
mergers.
Repayment of Intracompany Debt. In connection with the closing of the AT&T
Comcast transaction, Broadband repaid all intercompany debt owed by AT&T's
broadband business to AT&T's communications business. Broadband effected this
repayment by making a cash payment to AT&T in an amount equal to
$5,849,481,982.66 and by issuing approximately $3,505,277,000 in debt to retire
existing AT&T debt. The cash payment referred to in the preceding sentence
reflected certain adjustments and was made with the proceeds of (i) a borrowing
by Broadband of $4 billion under a bridge loan facility dated April 26, 2002
among Broadband, us, the lenders party thereto and JPMorgan Chase Bank, as
administrative agent, and (ii) a borrowing by Broadband of $2.5 billion under a
credit agreement dated April 26, 2002 among Broadband, us, the lenders party
thereto and JPMorgan Chase Bank, as administrative agent. The retirement of
existing AT&T debt by Broadband referred to above resulted from a recently
completed debt exchange offer pursuant to which Broadband issued debt
guaranteed by us and certain of our cable subsidiaries in an aggregate
principal amount of approximately $3,505,277,000 consisting of approximately
$2,429,790,000 of 8.375% Notes Due 2013 and approximately $1,075,487,000 of
9.455% Notes Due 2022.
Obligations Relating to Broadband's TOPrS Securities. We have agreed, on
the earliest date on which the Broadband debt known by the acronym TOPrS as to
which AT&T has guaranteed certain obligations may be redeemed, to either redeem
such series of TOPrS, cause AT&T to be released from any such guarantee or post
a letter of credit in respect of such debt. As of the date of this filing,
approximately $500 million of outstanding TOPrS remains subject to this
obligation.
Post-Spin-Off Transactions. The ability of Broadband to engage in certain
acquisitions, redeem stock, issue equity securities or take any other action or
actions that in the aggregate would be reasonably likely to have the effect of
causing or permitting one or more persons to acquire directly or indirectly
stock representing a 50% or greater interest, within the meaning of Section
355(e) of the Code, in Broadband or otherwise jeopardize the non-recognition of
taxable gain or loss for U.S. federal income tax purposes to AT&T, AT&T
affiliates and AT&T shareholders in connection with the separation and the
Broadband spin-off may be limited for a period of 25 months following the
Broadband spin-off.
Disposition Of Time Warner Entertainment Interest
Sharing of Proceeds. Upon any disposition of all or any portion of its
interest in Time Warner Entertainment after the signing of the merger
agreement, Broadband has agreed to pay AT&T 50% of the proceeds received from
such disposition in excess of the threshold amount described in the next
sentence reduced by taxes on 50% of such excess. The threshold amount is equal
to the balance, plus 7% simple interest per annum on the balance, of $10.2
billion reduced by the aggregate proceeds of any previous dispositions of any
portion of the Time Warner Entertainment interest. If the Time Warner
Entertainment interest has not been fully disposed of within 54 months of the
completion of the AT&T Comcast transaction, the remaining Time Warner
Entertainment interest will be appraised at fair market value. To the extent
that the amount of such appraisal exceeds the threshold amount specified above,
Broadband has agreed to pay AT&T 50% of such excess, on a tax-adjusted basis.
Restructuring Agreement. On August 21, 2002, AT&T and Comcast
announced that they had entered into an agreement with AOL Time Warner
providing for the restructuring of Time Warner Entertainment Company L.P., or
TWE. The restructuring agreement was intended to provide for a more orderly and
timely disposition of AT&T Broadband Group's entire stake in TWE than would
likely be available under the registration rights provisions of the TWE
partnership agreement, which AT&T Broadband Group had been pursuing. Upon
consummation of the AT&T Comcast transaction, we assumed all of AT&T's interest
in TWE and in the restructuring agreement.
Under the restructuring agreement, which is expected to close in the first
half of 2003, for its 27.64% interest in TWE, Broadband will receive $1.5
billion in common stock of AOL Time Warner Inc. (valued at the time of the
closing and subject to certain limitations) and an effective 21% equity
interest in all of AOL Time Warner's cable properties, including those already
in TWE, and Broadband will also receive $2.1 billion in cash. As part of the
restructuring, TWE will distribute to AOL Time Warner all of TWE's major
content assets, which include Home Box Office (HBO), Warner Bros., and stakes
in The WB Network, Comedy Central and Court TV. Time Warner Cable, which will
own substantially all of AOL Time Warner's cable interests, is expected to
conduct an initial
37
public offering of common stock following the restructuring. Under the
restructuring agreement, Broadband has registration rights enabling it to
dispose of its shares in Time Warner Cable and in AOL Time Warner. In
connection with the transactions, Comcast and Broadband will also enter into a
three-year non-exclusive agreement with AOL Time Warner under which AOL
High-Speed Broadband service would be made available on certain of our cable
systems which pass approximately 10 million homes.
On November 13, 2002, the Federal Communications Commission, referred to
in this prospectus as the FCC, gave conditional approval to the transfer of
certain FCC licenses required to complete the AT&T Comcast transaction. The
Memorandum Opinion and Order issued by the FCC ordered AT&T and Comcast to
place Broadband's interest in TWE into irrevocable trust prior to completion of
the transaction and to fully divest the TWE interest within five-and-a-half
years after completion of the transaction. During the divestiture period, the
divestiture order prohibits us from any involvement in the video programming
activities of TWE. Copies of the trust agreements pursuant to which Broadband's
TWE interest will be placed into irrevocable trust are attached as exhibits to
our Current Report on Form 8-K filed on November 18, 2002 incorporated by
reference herein.
AT&T acquired its stake in TWE as part of its June 2000 acquisition of the
MediaOne Group. In February of 2001, AT&T requested that TWE convert from a
limited partnership into a corporation and create equity securities for
registration with the Securities and Exchange Commission. On July 30, 2002,
AT&T and TWE agreed to suspend the registration process to explore alternative
approaches that led to the transactions contemplated by the restructuring
agreement. In connection with the Broadband spin-off, all of AT&T Broadband
Group's interests and rights with respect to TWE were transferred to Broadband
subsidiaries, and subsequently placed in trust for orderly disposition. The TWE
restructuring is subject to receipt of certain regulatory approvals and other
closing conditions, certain of which are outside our control. There can be no
assurance that the transactions contemplated by the TWE restructuring agreement
will be consummated. If the restructuring agreement is terminated without the
restructuring being consummated, the parties will return to the registration
rights process under the TWE partnership agreement.
Mutual Release of Pre-Closing Claims. AT&T and Broadband have each agreed
to release the other from any and all claims that it may have against the other
party arising from any acts or events occurring or failing to occur prior to
the completion of the Broadband spin-off, subject to certain exceptions
specified in the separation and distribution agreement.
Indemnification by AT&T. After completion of the Broadband spin-off, AT&T
will indemnify Broadband from any and all liabilities relating to, arising out
of or resulting from any of the following:
o the failure of AT&T or any of its subsidiaries or any other person to
pay any liabilities, or perform under any contracts, of AT&T's
communications business,
o the assets or contracts of AT&T's communications business, and
o any breach of the separation and distribution agreement or any of the
ancillary agreements by AT&T.
Indemnification by Broadband. After completion of the Broadband spin-off,
Broadband will indemnify AT&T from any and all liabilities relating to, arising
out of or resulting from any of the following:
o the failure of Broadband or any of its subsidiaries or any other
person to pay any liabilities, or perform under any contracts, of
AT&T's broadband business;
o the assets or contracts of AT&T's broadband business; and
o any breach of the separation and distribution agreement or any of the
ancillary agreements by Broadband;
Tax Indemnification. Subject to the exceptions described below, Broadband
has indemnified AT&T against 50% of the taxes and related costs assessed
against AT&T resulting from the disqualification of the separation and the
Broadband spin-off as tax-free transactions under Section 355 of the Code.
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If such disqualification results from a transaction involving the stock or
assets of Broadband occurring after the Broadband spin-off, from Broadband's
failure to remain actively engaged in a trade or business or from the failure
of any representation made with respect to Broadband in connection with certain
tax opinions and Internal Revenue Service rulings, then Broadband will be
required to indemnify AT&T against all such taxes and related costs.
If such disqualification results from a transaction involving the stock or
assets of AT&T occurring after the Broadband spin-off, from AT&T's failure to
remain actively engaged in a trade or business or from the failure of any
representation made with respect to AT&T in connection with certain tax
opinions and Internal Revenue Service rulings, then Broadband is not required
to indemnify AT&T against any such taxes or related costs.
Broadband has also indemnified AT&T against 50% of the taxes and related
costs resulting from the Liberty Media or AT&T Wireless spin-offs failing to be
tax-free, unless either spin-off becomes taxable as a result of an action taken
by AT&T or Broadband, in which case the acting party bears full responsibility
for any resulting AT&T liabilities. Broadband's obligation described in the
preceding sentence is reduced by Broadband's share of any indemnification that
AT&T receives from Liberty Media or AT&T Wireless as a result of the relevant
spin-off failing to qualify as tax-free.
Other Indemnification. Subject to the next sentence, AT&T and Broadband
have indemnified each other for 50% of any liability resulting from any untrue
statement or omission of a material fact in any registration statement relating
to the Broadband spin-off or in any other filing made by AT&T or Broadband with
the Securities and Exchange Commission in connection with the separation, the
Broadband spin-off, the Broadband merger or any related agreements. AT&T also
indemnified us and Broadband for any liability resulting from any untrue
statement or omission of a material fact in any registration statement relating
to the Consumer Services charter amendment proposal, any other proposal related
to the creation of AT&T Consumer Services Group tracking stock, the reverse
stock split proposal or any AT&T 2002 annual meeting proposal other than the
AT&T transaction proposal or the AT&T Comcast charter proposal.
The Tax Sharing Agreement
The following summary of the tax sharing agreement is qualified by
reference to the tax sharing agreement, which is included as an exhibit to the
registration statement of which this prospectus is a part.
In General. Broadband is currently included in AT&T's federal consolidated
income tax group and Broadband's tax liability will be included in the
consolidated federal income tax liability of AT&T for 2002 until the time of
the Broadband spin-off. The tax sharing agreement provides for tax sharing
payments between Broadband and AT&T for periods prior to the Broadband
spin-off, based on the taxes or tax benefits of hypothetical affiliated groups
consisting of the businesses, assets and liabilities that make up Broadband, on
the one hand, and all other businesses, assets and liabilities of AT&T, on the
other hand. Each group is generally responsible for the taxes attributable to
its lines of business and entities comprising its group.
AT&T and Broadband have agreed that the consolidated tax liability (before
credits) of the hypothetical group will be allocated to each group based on
such group's contribution to consolidated taxable income. This allocation will
take into account losses, deductions and other tax attributes that are utilized
by the hypothetical group even if these attributes could not be utilized on a
stand-alone basis. Tax sharing payments in respect of the consolidated tax
liability of the hypothetical group, after allocation of consolidated tax
credits, will be made between AT&T and Broadband consistent with the
allocations under the tax sharing agreement. As between AT&T and Broadband,
certain tax items are specially allocated to the AT&T group and Broadband group
under the tax sharing agreement.
Broadband Spin-off. AT&T and Broadband have agreed that taxes related to
intercompany transactions that are triggered by the Broadband spin-off will be
generally allocated to Broadband.
Non-Income Tax Liabilities. AT&T and Broadband have agreed that joint
non-income tax liabilities will generally be allocated between AT&T and
Broadband based on the amount of such taxes attributable to each group's line
of business. If the line of business with respect to which the liability is
appropriately associated cannot be readily determined, the tax liability will
be allocated to the AT&T group.
39
Audit Adjustments. AT&T and Broadband have agreed that taxes resulting
from audit adjustments will generally be allocated between the two groups based
on line of business. In general, AT&T controls audits and administrative
matters related to pre-spin-off periods.
Post-Spin-off Tax Attributes. Generally, Broadband may not carry back a
loss, credit or other tax attribute from a post-spin-off period to a
pre-spin-off period, unless Broadband obtains AT&T's consent (which, in the
case of significant net operating or capital loss carrybacks, may not be
unreasonably withheld) and then only to the extent permitted by applicable law.
The Ancillary Agreements
In addition to the other agreements described in this section, AT&T and
Broadband entered into various other commercial agreements in connection with
the AT&T Comcast transaction. A brief summary of these agreements follows:
Network Service Agreements. AT&T and Broadband entered into principal
network service agreements as follows.
o Master Carrier Agreement. This agreement reflects the rates, terms
and conditions on which AT&T Business Services Group will provide
voice, data and Internet services to Broadband, including both
wholesale services (those used as a component in Broadband's services
to its customers) and "administrative" services (for internal
Broadband usage). Pricing is market based, with provisions defining
an ongoing process to ensure that the prices remain competitive.
o First Amended and Restated Local Network Connectivity Services
Agreement. This agreement reflects the rates, terms and conditions on
which AT&T Business Services Group will provide certain local network
connectivity services to Broadband for use in providing local
telephone services to Broadband's subscribers. This agreement
consists of two parts:
o a capital lease from AT&T Business Services Group to
Broadband of certain network switching and transport assets
to be used exclusively by Broadband for a term of up to ten
years, commencing January 1, 2001 for initial assets leased
under the agreement; and
o an operating agreement for the provision of local network
connectivity, management and operational services in
support of Broadband's local cable telephone services, with
a minimum term of five years commencing January 1, 2001.
o Master Facilities Agreement. This agreement permits AT&T or any of
its subsidiaries to use existing fiber facilities owned or leased by
Broadband or its controlled affiliates, together with related
services. In addition, Broadband will construct and lease to AT&T new
fiber facilities in the areas served by Broadband's cable systems for
use in providing telecommunications services. The term of the
build-out period will expire on January 8, 2013. Subject to certain
termination rights specified in this agreement, the term of AT&T's
right to use facilities leased under this agreement will expire on
January 8, 2028, renewable at AT&T's option for successive 20-year
terms in perpetuity.
o Interconnection and Intercarrier Compensation Term Sheet. This
agreement, which has a five-year initial term commencing January 1,
2001, specifies the terms of interconnection of the parties'
networks, and compensation for:
o the origination or termination of interexchange traffic for
the other party; and
o the exchange of local traffic between the parties' local
customers.
o High Speed Internet Services Binding Term Sheet. This agreement
reflects the rates, terms and conditions on which AT&T will provide
specified processes, procedures and services to support Broadband in
its
40
provision of broadband Internet services to Broadband subscribers.
This agreement has a four-year initial term commencing December 4,
2001.
o Intellectual Property Agreement. This agreement specifies the
ownership and license rights granted by each party to the other in
specified patents, software, copyrights and trade secrets. Among
other rights granted, the effect of this agreement is to allow
Broadband and AT&T to continue to have the same rights to use the
intellectual property that they had at the time of the separation and
Broadband spin-off.
o Other Agreements to be Executed. AT&T and we entered into a corporate
name agreement immediately prior to the completion of the AT&T
Comcast transaction pursuant to which AT&T will grant to AT&T Comcast
the right to use the term "AT&T" as part of its full corporate name,
but prohibit any use of "AT&T" as a trade name, trademark, or service
mark, or in a domain name other than specified domain names permitted
for certain purposes. Such grant of rights will be perpetual unless
terminated as a result of the Roberts family's voting power falling
below 33% or pursuant to any other terms of the agreement.
Subject to the terms of the separation and distribution agreement, AT&T
and Broadband may also enter into other agreements in connection with the AT&T
Comcast transaction.
The QUIPS Exchange
Prior to the AT&T Comcast transaction, Microsoft (through a wholly owned
subsidiary) held $5 billion in aggregate liquidation preference amount of 5%
Convertible Quarterly Income Preferred Securities, referred to in this
prospectus by their acronym "QUIPS," of AT&T Finance Trust I, a Delaware
business trust. The QUIPS were convertible into $5 billion aggregate face
amount of 5% Junior Convertible Subordinated Debentures due 2029 of AT&T, which
were in turn convertible into AT&T common stock. In connection with the AT&T
Comcast transaction, Comcast and Microsoft entered into an exchange agreement
dated December 7, 2001 relating to the exchange of the QUIPS for a combination
of our voting and non-voting shares to be issued in the merger, and on December
19, 2001 we became a party to the exchange agreement by executing the
instrument of admission. On March 11, 2002, the parties amended the exchange
agreement and instrument of admission. The following summary of the exchange
agreement and the instrument of admission, in each case as amended, is
qualified in its entirety by reference to the complete texts of the exchange
agreement and the instrument of admission, in each case as amended, which are
incorporated by reference and attached as exhibits to the registration
statement in which this prospectus is included.
The Exchange. In the exchange agreement and instrument of admission, we
agreed to exchange the QUIPS for approximately 100.6 million million shares of
AT&T Comcast Class A common stock, and approximately 14.4 million shares of the
non-voting AT&T Comcast Class A Special common stock in the Broadband merger.
If Microsoft transfers shares of AT&T Comcast Class A common stock or its
voting interest in AT&T Comcast is diluted below 4.95%, subject to certain
conditions, Microsoft will have the right to cause AT&T Comcast to exchange the
shares of non-voting AT&T Comcast Class A Special common stock received in the
Broadband merger for shares of voting AT&T Comcast Class A common stock
provided that its voting interest in AT&T Comcast does not exceed 4.95% after
the exchange. Prior to six months after completion of the Microsoft
transaction, subject to certain exceptions, Microsoft has agreed that neither
Microsoft nor any of its wholly owned subsidiaries will sell, or enter into any
agreement, arrangement or negotiations relating to the sale of, any of the
shares of our Class A Special common stock that it received in connection with
the Microsoft transaction. Comcast agreed to indemnify Microsoft against any
claim by Comcast, AT&T or any shareholder of Comcast, AT&T or AT&T Comcast for
any loss arising as a result of the Broadband spin-off or the mergers failing
to be tax-free, except to the extent such a failure results directly from a
breach by Microsoft of the lock-up agreement described above or of the failure
of a related representation and warranty made by Microsoft in the exchange
agreement.
Internet Access. Until the fifth anniversary of the Microsoft transaction,
we have agreed that if we offer a high-speed Internet access agreement to any
third party, then we will be obligated to offer an agreement on
nondiscriminatory terms with respect to the same cable systems to Microsoft for
its Internet service provider, The Microsoft Network. Because Comcast has
entered into an access agreement with United Online and Broadband has entered
into an access agreement with each of Earthlink, Internet Central, Connected
Data Systems, Galaxy Internet Services and Connect Plus International, we will
be required after the consummation of the AT&T Comcast
41
transaction, with respect to each such agreement with another ISP, to offer an
access agreement to Microsoft on terms no less favorable than those provided to
the other ISP with respect to the specific cable systems covered under the
agreement with the other ISP.
Interactive Technology Agreement. In connection with the exchange
agreement, Microsoft and Comcast Cable Communications, Inc. entered into a
three-year agreement pursuant to which the parties will conduct a trial during
2002 of an interactive television platform, including set-top box middleware.
If the trial results meet agreed technical standards, the platform meets
defined competitive requirements and a launch would meet Comcast Cable's
reasonable business objectives, Comcast Cable has agreed that it will
commercially launch the Microsoft platform to at least 25% of its newly
installed middleware customer base.
The Cross Guarantees
To simplify our capital structure and to insure that our traded debt
securities and those of Comcast Cable, Broadband, MediaOne and TCI will be
treated equally, upon completion of the AT&T Comcast transaction, we, Comcast
Cable, Broadband, MediaOne and TCI each fully and unconditionally guaranteed
each other's traded debt securities.
Comcast did not become a guarantor, and its debt securities were not
guaranteed, because we believe that future investors will be interested in
"pure play" debt securities of our cable communications operations and not
Comcast's commerce and content assets, such as QVC, E! Entertainment and
Comcast Spectacor. MediaOne of Delaware, Inc., formerly known as Continental
Cablevision, Inc. and one of AT&T's cable subsidiaries that was transferred to
Broadband in the AT&T Comcast transaction, which we refer to in this prospectus
as Continental, also did not become a guarantor, and its debt securities were
not guaranteed, because Continental's indentures contain covenants that
effectively prohibit Continental from guaranteeing its affiliates' debt
obligations. If these indentures were amended to permit guarantees of affiliate
debt obligations, Continental might become a guarantor and its debt securities
might be cross-guaranteed.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Any statements in this prospectus and in our filings with the Commission
incorporated by reference in this prospectus that are not statements of
historical information are forward-looking statements made pursuant to the safe
harbor provisions of the Private Litigation Reform Act of 1995. These
forward-looking statements, as well as other oral and written forward-looking
statements made by or on behalf of us from time to time, including statements
contained in our other filings with the Commission and our reports to
shareholders, involve known and unknown risks and assumptions about our
business and other factors which may cause our actual results in future periods
to differ materially from those expressed in any forward-looking statements.
Any such statement is qualified by reference to the risks and factors discussed
in our filings with the Securities and Exchange Commission incorporated by
reference in this prospectus. We caution that the risks and factors discussed
in this prospectus are not exclusive. We have no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or risks. New information, future events or risks
may cause the forward-looking events we discuss in this prospectus and in the
filings with the Commission we incorporate by reference in this prospectus not
to occur.
WHERE YOU CAN FIND MORE INFORMATION
We, and Comcast as our predecessor, file annual, quarterly and special
reports, prospectuses and other information with the SEC. You may read and copy
any reports, statements or other information we or Comcast file at the SEC's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. The SEC filings of AT&T Comcast and
42
Comcast are also available to the public from commercial document retrieval
services and at the website maintained by the SEC at www.sec.gov.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document we have filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information contained directly in this
prospectus.
This prospectus incorporates by reference the documents set forth below
that we and Comcast have previously filed with the SEC. These documents contain
important information about the financial condition of AT&T Comcast and
Comcast.
AT&T Comcast Corporation SEC Filings (File No. 333-82460)
o Current Reports on Form 8-K filed on October 30, 2002 and
November 18, 2002
Comcast Corporation SEC Filings (File No. 001-15471)
o Annual Report on Form 10-K for the year ended December 31, 2001,
filed on March 29, 2002
o Quarterly Report on Form 10-Q for the quarter ended March 31,
2002, filed on May 15, 2002
o Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, filed on August 14, 2002
o Quarterly Report on Form 10-Q for the quarter ended September
30, 2002, filed on October 30, 2002
o Comcast's annual financial statements for the year ended
December 31, 2001 and Independent Auditors' Report included as
Exhibit 99.1 to the Registration Statement on Form S-8 (File No.
333-99343), related to the registration of 25,000,000 shares of
Class A Special Common Stock, pursuant to Comcast's 1996 Stock
Option Plan filed on September 9, 2002
o Current Reports on Form 8-K filed on May 3, 2002, July 10, 2002,
August 1, 2002, September 26, 2002 and October 4, 2002
We also incorporate by reference into this prospectus additional documents
that we may file with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act from the date of this prospectus before the termination of
this offering. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well
as prospectuses. Any statements contained in a previously filed document
incorporated by reference into this prospectus is deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus, or in a subsequently filed document also
incorporated by reference herein, modifies or supersedes that statement.
You may obtain copies of any documents incorporated by reference in this
prospectus through us, the SEC or the SEC's website as described above.
Documents incorporated by reference are available from us without charge,
excluding exhibits thereto unless we have specifically incorporated by
reference such exhibits in this prospectus. Any person, including any
beneficial owner, to whom this prospectus is delivered may obtain documents
incorporated by reference in, but not delivered with, this prospectus by
requesting them from the Information Agent in writing or by telephone at the
address set forth on the back cover of this prospectus. Any request should be
made not later than five business days prior to the end of the tender offer and
consent statement.
We have filed a registration statement on Form S-4 under the Securities
Act with the SEC with respect to our offering of these securities. This
prospectus does not contain all of the information included in the registration
statement and the exhibits and schedules to the registration statement. You
will find additional information about the new notes and the companies involved
in the exchange offer in the registration statement. Certain items are omitted
in accordance with the rules and regulations of the SEC. For further
information with respect to the companies and
43
the new notes, reference is made to the registration statement and the exhibits
and any schedules filed therewith. Statements contained in this prospectus as
to the contents of any contract or other document referred to are not
necessarily complete and in each instance, if such contract or document is
filed as an exhibit, reference is made to the copy of such contract or other
document filed as an exhibit to the registration statement, each statement
being qualified in all respects by such reference. A copy of the registration
statement, including the exhibits and schedules thereto, may be read and copied
at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. All documents incorporated by reference will, so long as the eligible
notes are listed on the Luxembourg Stock Exchange, be available free of charge
during normal business hours at the specified office of the Luxembourg Agent.
LEGAL MATTERS
The validity of the shares of our Class A Special common stock to be
issued upon any conversion of the Debentures issued by Comcast will be passed
upon for us by Arthur R. Block, our General Counsel.
EXPERTS
The balance sheet of AT&T Comcast as of December 31, 2001 included in this
prospectus has been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, appearing herein, and is so included in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements of Comcast, incorporated in this Registration
Statement by reference from Exhibit 99.1 to Registration Statement No.
333-99343 on Form S-8 of Comcast, and the related financial statement schedule
of Comcast, appearing in Exhibit 99.1 to this Registration Statement, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports (which report on the financial statements expresses an unqualified
opinion and includes an explanatory paragraph related to the adoption of
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended, effective January 1, 2001),
which are included or incorporated herein by reference, and have been so
included or incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
44
AT&T COMCAST CORPORATION
BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 2002
Assets......................................................... $ --
=======
Stockholders' Equity
Stock subscription receivable.............................. $ (2)
Common stock, $.01 par value, authorized 100 shares;
2 shares issued and outstanding.......................... $ --
Additional capital......................................... $ 2
-------
$ --
=======
See note to balance sheet.
F-1
AT&T COMCAST CORPORATION
NOTE TO BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 2002
1. ORGANIZATION
On December 7, 2001, CAB Holdings Corp. was incorporated under the laws of
the State of Pennsylvania and was authorized to issue 100 shares of $.01 par
value common stock. At that date of incorporation, CAB Holdings Corp.'s name
was changed to AT&T Comcast Corporation (the "Company") and the Company issued
one share of its $.01 par value common stock to each of Comcast Corporation
("Comcast") and AT&T Corp. ("AT&T") for $1 per share. The Company was organized
to conduct, subsequent to the combination of Comcast and AT&T's Broadband
division ("AT&T Broadband"), the business currently conducted by Comcast and
AT&T Broadband.
On December 19, 2001, Comcast and AT&T entered into an Agreement and Plan
of Merger that will result in the combination of Comcast and AT&T Broadband.
AT&T will spin off AT&T Broadband to its stockholders immediately prior to the
combination. The combined company will also hold AT&T's approximate 27.6%
interest in Time Warner Entertainment. On July 10, 2002, shareholders of both
Comcast and AT&T approved the transaction. The transaction is expected to close
by the end of November 2002.
Upon completion of the combination of Comcast and AT&T Broadband (the
"Merger"), Comcast and an entity which will then own AT&T Broadband will be
wholly-owned subsidiaries of the Company.
On May 3, 2002, the Company and AT&T Broadband Corp. entered into
definitive credit agreements with a syndicate of lenders for an aggregate of
$12.825 billion of new indebtedness in order to obtain the financing necessary
to complete the Merger and for the combined company's financing needs after the
transaction. This financing requires subsidiary guarantees, including
guarantees by certain of Comcast's wholly owned subsidiaries and by
subsidiaries of AT&T Broadband. Under the terms of the new credit facilities,
the obligations of the lenders to provide the financing upon the completion of
the Merger are subject to a number of conditions, including the condition that
the combined company holds investment-grade credit ratings from both the
Standard & Poor's and Moody's Investors Services ("Moody's") rating agencies at
the time of closing. On September 30, 2002, Comcast announced that the Company
had received investment-grade credit ratings from each of S&P and Moody's
allowing the Company to access all amounts under the credit facilities upon
closing the Merger.
From the date of inception on December 7, 2001 through September 30, 2002,
the Company had no operations.
F-2
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
AT&T Comcast Corporation
Philadelphia, Pennsylvania
We have audited the accompanying balance sheet of AT&T Comcast Corporation as
of December 31, 2001. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the balance
sheet is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of AT&T Comcast Corporation as of December 31, 2001, in
conformity with accounting principles generally accepted in the United States
of America.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
April 29, 2002
F-3
AT&T COMCAST CORPORATION
BALANCE SHEET
DECEMBER 31, 2001
Assets......................................................... $ --
======
Stockholders' Equity
Stock subscription receivable.............................. $ (2)
Common stock, $.01 par value, authorized 100 shares;
2 shares issued and outstanding.......................... $ --
Additional capital......................................... $ 2
------
$ --
======
See note to balance sheet.
F-4
AT&T COMCAST CORPORATION
NOTE TO BALANCE SHEET
DECEMBER 31, 2001
1. ORGANIZATION
On December 7, 2001, CAB Holdings Corp. was incorporated under the laws of
the State of Pennsylvania and was authorized to issue 100 shares of $.01 par
value common stock. At that date of incorporation, CAB Holdings Corp.'s name
was changed to AT&T Comcast Corporation (the "Company") and the Company issued
one share of its $.01 par value common stock to each of Comcast Corporation
("Comcast") and AT&T Corp. ("AT&T") for $1 per share. The Company was organized
to conduct, subsequent to the combination of Comcast and AT&T's Broadband
division ("AT&T Broadband"), the business currently conducted by Comcast and
AT&T Broadband.
On December 19, 2001, Comcast and AT&T entered into an Agreement and Plan
of Merger that will result in the combination of Comcast and AT&T Broadband.
AT&T will spin off AT&T Broadband to its stockholders immediately prior to the
combination. The combined company will also hold AT&T's approximate 25.5%
interest in Time Warner Entertainment. The transaction is subject to customary
closing conditions and regulatory approvals and is expected to close by the end
of 2002.
Upon completion of the combination of Comcast and AT&T Broadband, Comcast
and an entity which will then own AT&T Broadband will be wholly-owned
subsidiaries of the Company.
From the date of inception on December 7, 2001 through December 31, 2001,
the Company had no operations.
F-5
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Indemnification under Pennsylvania Law and AT&T Comcast Charter and
Bylaws. Sections 1741 through 1750 of Subchapter D, Chapter 17, of the
Pennsylvania Business Corporation Law ("PBCL") contain provisions for mandatory
and discretionary indemnification of a corporation's directors, officers and
other personnel, and related matters.
Under Section 1741 of the PBCL, subject to certain limitations, a
corporation has the power to indemnify directors and officers under certain
prescribed circumstances against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with an action or proceeding, whether civil, criminal,
administrative or investigative (other than derivative actions), to which any
such officer or director is a party or is threatened to be made a party by
reason of such person being a representative of the corporation or serving at
the request of the corporation as a representative of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise, so long as the director or officer acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal proceeding, such
officer or director had no reasonable cause to believe his/her conduct was
unlawful.
Section 1742 of the PBCL permits indemnification in derivative and
corporate actions if the appropriate standard of conduct is met, except in
respect of any claim, issue or matter as to which the person has been adjudged
to be liable to the corporation unless and only to the extent that the proper
court determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Under Section 1743 of the PBCL, indemnification is mandatory to the extent
that the officer or director has been successful on the merits or otherwise in
defense of any action or proceeding referred to in Section 1741 or 1742 of the
PBCL.
Section 1744 of the PBCL provides that, unless ordered by a court, any
indemnification under Section 1741 or 1742 of the PBCL shall be made by the
corporation only as authorized in the specific case upon a determination that
the representative met the applicable standard of conduct, and such
determination will be made by (i) the board of directors by a majority vote of
a quorum of directors not parties to the action or proceeding, (ii) if a quorum
is not obtainable, or if obtainable and a majority of disinterested directors
so directs, by independent legal counsel in a written opinion, or (iii) by the
shareholders.
Section 1745 of the PBCL provides that expenses (including attorneys'
fees) incurred by an officer, director, employee or agent in defending any
action or proceeding referred to in Subchapter D of Chapter 17 of the PBCL may
be paid by the corporation in advance of the final disposition of such action
or proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation. Except as otherwise provided in the
corporation's bylaws, advancement of expenses must be authorized by the board
of directors.
Section 1746 of the PBCL provides generally that the indemnification and
advancement of expenses provided by Subchapter D of Chapter 17 of the PBCL
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding that office. In no event may indemnification be made in any case
where the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.
II-1
Section 1747 of the PBCL grants a corporation the power to purchase and
maintain insurance on behalf of any director or officer against any liability
incurred by him in his capacity as officer or director, whether or not the
corporation would have the power to indemnify him against that liability under
Subchapter D of Chapter 17 of the PBCL.
Sections 1748 and 1749 of the PBCL extend the indemnification and
advancement of expenses provisions contained in Subchapter D of Chapter 17 of
the PBCL to successor corporations in fundamental changes and to
representatives serving as fiduciaries of employee benefit plans.
Section 1750 of the PBCL provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, Subchapter D of Chapter 17 of
the PBCL shall, unless otherwise provided when authorized or ratified, continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs and personal representatives of such
person.
Article Eleventh of the AT&T Comcast charter and Article VII of the AT&T
Comcast bylaws provide that no director of AT&T Comcast will be personally
liable, as such, for monetary damages (other than under criminal statutes and
under laws imposing such liability on directors or officers for the payment of
taxes) unless such person's conduct constitutes self-dealing, willful
misconduct or recklessness. Article Eleventh of the AT&T Comcast charter also
extends such protection to officers.
Article VII of the AT&T Comcast bylaws provides that each officer and
director of AT&T Comcast is indemnified and held harmless by AT&T Comcast for
all actions taken by him or her and for all failures to take action (regardless
of the date of any such action or failure to take action) to the fullest extent
permitted by Pennsylvania law against all expense, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, taxes,
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such officer or director in connection with any threatened, pending
or completed action, suit or proceeding (including, without limitation, an
action, suit or proceeding by or in the right of AT&T Comcast), whether civil,
criminal, administrative or investigative.
The foregoing statements are subject to the detailed provisions of the
PBCL and to the applicable provisions of the AT&T Comcast charter and bylaws.
Merger Agreement Provision Relating To AT&T and Comcast Directors and
Officers. AT&T Comcast has agreed in the merger agreement to indemnify the
present and former officers and directors of AT&T, the AT&T subsidiaries, AT&T
Broadband, the AT&T Broadband subsidiaries, Comcast and the Comcast
subsidiaries, and each individual who prior to the completion of the
transactions described in the prospectus included in this registration
statement becomes such an officer or director, from their acts or omissions in
those capacities occurring at or prior to the completion of such transactions
to the maximum extent permitted by law; provided, however, no such
indemnification will be required for officers or directors acting in a capacity
for AT&T and its subsidiaries other than in connection with either AT&T's
broadband business or the merger agreement and the transactions contemplated by
the merger agreement.
AT&T (and not AT&T Broadband) will indemnify and hold harmless AT&T
Comcast for 50% of any losses described in the preceding paragraph arising out
of acts or omissions of the AT&T officers and directors in connection with the
merger agreement and the transactions contemplated by the merger agreement.
For six years after completion of the transactions described in the
prospectus included in this registration statement, AT&T Comcast will provide
officers' and directors' liability insurance in respect of acts or omissions
occurring prior to completion of the transactions covering each officer and
director identified in the second preceding paragraph (for officers and
directors of AT&T and its subsidiaries, only for acts or omissions of such
person acting in connection with either AT&T's broadband business or the merger
agreement and the transactions contemplated by the merger agreement) currently
covered by the officers' and directors' liability insurance policy of AT&T or
Comcast, as the case may be, on terms no less favorable than those of such
policy in effect on December 19, 2001, except that AT&T Comcast will only be
obligated to pay up to 300% of the annual premium paid for such insurance by
either AT&T or Comcast as of December 19, 2001.
II-2
Item 21. Exhibits and Financial Statement Schedules
Exhibit
No. Document
--- --------
2.1 Agreement and Plan of Merger dated as of December 19, 2001, as
amended, among AT&T Corp., AT&T Broadband Corp., Comcast Corporation,
AT&T Broadband Acquisition Corp., Comcast Acquisition Corp. and AT&T
Comcast Corporation.*
2.2 Separation and Distribution Agreement dated as of December 19, 2001,
as amended, between AT&T Corp. and AT&T Broadband Corp.*
2.3 Support Agreement dated as of December 19, 2001, as amended, AT&T
Corp., Comcast Corporation, AT&T Comcast Corporation, Sural LLC and
Brian L. Roberts.*
2.4 Tax Sharing Agreement dated as of December 19, 2001 between AT&T
Corp. and AT&T Broadband Corp.**
2.5 Employee Benefits Agreement dated as of December 19, 2001 between
AT&T Corp. and AT&T Broadband Corp.****
2.6 Exchange Agreement dated as of December 7, 2001, as amended, between
Microsoft Corporation and Comcast Corporation.*
2.7 Instrument of Admission dated as of December 19, 2001, as amended,
between AT&T Comcast Corporation and AT&T Corp.*
3.1 Amended and Restated Articles of Incorporation of AT&T Comcast
Corporation.****
3.2 AT&T Comcast Bylaws.****
4.1 Indenture dated as of June 15, 1999 between Comcast and Bank of
Montreal Trust Company, as Trustee.****
4.2 Form of Debenture relating to Comcast's Zero Coupon Convertible
Debentures Due 2020.****
4.3 Credit Agreement dated as of April 26, 2002 among AT&T Comcast
Corporation, AT&T Broadband Corp., the Financial Institutions party
thereto, JP Morgan Chase Bank, as Administrative Agent, Swing Line
Lender and Issuing Lender, Citibank, N.A., as Syndication Agent, and
Bank of America, N.A., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley Senior Funding, Inc.,
as Co-Documentation Agents.**
4.4 Bridge Credit Agreement dated as of April 26, 2002 among AT&T Comcast
Corporation, AT&T Broadband Corp., the Financial Institutions party
thereto, JP Morgan Chase Bank, as Administrative Agent, Swing Line
Lender and Issuing Lender, Citibank, N.A., as Syndication Agent, and
Bank of America, N.A., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley Senior Funding, Inc.,
as Co-Documentation Agents.**
4.5 Credit Agreement dated as of May 3, 2002 among AT&T Broadband Corp.,
AT&T Comcast Corporation, the Financial Institutions party thereto,
JP Morgan Chase Bank, as Administrative Agent, Citibank, N.A., Bank
of America, N.A., Merrill Lynch Capital Corporation and Morgan
Stanley Senior Funding, Inc.**
5.1 Opinion of Arthur R. Block.****
23.1 Consent of Arthur R. Block (included in Exhibit 5.1.)
23.2 Consent of Deloitte & Touche LLP with respect to AT&T Comcast
Corporation.***
23.3 Consent of Deloitte & Touche LLP with respect to Comcast
Corporation.***
24 Power of Attorney (included on the signature page hereof.)
99.1 Financial Statement Schedule of Comcast Corporation.***
* Incorporated by reference to our registration statement on Form S-4, filed
on February 11, 2002.
** Incorporated by reference to our amended registration statement on Form
S-4/A, filed on May 14, 2002.
*** Filed herewith.
**** To be filed by amendment.
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report
II-3
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by one
of our directors, officers or controlling persons in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) The undersigned hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES FOR AT&T COMCAST CORPORATION
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Philadelphia, State of
Pennsylvania, on November 18, 2002.
AT&T COMCAST CORPORATION
By: /s/ Arthur R. Block
--------------------------------
Name: Arthur R. Block
Title: Senior Vice President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John R. Alchin and Arthur R. Block, and each of
them, his or her true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement and any
and all additional registration statements pursuant to Rule 462(b) of the
Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and all other documents in connection therewith, with the Securities
and Exchange Commission, granting unto each said attorney-in-fact and agents
full power and authority to do and perform each and every act in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or either
of them or their or his or her substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/s/ Brian L. Roberts
- -------------------------------------
Brian L. Roberts Co-President (Co-Principal Executive November 18, 2002
Officer)
/s/ C. Michael Armstrong
- -------------------------------------
C. Michael Armstrong Co-President (Co-Principal Executive November 18, 2002
Officer)
/s/ John R. Alchin
- -------------------------------------
John R. Alchin Executive Vice President and November 18, 2002
Co-Treasurer (Co-Principal Financial
Officer)
/s/ Lawrence S. Smith
- -------------------------------------
Lawrence S. Smith Executive Vice President and November 18, 2002
Director (Co-Principal Accounting
Officer)
/s/ Stanley Wang
- -------------------------------------
Stanley Wang Executive Vice President, November 18, 2002
Co-Secretary and Director
II-5
/s/ Arthur R. Block
- -------------------------------------
Arthur R. Block Senior Vice President, Assistant November 18, 2002
Secretary, Assistant Treasurer, and
Director
II-6
INDEX OF EXHIBITS
Exhibit
No. Document
--- --------
2.1 Agreement and Plan of Merger dated as of December 19, 2001, as
amended, among AT&T Corp., AT&T Broadband Corp., Comcast Corporation,
AT&T Broadband Acquisition Corp., Comcast Acquisition Corp. and AT&T
Comcast Corporation.*
2.2 Separation and Distribution Agreement dated as of December 19, 2001,
as amended, between AT&T Corp. and AT&T Broadband Corp.*
2.3 Support Agreement dated as of December 19, 2001, as amended, AT&T
Corp., Comcast Corporation, AT&T Comcast Corporation, Sural LLC and
Brian L. Roberts.*
2.4 Tax Sharing Agreement dated as of December 19, 2001 between AT&T
Corp. and AT&T Broadband Corp.**
2.5 Employee Benefits Agreement dated as of December 19, 2001 between
AT&T Corp. and AT&T Broadband Corp.****
2.6 Exchange Agreement dated as of December 7, 2001, as amended, between
Microsoft Corporation and Comcast Corporation.*
2.7 Instrument of Admission dated as of December 19, 2001, as amended,
between AT&T Comcast Corporation and AT&T Corp.*
3.1 Amended and Restated Articles of Incorporation of AT&T Comcast
Corporation.****
3.2 AT&T Comcast Bylaws.****
4.1 Indenture dated as of June 15, 1999 between Comcast and Bank of
Montreal Trust Company, as Trustee.****
4.2 Form of Debenture relating to Comcast's Zero Coupon Convertible
Debentures Due 2020.****
4.3 Credit Agreement dated as of April 26, 2002 among AT&T Comcast
Corporation, AT&T Broadband Corp., the Financial Institutions party
thereto, JP Morgan Chase Bank, as Administrative Agent, Swing Line
Lender and Issuing Lender, Citibank, N.A., as Syndication Agent, and
Bank of America, N.A., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley Senior Funding, Inc.,
as Co-Documentation Agents.**
4.4 Bridge Credit Agreement dated as of April 26, 2002 among AT&T Comcast
Corporation, AT&T Broadband Corp., the Financial Institutions party
thereto, JP Morgan Chase Bank, as Administrative Agent, Swing Line
Lender and Issuing Lender, Citibank, N.A., as Syndication Agent, and
Bank of America, N.A., Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley Senior Funding, Inc.,
as Co-Documentation Agents.**
4.5 Credit Agreement dated as of May 3, 2002 among AT&T Broadband Corp.,
AT&T Comcast Corporation, the Financial Institutions party thereto,
JP Morgan Chase Bank, as Administrative Agent, Citibank, N.A., Bank
of America, N.A., Merrill Lynch Capital Corporation and Morgan
Stanley Senior Funding, Inc.**
5.1 Opinion of Arthur R. Block.****
23.1 Consent of Arthur R. Block (included in Exhibit 5.1.)
23.2 Consent of Deloitte & Touche LLP with respect to AT&T Comcast
Corporation.***
23.3 Consent of Deloitte & Touche LLP with respect to Comcast
Corporation.***
24 Power of Attorney (included on the signature page hereof.)
99.1 Financial Statement Schedule of Comcast Corporation.***
* Incorporated by reference to our registration statement on Form S-4, filed
on February 11, 2002.
** Incorporated by reference to our amended registration statement on Form
S-4/A, filed on May 14, 2002.
*** Filed herewith.
**** To be filed by amendment.
II-7
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of AT&T Comcast
Corporation on Form S-4 of our report dated April 29, 2002 related to the
balance sheet of AT&T Comcast Corporation as of December 31, 2001, and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
November 15, 2002
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
AT&T Comcast Corporation on Form S-4 of our report dated February 5, 2002 (July
30, 2002 as to Note 14) (which report expresses an unqualified opinion and
includes an explanatory paragraph related to the adoption of Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended, effective January 1, 2001), appearing in
Exhibit 99.1 to Registration Statement No. 333-99343 on Form S-8 of Comcast
Corporation, and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Comcast Corporation,
appearing in Exhibit 99.1 of this Registration Statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
November 15, 2002
EXHIBIT 99.1
COMCAST CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In millions)
Additions
Balance at Charged to Deductions
Beginning of Costs and from Balance at
Year Expenses Reserves(A) End of Year
------------ --------- ----------- -----------
Allowance for Doubtful Accounts
- -------------------------------
2001 $141.7 $86.3 $74.1 $153.9
2000 136.6 65.9 60.8 141.7
1999 120.7 48.6 32.7 136.6
Allowance for Excess and Obsolete
Electronic Retailing Inventories
- ---------------------------------
2001 $105.5 $55.1 $46.3 $114.3
2000 89.2 46.3 30.0 105.5
1999 60.9 61.9 33.6 89.2
(A) Uncollectible accounts and excess and obsolete inventory written off.
