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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)*
RCN CORPORATION
(NAME OF ISSUER)
COMMON STOCK
(TITLE OF CLASS OF SECURITIES)
7493 6101
(CUSIP NUMBER)
William D. Savoy Alvin G. Segel, Esq.
Vulcan Ventures Incorporated Irell & Manella LLP
110-110th Avenue N.E., Suite 550 1800 Avenue of the Stars
Bellevue, WA 98004 Suite 900
(206) 453-1940 Los Angeles, CA 90067
(310) 277-1010
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS)
OCTOBER 1, 1999
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP No. 7493 6101 SCHEDULE 13D Page of Pages
--------------------- -------- --------
(1) Names of Reporting Person
S.S. or I.R.S. Identification No. of Above Person (Entities Only)
Vulcan Ventures Incorporated
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(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(See Instructions) (b) [ ]
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(3) SEC Use Only
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(4) SOURCE OF FUNDS*
WC
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
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(6) Citizenship or Place of Organization
State of Washington
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(7) Sole Voting Power
Number of -0- shares
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 30,048,070 shares(1)
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With -0- shares
--------------------------------------------------------
(10) Shared Dispositive Power
3,407,100 shares(2)
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
30,048,070 shares(1)
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CUSIP No. 7493 6101 SCHEDULE 13D Page of Pages
--------------------- -------- --------
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(12) Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
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(13) Percent of Class Represented by Amount in Row (11)
39.6%
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(14) Type of Reporting Person*
CO
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(1) 3,407,100 of these shares are directly owned by Vulcan Ventures
Incorporated. Paul G. Allen is the sole shareholder of Vulcan Ventures
Incorporated and may be deemed to have shared voting and dispositive power
with respect to such shares. The remaining 26,640,970 shares are
beneficially owned by Level 3 Telecom Holdings, Inc. and are subject to the
Voting Agreement described in Item 6, pursuant to which Level 3 Telecom
Holdings, Inc. has agreed to vote such shares in favor of the Stock Purchase
Agreement described in Item 6 and has granted a proxy to Vulcan Ventures for
that purpose. Vulcan Ventures has no economic interest in any of the shares
beneficially owned by Level 3 and such shares are included in this Schedule
13D solely due to Level 3's agreement under the Voting Agreement to vote in
favor of the Stock Purchase Agreement. The reported shares do not include
1,650,000 shares of Series B 7% Senior Convertible Preferred Stock (and the
shares of Common Stock that may be obtained upon conversion thereof) that
Vulcan Ventures Incorporated may acquire pursuant to the Stock Purchase
Agreement described in Item 6
(2) These shares are directly owned by Vulcan Ventures Incorporated. Paul G.
Allen is the sole shareholder of Vulcan Ventures Incorporated and may be
deemed to have shared voting and dispositive power with respect to such
shares
* SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP No. 7493 6101 SCHEDULE 13D Page of Pages
--------------------- -------- --------
(1) Names of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Paul G. Allen
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(2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a) [ ]
(b) [ ]
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(3) SEC Use Only
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(4) SOURCE OF FUNDS*
AF, PF, BK
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
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(6) Citizenship or Place of Organization
United States of America
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(7) Sole Voting Power
Number of -0- shares
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 30,048,070 shares(1)
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With -0- shares
--------------------------------------------------------
(10) Shared Dispositive Power
3,407,100 shares(2)
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
30,048,070 shares(1)
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CUSIP No. 7493 6101 SCHEDULE 13D Page of Pages
--------------------- -------- --------
- -------------------------------------------------------------------------------
(12) Check Box if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
39.6%
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(14) Type of Reporting Person*
IN
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(1) 3,407,100 of these shares are directly owned by Vulcan Ventures
Incorporated. Paul G. Allen is the sole shareholder of Vulcan Ventures
Incorporated and may be deemed to have shared voting and dispositive power
with respect to such shares. The remaining 26,640,970 shares are
beneficially owned by Level 3 Telecom Holdings, Inc. and are subject to the
Voting Agreement described in Item 6, pursuant to which Level 3 Telecom
Holdings, Inc. has agreed to vote such shares in favor of the Stock Purchase
Agreement described in Item 6 and has granted a proxy to Vulcan Ventures for
that purpose. Vulcan Ventures has no economic interest in any of the shares
beneficially owned by Level 3 and such shares are included in this Schedule
13D solely due to Level 3's agreement under the Voting Agreement to vote in
favor of the Stock Purchase Agreement. The reported shares do not include
1,650,000 shares of Series B 7% Senior Convertible Preferred Stock (and the
shares of Common Stock that may be obtained upon conversion thereof) that
Vulcan Ventures Incorporated may acquire pursuant to the Stock Purchase
Agreement described in Item 6
(2) These shares are directly owned by Vulcan Ventures Incorporated. Paul G.
Allen is the sole shareholder of Vulcan Ventures Incorporated and may be
deemed to have shared voting and dispositive power with respect to such
shares.
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, $1.00 par value per share,
of RCN Corporation, a Delaware corporation (the "Issuer"). The Issuer's
principal executive offices are located at 105 Carnegie Center, Princeton, New
Jersey 08540-6215. The Issuer's telephone number is (609) 734-3700.
ITEM 2. IDENTITY AND BACKGROUND.
The persons filing this statement are Vulcan Ventures Incorporated
("Vulcan Ventures") and Paul G. Allen. Vulcan Ventures is a Washington
corporation whose principal business is investing in various companies. Paul G.
Allen is its sole shareholder. The principal office of Vulcan Ventures is
located at 110-110th Avenue N.E., Suite 550, Bellevue, Washington 98004. All of
Vulcan Ventures' executive officers and directors are U.S. citizens. Their
names, business addresses and principal occupations are as follows:
Paul G. Allen, Vulcan Ventures Incorporated, 110-110th Avenue N.E.,
Suite 550, Bellevue, Washington 98004. Mr. Allen is Chairman, President and sole
shareholder of Vulcan Ventures and a Director and sole shareholder of Vulcan
Northwest Inc.
William D. Savoy, Vulcan Northwest Inc., 110-110th Avenue N.E., Suite
550, Bellevue, Washington 98004. Mr. Savoy is Vice President and a Director of
Vulcan Ventures and Chairman and President of Vulcan Northwest Inc.
Bert Kolde, Vulcan Ventures Incorporated, 110-110th Avenue N.E., Suite
550, Bellevue, Washington 98004. Mr. Kolde is a Vice President, Secretary,
Treasurer and a Director of Vulcan Ventures and a Vice President of Vulcan
Northwest Inc.
Jo Allen Patton, Vulcan Northwest Inc., 110-110th Avenue N.E., Suite
550, Bellevue, Washington 98004. Ms. Patton is Vice Chairman and a Vice
President of Vulcan Ventures and Vulcan Northwest Inc.
During the last five years, Mr. Allen and Vulcan Ventures have not,
nor, to the best knowledge of Vulcan Ventures and Mr. Allen, has any other
person named in this Item 2, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which he is or was subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
ITEM 3: SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
As more fully described in Item 6 below, on October 1, 1999, Vulcan
Ventures and the Issuer entered into a Stock Purchase Agreement pursuant to
which Vulcan Ventures agreed to purchase from the Issuer 1,650,000 shares of
Series B 7% Senior Convertible Preferred Stock (the "Preferred Stock") for an
aggregate purchase price of $1,650,000,000,
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subject to the terms and conditions set forth in the Stock Purchase Agreement.
Vulcan Ventures will provide the funds necessary to fund the purchase of the
Preferred Stock from its working capital or its affiliates' working capital or
from a capital contribution from Mr. Allen, which may be funded either by Mr.
Allen's personal funds and/or from an existing margin credit facility maintained
by Mr. Allen with BT Alex. Brown Incorporated.
Vulcan Ventures funded its purchase of the 3,407,100 shares of Common
Stock that it owned prior to the execution of the Stock Purchase Agreement from
its own working capital. None of the funds used to purchase such shares of
Common Stock consisted of funds or other consideration borrowed or otherwise
obtained for the purpose of acquiring, holding, trading or voting the shares of
Common Stock.
ITEM 4: PURPOSE OF TRANSACTION.
Vulcan Ventures and Mr. Allen acquired the shares of Common Stock that
Vulcan Ventures directly owns, and will acquire the shares of Preferred Stock to
be acquired pursuant to the Stock Purchase Agreement, for investment purposes
and in order to obtain representation on the Issuer's Board of Directors.
Subject to the limitations set forth in the Stock Purchase Agreement, Vulcan
Ventures and/or Mr. Allen may acquire additional shares of Common Stock from
time to time in open market or private transactions, depending on various
factors, including, without limitation, the price of the Common Stock, stock
market conditions and the business prospects of the Issuer. Vulcan Ventures or
Mr. Allen may determine to dispose of some or all of their beneficial holdings
of the Issuer's securities. Each reserves the right to increase or decrease its
or his holdings on such terms and at such times as each may decide, subject to
the terms and conditions of the Stock Purchase Agreement.
In addition, the matters set forth in Item 6 are incorporated in this
Item 4 by reference as if fully set forth herein.
Except as set forth in this statement, Vulcan Ventures and Mr. Allen
have no present plan or proposal that relates to or would result in (i) the
acquisition of additional securities or the disposition of securities of the
Issuer by any person, (ii) an extraordinary corporate transaction, such as a
merger, reorganization, liquidation, or sale or transfer of a material amount of
assets involving the Issuer or any of its subsidiaries, (iii) any change in the
Issuer's present Board of Directors or management, (iv) any material change in
the Issuer's present capitalization or dividend policy or any other material
change in the Issuer's business or corporate structure, (v) any change in the
Issuer's charter or by-laws or other actions that may impede the acquisition of
control of the Issuer by any person, (vi) any change that would result in any
class of the Issuer's equity securities becoming eligible for termination of its
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of
1934, as amended, or to cease to be authorized to be quoted in Nasdaq, or (vii)
any similar action. However, Vulcan Ventures and Mr. Allen reserve the right to
formulate plans or proposals specified in clauses (a) through (j) of Item 4 of
Schedule 13D, subject to the terms and conditions of the Stock Purchase
Agreement.
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Vulcan Ventures and Mr. Allen each beneficially owns 30,048,070
shares of the Issuer's Common Stock, including 26,640,970 shares of Common Stock
that are beneficially owned by Level 3 Telecom Holdings, Inc. ("Level 3") and
that are subject to the Voting Agreement described in Item 6. These shares
exclude the 1,650,000 shares of Preferred Stock (and the shares of Common Stock
and Class B Common Stock that may be obtained upon conversion thereof) that
Vulcan Ventures has the right to acquire pursuant to the Stock Purchase
Agreement described in Item 6. The Class B Common Stock is essentially
identical to the Common Stock except that it is not entitled to vote.
Vulcan Ventures' and Mr. Allen's stockholdings, including the shares of
Common Stock subject to the Voting Agreement, represent approximately 39.6% of
the shares of the Issuer's Common Stock outstanding. Excluding the shares of
Common Stock beneficially owned by Level 3 that are subject to the Voting
Agreement, Vulcan Ventures' and Mr. Allen's current stockholdings represent
approximately 4.5% of the shares of the Issuer's Common Stock outstanding.
Upon acquisition of the Preferred Stock by Vulcan Ventures pursuant to
the Stock Purchase Agreement, and assuming immediate conversion of all of the
shares of Preferred Stock into shares of Common Stock, Vulcan Ventures and Mr.
Allen would beneficially own 30,020,003 shares of Common Stock, which would
represent approximately 29.3% of the shares of the Issuer's Common Stock
outstanding (27.4% if all of the Issuer's outstanding Series A 7% Senior
Convertible Preferred Stock were converted into shares of Common Stock).
But see Item 6.
All of the percentages set forth in this Item 5(a) are based upon
75,859,602 shares of the Issuer's Common Stock outstanding as of June 30, 1999,
as reported by the Issuer in its Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999.
To the best knowledge of Vulcan Ventures and Mr. Allen, none of the
other parties named in Item 2 owns any of the Issuer's Common Stock.
(b) Vulcan Ventures and Mr. Allen have shared voting and dispositive
power with respect to the 3,407,100 shares of Common Stock directly owned by
Vulcan Ventures. Vulcan Ventures and Mr. Allen may also be deemed to have shared
voting power over the 26,640,970 shares of Common Stock beneficially owned by
Level 3 that are subject to the Voting Agreement described in Item 6.
(c) Vulcan Ventures and Mr. Allen have not, nor to the knowledge of
Vulcan Ventures, has any of its executive officers, directors or controlling
persons named in Item 2, effected any transactions in the Issuer's Common Stock
during the past sixty days.
(d) Neither Vulcan Ventures nor Mr. Allen knows any other person who
has the right to receive or the power to direct the receipt of dividends from or
the proceeds from the sale of any Common Stock directly owned by Vulcan Ventures
or Mr. Allen. Neither Vulcan Ventures nor Mr. Allen knows whether any other
person besides Level 3 has the right to receive or the power to direct the
receipt of dividends from or the proceeds from the
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sale of any Common Stock beneficially owned by Level 3 which are subject to the
Voting Agreement described in Item 6.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Stock Purchase Agreement
Pursuant to the Stock Purchase Agreement (the "Stock Purchase
Agreement") dated as of October 1, 1999 between Vulcan Ventures and the Issuer,
the Issuer agreed to sell to Vulcan Ventures, and Vulcan Ventures agreed to
purchase from the Issuer, 1,650,000 shares of the Preferred Stock for a purchase
price of $1,650,000,000. The consummation of the sale of the Preferred Stock by
the Issuer to Vulcan Ventures is referred to as the "Closing". The Closing is
subject to customary conditions, including regulatory approvals. Capitalized
terms used below under this sub-heading and not otherwise defined have the
meaning given to them in the Stock Purchase Agreement.
The Stock Purchase Agreement provides, among other things, that Vulcan
Ventures will be entitled to designate for election to the Board of Directors of
the Issuer (i) two persons, for so long as the aggregate number of shares of
Common Stock and Class B Stock (treating all shares of Preferred Stock as if
they had been converted) owned by Vulcan Ventures is not less than 50% of the
sum of the number of shares of Common Stock that Vulcan Ventures owned on
October 1, 1999 plus the number of shares of Common Stock and Class B Stock
issued or issuable on conversion under the Certificate of Designations,
Preferences and Rights of Series B 7% Senior Convertible Preferred Stock (the
"Certificate of Designations") of all shares of Preferred Stock issued to Vulcan
Ventures from time to time and (ii) one person, for so long as the aggregate
number of shares of Common Stock and Class B Stock (treating all shares of
Preferred Stock as if they had been converted) owned by Vulcan Ventures is not
less than 25% of the sum of the number of shares of Common Stock that Vulcan
Ventures owned on October 1, 1999 plus the number of shares of Common Stock and
Class B Stock issued or issuable on conversion under the Certificate of
Designations of all shares of Preferred Stock issued to Vulcan Ventures from
time to time, subject to suspension of such right as to one nominee at any time
that the holders of Preferred Stock have the right to designate a director under
the Certificate of Designations.
Pursuant to the Stock Purchase Agreement, Vulcan Ventures will have the
right under certain circumstances in connection with new issuances of securities
by the Issuer to purchase securities from the Issuer in order to maintain its
percentage ownership interest in the Issuer. Vulcan Ventures also has the right
at any time, subject to the other terms and conditions of the Stock Purchase
Agreement, to exchange any shares of Class B Stock it may obtain upon
conversion of shares of Preferred Stock into shares of Common Stock.
Under the Stock Purchase Agreement, Vulcan Ventures is subject to a
standstill provision during the Standstill Period. During the Standstill Period
and subject to certain exceptions, Vulcan Ventures will not, and will not permit
its affiliates to, among other things, (i) acquire any Restricted Securities,
(ii) solicit or become a participant in any solicitation of proxies with respect
to the Issuer's voting securities, or (iii) seek, propose (in
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a manner that is intended to require, or would reasonably be expected
to require, public disclosure) or make any statement with respect to, or
otherwise participate in, any merger, consolidation, business combination,
tender or exchange offer, sale or purchase of assets, sale or purchase of
securities, dissolution, liquidation, restructuring, recapitalization or similar
transactions of or involving the Issuer or any of its subsidiaries.
During the Standstill Period, Vulcan Ventures will not, and will not
permit its affiliates to, sell, pledge, encumber or otherwise transfer any
Restricted Securities, except, generally, (i) in a transaction in compliance
with Rule 144 under the Securities Act of 1933, as amended, (ii) in a bona fide
firm commitment, underwritten public offering, (iii) to a commercial bank or
other financial institution in connection with a bona fide financing transaction
by Vulcan Ventures; or (iv) to Permitted Transferees. During the Standstill
Period, Vulcan Ventures also will not, and will not permit its affiliates to,
purchase or otherwise acquire, directly or indirectly, or agree or offer to
purchase or otherwise acquire any Voting Securities of the Issuer if, as a
result thereof, Vulcan Ventures and its affiliates, in the aggregate, would
beneficially own Voting Securities representing more than the Agreed Percentage
of the Total Voting Power (generally 15%).
During the Standstill Period, Vulcan Ventures will vote and cause to be
voted all Voting Securities owned by it (i) for nominees to the Board of
Directors of the Issuer who have been recommended by the Issuer's Board of
Directors and (ii) on all other matters submitted to the holders of Voting
Securities, either in accordance with the recommendation of the Issuer's Board
of Directors or in proportion to the votes cast by the other holders of Voting
Securities; provided, however, that (a) with respect to any Takeover Proposal
submitted to the vote of the Issuer's stockholders, Vulcan Ventures may vote
without restriction all Voting Securities beneficially owned by it and (b) with
respect to any proposal to approve the issuance of equity securities by the
Issuer (not including, among other things, in connection with a Takeover
Proposal) submitted to a vote of the Issuer's stockholders, Vulcan Ventures may
vote without restriction Voting Securities beneficially owned by it representing
up to, in general, the Agreed Percentage of the Total Voting Power. In addition
and subject to certain exceptions, Vulcan Ventures will vote all shares of
Preferred Stock that it owns pro rata with the voting of the Issuer's other
stockholders on matters submitted to a vote of such stockholders.
Upon the occurrence of a Change of Control, the Issuer will be required
to make an offer to repurchase from Vulcan Ventures (i) if the Change of Control
occurs prior to the Change of Control Premium Date, 100% of Vulcan Ventures'
shares of Preferred Stock or (ii) if the Change of Control occurs after the
Change of Control Premium Date, 50% of Vulcan Ventures' shares of Preferred
Stock, in either case at a price per share equal to (A) if the Change of Control
Payment Date is prior to the First Call Date (as defined in the Certificate of
Designations), 110% of the product of (a) one plus the number (or fraction) of
shares of Preferred Stock accrued and unpaid as dividends on such share to the
Change of Control Payment Date, times (b) the Conversion Ratio in effect
immediately prior to the Change of Control, times (c) if the Change of Control
is the result of a tender or exchange offer, merger or other form of business
combination, the price paid per share of Common Stock in such tender or exchange
offer, merger or other form of business combination, or if the Change of Control
is not the result of a tender or exchange offer, merger or other form of
business combination, the 10-Day Market Price of the Common Stock on the Change
of
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Control Payment Date and (B) if the Change of Control Payment Date is
on or after the First Call Date, the Redemption Price (as defined in the
Certificate of Designations).
The foregoing description of the Stock Purchase Agreement is not, and
does not purport to be, complete and is qualified in its entirety by reference
to the Stock Purchase Agreement, a copy of which is filed herewith as Exhibit
10.1.
Registration Rights
Upon the Closing, Vulcan Ventures will receive certain registration
rights. Pursuant to such provisions, the Issuer has agreed to effect six
"demand" registrations at the request of Vulcan Ventures, provided that each
such demand registration must be in respect of Registerable Securities (as
defined) with a fair market value of at least $50,000,000 (or, if in respect of
all remaining Registrable Securities, $5,000,000). In addition, Vulcan Ventures
has certain "piggyback" registration rights in connection with registrations by
the Issuer under the Securities Act of 1933.
The foregoing description of the registration rights provisions of the
Stock Purchase Agreement is not, and does not purport to be, complete and is
qualified in its entirety by reference to the registration rights provisions of
the Stock Purchase Agreement, a copy of which is filed as an exhibit to Exhibit
10.1.
Certificate of Designations
As contemplated by the Stock Purchase Agreement, immediately prior to
the Closing the Certificate of Designations will be filed with the Secretary of
State of the State of Delaware to create the series of Preferred Stock.
Capitalized terms used below under this sub-heading and not otherwise defined
have the meaning given to them in the Certificate of Designations.
Under the Certificate of Designations, any class or series of stock of
the Issuer will be deemed to rank (i) prior to the Preferred Stock, if the
holders of such class or series will be entitled by the terms thereof to receive
dividends or distributions upon liquidation in preference or priority to the
holders of Preferred Stock, (ii) on a parity with the Preferred Stock, if the
holders of the Preferred Stock and the holders thereof will be entitled to
receive dividends or distributions upon liquidation without preference or
priority over one another and such class or series is not senior to the
Preferred Stock and (iii) junior to the Preferred Stock, if such class or series
is Common Stock or if the holders of the Preferred Stock will be entitled by the
terms thereof to receive dividends or distributions upon liquidation in
preference or priority to the holders of such class or series. Creation by the
Issuer of securities senior to the Preferred Stock requires the vote of holders
of a majority of the outstanding shares of Preferred Stock.
The holders of the Preferred Stock will be entitled to receive with
respect to each share of Preferred Stock, when and if declared by the Board of
Directors of the Issuer, out of funds legally available for the payment of
dividends, dividends at a rate per annum equal to seven percent (7%) of the
Liquidation Preference per share, and an additional amount at a rate per annum
equal to seven percent (7%) of all dividends which have not been paid with
respect to each share of Preferred Stock. Such dividends will be cumulative from
the date of
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issuance of the Preferred Stock and shall be payable quarterly in arrears.
The Issuer will pay accrued dividends (including accrued and unpaid dividends)
in shares of Preferred Stock.
The Preferred Stock will not be redeemable by the Issuer prior to the
earlier of the 42-month anniversary of (i) January 1, 2000 or (i) the first
issuance of the Preferred Stock (the "First Call Date"). On and after the First
Call Date, to the extent the Issuer has funds legally available for such
payment, the Issuer may redeem at its option shares of Preferred Stock, at any
time, at a redemption price equal to the Liquidation Preference plus any accrued
and unpaid dividends on the Preferred Stock from the last dividend payment date
to the date fixed for redemption, plus (if the date fixed for redemption is
prior to the Issue 42 Date) the amount of dividends that would have accrued
during the period from the date fixed for redemption to the Issue 42 Date,
without interest.
The holders of shares of Preferred Stock will have the right,
generally, at any time, to convert any or all outstanding shares of Preferred
Stock into fully paid and non-assessable shares of, at the election of the
holder, Common Stock or Class B Stock. In addition, the Issuer has the right
within five days after a Directed Conversion Event to direct the holders of the
Preferred Stock to convert their shares of Preferred Stock into fully paid and
non-assessable shares of, at the election of the holder, Common Stock or Class B
Stock. Finally, any shares of Preferred Stock outstanding on the Mandatory
Conversion Date (the seventh anniversary of the first issuance of the Preferred
Stock) will automatically be converted into fully paid and non-assessable shares
of, at the election of the holder, Common Stock or Class B Stock.
The number of shares of Common Stock or Class B Stock deliverable upon
any such conversion of a share of Preferred Stock (the "Conversion Ratio") will
be an amount equal to the Liquidation Preference divided by the Conversion Price
(which initially is $62.00 and is subject to adjustment as a result of Common
Stock dividends, reclassifications, distributions or stock splits in connection
with a merger or consolidation of the Issuer or otherwise). Upon conversion,
each holder of Preferred Stock will also be entitled to receive from the Issuer
an additional number of shares (or fraction of a share, as the case may be) of
Common Stock or Class B Stock, at the election of the holder, equal to the
product of (A) the number of additional shares (or fraction of a share, as the
case may be) of Preferred Stock accrued and unpaid as of the date of conversion
on the share of Preferred Stock being converted times (B) the Conversion Ratio.
If (i) the conversion is either (a) an Optional Conversion that is being made in
respect of a share of Preferred Stock that has been called for redemption or (b)
a Directed Conversion and (ii) the effective time of such conversion is prior to
the Issue 42 Date, then upon conversion of such share of Preferred Stock, the
holder thereof shall also be entitled to receive from the Issuer an additional
number of shares (or fraction of a share, as the case may be) of Common Stock or
Class B Stock, at the election of the holder, equal to the product of (w) the
number of additional shares of Preferred Stock that would have accrued on the
share of Preferred Stock being converted from the effective date of the
conversion to the Issue 42 Date times (x) the Conversion Ratio. In the event
there is a Change of Control and the holder of the Preferred Stock properly
exercises its right to convert at the holder's option the Preferred Stock into
shares of Common Stock or Class B Stock, then, in addition to the foregoing, the
holder shall also be entitled to receive an amount of cash to the extent that
there are funds legally available therefor equal to the product of (X) the
amount of dividends that would
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have accrued on the Preferred Stock so converted for the period beginning in
the date of delivery of the Optional Conversion Notice and ending on the Issue
42 Date if such Preferred Stock had not been converted, times (Y) the Conversion
Ratio in effect immediately prior to the Change of Control, times (C) if the
Change of Control is the result of a tender or exchange offer, merger or other
form of business combination, the price per share of Common Stock in such tender
or exchange offer, merger or other form of business combination, or if the
Change of Control is not the result of a tender or exchange offer, merger or
other form of business combination, the 10 Day Market Price of the Common Stock
on the date of the Change of Control, divided by the Liquidation Preference;
provided that a holder of Preferred Stock shall not be entitled to receive any
cash payment under this provision until such time as the Issuer has repurchased
such debt securities as are required to be repurchased by the Issuer upon such
Change of Control pursuant to the Issuer's credit and financing arrangements and
provided further that a holder of Preferred Stock that receives such a cash
payment shall not be entitled to any Issue 42 Dividends.
The holders of shares of Preferred Stock will vote with the holders of
Common Stock on all matters submitted to a vote of the Issuer's stockholders and
will be entitled to a number of votes equal to the number of votes to which
shares of Common Stock issuable upon conversion of the Preferred Stock would
have been entitled if such shares were outstanding at the time of the applicable
vote or record date. In addition, if six quarterly dividends payable on the
Preferred Stock have not been paid in full, the number of directors then
constituting the Board of Directors of the Issuer will be increased by one and
the holders of shares of Preferred Stock will be entitled to elect such
additional director to serve on the Board of Directors. When all arrears in
dividends payable on the shares of Preferred Stock then outstanding shall have
been paid and dividends payable thereon for the current quarterly dividend
period shall have been paid, then the right of the holders to elect such
additional director will cease, and the term of office of any person elected as
director by the holders will terminate and the number of the Board of Directors
will be reduced accordingly.
The foregoing description of the Certificate of Designations is not,
and does not purport to be, complete and is qualified in its entirety by
reference to the Certificate of Designations, a copy of the form of which is
filed as an exhibit to Exhibit 10.1.
Voting Agreement
On October 1, 1999 and as a condition to entering into the Stock
Purchase Agreement, Vulcan Ventures, the Issuer and Level 3 entered into a
Voting Agreement (the "Voting Agreement") pursuant to which Level 3 agreed that,
if a vote of the Issuer's stockholders is required in connection with the sale
of the Preferred Stock to Vulcan Ventures pursuant to the Stock Purchase
Agreement, it would vote all shares of Common Stock that it is entitled to vote
(i) in favor of the issuance of the Preferred Stock to Vulcan Ventures pursuant
to the Stock Purchase Agreement and (ii) in favor of any other matter relating
to the consummation of the transactions contemplated by the Stock Purchase
Agreement and against any action which would reasonably be expected to result in
a failure of the conditions to the consummation of the transactions contemplated
by the Stock Purchase Agreement. Level 3 also granted Vulcan Ventures a proxy,
appointing Vulcan Ventures as Level 3's attorney-in-fact and proxy, with full
power of substitution, for and in
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<PAGE> 14
Level 3's name, to vote or consent, or otherwise to utilize such voting power,
solely with respect to the matters covered by and in the manner contemplated by
the Voting Agreement. Pursuant to the terms of the Voting Agreement, Level 3
also agreed not to sell or otherwise dispose of any shares of Common Stock
beneficially owned by it prior to the vote to approve the issuance of the
Preferred Stock to Vulcan Ventures pursuant to the Stock Purchase Agreement.
Notwithstanding the foregoing, Level 3 may sell shares of Common Stock so long
as the recipient agrees in writing to be bound by the terms of the Voting
Agreement.
The Voting Agreement (including the proxy granted thereby) will
terminate upon the earlier of: (i) the date of notification by the National
Association of Securities Dealers, Inc. ("NASD") that the NASD concurs with the
Issuer's view that the issuance of the Preferred Stock to Vulcan Ventures
pursuant to the Stock Purchase Agreement does not require the approval of the
Issuer's stockholders, (ii) the day immediately following final adjournment of
the stockholders meeting called to approve the issuance of the Preferred Stock
to Vulcan Ventures, if such approval is required, and (iii) the date upon which
the Stock Purchase Agreement terminates.
The foregoing description of the Voting Agreement is not, and does not
purport to be, complete and is qualified in its entirety by reference to the
Voting Agreement, a copy of which is filed as Exhibit 10.2.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 10.1: Stock Purchase Agreement dated as of October 1,
between RCN Corporation and Vulcan Ventures
Incorporated relating to the purchase and sale of
Series B 7% Senior Convertible Preferred Stock of RCN
Corporation.
Exhibit 10.2: Voting Agreement dated as of October 1, 1999 among
Vulcan Ventures Incorporated, Level 3 Telecom
Holdings, Inc. and RCN Corporation.
Exhibit 99.1: Joint Filing Agreement
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<PAGE> 15
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 18, 1999 VULCAN VENTURES
INCORPORATED
By: /s/ WILLIAM D. SAVOY
---------------------------
Name: William D. Savoy
Title: Vice President
Dated: October 18, 1999 /s/ PAUL G. ALLEN
---------------------------
Paul G. Allen
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<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
10.1 Stock Purchase Agreement dated as of October 1, 1999
between RCN Corporation and Vulcan Ventures
Incorporated relating to the purchase and sale of
Series B 7% Senior Convertible Preferred Stock of RCN
Corporation (incorporated by reference to Exhibit
10.01 to the Current Report on Form 8-K filed by RCN
Corporation on October 15, 1999).
10.2 Voting Agreement dated as of October 1, 1999 among
Vulcan Ventures Incorporated, Level 3 Telecom
Holdings, Inc. and RCN Corporation (incorporated by
reference to Exhibit 10.02 to the Current Report on
Form 8-K filed by RCN Corporation on October 15,
1999).
99.1 Joint Filing Agreement
</TABLE>
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<PAGE> 1
EXHIBIT 99.1
JOINT FILING STATEMENT
We, the signatories of the Statement on Schedule 13D to which this
Joint Filing Statement is attached, hereby agree that such Statement is filed,
and any amendments thereto filed by either or both of us will be filed, on
behalf of each of us.
Dated: October 18, 1999 VULCAN VENTURES
INCORPORATED
By: /s/ WILLIAM D. SAVOY
---------------------------
Name: William D. Savoy
Title: Vice President
Dated: October 18, 1999 /s/ PAUL G. ALLEN
---------------------------
Paul G. Allen
