As filed with the Securities and Exchange Commission on October 6, 1999
Registration No. 333-71525
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RCN CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 22-3498533
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Carnegie Center
Princeton, NJ 08540-6215
(609) 734-3700
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
John J. Jones, Esq.
RCN Corporation
105 Carnegie Center
Princeton, NJ 08540-6215
(609) 734-3700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copy to:
Julia K. Cowles, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
(212) 450-4000
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Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective. If the only
securities being registered on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<TABLE>
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Proposed
Title of Each Class of Amount to be Maximum Offering Proposed Maximum Amount of
Securities to be Registered Registered Price Per Share Aggregate Offering Price Registration Fee (4)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, Preferred Stock and
Debt Securities................................ N/A N/A $969,611,899 (1)(2) $269,552
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock..................................... 1,107,539 27 7/16 $30,388,101 (3) $8,448
==================================================================================================================================
(1) Such indeterminate number or amount of Common Stock, Preferred Stock and
Debt Securities as may from time to time be issued at indeterminate prices.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) and exclusive of accrued interest and dividends, if
any.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), based on the average high and low prices of the
Common Stock on January 26, 1999 on The Nasdaq Stock Market, which was
$27 7/16.
(4) $278,000 was paid in connection with the filing of the Registration
Statement on February 1, 1999.
</TABLE>
--------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
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 it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 6, 1999
PROSPECTUS
[LOGO]
$1,000,000,000
consisting of:
$969,611,899
Common Stock, Preferred Stock, Debt Securities
1,107,539 Shares
Common Stock
RCN Corporation
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We may offer common stock, preferred stock or debt securities, and one of
our shareholders may offer up to 1,107,539 shares of our common stock, from time
to time. Specific terms of securities offered by us will be provided in
supplements to this prospectus. You should read this prospectus and any
supplement carefully before you invest.
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Our common stock trades on the Nasdaq National Market under the symbol
"RCNC".
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Investing in these securities involves certain risks. See "Risk Factors"
beginning on page 7.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October 6, 1999
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information contained in or incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of this prospectus.
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TABLE OF CONTENTS
Page
----
Summary.......................................................................2
Risk Factors..................................................................7
Where You Can Find More Information..........................................13
Special Note on Forward-Looking Statements...................................13
Use of Proceeds..............................................................14
Dividends....................................................................14
Market Price and Dividend Information........................................14
Selected Historical Consolidated Financial Data..............................15
Business.....................................................................17
Description of Capital Stock.................................................22
Description of Debt Securities...............................................27
Selling Shareholder..........................................................35
Plan of Distribution.........................................................36
Legal Matters................................................................37
Experts......................................................................37
<PAGE>
SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision.
We are building high-speed, high-capacity advanced fiber optic networks in
selected markets with high levels of population density. Our strategy is to
become the leading single source provider of voice, video and data services to
residential customers in each of our markets by offering individual or bundled
service options, superior customer service and competitive prices. We are also
constructing our networks with significant excess capacity in order to
accommodate expanded services in the future.
Our initial advanced fiber optic networks have been established in
selected markets in the Boston to Washington, D.C. corridors, which includes New
York City, and also in the San Francisco Bay area. In Boston and Washington, we
operate through joint ventures with Boston Edison Company and PEPCO
Communications, L.L.C., respectively. We are typically building the first true
local network to compete with the aging infrastructure of the incumbent service
providers in our markets.
Because our network development plan involves relatively low fixed costs,
we are able to schedule capital expenditures to meet expected subscriber growth
in each major market. Our principal fixed costs in each such market are incurred
in connection with the establishment of a video transmission and telephone
switching facility. To make each market economically viable, it is then
necessary to construct infrastructure to connect a minimum number of subscribers
to the transmission and switching facility. We phase our market entry projects
to ensure that we have sufficient cash on hand to fund this construction.
We have extensive operating experience in the telephone, video and
Internet industries and in the design, development and construction of
telecommunications facilities. As of December 31, 1998, we had approximately
855,000 total service connections, including approximately 123,000 connections
provided to customers on our advanced fiber optic network.
Business Strategy
Our goal is to become the leading provider of communication services to
residential customers in our target markets by pursuing the following key
strategies:
o Exploit the "Last Mile" Bottleneck in Existing Local Networks.
Existing local networks are typically low capacity, single service
facilities without the bandwidth for multiple or new services and
revenue streams. We seek to be the first operator of an advanced fiber
optic network offering advanced communications services to residential
customers in our target markets.
o Continue Construction of Advanced Fiber Optic Networks. Our advanced
fiber optic networks are designed with sufficient capacity to meet the
growing demand for high speed, high capacity, voice, video and data
services. Our networks also have a significant amount of excess
capacity which will be available for the introduction of new products.
o Leverage our Network and Customer Base. We are able to leverage our
network by delivering a broad range of communications products and by
focusing on high density residential markets. This bandwidth capacity
and home density allows us to maximize the revenue potential per mile
of constructed network. We believe we can further exploit our network
capacity and customer base by exploring opportunities to deliver new
products and services in the future, including complementary
commercial and wholesale products and services.
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o Offer Bundled Voice, Video and Data Services with Quality Customer
Service. By connecting customers to our own network, we improve our
operating economics and have complete control over our customers'
experience with us.
o Continue to Use Strategic Alliances. We have been able to enter
markets quickly and efficiently and to reduce the up-front capital
investment required to deploy our networks by entering into strategic
alliances.
Connections
Because we deliver a variety of services to our customers, we report the
total number of our various revenue generating service connections for local
telephone, video programming and Internet access. For example, a single customer
who purchases local telephone, video programming and Internet access counts as
three connections. The table below shows our growth in total connections and
growth in customers connected to advanced fiber optic networks, which we refer
to as "On-Net Connections".
As of
-----------------------------------------------------
12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
-------- ------- ------- ------- --------
Total Connections:
Voice............... 28,114 44,950 60,480 78,950 95,890
Video............... 239,403 243,157 249,360 255,100 261,662
Data................ 150 370,538 400,148 474,127 497,809
------- ------- ------- ------- -------
Total............. 267,667 658,645 709,988 808,177 855,361
------- ------- ------- ------- -------
On-Net Connections... 15,148 20,339 48,212 82,842 123,393
Homes Passed......... 44,045 63,386 122,977 213,983 304,505
Marketable Homes..... -- -- 111,187 181,353 270,406
Our off-net connections are delivered through a variety of facilities
including hybrid fiber/coaxial cable systems and a wireless video system.
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Our principal executive offices are located at 105 Carnegie Center,
Princeton, New Jersey, 08540, and our telephone number is (609) 734-3700. We
maintain a website at www.rcn.com where general information about us is
available. We are not incorporating the contents of the website into this
prospectus.
3
<PAGE>
About this Prospectus
This prospectus is part of a registration statement that we filed with the
SEC utilizing a "shelf" registration process. Under this shelf process, we may
sell any combination of the securities described in this prospectus in one or
more offerings for up to an aggregate total dollar amount of $969,611,899, and
one of our shareholders may offer 1,107,539 shares of our common stock. This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. Sales by the selling shareholder may not require the provision
of a prospectus supplement. You should read both this prospectus and any
prospectus supplement together with additional information described under the
heading WHERE YOU CAN FIND MORE INFORMATION.
Risk Factors
You should carefully consider all of the information in this prospectus
and, in particular, you should evaluate the specific risk factors set forth
under the caption "Risk Factors", beginning on page 7.
4
<PAGE>
Summary Historical Consolidated Financial Data
The table below sets forth our selected historical consolidated financial
data. We did not operate as an independent company prior to September 30, 1997.
Therefore, we had to make certain assumptions in preparing data for prior
periods, and the data may not reflect the results of operations or the financial
condition which would have resulted if we had operated as a separate,
independent company during those periods. The data also do not necessarily
indicate our future results of operations or financial condition.
The selected historical consolidated financial data for the years ended
December 31, 1998, 1997 and 1996 and as of December 31, 1998 and 1997 are
derived from and should be read in conjunction with our audited historical
consolidated financial statements incorporated by reference to our report on
Form 10-K for the year ended December 31, 1998.
<TABLE>
Year Ended December 31,
--------------------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Statement of Operations Data:
Total sales............................................................... $104,910 $127,297 $210,940
Costs and expenses, excluding depreciation and amortization............... 79,107 134,967 262,352
Nonrecurring charges...................................................... -- 10,000 --
Acquired research and development......................................... -- -- 18,293
Depreciation and amortization............................................. 38,881 53,205 89,088
------- --------- ---------
Operating (loss).......................................................... (13,078) (70,875) (158,793)
Interest income........................................................... 25,602 22,824 58,679
Interest expense.......................................................... (16,046) (25,602) (112,239)
Other (expense) income, net............................................... (546) 131 (1,889)
(Benefit) provision for income taxes...................................... 979 (20,849) (4,998)
Equity in loss of unconsolidated entities................................. (2,282) (3,804) (12,719)
Minority interest in loss of consolidated entities........................ 1,340 7,296 17,162
Extraordinary charge- debt prepayment penalty, net of tax of $1,728....... -- (3,210) --
Cumulative effect of change in accounting for start-up costs, net of tax.. -- -- (641)
------- --------- ---------
Net (loss)................................................................ $(5,989) $(52,391) $(205,442)
======= ========= =========
Balance Sheet Data (at end of period):
Cash, temporary cash investments and short-term
investments......................................................... $108,674 $638,513 $1,012,574
Investments restricted for debt service................................... -- 61,911 43,306
Total assets.............................................................. 628,085 1,150,992 1,907,615
Long-term debt (excluding current portion)................................ 131,250 686,103 1,263,036
Shareholders' equity...................................................... 390,765 356,584 371,446
Other Data:
EBITDA before nonrecurring charges........................................ 25,803 (7,670) (51,412)
Cash Provided by (Used in):
Operating Activities...................................................... 23,831 2,069 35,110
Investing Activities...................................................... (9,377) (475,860) (828,176)
Financing Activities...................................................... 9,391 634,858 690,282
- ----------
(1) Nonrecurring charges represent costs of $10,000 incurred in 1997 as a
result of the termination of a marketing services agreement related to our
wireless video services, and costs of $18,293 incurred in 1998 relating to
acquisition of in-process technology in connection with acquisitions.
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<PAGE>
(2) EBITDA before nonrecurring charges represents earnings before interest,
depreciation and amortization, and income taxes. Because of the capital
intensive nature of the business and resulting large non-cash charges for
depreciation, EBITDA is commonly used in the communications industry by
management, investors, and analysts to analyze companies on the basis of
operating performance, leverage and liquidity. RCN intends to judge the
success of its initial rollout of fiber optic networks before deciding
whether to undertake additional capital expenditures to expand its network
in new areas. RCN believes that EBITDA is a critical measure of success.
Because RCN is in a growth-oriented and capital intensive phase of
development, it incurs depreciation and amortization charges in new markets
which may obscure its earnings growth in more mature markets. In addition,
EBITDA provides a measure of the availability of funds for various uses
including repayment of debt, expansion into new markets and acquisitions.
EBITDA is not intended to represent cash flows for the period and should
not be considered as an alternative to cash flows from operating, investing
or financing activities as determined in accordance with U.S. GAAP. EBITDA
is not a measurement under U.S. GAAP and may not be comparable with other
similarly titled measures of other companies. Certain of our debt
agreements contain certain covenants that, among other things, limit our
and our subsidiaries' ability to incur indebtedness, pay dividends, prepay
subordinated indebtedness, repurchase capital stock, engage in transactions
with stockholders and affiliates, create liens, sell assets and engage in
mergers and consolidations. Certain of these covenants are based on EBITDA
performance measures.
</TABLE>
6
<PAGE>
RISK FACTORS
You should carefully consider each of the following risks and all of the
other information set forth in this prospectus before deciding to invest in our
securities. Some of the following risks relate principally to our business in
general and the industry in which we operate. Other risks relate principally to
the securities markets and ownership of our securities. The risks and
uncertainties described below are not the only ones facing our company.
Additional risks and uncertainties not presently known to us or that we
currently believe to be immaterial may also adversely affect our business.
If any of the following risks and uncertainties develop into actual
events, our business, financial condition or results of operations could be
materially adversely affected. In such case, the trading price of our securities
could decline, and you may lose all or part of your investment.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
the risks faced by us described below and elsewhere in this prospectus.
We have a limited operating history and have incurred negative cash flow and
operating losses
We have only recently begun operating a voice, video and data services
business. Accordingly, you will need to evaluate our performance based on a
limited operating history. In connection with entering this business, we have
incurred operating and net losses and negative cash flows and expect to continue
to do so for the next five to seven years as we expand our network and customer
base. Whether we continue to have negative cash flow in the future will be
affected by a variety of factors including:
o our pace of entry into new markets;
o the time and expense required for constructing our fiber optic
network as we planned;
o our success in marketing services;
o the intensity of competition; and
o the availability of additional capital to pursue our business
plans.
We had operating losses after depreciation and amortization and
nonrecurring charges of $158,793,000, $70,875,000 and $13,078,000 for the years
ended December 31, 1998, 1997 and 1996. We can not assure you that we will
achieve or sustain profitability or positive cash flows from operating
activities in the future.
Additional growth will require additional capital, and our total capital needs
may be substantial
We expect that we will require substantial additional capital to expand
the development of our network and operations into new areas. We will need
capital to fund the construction of our advanced fiber optic networks, upgrade
our hybrid fiber/coaxial plant and fund operating losses and pay our debts.
Based on our current growth plan, we currently estimate that our capital
requirements for the period from January 1, 1999 through 2000 will be
approximately $1.8 billion, which include capital expenditures of approximately
$700 million in 1999 and approximately $1 billion in 2000. These capital
expenditures do not include amounts our joint venture partners contribute to the
Boston and Washington, D.C. joint ventures. We are obligated to pay our portion
of any capital contributions required by the joint ventures' annual budget or
capital contribution schedule. If our joint venture partner(s) fail to make
anticipated capital contributions, it could have a material adverse effect on
our business. See "Business--Network Development and Financing Plan."
We may seek additional sources of funding from vendor financing, public
offerings or private placements of equity and/or debt securities, and bank
loans. We cannot assure you that additional financing will be available to us
or, if available, that it can be obtained on a timely basis and on acceptable
terms. If we fail to obtain such
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financing, it could result in the delay or curtailment of our development and
expansion plans and expenditures and could have a material adverse effect on our
business.
Our estimates of capital requirements are forward-looking statements that
are subject to change. The actual timing and amount of capital required to
develop our network and to fund operating losses may vary materially from our
estimates if there are significant departures from the current business plan,
unforeseen delays, cost overruns, engineering design changes or other
unanticipated expenses or occurrences.
Our substantial indebtedness limits our business flexibility
We have indebtedness that is substantial in relation to our shareholders'
equity and cash flow. As of December 31, 1998, we had an aggregate of
approximately $1,267 million of indebtedness outstanding. As a result of our
substantial indebtedness, fixed charges are expected to exceed earnings for the
foreseeable future, and our operating cash flow may not be sufficient to pay
principal and interest on our various debt securities. The extent of our
leverage may also have the following consequences:
o limit our ability to obtain necessary financing in the future for
working capital, capital expenditures, debt service requirements
or other purposes;
o require that a substantial portion of our cash flows from
operations be dedicated to paying principal and interest on our
indebtedness and therefore not be available for other purposes;
o limit our flexibility in planning for, or reacting to, changes in
our business;
o place us at a competitive disadvantage as compared with our
competitors who do not have as much debt; and
o render us more vulnerable in the event of a downturn in our
business.
Our outstanding debt securities contain customary covenants limiting our
flexibility, including covenants limiting our ability to incur additional debt,
make liens, make investments, consolidate, merge or acquire other businesses and
sell assets, pay dividends and other distributions, make capital expenditures
and enter into transactions with affiliates.
Our holding company structure structurally subordinates our creditors, including
holders of our debt securities
We are a holding company with limited assets that conducts substantially
all of our operations through subsidiaries and joint ventures. The securities
will be solely our obligations and no other entity has any obligation,
contingent or otherwise, to make any payments under the securities. Accordingly,
we will be dependent on dividends and other distributions from subsidiaries and
joint ventures to pay off our obligations, including the principal and interest
on debt securities that may be issued by means of this prospectus. The ability
of our subsidiaries and joint ventures to pay dividends to us will be subject to
the terms of their debt instruments and applicable law. In addition, our joint
ventures require our consent and the consent of our joint venture partner to
distribute or advance funds to us. Claims of holders of the debt securities will
be effectively junior in priority to the debt and other liabilities and
commitments of our subsidiaries and joint ventures. Our interest in the joint
ventures will be limited to the extent of our direct or indirect equity interest
in the joint ventures. Consequently, in the event our subsidiaries or joint
ventures become insolvent, liquidate, reorganize, dissolve or otherwise wind up
their business, our creditors' claims will be junior to the prior claims of
those entities' creditors, including trade creditors, and any prior or equal
claim of any joint venture partner. Any distributions of our equity interests in
our non-wholly owned subsidiaries or in joint ventures may be expected to be
made on an equal basis to all equity holders. We expect that a majority of our
cash flow in the advanced fiber optic network business will ultimately be
derived from our joint venture investments. The indenture under which the debt
securities will be issued will permit substantial indebtedness to be incurred by
our subsidiaries and joint ventures. The indenture does not, except under
limited circumstances, require our subsidiaries to guarantee the debt
securities. In addition, the indenture will
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<PAGE>
permit our subsidiaries and joint ventures to become parties to debt instruments
that limit these entities' ability to pay dividends or make distributions to us.
We may not be able to manage our growth or integrate our acquisitions
The expansion and development of our operations, including the
construction and development of additional networks, will depend on several
factors, including our ability to:
o access markets,
o design fiber optic network backbone routes,
o install or lease fiber optic cable and other facilities, including
switches, and
o obtain rights-of-way, building access rights and any government
authorizations, franchises and permits,
all in a timely manner, at reasonable costs and on satisfactory terms and
conditions.
In addition to the markets we are presently developing, we continually
evaluate other potential markets. These markets may be within the Boston to
Washington, D.C. corridor or in non-contiguous areas. As is the case in our
present markets, we intend to evaluate potential markets in terms of population
density and favorable demographics, and to apply a strategy of building network
facilities to meet the needs of targeted subscribers in new markets. We cannot
assure you that we will be able to expand our existing network or to identify
and develop new markets. Furthermore, our ability to manage our expansion
effectively will also require us to continue to implement and improve our
operating and administrative systems and attract and retain qualified management
and professional and technical personnel. If we are not able to manage our
planned expansion effectively, it could have a material adverse effect on our
business.
We recently announced our intention to begin developing advanced fiber
optic networks in selected high density markets outside of the Boston to
Washington, D.C. corridor, initially in the San Francisco Bay Area. Our proposed
expansion into non-contiguous markets could place additional strain on
management resources. Furthermore, although we believe that our experience in
the Northeast will provide us with strategic advantages in developing new
markets, we cannot assure you that our experience in our current markets will be
replicated in the western United States.
We have experienced significant growth through acquisitions and will
continue to consider acquisition opportunities that arise from time to time.
Acquisitions may place a significant strain on our resources, and we may incur
additional expenses during the integration of the acquired company with our
business. For instance, the process of integrating the Internet service provider
businesses we acquired in 1998 may take a significant period of time and require
significant expenditure, including costs to upgrade the systems and internal
controls of these businesses. As a result, we cannot assure you that we will be
able to integrate these businesses successfully or in a timely manner.
Our business is dependent upon acceptance of fiber optic technology as the
platform of choice
The telecommunications industry has been and will continue to be subject
to rapid and significant changes in technology. The effect of technological
changes on our business cannot be predicted, and we cannot assure you that the
fiber optic technology that we use will not be supplanted by new or different
technologies.
We are dependent on our strategic relationships and joint ventures
We have entered into a number of strategic alliances and relationships
which allowed us to enter into the market for telecommunications services
earlier than if we had made the attempt independently. As our network is
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<PAGE>
further developed, we will be dependent on some of these arrangements to provide
a full range of telecommunications service offerings. Our key strategic
relationships include:
o our arrangements with MFS Communications Company, Inc. (a
subsidiary of WorldCom, Inc.) to lease portions of MFS/WorldCom's
fiber optic network in New York City and Boston;
o our joint venture with Boston Edison Company under which we have
access to its extensive fiber optic network in Greater Boston;
o our joint venture with Pepco Communications to develop and operate
an advanced fiber optic network in the Washington, D.C. market;
and
o our agreement with Level 3 to provide us with access to its
cross-country fiber network.
Our joint venture agreements with Boston Edison Company and Pepco
Communications contain provisions for the management, governance and ownership
of the RCN-BECOCOM and Starpower joint ventures, respectively. Certain matters
require the approval of our joint venture partner, including some matters beyond
our control, such as a change of control. In addition, although certain
covenants contained in our indentures apply to the joint venture companies,
neither the joint venture companies nor our joint venture partners are parties
to these indentures and are not bound to comply with the indentures. A
disagreement with our joint venture partners over certain business actions,
including actions related to compliance with these indentures, could impede our
ability to conduct our business. It may also trigger deadlock provisions in the
joint venture agreements which could force us to sell our interest in the
relevant joint venture or buy out the interest of the other joint venturer.
In addition, any disruption of our relationships or arrangements with
incumbent local exchange carriers, such as Bell Atlantic, could have a material
adverse effect on our company. We cannot assure you that we will successfully
negotiate agreements with the incumbent local exchange carrier in new markets or
renew existing agreements. Our failure to negotiate or renew required
interconnection and resale agreements could have a material adverse effect on
our business.
We may encounter difficulties in competing in the highly competitive
telecommunications industry
In each of the markets where we offer our services, we face significant
competition from larger, better-financed telephone carriers and cable companies.
Virtually all markets for voice, video and data services are extremely
competitive, and we expect that competition will intensify in the future. Our
principal competitors include:
o traditional and competitive telephone companies, including Bell
Atlantic, AT&T, Sprint, and MCI WorldCom, some of which are
constructing extensive fiber optic networks and expanding into
data services;
o cable television service operators such as Time Warner, some of
which are beginning to offer telephone and data services through
cable networks using fiber optic networks and high-speed modems;
o established online services, such as America Online and Internet
services of other telecommunications companies;
o alliances and combinations of telephone companies, cable service
providers and Internet companies, including the recently announced
alliance that will combine services of AT&T, TCI and At Home; and
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o developing technologies such as Internet-based telephony and
satellite communications services.
It may be difficult to gain customers from the incumbent providers which have
historically dominated their markets.
Other new technologies may become competitive with services that we offer.
Advances in communications technology as well as changes in the marketplace and
the regulatory and legislative environment are constantly occurring. In
addition, a continuing trend toward business combinations and alliances in the
telecommunications industry may also create significant new competitors. We
cannot predict the extent to which competition from such developing and future
technologies or from such future competitors will impact our operations.
Our business plan depends upon continued application of regulations that have
been challenged in the past
Our ability to provide telephone and video programming transmission
services was made possible by important changes in government regulations which
have been subsequently challenged and may be subject to change in the future.
These regulations often have a direct or indirect impact on the costs of
operating our networks, and therefore the profitability of our services. In
addition, we will continue to be subject to other regulations at the federal,
state and local levels, all of which may change in the future. We cannot assure
you that we will be able to obtain all of the authorizations we need to
construct advanced fiber optic network facilities or to retain the
authorizations we have already acquired. It is possible that changes in existing
regulations could have an adverse impact on our ability to obtain or retain
authorizations and on our business.
We may not be able to procure programming services from the third parties we
depend on
Our video programming services are dependent upon our management's ability
to procure programming that is attractive to our customers at reasonable
commercial rates. We are dependent upon third parties for the development and
delivery of programming services. These programming suppliers charge us for the
right to distribute the channels to our customers. The costs to us for
programming services is determined through negotiations with these programming
suppliers. Management believes that the availability of sufficient programming
on a timely basis will be important to our future success. We cannot assure you
that we will have access to programming services or that management can secure
rights to such programming on commercially acceptable terms.
The expansion of our Internet services business has subjected us to additional
risks
The expansion of our Internet services business has subjected us to
additional risks. These risks will affect our ability to develop a profitable
Internet services business. These special factors include:
o evolving industry standards which have the potential to make our
services obsolete by replacing or providing lower-cost
alternatives to our services;
o constraints on server capacity or supply of equipment (such as
modems and servers) which could result in a strain on incoming
access lines, causing busy signals and/or delays for our
subscribers;
o network infrastructure and risk of system failure, such as
viruses, which could lead to interruptions, delays, or cessation
of our services, as well as corruption of our or our subscribers'
computer systems;
o possible claims of liability against us as a result of computer
viruses or security breaches; and
o the evolving competitive and regulatory environment concerning
Internet services.
11
<PAGE>
Our management may have conflicts of interest with other companies
Level 3 Telecom beneficially owns approximately 46% of our common stock.
Level 3 Telecom effectively has the power to elect a majority of our directors
and to decide the outcome of substantially all matters voted on by shareholders.
This may tend to deter non-negotiated tender offers or other efforts to obtain
control of our company and thereby deprive shareholders of opportunities to sell
shares at prices higher than the prevailing market price. Moreover, a
disposition by Level 3 Telecom of a significant portion of our common stock, or
the perception that such a disposition may occur, could affect the trading price
of our common stock and the control of our company. The common stock of Level 3
Telecom is owned 90% by Level 3 and 10% by David C. McCourt, our Chairman and
Chief Executive Officer. Mr. McCourt has been a member of the Board of Directors
and President of Level 3 Telecom since September 1992. Based upon a review of
documents filed with the SEC, we believe that as of December 31, 1998, 16.1% of
the common stock of Level 3 was owned by directors and executive officers of
Level 3, five of whom (Walter Scott, Jr., Richard R. Jaros, David C. McCourt,
James Q. Crowe and Michael B. Yanney) are executive officers or directors of
RCN. The remaining shares of Level 3 common stock are owned by other persons,
none of whom own more than 5% of outstanding shares.
As a result of the September 30, 1997 spin-off of our shares to holders of
common equity of Commonwealth Telephone Enterprises, Inc., relationships exist
that may lead to conflicts of interest. Level 3 Telecom effectively controls
both us and Commonwealth Telephone. In addition, the majority of our named
executive officers are also directors and/or executive officers of Commonwealth
Telephone. Our success may be affected by the degree which our officers and
directors are involved in our business and the abilities of officers, directors
and employees in managing both our company and Commonwealth Telephone. We will
deal with potential conflicts of interest on a case-by-case basis taking into
consideration relevant factors including the requirements of The Nasdaq National
Market and prevailing corporate practices.
In February 1999, we announced that we have entered into joint
construction agreements with Level 3. We also recently announced that we have
entered into a letter of intent with Level 3 for Level 3 to provide us with
cross-country capacity to allow our customers to connect to major Internet
connection points in the United States. Although these arrangements are designed
to reflect similar arrangements entered into by parties negotiating at arm's
length, we cannot assure you that we would not be able to obtain better terms
from an unrelated third party.
The price of our securities may fluctuate significantly following any offering
Prior to an offering, there has been no public market for the debt
securities and the preferred stock. We cannot assure you that any market will
develop for the debt securities or the preferred stock. After we issue
securities, they may trade at prices that are higher or lower than your purchase
price. The trading price for our securities will depend on prevailing interest
rates, the market for similar securities and other factors, including economic
conditions and our financial condition, performance and prospects. In
particular, the prices of non-investment grade securities historically have been
highly volatile. We cannot assure you that the future market for our debt
securities will not be subject to similar volatility.
12
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document that we file at the
Public Reference Room of the SEC at 450 Fifth Street, NW, Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. You may also inspect our filings at the
regional offices of the SEC located at Citicorp, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, New York, New York 10048
or over the Internet at the SEC's WEB site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until we sell all of the securities:
(a) Current Report on Form 8-K dated May 8, 1998;
(b) Current Report on Form 8-K dated March 19, 1999; and
(c) Annual Report on Form 10-K for the year ended December 31, 1998.
You may request a copy of these filings at no cost, by writing or
telephoning the office of Valerie Haertel, RCN Corporation, 105 Carnegie Center,
Princeton, N.J. 08540-6215, telephone number (609) 734 -3700.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about our business, including, among other
things:
o plans to develop networks and upgrade facilities;
o opportunities presented by target markets;
o plans to connect certain wireless video, resale telephone and
Internet service customers to advanced fiber optic networks;
o development of existing businesses;
o current and future markets for services and products;
o anticipated capital expenditures;
o impact of the Year 2000 issue;
o anticipated sources of capital; and
o effects of regulatory reform and competitive and technological
developments.
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 not to occur.
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<PAGE>
USE OF PROCEEDS
Unless otherwise indicated in a prospectus supplement, the net proceeds
from the sale of the securities will be used to fund our network development,
operating losses and for general corporate purposes. We will not receive any
proceeds from the sale of shares by the selling shareholder.
DIVIDENDS
We anticipate that future revenues will be used principally to support
operations and finance business growth. Accordingly, we do not intend to declare
or pay cash dividends in the foreseeable future. Our Board of Directors has the
discretion to declare or pay any cash dividends in the future. Their decision to
declare any dividends and the amount of any dividends will depend on a number of
factors, including our financial condition, capital requirements, funds from
operations, future business prospects and any other factor that they may deem
relevant. We are a holding company and our ability to pay cash dividends is
dependent on our ability to receive cash dividends, advances and other payments
from our subsidiaries. Our credit agreement contains restrictions on our
subsidiaries' ability to pay dividends. In addition, we have entered into
indentures in connection with our debt securities which also restrict our and
certain of our subsidiaries' ability to pay dividends. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
10-K for the year ended December 31, 1998.
MARKET PRICE AND DIVIDEND INFORMATION
Our common stock (symbol: "RCNC") currently trades on the Nasdaq National
Market.
The following table sets forth the high and low bid prices per share of
the common stock on the Nasdaq National Market and cash dividends declared on
the common stock since September 30, 1997:
Common stock
------------------------------------
Market Price($) Cash
------------------- Dividends
High Low Declared($)
1997 -------- ------- -----------
Quarter ending September 30.. 15 11/16 10 9/16 0
Quarter ending December 31... 21 1/2 12 1/2 0
1998
Quarter ending March 31...... 30 5/8 15 7/8 0
Quarter ending June 30....... 29 3/8 19 1/4 0
Quarter ending September 30.. 24 5/16 12 3/8 0
Quarter ending December 31... 25 8 3/4 0
1999
Quarter ending March 31...... 39 3/4 17 3/4 0
Our common stock was distributed on September 30, 1997 to holders of
record of the common stock of Commonwealth Telephone Enterprises, Inc. on
September 19, 1997. Accordingly, market price and dividend information have only
been set forth in the table above for the quarter ending September 30, 1997 and
subsequent periods. Information for the quarter ending September 30, 1997
reflects the partial period between September 19, 1997 through September 30,
1997.
The last reported sale price per share of our common stock on October 1,
1999, the last practicable date prior to the filing of this prospectus, was
$38 1/16.
On October 1, 1999, there were approximately 2,821 holders of common
stock. On October 1, 1999, 76,324,768 shares of common stock were outstanding.
14
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The table below sets forth our selected historical consolidated financial
data. Prior to September 30, 1997, we operated as part of C-TEC Corporation. The
historical consolidated financial data presented below reflect periods during
which we did not operate as an independent company. Accordingly, we had to make
certain assumptions to reflect the results of operations or the financial
condition which would have resulted if we had operated as a separate,
independent company during the periods listed below. You should not rely on the
historical consolidated financial data as an indication of our results of
operation and financial condition that would have been achieved if we had
operated as a separate, independent company during the periods listed below. The
historical consolidated financial data also do not necessarily indicate our
future results of operation or financial condition.
The selected historical consolidated financial data for the year ended
December 31, 1994 and as of December 31, 1994 are derived from our unaudited
historical consolidated financial statements not included in this prospectus.
The selected historical consolidated financial data as of December 31, 1995 are
derived from our audited historical consolidated financial statements not
included in this prospectus. The selected historical consolidated financial data
for the year ended December 31, 1995 and as of December 31, 1996 are derived
from and should be read in conjunction with our audited historical consolidated
financial statements incorporated by reference to our 10-K for the year ended
December 31, 1997. The selected historical consolidated financial data for the
years ended December 31, 1998, 1997 and 1996 and as of December 31, 1998 and
1997 are derived from and should be read in conjunction with our audited
historical consolidated financial statements incorporated by reference to our
10-K for the year ended December 31, 1998. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our 10-K for the
year ended December 31, 1998.
<TABLE>
Year Ended December 31,
-------------------------------------------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales $59,500 $91,997 $104,910 $127,297 $210,940
Costs and expenses, excluding depreciation
and amortization........................... 49,747 75,003 79,107 134,967 262,352
Nonrecurring charges......................... -- -- -- 10,000 --
Acquired research and development............ -- -- -- -- 18,293
Depreciation and amortization................ 9,803 22,336 38,881 53,205 89,088
------ ------ ------ ------ -------
Operating (loss)............................. (50) (5,342) (13,078) (70,875) (158,793)
Interest income.............................. 21,547 29,001 25,602 22,824 58,679
Interest expense............................. (16,669) (16,517) (16,046) (25,602) (112,239)
Other (expense) income, net.................. 1,343 (304) (546) 131 (1,889)
(Benefit) provision for income taxes......... 2,340 1,119 979 (20,849) (4,998)
Equity in loss of unconsolidated entities.... -- (3,461) (2,282) (3,804) (12,719)
Minority interest in loss (income) of
consolidated entities...................... (95) (144) 1,340 7,296 17,162
Extraordinary charge-debt prepayment
penalty, net of tax of $1,728.............. -- -- -- (3,210) --
Cumulative effect of changes in accounting
principles................................. (83) -- -- -- (641)
------ ------ ------ ------ -------
Net (loss) income............................ $3,653 $2,114 $(5,989) $(52,391) $(205,442)
====== ====== ====== ====== =======
Ratio of earnings to fixed charges........... 1.36 1.41 0.75 (1.87) (0.91)
Deficiency of earnings to fixed charges...... N/A N/A N/A $(73,522) $(214,242)
Balance Sheet Data (at end of period):
Total assets................................. $568,586 $649,610 $628,085 $1,150,992 $1,907,615
Long-term debt excluding current portion..... 154,000 135,250 131,250 686,103 1,263,036
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<PAGE>
Year Ended December 31,
-------------------------------------------------------------------
1994 1995 1996 1997 1998
------ ------ ------ ------ ------
Shareholders' equity......................... 372,847 394,069 390,765 356,584 371,446
Other Data:
EBITDA before nonrecurring charges........... 9,753 16,994 25,803 (7,670) (51,412)
Cash Provided by (Used in):
Operating Activities......................... 6,193 48,559 23,831 2,069 35,110
Investing Activities......................... (140,152) (146,203) (9,377) (475,860) (828,176)
Financing Activities......................... 280,014 (31,203) 9,391 634,858 690,282
- ----------
(1) Nonrecurring charges represent costs of $10,000 incurred in 1997 the
termination of a marketing services agreement related to our wireless video
services, and costs of $18,293 incurred in 1998 relating to acquisition of
in-process technology in connection with the acquisitions.
(2) The deficiency of earnings to fixed charges is based on income from
continuing operations and has been computed on a total enterprise basis.
Earnings represent income before income taxes, and fixed charges.
Fixed charges consist of interest expense and debt amortization costs.
(3) EBITDA before nonrecurring charges represents earnings before interest,
depreciation and amortization, and income taxes. Because of the capital
intensive nature of the business and resulting large non-cash charges for
depreciation, EBITDA is commonly used in the communications industry by
management, investors, and analysts to analyze companies on the basis of
operating performance, leverage and liquidity. RCN intends to judge the
success of its initial rollout of fiber optic networks before deciding
whether to undertake additional capital expenditures to expand its network
in new areas. RCN believes that EBITDA is a critical measure of success.
Because RCN is in a growth-oriented and capital intensive phase of
development, it incurs depreciation and amortization charges in new markets
which may obscure its earnings growth in more mature markets. In addition,
EBITDA provides a measure of the availability of funds for various uses
including repayment of debt, expansion into new markets and acquisitions.
EBITDA is not intended to represent cash flows for the period and should
not be considered as an alternative to cash flows from operating, investing
or financing activities as determined in accordance with U.S. GAAP. EBITDA
is not a measurement under U.S. GAAP and may not be comparable with other
similarly titled measures of other companies. Certain of our debt
agreements contain certain covenants that, among other things, limit our
and our subsidiaries' ability to incur indebtedness, pay dividends, prepay
subordinated indebtedness, repurchase capital stock, engage in transactions
with stockholders and affiliates, create liens, sell assets and engage in
mergers and consolidations.
</TABLE>
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BUSINESS
Overview
We are building high-speed, high-capacity advanced fiber optic networks in
selected markets with high levels of population density. Our current services
include local and long distance telephone, video programming and data services,
including high speed Internet access. Our strategy is to become the leading
single-source provider of voice, video and data services to residential
customers in each of our markets by offering individual or bundled service
options, superior customer service and competitive prices. We are also
constructing our networks with significant excess capacity in order to
accommodate expanded services in the future. We intend to expand the services
provided to our customers through strategic alliances and opportunistic
development of complementary products. In addition, we will use the excess
capacity in our fiber optic networks to provide services to commercial customers
located on or near our networks. As a result of recent acquisitions and internal
growth, we are a leading regional Internet service provider in the Boston to
Washington, D.C. corridor. Our Internet businesses have recently been integrated
under the brand name "RCN.com."
Our initial advanced fiber optic networks have been established in
selected markets in the Boston to Washington, D.C. corridor, including New York
City, and the San Francisco Bay area. We are typically building the first true
local network to compete with the aging infrastructure of the incumbent service
providers in our markets. In the Boston market we operate our advanced fiber
optic network through a joint venture with Boston Edison Company. We own and
manage 51% owned of the venture and it is accounted for on a consolidated basis.
In the Washington, D.C. market, we are developing an advanced fiber optic
network through a joint venture named Starpower with Pepco Communications,
L.L.C., an indirect wholly owned subsidiary of Potomac Electric Power Company.
We own 50% of Starpower and Pepco Communications owns 50% and it is accounted
for under the equity method of accounting. We believe that these joint ventures
provide us with a number of important advantages. For example, we are able to
access rights of way of our joint venture partners and use their existing fiber
optic facilities. This allows us to enter our target markets quickly and
efficiently and to reduce our up-front costs of developing our networks. In
addition, our joint venture partners provide us with additional assets, equity
capital and established customer bases. We also benefit from our relationship
with our largest shareholder, Level 3 Communications, Inc., and from the
experience gained by certain of our key employees who participated in the
operation and development of other telephone, cable television and business
ventures, including MFS Communications Company, Inc.
Because we deliver a variety of services, we report the total number of
our various service connections purchased for local telephone, video programming
and Internet access rather than the number of customers. For example, a single
customer who purchases local telephone, video programming and Internet access
counts as three connections. Because we view long distance as a complementary
product, we do not currently include customers of our long distance service as
connections. See "--RCN Services--Connections." As of December 31, 1998, we had
approximately 855,000 connections which were delivered through a variety of our
owned and leased facilities including hybrid fiber/coaxial cable systems, a
wireless video system and advanced fiber optic networks. As of that date, we had
approximately 123,000 total connections attributable to customers connected to
advanced fiber optic networks ("on-net" connections) and had approximately
732,000 connections attributable to customers served through other facilities
("off-net" connections). See "--RCN Services." We obtained approximately 370,000
of our 497,000 Internet service connections through acquisitions of subscriber
bases during 1998.
We have extensive operating experience in both the telephone and video
industries and in the design and development of telecommunications facilities.
Our experience provides us with expertise in systems operation and development,
and gives us an established infrastructure for customer service and billing for
both voice and video services and established relationships with suppliers of
equipment and video programming. In addition, our management team and board of
directors benefit from experience gained when they managed C-TEC, which prior to
September 30, 1997 owned and operated our company. C-TEC has over 100 years of
experience in the telephone business and nearly 25 years of experience in the
cable television business. Both C-TEC and certain
17
<PAGE>
members of management also have extensive experience in the design and
development of advanced telecommunications facilities.
We seek to exploit competitive opportunities in selected markets where
population density, favorable demographics and the aging infrastructure of the
incumbent service providers' network facilities combine to create a particularly
attractive opportunity to develop advanced fiber optic networks. We continue to
construct network facilities within the Boston to Washington, D.C. corridor. We
believe that our experience in the Northeast will provide us with a key
strategic advantage as we enter markets in the San Francisco to San Diego
corridor.
West Coast Expansion
We recently began to develop advanced fiber optic networks in selected
high density markets outside of the Boston to Washington, D.C. corridor. Our
initial west coast network is being developed in the San Francisco Bay Area,
which is densely populated and has high per capita income and the highest per
capita Internet usage in the United States. We have received competitive local
exchange carrier ("CLEC") status in California. We have also obtained an "open
video system" ("OVS") certification from the Federal Communications Commission
for the City of San Francisco and surrounding counties and have begun to develop
our network in the San Francisco Bay Area. We expect to expand into selected
markets in or near Southern California. As is the case in our existing markets,
we intend to focus on high density markets with favorable demographics, and to
apply a subscriber-driven investment strategy. We expect to begin offering
services in the San Francisco Bay Area in late 1999.
Business Strategy
Our goal is to become the leading provider of communications services to
residential customers in our target markets by pursuing the following key
strategies:
Exploit the "Last Mile" Bottleneck in Existing Local Networks: Existing
local networks are typically low capacity, single service facilities without the
bandwidth for multiple or new services and revenue streams. Investment in the
local network or "last mile" has not generally kept pace with other industry and
technological advances. In our target markets, we seek to be the first operator
of an advanced fiber optic network offering advanced communications services to
residential customers.
Continue Construction of Advanced Fiber Optic Networks: Our advanced fiber
optic networks are designed with sufficient capacity to meet the growing demand
for high speed, high capacity, voice, video and data services. Our networks also
have a significant amount of excess capacity at relatively low incremental cost
which will be available for the introduction of new products. We believe that
our high capacity advanced fiber optic networks provide us with certain
competitive advantages such as the ability to offer bundled services and the
opportunity to recover the cost of our network through multiple revenue streams.
In addition, our networks generally provide superior signal quality and network
reliability relative to the typical networks of the incumbent service providers.
Leverage our Network and Customer Base: We are able to leverage our
network by delivering a broad range of communications products and by focusing
on high density residential markets. This bandwidth capacity and home density
allows us to maximize the revenue potential per mile of constructed network. We
believe we can further exploit our network capacity and customer base by
exploring opportunities to deliver new products and services in the future,
including complementary commercial and wholesale products and services.
Offer Bundled Voice, Video and Data Services with Quality Customer
Service: We offer our customers a single-source package of competitively priced
voice, video and data services, individually or on a bundled basis, with quality
customer service. By connecting customers to our own network, we improve our
operating economics and have complete control over our customers' experience
with us. We believe that the combination of bundled communications services and
quality customer care that we provide is superior to services that are typically
available from most incumbent telephone, cable or other service providers.
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<PAGE>
Continue to Use Strategic Alliances: We have been able to enter markets
quickly and efficiently and to reduce the up-front capital investment required
to deploy our networks by entering into strategic alliances with companies such
as BECO, Pepco Communications, Level 3, Qwest and MCI/WorldCom. By establishing
relationships with these companies, we are able to take advantage of their
existing extensive fiber optic networks and other assets, and our own existing
cable television infrastructure, to expedite and reduce the cost of market entry
and business development. We will continue to evaluate other strategic alliances
in our existing markets and our developing markets.
Network Development and Financing Plan
Because our network development plan involves relatively low fixed costs,
we are able to schedule capital expenditures to meet expected subscriber growth
in each major market. Our principal fixed costs in each such market are incurred
in connection with the establishment of a video transmission and telephone
switching facility. To make each market economically viable, it is then
necessary to construct infrastructure to connect a minimum number of subscribers
to the transmission and switching facility. We phase our market entry projects
to ensure that we have sufficient cash on hand to fund this construction.
Based on our current growth plan, we expect that we will require
substantial additional capital to expand the development of our network and
operations into new areas within our larger target markets. We will need capital
to fund the construction of our advanced fiber optic networks, upgrade our
hybrid fiber/coaxial plant and fund operating losses and repay our debts. We
currently estimate that our capital requirements for the period from January 1,
1999 through 2000 will be approximately $1.8 billion, which include capital
expenditures of approximately $700 million in 1999 and approximately $1 billion
in 2000. These capital expenditures will be used principally to fund additional
construction of our fiber optic network in high density areas in the Boston, New
York City, Washington, D.C. and San Francisco Bay area markets as well as to
expand into new markets (including selected markets in the western United
States) and to develop our information technology systems. These estimates are
forward-looking statements that may change if circumstances related to
construction, timing of receipt of regulatory approvals and opportunities to
accelerate the deployment of our networks do not occur as we expect. In addition
to our own capital requirements, our joint venture partners are each expected to
contribute approximately $275 million (of which $120 million has been
contributed) to the joint ventures through 2000 in connection with development
of the Boston and Washington, D.C. markets.
In order to facilitate growth beyond 2000, we expect to supplement our
existing available credit facilities and operating cash flow by seeking
additional capital to increase our network coverage and pay for other capital
expenditures, working capital, debt service requirements and anticipated further
operating losses. We may seek additional sources of funding from vendor
financing, public offerings or private placements of equity and/or debt
securities, and bank loans.
In March 1999, we secured a $1 billion bank facility from The Chase
Manhattan Bank and sold $250 million of convertible preferred stock to a private
investment fund.
RCN Services
We provide a wide range of local and long distance telephone, video
programming and data services, both individually and in bundled service options.
We provide these services through a range of facilities including our
advanced fiber optic networks in New York City, Boston and Washington D.C., a
wireless video system in New York City, our hybrid fiber/coaxial cable systems
in the states of New York (outside New York City), New Jersey and Pennsylvania.
We also provide, on a limited basis, resale local and long distance telephony
services.
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Connections. The following table summarizes the development of our
subscriber base:
<TABLE>
As of
--------------------------------------------------------------------------
9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
On-Net Service Connections:
Voice.......................... 1,909 3,214 4,473 11,428 20,857 30,868
Video.......................... 4,870 11,784 15,599 35,196 58,324 86,349
Data........................... 326 150 267 1,588 3,661 6,176
------- ------- ------- ------- ------- -------
Subtotal On-Net................. 7,105 15,148 20,339 48,212 82,842 123,393
Off-Net Service Connections:
Voice.......................... 10,953 24,900 40,447 49,052 58,093 65,022
Video.......................... 229,198 227,619 227,558 214,164 196,776 175,313
Data........................... -- -- 370,271 398,560 470,466 491,633
------- ------- ------- ------- ------- -------
Subtotal Off-Net................ 240,151 252,519 638,276 661,776 725,335 731,968
------- ------- ------- ------- ------- -------
Total Service Connections....... 247,256 267,667 658,615 709,988 808,177 855,361
======= ======= ======= ======= ======= =======
Homes Passed.................... 26,083 44,045 63,386 122,977 213,983 304,505
Marketable Homes................ -- -- -- 111,187 181,353 270,406
</TABLE>
Because we deliver a variety of services to our customers, we account for
our customer activity by the number of individual local telephone, video
programming or Internet access services, or "connections," purchased.
Consequently, a single customer purchasing local telephone, video programming
and Internet access counts as three connections.
We classify connections in the "Off-Net" category until the relevant
facilities are capable of providing voice, video and data services, including
local telephone service, through an RCN switch. During 1998, our Allentown,
Pennsylvania system was upgraded to provide a full range of services, and the
customers on that system were moved to the "On-Net" connections category.
"Off-Net--Voice" figures in the table above represent resold local phone
service provided to customers not connected to the advanced fiber optic
networks.
Our "Off-Net--Video" figures in the table above include approximately
31,000 wireless connections and wireline video connections serving the
University of Delaware (4,000 connections at December 31, 1998).
As of December 31, 1998 we had approximately 186,000 homes passed and
approximately 140,000 basic subscribers connected to our hybrid fiber/coaxial
cable system in New York, New Jersey and Lehigh Valley service areas.
In areas served by our joint ventures in the Greater Boston and
Washington, D.C. areas, the subscribers are customers of the relevant joint
venture and are included in the connections set forth in the table above.
As of September 30, 1998, we began to report marketable homes, which
represents that segment of homes passed which are being marketed our entire line
of advanced fiber optic network products. The distinction between homes passed
and marketable homes recognizes our transition from constructing our network in
initial markets to providing services to customers that have ordered our
services.
Set forth below is a brief description of our services:
Voice. We offer full-featured local exchange telephone service, including
standard dial tone access, enhanced 911 access, operator services and directory
assistance. We compete with the incumbent local exchange providers and CLECs. In
addition, we offer a wide range of value-added services, including call
forwarding, call waiting,
20
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conference calling, speed dial, calling card, 800-numbers and voice mail. We
also provide Centrex service and associated features. Our local telephone rates
are generally competitive with the rates charged by the incumbent providers. At
December 31, 1998, we had approximately 30,900 telephone service connections on
our advanced fiber optic networks and approximately 65,000 customers for resold
telephone service. We also provide long distance telephone services, including
outbound, inbound, calling card and operator services. These services are
offered to residential and business customers.
Video Services. We offer a diverse line-up of high quality basic, premium
and pay-per-view video programming. Depending on the system, we offer from 61 to
147 channels. Our basic video programming package provides extensive channel
selection featuring all major cable and broadcast networks. Our premium services
include HBO, Cinemax, Showtime and The Movie Channel, as well as supplementary
channels such as HBO 2, HBO 3 and Cinemax 2. StarCinema, available on our
advanced fiber optic networks, uses the latest "impulse" technology allowing
convenient impulse pay-per-view ordering of the latest hit movies and special
events instantly from the customer's remote. "Music Choice" offers 30 different
commercial-free music channels delivered to the customer's stereo in digital CD
quality sound.
As of December 31, 1998, we had approximately 86,350 subscribers for our
video programming services provided over advanced fiber optic networks. As of
such date, we also had approximately 34,900 connections attributable to the
wireless video system and approximately 140,400 connections attributable to the
hybrid fiber/coaxial cable systems.
Internet Access and Data Transmission. We operate as an Internet service
provider under the RCN.com brand name. We focus on serving individuals and
businesses through a network of our-owned points of presence ("POPs") which are
connected to our advanced fiber optic network. Our primary service offerings are
56K dial-up and high-speed cable modem access. We also sell commercially
oriented private line point-to-point data transmission services such as DS-1 and
OC-3 and a range of web page and server hosting services. Our subscribers use
their RCN accounts to communicate, retrieve information, and publish information
on the Internet. Following the recent acquisitions described below under
"--Recent Acquisition Transactions", we believe that we are the largest regional
provider of Internet services in the Northeast United States. As of December 31,
1998, we had approximately 497,800 Internet subscribers.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is based upon our
certificate of incorporation ("Certificate of Incorporation"), our bylaws
("Bylaws") and applicable provisions of law. We have summarized certain portions
of the Certificate of Incorporation and Bylaws below. The summary is not
complete. The Certificate of Incorporation and Bylaws are incorporated by
reference to the registration statement for these securities that we have filed
with the SEC, and have been filed as exhibits to our 10-K for the year ended
December 31, 1997. You should read the Certificate of Incorporation and Bylaws
for the provisions that are important to you.
Certain provisions of the Delaware General Corporation Law ("DGCL"), the
Certificate of Incorporation and the Bylaws summarized in the following
paragraphs may have an anti-takeover effect. This may delay, defer or prevent a
tender offer or takeover attempt that a shareholder might consider in its best
interests, including those attempts that might result in a premium over the
market price for its shares.
Authorized Capital Stock
Our Certificate of Incorporation authorizes us to issue 200 million shares
of common stock, par value $1.00 per share, 400 million shares of Class B common
stock, par value $1.00 per share, and 25 million shares of preferred stock par
value $1.00 per share.
Common Stock
Subject to the rights of the holders of any preferred stock which may be
outstanding, each holder of common stock is entitled to receive any dividends
our Board of Directors declares out of funds legally available to pay dividends.
If we liquidate our business, holders of common stock are entitled to share
equally in any distribution of our assets after we pay our liabilities and the
liquidation preference of any outstanding preferred stock. Each holder of common
stock is entitled to one vote per share, and is entitled to vote on all matters
presented to a vote of shareholders, including the election of directors.
Holders of common stock have no cumulative voting rights or preemptive rights to
purchase or subscribe for any stock or other securities. In addition, there are
no conversion rights or redemption or sinking fund provisions. On December 31,
1998, there were 64,290,493 shares of common stock issued and outstanding. The
common stock is admitted for trading on the Nasdaq National Market.
The Certificate of Incorporation contains no restrictions on the
alienability of the common stock. Except as disclosed in the section entitled
"Charter and Bylaw Provisions," below, there are no provision in the Certificate
of Incorporation or Bylaws and or any agreement or plan involving RCN that would
discriminate against any existing or prospective holder of common stock as a
result of a holder owning a substantial amount of common stock.
Class B Stock
The Class B common stock is virtually identical to the Common Stock except
that:
o the Class B common stock is generally non-voting,
o the common stock is convertible at the option of the holder into Class
B common stock and
o in certain mergers, distributions and other transactions in which the
holders of common stock are entitled to receive equity interests of
one or more corporations (including RCN), the equity interests
distributed to holders of common stock and the Class B common stock
may have rights and privileges that are substantially equivalent to
the current rights and privileges of the common stock and the Class B
common stock, respectively.
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As of January 28, 1999, there are no outstanding shares of Class B common
stock and we do not have any current plan or intention to issue any Class B
common stock.
Preferred Stock
This prospectus describes certain general terms and provisions of our
preferred stock. When we offer to sell a particular series of preferred stock,
we will describe the specific terms of the securities in a supplement to this
prospectus. The prospectus supplement will also indicate whether the general
terms and provisions described in this prospectus apply to the particular series
of preferred stock. The preferred stock will be issued under a certificate of
designations relating to each series of preferred stock, and is also subject to
our Certificate of Incorporation.
We have summarized certain terms of the certificate of designations below.
The summary is not complete. The certificate of designations will be filed with
the SEC in connection with an offering of preferred stock.
Under the Certificate of Incorporation, our Board of Directors has the
authority to
o create one or more series of preferred stock,
o issue shares of preferred stock in any series up to the maximum number
of shares of preferred stock authorized, and
o determine the preferences, rights, privileges and restrictions of any
series.
Our Board may issue authorized shares of preferred stock, as well as
authorized but unissued shares of common stock, without further shareholder
action, unless shareholder action is required by applicable law or by the rules
of a stock exchange or quotation system on which any series of our stock may be
listed or quoted.
The prospectus supplement will describe the terms of any preferred stock
being offered, including:
o the number of shares and designation or title of the shares;
o any liquidation preference per share;
o any date of maturity;
o any redemption, repayment or sinking fund provisions;
o any dividend rate or rates and the dates of payment (or the method for
determining the dividend rates or dates of payment);
o any voting rights;
o if other than the currency of the United States, the currency or
currencies including composite currencies in which the preferred stock
is denominated and/or in which payments will or may be payable;
o the method by which amounts in respect of the preferred stock may be
calculated and any commodities, currencies or indices, or value, rate
or price, relevant to such calculation;
o whether the preferred stock is convertible or exchangeable and, if so,
the securities or rights into which the preferred stock is convertible
or exchangeable, and the terms and conditions of conversion or
exchange;
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o the place or places where dividends and other payments on the
preferred stock will be payable; and
o any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.
All shares of preferred stock offered will be fully paid and
non-assessable. Any shares of preferred stock that are issued will have priority
over the common stock with respect to dividend or liquidation rights or both.
Our Board of Directors could create and issue a series of preferred stock
with rights, privileges or restrictions which effectively discriminates against
an existing or prospective holder of preferred stock as a result of the holder
beneficially owning or commencing a tender offer for a substantial amount of
common stock. One of the effects of authorized but unissued and unreserved
shares of capital stock may be to make it more difficult or discourage an
attempt by a potential acquirer to obtain control of our company by means of a
merger, tender offer, proxy contest or otherwise. This protects the continuity
of our management. The issuance of these shares of capital stock may defer or
prevent a change in control of our company without any further shareholder
action.
The transfer agent for each series of preferred stock will be described in
the prospectus supplement.
Charter and Bylaw Provisions
Classified Board of Directors; Removal of Directors. Our Board of
Directors are divided into three classes. The term of office of the first class
expires at the 2001 annual meeting, the term of office of the second class
expires at the 1999 annual meeting, and the term of office of the third class
expires at the 2000 annual meeting. At each annual meeting, beginning with the
1999 annual meeting, a class of directors will be elected to replace the class
whose term has just expired. As a result, approximately one-third of the members
of our Board of Directors will be elected each year and generally, each of the
directors serves a staggered three-year term. Moreover, as the DGCL permits in
the case of a corporation having a classified board, our directors may be
removed only for cause.
These provisions could prevent a shareholder or a group of shareholders
having majority voting power from obtaining control of our Board of Directors
until the second annual meeting following the date the shareholder obtains
majority voting power. Accordingly, these provisions could have the effect of
discouraging a potential acquirer from making a tender offer or otherwise
attempting to obtain control of our company.
Shareholder Action by Written Consent; Special Meetings. No action
required or permitted to be taken at an annual or special meeting of
shareholders may be taken without a meeting. No action may be taken by the
written consent of shareholders instead of a meeting. Only our Board, our
Chairman of the Board or our Chief Executive Officer may call a special meeting
of shareholders. These provisions may make it more difficult for shareholders to
take action opposed by our Board.
Advance Notice Provisions. Shareholders seeking to nominate candidates to
be elected as directors at an annual meeting or to bring business before an
annual meeting must comply with an advanced written procedure. Only persons who
are nominated by or at the direction of our Board, or by a shareholder who has
given timely written notice to our Secretary before the meeting to elect
directors, will be eligible as directors. At any shareholders' meeting the
business to be conducted is limited to business brought before the meeting by or
at the direction of the Board of Directors, or a shareholder who has given
timely written notice to our Secretary of its intention to bring business before
an annual meeting. A shareholder must give notice which is received at our
principal executive offices in writing between 60 to 90 days before the meeting.
If, however, we gave less than 70 days' notice or prior public disclosure of the
meeting date, we must receive the shareholder's notice no later than the close
of business on the 10th day following the day we gave the notice or public
disclosure of the meeting date. A shareholder's notice must also contain certain
information specified in the Bylaws. These provisions may preclude or deter some
shareholders from bringing matters before, or making nominations for directors
at, an annual meeting.
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Amendment of Certain Charter and Bylaw Provisions. Our Board may adopt,
amend or repeal any provision of the Bylaws. Bylaw provisions may be adopted,
amended or repealed by the affirmative vote of shareholders holding at least 66
2/3% of the total number of votes entitled to be cast in the election of
directors.
Any amendment, modification or repeal of the provisions of the Certificate
of Incorporation relating to
o the election and removal of directors,
o the right to call special meetings,
o the prohibition on action by written consent,
o amendment of the Bylaws and
o the limitation of liability and indemnification of officers and
directors
will require approval by the affirmative vote of shareholders holding at least
66 2/3% of the total number of votes entitled to vote in the election of
directors.
Delaware Takeover Statute
We are subject to Section 203 of the DGCL ("Section 203"). In general,
Section 203 prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested shareholder" for a period of three
years following the date that the shareholder became an interested shareholder,
unless:
(a) before such date either the business combination or the transaction
which resulted in the shareholder becoming an interested shareholder
is approved by the board of directors of the corporation,
(b) upon consummation of the transaction which resulted in the shareholder
becoming an interested shareholder, the interested shareholder owns at
least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding for purposes of determining
the number of shares outstanding, shares owned by
(1) persons who are both directors and officers and
(2) employee stock plans in certain circumstances), or
(c) on or after such date the business combination is approved by the
board and authorized at an annual or special meeting of shareholders,
and not by written consent, by the affirmative vote of at least 66
2/3% of the outstanding voting stock which is not owned by the
interested shareholder.
A "business combination" includes a merger, consolidation, asset sale, or
other transaction resulting in a financial benefit to the interested
shareholder. An "interested shareholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock.
The restrictions imposed by Section 203 will not apply to a corporation
if, among other things:
(a) the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by Section 203 or
(b) 12 months have passed after the corporation, by action of its
shareholders holding a majority of the outstanding stock, adopts an
amendment to its certificate of incorporation or bylaws expressly
electing not to be governed by Section 203.
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The restrictions imposed by Section 203 will apply to us since we have not
elected not to be governed by that section. Our Board of Directors approved of
Level 3 becoming an interested shareholder and, consequently, Section 203 would
not apply to any business combination with Level 3.
Liability and Indemnification of Directors and Officers
Certain provisions of the DGCL and the Certificate of Incorporation and
the Bylaws relate to the limitation of liability and indemnification of our
directors and officers. These various provisions are described below.
Our Certificate of Incorporation provides that our directors are not
personally liable to us or our shareholders for monetary damages for breach of
their fiduciary duties as a director to the fullest extent permitted by the
DGCL. Under the DGCL, directors would not be personally liable to us or our
shareholders for monetary damages for breach of their fiduciary duties as a
director, except for
(a) any breach of the director's duty of loyalty to us or our
shareholders,
(b) acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law,
(c) any transaction from which the director derived improper personal
benefit or
(d) the unlawful payment of dividends or unlawful stock repurchases or
redemptions.
This exculpation provision may have the effect of reducing the likelihood
of derivative litigation against directors and may discourage or deter
shareholders or us from bringing a lawsuit against our directors for breach of
their fiduciary duties as directors. However, the provision does not affect
equitable remedies such as an injunction or rescission from being available.
We will indemnify and hold harmless to the fullest extent permitted by the
DGCL each person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or proceeding. These include civil,
criminal, administrative or investigative proceedings, if that person is or was
a director or officer of RCN or is or was serving at our request as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise. We will also pay the expenses incurred in connection with these
proceedings before its final disposition to the fullest extent authorized by the
DGCL. This right to indemnification is a contract right. By action of our Board
of Directors, we provide indemnification to our employees and agents to the
extent our Board determines to be appropriate and authorized by the DGCL.
We purchase and maintains insurance on behalf of any person who is or was
a director, officer, employee or agent of RCN, or is or was serving at our
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status, whether or not we would
have the power or the obligation to indemnify him or her against the liability
under the Certificate of Incorporation.
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DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of the debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms for the securities in a supplement to this
prospectus. The prospectus supplement will also indicate whether the general
terms and provisions described in this prospectus apply to a particular series
of debt securities. The debt securities will be issued under an indenture
between us and The Chase Manhattan Bank, as trustee.
We have summarized certain terms and provisions of the indenture. The
summary is not complete. The indenture has been incorporated by reference as an
exhibit to the registration statement for these securities that we have filed
with the SEC. You should read the indenture for the provisions which may be
important to you. Capitalized terms used in this summary have the meanings
specified in the indenture. The indenture is subject to and governed by the
Trust Indenture Act of 1939, as amended.
General
The indenture will not limit the amount of debt securities which we may
issue. We may issue debt securities up to an aggregate principal amount as we
may authorize from time to time. The prospectus supplement will describe the
terms of any debt securities being offered, including:
o the designation, aggregate principal amount and authorized
denominations;
o the maturity date;
o the interest rate, if any, and the method for calculating the interest
rate;
o the interest payment dates and the record dates for the interest
payments;
o any mandatory or optional redemption terms or prepayment, conversion,
sinking fund or exchangeability or convertability provisions;
o the place where we will pay principal and interest;
o if other than denominations of $1,000 or multiples of $1,000, the
denominations the debt securities will be issued in;
o whether the debt securities will be issued in the form of global
securities or certificates;
o additional provisions, if any, relating to the defeasance of the debt
securities;
o the currency or currencies, if other than the currency of the United
States, in which principal and interest will be paid;
o whether the debt securities will be issuable in registered form or
bearer form or both and, if bearer securities are issuable, any
restrictions which apply to the exchange of one form for another and
the offer, sale and delivery of bearer securities;
o any United States federal income tax consequences;
o the dates on which premium, if any, will be paid;
o our right, if any, to defer payment interest and the maximum length of
this deferral period;
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o any listing on a securities exchange;
o the initial public offering price; and
o other specific terms, including any additional events of default or
covenants.
As described in each prospectus supplement relating to any particular
series of debt securities we offer, the indenture may contain covenants
limiting:
o the incurrence of additional debt by us and certain of our
subsidiaries and affiliates;
o the making of certain payments by us and certain of our subsidiaries
and affiliates;
o business activities of us and certain of our subsidiaries and
affiliates;
o the issuance of preferred stock of certain of our subsidiaries and
affiliates;
o certain asset dispositions;
o certain transactions with affiliates;
o restrictions on dividend payments by certain subsidiaries and
affiliates;
o a change of control of our company;
o issuance of certain guarantees;
o liens; and
o mergers and consolidations involving our company.
Book-Entry System
Unless we specify otherwise in a prospectus supplement, debt securities of
any series may be issued under a book-entry system in the form of one or more
global securities (each, a "Global Security"). Each Global Security will be
deposited with, or on behalf of, a depositary, which will be The Depository
Trust Company, New York, New York (the "Depositary"). The Global Securities will
be registered in the name of the Depositary or its nominee.
The Depositary has advised us that the Depositary is a limited purpose
trust company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York banking law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. The Depositary was created to
hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations, some of which (and/or their
representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others, such as banks, brokers, dealers, and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
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When a Global Security in issued in registered form, the Depositary will
credit, on its book-entry registration and transfer system, the respective
principal amounts of the debt securities represented by each Global Security to
the participants' accounts. The underwriters, dealers, or agents, if any, will
designate the accounts to be credited. If debt securities are offered and sold
directly by us, we will designate the accounts to be credited. Only participants
or persons that may hold interests through participants will be able to own
beneficial interest in the Global Security. Ownership of beneficial interests by
participants in the Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, the participants' records. The
laws of some jurisdictions may require that certain purchasers of securities
take physical delivery of securities in definitive form, which may impair the
ability to transfer beneficial interests in a Global Security.
So long as the Depositary or its nominee is the owner of record of a
Global Security, we consider the Depositary or its nominee the sole owner or
holder of the debt securities represented by the Global Security. Generally,
owners of beneficial interests in a Global Security will not (a) be entitled to
have the debt security represented by a Global Security registered in their
names, (b) receive or be entitled to receive physical delivery of debt
securities in definitive form and (c) be considered the owners or holders of the
debt securities. Accordingly, each person owning a beneficial interest in a
Global Security must rely on the Depositary's procedures. Persons who are not
participants must rely on the procedures of the participant through which it
owns its interest. We understand that under existing industry practices, if we
request any action of holders or if any owner of a beneficial interest in a
Global Security desires to give or take any action which a holder is entitled to
give or take under the indenture, the Depositary would authorize the
participants holding the relevant beneficial interests to give or take the
action. The participants would in turn authorize beneficial owners owning
through them to give or take action or would otherwise act upon the instruction
of beneficial owners holding through them.
Payments of principal, premium, if any, and interest on debt securities
represented by a Global Security registered in the name of the Depositary or its
nominee will be made to the Depositary or nominee as the registered owner. None
of RCN, the trustee or any other agent of RCN or agent of the trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global
Security or for maintaining, supervising, or reviewing any records relating to
such beneficial ownership interests.
We have been advised by the Depositary that the Depositary will credit
participants' accounts with payments of principal, premium, if any, or interest
on the payment dates in amounts which are proportionate to their respective
beneficial interests in the principal amount of the Global Security as shown on
the Depositary's records. We expect that payments by participants to owners of
beneficial interests in the Global Security held through such participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in "street name,"
and will be the responsibility of the participants.
A Global Security may not be transferred except as a whole:
o by the Depositary to a nominee or successor of the Depositary or
o by a nominee of the Depositary to another nominee of the Depositary.
A Global Security representing all but not part of an offering of debt
securities is exchangeable for debt securities in definitive form of like tenor
and terms if:
o the Depositary notifies us that it is unwilling or unable to continue
as depositary for the Global Security or if at any time the Depositary
is no longer eligible to be or in good standing as a clearing agency
registered under the Exchange Act, and we do not appoint a successor
depositary within 90 days after we receive notice or
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o RCN in our sole discretion at any time decides not to have all of the
debt securities represented in an by a Global Security and notifies
the trustee.
If a Global Security is exchangeable, then it is exchangeable for debt
securities registered in the names and in authorized denominations as the
Depositary directs.
Payments of Principal and Interest
The payment of principal premium, if any, and interest on the debt
securities will rank equally with all of our unsecured and unsubordinated debt.
Events of Default
When we use the term "Event of Default" in the indenture with respect to
the debt securities of any series, here are some examples of what we mean:
(1) default in paying interest on the debt securities when it becomes due
and the default continues for a period of 30 days or more;
(2) default in paying principal, or premium, if any, on the debt
securities when due;
(3) default in the performance, or breach, of any covenant in the
indenture (other than defaults specified in clause (1) or (2) above)
and the default or breach continues for a period of 30 days or more
after we receive written notice from the trustee or the trustee
receives notice from the holders of at least 25% in aggregate
principal amount of the outstanding debt securities of the series;
(4) certain events of bankruptcy, insolvency, reorganization,
administration or similar proceedings with respect to RCN or any
material subsidiary has occurred; or
(5) any other Events of Default set forth in the prospectus supplement.
If an Event of Default (other than an Event of Default specified in clause
(4) with respect to RCN) under the indenture occurs with respect to the debt
securities of any series and is continuing, then the trustee or the holders of
at least 25% in principal amount of the outstanding debt securities of that
series may by written notice, and the trustee at the request of the holders of
not less than 25% in principal amount of the outstanding debt securities of such
series will, require us to repay immediately the entire principal amount of the
outstanding debt securities of that series (or such lesser amount as may be
provided in the terms of the securities), together with all accrued and unpaid
interest and premium, if any.
If an Event of Default under the indenture specified in clause (4) with
respect to RCN occurs and is continuing, then the entire principal amount of the
outstanding debt securities (or such lesser amount as may be provided in the
terms of the securities) will automatically become due immediately and payable
without any declaration or other act on the part of the trustee or any holder.
After a declaration of acceleration or any automatic acceleration under
clause (4) described above, the holders of a majority in principal amount of
outstanding debt securities of any series may rescind this accelerated payment
requirement if all existing Events of Default, except for nonpayment of the
principal and interest on the debt securities of that series that has become due
solely as a result of the accelerated payment requirement, have been cured or
waived and if the rescission of acceleration would not conflict with any
judgment or decree. The holders of a majority in principal amount of the
outstanding debt securities of any series also have the right to waive past
defaults, except a default in paying principal or interest on any outstanding
debt security, or in respect of a covenant
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or a provision that cannot be modified or amended without the consent of all
holders of the debt securities of that series.
Holders of at least 25% in principal amount of the outstanding debt
securities of a series may seek to institute a proceeding only after they have
made written request, and offered reasonable indemnity, to the trustee to
institute a proceeding and the trustee has failed to do so within 60 days after
it received this notice. In addition, within this 60-day period the trustee must
not have received directions inconsistent with this written request by holders
of a majority in principal amount of the outstanding debt securities of that
series. These limitations do not apply, however, to a suit instituted by a
holder of a debt security for the enforcement of the payment of principal,
interest or any premium on or after the due dates for such payment.
During the existence of an Event of Default, the trustee is required to
exercise the rights and powers vested in it under the indenture and use the same
degree of care and skill in its exercise as a prudent person would under the
circumstances in the conduct of that person's own affairs. If an Event of
Default has occurred and is continuing, the trustee is not under any obligation
to exercise any of its rights or powers at the request or direction of any of
the holders unless the holders have offered to the trustee reasonable security
or indemnity. Subject to certain provisions, the holders of a majority in
principal amount of the outstanding debt securities of any series have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the trustee, or exercising any trust, or power conferred on the
trustee.
The trustee will, within 45 days after any Default occurs, give notice of
the Default to the holders of the debt securities of that series, unless the
Default was already cured or waived. Unless there is a default in paying
principal, interest or any premium when due, the trustee can withhold giving
notice to the holders if it determines in good faith that the withholding of
notice is in the interest of the holders.
We are required to furnish to the trustee an annual statement as to
compliance with all conditions and covenants under the indenture.
Modification and Waiver
The indenture may be amended or modified without the consent of any holder
of debt securities in order to:
o cure ambiguities, defects or inconsistencies;
o provide for the assumption of our obligations in the case of a merger
or consolidation;
o make any change that would provide any additional rights or benefits
to the holders of the debt securities of a series;
o add Guarantors with respect to the debt securities of a series;
o secure the debt securities of a series;
o establish the form or forms of debt securities of any series;
o maintain the qualification of the indenture under the Trust Indenture
Act; or
o make any change that does not adversely affect the rights of any
holder.
Other amendments and modifications of the indenture or the debt securities
issued may be made with the consent of the holders of not less than a majority
of the aggregate principal amount of the outstanding debt securities of each
series affected by the amendment or modification (each series voting as a
separate class).
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However, no modification or amendment may, without the consent of the holder of
each outstanding debt security affected:
o reduce the principal amount, or extend the fixed maturity, of the debt
securities, alter or waive the redemption provisions of the debt
securities;
o change the currency in which principal, any premium or interest is
paid;
o reduce the percentage in principal amount outstanding of debt
securities of any series which must consent to an amendment,
supplement or waiver or consent to take any action;
o impair the right to institute suit for the enforcement of any payment
on the debt securities;
o waive a payment default with respect to the debt securities or any
Guarantee;
o reduce the interest rate or extend the time for payment of interest on
the debt securities;
o adversely affect the ranking of the debt securities of any series; or
o release any Guarantor from any of its obligations under its Guarantee
or the indenture, except in compliance with the terms of the
indenture.
Consolidation, Merger, Sale of Assets, Etc.
We will not consolidate or combine with or merge with or into or, directly
or indirectly, sell, assign, convey, lease, transfer or otherwise dispose of all
or substantially all of our properties and assets to any person or persons in a
single transaction or through a series of transactions, unless:
o RCN shall be the continuing person or, if RCN is not the continuing
person, the resulting, surviving or transferee person (the "surviving
entity") is a company organized and existing under the laws of the
United States or any State or territory;
o the surviving entity will expressly assume all of our obligations
under the debt securities and the indenture, and will, if required by
law to effectuate the assumption, execute a supplemental indenture
which will be delivered to the trustee and will be in form and
substance reasonably satisfactory to the trustee;
o immediately after giving effect to such transaction or series of
transactions on a pro forma basis, no Default has occurred and is
continuing; and
o RCN or the surviving entity will have delivered to the trustee an
officers' certificate and opinion of counsel stating that the
transaction or series of transactions and a supplemental indenture, if
any, complies with this covenant and that all conditions precedent in
the indenture relating to the transaction or series of transactions
have been satisfied.
If any consolidation or merger or any sale, assignment, conveyance, lease,
transfer or other disposition of all or substantially all of our assets occurs
in accordance with the indenture, the successor corporation will succeed to, and
be substituted for, and may exercise every right and power of RCN under the
indenture with the same effect as if such successor corporation had been named
as RCN. Except for (1) any lease or (2) any sale, assignment, conveyance,
transfer, lease or other disposition to certain subsidiaries of RCN, we will be
discharged from all obligations and covenants under the indenture and the debt
securities.
32
<PAGE>
Satisfaction and Discharge of the Indenture; Defeasance
We may terminate our obligations under the indenture, when:
o either:
- all debt securities of any series issued that have been
authenticated and delivered have been delivered to the trustee
for cancellation; or
- all the debt securities of any series issued that have not been
delivered to the trustee for cancellation will become due and
payable (a "Discharge") under irrevocable arrangements
satisfactory to the trustee for the giving of notice of
redemption by such trustee in our name, and at our expense and we
have irrevocably deposited or caused to be deposited with the
trustee sufficient funds to pay and discharge the entire
indebtedness on the series of debt securities to pay principal,
interest and any premium;
o we have paid or caused to be paid all other sums then due and payable
under the indenture; and
o we have delivered to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent under
the indenture relating to the satisfaction and discharge of the
indenture have been complied with.
We may elect to have our obligations under the indenture discharged with
respect to the outstanding debt securities of any series ("legal defeasance").
Legal defeasance means that we will be deemed to have paid and discharged the
entire indebtedness represented by the outstanding debt securities of such
series under the indenture, except for:
o the rights of holders of the debt securities to receive principal,
interest and any premium when due;
o our obligations with respect to the debt securities concerning issuing
temporary debt securities, registration of transfer of debt
securities, mutilated, destroyed, lost or stolen debt securities and
the maintenance of an office or agency for payment and money for
security payments held in trust;
o the rights, powers, trusts, duties and immunities of the trustee; and
o the defeasance provisions of the indenture.
In addition, we may elect to have our obligations released with respect to
certain covenants in the indenture ("covenant defeasance"). Any omission to
comply with these obligation will not constitute a Default or an Event of
Default with respect to the debt securities of any series. In the event covenant
defeasance occurs, certain events, not including non-payment, bankruptcy and
insolvency events, described under "Events of Default" will no longer constitute
an Event of Default for that series.
In order to exercise either legal defeasance or covenant defeasance with
respect to outstanding debt securities of any series:
o we must irrevocably have deposited or caused to be deposited with the
trustee as trust funds for the purpose of making the following
payments, specifically pledged as security for, and dedicated solely
to the benefits of the holders of the debt securities of a series:
- money in an amount;
33
<PAGE>
- U.S. Government Obligations; or
- a combination of money and U.S. Government Obligations,
in each case sufficient without reinvestment, in the written opinion
of an internationally recognized firm of independent public
accountants to pay and discharge, and which shall be applied by the
trustee to pay and discharge, all of the principal, interest and any
premium at due date or maturity or if we have made irrevocable
arrangements satisfactory to the trustee for the giving of notice of
redemption by the trustee in our name and at our expense, the
redemption date;
o in the case of legal defeasance, we have delivered to the trustee an
opinion of counsel stating that, under then applicable Federal income
tax law, the holders of the debt securities of that series will not
recognize gain or loss for federal income tax purposes as a result of
the deposit, defeasance and discharge to be effected and will be
subject to the same federal income tax as would be the case if the
deposit, defeasance and discharge did not occur;
o in the case of covenant defeasance, we have delivered to the trustee
an opinion of counsel to the effect that the holders of the debt
securities of that series will not recognize gain or loss for U.S.
federal income tax purposes as a result of the deposit and covenant
defeasance to be effected and will be subject to the same federal
income tax as would be the case if the deposit and covenant defeasance
did not occur;
o no Default with respect to the outstanding debt securities of that
series has occurred and is continuing at the time of such deposit
after giving effect to the deposit or, in the case of legal
defeasance, no Default relating to bankruptcy or insolvency has
occurred and is continuing at any time on or before the 91st day after
the date of such deposit, it being understood that this condition is
not deemed satisfied until after the 91st day;
o the legal defeasance or covenant defeasance will not cause the trustee
to have a conflicting interest within the meaning of the Trust
Indenture Act, assuming all debt securities of a series were in
default within the meaning of such Act;
o the defeasance or covenant defeasance will not result in a breach or
violation of, or constitute a default under, any other agreement or
instrument to which we are a party;
o the legal defeasance or covenant defeasance will not result in the
trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act of 1940, as amended,
unless the trust is registered under such Act or exempt from
registration; and
o we have delivered to the trustee an officers' certificate and an
opinion of counsel stating that all conditions precedent with respect
to the defeasance or covenant defeasance have been complied with.
34
<PAGE>
SELLING SHAREHOLDER
As of October 1, 1999, Boston Edison Company ("BECO") beneficially owned
1,107,539 shares of our common stock. Registration of these shares does not
necessarily mean that BECO will sell all or any of these shares. Although BECO
does not, as of October 1, 1999, own any other equity securities of RCN, it
continues to have the right to convert additional percentages of its equity
interest in RCN BECOCOM, LLC, the joint venture entity it owns with RCN, into
shares of our common stock. In May 1999, BECO exercised its right to convert an
additional percentage of such interest. The number of our shares which BECO is
entitled to receive on this additional conversion and the effect that the
conversion will have on the current ownership interests of the parties in RCN
BECOCOM, LLC is yet to be determined. Because BECO may sell all or some of the
1,107,539 shares, no estimate can be given as to the number of shares of our
common stock that will be held by BECO after completion of any offering. Thomas
May, Chairman, President and Chief Executive Officer of BECO, was appointed as a
director of RCN in September 1997.
35
<PAGE>
PLAN OF DISTRIBUTION
We may sell the securities in any of three ways (or in any combination):
(a) through underwriters or dealers; (b) directly to a limited number of
purchasers or to a single purchaser; or (c) through agents. The prospectus
supplement will set forth the terms of the offering of such securities,
including
(a) the name or names of any underwriters, dealers or agents and the
amounts of securities underwritten or purchased by each of them,
(b) the initial public offering price of the securities and the
proceeds to us and any discounts, commissions or concessions
allowed or reallowed or paid to dealers, and
(c) any securities exchanges on which the securities may be listed.
Any initial public offering price and any discounts or concessions allowed
or reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale of any securities, the securities
will be acquired by the underwriters for their own account and may be resold
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The securities may be either offered to the public through
underwriting syndicates represented by managing underwriters, or directly by
underwriters. Generally, the underwriters' obligations to purchase the
securities will be subject to certain conditions precedent. The underwriters
will be obligated to purchase all of the securities if they purchase any of the
securities.
We may sell the securities through agents from time to time. The
prospectus supplement will name any agent involved in the offer or sale of the
securities and any commissions we pay to them. Generally, any agent will be
acting on a best efforts basis for the period of its appointment.
We may authorize underwriters, dealers or agents to solicit offers by
certain purchasers to purchase the securities from at the public offering price
set forth in the prospectus supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the future. The
contracts will be subject only to those conditions set forth in the prospectus
supplement, and the prospectus supplement will set forth any commissions we pay
for solicitation of these contracts.
This prospectus, including any amendment or supplement, may also be used
in connection with sales of up to 1,107,539 shares of our common stock issued to
BECO under the terms of an exchange agreement between BECO and RCN. The exchange
agreement provides BECO with registration rights with respect to our common
stock. BECO has agreed to provide us with advance written notice of their intent
to make such sales.
BECO may offer its shares of RCN common stock at various times in one or
more of the following transactions: in exchange or the over-the-counter market
transactions; in private transactions other than exchange or over-the-counter
market transactions; in connection with short sales of RCN common stock; and by
pledge to secure debts and other obligations. BECO may sell its shares at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices or fixed prices. BECO may use broker-dealers
to sell its shares. If this happens, broker-dealers will either receive
discounts or commissions from BECO or they will receive commissions from
purchasers of shares for whom they acted as agents. In connection with any
resales by BECO, a prospectus supplement, if required, will be filed under Rule
424(b) under the Securities Act, disclosing the number of shares involved and
other details of such resale to the extent appropriate.
Agents and underwriters may be entitled to indemnification by us against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents or underwriters
36
<PAGE>
may be required to make in respect thereof. Agents and underwriters may be
customers of, engage in transactions with, or perform services for us in the
ordinary course of business.
LEGAL MATTERS
The validity of the securities in respect of which this prospectus is
being delivered will be passed on for us by Davis Polk & Wardwell, New York, New
York.
EXPERTS
The consolidated financial statements of RCN Corporation as of December
31, 1998 and 1997, and for the years ended December 31, 1998, 1997 and 1996,
appearing in the RCN 10-K for the year ended December 31, 1998 and incorporated
by reference into this registration statement have been audited by
PricewaterhouseCoopers LLP, independent accountants, as set forth in their
report thereon incorporated by reference herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The financial statements of Erols Internet, Inc. at December 31, 1996 and
1997 and for the period from August 1, 1995 (inception) to December 31, 1995 and
for the years ended December 31, 1996 and 1997, appearing in the RCN 8-K dated
May 8, 1998 and incorporated by reference into the registration statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference herein, and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
37
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the securities being registered
hereby. All amounts are estimates except the registration fee.
Amount to be
Paid
------------
Registration fee.............................. $ 278,000
Printing...................................... 250,000
Legal fees and expenses....................... 500,000
Accounting fees and expenses.................. 200,000
Miscellaneous................................. 25,000
---------
TOTAL........................................ $1,253,000
=========
Item 15. Indemnification of Directors and Officers
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law, which enables a corporation in its original certificate of incorporation or
an amendment thereto to eliminate or limit the personal liability of a director
for violations of the director's fiduciary duty, except (i) for any breach of
the director's duty of loyalty to the corporation or it stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law (providing for liability of directors for the unlawful payment
of dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which a director derived an improper personal benefit.
Section 145 of the Delaware General Corporation Law empowers RCN to
indemnify, subject to the standards set forth therein, any person in connection
with any action, suit or proceeding brought before or threatened by reason of
the fact that the person was a director, officer, employee or agent of such
company, or is or was serving as such with respect to another entity at the
request of such company. The Delaware General Corporation Law also provides that
RCN may purchase insurance on behalf of any such director, officer, employee or
agent.
RCN's Amended and Restated Articles of Incorporation provides in effect
for the elimination of the personal liability of RCN directors for breaches of
fiduciary duty and for the indemnification by RCN of each director and officer
of RCN, in each case, to the fullest extent permitted by applicable law.
RCN purchases and maintains insurance on behalf of any person who is or
was a director, officer, employee or agent of RCN, or is or was serving at the
request of RCN as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
RCN would have the power or the obligation to indemnify him or her against such
liability under the provisions of the RCN Certificate of Incorporation.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit No. Document
----------- --------
1.1* Form of Underwriting Agreement
II-1
<PAGE>
Exhibit No. Document
----------- --------
2.1 Form of Distribution Agreement among C-TEC Corporation,
Cable Michigan, Inc. and RCN Corporation (incorporated by
reference to Exhibit 2.1 to Amendment No. 2 to RCN's
Information Statement on Form 10/A ("Form 10") filed on
September 5, 1997)
2.2 Tax Sharing Agreement by and among C-TEC Corporation, Cable
Michigan, Inc. and the Registrant (incorporated by reference
to Exhibit 10.1 to RCN's Form 10)
2.3 Agreement and Plan of Merger dated as of January 21, 1998
among Erols Internet, Inc., Erol Onaran, Gold & Appel
Transfer, S.A., RCN Corporation and ENET Holding, Inc.
(incorporated by reference to Exhibit 2.1 to RCN's Current
Report on Form 8-K ("March 1998 8-K") filed on March 6,
1998)
2.4 Amendment No. 1 to Agreement and Plan of Merger dated as of
January 21, 1998 among Erols Internet, Inc., Erol Onaran,
Gold & Appel Transfer, S.A., RCN Corporation and ENET
Holding, Inc. (incorporated by reference to Exhibit 2.2 to
RCN's March 1998 8-K)
3.1* Certificate of Designations, Preferences and Rights of
Series A 7% Senior Convertible Preferred Stock dated
April 7, 1999
4.1 Indenture dated as of February 6, 1998 between RCN, as
Issuer, and The Chase Manhattan Bank, as trustee, with
respect to the 9.80% Senior Discount Notes due 2008
(incorporated by reference to Exhibit 4.1 to RCN's
Registration Statement on Form S-4 (Commission File No.
333-48487) ("1998 Form S-4") filed on March 23, 1998)
4.2 Form of the 9.80% Senior Discount Notes due 2008, Series B
(included in Exhibit 4.1) (incorporated by reference to
Exhibit 4.2 to RCN's 1998 Form S-4)
4.3 Indenture dated as of October 17, 1997 between RCN, as
Issuer, and The Chase Manhattan Bank, as trustee, with
respect to the 10% Senior Notes due 2007 (incorporated by
reference to Exhibit 4.1 to RCN's Registration Statement on
Form S-4 (Commission File No. 333-41081) ("Form S- 4") filed
on November 26, 1997)
4.4 Form of the 10% Senior Exchange Notes due 2007 (included in
Exhibit 4.4) (incorporated by reference to Exhibit 4.2 to
RCN's Form S-4)
4.5 Indenture dated as of October 17, 1997 between RCN, as
Issuer, and The Chase Manhattan Bank, as trustee, with
respect to the 11 1/8% Senior Discount Notes due 2007
(incorporated by reference to Exhibit 4.3 to RCN's Form S-4)
4.6 Form of the 11 1/8% Senior Discount Exchange Notes due 2007
(included in Exhibit 4.6) (incorporated by reference to
Exhibit 4.4 to RCN's Form S-4)
4.7 Indenture dated June 24, 1998 between RCN, as Issuer, and
The Chase Manhattan Bank, as trustee, with respect to the
11% Senior Discount Notes due 2008 (incorporated by
Reference to Exhibit 4.8 to RCN's Registration Statement on
Form S-1 (Commission File No. 333-55673))
4.8 Form of 11% Senior Discount Note due 2008 (included in
Exhibit 4.8) (incorporated by reference to Exhibit 4.8 to
RCN's Registration Statement on Form S-1 (Commission File
No. 333-55673))
4.9 Escrow Agreement dated as of October 17, 1997 among The
Chase Manhattan Bank, as escrow agent, The Chase Manhattan
Bank, as trustee under the Indenture (as defined therein),
and RCN (incorporated by reference to Exhibit 4.6 to RCN's
Form S-4)
4.10 Credit Agreement dated as of July 1, 1997 among C-TEC Cable
Systems, Inc., ComVideo Systems, Inc., C-TEC Cable Systems
of New York, Inc. and First Union National Bank, as agent
(incorporated by reference to Exhibit 4.1 to RCN's Form 10)
II-2
<PAGE>
Exhibit No. Document
----------- --------
4.11* Form of Indenture relating to Debt Securities issued
hereunder
5.1* Opinion of Davis Polk & Wardwell
11.1 Statement regarding Computation of Per Share Earnings
(included in the Notes to the Consolidated Financial
Statements)
12.1* Statement re computation of ratios
23.1 Consent of PricewaterhouseCoopers LLP with respect to RCN
Corporation
23.2* Consent of Ernst & Young LLP, Independent Auditors, with
respect to Erols Internet, Inc.
24.1 Power of Attorney (included on the signature page of the
Registration Statement)
25.1* Statement of Eligibility of Trustee
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made of securities registered hereby, a post-effective amendment to this
registration statement :
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act of 1933 if, in the
aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that the undertakings set forth in paragraph (i)
and (ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post- effective amendment shall be
deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
- ----------
*Previously filed.
II-3
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby understands 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 that is
incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrants pursuant to the foregoing
provisions, or otherwise, the registrants 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. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this post-effective
amendment No.1 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Princeton, State of New
Jersey, on October 6, 1999.
RCN CORPORATION
By: /s/ BRUCE C. GODFREY
--------------------------------------
BRUCE C. GODFREY
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
*
- ------------------------ Director, Chairman and Chief October 6, 1999
David C. McCourt Executive Officer
*
- ------------------------ Director, President and Chief October 6, 1999
Michael J. Mahoney Operating Officer
/s/ Bruce C. Godfrey Director, Executive Vice President October 6, 1999
- ------------------------ and Chief Financial Officer
Bruce C. Godfrey
*
- ------------------------ Director October 6, 1999
James Q. Crowe
*
- ------------------------ Director October 6, 1999
Alfred Fasola
*
- ------------------------ Director October 6, 1999
Stuart E. Graham
*
- ------------------------ Director October 6, 1999
Richard R. Jaros
- ------------------------ Director October 6, 1999
Michael J. Levitt
II-5
<PAGE>
Signature Title Date
--------- ----- ----
*
- ------------------------ Director October 6, 1999
Thomas May
*
- ------------------------ Director October 6, 1999
Thomas P. O'Neill, III
*
- ------------------------ Director October 6, 1999
Eugene Roth
*
- ------------------------ Director October 6, 1999
Walter Scott, Jr.
*
- ------------------------ Director October 6, 1999
Michael B. Yanney
*
- ------------------------ Senior Vice President and Chief October 6, 1999
Ralph S. Hromisin Accounting Officer
*By: /s/ Bruce C. Godfrey
------------------------------
Bruce C. Godfrey
Attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
Exhibit No. Document
----------- --------
1.1* Form of Underwriting Agreement
2.1 Form of Distribution Agreement among C-TEC Corporation,
Cable Michigan, Inc. and RCN Corporation (incorporated by
reference to Exhibit 2.1 to Amendment No. 2 to RCN's
Information Statement on Form 10/A ("Form 10") filed on
September 5, 1997)
2.2 Tax Sharing Agreement by and among C-TEC Corporation, Cable
Michigan, Inc. and the Registrant (incorporated by reference
to Exhibit 10.1 to RCN's Form 10)
2.3 Agreement and Plan of Merger dated as of January 21, 1998
among Erols Internet, Inc., Erol Onaran, Gold & Appel
Transfer, S.A., RCN Corporation and ENET Holding, Inc.
(incorporated by reference to Exhibit 2.1 to RCN's Current
Report on Form 8-K ("March 1998 8-K") filed on March 6,
1998)
2.4 Amendment No. 1 to Agreement and Plan of Merger dated as of
January 21, 1998 among Erols Internet, Inc., Erol Onaran,
Gold & Appel Transfer, S.A., RCN Corporation and ENET
Holding, Inc. (incorporated by reference to Exhibit 2.2 to
RCN's March 1998 8-K)
3.1* Certificate of Designations, Preferences and Rights of
Series A 7% Senior Convertible Preferred Stock dated
April 7, 1999
4.1 Indenture dated as of February 6, 1998 between RCN, as
Issuer, and The Chase Manhattan Bank, as trustee, with
respect to the 9.80% Senior Discount Notes due 2008
(incorporated by reference to Exhibit 4.1 to RCN's
Registration Statement on Form S-4 (Commission File No.
333-48487) ("1998 Form S-4") filed on March 23, 1998)
4.2 Form of the 9.80% Senior Discount Notes due 2008, Series B
(included in Exhibit 4.1) (incorporated by reference to
Exhibit 4.2 to RCN's 1998 Form S-4)
4.3 Indenture dated as of October 17, 1997 between RCN, as
Issuer, and The Chase Manhattan Bank, as trustee, with
respect to the 10% Senior Notes due 2007 (incorporated by
reference to Exhibit 4.1 to RCN's Registration Statement on
Form S-4 (Commission File No. 333-41081) ("Form S-4") filed
on November 26, 1997)
4.4 Form of the 10% Senior Exchange Notes due 2007 (included in
Exhibit 4.4) (incorporated by reference to Exhibit 4.2 to
RCN's Form S-4)
4.5 Indenture dated as of October 17, 1997 between RCN, as
Issuer, and The Chase Manhattan Bank, as trustee, with
respect to the 11 1/8% Senior Discount Notes due 2007
(incorporated by reference to Exhibit 4.3 to RCN's Form S-4)
4.6 Form of the 11 1/8% Senior Discount Exchange Notes due 2007
(included in Exhibit 4.6) (incorporated by reference to
Exhibit 4.4 to RCN's Form S-4)
4.7 Indenture dated June 24, 1998 between RCN, as Issuer, and
The Chase Manhattan Bank, as trustee, with respect to the
11% Senior Discount Notes due 2008 (incorporated by
Reference to Exhibit 4.8 to RCN's Registration Statement on
Form S-1 (Commission File No. 333-55673))
4.8 Form of 11% Senior Discount Note due 2008 (included in
Exhibit 4.8) (incorporated by reference to Exhibit 4.8 to
RCN's Registration Statement on Form S-1 (Commission File
No. 333-55673))
II-7
<PAGE>
Exhibit No. Document
----------- --------
4.9 Escrow Agreement dated as of October 17, 1997 among The
Chase Manhattan Bank, as escrow agent, The Chase Manhattan
Bank, as trustee under the Indenture (as defined therein),
and RCN (incorporated by reference to Exhibit 4.6 to RCN's
Form S-4)
4.10 Credit Agreement dated as of July 1, 1997 among C-TEC Cable
Systems, Inc., ComVideo Systems, Inc., C-TEC Cable Systems
of New York, Inc. and First Union National Bank, as agent
(incorporated by reference to Exhibit 4.1 to RCN's Form 10)
4.11* Form of Indenture relating to Debt Securities issued
hereunder
5.1* Opinion of Davis Polk & Wardwell
11.1 Statement regarding Computation of Per Share Earnings
(included in the Notes to the Consolidated Financial
Statements)
12.1* Statement re computation of ratios
23.1 Consent of PricewaterhouseCoopers LLP with respect to RCN
Corporation
23.2* Consent of Ernst & Young LLP, Independent Auditors, with
respect to Erols Internet, Inc.
24.1 Power of Attorney (included on the signature page of the
Registration Statement)
25.1* Statement of Eligibility of Trustee
- ----------
*Previously filed.
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Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
RCN Corporation on Form S-3 (No. 333-71525) and the related Prospectus, of our
report dated March 8, 1999, except Note 20, as to which the date is March 18,
1999, on our audits of the consolidated financial statements of RCN Corporation
as of December 31, 1998 and 1997 and for the years ended December 31, 1998, 1997
and 1996. We also consent to the reference to our Firm under the caption
"Experts."
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
October 5, 1999
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