As filed with the Securities and Exchange Commission on April 16, 1999
Registration No. 333-71525
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 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. |_|
-----------------------
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.
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<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 16, 1999
PROSPECTUS
[LOGO]
$1,000,000,000
RCN Corporation
Common Stock, Preferred Stock, Debt Securities
-----------------------
We will offer from time to time common stock, preferred stock or debt
securities. We will provide specific terms of these securities in supplements
to this prospectus. You should read this prospectus and any supplement
carefully before you invest.
-----------------------
Our common stock trades on the Nasdaq National Market under the symbol
"RCNC".
-----------------------
Investing in these securities involves certain risks. See "Risk Factors"
beginning on page 8.
-----------------------
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 April 16, 1999
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.
<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.
-----------------------
TABLE OF CONTENTS
Page
----
Summary................................................................ 2
Risk Factors........................................................... 8
Where You Can Find More Information.................................... 14
Special Note on Forward-Looking Statements............................. 14
Use of Proceeds........................................................ 15
Dividends.............................................................. 15
Market Price and Dividend Information.................................. 15
Selected Historical Consolidated Financial Data........................ 16
Unaudited Pro Forma Consolidated Statements of Operations.............. 18
Business............................................................... 22
Description of Capital Stock........................................... 44
Description of Debt Securities......................................... 49
Plan of Distribution................................................... 57
Legal Matters.......................................................... 58
Experts................................................................ 58
<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.
2
<PAGE>
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".
<TABLE>
As of
---------------------------------------------------------
12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
Our off-net connections are delivered through a variety of facilities
including hybrid fiber/coaxial cable systems and a wireless video system.
-----------------------
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 up to a total dollar amount of $1,000,000,000. This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
WHERE YOU CAN FIND MORE INFORMATION.
Risk Factors
You should carefully consider all of the information in this prospectus
and, in particular, you should evaluate the specific risk factors set forth
under the caption "Risk Factors", beginning on page 8.
4
<PAGE>
Summary Historical Consolidated Financial Data
The table below sets forth our selected historical consolidated financial
data. We did not operate as an independent company prior to September 30,
1997. Therefore, we had to make certain assumptions in preparing data for
prior periods, and the data may not reflect the results of operations or the
financial condition which would have resulted if we had operated as a
separate, independent company during those periods. The data also do not
necessarily indicate our future results of operations or financial condition.
The selected historical consolidated financial data for the years ended
December 31, 1998, 1997 and 1996 and as of December 31, 1998 and 1997 are
derived from and should be read in conjunction with our audited historical
consolidated financial statements incorporated by reference to our report on
Form 10-K for the year ended December 31, 1998.
<TABLE>
Year Ended December 31
-----------------------------------
1996 1997 1998
--------- ---------- ----------
<S> <C> <C> <C>
Statement of Operations Data:
Total sales.............................................................$ 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
</TABLE>
In the table above:
(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.
5
<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.
6
<PAGE>
Summary Pro Forma Financial Data
The following unaudited summary pro forma financial data include
adjustments to our historical statements of operations for the year ended
December 31, 1998 as if each of the transactions described under "Unaudited
Pro Forma Consolidated Statements of Operations" on page 18 had occurred on
the first day of each of the periods listed below. These adjustments result
primarily from changes in our capital structure and accounting for the
acquisition of Erols Internet, Inc. The following unaudited pro forma
financial data are provided for your information only. You should not rely on
the unaudited pro forma financial data as an indication of the results of
operation and financial condition that would have been achieved if the
transactions had occurred on the dates we assumed. In addition, the unaudited
pro forma financial data do not necessarily indicate our future results of
operations or financial condition.
<TABLE>
Year Ended
December 31,
1998
-----------
(dollars in
thousands)
<S> <C>
Statement of Operations Data:
Total sales............................................................... $ 214,269
Costs and expenses, excluding depreciation and amortization............... 265,561
Nonrecurring acquisition costs: In-process technology..................... 18,293
Depreciation and amortization............................................. 90,918
----------
Operating (loss).......................................................... (160,503)
Interest income........................................................... 58,679
Interest expense.......................................................... (124,374)
Other (expense), net...................................................... (1,894)
----------
(Loss) before income taxes................................................ (228,092)
(Benefit) for income taxes................................................ (4,998)
----------
(Loss) before equity in unconsolidated entities and minority interest..... (223,094)
Equity in loss of unconsolidated entities................................. (15,406)
Minority interest in loss of consolidated entities........................ 17,162
----------
(Loss) before cumulative effect of change in accounting principle......... $ (221,338)
==========
Other Data:
EBITDA before nonrecurring charge and acquired research and development... $ (51,292)
</TABLE>
In the table above, "EBITDA" before nonrecurring charges represents
earnings before interest, depreciation and amortization, and income taxes.
EBITDA is commonly used in the communications industry 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.
7
<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
8
<PAGE>
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
9
<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. See "Business--Competition."
10
<PAGE>
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
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. See "Business -- Strategic Relationships and Facilities Agreements."
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;
11
<PAGE>
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
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. See "Business -- Competition".
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. See "Business--Regulation."
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
12
<PAGE>
o the evolving competitive and regulatory environment concerning
Internet services.
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.
13
<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.
14
<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.
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(s) 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 April 14,
1999, the last practicable date prior to the filing of this prospectus, was
$44.
On March 31, 1998, there were approximately 2,800 holders of common
stock. On March 31, 1998, 66,522,888 shares of common stock were outstanding.
15
<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
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)
16
<PAGE>
Year Ended December 31
---------------------------------------------------------------------
1994 1995 1996 1997 1998
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
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
</TABLE>
In the table above:
(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.
17
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Prior to September 30, 1997, RCN was operated as part of C-TEC. The
following unaudited pro forma consolidated statements of operations set forth
the historical statements of operations of RCN for the year ended December 31,
1998 and as adjusted for the following:
o RCN's acquisition of Erols in February 1998;
o RCN's February 1998 issuance and sale of its 9.80% Senior Discount
Notes due 2008 (the "9.80% Notes"); and
o RCN's June 1998 issuance and sale of 6,098,355 shares of Common
Stock (the "Stock Offering") and its 11% Senior Discount Notes due
2008 (the "11% Notes")
and the related transactions and events described in the notes thereto, as if
such transactions and events had been consummated on the first day of 1998.
Management believes that the assumptions used provide a reasonable basis
on which to present such unaudited pro forma statements of operations. The
unaudited pro forma statements of operations should be read in conjunction
with the financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our 10-K for the year ended
December 31, 1998.
The unaudited pro forma statements of operations are provided for
information purposes only and should not be construed to be indicative of
RCN's results of operations had the spin-off and the transactions and events
described above been consummated on the dates assumed, may not reflect the
results of operations or financial condition which would have resulted had RCN
been operated as a separate, independent company during such period, and are
not necessarily indicative of RCN's future results of operations or financial
condition.
18
<PAGE>
RCN CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
($ in thousands, except per share amounts and number of shares)
<TABLE>
Erols Adjustments
Historical for the Stock
Adjustments 1/1/98 - Acquisition Offering and
RCN for the 9.8% 2/28/98 Adjustments the 11%
Historical Notes (2) For Erols Notes Pro Forma
---------- ------------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Sales.........................................$ 210,940 $ 8,700 $(5,371)(3) $ 214,269
Cost and expenses excluding
depreciation and amortization.............. 262,352 8,388 (5,179)(3) 265,561
Nonrecurring acquisition costs:
In-process technology...................... 18,293 18,293
Depreciation and amortization ................ 89,088 1,478 352 (4) 90,918
---------- --------- ------- ------- -------- -----------
Operating (loss).............................. (158,793) (1,166) (544) -- (160,503)
Interest income............................... 58,679 58,679
Interest expense.............................. (112,239) $ (3,492)(1) (164) 101 $ (8,580)(6) (124,374)
Other (expense), net.......................... (1,889) (5) (1,894)
---------- --------- ------- ------- -------- -----------
(Loss) before income taxes.................... (214,242) (3,492) (1,335) (443) (8,580) (228,092)
(Benefit) for income taxes.................... (4,998) (1) -- -- (5) (4,998)
---------- --------- ------- ------- -------- -----------
(Loss) before equity in unconsolidated
entities and minority interest............. (209,244) (3,492) (1,335) (443) (8,580) (223,094)
Equity in (loss) of unconsolidated
entities................................... (12,719) (2,687)(3) (15,406)
Minority interest in loss of
consolidated entities...................... 17,162 17,162
---------- --------- ------- ------- -------- -----------
Loss before cumulative effect of change
in accounting principle....................$ (204,801) $ (3,492) $(1,335) $(3,130) $ (8,580) $ (221,338)
========== ========= ======= ======= ======== ===========
Unaudited pro forma loss per average common
share before cumulative effect of change
in accounting principle....................$ (3.35) $ $ (3.62)
Weighted average number of common shares and
common stock equivalents outstanding.......61,187,354 61,187,354
See Notes to Unaudited Pro Forma Statement of Operations
</TABLE>
19
<PAGE>
RCN CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(dollars in thousands)
The Unaudited Pro Forma Consolidated Statement of Operations assumes that
RCN was an autonomous entity rather than a wholly owned subsidiary of C-TEC
for the periods shown. The pro forma adjustments, as described below, are
keyed to the corresponding amounts shown in the relevant statement.
(1) Adjustment to reflect interest expense and amortization of debt
issuance costs related to the issuance of the 9.8% Notes aggregating $3,492
for the year ended December 31, 1998. A pro forma adjustment was not assumed
for income tax benefits associated with the pro forma adjustment for
additional interest expense for the year ended December 31, 1998 because the
realization of such benefit would be uncertain.
(2) On February 20, 1998, RCN completed the acquisition of Erols,
Washington, D.C.'s largest Internet service provider. RCN accounted for this
transaction under the purchase method of accounting and accordingly, the
financial statements of Erols are not consolidated with RCN's historical
financial statements as of and for the year ended December 31, 1997. In 1998,
the financial results of Erols also are not consolidated with RCN's historical
financial statements for the period prior to February 20, 1998. The financial
information relating to Erols was provided by Erols.
A summary of the transaction is as follows:
Cash paid (including out of pocket expenses of
approximately $1,400 and repayment of debt of
approximately $5,100)...........................$ 36,000
Fair value of RCN stock issued....................... 45,000
Fair value of stock options exchanged................ 11,000
Liabilities assumed.................................. 55,000
----------
Fair value of assets acquired........................$ 147,000
==========
The fair value of assets acquired was allocated as follows:
In-process technology................................$ 13,228
Property, plant & equipment.......................... 19,100
Current assets....................................... 2,280
Other assets......................................... 3,800
----------
Intangible assets: Estimated
Useful
Life (months)
-------------
Customer base................................... 15,000 48
Acquired current products/technologies.......... 49,224 48
Goodwill........................................ 41,115 48
Tradename....................................... 3,253
---------- 13
$ 147,000
=========
(3) Such adjustments include a pro forma allocation of historical
operating results of Erols to the joint venture with Pepco Communications (see
below) based upon the relationship of the number of subscribers contributed to
the joint venture to the total number of subscribers acquired in the merger.
RCN's share of such operating results, including the depreciation and
amortization effects of the allocation of a portion of the total purchase
price to the joint venture, representing the agreed upon value of the
subscribers to be contributed to the joint venture, are included in the
adjustment for "equity in (loss) of unconsolidated entities."
20
<PAGE>
A subsidiary of RCN is a party to a joint venture with a subsidiary of
Pepco Communications, to provide the greater Washington, D.C. area residents
and businesses local and long-distance telephone, cable television, and
Internet services as a package from a single source. As a result of this joint
venture, RCN contributed to the joint venture the subscribers acquired in the
merger with Erols which are located in the relevant joint venture market. This
represents approximately 62% of the customer base acquired from Erols. The
value of such contribution as agreed to by the joint venture partners was
$51,937. Additionally, Starpower assumed the liability for the unearned
revenue related to the subscribers contributed to the joint venture of
$26,663. A summary of related amounts transferred to the joint venture is as
follows:
Property, plant and equipment........................ $ 11,900
Customer base........................................ 9,300
Trade name........................................... 2,060
Goodwill............................................. 55,340
Unearned revenue..................................... (26,663)
----------
Net investment in joint venture................... $ 51,937
==========
(4) Such adjustment reflects the change in depreciation and amortization
for the effect of the fair value adjustment of the net assets of Erols
acquired. RCN allocated the purchase price for Erols (see Note 2) on the basis
of the fair market value of the assets acquired and liabilities assumed.
(5) A pro forma adjustment was not assumed for income tax benefits
associated with the pro forma adjustments for the historical results of
operations of Erols because the realization of such benefit would be
uncertain.
(6) Adjustment to reflect interest expense and amortization of debt
issuance costs related to the issuance of the 11% Notes aggregating $8,580 for
the year ended December 31, 1998. Pro forma adjustments were not assumed for
income tax benefits associated with the pro forma adjustments for additional
interest expense because the realization of such benefits would be uncertain.
21
<PAGE>
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. See "--Recent Acquisition Transactions."
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
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telephone business and nearly 25 years of experience in the cable television
business. Both C-TEC and certain 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
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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.
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
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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.
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:
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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, 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.
Migration of Customers to Advanced Fiber Networks
We provide wireless video services to customers located near our advanced
fiber optic network in New York City and Internet services to acquired
subscribers. We have also actively marketed resold telephone service in the
past. Our goal is to extend our advanced fiber optic network to service many of
those customers. As our advanced fiber optic network is extended into these
areas or buildings, customers receiving wireless video service in New York City
are switched to the advanced fiber optic network from the wireless video
network. The wireless video equipment is then used to provide service to other
customers in off-network premises. Similarly, as the advanced fiber optic
network is developed, voice and data customers are switched to the advanced
fiber optic network from resale accounts. The switch to our network allows us to
gain additional revenue and higher margins from originating and terminating
access fees and to control the related services and service quality.
Strategic Relationships and Facilities Agreements
We have entered into a number of strategic alliances and relationships
which allow us to enter into the telecommunications services market early,
reduce the cost of entry into our markets and tap management expertise. We
expect to continue to pursue potential opportunities from entering into
strategic alliances to facilitate network expansion and entry into new markets.
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BECO Joint Venture
In 1996 RCN and the Boston Edison Company ("BECO"), through wholly owned
subsidiaries, formed a joint venture to use 126 fiber miles of BECO's fiber
optic network to deliver our comprehensive communications package in Greater
Boston. A joint venture agreement provided for the organization and operation of
RCNBECOCOM, LLC, an unregulated entity with a term expiring in the year 2060.
RCN-BECOCOM is a Massachusetts limited liability company organized to own and
operate an advanced fiber optic telecommunications network and to provide, in
the market in and around Boston, Massachusetts, voice, video and data services.
Through RCN Telecom Services of Massachusetts, we own 51% of the equity interest
in RCN-BECOCOM and BECO, through a subsidiary, owns the remaining 49% interest.
This joint venture with BECO is reflected on our financial statements on a
consolidated basis.
Pursuant to an exchange agreement between BECO and RCN, BECO has the right,
from time to time, to convert portions of its ownership interest in RCN-BECOCOM
into shares of our common stock. In February 1999, BECO exercised this right and
converted a portion of its interest into 1,107,539 shares of our common stock.
This conversion reduced BECO's current ownership interest in RCN-BECOCOM to
45.74% and increased our current ownership interest to 54.26%. Future capital
contributions to the joint venture will continue to be made 49% by BECO and 51%
by RCN until BECO disposes of the shares it received on the conversion. The
capital contribution percentages will change in proportion to BECO's future
disposal of the shares.
We expect to benefit from our ability to use BECO's large fiber optic
network, its focus on innovative technology, its sales and marketing expertise
and its reach into the market. In the future, the venture may expand into energy
management and property monitoring services. Starting in Boston, the joint
venture partners have expanded into surrounding markets, including Arlington,
Somerville and Newton. As a result of our access to the extensive BECO network,
our reliance on and use of MFS/WorldCom facilities in Boston has been reduced
significantly.
Starpower Joint Venture
In 1997, RCN Telecom Services, Inc., one of our subsidiaries, and Potomac
Capital Investment Corporation ("PCI"), a wholly owned subsidiary of Potomac
Electric Power Company, formed a joint venture to own and operate a
communications network to provide voice, video, data and other communications
services to residential and commercial customers in the greater Washington,
D.C., Virginia and Maryland area. Starpower is an unregulated limited liability
company with a perpetual term. Starpower was formed to construct, own, lease,
operate and market a network for the selling of voice, video, data and other
telecommunications services to all potential commercial and residential
customers in the Washington, D.C. market covered by the joint venture contract.
We own 50% of the equity interest in Starpower and Pepco Communications owns the
remaining 50% interest. Starpower is reflected on our financial statements under
the equity method of accounting.
Other Strategic Relationships
On April 7, 1999, Hicks, Muse, Tate & Furst Incorporated, through HM4 RCN
Partners, purchased $250 million of a new issue of convertible preferred stock
of RCN in a private placement transaction. In connection with this transaction,
we agreed to provide the purchaser with the right to appoint one director to
RCN's Board of Directors for so long as it owns at least 50% of its initial
investment. Michael J. Levitt, a partner of Hicks, Muse, has been appointed to
RCN's Board of Directors in connection with this agreement.
Miscellaneous Facilities Agreements
We have also entered into agreements which have helped us accelerate
network development, including Fiber Agreements entered into with MFS/WorldCom.
MFS/WorldCom owns or has the right to use certain fiber optic network facilities
in the Boston, Massachusetts and New York City markets. Under the Fiber
Agreements,
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MFS/WorldCom agreed to construct and provide extensions connecting the fiber
optic facilities to buildings we designated. We are also able to use certain
dedicated fibers in those facilities, except that we may not use the facilities
to deliver telephone services to commercial customers.
In February 1999, we announced that we have entered into joint construction
agreements with Level 3. The agreements will allow us to deploy additional
network in Boston and New York faster and at a lower cost. We also recently
announced that we have entered into a letter of intent with Level 3 for Level 3
to provide us with crosscountry capacity to allow our customers to connect to
major Internet connection points in the United States. This gives us the ability
to negotiate peering agreements that will allow the exchange of traffic as a
Tier I operator.
In June 1998, we entered into an agreement with Qwest Communications for
Qwest to provide us with capacity in its regional backbone of fiber lines to
connect to our local networks from Boston to Washington, D.C.
Recent Acquisition Transactions
In February 1998, we acquired Erols. The total approximate consideration
was $36.0 million in cash, including out of pocket costs of approximately $1.4
million and the assumption and repayment of debt of approximately $5.1 million,
and RCN common stock with a fair value at the time of issuance of approximately
$45.0 million. The purchase price also included approximately $11.0 million
representing the fair value of Erols stock options which were converted to RCN
stock options in connection with the acquisition.
RCN contributed approximately 60% of the subscribers and related unearned
revenue acquired in the acquisition of Erols to Starpower and approximately 1%
to RCN-BECOCOM.
In February 1998, we acquired Ultranet Communications, Inc. The total
approximate consideration was $7.7 million in cash, including cash payments
aggregating approximately $.5 million to certain holders of Ultranet stock
options, and RCN common stock with a fair value at the time of issuance of
approximately $26.2 million. The purchase price also included approximately $1.9
million representing the fair value of Ultranet stock options which were
converted to RCN stock options in connection with the acquisition.
RCN contributed to RCN-BECOCOM approximately 30% of the subscribers
acquired in the acquisition of Ultranet.
In the allocation of purchase price associated with the acquisition of
Erols and Ultranet, $13.2 million and $5.1 million, respectively, was determined
to represent acquired in-process research & development ("IPR&D"). In
particular, four projects which qualified as IPR&D were identified as not having
achieved technological feasibility and representing technology which, at the
time of acquisition, offered no alternative use than the defined project. For
both the Erols and the Ultranet acquisitions, we identified the research and
development projects to include--
o Cable Modem Internet access for subscribers, consisting of projects to
develop the hardware, systems and software to permit subscribers to be
offered high-speed Internet access through direct cable connection.
The remaining development effort is concerned with technical standards
for this service and with the design and integration of this product
into our cable and fiber optic network.
o Internet Telephony, representing projects to develop the potential for
dial-up telephone service through the Internet. This service area
required that significant technical challenges as well as political,
commercial and market challenges be faced before service could be
offered to subscribers. At the date of acquisition, neither hardware
nor systems had been acquired or developed in support of this new
product and, as a result, a high degree of development activity
remains.
o E-Commerce Systems, consisting of efforts to develop a suitable system
that would permit subscribers to conduct commercial activities over
the Internet. Following evaluation of commercially-available
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packages, none were capable of meeting subscriber needs and
development of the suitable system was undertaken.
o High-speed shared office Internet access, representing a blending of
fiber optic and Internet networking technologies, was under
development as a package to be offered to commercial clients. While
the technical challenges were still being addressed at the date of
acquisition, there was no certainty that this system would result in a
competitive product offering in the market.
In June 1998, we acquired Interport Communications Corp. The total
approximate consideration for the transaction was $1.3 million in cash and RCN
common stock with a fair value at the time of issuance of approximately $8.5
million.
In June 1998, we also acquired Lancit Media Entertainment, Ltd., a producer
of high quality children's programming. The total approximate consideration for
the transaction was $.4 million in cash and RCN common stock with a fair value
at the time of issuance of approximately $7.4 million.
In July 1998, we acquired Javanet, Inc. The total approximate consideration
for the transaction was $3.7 million in cash and RCN common stock with a fair
value at the time of issuance of approximately $13.4 million.
RCN contributed to RCN-BECOCOM approximately 6% of the subscribers acquired
in the acquisition of Javanet.
International
We own a 40.0% interest in Megacable, the second largest cable television
provider in Mexico. Megacable owns 22 wireline cable systems in Mexico,
principally on the Pacific and Gulf coasts and including Guadalajara, the second
largest city in Mexico, Hermosillo, the largest city in the state of Sonora and
Veracruz, the largest city in the state of Veracruz. At December 31, 1998, their
wireline systems passed approximately 733,500 homes and served approximately
222,300 subscribers. Megacable had revenues of $37.5 million and $30.4 million
for the years ended December 31, 1998 and 1997, respectively.
Additionally, Megacable presently holds a 99% interest in Megacable
Comunicaciones de Mexico S.A. ("MCM"). MCM has received a license from the
Mexican government to allow it to build a fiber optic network in Mexico City,
Monterrey and Guadalajara. MCM intends to use this network to provide local
voice and high-speed data service in these cities, principally to commercial
customers in Mexico City.
Competition
Overview
We compete with a wide range of service providers for each of our services.
Virtually all markets for voice and video services are extremely competitive,
and we expect that competition will intensify in the future. We face significant
competition in each of the markets in which we offer voice and video programming
services. Our competitors are often larger, better-financed incumbent local
telephone carriers and cable companies with better access to capital resources,
and many have historically dominated their local telephone and cable television
markets. These incumbents presently have numerous advantages as a result of
their historic monopolistic control of their respective markets, economies of
scale and scope and control of limited conduit and pole space. They also have
well-established customer and vendor relationships. However, we believe that
most existing and potential competitors will, at least initially, offer narrower
services over limited delivery platforms compared to the wide range of voice,
video and data services that we provide over our fiber-based networks. This
gives us an opportunity to achieve important market penetration.
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We compete with the incumbent Local Exchange Carriers ("LECs") for the
provision of local telephone services, as well as with alternative service
providers including CLECs. Cable operators are also entering the local exchange
market in some locations. Other sources of competitive local and long distance
telephone services include: Commercial mobile radio services providers,
including cellular carriers (such as Bell Atlantic Mobile Services); personal
communications services carriers such as Sprint PCS; and enhanced specialized
mobile radio services providers (such as NexTel).
We face, and expect to continue to face, significant competition for long
distance telephone services from the inter-exchange carriers ("IXCs"), including
AT&T, Sprint and MCI WorldCom, which account for the majority of all U.S. long
distance revenue. The major long distance service providers benefit from
established market share and from established trade names through nationwide
advertising. However, we regard our long-distance service as a complementary
service rather than a principal source of revenue. Certain IXCs, including AT&T,
MCI WorldCom and Sprint, have also announced their intention to offer local
services in major U.S. markets using their existing infrastructure in
combination with resale of incumbent LEC service, lease of unbundled local loops
or other providers' services. Internet-based telephony, a potential competitor
for low cost telephone service, is also developing and we are also pursuing this
technology.
All of our video services face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment. Other sources include off-air television
broadcast programming, newspapers, movie theaters, live sporting events,
interactive online computer services and home video products, including
videotape cassette recorders. Alternative video distribution technologies
include traditional cable networks, wireless local video distribution
technologies, and home satellite dish ("HSD") earth stations. Home satellite
systems enable individual households to receive many of the satellite-delivered
program services formerly available only to cable subscribers. The Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Act")
contains provisions, which the FCC has implemented with regulations, to enhance
the ability of cable competitors to purchase and make available to HSD owners
certain satellite-delivered cable programming at competitive costs. We face
additional competition from private satellite master antenna television
("SMATV") systems that serve condominiums, apartment and office complexes and
private residential developments. The FCC and Congress have adopted policies
providing a more favorable operating environment for new and existing
technologies that compete, or may compete, with our various video distribution
systems. These technologies include, among others, Direct Broadcast Satellite
("DBS") service whereby signals are transmitted by satellite to receiving
facilities located on customer premises. We expect that our video programming
services will face growing competition from current and new DBS service
providers. The FCC has recently determined that DBS is the fastest-growing
competitor to franchised cable operations. We also compete with wireless program
distribution services such as Multi-Channel Multi-Point Distribution Service
which use low-power microwave frequencies to transmit video programming
over-the-air to subscribers.
The Internet access market is extremely competitive and highly fragmented.
Competition in this market is expected to intensify. Our current and prospective
competitors include established online services; local, regional and national
ISPs; national and international telecommunications companies including Regional
Bell Operating Companies ("RBOCs") such as Bell Atlantic; and affiliates of
incumbent cable providers. Increased competition may create downward pressure on
the pricing of and margins from Internet access services.
Other new technologies, including Internet-based services, may compete with
services that we can offer. Advances in communications technology as well as
changes in the marketplace and the regulatory and legislative environment are
constantly occurring. Thus, we cannot predict the effect that ongoing or future
developments might have on the voice, video and data industries or on our
operations or financial condition.
We believe that among the existing competitors, the incumbent LECs,
incumbent cable providers and the CLECs are most of our competitors in the
delivery of "last mile" connections for voice and video services.
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Incumbent LECs
In each of our target markets for advanced fiber optic networks, we face,
and expect to continue to face, significant competition from the incumbent LECs.
The incumbent LECs include Bell Atlantic in the Northeast Corridor, and Pacific
Bell in California, both of which currently dominate their local telephone
markets. We compete with the incumbent LECs in our markets for local exchange
services on the basis of product offerings, including the ability to offer
bundled voice and video service, reliability, state-of-the-art technology and
superior customer service, as well as price. We believe that our advanced fiber
optic networks provide superior technology for delivering high-speed,
high-capacity voice, video and data services compared to the incumbent LECs'
primarily copper wire based networks. However, the incumbent LECs have
long-standing relationships with their customers. They have also begun to expand
the amount of fiber facilities in their networks, to offer broadband digital
transmission services and retail Internet access, and to prepare to re-enter the
long distance telephone service market. The pending merger between Bell Atlantic
and GTE Corporation may enhance the combined entity's ability to compete with us
in the Northeast corridor markets. The pending merger between SBC and Ameritech
may also increase competitive pressures in the Northeast corridor if SBC, which
already owns a Connecticut incumbent LEC and several wireless franchises in this
region, continues to pursue a nationwide strategy.
Under the Telecommunications Act of 1996 (the "1996 Act"), and ensuing
federal and state regulatory initiatives, barriers to local exchange competition
are being slowly removed. The introduction of such competition, however, also
establishes the predicate for the RBOCs, such as Bell Atlantic, to provide
in-region interexchange long distance services. The RBOCs are currently allowed
to offer "incidental" long distance service in-region and to offer out-of-region
long distance service. Once the RBOCs are allowed to offer in-region long
distance services, they will also be in a position to offer single source local
and long distance service similar to what we offer and proposed by the three
largest IXCs: AT&T, MCI/WorldCom and Sprint. We expect that the increased
competition made possible by regulatory reform will result in certain pricing
and margin pressures in the telecommunications services business.
We have sought, and will continue to seek, to provide a full range of local
voice services which compete with incumbent LECs in our service areas. We expect
that competition for local telephone services will be based primarily on
quality, capacity and reliability of network facilities, customer service,
response to customer needs, service features and price, and will not be based on
any proprietary technology. Our new advanced fiber optic networks employ dual
backbone architecture and state-of-the-art technology and, as a result, we may
have capital cost and service quality advantages over some of the networks of
the incumbent LECs. We may also have a competitive advantage because we are able
to deliver a bundled voice and video service.
The 1996 Act permits the incumbent LECs and others, with which we compete,
to provide a wide variety of video services directly to subscribers. Various
LECs currently are providing video services within and outside their telephone
service areas through a variety of distribution methods, including both the
deployment of broadband wire facilities and the use of wireless transmission
facilities. We cannot predict the likelihood of success of video service
ventures by LECs or the impact such competitive ventures may have on us. Some
LECs, including Bell Atlantic, also offer Internet access services that compete
with our services.
Incumbent Cable Television Service Providers
Certain of our video service businesses compete with incumbent wireline
cable companies in their respective service areas. In particular, our advanced
fiber optic networks compete for cable subscribers with the major wireline cable
operators in our markets, such as Time-Warner Cable in New York City,
Cablevision in Boston and TCI in Washington, D.C. Our wireless video service in
New York City competes primarily with Time-Warner Cable. We believe that the
expanded capacity and fiber-to-node architecture of our advanced fiber optic
networks make us better equipped to provide high-capacity communications
services than traditional coaxial cable based networks using "tree and branch"
architecture. Our Lehigh Valley, Pennsylvania hybrid fiber/coaxial cable
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television system competes with an alternate service provider, Service Electric,
which also holds a franchise for the relevant service area.
Cable television systems generally operate pursuant to franchises granted
on a non-exclusive basis, and the 1992 Act prohibits franchising authorities
from unreasonably denying requests for additional franchises and permits
franchising authorities to operate cable systems. Therefore, well-financed
businesses from outside the cable industry, such as the public utilities that
own certain of the conduits or poles which carry cable, may become competitors
for franchises or providers of competing services. Telephone companies or others
may also enter the video distribution market by becoming open video service
operators as we have done in several markets, pursuant to Section 653 of the
Communications Act. No local franchise is required for the provision of such
service. See "Regulation of Video Services" below.
CLECs and Other Competitors
We also face, and expect to continue to face, competition from other
potential competitors in certain of our geographic markets. Other CLECs, such as
subsidiaries of AT&T and MCI/WorldCom, compete for local telephone services,
although they have to date focused primarily on the market for commercial
customers rather than residential customers. In addition, potential competitors
capable of offering private line and special access services also include other
smaller long distance carriers, cable television companies, electric utilities,
microwave carriers, wireless telephone system operators and private networks
built by large end-users, including Winstar, Dualstar and New Vision. However,
we believe that, at least initially, we are relatively unique in our markets in
offering bundled voice, video and data services primarily to customers in
residential areas over our own advanced fiber optic network.
Internet Services
The Internet access market is extremely competitive and highly fragmented.
No significant barriers to entry exist, and accordingly competition in this
market is expected to intensify. Our current and prospective competitors include
many large companies with substantially greater market presence and financial
and other resources. We compete directly or indirectly with:
o established online services, such as America Online, the Microsoft
Network and Prodigy;
o local, regional, and national ISPs such as PSINet, EarthLink,
Mindspring and Rocky Mountain Internet;
o the Internet services of national and international telecommunications
companies, such as AT&T, GTE, MCI/WorldCom and Cable & Wireless;
o Internet access offered by RBOCs such as Bell Atlantic; and
o online services offered by incumbent cable providers, such as At Home
and Roadrunner.
Bell Atlantic has recently asked the FCC to authorize it to build a
regional high-speed network, which would serve as an Internet backbone, and to
exempt this network from pricing and other regulatory restrictions. The network
would span the states from Maine to Virginia. The acquisition of Internet access
competition is likely to increase as large diversified telecommunications and
media companies acquire ISPs and as ISPs consolidate into larger, more
competitive companies. For example, AT&T has completed the acquisition of TCI's
cable television networks, which gives it a significant ownership interest in At
Home, an ISP. Diversified competitors may bundle other services and products
with Internet connectivity services, potentially placing us at a competitive
disadvantage. In addition, competitors may create downward pressure on the
pricing of and margins from Internet access services. Competition could also
impact our ability to participate in transit agreements and peering
arrangements, which could in turn adversely effect the speed of service that we
can provide to our customers.
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Other new technologies may become competitive with our services. A provider
of Limited Multi Distribution Systems ("LMDS") recently began offering wireless
Internet and video programming services in New York City and has announced plans
to offer telephone service in the future. 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 whether competition from
developing and future technologies or from future competitors will have a
material impact on our operations or financial condition.
Regulation
Our telephone and video programming transmission services are subject to
federal, state and local government regulation. The 1996 Act introduced
widespread changes in the regulation of the communications industry, including
the local telephone, long distance telephone, data services, and television
entertainment segments. The 1996 Act was intended to promote competition and
decrease regulation of these segments of the industry. The law delegates to both
the FCC and the states broad regulatory and administrative authority to
implement the 1996 Act.
Telecommunications Act of 1996
The 1996 Act eliminates many of the pre-existing legal barriers to
competition in the telephone and video programming communications businesses.
The Act also preempts many of the state barriers to local telephone service
competition that previously existed in state and local laws and regulations and
sets basic standards for relationships between telecommunications providers.
The 1996 Act removes barriers to entry in the local exchange telephone
market by preempting state and local laws that restrict competition and by
requiring LECs to provide nondiscriminatory access and interconnection to
potential competitors, such as cable operators, wireless telecommunications
providers, and long distance companies. In addition, the 1996 Act provides
relief from the earnings restrictions and price controls that have governed the
local telephone business for many years. The 1996 Act will also, once certain
thresholds are met, allow incumbent RBOCs to enter the long distance market
within their own local service regions.
Regulations promulgated by the FCC under the 1996 Act require LECs to open
their telephone networks to competition by providing competitors
interconnection, access to unbundled network elements and retail services at
wholesale rates. As a result of these changes, companies such as ours are now
able to interconnect with the incumbent LECs in order to provide local exchange
services. Numerous parties appealed certain aspects of these regulations, and
implementation of several provisions of the rules was delayed while the courts
considered these appeals. On January 25, 1999, the Supreme Court issued an
opinion confirming the FCC's authority to issue regulations implementing the
pricing and other provisions of the 1996 Act and reinstating most of the
challenged rules. However, the Supreme Court vacated a key FCC rule identifying
the network elements that incumbent LECs are required to unbundle. This decision
will likely require the FCC to conduct additional proceedings to determine new
unbundling standards. The outcome of such proceedings cannot be predicted. Also,
while the Supreme Court confirmed that the FCC has authority to issue rules
implementing the 1996 Act, particular rules still may be challenged in future
court proceedings. Future regulatory proceedings and court appeals may create
delay and uncertainty in effectuating the interconnection and local competition
provisions of the 1996 Act. While the courts were reviewing the FCC rules, we
had entered into interconnection agreements with Bell Atlantic covering all of
our target market area that are generally consistent with the FCC guidelines.
Those agreements remain in effect, although some are subject to termination on
or after July 1, 1999. We cannot assure you, however, that we will be able to
obtain or enforce future interconnection agreements, or obtain renewal of
existing agreements, on acceptable terms.
The 1996 Act establishes certain conditions before RBOCs are allowed to
offer interLATA long distance service to customers within their local service
regions. These conditions include 14 "checklist" requirements designed to open
the RBOC networks to competitors. To date, no RBOC has received FCC
authorization to
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provide in-region long distance service, but it is likely that several RBOCs
will seek authorization in 1999. Bell Atlantic is likely to seek authorization
for New York and possibly other states in its region. If an RBOC is authorized
to provide in-region long distance service in one or more states, the RBOC may
be able to offer "one-stop shopping" services that compete with our service
offerings. See "Business-Competition". In addition, the RBOC will lose the
incentive it now has to rapidly implement the interconnection provisions of the
1996 Act in order to obtain in-region authority, although the RBOC will still be
subject to a legal obligation to comply with those provisions.
The 1996 Act also makes far-reaching changes in the regulation of video
programming transmission services. These include changes to the regulations
applicable to video operators, the elimination of restrictions on telephone
company entry into the video business, and the establishment of a new OVS
regulatory structure for telephone companies and others. Under the 1996 Act and
implementing rules adopted by the FCC, local telephone companies, including both
incumbent LECs such as Bell Atlantic, and CLECs such as RCN, may provide service
as traditional cable television operators subject to municipal cable television
franchises, or they may choose to provide their programming over non-franchised
open video systems subject to certain conditions. The ability to provide OVS
service without having obtained a local franchise, however, has been called into
question by a recent decision. See "Regulation of Video Services" below. The
conditions include making available a portion of their channel capacity for use
by unaffiliated program distributors and satisfying certain other requirements,
including providing capacity for public, educational and government channels,
and paying a gross receipts fee equal to the franchise fee paid by the incumbent
cable television operator. We are one of the first CLECs to provide television
programming over an advanced fiber optic network under the OVS regulations
implemented by the FCC under the 1996 Act. As discussed below, we are currently
providing OVS service in the City of Boston, in the City of New York and in a
number of communities surrounding Boston. We are also negotiating, in the
District of Columbia, similar agreements in Northern New Jersey, Philadelphia
and surrounding communities, and San Francisco and surrounding communities.
Starpower is negotiating similar OVS agreements and local franchises in
communities surrounding Washington D.C.
Regulation of Voice Services
Our voice business is subject to regulation by the FCC at the federal level
for interstate telephone services (i.e., those that originate in one state and
terminate in a different state). State regulatory commissions have jurisdiction
over intrastate communications (i.e., those that originate and terminate in the
same state).
State Regulation of Intrastate Local and Long Distance Telephone Services.
Our intrastate telephone services are regulated by the public service
commissions or comparable agencies of the various states in which we offer these
services. Our subsidiaries or affiliates have received authority to offer
intrastate telephone services, including local exchange service, in California,
Delaware, the District of Columbia, Maryland, Massachusetts, Nevada, New Jersey,
New York, Pennsylvania, Rhode Island, Vermont and Virginia. We have applied for
authority to offer these services in Arizona, Connecticut, Maine and New
Hampshire. Starpower has separately obtained similar authority in Maryland,
Virginia and the District of Columbia. Our resale and interconnection agreements
have been approved, pursuant to Section 252 of the Communications Act, by state
regulatory commissions in Arizona, Delaware, the District of Columbia, Maine,
Maryland, Massachusetts, New York, New Jersey, New Hampshire, Pennsylvania,
Rhode Island, Vermont and Virginia.
RCN Long Distance Company is authorized to offer intrastate long distance
services in 48 states nationwide. RCN Long Distance Company is permitted to
resell intrastate long distance services both to other carriers, including our
local operating subsidiaries and Starpower for resale to their end user
subscribers, and to our own end user customers.
FCC Regulation of Interstate and International Telephone Services. Through
several of our subsidiaries, including RCN Long Distance Company, we may provide
domestic interstate telephone services nationwide under
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tariffs on file at the FCC. We have been authorized by the FCC under Section 214
of the 1996 Act to offer worldwide international services as well.
Local Regulation of Telephone Services. Municipalities also regulate
limited aspects of our voice business by, for example, imposing various zoning
requirements. In some instances, they require telecommunications licenses,
franchise agreements and/or installation permits for access to local streets and
rights-of-way. In New York City, for example, we will be required to obtain a
telephone franchise in order to provide voice services using our advanced fiber
optic network facilities located in the streets of New York City, although
services may be provided over certain leased or resold facilities while we wait
to receive a franchise.
Regulation of Video Services
Open Video Systems. At various times between February 1997 and July 1998,
our subsidiaries and affiliates have been certified by the FCC to operate OVS
networks in New York City, Boston, Washington, Philadelphia and San Francisco,
and communities surrounding each of these cities, and in the Northern New Jersey
area. Initiation of OVS services is subject to completion of an open enrollment
period for non-affiliated video programmers to seek capacity on the systems and
after negotiation of certain agreements with local governments. The initial open
enrollment period for each of these systems has expired, except for the Northern
New Jersey system, where the open enrollment period has not yet begun. We
executed an agreement with the City of Boston on June 2, 1997, and initiated OVS
service in the City on that day. Under our agreement with the City of Boston, we
will be required to pay a fee to the City equal to 5% of video revenues. We have
entered into similar OVS agreements or are in the process of negotiating
agreements with certain other Boston-area municipalities, either to offer OVS
services or franchised cable television services. We entered into an agreement
with the City of New York on December 29, 1997 and have initiated OVS service in
the Borough of Manhattan. RCN also provides video distribution service in
Manhattan and a portion of the Bronx using microwave facilities and antennas
located at multiple dwelling units. On July 10, 1998, we supplemented our
agreement with the City of New York to include all five boroughs. On October 26,
1998, Starpower entered into an agreement with the District of Columbia and
initiated OVS service in the District in the last quarter of 1998. Starpower has
entered into similar agreements or is in the process of negotiating agreements
with numerous suburban communities near Washington, D.C., to offer either OVS
services or franchised cable television services.
In areas where we offer video programming services as an OVS operator, we
are required to make any "open capacity" on the system available to unaffiliated
video program providers ("VPPs"). The commission's rules permit us to retain up
to one-third of system capacity for our own (or our affiliates') use. Under the
OVS regulations, during initial open enrollment period we must offer at least
two-thirds of our capacity to unaffiliated parties, if demand for such capacity
exists during the open enrollment period. In certain areas, at the request of
local officials, we are in discussions to explore the feasibility of obtaining a
cable franchise instead of an OVS agreement. We will consider providing RCN
video service under franchise agreements rather than OVS certification, if
franchise agreements are preferred by the local authorities and can be obtained
on acceptable terms and conditions. We will consider the relative benefits of
OVS certification versus local franchise agreements, including the possible
imposition build-out requirements, before making any decisions.
The U.S. Court of Appeals for the Fifth Circuit has recently released a
decision approving some portions of the FCC's OVS rules but striking down other
portions. Although a number of the Court's rulings are favorable to OVS
operators, others could have an adverse impact on our OVS operations and
planning. The Court's most significant decision was to strike down the FCC's
rule preempting local authority to franchise OVS operators. The FCC's rules had
set forth a relatively simple procedure at the FCC for rapid certification of
each OVS system on a regional basis and permitted local authorities to regulate
OVS only as to rights-of-way administration and in other minor respects. One of
the principal advantages of OVS as structured by Congress and by the FCC was to
eliminate the time, expense, and uncertainty generally required to secure a
local franchise. The Court's action allowing local governments to require
area-by-area franchising may significantly reduce the advantage of OVS operation
as compared with traditional franchising and delay achieving agreements with
local governments. We believe the
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Court's decision is erroneous in its application of law and have sought
reconsideration by the full court. The FCC, which is the respondent before the
Fifth Circuit, has also sought reconsideration. In the event the court denies
reconsideration, it is not clear how the FCC will modify its OVS policy and
rules to take account of the Court's specific rulings. The U.S. Courts of Appeal
do not routinely grant requests to reconsider their rulings and when they do a
significant period of time is generally required for the consideration of such
requests. However, in many instances RCN, at the insistence of local
authorities, has been negotiating franchise agreements and agreeing to
provisions in OVS right-of-way agreements which to some extent erode the
differences between the two modes of operation. Accordingly, while the ruling is
disadvantageous to us, we expect to continue to expand our video service
offerings.
The FCC's rules require OVS operators to make their facilities available to
video program providers on a non-discriminatory basis, with certain exceptions.
One exception is that competing in-region cable operators are not entitled to
become video program providers on an OVS except in certain limited
circumstances. The incumbent cable operator in Boston, Cablevision of Boston,
Inc., sought an order from the FCC compelling us to provide it with certain data
on our Boston OVS system and declaring Cablevision an eligible video programming
provider on our system. The FCC's Cable Services Bureau denied its request and
that denial has become final. Time Warner Cable Co., which operates franchised
cable systems in many suburban Boston communities included within our OVS
certification, also sought an order compelling us to release certain OVS system
data and to declare it eligible for carriage on our system. Unlike Cablevision,
Time Warner is not competing with any RCN-provided OVS service and restricted
its request to communities where it is not the franchised cable operator. Time
Warner also petitioned the FCC to impose fines or cancel our OVS authority. The
Cable Services Bureau partially granted the data request and partially denied it
but found too little evidence to justify further exploration of our good faith
in acquiring OVS authority. We have sought partial reconsideration of the
Bureau's order, which is currently pending. Time Warner filed a similar
complaint against us in New York City where we compete with it for video
distribution business in Manhattan. Time Warner asked for system data concerning
parts of New York City in which it does not hold a franchise for cable service.
The FCC's Cable Services Bureau partially granted Time Warner's complaint, and
partially denied it, relying on its prior decision in the Time Warner complaint
in the Boston area. We have sought partial reconsideration of that decision and
Time Warner has asked the full commission to review that portion of the Cable
Bureau's decision which denied certain of Time Warner's data requests.
Two additional cable company complaints have been filed against Starpower,
seeking data and a determination of eligibility for carriage on the metropolitan
Washington OVS system. As in the prior complaints, they challenge our status as
an OVS operator and seek to revoke our OVS authority. These complaints were
filed by Media General Cable of Fairfax, Inc., which operates franchised cable
service within the projected service area of Starpower's OVS system, and Media
General Cable of Fredericksburg, Inc. which is an affiliate of Media General
Cable of Fairfax, Inc. and operates a cable system beyond Starpower's service
area. Both claimed to be seeking system data for areas in which they do not
provide franchised service. Starpower declined to provide system data to Media
General of Fairfax on the ground that, as an in-region competitive cable
company, it was not entitled to the data or to be carried on the system. The
request of Media General of Fredericksburg was denied on the ground that, as an
affiliate of Media General of Fairfax, it was not entitled under FCC rules to
the requested data or to be carried on the system. Starpower responded to both
Media General Complaints on December 14, 1998. Media General has also sought to
initiate discovery against Starpower. The Cable Services Bureau has not yet
acted on the Media General complaints.
Cable industry representatives have opposed or commented adversely on two
other RCN OVS initiatives. In respect to our application for OVS authority in
the San Francisco area, the California Cable Television Association filed an
opposition, alleging that we were misusing the OVS rules to compete unfairly
against franchised cable operators. The Pennsylvania Cable & Telecommunications
Association filed comments on our OVS application for OVS authority in the
Philadelphia region, making similar allegations but not formally opposing the
application. The Cable Services Bureau granted both of our applications,
indicating that our applications were consistent with the rules and that the
opposing parties had not provided sufficient evidence to justify initiating any
regulatory
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action against us. There is language in each of these Cable Bureau
determinations involving our implementation of the OVS concept which leave open
the possibility for adverse parties to challenge our status as an OVS operator.
We believe that we are operating in strict conformity with all applicable
provisions of the law and will continue to defend our OVS roll-outs against what
we believe are anti-competitive requests for data or carriage by competing
in-region cable operators. However, we cannot assure you that the FCC will
resolve the pending OVS complaints in our favor. If the FCC were to grant any
such complaints and as a result we were obliged to share system data with our
local competitors, we would be forced to reassess the desirability of continuing
to operate in certain markets as an OVS operator as compared with seeking
traditional cable franchises. We do not believe that abandoning our OVS
certifications under such circumstances would materially adversely affect our
video distribution activities.
As in the case of traditional franchised cable systems, OVS operators must
in virtually all locations have access to public rights-of-way for their
distribution plant. In a number of jurisdictions local authorities have
attempted to impose rights-of-way fees on us which we believe are in violation
of federal law. A number of FCC and judicial decisions have addressed the issues
posed by the imposition of rights-of-way fees on CLECs and on video
distributors. To date the state of the law is uncertain and may remain so for
some time. The obligation to pay local rights-of-way fees which are excessive or
discriminatory could have adverse effects on our business activities. The
incumbent cable operator in Boston, MA, Cablevision of Boston, Inc., recently
filed suit in U.S. District Court in Boston against the City of Boston,
RCN-BECOCOM, RCN, BECOCOM and others, alleging that the City had followed a
discriminatory policy in administering access to public rights-of-way for the
installation and use of underground conduit and that the private defendants had
participated in an effort to unlawfully construct and use underground conduit.
Cablevision claimed that the defendants were in violation of the 1996 Act and
Massachusetts state law, and sought a preliminary injunction. RCN and the other
defendants denied participating in any unlawful activity. The Court has denied
the preliminary injunction and issued a written memorandum of decision
expressing some doubts about the underlying merits of Cablevision's claims.
Cablevision filed an appeal of the District Court's ruling with the First
Circuit Court of Appeals on February 26, 1999. On March 15, 1999 the district
judge stayed the litigation pending the outcome of Cablevision's appeal. We
cannot assure you that Cablevision will not further pursue the litigation nor
that if it does so the outcome will be favorable to RCN. Oral argument on the
appeal will be scheduled for June 1999. Cablevision has filed an amended
complaint in the District Court, but the District Court has stayed that
proceeding until the First Circuit Court rules on the appeal. We cannot assure
you that Cablevision will not further pursue the litigation nor that if it does
so the outcome will be favorable to us.
Access issues have also arisen in a proceeding before the Massachusetts
Department of Telecommunications and Energy (the "MDTE"). In 1997, the MDTE
opened an investigation into Boston Edison Company's compliance with a MDTE
order in 1993 that permitted Boston Edison to invest up to $45 million in its
unregulated subsidiary Boston Edison Technology Group for three limited
purposes. RCN-BECOCOM intervened in the current proceeding, as did Cablevision
Systems Corporation and the New England Cable Television Association, Inc.,
along with others. Hearings began in December 1998 and are still proceeding. The
intervenors, Cablevision in particular, have advocated that if the MDTE finds
that Boston Edison's investment in RCN-BECOCOM violated the 1993 Order, then
Boston Edison should be forced to divest itself of its interest in RCN-BECOCOM,
that RCNBECOCOM should be subject to the same terms and conditions as other
cable television providers who seek to attach their facilities to Boston Edison
facilities, and that installed RCN-BECOCOM cables and fiber-optic facilities
should be relocated. Boston Edison is vigorously defending the propriety of its
compliance with the MDTE's 1993 Order, and its investment in RCN-BECOCOM. We
cannot assure you that the MDTE will not determine that Boston Edison violated
the MDTE's 1993 Order nor can we assure you as to the nature of any remedy that
the MDTE may determine to be appropriate including those proposed remedies which
are equitable in nature. We are participating in the proceeding and plan to take
such action as we deem appropriate to protect our rights.
Prior to our certification as an OVS provider, we offered limited video
programming services using the Video DialTone Transport ("VDT") services offered
by MFS/WorldCom in Manhattan and the City of Boston. In February 1997, the FCC
held that MFS/WorldCom's facilities did not qualify as video dialtone facilities
entitled to
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an extension of time to comply with the newly adopted OVS rules. Nonetheless,
the FCC did not direct MFS/WorldCom and RCN to cease video programming
distribution operations over the MFS/WorldCom platform. One of the incumbent
cable television companies in New York City has filed a complaint with the New
York Public Service Commission challenging the former, pre-OVS, operations of
RCN and WorldCom under the VDT framework, which remains pending before that
commission.
Wireless Video Services. Our 18 GHz wireless video services in New York
City are distributed using microwave facilities provided by Bartholdi Cable
under temporary authorizations issued to Bartholdi Cable by the FCC. Bartholdi
Cable has agreed to provide us with transmission services until we have either
converted the wireless video subscribers to our advanced fiber optic network
facilities or have obtained FCC authority to provide services under our own
wireless radio licenses. In addition, Bartholdi Cable has agreed to transfer to
us the transmission equipment on demand. Bartholdi Cable's obligation to provide
transmission services is subject to Bartholdi Cable having licenses from the FCC
to provide these services. The qualifications of Bartholdi Cable to hold certain
of the licenses needed to provide transmission services to us are at issue in an
FCC proceeding in which an initial decision was released on March 6, 1998. In
the initial decision, the Administrative Law Judge found Bartholdi Cable
unqualified with respect to 15 such licenses. The Administrative Law Judge
declared that the initial decision would become effective 50 days after its
release unless Bartholdi Cable filed exceptions to the initial decision within
30 days of its release or the FCC elected to review the case on its own motion.
Bartholdi Cable filed exceptions to the initial decision on April 7, 1998.
Because of the uncertainty as to Bartholdi Cable's right in the future to offer
transmission services to us, we filed our own license applications at the FCC
for all of the microwave transmission paths which are currently being used by
Bartholdi Cable to provide us with transmission services. In light of the
increased uncertainties resulting from the initial decision in the FCC
proceeding, we expect now actively to pursue our license applications. While we
expect to receive authorizations to transmit over these microwave paths, we
cannot assure you that we will be able to offer wireless video services under
our own FCC licenses or that the FCC's investigation will be resolved favorably.
Our failure to obtain these licenses or resolve these proceedings would
materially adversely affect our wireless video operations in New York City.
We cannot assure you that we will be able to obtain or retain all necessary
authorizations needed to construct advanced fiber optic network facilities, to
convert our wireless video subscribers to an advanced fiber optic network or to
offer wireless video services under our own FCC licenses.
Hybrid Fiber/Coaxial Cable. Our hybrid fiber/coaxial cable systems are
subject to regulation under the 1992 Act. The 1992 Act regulate rates for cable
services in communities that are not subject to "effective competition," certain
programming requirements, and broadcast signal carriage requirements that allow
local commercial television broadcast stations to require a cable system to
carry the station. Local commercial television broadcast stations may elect once
every three years to require a cable system to carry the station ("must-carry"),
subject to certain exceptions, or to withhold consent and negotiate the terms of
carriage ("retransmission consent"). A cable system generally is required to
devote up to one-third of its activated channel capacity for the carriage of
local commercial television stations whether under the mandatory carriage or
retransmission consent requirements of the 1992 Act. Local non-commercial
television stations are also given mandatory carriage rights. The FCC recently
issued rules establishing standards for digital television ("DTV"). The FCC's
rules require television stations to simulcast their existing television signals
("NTSC") and DTV signals for a period of years. During this simulcast period, it
is unclear whether must-carry rules will apply to DTV signals. The FCC has
initiated a rule making proceeding seeking comment on the carriage of broadcast
DTV signals by cable and OVS operators during the transitional period to full
digital broadcasting. The FCC's proceeding addresses the need for the digital
systems to be compatible, seeks comment on possible changes to the mandatory
carriage rules, and explores the impact carriage of DTV signals may have on
other FCC rules. The cable industry has generally opposed many of the FCC's
proposals, on the grounds that they constitute excessively burdensome
obligations on the industry. The Communications Act permits franchising
authorities to require cable operators to set aside certain channels for public,
educational and governmental access programming. Cable systems with 36 or more
channels must designate a portion of their channel capacity for commercial
leased access by third parties to provide programming that may compete with
services offered by the cable operator.
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On September 8, 1997, we were notified by the FCC that it had ruled that
certain of our upper levels of service for our New Jersey systems were regulated
levels of service and that our rates for these levels of service exceeded the
rates allowed by the FCC rate regulation rules. Since that time, RCN and the FCC
have negotiated a settlement under which the FCC finds that our upper levels of
service for our New Jersey and certain New York systems are "New Product Tiers".
Our rates for 1997 and prior years for those systems are approved, except that
we will give a $5.00 per subscriber refund to all subscribers in our New Jersey
systems and a refund of $3.30 per subscriber in certain of our New York systems.
The settlement has been subject to public comment and is now awaiting final
approval by the FCC. We do not believe that the ultimate resolution of this
matter, whether the settlement is finally approved or not, will have a material
impact on our results of operations or financial condition.
Because a cable communications system uses local streets and rights-of-way,
such cable systems are generally subject to state and local regulation,
typically imposed through the franchising process. The terms and conditions of
state or local government franchises vary materially from jurisdiction to
jurisdiction. Generally, they contain provisions governing cable service rates,
franchise fees, franchise term, system construction and maintenance obligations,
customer service standards, franchise renewal, sale or transfer of the
franchise, territory of the franchisee and use and occupancy of public streets
and types of cable services provided. Local franchising authorities may award
one or more franchises within their jurisdictions and prohibit non-grandfathered
cable systems from operating without a franchise. The Communications Act also
provides that in granting or renewing franchises, local authorities may
establish requirements for cable-related facilities and equipment, but not for
video programming or information services other than in broad categories. The
Communications Act limits franchise fees to 5% of revenues derived from cable
operations and permits the cable operator to seek modification of franchise
requirements through the franchise authority or by judicial action if changed
circumstances warrant.
Our ability to provide franchised cable television services depends largely
on our ability to obtain and renew our franchise agreements from local
government authorities on generally acceptable terms. We currently have 91
franchise agreements relating to the hybrid fiber/coaxial cable systems in New
York (outside New York City), New Jersey and Pennsylvania. These franchises
typically contain many conditions, such as time limitations on commencement and
completion of construction, conditions of service, including the number of
channels, the provision of free service to schools and certain other public
institutions, and the maintenance of insurance and indemnity bonds. These
franchises provide for the payment of fees to the issuing authorities and
generally range from 3% to 5% of revenues. The duration of these outstanding
franchises presently varies up to the year 2011. To date, all of our cable
franchises have been renewed or extended, generally at or before their stated
expirations and on acceptable terms. Approximately 39 of our hybrid
fiber/coaxial cable systems' franchises are due for renewal within the next
three years. We cannot assure you that we will be able to renew our franchises
on acceptable terms. No single franchise accounts for more than 4% of our total
revenue. Our five largest franchises account for approximately 11% of our total
revenue.
The hybrid fiber/coaxial cable systems are also subject to certain service
quality standards and other obligations imposed by the FCC and, where effective
competition has not been demonstrated to exist, to rate regulation by the FCC as
well. Our cable television system in Pennsylvania has been operating in a
competitive cable environment for almost 30 years, with approximately 80% of the
homes passed having access to an alternate cable operator, Service Electric
Cable TV. As a result, our Pennsylvania cable system is exempt from many FCC
cable television regulations, including rate regulation. Our other cable
television systems in New York State and New Jersey currently remain subject to
FCC rate regulation. As required by the 1996 Act, however, all cable programming
services will be deregulated if effective competition is shown to exist in the
franchise area, or by March 31, 1999, whichever date is sooner. There has been
widespread discussion in Congress about possible legislation to keep cable rate
regulation in effect longer. We cannot assure you that such legislation will not
be adopted. We anticipate that the remaining provisions of the 1992 Act that do
not relate to rate regulation, including provisions relating to retransmission
consent and customer service standards, will remain in place and may reduce the
future operating margins of our hybrid fiber/coaxial cable television businesses
as video programming competition develops in our cable television service
markets.
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The FCC is required to regulate the rates, terms and conditions imposed by
public utilities for cable systems' use of utility pole and conduit space unless
state authorities can demonstrate that they adequately regulate pole attachment
rates. In the absence of state regulation, the FCC administers pole attachment
rates on a formula basis. In some cases, utility companies have increased pole
attachment fees for cable systems that have installed fiber optic cables and
that are using these cables for the distribution of non-video services. The FCC
concluded that, in the absence of state regulation, it can determine whether
utility companies have justified their demand for additional rental fees and
that the Communications Act does not permit disparate rates based on the type of
service provided over the equipment attached to the utility's pole. The 1996 Act
and the FCC's implementing regulations modify the current pole attachment
provisions of the Communications Act. It immediately permits certain providers
of telecommunications services to rely upon the protections of the current law
and require that utilities provide cable systems and telecommunications carriers
with nondiscriminatory access to any pole, conduit or right-of-way, controlled
by the utility. The FCC has recently adopted new regulations to govern the
charges for pole attachments used by companies providing telecommunications
services, including cable operators. These new pole attachment rate regulations
will become effective five years after enactment of the 1996 Act, and any
increase in attachment rates resulting from the FCC's new regulations will be
phased in equal annual increments over a period of five years beginning on the
effective date of the new FCC regulations. The ultimate outcome of these
rulemakings and the ultimate impact of any revised FCC rate formula or of any
new pole attachment rate regulations on us or our businesses cannot be
determined at this time.
The 1992 Act, the 1996 Act and FCC regulations preclude any cable operator
or satellite video programmer affiliated with a cable company, or with a common
carrier providing video programming directly to its subscribers, from favoring
an affiliated company over competitors. These programmers are required to sell
their programming to other multichannel video distributors. These provisions
limit the ability of program suppliers affiliated with cable companies or with
common carriers providing satellite delivered video programming directly to
their subscribers to offer exclusive programming arrangements to their
affiliates. Except in limited circumstances, however, these statutory and
regulatory limitations do not apply to programming which is distributed other
than by satellite. We are experiencing difficulty in securing access to certain
local sports programming in the New York City market, which we consider
important to successful competition in that market. The Communications Act also
includes provisions concerning horizontal and vertical of cable
systems, customer service, subscriber privacy, marketing practices, equal
employment opportunity, obscene or indecent programming, regulation of technical
standards and equipment compatibility.
In addition to the FCC regulations previously discussed, there are other
FCC regulations covering areas such as:
o equal employment opportunity;
o syndicated program exclusivity;
o network program non-duplication;
o registration of cable systems;
o maintenance of various records and public inspection files;
o microwave frequency usage;
o lockbox availability;
o sponsorship identification;
o antenna structure notification;
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o tower marking and lighting;
o carriage of local sports broadcast programming;
o application of rules governing political broadcasts;
o limitations on advertising contained in non-broadcast children's
programming;
o consumer protection and customer service;
o ownership and access to cable home wiring and home wiring in
multiple dwelling units;
o indecent programming;
o programmer access to cable systems;
o programming agreements;
o technical standards; and
o consumer electronics equipment compatibility and closed captioning.
The FCC has the authority to enforce its regulations through imposing
substantial fines, issuing cease and desist orders and/or imposing other
administrative sanctions, such as revoking FCC licenses needed to operate
certain transmission facilities often used in connection with cable operations.
We have difficulty gaining access to the video distribution wiring in certain
multiple dwelling units in the City of Boston in which Cablevision is the
incumbent provider of video services. In some buildings the management will not
permit us to install our own distribution wiring and Cablevision has not been
willing to permit us to use the existing wiring on some equitable basis when we
wish to initiate service to an individual unit previously served by Cablevision.
We have sought a ruling from the FCC's Cable Services Bureau that existing FCC
inside wiring rules require Cablevision to cooperate with us to make such wiring
available to it. The matter is currently pending before the FCC's Cable Services
Bureau staff.
Other bills and administrative proposals pertaining to cable television
have previously been introduced in Congress or considered by other governmental
bodies over the past several years. There will likely be legislative proposals
in the future by Congress and other governmental bodies relating to the
regulation of communications services.
Cable television systems are subject to federal compulsory copyright
licensing covering the retransmission of television and radio broadcast signals.
In exchange for filing certain reports and contributing a percentage of their
basic revenues to a federal copyright royalty pool, cable operators can obtain
blanket licenses to retransmit the copyrighted material on broadcast signals.
Other Regulatory Issues
The data services business, including Internet access, is largely
unregulated at this time apart from federal, state, and local laws and
regulations applicable to businesses in general. However, we cannot assure you
that this business will not become subject to regulatory restraints. Some
federal, state, local and foreign governmental organizations are considering a
number of legislative and regulatory proposals with respect to Internet user
privacy, infringement, pricing, quality of products and services and
intellectual property ownership. We are also unsure how existing laws will be
applied to the Internet in areas such as property ownership, copyright,
trademark, trade secret, obscenity and defamation. Additionally, some
jurisdictions have sought to impose taxes and other burdens
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on providers of data services, and to regulate content provided via the Internet
and other information services. We expect that proposals of this nature will
continue to be debated in Congress and state legislatures in the future. In
addition, although the FCC has on several occasions rejected proposals to impose
additional costs on providers of Internet access service and other data services
for the use of local exchange telephone network facilities for access to their
customers, the FCC or Congress may consider similar proposals in the future. The
adoption of new laws or the adaptation of existing laws to the Internet may
decrease the growth in the use of the Internet, which could in turn have a
material adverse effect on our Internet business.
We have interconnection agreements with Bell Atlantic and other incumbent
local exchange carriers ("ILECs") that entitle us to collect reciprocal
compensation payments from them for local telephone calls that terminate on our
facilities. We make similar payments for outbound local calls we deliver to the
incumbent local exchange carriers. However, ILECs around the country have been
contesting whether the obligation to pay reciprocal compensation to CLECs should
apply to local telephone calls from an ILEC's customers to Internet service
providers served by CLECs. The ILECs claim that this traffic is interstate in
nature and therefore should be exempt from compensation arrangements applicable
to local, intrastate calls. CLECs have contended that the interconnection
agreements provide no exception for local calls to Internet service providers
and reciprocal compensation is therefore applicable. Currently, over 25 state
commissions and several federal and state courts have ruled that reciprocal
compensation arrangements do apply to calls to Internet service providers, and
no jurisdiction has ruled to the contrary. In the regions we are focusing on,
the California, Massachusetts, New York, Pennsylvania, Maryland and Virginia
public utility commissions have issued such orders. Certain of these are subject
to appeal. Additional disputes over the appropriate treatment of ISP traffic are
pending in other states. On February 26, 1999, the FCC released a Declaratory
Ruling determining that ISP traffic is interstate for jurisdictional purposes,
but that its current rules neither require nor prohibit the payment of
reciprocal compensation for such calls. In the absence of a federal rule, the
FCC determined that state commissions have authority to interpret and enforce
the reciprocal compensation provisions of existing interconnection agreements,
and to determine the appropriate treatment of ISP traffic in arbitrating new
agreements. The FCC also requested comment on alternative federal rules to
govern compensation for such calls in the future. In response to the FCC ruling,
some RBOCs have asked state commissions to reopen previous decisions requiring
the payment of reciprocal compensation on ISP calls. We are opposing such
efforts in Maryland, Massachusetts, and New York. We anticipate that Internet
service providers will be among our target customers, and adverse decisions in
state proceedings could limit our ability to service this group of customers
profitably.
In order to develop our networks, we must obtain local franchises and other
permits, as well as building access agreements and rights to use underground
conduit and pole space, private easements and other rights-of-way and fiber
capacity from entities such as incumbent local exchange carriers and other
utilities, railroads, long distance companies, state highway authorities, local
governments and transit authorities. We cannot assure you that we will be able
to maintain our existing franchises, permits and rights or to obtain and
maintain the other franchises, permits, building access agreements and rights
needed to implement our business plan on acceptable terms. Although we do not
believe that any of the existing arrangements will be canceled or will not be
renewed as needed in the near future, certain cancellation or non-renewal of
these arrangements could materially adversely affect our business. In addition,
our failure to enter into and maintain any such required arrangements for a
particular network, including a network which is already under development, may
affect our ability to acquire or develop that network.
We have summarized present and proposed federal, state, and local
regulations and legislation affecting the telephone, video programming and data
service industries. This summary is not complete. Other existing federal
regulations, copyright licensing, and, in many jurisdictions, state and local
franchise requirements, are currently the subject of judicial proceedings,
legislative hearings and administrative proposals which could change, in varying
degrees, the operations of communications companies. The ultimate outcome of
these proceedings, and the ultimate impact of the 1996 Act or any final
regulations adopted under the new law on us or our businesses cannot be
determined at this time.
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Employees
As of December 31, 1998, we had approximately 2,150 full-time employees
including joint ventures, general office and administrative personnel and
approximately 200 part-time employees. We have a collective bargaining agreement
that covers approximately 70 employees, which is valid through January 14, 2001.
We consider relations with our employees to be good.
Legal Proceedings
In the normal course of business, there are various legal proceedings
outstanding, including both commercial and regulatory litigation. In the opinion
of management, these proceedings will not have a material adverse effect on our
results of operations or financial condition. For a description of certain
proceedings affecting certain of our affiliates, see "Regulation - Regulation of
Video Services."
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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
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(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.
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 or a provision that cannot be
modified or amended without the consent of all holders of the debt securities
of that series.
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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 anyGuarantor 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.
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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;
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- 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.
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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.
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 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.
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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.
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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
II-1
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<TABLE>
Exhibit
No. Document
- ------- --------
<S> <C>
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 as of 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 111/8%
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))
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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
- ---------
*Exhibits and schedules which have not been filed with Exhibit 4.10 will
be provided to the Commission by the registrant upon request.
**Previously filed.
</TABLE>
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;
II-3
<PAGE>
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.
(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
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 April 16, 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.
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David C. McCourt* Director, Chairman and Chief April 16, 1999
- ---------------------------------- Executive Officer
David C. McCourt
/s/ Michael J. Mahoney* Director, President and Chief April 16, 1999
- ---------------------------------- Operating Officer
Michael J. Mahoney
/s/ Bruce Godfrey Director, Executive Vice President April 16, 1999
- ---------------------------------- and Chief Financial Officer
Bruce C. Godfrey
/s/ James Q. Crowe*
- ---------------------------------- Director April 16, 1999
James Q. Crowe
/s/ Alfred Fasola*
- ---------------------------------- Director April 16, 1999
Alfred Fasola
/s/ Stuart E. Graham*
- ---------------------------------- Director April 16, 1999
Stuart E. Graham
/s/ Richard R. Jaros*
- ---------------------------------- Director April 16, 1999
Richard R. Jaros
/s/ Thomas May*
- ---------------------------------- Director April 16, 1999
Thomas May
II-5
<PAGE>
/s/ Thomas P. O'Neill, III*
- ---------------------------------- Director April 16, 1999
Thomas P. O'Neill, III
/s/ Eugene Roth*
- ---------------------------------- Director April 16, 1999
Eugene Roth
/s/ Walter Scott, Jr.*
- ---------------------------------- Director April 16, 1999
Walter Scott, Jr.
/s/ Michael B. Yanney*
- ---------------------------------- Director April 16, 1999
Michael B. Yanney
/s/ Ralph S. Hromisin*
- ---------------------------------- Senior Vice President and Chief April 16, 1999
Ralph S. Hromisin Accounting Officer
</TABLE>
*By: /s/ Bruce C. Godfrey
------------------------------
Bruce C. Godfrey
Attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
Exhibit
No. Document
- ------- --------
<S> <C>
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 as of 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>
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
</TABLE>
- --------
*Exhibits and schedules which have not been filed with Exhibit 4.10 will be
provided to the Commission by the registrant upon request.
**Previously filed.
II-8
- --------------------------------------------------------------------------------
Exhibit 1.1
RCN Corporation
FORM OF
UNDERWRITING AGREEMENT
- -------------------------------------------------------------------------------
<PAGE>
RCN Corporation
FORM OF UNDERWRITING AGREEMENT
Ladies and Gentlemen:
RCN Corporation, a Delaware corporation (the "Company"), confirms its
agreement with [ ] (the "Underwriters", which term shall also include any
underwriter substituted as hereinafter provided in Section 10 hereof), with
respect to the sale by the Company and the purchase by the Underwriters,
acting severally and not jointly, of the respective principal amounts set
forth in Schedule A hereto, of [ ] of the Company's [securities] [and the
grant by the Company to the Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of an
additional [ ] securities to cover over-allotments, if any]. The aforesaid [ ]
securities (the "Initial Securities") to be purchased by the Underwriters and
all or any part of the [ ] securities subject to the option described in
Section 2(b) hereof, if applicable (the "Option Securities") are hereinafter
called, collectively, the "Securities". [The Securities are to be issued
pursuant to an indenture dated as of [ ], (the "Indenture") between the
Company and [ ], as trustee (the "Trustee").]
The Company understands that the Underwriters propose to make a
public offering of the Securities as soon as the Underwriters deem advisable
after this Agreement has been executed and delivered [and the Indenture has
been qualified under the Trust Indenture Act of 1939, as amended (the "1939
Act")].
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 (No. 333-71525)
covering the registration of the Securities under the Securities Act of 1933,
as amended (the "Act"), including a prospectus relating to, among other
things, certain securities of the Company, to be issued from time to time by
the Company. Promptly after execution and delivery of this Agreement, the
Company will prepare and file a prospectus supplement in accordance with the
provisions of paragraph (b) of Rule 424 ("Rule 424(b)") of the rules and
regulations of the Commission under the Act (the "1933 Act Regulations")
relating specifically to the Securities. Any prospectus that was used prior to
execution and delivery of this Agreement is referred to as a "preliminary
prospectus." Such registration statement, including the exhibits thereto and
the
2
<PAGE>
documents incorporated by reference pursuant to Item 12 of Form S-3 under the
Act at the time it became effective is herein called the "Registration
Statement." Any registration statement filed pursuant to Rule 462(b) of the
1933 Act Regulations is herein referred to as the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The final prospectus including
the documents incorporated by reference pursuant to Item 12 of Form S-3 under
the Act in the form first furnished to the Underwriters for use in connection
with the offering of the Securities is herein called the "Prospectus."
Further, the items "preliminary prospectus" and "Prospectus" shall refer to
any prospectus supplement used to consummate any offering pursuant to Rule 415
under the Act. For purposes of this Agreement, all references to the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
Section 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time (as defined in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof), and agrees with each
Underwriter as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registration
Statement has been issued under the Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of
the Company, are contemplated by the Commission, and any request on
the part of the Commission for additional information has been
complied with.
As of the date of the Prospectus and at the Closing Time
(and, if any Option Securities are purchased, at the Date of
Delivery), the Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the Act and the 1933 Act Regulations and did
not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any such amendment or supplement was issued and at the
Closing Time (and, if any Option Securities are
3
<PAGE>
purchased, at the Date of Delivery), included or will include an
untrue statement of a material fact or omitted or will omit to state
a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any Underwriter
through [ ] expressly for use in the Registration Statement or
Prospectus.
The Prospectus, when filed pursuant to Rule 424(b) under the
Act, will comply in all material respects with the 1933 Act
Regulations and the Prospectus delivered to the Underwriters for use
in connection with this offering was substantially identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) The documents incorporated by reference in the Registration
Statement and the Prospectus, at the time they were filed with the
Commission, complied in all material respects with the requirements
of the Act and the 1933 Act Regulations or the Securities Exchange
Act of 1934 (the "Exchange Act") and the rules and regulations of the
Commission thereunder (the "Exchange Act Regulations"), as
applicable, and, when read together with the other information in the
Prospectus, at the time the Registration Statement became effective,
at the time the Prospectus was issued and at the Closing Time, did
not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(iii) The only Restricted Affiliates (as defined in the Indenture
dated [ ], between the Company and the Trustee) are [ ]. Each of the
Company and each "significant subsidiary" (as defined in Section
210.1-02 of Regulation S-X) of the Company (each a "Subsidiary" and
collectively, the "Subsidiaries") and the Restricted Affiliates has
been duly organized and is validly existing and in good standing
under the laws of its jurisdiction of organization, with all
requisite power and authority under such laws, and all necessary
authorizations, approvals, orders, licenses, certificates and permits
of and from regulatory or governmental officials, bodies and
tribunals, (a) to own, lease and operate their respective properties
and to conduct their respective businesses as now conducted and as
described in the Prospectus and (b), in the case of the Company, to
enter into, deliver and perform its
4
<PAGE>
obligations under this Agreement [, the Indenture] and the Securities
except, in the case of the foregoing subclause (a) for
authorizations, approvals, orders, leases, certificates and permits,
the failure of which to possess could not reasonably be expected to
have a Material Adverse Effect (as defined below); and are all duly
qualified to do business and in good standing in all other
jurisdictions where the ownership or leasing of their respective
properties or the conduct of their respective businesses requires
such qualification, except where the failure to be so qualified could
not reasonably be expected to have a material adverse effect (i) on
the business, condition (financial or otherwise), results of
operations, business affairs or business prospects of the Company,
the Restricted Affiliates and the Subsidiaries taken as a whole or
(ii) on the ability of the Company to perform any of its obligations
under this Agreement [, the Indenture] and the Securities or to
consummate any of the transactions contemplated hereby (a "Material
Adverse Effect").
(iv) This Agreement has been duly authorized, executed and
delivered by the Company.
(v) The Securities have been duly authorized by the Company, and
the Company has all requisite corporate power and authority to execute,
issue and deliver the Securities, and to incur and perform its
obligations provided for therein.
(vi) The Company has all requisite corporate power and authority
to execute and deliver this Agreement [and the Indenture] and perform
its obligations provided for therein. This Agreement has been[, and,
as of the Closing Date, the Indenture will have been,] duly
authorized, executed and delivered by the Company [and upon such
execution by the Company (assuming the due authorization, execution
and delivery by parties thereto other than the Company) and, as of
the Closing Date, the Indenture will constitute, the valid and
binding obligation of the Company, enforceable against the Company in
accordance with the terms hereof or thereof, subject only to the
Enforceability Limitations (as defined below). [The Indenture has
been duly qualified under the 1939 Act].
(vii) No consent, waiver, authorization, approval, license,
qualification or order of, or filing or registration with, any court
or governmental or regulatory agency or body, is required for the
issue and sale of the Securities, the performance by the Company of
its obligations under this Agreement, or for the consummation of any
of the transactions contemplated to be taken by the Company pursuant
to this Agreement [or the Indenture], including, without limitation,
the issuance and sale of the
5
<PAGE>
Securities hereunder, except, such as have been obtained under the
Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters in the manner contemplated in this
Agreement and in the Prospectus.
(viii) The issuance, sale and delivery of the Securities, the
execution, delivery and performance by the Company of this
Agreement[, the Indenture and the Securities] and the consummation by
the Company of the transactions contemplated hereby and the
compliance by the Company with the terms of the foregoing do not,
and, at the Closing Time, will not conflict with or constitute or
result in a breach or violation by the Company, any of the
Subsidiaries or the Restricted Affiliates of (A) any of the terms or
provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) by any
of the Company, the Subsidiaries or the Restricted Affiliates or give
rise to any right to accelerate the maturity or require the
prepayment of any indebtedness under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company, the Subsidiaries or the Restricted Affiliates
under any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, authorization,
permit, certificate or other agreement or document to which any of
the Company, the Subsidiaries or the Restricted Affiliates is a party
or by which any of them may be bound, or to which any of them or any
of their respective assets or businesses is subject (collectively,
"Contracts") (and the Company has no knowledge of any conflict,
breach or violation of such terms or provisions or of any such
default, in any such case, which has occurred or will so result),
except for any such conflict, breach or violation which would not,
individually or in the aggregate, have a Material Adverse Effect, (B)
the articles of incorporation, by-laws or similar organizational
documents (each, an "Organizational Document") of any of the Company,
the Subsidiaries or the Restricted Affiliates or (C) any law,
statute, rule or regulation, or any judgment, decree or order, in any
such case, of any domestic or foreign court or governmental or
regulatory agency or other body having jurisdiction over the Company,
any of the Subsidiaries or the Restricted Affiliates or any of their
respective properties or assets.
[(ix) The Securities, when executed, authenticated and issued in
accordance with the terms of the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the
Trustee) and when delivered against payment of the purchase price
therefor as provided in this Agreement, will constitute valid and
binding obligations of the
6
<PAGE>
Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with the terms thereof; subject, in
the case of each of the foregoing, to (a) applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, (b) general principles of
equity (regardless of whether enforcement is sought in a proceeding
in equity or at law) and (c) the discretion of the court before which
any proceeding therefor may be brought (clauses (a), (b) and (c)
being referred to herein as the "Enforceability Limitations").]
[(x) The Securities and the Indenture will each conform in all
material respects to the descriptions thereof in the Prospectus.]
[(xi) The shares of [Common Stock][Preferred Stock] have been duly
authorized for issuance and sale to the Underwriters pursuant to this
Agreement and, when issued and delivered by the Company pursuant to
this Agreement against payment of the consideration set forth herein,
will be validly issued and fully paid and non-assessable; the [Common
Stock] [Preferred Stock] conforms to all statements relating thereto
contained in the Prospectus and such description conforms to the
rights set forth in the instruments defining the same; no holder of
the [Common Stock] [Preferred Stock] will be subject to personal
liability by reason of being such a holder; and the issuance of the
[Common Stock] [Preferred Stock] is not subject to the preemptive or
other similar rights of any security holder of the Company.]
(xii) The audited and unaudited consolidated financial statements of
the Company included or incorporated by reference in the Registration
Statement, including the notes thereto, present fairly in all
material respects the financial position of the Company and its
consolidated subsidiaries at the dates indicated, and the statement
of operations, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries for the periods have been prepared in
conformity with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the
periods involved. PricewaterhouseCoopers LLP, which certified the
financial statements of the Company included or incorporated by
reference in Registration Statement, is an independent public
accounting firm with respect to the Company and its Subsidiaries
within the meaning of Regulation S-X under the Act. The selected
financial data and the summary financial information included in the
Prospectus present fairly in all material respects the information
shown therein and have been compiled on a basis consistent with that
of the financial statements included in the Prospectus. [The pro
forma financial
7
<PAGE>
information relating to the Company and its Subsidiaries and the
related notes thereto included in the Prospectus present fairly in
all material respects the information shown therein, have been
prepared in all material respects in accordance with the Commission's
rules and guidelines with respect to pro forma financial adjustments
and have been properly computed on the bases described therein, and
the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.]
(xiii) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise
specifically stated therein, there has been no (A) material adverse
change in the business, condition (financial or otherwise), results
of operations, business affairs or business prospects of the Company,
the Subsidiaries and the Restricted Affiliates taken as a whole,
whether or not arising in the ordinary course of business (a
"Material Adverse Change"), (B) transaction entered into by any of
the Company, the Subsidiaries or the Restricted Affiliates, other
than in the ordinary course of business, that is material to the
Company, the Subsidiaries and the Restricted Affiliates, taken as a
whole or (C) dividend or distribution of any kind declared, paid or
made by the Company on its capital stock.
[(xiv) The Company has the authorized, issued and outstanding
capitalization set forth in the Prospectus; all of the outstanding
capital stock of the Company has been duly authorized and validly
issued, is fully paid and nonassessable and was not issued in
violation of any preemptive or similar rights. Except as set forth in
the Prospectus, the Company does not own, directly or indirectly, any
material amount of shares, or any other material amount of equity or
long-term debt securities or have any material equity interest in any
firm, partnership, joint venture or other entity. Except as set forth
in the Prospectus, no holder of any securities of the Company is
entitled to have such securities under the Registration Statement or
otherwise registered by the Company under the Act. All of the
outstanding capital stock or other ownership interests of each of the
Subsidiaries and Restricted Affiliates has been duly authorized and
validly issued, is fully paid and nonassessable and was not issued in
violation of any preemptive or similar rights.]
(xv) None of the Company, the Subsidiaries or the Restricted
Affiliates is (A) in violation of its respective charter documents,
(B) in default (or, with notice or lapse of time or both, would be in
default) in the performance or observance of any obligation,
agreement, covenant or
8
<PAGE>
condition contained in any Contract or (C) in violation of any law,
statute, judgment, decree, order, rule or regulation of any domestic
or foreign court with jurisdiction over the Company, the Subsidiaries
or the Restricted Affiliates or any of their respective assets or
properties, or other governmental or regulatory authority, agency or
other body, other than, in the case of clause (B) or (C), such
defaults or violations which could not, individually or in the
aggregate, reasonably be expected to have or result in a Material
Adverse Effect; and any real property and buildings held under lease
by the Company, the Subsidiaries or the Restricted Affiliates are
held by the Company or such Subsidiary or Restricted Affiliate, as
the case may be, under valid, subsisting and enforceable leases with
such exceptions which could not, individually or in the aggregate,
reasonably be expected to have or result in a Material Adverse
Effect.
(xvi) Except as described in the Prospectus, each of the Company,
the Subsidiaries and the Restricted Affiliates has obtained all
consents, approvals, orders, certificates, licenses, permits,
franchises and other authorizations, in each case material to the
operations of the Company (collectively, the "Licenses") of and from,
and has made all declarations and filings with, all governmental and
regulatory authorities, all self-regulatory organizations and all
courts and other tribunals necessary to own, lease, license and use
its properties and assets and to conduct its businesses in the manner
described in the Prospectus. None of the Company, the Subsidiaries or
the Restricted Affiliates has received any notice of proceedings
relating to the revocation or modification of, or denial of any
application for, any License which, if the subject of any unfavorable
decision, ruling or finding, could, singly or in the aggregate,
reasonably be expected to have or result in a Material Adverse
Effect; the Company, each of the Subsidiaries and the Restricted
Affiliates have fulfilled and performed all of their obligations with
respect to all Licenses possessed by any of them, except where the
failure to so fulfill and perform could not, singly or in the
aggregate, reasonably be expected to have or result in a Material
Adverse Effect; and no event has occurred which allows, or after
notice or lapse of time, or both, would allow, revocation or
termination thereof or result in any other material impairment of the
rights of the holder of any such License, except where such
revocation or termination could not, singly or in the aggregate,
reasonably be expected to have or result in a Material Adverse
Effect; and the Licenses referred to above place no restrictions on
the Company, any of the Subsidiaries or any of the Restricted
Affiliates that are not described in the Prospectus, except where
such restrictions could not, singly or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect.
9
<PAGE>
(xvii) Except as described in the Prospectus, there is no legal
action, suit, proceeding inquiry or investigation before or by any
court or governmental body or agency, domestic or foreign, now
pending or, to the best knowledge of the Company, threatened against
the Company, any of the Subsidiaries or any of the Restricted
Affiliates or affecting the Company, any of the Subsidiaries or any
of the Restricted Affiliates or any of their respective properties
which would be required to be disclosed in a registration statement
filed under the Act which could, individually or in the aggregate,
reasonably be expected to have or result in a Material Adverse
Effect. Except as set forth in the Prospectus, none of the Company,
any of the Subsidiaries or any of the Restricted Affiliates has
received any notice or claim of any material default (or event,
condition or omission which with notice or lapse of time or both
would result in a default) under any of its respective Contracts or
has knowledge of any material breach of any of such Contracts by the
other party or parties thereto, in each case which would,
individually or in the aggregate have a Material Adverse Effect.
(xviii) The Company has good and marketable title to all real and
personal property described in the Prospectus as being owned by it
and good and marketable title to a leasehold estate in the real and
personal property described in the Prospectus as being leased by it,
free and clear of all liens, charges, encumbrances or restrictions,
except to the extent the failure to have such title or the existence
of such liens, charges, encumbrances or restrictions could not,
individually or in the aggregate, reasonably be expected to have or
result in a Material Adverse Effect.
(xix) The Company is not and, after giving effect to the offering
and sale of the Securities and the application of the proceeds
therefrom as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended.
(xx) There are no contracts or documents which are required to be
described in the Registration Statement or the Prospectus or to be
filed as exhibits thereto which have not been so described or filed
as required.
(b) Any certificate signed by any officer of the Company and
delivered to the Representatives or to counsel for the Underwriters pursuant
to the terms of this Agreement shall be deemed a representation and warranty
by the Company to the Underwriters as to the matters covered thereby.
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Section 2. Sale and Delivery to Underwriters; Closing. (a) Initial
Securities. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, severally and not jointly, and
each Underwriter, severally and not jointly, agrees to purchase from the
Company at the price set forth in Schedule B, the amount of Initial Securities
set forth in Schedule A opposite the name of such Underwriter, plus any
additional amount of Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
[(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional [ ]
Securities at the price set forth in Schedule B for the Initial Securities.
The option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Initial Securities upon notice by the Underwriters to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment
and delivery for such Option Securities. Any such time and date of delivery (a
"Date of Delivery") shall be determined by the Underwriters, but shall not be
later than seven full business days after the exercise of said option, nor in
any event prior to the Closing Time, as hereinafter defined. If the option is
exercised as to all or any portion of the Option Securities, each of the
Underwriters, acting severally and not jointly, will purchase that proportion
of the total number of Option Securities then being purchased which the number
of Initial Securities set forth in Schedule A opposite the name of such
Underwriter bears to the total number of Initial Securities.]
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of [ ]
or at such other place as shall be agreed upon by the Underwriters and the
Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Eastern time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section
10), or such other time not later than ten business days after such date as
shall be agreed upon by the Underwriters and the Company (such time and date
of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities
are purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Securities shall be made at the
above-mentioned
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offices, or at such other place as shall be agreed upon by the Underwriters
and the Company, on each Date of Delivery as specified in the notice from the
Underwriters to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company against delivery
to the Underwriters for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. [ ] individually and
not as representative of the Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial Securities or the Option
Securities, if any, to be purchased by any Underwriter whose funds have not
been received by the Closing Time or the relevant Date of Delivery, as the
case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder.
(d) Denominations; Registration. Certificates for the Securities
shall be in such denominations and registered in such names as the
Underwriters may request in writing at least one full business day before the
Closing Time or the relevant Date of Delivery, as the case may be. The
certificates for the Securities will be made available for examination and
packaging by the Underwriters in The City of New York not later than 10:00
A.M. (Eastern time) on the business day prior to the Closing Time or the
relevant Date of Delivery, as the case may be.
Section 3. Covenants of the Company. The Company covenants with
each Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
Until the completion of the distribution of the Securities by the
Underwriters, the Company will notify the Underwriters as soon as practicable:
(i) when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any
order preventing or suspending the use of the Prospectus, or of the suspension
of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any
of such purposes. The Company will promptly effect the filings necessary
pursuant to Rule 424(b) and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing under
Rule 424(b) was received for filing by the Commission and, in the event that
it was not, it will promptly file such prospectus. The Company will make every
reasonable effort to prevent the
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issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest practicable moment.
(b) Filing of Amendments. Prior to the completion of the
distribution of the Securities by the Underwriters, the Company will give the
Underwriters notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b) but excluding
annual or quarterly reports filed under the Exchange Act) or any amendment,
supplement or revision to the Prospectus and will furnish the Underwriters
with copies of any such documents prior to such proposed filing or use, as the
case may be.
(c) Delivery of Registration Statements. The Company has furnished
or will deliver to the Underwriters and counsel for the Underwriters, without
charge, signed or conformed copies (or duplicates thereof) of the Registration
Statement as originally filed and of each amendment thereto (including
exhibits filed therewith). The copies of the Registration Statement and each
amendment thereto furnished to the Underwriters will be substantially
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the Act. The Company will furnish
to each Underwriter during the period when the Prospectus is required to be
delivered under the Act or the Exchange Act, such number of copies of the
Prospectus (as amended or supplemented in accordance with Section 3(e)) as
such Underwriter may reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be substantially
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation
S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time after the first date of the
public offering of securities to be sold hereunder and prior to the expiration
of nine months after the date of the Prospectus relating to the Securities to
be sold hereunder, a prospectus is required by the Act to be delivered in
connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel
for the Underwriters or for the Company, to amend the Registration Statement
or amend or supplement the Prospectus in order that the Prospectus will not
include any untrue statements of a material fact or omit to
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state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the Act
or the 1933 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may
be necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Company
will furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the Underwriters, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Underwriters may reasonably request
and to maintain such qualifications in effect for a period of not less than
one year from the later of the effective date of the Registration Statement
and any Rule 462(b) Registration Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. In each jurisdiction in which the Securities have been
so qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
the Exchange Act as are necessary in order to make generally available to its
security holders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the Act.
(h) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."
[(i) Restriction on Sale of Securities. During a period of 90 days
from the date of the Prospectus, the Company will not, without the prior
written consent of [lead underwriter] directly or indirectly, issue, sell,
offer or contract to sell, grant any option for the sale of or otherwise
transfer or dispose of any securities of the Company of the class being sold
under this Agreement.]
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(j) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the Act or the Exchange Act, will
file all documents required to be filed with the Commission pursuant to the
Exchange Act within the time periods required by the Exchange Act and the
rules and regulations of the Commission thereunder.
Section 4. Payment of Expenses. (a) Whether or not any sale of the
Securities is consummated, the Company agrees to pay and bear all costs and
expenses incident to the performance of all of its obligations under this
Agreement, including (i) the preparation and printing of the Registration
Statement and any amendments or supplements thereto prepared prior to nine
months after the date of the Prospectus and the cost of furnishing copies
thereof to the Underwriters, (ii) the preparation, issuance, printing and
delivery of certificates for the Securities, [including any stock or other
transfer taxes and any stamp or other duties payable upon the sale, issuance
or delivery of the Securities to the Underwriters,] (iii) the fees and
disbursements of the Company's counsel and accountants, (iv) the printing and
delivery to the Underwriters of copies of each preliminary prospectus and of
the Prospectus and any amendments or supplements thereto prepared prior to
nine months after the date of the Prospectus, (v) the fees and expenses of any
transfer agent or registrar for the Securities, (vi) the filing fees in
connection with the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities, (vii) the fees
and expenses incurred in connection with the listing of the Common Stock, and
(viii) all expenses (including travel expenses) of the Company in connection
with any meetings with prospective investors in the Securities.
(b) If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Underwriters set
forth in Section 5 hereof is not satisfied or because this Agreement is
terminated pursuant to Section 9(a)(i) or Section 10 hereof or because of any
failure, refusal or inability on the part of the Company to perform all
obligations and satisfy all conditions on its part to be performed or
satisfied hereunder other than by reason of a default by an Underwriter in
payment for the Securities at the Closing Time, the Company agrees to
reimburse the Underwriters promptly upon demand for all reasonable and
documented out-of-pocket expenses (including reasonable fees and disbursements
of their counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities.
Section 5. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Securities
are subject to the continued accuracy, as of the Closing Time and at each Date
of Delivery, of the representations and warranties of the Company herein
contained, to the
15
<PAGE>
accuracy of the statements of the Company and officers of the Company made in
any certificate pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following further conditions:
(a) The Registration Statement has become effective and at the
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus shall
have been filed with the Commission in accordance with Rule 424(b).
(b) At the Closing Time, the Underwriters shall have received the
opinion of Davis Polk & Wardwell, counsel to the Company, dated as of the
Closing Time, in substantially the form set forth below and otherwise
reasonably satisfactory to the Underwriters and counsel for the Underwriters,
to the effect that:
(1) The Company has the requisite corporate power and
authority to execute, deliver and perform its obligations
under this Agreement [and the Indenture];
(2) This Agreement has been duly authorized, executed
and delivered by the Company;
(3) The statements in the Prospectus under the headings
["Description of Capital Stock"] ["Description of Debt
Securities"] insofar as such statements purport to summarize
certain provisions of the [Certificate of Incorporation and
By-laws of the Company] [Indenture] fairly summarize in all
material respects such provisions of such documents and
instruments;
[(4) When the Indenture has been duly executed by the
parties thereto, the Securities, substantially in the form
filed as an exhibit to the Registration Statement, have been
duly authorized by the Company, and such Securities have
been duly executed and authenticated in accordance with the
Indenture and duly delivered to and paid for by the
purchasers thereof in the manner described in the
Registration Statement, the Securities will, insofar as New
York law is concerned, constitute valid and binding
obligations of the Company, enforceable against the Company
in accordance with their terms, except (A) as such
enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws
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<PAGE>
affecting creditor's rights and remedies generally and (B)
as such enforcement may be limited by general principles of
equity, regardless of whether enforcement is sought in a
proceeding at law or in equity;]
[(5) The [Common Stock] [Preferred Stock] has been duly
authorized and when issued and delivered in accordance with
the terms of this Agreement, will be validly issued, fully
paid and non-assessable]; and
(6) The Company is not and, after giving effect to the
offering and sale of the Securities and the application of
the proceeds therefrom as described in the Prospectus, will
not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
In addition such counsel shall state that the Registration Statement
has been declared effective under the Act and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the Registration
Statement has been issued under the Act and no proceedings for that purpose
have been instituted or are pending or threatened by the Commission. Such
counsel shall also state that (although, other than as set forth in paragraph
(2) above, such counsel has not checked the accuracy or completeness of, or
otherwise verified, the information furnished with respect to matters in the
Registration Statement or the Prospectus) such counsel has generally reviewed
and discussed with representatives of the Underwriters, certain officers and
employees of, and counsel and independent public accountants for, the Company,
the information furnished, whether or not subject to such counsel's
independent check and verification and on the basis of such consideration,
review and discussion, but without independent check or verification, except
as stated, nothing has come to such counsel's attention which caused them to
believe that (A) the Registration Statement and the Prospectus (except for
financial statements and schedules and other financial and statistical data
included therein and that part of the Registration Statement that constitutes
the Statement of Eligibility (Form T-1) under the Trust Indenture Act of 1939,
as amended, of the Trustee, as to which such counsel need not express any
belief) do not comply as to form in all material respects with the Act and the
applicable rules and regulations of the Commission thereunder, (B) the
Registration Statement and the prospectus included therein at the time the
Registration Statement became effective (except for financial statements and
schedules and other financial and statistical data included therein, as to
which such counsel need not express any belief) contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and (C) the
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Prospectus, except as stated, contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other than
the Federal law of the United States, the General Corporation Law of the State
of Delaware and the laws of the State of New York and (B) may rely, as to
matters of fact, to the extent they deem proper on representations or
certificates of responsible officers of the Company and certificates of public
officials.
(c) At the Closing Time, the Underwriters shall have received the
opinion of internal counsel for the Company, dated as of the Closing Time, in
the form set forth below and otherwise reasonably satisfactory to the
Underwriters and counsel for the Underwriters, to the effect that:
(1) The Company has been duly incorporated and is
validly existing under the laws of the State of Delaware,
with corporate power and authority to own, lease and operate
its assets and properties and conduct its business as
described in the Prospectus and to enter into and perform
its obligations under this Agreement [, the Securities and
the Indenture]; the Company is duly qualified as a foreign
corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a
Material Adverse Effect;
(2) The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus under
the caption "[ ]"; the shares of issued and outstanding
capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; and
none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other
similar rights of any security holder of the Company.
(3) Each of the Subsidiaries has been duly organized
and is validly existing in good standing under the laws of
the jurisdiction of its organization, has the requisite
power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus
and is duly qualified to
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transact business and is in good standing in each
jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to
qualify or to be in good standing individually or in the
aggregate would not result in a Material Adverse Effect; all
of the issued and outstanding capital stock or other
ownership interests of each of the Subsidiaries has been
duly authorized and validly issued, is fully paid and
non-assessable and, to such counsel's knowledge and
information, except as set forth in the Prospectus, is owned
by the Company directly, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or
equity;
(4) The issuance, sale and delivery of the Securities,
the execution, delivery and performance by the Company of
this Agreement [and the Indenture] and the consummation by
the Company of the transactions contemplated hereby and the
compliance by the Company with the terms of the foregoing do
not conflict with or constitute or result in a breach or
violation by the Company of (A) any provision of the
Certificate of Incorporation or By-laws of the Company, or
(B) any of the terms or provisions of, or constitute a
default (or an event which, with notice or lapse of time or
both, would constitute a default) by the Company under any
material Contract known to such counsel, except where any
such conflict, breach, violation or default would not result
in a Material Adverse Effect;
(5) To the knowledge of such counsel, other than as
described in the Prospectus, no legal, regulatory or
governmental proceedings are pending to which the Company or
any of the Subsidiaries or Restricted Affiliates is a party
or to which the property or assets of the Company or any of
the Subsidiaries or Restricted Affiliates are subject which,
individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or which,
individually or in the aggregate, could have a material
adverse effect on the power or ability of the Company to
perform its obligations under this Agreement [or the
Indenture] or to consummate the transactions contemplated
hereby and to the knowledge of such counsel, no such
material proceedings have been threatened against the
Company or any of the Subsidiaries or Restricted Affiliates
or with respect to any of their respective assets or
properties;
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(6) The Company is not in violation of its Certificate
of Incorporation or By-laws; to the knowledge of such
counsel, none of the Company, the Subsidiaries or any of the
Restricted Affiliates is in breach or violation of any law,
statute, rule or regulation, or any judgment, decree or
order or governmental or regulatory agency or other body
having jurisdiction over the Company or any of its
properties or assets except, in each case, violations,
defaults or breaches that individually or in the aggregate
would not have a Material Adverse Effect.
In addition such counsel shall state that (although, other than as
set forth in paragraph (2) above, such counsel has have not checked the
accuracy or completeness of, or otherwise verified, the information furnished
with respect to matters in the Registration Statement or the Prospectus) such
counsel has generally reviewed and discussed with representatives of the
Underwriters, certain officers and employees of, and counsel and independent
public accountants for, the Company, the information furnished, whether or not
subject to such counsel's independent check and verification and on the basis
of such consideration, review and discussion, but without independent check or
verification, except as stated, nothing has come to such counsel's attention
which caused him to believe that (A) the Registration Statement and the
prospectus included therein at the time the Registration Statement became
effective (except for financial statements and schedules and other financial
and statistical data included therein, as to which such counsel need not
express any belief) contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (B) the Prospectus, except as
stated, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other than
the Federal law of the United States, the General Corporation Law of the State
of Delaware and the laws of the State of New York and (B) may rely, as to
matters of fact, to the extent they deem proper on representations or
certificates of responsible officers of the Company and certificates of public
officials.
(d) At the Closing Time, the Underwriters shall have received the
opinion of Swidler & Berlin, regulatory counsel to the Company, dated as of
the Closing Time, in a form reasonably satisfactory to counsel for the
Underwriters.
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of any laws other than the
Communications Act of
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1934, as amended, (the "Communications Act"), the Telecommunications Act of
1996 (the "1996 Act"), the Cable Communications Policy Act of 1984 (the "1984
Act") or the Cable Television Consumer Protection Act of 1992 (the "1992 Act"
and, together with the Communications Act, the 1996 Act and the 1984 Act and
rules and regulations promulgated thereunder, the "Communications Laws") and
(B) may rely, as to matters of fact, to the extent they deem proper on
representations or certificates of responsible officers of the Company and
certificates of public officials.
(e) The Underwriters shall have received the opinion, dated as of
the Closing Time, of counsel for the Underwriters, with respect to certain
matters set forth in clauses [2, 3, 4 and 6] of subsection (b) of this Section
5.
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other than
the Federal laws of the United States, the General Corporation Law of the
State of Delaware and the laws of the State of New York and (B) may rely, as
to matters of fact, to the extent they deem proper on representations or
certificates of responsible officers of the Company and certificates of public
officials.
In addition, such counsel shall additionally state that such counsel
has participated in conferences with officers and other representatives of the
Company and representatives of the independent accountants for the Company at
which conferences the contents of the Prospectus and the Registration
Statement and related matters were discussed and, although given the
limitations inherent in the role of outside counsel and the character of
determinations involved in the preparation of the Registration Statement, such
counsel is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement (except and only to the extent set forth in clause (2)
of subsection (b) of this Section 5) and has made no independent check or
verification thereof, on the basis of the foregoing, no facts have come to the
attention of such counsel which would lead such counsel to believe that the
Registration Statement or any amendment thereto, at the time such Registration
Statement or any such amendment became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading
or that the Prospectus or any amendment or supplement thereto at the time the
Prospectus was issued, at the time any such amended or supplemented prospectus
was issued or at the Closing Time, included or includes an untrue statement of
a material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that such counsel
need express no belief with respect to the financial statements, including the
notes thereto, or any other
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financial or statistical data found in or derived from the internal accounting
and other records of the Company and its subsidiaries set forth or referred to
in the Registration Statement or Prospectus).
(f) The following conditions contained in clauses (i) and (ii) of
this subsection (f) shall have been satisfied at and as of the Closing Time
and the Company shall have furnished to the Underwriters a certificate, signed
by the Chairman of the Board or the President and the principal financial or
accounting officer of the Company, dated as of the Closing Time, to the effect
that the signers of such certificate have carefully examined the Registration
Statement and Prospectus, any amendment or supplement thereto, and this
Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Time with the same effect as if made at the Closing Time;
(ii) since the date of the most recent financial statements included
or incorporated by reference in the Prospectus (exclusive of any
amendment or supplement thereto), there has been no Material Adverse
Change, whether or not arising in the ordinary course of business. As
used in this subparagraph, the term "Prospectus" means the Prospectus
in the form first used to confirm sales of the Securities;
(iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to
the Closing Time; and
(iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have
been instituted or are pending or are contemplated by the Commission.
(g) On the date hereof and at the Closing Time,
PricewaterhouseCoopers LLP shall have furnished to the Underwriters a letter
or letters, dated respectively as of the date of this Agreement and as of the
Closing Time, in form and substance satisfactory to the Underwriters,
confirming that they are independent certified public accountants within the
meaning of the Act and the applicable published rules and regulations
thereunder and containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
financial statements of the Company and certain financial information
contained in the Registration Statement, in form and substance satisfactory to
counsel for the Underwriters.
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(h) Subsequent to the date hereof or, if earlier, the dates as of
which information is given in the Prospectus (exclusive of any amendment or
supplement thereto), there shall not have been any change, or any development
involving a prospective change, in or affecting the business or properties of
the Company and its Subsidiaries and Restricted Affiliates, taken as a whole,
the effect of which is, in the sole judgment of the Underwriters, so material
and adverse as to make it impractical or inadvisable to proceed with the
purchase and the delivery of the Securities as contemplated by the Prospectus
(exclusive of any amendment or supplement thereto).
[(i) At the date of this Agreement, the Representatives shall have
received an agreement substantially in the form of Exhibit A hereto signed by
the persons listed on Schedule C hereto.]
[(j) In the event that the Underwriters exercise their option
provided in Section 2(b) hereof to purchase all or any portion of the Option
Securities, the representations and warranties of the Company contained herein
and the statements in any certificates furnished by the Company or any
subsidiary of the Company hereunder shall be true and correct as of each Date
of Delivery and, at the relevant Date of Delivery, the Underwriters shall have
received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the Chairman of the Board or the President and the
principal financial or accounting officer of the Company confirming
that the certificate delivered at the Closing Time pursuant to
Section 5(f) hereof remains true and correct as of such Date of
Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of Davis
Polk & Wardwell, counsel for the Company, together with the favorable
opinion of [ ], counsel for the Company and Swidler & Berlin,
regulatory counsel for the Company, each in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such
Date of Delivery.
(iii) Opinion of Counsel for Underwriters. The favorable opinion of
counsel for the Underwriters, dated such Date of Delivery, relating
to the Option Securities to be purchased on such Date of Delivery.
(iv) Bring-down Comfort Letter. A letter from
PricewaterhouseCoopers LLP, in form and substance satisfactory to the
Underwriters and dated such Date of Delivery, substantially in the
same form and substance as the letter furnished to the Underwriters
pursuant to
23
<PAGE>
Section 5(g) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than
five days prior to such Date of Delivery.]
(k) At the Closing Time and at each Date of Delivery, counsel for
the Underwriters shall have been furnished with such information, certificates
and documents as they may reasonably require for the purpose of enabling them
to pass upon the issuance and sale of the Securities as contemplated herein
and related proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all opinions and certificates mentioned above or
elsewhere in this Agreement shall be reasonably satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
[(l) The Company and the Trustee shall have entered into the
Indenture.]
If any condition specified in this Section 5 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Underwriters by notice to the Company, and such termination
shall be without liability of any party to any other party except as provided
in Section 4. Notwithstanding any such termination, the provisions of Sections
1, 6, 7 and 8 shall remain in effect. Notice of such cancellation shall be
given to the Company in writing or by telephone, facsimile transmission or
telegraph confirmed in writing. The Company shall furnish to the Underwriters
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Underwriters and counsel for the Underwriters shall
reasonably request.
Section 6. Indemnification. (a) The Company agrees to indemnify and
hold harmless the Underwriters, their respective affiliates, and each person,
if any, who controls any Underwriter or their respective affiliates within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, and their
respective directors, officers, employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact
contained in Registration Statement (or any amendment thereto), or
the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of
a material fact necessary in order to make the statements
24
<PAGE>
therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Sections 6(e) below)
any such settlement is effected with the written consent of the
Company; and
(iii) against any and all expenses whatsoever, as incurred (
including reasonable fees and disbursements of one counsel chosen by
[ ] (in addition to any local counsel)), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i)
or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by
any Underwriter through [ ] expressly for use in the Registration Statement
(or any amendment), including any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto).
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, each of its officers who signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
against any and all loss, liability, claim, damage and expense described in
the indemnity contained in subsection (a) of this Section 6, as incurred, but
only with respect untrue statements or omissions, or alleged untrue statements
or omissions, made in the Registration Statement (or any amendment thereto) or
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through [ ] expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
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<PAGE>
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, enclosing a
copy of all papers properly served on such indemnified party, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which
it may have otherwise than on account of this indemnity agreement. In the case
of parties indemnified pursuant to Section 6(a) above, one counsel to the
indemnified parties shall be selected by [ ], and, in the case of parties
indemnified pursuant to Section 6(b) above, counsel to the indemnified parties
shall be selected by the Company. An indemnifying party may participate at its
own expense in the defense of any such action; provided, that counsel to the
indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. Notwithstanding the
foregoing, if it so elects within a reasonable time after receipt of such
notice, an indemnifying party, jointly with any other indemnifying parties
receiving such notice, may assume the defense of such action with counsel
chosen by it and approved by the indemnified parties defendant in such action
(which approval shall not be unreasonably withheld), unless such indemnified
parties reasonably object to such assumption on the ground that there may be
legal defenses available to them which are different from or in addition to
those available to such indemnifying party. If an indemnifying party assumes
the defense of such action, the indemnifying parties shall not be liable for
any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall the indemnifying
parties be liable for the fees and expenses of more than one counsel (in
addition to local counsel) separate from their own counsel for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations
or circumstances. No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 6 or Section 7 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and the offer and sale of any Securities
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
26
<PAGE>
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as to which such indemnified party is liable pursuant to Section
6(a)or(b), as the case may be, such indemnifying party agrees that it shall be
liable for any settlement of the nature contemplated by Section 6(a)(ii)
effected without its written consent if (i) such settlement is entered into
more than 45 days after receipt by such indemnifying party of the aforesaid
request, (ii) such indemnifying party shall have received notice of the terms
of such settlement at least 30 days prior to such settlement being entered
into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
Section 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
bear to the aggregate initial offering price of the Securities.
The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among
other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission.
27
<PAGE>
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
Section 8. Representations, Warranties and Agreements To Survive
Delivery. All representations, warranties, indemnities, agreements and other
statements of the Company and its officers contained in or made pursuant to
this Agreement shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or controlling
person or by or on behalf of the Company, and shall survive delivery and
payment for the Securities to the Underwriters.
28
<PAGE>
Section 9. Termination of Agreement.
(a) Termination: General. The Underwriters may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing
Time if (i) there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the Prospectus
and on or prior to the Closing Time, any Material Adverse Change with respect
to the Company, the Subsidiaries and the Restricted Affiliates, taken as a
whole, and whether or not arising in the ordinary course of business, or (ii)
since the date of this Agreement and on or prior to the Closing Time, (A)
there has occurred any outbreak of hostilities or escalation of existing
hostilities or other national or international calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case, the
effect of which on the financial securities markets of the United States is
such as to make it, in the judgment of the Underwriters, impracticable to
market the Securities or to enforce contracts for the sale of the Securities,
or (B) trading in any securities of the Company has been suspended or limited
by the Commission or trading generally on the New York Stock Exchange, the
American Stock Exchange or the over-the-counter market has been suspended, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities generally have been required, by any such exchange or by
order of the Commission, the NASD or any other governmental authority or (C) a
general banking moratorium has been declared by either Federal or New York
authorities. As used in this Section 9(a), the term "Prospectus" means the
Prospectus in the form first used to confirm sales of the Securities.
(b) If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any party to any other party except
as provided in Section 4 hereof, provided that Sections 1, 6, 7, and 8 shall
survive such termination and remain in full force and effect.
(c) This Agreement may also terminate pursuant to the provisions of
Section 5, with the effect stated in such Section.
Section 10. Default by One of More of the Underwriters. If one or
more of the Underwriters shall fail at the Closing Time or a Date of Delivery
to purchase the Securities which it is obligated to purchase under this
Agreement (the "Defaulted Securities"), the other Underwriters shall have the
right, but not the obligation, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Underwriters shall not have completed such
arrangements within such 24-hour period, then:
29
<PAGE>
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of
the Underwriters to purchase and of the Company to sell the Option Securities
to be purchased and sold on such Date of Delivery shall terminate without
liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the Underwriters to purchase and the Company to sell the
relevant Option Securities, as the case may be, either the Underwriters or the
Company shall have the right to postpone Closing Time or the relevant Date of
Delivery, as the case may be, for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or Prospectus or
in any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
Section 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to [ ], attention: [ ]; and notices to the
Company shall be directed to RCN Corporation, 105 Carnegie Center, Princeton,
NJ 08540, attention: Chief Executive Officer, with a copy to [ ].
Section 12. Information Supplied by the Underwriters. The statements
set forth in the [ ]
sections and under the heading "Underwriting" in the Prospectus (to the extent
such statements relate to the Underwriters) constitute the only information
furnished by the Underwriters to the Company for the purposes of Sections 1
and 6 hereof.
30
<PAGE>
Section 13. Parties. This Agreement shall inure to the benefit of and
be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters, their respective affiliates and the Company and its successors
and legal representatives and the controlling persons and officers, directors,
employees and agents referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under, by
virtue of or in respect of this Agreement or any provision herein contained.
This Agreement and all conditions and provisions hereof are intended to be for
the sole and exclusive benefit of the Underwriters their respective affiliates
and the Company and its successors and legal representatives, and said
controlling persons and officers, directors, employees and agents and their
heirs and legal representatives, and said controlling persons and officers,
directors, employees and agents and their heirs and legal representatives, and
for the benefit of no other person, firm or corporation. No purchaser of
Securities from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
Section 14. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
Specified times of day refer to New York time.
Section 15. Counterparts. This Agreement may be executed in one or
more counterparts and, when each party has executed a counterpart, all such
counterparts taken together shall constitute one and the same agreement.
[Signature page follows]
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement among the Underwriters and the Company in accordance with its terms.
Very truly yours,
RCN CORPORATION
By:_______________________________
Name:
Title:
Confirmed and accepted as of the date first above written:
By: _______________________________
By: _______________________________
Name:
Title:
32
<PAGE>
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
Total.........................................................................
<PAGE>
SCHEDULE B
RCN CORPORATION
Common Stock and Preferred Stock
(Par Value $1.00 Per Share)
1. The initial public offering price for the Securities, determined
as provided in said Section 2, shall be $[ ].
2. The purchase price for the Securities to be paid by the several
Underwriters shall be $[ ], being an amount equal to the initial public
offering price set forth above less [ ][; provided that the purchase price per
share for any Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities.]
<PAGE>
[Form of lock-up from directors, officers or other stockholders in connection
with offerings of common stock pursuant to Section 5(j)]
Exhibit A
, 199
Dear Sirs:
The undersigned, a [stockholder/an officer and/or director] of RCN
Corporation, a Delaware corporation (the "Company"), understands that [ ]
propose to enter into a Underwriting Agreement (the "Underwriting Agreement")
with the Company providing for the public offering of shares (the
"Securities") of the Company's common stock, par value $1.00 per share (the
"Common Stock"). In recognition of the benefit that such an offering will
confer upon the undersigned and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
agrees with each underwriter to be named in the Underwriting Agreement that,
during a period of 90 days from the date of the Underwriting Agreement, the
undersigned will not, without the prior written consent of the lead
Underwriters, directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer any shares of the Company's Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise.
Very truly yours,
Signature:_________________________
Print Name:
Exhibit 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
of
RCN CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, the undersigned, John J. Jones, Executive Vice President, General
Counsel and Corporate Secretary, and Bruce C. Godfrey, Executive Vice
President and Chief Financial Officer, of RCN Corporation, a Delaware
corporation (hereinafter called the "Corporation"), pursuant to the provisions
of Sections 103 and 151 of the General Corporation Law of the State of
Delaware, do hereby make this Certificate of Designations and do hereby state
and certify that pursuant to the authority expressly vested in the Board of
Directors of the Corporation by the Certificate of Incorporation, the Board of
Directors duly adopted the following resolutions:
RESOLVED, that, pursuant to Article FOURTH of the Certificate of
Incorporation (which authorizes 25,000,000 shares of preferred stock, $1.00
par value ("Preferred Stock")), the Board of Directors hereby fixes the
powers, designations, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions, of
a series of Preferred Stock.
RESOLVED, that each share of such series of Preferred Stock shall
rank equally in all respects and shall be subject to the following provisions:
1. Number and Designation. 708,000 shares of the Preferred Stock of
the Corporation shall be designated as Series A 7% Senior Convertible
Preferred Stock (the "Series A Preferred Stock") (including 458,000 shares of
Series A Preferred Stock reserved exclusively for the payment of dividends
pursuant to paragraph 4).
2. Definitions. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Additional Amount" shall have the meaning set forth in paragraph 4(a)
hereof.
<PAGE>
"Affiliate" means, with respect to any specified person, any other
person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified person. For the
purposes of this definition, "control" when used with respect to any person
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the terms "affiliated," "controlling," and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in New
York City, New York generally are authorized or required by law or other
governmental actions to close.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting and/or non-voting) of such person's capital
stock, whether outstanding on the Issue Date or issued after the Issue Date,
and any and all rights (other than any evidence of indebtedness), warrants or
options exchangeable for or convertible into such capital stock.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), excluding the Kiewit Holders, is or becomes
the "beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Corporation; or
(b) the Corporation consolidates with, or merges with or into, another person
or sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates
with, or merges with or into the Corporation, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Corporation is
converted into or exchanged for cash, securities or other property, other than
any such transaction where (i) the outstanding Voting Stock of the Corporation
is converted into or exchanged for Voting Stock of the surviving or transferee
corporation or its parent corporation and/or cash, securities or other
property in an amount which could be paid by the Corporation under the terms
of the Corporation's credit and financing agreements and (ii) immediately
after such transaction no "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), excluding the Kiewit
2
<PAGE>
Holders, is the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total Voting Stock of
the surviving or transferee corporation, as applicable; or (c) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason (other than by action of the Kiewit Holders) to
constitute a majority of the Board of Directors then in office.
"Common Stock" means the Corporation's common stock, par value
$1.00 per share.
"Current Market Price" means the average of the daily Market Prices
of the Common Stock for ten consecutive trading days immediately preceding the
date for which such value is to be computed.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated
thereunder.
"Issue Date" means the original date of issuance of shares of Series
A Preferred Stock.
"Kiewit Holders" means Peter Kiewit Sons Inc., Level 3
Communications, Inc. and Level 3 Telecom Holdings, Inc. and any of their
respective controlled Affiliates.
"Liquidation Preference" is an amount equal to $1,000.00 per share of
Series A Preferred Stock.
"Market Price" means, with respect to the Common Stock, on any given
day, (i) the price of the last trade, as reported on the Nasdaq National
Market, not identified as having been reported late to such system, or (ii) if
the Common Stock is so traded, but not so quoted, the average of the last bid
and ask prices, as those prices are reported on the Nasdaq National Market, or
(iii) if the Common Stock is not listed or authorized for trading on the
Nasdaq National Market or any comparable system, the average of the closing
bid and asked prices as furnished by two members of the National Association
of Securities Dealers, Inc. selected
3
<PAGE>
from time to time by the Corporation for that purpose. If the Common Stock is
not listed and traded in a manner that the quotations referred to above are
available for the period required hereunder, the Market Price per share of
Common Stock shall be deemed to be the fair value per share of such security
as determined in good faith by the Board of Directors of the Corporation.
"Special Amount" with respect of any share of Series A Preferred
Stock shall mean all dividends and other amounts which have become payable in
respect of such share under paragraph 4(a) but which have not been paid. The
Special Amount with respect to any such share shall be reduced by the amount
of any such dividends and other amounts actually paid in respect of such share
under paragraph 4(c) (including any such amounts paid in shares of Series A
Preferred Stock pursuant to paragraph 4(f)).
"Voting Stock" means, with respect to any person, the Capital Stock
of any class or kind ordinarily having the power to vote for the election of
directors or other members of the governing body of such person.
3. Rank. (a) Any class or series of stock of the Corporation
shall be deemed to rank:
(i) prior to the Series A Preferred Stock, either as to
the payment of dividends or other amounts or as to
distribution of assets upon liquidation, dissolution or
winding up, or both, if the holders of such class or series
shall be entitled by the terms thereof to the receipt of
dividends or other amounts and of amounts distributable upon
liquidation, dissolution or winding up, in preference or
priority to the holders of Series A Preferred Stock ("Senior
Securities");
(ii) on a parity with the Series A Preferred Stock,
either as to the payment of dividends or other amounts or as
to distribution of assets upon liquidation, dissolution or
winding up, or both, whether or not the dividend rates,
dividend payment dates or redemption or liquidation prices
per share thereof be different from those of the Series A
Preferred Stock, if the holders of the Series A Preferred
Stock and of such class of stock or series shall be entitled
by the terms thereof to the receipt of dividends or other
amounts or of amounts distributable upon liquidation,
dissolution or winding up, or both, in proportion to their
respective amounts of accrued and unpaid dividends per share
or liquidation preferences (including, but not limited to
preferences as to payment of dividends or other amounts
distributable upon liquidation), without
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preference or priority one over the other and such class of
stock or series is not a class of Senior Securities ("Parity
Securities"); and
(iii) junior to the Series A Preferred Stock, either as
to the payment of dividends or as to the distribution of
assets upon liquidation, dissolution or winding up, or both,
if such stock or series shall be Common Stock or if the
holders of the Series A Preferred Stock shall be entitled by
the terms thereof to receipt of dividends or other amounts,
and of amounts distributable upon liquidation, dissolution
or winding up, in preference or priority to the holders of
shares of such stock or series (including, but not limited
to preferences as to payment of dividends or other amounts
distributable upon liquidation) ("Junior Securities").
(b) The respective definitions of Senior Securities, Junior
Securities and Parity Securities shall also include any rights or
options exercisable or exchangeable for or convertible into any of
the Senior Securities, Junior Securities and Parity Securities, as
the case may be.
(c) The Series A Preferred Stock shall be subject to the creation of
Junior Securities and Parity Securities.
4. Dividends and Additional Amounts. (a) The holders of shares of
Series A Preferred Stock shall be entitled to receive with respect to each
share of Series A Preferred Stock, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends,
dividends at a rate per annum equal to seven percent (7%) of the Liquidation
Preference per share, and an additional amount at a rate per annum equal to
seven percent (7%) of the Special Amount with respect to any share of Series A
Preferred Stock (an "Additional Amount"), if any, to be paid in accordance
with the terms of this Section 4. Such dividends and Additional Amounts shall
be cumulative from the Issue Date and shall be payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year (unless such day
is not a Business Day, in which event such dividends and Additional Amounts
shall be payable on the next succeeding Business Day) (each such date being a
"Dividend Payment Date" and each such quarterly period being a "Dividend
Period"). Each such dividend and Additional Amount shall be payable to the
holders of record of shares of the Series A Preferred Stock as they appear on
the share register of the Corporation on the corresponding Record Date. As
used herein, the term "Record Date" means, with respect to the dividend
payable on March 31, June 30, September 30 and December 31, respectively of
each year, the preceding March 15, June 15, September 15 and December 15, or
such other record date, not more
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<PAGE>
than 60 days or less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board of Directors.
(b) The amount of dividends and Additional Amounts payable for each
full Dividend Period for the Series A Preferred Stock shall be computed by
dividing the annual seven percent (7%) rate by four. The amount of dividends
and Additional Amounts payable for the initial Dividend Period, or any other
period shorter or longer than a full Dividend Period, on the Series A
Preferred Stock shall be computed on the basis of twelve 30-day months and a
360-day year. Holders of shares of Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in
excess of amounts payable under Section 4(a) hereof (including Special
Amounts), on the Series A Preferred Stock. Except as expressly provided
herein, no interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series A Preferred Stock
that may be in arrears.
(c) Accrued and unpaid Special Amounts for any past Dividend Periods
may be declared and paid on any subsequent Dividend Payment Date, to holders
of record on the corresponding Record Date.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividend, except any dividend paid to effectuate a stock split
and except as described in the next succeeding sentence, shall be declared or
paid or set apart for payment on any Parity Securities, nor shall any Parity
Securities be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Corporation, directly or
indirectly (except by conversion into or exchange for Parity Securities or
Junior Securities), unless in each case all Special Amounts have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Series A Preferred Stock
for all Dividend Periods terminating on or prior to the date of payment of the
dividend on such class or series of Parity Securities. When Special Amounts
are not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all Special Amounts and Additional Amounts declared upon shares of
the Series A Preferred Stock and all dividends and additional amounts declared
upon any other class or series of Parity Securities shall be declared ratably
in proportion to the respective amounts of Special Amounts and Additional
Amounts accumulated and unpaid on the Series A Preferred Stock and dividends
and additional amounts accumulated and unpaid on such Parity Securities.
(e) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in
shares of,
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or to effectuate a stock split on, or options, warrants or rights to subscribe
for or purchase shares of, Junior Securities) shall be declared or paid or set
apart for payment or other distribution declared or made upon Junior
Securities, nor shall any Junior Securities be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition of
shares of Common Stock made for purposes of an employee incentive or benefit
plan of the Corporation or any subsidiary) (any such dividend, distribution,
redemption or purchase being hereinafter referred to as a "Junior Securities
Distribution") for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such
stock) by the Corporation, directly or indirectly (except by conversion into
or exchange for Junior Securities), unless in each case (i) all Special
Amounts on all outstanding shares of the Series A Preferred Stock and accrued
and unpaid dividends and additional amounts on any other Parity Securities
shall have been paid or set apart for payment for all past Dividend Periods
with respect to the Series A Preferred Stock and all past dividend periods
with respect to such Parity Securities and (ii) sufficient funds shall have
been paid or set apart for the payment of the dividend and Additional Amount
for the current Dividend Period with respect to the Series A Preferred Stock
and the current dividend period with respect to such Parity Securities.
(f) The Corporation may pay accrued dividends (including accrued
and unpaid dividends), Additional Amounts (including accrued and unpaid
Additional Amounts) , if any, and Special Amounts at its election, in cash or
shares of Series A Preferred Stock, or any combination thereof. The number of
shares of Series A Preferred Stock to be issued in circumstances when
dividends, Additional Amounts or Special Amounts are paid with additional
shares of Series A Preferred Stock will equal the cash amount of the dividend,
Additional Amount, or Special Amount, as the case may be, payable (but for the
operation of this Section 4(f)), divided by the Liquidation Preference,
rounded to the nearest full share, up or down, after taking into account all
shares of Series A Preferred Stock owned by the holder thereof, provided that
if the resulting fractional share held by such holder equals one-half of a
share of Series A Preferred Stock, such fractional share shall be rounded up
to the nearest full share.
5. Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for the
holders of Junior Securities, the holders of the shares of Series A Preferred
Stock shall be entitled to receive with respect to each share of Series A
Preferred Stock an amount in cash equal to the Liquidation Preference, plus
the Special Amount in respect of such share, plus an amount equal to all
dividends and the Additional Amount accrued and unpaid thereon from the last
Dividend Payment Date to the date of final distribution to
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such holders, but such holders shall not be entitled to any further payment.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, shall be insufficient to pay
in full the preferential amount aforesaid and liquidating payments on all
Parity Securities, then such assets, or the proceeds thereof, shall be
distributed among the holders of shares of Series A Preferred Stock and all
such other Parity Securities ratably in accordance with the respective amounts
that would be payable on such shares of Preferred Stock and any such other
Parity Securities if all amounts payable thereon were paid in full. For the
purposes of this paragraph 5, (i) a consolidation or merger of the Corporation
with one or more corporations, or (ii) a sale or transfer of all or
substantially all of the Corporation's assets, shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.
(b) Subject to the rights of the holders of any Parity Securities,
after payment shall have been made in full to the holders of the Series A
Preferred Stock, as provided in this paragraph 5, any other series or class or
classes of Junior Securities shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of the Series A
Preferred Stock and any Parity Securities shall not be entitled to share
therein.
6. Redemption. (a) The Series A Preferred Stock shall not be
redeemable by the Corporation prior to March 31, 2003. On and after March 31,
2003, to the extent the Corporation shall have funds legally available for
such payment, the Corporation may redeem at its option shares of Series A
Preferred Stock, at any time in whole or from time to time in part, at a
redemption price per share equal to the Liquidation Preference, plus the
Special Amount in respect of such share, plus an amount equal to all dividends
and the Additional Amount accrued and unpaid thereon from the last Dividend
Payment Date to the date fixed for redemption, without interest.
(b) To the extent the Corporation shall have funds legally available
for such payment, on March 31, 2014, the Corporation shall redeem all
outstanding shares of the Series A Preferred Stock, if any, at a redemption
price per share in cash equal to the Liquidation Preference, plus the Special
Amount in respect of such share, plus an amount equal to all dividends and the
Additional Amount accrued and unpaid thereon from the last Dividend Payment
Date to such date, without interest.
(c) Shares of Series A Preferred Stock which have been issued and
reacquired in any manner, including shares purchased or redeemed, shall (upon
compliance with any applicable provisions of the laws of the State of
Delaware)
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<PAGE>
have the status of authorized and unissued shares of the class of Preferred
Stock undesignated as to series and may be redesignated and reissued as part
of any series of the Preferred Stock; provided that no such issued and
reacquired shares of Series A Preferred Stock shall be reissued or sold as
Series A Preferred Stock.
(d) If the Corporation is unable or shall fail to discharge its
obligation to redeem all outstanding shares of Series A Preferred Stock
pursuant to paragraph 6(b) (the "Mandatory Redemption Obligation"), the
Mandatory Redemption Obligation shall be discharged as soon as the Corporation
is able to discharge such Mandatory Redemption Obligation. If and so long as
any Mandatory Redemption Obligation with respect to the Series A Preferred
Stock shall not be fully discharged, the Corporation shall not (i) directly or
indirectly, redeem, purchase, or otherwise acquire any Parity Security or
discharge any mandatory or optional redemption, sinking fund or other similar
obligation in respect of any Parity Securities (except in connection with a
redemption, sinking fund or other similar obligation to be satisfied pro rata
with the Series A Preferred Stock) or (ii) declare or make any Junior
Securities Distribution, or, directly or indirectly, discharge any mandatory
or optional redemption, sinking fund or other similar obligation in respect of
any Junior Securities.
7. Procedure for Redemption. (a) In the event that fewer than all
the outstanding shares of Series A Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined by the Board of Directors
and the shares to be redeemed shall be selected pro rata (with any fractional
shares being rounded to the nearest whole share).
(b) In the event the Corporation shall redeem shares of Series A
Preferred Stock, notice of such redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 days nor more than 60 days prior to
the redemption date, to each holder of record of the shares to be redeemed at
such holder's address as the same appears on the stock register of the
Corporation; provided that neither the failure to give such notice nor any
defect therein shall affect the validity of the giving of notice for the
redemption of any share of Series A Preferred Stock to be redeemed except as
to the holder to whom the Corporation has failed to give said notice or except
as to the holder whose notice was defective. Each such notice shall state: (i)
the redemption date; (ii) the number of shares of Series A Preferred Stock to
be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of shares to be redeemed from such holder; (iii) the
redemption price; (iv) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price; and (v) that
dividends and Additional Amounts on the shares to be redeemed will cease to
accrue on such redemption date.
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(c) Notice having been mailed as aforesaid, from and after the
redemption date, dividends and Additional Amounts on the shares of Series A
Preferred Stock so called for redemption shall cease to accrue, and all rights
of the holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price) shall cease. Upon surrender
in accordance with said notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such share shall
be redeemed by the Corporation at the redemption price aforesaid. In case
fewer than all the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
8. Conversion. (a) Subject to the provisions of this paragraph 8,
the holders of the shares of Series A Preferred Stock shall have the right, at
any time and from time to time, at such holder's option, to convert any or all
outstanding shares (and fractional shares) of Series A Preferred Stock, in
whole or in part, into fully paid and non-assessable shares of Common Stock.
The number of shares of Common Stock deliverable upon conversion of a share of
Series A Preferred Stock, adjusted as hereinafter provided, is referred to
herein as the "Conversion Ratio." The Conversion Ratio as of any date shall be
an amount equal to the sum of (i) the Liquidation Preference, (ii) the Special
Amount and (iii) an amount equal to all dividends and the Additional Amount
accrued thereon from the last Dividend Payment Date to such date, divided by
$39.00, subject to adjustment from time to time pursuant to paragraph 8(g)
hereof. Notwithstanding any call for redemption pursuant to paragraph 6, the
right to convert shares so called for redemption shall terminate at the close
of business on the date immediately preceding the date fixed for such
redemption unless the Corporation shall default in making payment of the
amount payable upon such redemption.
(b) (i) In order to exercise the conversion privilege, the
holder of the shares of Series A Preferred Stock to be converted
shall surrender the certificate representing such shares at the
office of the Corporation, with a written notice of election to
convert completed and signed, specifying the number of shares to be
converted. Unless the shares issuable on conversion are to be issued
in the same name as the name in which such shares of Series A
Preferred Stock are registered, each share surrendered for conversion
shall be accompanied by instruments of transfer, in form satisfactory
to the Corporation, duly executed by the holder or the holder's duly
authorized attorney, and an amount sufficient to pay any transfer or
similar tax.
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(ii) As promptly as practicable after the surrender by the holder
of the certificates for shares of Series A Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver to such
holder, or on the holder's written order to the holder's transferee,
(x) a certificate or certificates for the whole number of shares of
Common Stock issuable upon the conversion of such shares in
accordance with the provisions of this paragraph 8, (y) any cash
adjustment required pursuant to Section 8(f), and (z) in the event of
a conversion in part, a certificate or certificates for the whole
number of Preferred Shares not being so converted.
(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for shares of Series A Preferred Stock shall have been
surrendered and such notice received by the Corporation as aforesaid,
and the person in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder of record of the shares of
Common Stock represented thereby at such time on such date and such
conversion shall be into a number of whole shares of Common Stock
equal to the product of the number of shares of Series A Preferred
Stock surrendered times the Conversion Ratio in effect at such time
on such date. All shares of Common Stock delivered upon conversion of
the Series A Preferred Stock will upon delivery be duly and validly
issued and fully paid and non-assessable, free of all liens and
charges and not subject to any preemptive rights. Upon the surrender
of certificates representing the shares of Series A Preferred Stock
to be converted, the shares to be so converted shall no longer be
deemed to be outstanding and all rights of a holder with respect to
such shares surrendered for conversion shall immediately terminate
except the right to receive the Common Stock and other amounts
payable pursuant to this paragraph 8 and a certificate or
certificates representing the shares of Series A Preferred Stock not
converted.
(c) (i) Upon delivery to the Corporation by a holder of shares
of Series A Preferred Stock of a notice of election to convert, the
right of the Corporation to redeem such shares of Series A Preferred
Stock shall terminate, regardless of whether a notice of redemption
has been mailed as aforesaid.
(ii) If a holder of Series A Preferred Stock delivers to the
Corporation a notice of election to convert, the Series A Preferred
Stock to be converted shall cease to accrue dividends and Additional
Amounts pursuant to paragraph 4 but shall continue to be entitled to
receive pro rata
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dividends and Additional Amounts for the period from the last
Dividend Payment Date to the date of delivery of the notice of
election to convert in preference to and in priority over any
dividends on any Junior Securities.
(iii) Except as provided above and in paragraph 8(g), the
Corporation shall make no payment or adjustment for accrued and
unpaid dividends or Additional Amounts on shares of Series A
Preferred Stock, whether or not in arrears, on conversion of such
shares or for dividends in cash on the shares of Common Stock issued
upon such conversion.
(d) (i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number
of its authorized but unissued shares of Common Stock as shall be
required for the purpose of effecting conversions of the Series A
Preferred Stock.
(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the
Series A Preferred Stock, the Corporation shall comply with all
applicable federal and state laws and regulations which require
action to be taken by the Corporation.
(e) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of the Series A Preferred Stock pursuant
hereto; provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the holder of
the Series A Preferred Stock to be converted and no such issue or delivery
shall be made unless and until the person requesting such issue or delivery
has paid to the Corporation the amount of any such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid.
(f) In connection with the conversion by a holder of any shares of
Series A Preferred Stock, no fractions of shares of Common Stock shall be
required to be issued to such holder, but in lieu thereof the Corporation
shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Market Price per
share of Common Stock on the business day on which such shares of Series A
Preferred Stock are deemed to have been converted.
(g) (i) In case the Corporation shall at any time after the date of
issue of the Series A Preferred Stock (A) declare a dividend or make a
distribution on Common Stock payable in Common Stock, (B) subdivide or split
the outstanding Common Stock, (C) combine or reclassify the outstanding Common
Stock into a
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smaller number of shares, (D) issue any shares of its Capital Stock in a
reclassification of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing corporation), or (E) consolidate with, or merge with or into, any
other Person, the Conversion Ratio in effect at the time of the record date
for such dividend or distribution or of the effective date of such
subdivision, split, combination, consolidation, merger or reclassification
shall be proportionately adjusted so that the conversion of the Series A
Preferred Stock after such time shall entitle the holder to receive the
aggregate number of shares of Common Stock or other securities of the
Corporation (or shares of any security into which such shares of Common Stock
have been combined, consolidated, merged or reclassified pursuant to clause
8(g)(i)(C), 8(g)(i)(D) or 8(g)(i)(E) above) which, if this Series A Preferred
Stock had been converted immediately prior to such time, such holder would
have owned upon such conversion and been entitled to receive by virtue of such
dividend, distribution, subdivision, split, combination, consolidation, merger
or reclassification, assuming such holder of Common Stock of the Corporation
(x) is not a Person with which the Corporation consolidated or into which the
Corporation merged or which merged into the Corporation or to which such
recapitalization, sale or transfer was made, as the case may be ("constituent
person"), or an affiliate of a constituent person and (y) failed to exercise
any rights of election as to the kind or amount of securities, cash and other
property receivable upon such reclassification, change, consolidation, merger,
recapitalization, sale or transfer (provided, that if the kind or amount of
securities, cash and other property receivable upon such reclassification,
change, consolidation, merger, recapitalization, sale or transfer is not the
same for each share of Common Stock of the Corporation held immediately prior
to such reclassification, change, consolidation, merger, recapitalization,
sale or transfer by other than a constituent person or an affiliate thereof
and in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this subparagraph 8(g) the
kind and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale or
transfer by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). Such
adjustment shall be made successively whenever any event listed above shall
occur.
(ii) In case the Corporation shall issue or sell any Common Stock
(other than Common Stock issued (A) pursuant to the Corporation's
existing or future stock option plans or pursuant to any other
existing or future Common Stock-related director or employee
compensation plan of the Corporation approved by the Board of
Directors, (B) as consideration for the acquisition of a business or
of assets, (C) in a firmly committed underwritten public offering,
(D) to the Corporation's joint venture
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partners in exchange for interests in the relevant joint venture or
(E) upon exercise or conversion of any security the issuance of which
caused an adjustment under paragraph 8(g)(i) or 8(g)(iii) hereof or
the issuance of which did not require adjustment hereunder) without
consideration or for a consideration per share less than the Current
Market Price on the date of such issuance, or shall issue securities
convertible into Common Stock having a conversion price per share
less than the Current Market Price at the date of issuance of such
convertible security, the Conversion Ratio to be in effect after such
issuance or sale shall be determined by multiplying the Conversion
Ratio in effect immediately prior to such issuance or sale by a
fraction, (1) the numerator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to such
issuance or sale and the number of additional shares of Common Stock
to be issued or sold (or, in the case of convertible securities,
issued on conversion), and (2) the denominator of which shall be the
sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale and (y) the number of
shares of Common Stock which the aggregate consideration receivable
by the Corporation for the total number of additional shares of
Common Stock so issued or sold (or issuable on conversion) would
purchase at the Current Market Price in effect immediately prior to
such issuance or sale. In case any portion of the consideration to be
received by the Corporation shall be in a form other than cash, the
fair market value of such noncash consideration shall be utilized in
the foregoing computation. Such fair market value shall be determined
in good faith by the Board of Directors.
(iii) In case the Corporation shall fix a record date for the
issuance of rights, options or warrants (other than rights, options
or warrants issued under a shareholders' rights plan) to the holders
of its Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities
convertible into shares of Common Stock) at a price per share of
Common Stock (or having a conversion price per share of Common Stock,
if a security convertible into shares of Common Stock) less than the
Current Market Price on such record date, the maximum number of
shares of Common Stock issuable upon exercise of such rights, options
or warrants (or conversion of such convertible securities) shall be
deemed to have been issued and outstanding as of such record date and
the Conversion Ratio shall be adjusted pursuant to paragraph 8(g)(ii)
hereof, as though such maximum number of shares of Common Stock had
been so issued for an aggregate consideration payable by the holders
of such rights, options, warrants or convertible securities prior to
their receipt of such shares of Common Stock. In case any portion of
such consideration shall be in a form other than cash, the fair
market
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value of such noncash consideration shall be determined as set forth
in paragraph 8(g)(ii) hereof. Such adjustment shall be made
successively whenever such record date is fixed; and in the event
that such rights, options or warrants are not so issued or expire in
whole or in part unexercised, or in the event of a change in the
number of shares of Common Stock to which the holders of such rights,
options or warrants are entitled (other than pursuant to adjustment
provisions therein comparable to those contained in this paragraph
8(g)), the Conversion Ratio shall again be adjusted as follows: (A)
in the event that all of such rights, options or warrants expire
unexercised, the Conversion Ratio shall be the Conversion Ratio that
would then be in effect if such record date had not been fixed; (B)
in the event that less than all of such rights, options or warrants
expire unexercised, the Conversion Ratio shall be adjusted pursuant
to paragraph 8(g)(ii) to reflect the maximum number of shares of
Common Stock issuable upon exercise of such rights, options or
warrants that remain outstanding (without taking into effect shares
of Common Stock issuable upon exercise of rights, options or warrants
that have lapsed or expired); and (C) in the event of a change in the
number of shares of Common Stock to which the holders of such rights,
options or warrants are entitled, the Conversion Ratio shall be
adjusted to reflect the Conversion Ratio which would then be in
effect if such holder had initially been entitled to such changed
number of shares of Common Stock. Notwithstanding anything herein to
the contrary, no further adjustment to the Conversion Ratio shall be
made upon the issuance or sale of Common Stock upon the exercise of
any rights, options or warrants to subscribe for or purchase Common
Stock, if any adjustment in the Conversion Ratio was made or required
to be made upon the record date for the issuance or sale of such
rights, options or warrants under this clause 8(g)(iii).
(iv) In case the Corporation shall fix a record date for the
making of a distribution to holders of Common Stock (including any
such distribution made in connection with a consolidation or merger
in which the Corporation is the continuing corporation) of evidences
of indebtedness, assets or other property (other than (x) dividends
payable in Common Stock or rights, options or warrants referred to
in, and for which an adjustment is made pursuant to, paragraph
8(g)(i) or 8(g)(iii) hereof, (y) cash dividends paid from the
Corporation's retained earnings, or (z) distributions of stock or
assets having an aggregate fair market value of less than $25
million), the Conversion Ratio to be in effect after such record date
shall be determined by multiplying the Conversion Ratio in effect
immediately prior to such record date by a fraction, (A) the
numerator of which shall be the Current Market Price on such record
date, and (B) the denominator of which shall be the Current Market
Price on
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such record date, less the fair market value (determined as set forth
in paragraph 8(g)(ii) hereof) of the portion of the assets, other
property or evidence of indebtedness so to be distributed which is
applicable to one share of Common Stock. Such adjustments shall be
made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Conversion Ratio
shall again be adjusted to be the Conversion Ratio which would then
be in effect if such record date had not been fixed. In addition to
the foregoing, an adjustment to the Conversion Ratio shall be made in
respect of dividends and distributions paid in cash (excluding any
dividend or distribution in connection with the liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, and any cash that is distributed upon a merger,
consolidation or other transaction for which an adjustment pursuant
to paragraph 8(g)(i) is made) where the sum of (1) all such cash
dividends and distributions made within the preceding 12 months in
respect of which no adjustment has been made and (2) any cash and the
fair market value of other consideration paid in respect of any
repurchases of Common Stock by the Corporation or any of its
subsidiaries within the preceding 12 months in respect of which no
adjustment has been made, exceeds 12.5% of the Corporation's market
capitalization (being the product of the then Current Market Price of
the Common Stock times the aggregate number of shares of Common Stock
then outstanding on the record date for such distribution).
(v) No adjustment to the Conversion Ratio pursuant to
paragraphs 8(g)(ii), 8(g)(iii) or 8(g)(iv) above shall be required
unless such adjustment would require an increase or decrease of at
least 1% in the Conversion Ratio; provided however, that any
adjustments which by reason of this paragraph 8(g)(v) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this paragraph
8(g) shall be made to the nearest four decimal points.
(vi) In the event that, at any time as a result of the provisions
of this paragraph 8(g), a holder of Series A Preferred Stock upon
subsequent conversion shall become entitled to receive any shares of
Capital Stock of the Corporation other than Common Stock, the number
of such other shares so receivable upon conversion of Series A
Preferred Stock shall thereafter be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable
to the provisions contained herein.
16
<PAGE>
(h) All adjustments pursuant to this paragraph 8 shall be notified
to the holders of the Series A Preferred Stock and such notice shall be
accompanied by a schedule of computations of the adjustments
9. Change of Control. (a) Subject to paragraph 9(c) and 9(d) below,
upon the occurrence of a Change of Control (the date of such occurrence being
the "Change of Control Date"), the Corporation shall be required to make an
offer (the "Change of Control Obligation") to each holder of shares of Series
A Preferred Stock to repurchase of such holder's shares of Series A Preferred
Stock, or such portion thereof as may be determined by such holder, at a price
per share in cash equal to the Liquidation Preference plus the Special Amount
in respect of such share, plus an amount equal to all dividends and the
Additional Amount accrued and unpaid thereon from the last Dividend Payment
Date to the date of repurchase; provided, that the holders of Series A
Preferred Stock shall not be entitled to tender any Series A Preferred Stock
under this provision until such time as the Corporation has repurchased such
debt securities as are required to be repurchased by the Corporation upon such
event pursuant to Corporation's credit and financing agreements.
(b) Such offer to purchase (the "Change of Control Offer"), shall
take place on a Business Day (the "Change of Control Payment Date") not later
than 60 days following the Change of Control Date. Notice of a Change of
Control Offer shall be given to holders of the Series A Preferred Stock, not
less than 25 days nor more than 45 days before the Change of Control Payment
Date. The Change of Control Offer is required to remain open for at least 20
business days and until the close of business on the Change of Control Payment
Date.
(c) Notwithstanding the foregoing, the Corporation shall not be
required to make a Change of Control Offer following a Change of Control if a
third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements applicable to a Change of
Control Offer made by the Corporation and purchases all shares of Series A
Preferred Stock validly tendered and not withdrawn under such Change of
Control Offer.
(d) If the Corporation is required to make a Change of Control
Offer, the Corporation will comply with all applicable tender offer laws and
regulations, including, to the extent applicable, Section 14(e) and Rule 14e-1
under the Securities Exchange Act of 1934, and any other applicable securities
laws and regulations.
10. Voting Rights. (a) The holders of record of shares of Series A
Preferred Stock shall not be entitled to any voting rights except as
hereinafter provided in this paragraph 10 or as otherwise provided by law.
17
<PAGE>
(b) If and whenever six quarterly dividends or Additional Amounts
payable on the Series A Preferred Stock have not been paid in full or if the
Corporation shall have failed to discharge its Mandatory Redemption Obligation
or its Change of Control Obligation, the number of directors then constituting
the Board of Directors shall be increased by one and the holders of shares of
Series A Preferred Stock, voting as a single class, shall be entitled to elect
the additional director to serve on the Board of Directors at any annual
meeting of stockholders or special meeting held in place thereof, or at a
special meeting of the holders of the Series A Preferred Stock called as
hereinafter provided. Whenever all arrears in dividends and Special Amounts on
the Series A Preferred Stock then outstanding shall have been paid and
dividends and Additional Amounts thereon for the current quarterly dividend
period shall have been paid or declared and set apart for payment, or the
Company shall have fulfilled its Mandatory Redemption Obligation or Change of
Control Obligation, as the case may be, then the right of the holders of the
Series A Preferred Stock to elect such additional director shall cease (but
subject always to the same provisions for the vesting of such voting rights in
the case of any similar future arrearage in six quarterly dividends or failure
to fulfill any Mandatory Redemption Obligation or Change of Control
Obligation), and the term of office of any person elected as director by the
holders of the Series A Preferred Stock shall forthwith terminate and the
number of the Board of Directors shall be reduced accordingly. At any time
after voting power to elect a director shall have become vested and be
continuing in the holders of Series A Preferred Stock pursuant to this
paragraph, or if a vacancy shall exist in the office of a director elected by
the holders of Series A Preferred Stock, a proper officer of the Corporation
may, and upon the written request of the holders of record of at least
twenty-five percent (25%) of the shares of Series A Preferred Stock then
outstanding addressed to the Secretary of the Corporation shall, call a
special meeting of the holders of Series A Preferred Stock, for the purpose of
electing the director which such holders are entitled to elect. If such
meeting shall not be called by a proper officer of the Corporation within
twenty (20) days after personal service of said written request upon the
Secretary of the Corporation, or within twenty (20) days after mailing the
same within the United States by certified mail, addressed to the Secretary of
the Corporation at its principal executive offices, then the holders of at
least twenty-five percent (25%) of the outstanding shares of Series A
Preferred Stock may designate in writing one of their number to call such
meeting at the expense of the Corporation, and such meeting may be called by
the person so designated upon the notice required for the annual meeting of
stockholders of the Corporation and shall be held at the place for holding the
annual meetings of stockholders. Any holder of Series A Preferred Stock so
designated shall have, and the Corporation shall provide, access to the lists
of stockholders to be called pursuant to the provisions hereof.
18
<PAGE>
(c) Without the written consent of holders of a majority of the
outstanding shares of Series A Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series A Preferred Stock at a meeting of
the holders of Series A Preferred Stock called for such purpose, the
Corporation will not amend, alter or repeal any provision of the Certificate
of Incorporation or this Certificate of Designations so as to adversely affect
the preferences, rights or powers of the Series A Preferred Stock or to
authorize the issuance or issue of any additional shares of Series A Preferred
Stock; provided that any such amendment that changes any dividend or other
amount payable on or the liquidation preference of the Series A Preferred
Stock shall require the written consent of holders of two-thirds of the
outstanding shares of Series A Preferred Stock or the vote of holders of
two-thirds of the outstanding shares of Series A Preferred Stock at a meeting
of the holders of Series A Preferred Stock called for such purpose.
(d) Without the written consent of holders of a majority of the
outstanding shares of Series A Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series A Preferred Stock at a meeting of
such holders called for such purpose, the Corporation will not create,
authorize or issue any Senior Securities.
(e) Without the written consent of holders of a majority of the
outstanding shares of Series A Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series A Preferred Stock at a meeting of
the holders of Series A Preferred Stock called for such purpose, the
Corporation shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets
to, any person or adopt a plan of liquidation unless: either (1) the
Corporation is the surviving or continuing person and the Series A Preferred
Stock shall remain outstanding without any amendment that would adversely
affect the preferences, rights or powers of the Series A Preferred Stock or
(2) (i) the person (if other than the Corporation) formed by such
consolidation or into which the Corporation is merged or the person which
acquires by conveyance, transfer or lease the properties and assets of the
Corporation substantially as an entirety or in the case of a plan of
liquidation, the person to which assets of the plan of liquidation, the person
to which assets of the Corporation have been transferred, shall be a
corporation, partnership or trust organized and existing under the laws of the
United States or any State thereof or the District of Columbia and (ii) the
Series A Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or resulting person, having in
respect of such successor, transferee or resulting person, the same powers,
preferences and relative participating, optional or other special rights and
the qualifications, limitations or restrictions thereon, that the Series A
Preferred Stock had immediately prior to such transaction. For purposes
19
<PAGE>
of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a
single transaction or series of related transactions) of all or substantially
all of the properties or assets of one or more subsidiaries of the
Corporation, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Corporation, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Corporation.
(f) In exercising the voting rights set forth in this paragraph 10,
each share of Series A Preferred Stock shall have one vote per share, except
that when any other series of preferred stock shall have the right to vote
with the Series A Preferred Stock as a single class on any matter, then the
Series A Preferred Stock shall have with respect to such matters one vote per
$1,000 (or fraction thereof) of the aggregate Liquidation Preference plus
Special Amounts. Except as otherwise required by applicable law or as set
forth herein, the shares of Series A Preferred Stock shall not have any
relative, participating, optional or other special voting rights and powers
and the consent of the holders thereof shall not be required for the taking of
any corporate action.
11. Reports. So long as any of the Series A Preferred Stock is
outstanding, in the event the Corporation is not required to file quarterly
and annual financial reports with the Securities and Exchange Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act, the Corporation
will furnish the holders of the Series A Preferred Stock with reports
containing the same information as would be required in such reports.
12. General Provisions. (a) The term "Person" as used herein means
any corporation, limited liability company, partnership, trust, organization,
association, other entity or individual.
(b) The term "outstanding", when used with reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation or a
subsidiary.
(c) The headings of the paragraphs, subparagraphs, clauses and
subclauses of this Certificate of Designations are for convenience of
reference only and shall not define, limit or affect any of the provisions
hereof.
(d) Each holder of Series A Preferred Stock, by acceptance thereof,
acknowledges and agrees that payments of dividends, interest, premium and
principal on, and exchange, redemption and repurchase of, such securities by
the Corporation are subject to restrictions on the Corporation contained in
certain credit and financing agreements.
20
Exhibit 4.11
- -------------------------------------------------------------------------------
RCN CORPORATION, as Issuer
and
THE CHASE MANHATTAN BANK, as Trustee
------------------------------
INDENTURE
Dated as of
------------------------------
Reconciliation and tie between Trust Indenture Act of 1939,
as amended, and Indenture, dated as of
Trust Indenture Indenture
Act Section Section
--------------- ---------
ss. 310(a)(1) 6.05, 6.09
(a)(2) 6.05, 6.09
(a)(3) 6.05
(a)(4) 6.05
(b) 6.05, 6.08,
6.10
ss. 311(a) 6.07
(b) 6.07
(c) Not
Applicable
ss. 312(a) 3.06, 7.01
(b) 7.02
(c) 7.02
ss. 313(a) 7.03
(b) 7.03
(c) 7.03
(d) 7.03
ss. 314(a) 7.04, 10.09
(b) Not
Applicable
(c)(1) 1.04, 4.04,
10.05
(c)(2) 1.04, 4.04,
10.05
(d) Not
Applicable
ss. 315(a) 6.01(a),
10.05
(b) 6.02
(c) 6.01(b)
(d) 6.01(c)
(e) 5.14
ss. 316(a) (last sentence) 3.15
<PAGE>
(a)(1)(A) 5.12
(a)(1)(B) 5.13
(a)(2) Not
Applicable
(b) 5.08
ss. 317(a)(1) 5.03
(a)(2) 5.04
(b) 10.03
ss. 318(a) 1.08
ii
<PAGE>
TABLE OF CONTENTS
----------------------
<TABLE>
PAGE
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ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
<S> <C> <C>
SECTION 1.01. Definitions....................................................................1
SECTION 1.02. Other Definitions..............................................................8
SECTION 1.03. Rules of Construction..........................................................9
SECTION 1.04. Form of Documents Delivered to Trustee.........................................9
SECTION 1.05. Acts of Holders...............................................................10
SECTION 1.06. Notices, etc., to the Trustee and the Company.................................11
SECTION 1.07. Notice to Holders; Waiver.....................................................12
SECTION 1.08. Conflict with Trust Indenture Act.............................................12
SECTION 1.09. Effect of Headings and Table of Contents......................................13
SECTION 1.10. Successors and Assigns........................................................13
SECTION 1.11. Separability Clause...........................................................13
SECTION 1.12. Benefits of Indenture.........................................................13
SECTION 1.13. Governing Law.................................................................13
SECTION 1.14. No Recourse Against Others....................................................13
SECTION 1.15. Independence of Covenants.....................................................13
SECTION 1.16. Exhibits......................................................................13
SECTION 1.17. Counterparts..................................................................14
SECTION 1.18. Duplicate Originals...........................................................14
ARTICLE 2
SECURITY FORMS
SECTION 2.01. Form and Dating...............................................................14
ARTICLE 3
THE SECURITIES
SECTION 3.01. Amount Unlimited; Issuable in Series..........................................14
SECTION 3.02. Registrar and Paying Agent....................................................18
SECTION 3.03. Execution and Authentication..................................................18
SECTION 3.04. Denomination and Date of Securities; Payments of
Interest......................................................................20
<PAGE>
PAGE
-----
SECTION 3.05. Temporary Securities .........................................................21
SECTION 3.06. Transfer and Exchange.........................................................21
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen.........................................25
SECTION 3.08. Payment of Interest; Interest Rights Preserved................................26
SECTION 3.09. Persons Deemed Owners.........................................................27
SECTION 3.10. Cancellation..................................................................27
SECTION 3.11. Computation of Interest.......................................................28
SECTION 3.12. Legal Holidays................................................................28
SECTION 3.13. CUSIP and CINS Numbers........................................................28
SECTION 3.14. Paying Agent to Hold Money in Trust...........................................29
SECTION 3.15. Treasury Securities...........................................................29
SECTION 3.16. Deposits of Monies............................................................29
SECTION 3.17. Book-entry Provisions for Global Securities...................................29
SECTION 3.18. Series May Include Tranches...................................................31
ARTICLE 4
DEFEASANCE OR COVENANT DEFEASANCE
SECTION 4.01. Company's Option to Effect Defeasance or Covenant
Defeasance....................................................................31
SECTION 4.02. Defeasance and Discharge......................................................32
SECTION 4.03. Covenant Defeasance...........................................................32
SECTION 4.04. Conditions to Defeasance or Covenant Defeasance...............................33
SECTION 4.05. Deposited Money and U.S. Government Obligations To
Be Held in Trust; Other Miscellaneous Provisions..............................35
SECTION 4.06. Reinstatement.................................................................36
ARTICLE 5
REMEDIES
SECTION 5.01. Events of Default.............................................................36
SECTION 5.02. Acceleration of Maturity Rescission Annulment.................................38
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee...............39
SECTION 5.04. Trustee May File Proofs of Claims.............................................39
SECTION 5.05. Trustee May Enforce Claims Without Possession of Securities...................41
ii
<PAGE>
PAGE
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SECTION 5.06. Application of Money Collected................................................41
SECTION 5.07. Limitation on Suits...........................................................41
SECTION 5.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest..........................................................42
SECTION 5.09. Restoration of Rights and Remedies............................................42
SECTION 5.10. Rights and Remedies Cumulative................................................43
SECTION 5.11. Delay or Omission Not Waiver..................................................43
SECTION 5.12. Control by Majority...........................................................43
SECTION 5.13. Waiver of past Defaults.......................................................43
SECTION 5.14. Undertaking for Costs.........................................................44
SECTION 5.15. Waiver of Stay, Extension or Usury Laws.......................................44
SECTION 5.16. Unconditional Right of Holders to Receive Payment.............................45
ARTICLE 6
THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities...........................................45
SECTION 6.02. Notice of Defaults............................................................46
SECTION 6.03. Certain Rights of Trustee.....................................................46
SECTION 6.04. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.................................48
SECTION 6.05. Trustee and Agents May Hold Securities; Collections; Etc......................48
SECTION 6.06. Money Held in Trust...........................................................48
SECTION 6.07. Compensation and Indemnification of Trustee and Its
Prior Claim.................................................................48
SECTION 6.08. Conflicting Interests.........................................................49
SECTION 6.09. Corporate Trustee Required; Eligibility.......................................49
SECTION 6.10. Resignation and Removal; Appointment of Successor
Trustee.....................................................................50
SECTION 6.11. Acceptance of Appointment by Successor........................................51
SECTION 6.12. Merger, Conversion, Amalgamation, Consolidation or
Succession to Business......................................................52
ARTICLE 7
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. Preservation of Information; Company To Furnish Trustee
Names and Addresses of Holders..............................................53
SECTION 7.02. Communications of Holders.....................................................53
iii
<PAGE>
PAGE
----
SECTION 7.03. Reports by Trustee............................................................54
SECTION 7.04. Reports by Company............................................................54
ARTICLE 8
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC
SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms..........................55
SECTION 8.02. Successor Substituted.........................................................55
ARTICLE 9
SUPPLEMENTAL INDENTURES AND WAIVERS
SECTION 9.01. Supplemental Indentures, Agreements and Waivers
Without Consent of Holders..................................................56
SECTION 9.02. Supplemental Indentures, Agreements and Waivers with
Consent of Holders..........................................................57
SECTION 9.03. Execution of Supplemental Indentures, Agreements and
Waivers.....................................................................58
SECTION 9.04. Effect of Supplemental Indentures.............................................58
SECTION 9.05. Conformity with Trust Indenture Act...........................................59
SECTION 9.06. Reference in Securities to Supplemental Indentures............................59
SECTION 9.07. Record Date...................................................................59
SECTION 9.08. Revocation and Effect of Consents.............................................59
ARTICLE 10
COVENANTS
SECTION 10.01. Payment of Principal, Premium and Interest...................................59
SECTION 10.02. Maintenance of Office or Agency..............................................60
SECTION 10.03. Money for Security Payments to Be Held.......................................61
SECTION 10.04. Corporate Existence..........................................................62
SECTION 10.05. Compliance Certificates and Opinions.........................................62
ARTICLE 11
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharge of Indenture......................................63
SECTION 11.02. Application of Trust Money...................................................64
iv
<PAGE>
PAGE
----
ARTICLE 12
REDEMPTION
SECTION 12.01. Applicability of Article......................................................64
SECTION 12.02. Notices to the Trustee........................................................65
SECTION 12.03. Selection of Securities to Be Redeemed........................................65
SECTION 12.04. Notice of Redemption..........................................................65
SECTION 12.05. Effect of Notice of Redemption................................................67
SECTION 12.06. Deposit of Redemption Price...................................................67
SECTION 12.07. Securities Redeemed or Purchased in Part......................................67
SECTION 12.08. Mandatory and Optional Sinking Funds..........................................68
</TABLE>
v
<PAGE>
INDENTURE, dated as of ____ _, 199_, between RCN CORPORATION, a
corporation incorporated under the laws of the State of Delaware (the
"Company"), as issuer, and The Chase Manhattan Bank, a New York banking
Corporation as trustee (the "Trustee").
RECITALS
The Company has duly authorized the issue from time to time of its
debentures, notes or other evidences of indebtedness to be issued in one or
more series (the "Securities"), up to such principal amount or amounts as may
from time to time be authorized in accordance with the terms of this Indenture
and to provide, among other things, for the authentication, delivery and
administration thereof, the Company has duly authorized the execution and
delivery of this Indenture.
All things necessary have been done to make this Indenture a valid
agreement of each of the Company and the Trustee in accordance with the terms
hereof.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchases of the
Securities by the holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of the respective holders from time to
time of the Securities or of any and all series thereof and of the coupons, if
any, appertaining thereto as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01. Definitions.
"Affiliate" of any specified person means any other person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified person. For the purposes of this
definition, "control" when used with respect to any person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Authorized Newspaper" means a newspaper (which, in the case of The
City of New York, will, if practicable, be The Wall Street Journal (Eastern
<PAGE>
Edition) and in the case of London, will, if practicable, be the Financial
Times (London Edition) and published in an official language of the country of
publication customarily published at least once a day for at least five days
in each calendar week and of general circulation in The City of New York or
London, as applicable. If it shall be impractical in the opinion of The
Trustee to make any publication of any notice required hereby in an Authorized
Newspaper, any publication or other notice in lieu thereof which is made or
given with the approval of the Trustee shall constitute a sufficient
publication of such notice.
"Bankruptcy Law" means Title 11, United States Code or any similar
federal or state law relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization or relief of debtors or the law of any
other jurisdiction relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization or relief of debtors or any amendment
to, succession to or change in any such law.
"Bankruptcy Order" means any court order made in a proceeding
pursuant to or within the meaning of any Bankruptcy Law, containing an
adjudication of bankruptcy or insolvency, or providing for liquidation,
receivership, winding-up, dissolution, "concordate" or reorganization, or
appointing a Custodian of a debtor or of all or any substantial part of a
debtor's property, or providing for the staying, arrangement, adjustment or
composition of indebtedness or other relief of a debtor.
"Board" means the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New
York, New York are authorized or obligated by law, regulation or executive
order to close.
"Common Stock" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however
designated and whether voting or non-voting) of such person's common stock
whether outstanding at the Issue Date, and includes, without limitation, all
series and classes of such common stock.
2
<PAGE>
"Company" means the person named as the "Company" in the first
paragraph of this Indenture, until a successor person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
Vice-Chairman, its Chief Executive Officer, its President or a Vice President,
and by its Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is
located at 450 West 33rd Street, 15th Floor, New York, New York 10001-2697,
Attention: Global Trust Services or at any other time at such other address as
the Trustee may designate from time to time by notice to the Securityholders.
"Custodian" means any receiver, interim receiver, receiver and
manager, receiver-manager, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law or any other law respecting secured
creditors and the enforcement of their security or any other person with like
powers whether appointed judicially or out of court and whether pursuant to an
interim or final appointment.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and
successors.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States and which are applicable
as of the date of determination and which are consistently applied for all
applicable periods.
"Global Securities" means one or more permanent global Securities in
registered form representing the aggregate principal amount of Securities.
3
<PAGE>
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of
credit.
"Holder" or "Securityholder" means a person in whose name a Security
is registered in the Security Register with respect to Registered Securities
and the bearer of any Unregistered Security or any coupon appertaining
thereto, as the case may be.
"Indenture" means this instrument as originally executed (including
all exhibits and schedules hereto) and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company under
this Indenture or under the Securities, to pay principal of, premium, if any,
and interest on the Securities when due and payable, whether at maturity, by
acceleration, call for redemption or repurchase or otherwise, and all other
amounts due or to become due under or in connection with this Indenture or the
Securities and the performance of all other obligations to the Trustee
(including, but not limited to, payment of all amounts due the Trustee under
Section 6.07 hereof) and the Holders of the Securities under this Indenture
and the Securities, according to the terms thereof.
"Interest Payment Date" means, when used with respect to any
Security, the stated maturity of an installment of interest on such Security,
as set forth in such Security.
"Issue Date" means the relevant original date of issuance of the
Securities of any series.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any
property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
4
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"Material Subsidiary" means any Subsidiary of the Company, which, at
any date of determination, is a "Significant Subsidiary" (as that term is
defined in Regulation S-X issued under the Securities Act).
"Maturity Date" means, with respect to any Security, the date
specified in such Security as the fixed date on which the principal of such
Security is due and payable.
"Moody's" means Moody's Investors Service.
"Officer" means, with respect to the Company, the Chairman of the
Board, a Vice Chairman, the President, a Vice President, the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, a Vice Chairman, the President or a Vice President, and by the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer, of
the Company and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel who may be
counsel for the Company or the Trustee, and who shall be reasonably acceptable
to the Trustee.
"Original Issue Discount Security" means any Security that provides
for an amount less than the principal amount thereof to be due and payable
upon a declaration of acceleration of the maturity thereof pursuant to Section
5.02.
"Outstanding" means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the
Company or any Affiliate thereof) in trust or set aside and
segregated in trust by the Company or any Affiliate thereof (if the
Company or such Affiliate shall act as Paying Agent) for the Holders
of such Securities; provided, however, that if such Securities are to
be redeemed, notice of such redemption has been duly given pursuant
to this Indenture or provision therefor satisfactory to the Trustee
has been made;
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(c) Securities with respect to which the Company has
effected defeasance or covenant defeasance as provided in Article 4,
to the extent provided in Sections 4.02 and 4.03 hereof; and
(d) Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of which there
shall have been presented to the Trustee proof satisfactory to it
that such Securities are held by a bona fide purchaser in whose hands
the Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities of any series have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities of such series owned by the Company or any other obligor
upon the Securities of such series or any Affiliate of the Company or such
other obligor shall be disregarded and deemed not to be Outstanding, except
that, in determining whether the Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Securities that a Responsible Officer of the Trustee actually knows to be
so owned shall be so disregarded. The Company shall notify the Trustee, in
writing, when it repurchases or otherwise acquires Securities, of the
aggregate principal amount of such Securities so repurchased or otherwise
acquired. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor. If the Paying Agent holds, in
its capacity as such, on any Maturity Date or on any optional redemption date
money sufficient to pay all accrued interest and principal with respect to
such Securities payable on that date and is not prohibited from paying such
money to the Holders thereof pursuant to the terms of this Indenture, then on
and after that date such Securities cease to be Outstanding and interest on
them ceases to accrue. Securities may also cease to be Outstanding to the
extent expressly provided in Article 4.
"Periodic Offering" means an offering of Securities of a series from
time to time, the specific terms of which Securities, including, without
limitation, the rate or rates of interest, if any, thereon, the stated
maturity or maturities thereof and the redemption provisions, if any, with
respect thereto, are to be determined by the Company or its agents upon the
issuance of such Securities.
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"person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Redemption Date" means, with respect to any Security of any series
to be redeemed, the date fixed by the Company for such redemption pursuant to
this Indenture and the Securities of such series.
"Redemption Price" means, with respect to any Security of any series
to be redeemed, the price fixed for such redemption pursuant to the terms of
this Indenture and the Securities of such series.
"Registered Global Security" means a Security evidencing all or a
part of a series of Registered Securities, issued to the Depository for such
series in accordance with Section 3.03 and bearing the legend prescribed in
Section 3.03.
"Registered Security" means any Security registered on the Security
Register (as defined in Section 3.03).
"Regular Record Date" means the Regular Record Date specified in the
Securities.
"Responsible Officer" means, when used with respect to the Trustee,
any officer within the Corporate Trust Office including any Vice President,
Managing Director, Assistant Vice President, Secretary, Assistant Secretary or
Assistant Treasurer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers
and also, with respect to a particular matter, any other officer to whom such
matter is referred because of such officer's knowledge and familiarity with
the particular subject.
"SEC" means the Securities and Exchange Commission, as from time to
time constituted, or if at any time after the execution of this Indenture such
Commission is not existing and performing the applicable duties now assigned
to it, then the body or bodies performing such duties at such time.
"Securities" shall have the meaning specified in the recitals of this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
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"Special Record Date" means, with respect to the payment of any
Defaulted Interest, a date fixed by the Trustee pursuant to Section 3.08
hereof.
"Subsidiary" means, with respect to any person, (i) any corporation
of which the outstanding capital stock or other ownership interests having at
least a majority of the votes entitled to be cast in the election of directors
shall at the time be owned, directly or indirectly, by such person, or (ii)
any other person of which at least a majority of voting interest is at the
time, directly or indirectly, owned by such person.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as amended.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this Indenture, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unregistered Security" means any Security other than a Registered
Security.
SECTION 1.02. Other Definitions.
Defined in
Term Section
- ---------- -------
"Act" 1.05
"Agent Members" 3.17
"covenant defeasance" 4.03
"Defaulted Interest" 3.08
"defeasance" 4.02
"Defeased Securities" 4.01
"Event of Default" 5.01
"insolvent person" 4.04
"Mandatory sinking fund payment" 12.08
"Optional sinking fund payment" 12.08
"Paying Agent" or "Agent" 3.02
"Physical Securities" 3.17
"Registrar" 3.02
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"Security Register" 3.06
"sinking fund payment date" 12.08
"surviving entity" 8.01
SECTION 1.03. Rules of Construction. For all purposes of this
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision;
(e) all references to "$" or "dollars" refer to the lawful currency
of the United States of America; and
(f) the words "include," "included" and "including" as used herein
are deemed in each case to be followed by the phrase "without limitation."
SECTION 1.04. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an
opinion of, any specified person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such person, or that they
be so certified or covered by only one document, but one such person may
certify or give an opinion with respect to some matters and one or more other
persons as to other matters, and any such person may certify or give an
opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are
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erroneous. Any such certificate or opinion may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or representations by,
an officer or officers of the Company stating that the information with
respect to such factual matters is in the possession of the Company, unless
such counsel knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to such matters are
erroneous.
Where any person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated,
with proper identification of each matter covered therein, and form one
instrument.
SECTION 1.05. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by an agent duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become effective
when such instrument or instruments are delivered to the Trustee and, where it
is hereby expressly required, to the Company. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution (as provided below in subsection (b) of this
Section 1.05) of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.01 hereof) conclusive in favor of the Trustee and the Company, if made in
the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) The ownership of any Registered Securities shall be proved by
the Security Register.
(d) The Holder of any Unregistered Security and the Holder of any
coupon shall be deemed and treated as the absolute owner of such Unregistered
Security or coupon (whether or not such Unregistered Security or coupon shall
be overdue). The fact of the holding by any Holder of an Unregistered
Security, and the identifying number of such Security and the date of his
holding the same, may be proved by the production of such Security or by a
certificate executed by any trust company, bank, banker or recognized
securities dealer wherever situated satisfactory to the banker or recognized
securities dealer wherever situated
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satisfactory to the Trustee, if such certificate shall be deemed by the
Trustee to be satisfactory. Each such certificate shall be dated and shall
state that on the date thereof a Security bearing a specified identifying
number was deposited with or exhibited to such trust company, bank, banker or
recognized securities dealer by the person named in such certificate. Any such
certificate may be issued in respect of one or more Unregistered Securities
specified therein. The holding by the person named in any such certificate of
any Unregistered Securities specified therein shall be presumed to continue
for a period of one year from the date of such certificate unless at the time
of any determination of such holding (i) another certificate bearing a later
date issued in respect of the same Securities shall be produced or (ii) the
Security specified in such certificate shall be produced by some other Person,
or (iii) the Security specified in such certificate shall have ceased to be
outstanding. Subject to Article 6, the fact and date of the execution of any
such instrument and the amount and numbers of Securities held by the Person so
executing such instrument may also be proven in accordance with such
reasonable rules and regulations as may be prescribed by the Trustee or in any
other manner which the Trustee may deem sufficient.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security or the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof to the same extent
as the original Holder, in respect of anything done, suffered or omitted to be
done by the Trustee, any Paying Agent or the Company in reliance thereon,
whether or not notation of such action is made upon such Security.
SECTION 1.06. Notices, etc., to the Trustee and the Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed, in writing, to
or with the Trustee at the Corporate Trust Office, 450 West 33rd Street, 15th
Floor, New York, New York 10001, Attention: Global Trust Services or at any
other address previously furnished in writing to the Holders and the Company
by the Trustee; or
(b) the Company by the Trustee or by any Holder shall be sufficient
for every purpose (except as otherwise expressly provided herein) hereunder if
in writing and mailed, first-class postage prepaid, to the Company addressed
to it at RCN Corporation, 105 Carnegie Center, Princeton, New Jersey,
08540-6215,
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Attention: Chief Executive Officer, or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 1.07. Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any Registered Securities and any Holders of
Unregistered Securities who have filed their names and addresses with the
Trustee pursuant to Section 313(c)(2) of the Trust Indenture Act of any event,
such notice shall be sufficiently given (unless otherwise expressly provided
herein) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at the address of such Holder as it appears in the
Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice,
nor any defect in any notice so mailed, to any particular Holder shall affect
the sufficiency of such notice with respect to other Holders. Any notice when
mailed to a Holder in the aforesaid manner shall be conclusively deemed to
have been received by such Holder whether or not actually received by such
Holder. Any notice or communication shall be sufficiently given to Holders of
any Unregistered Securities, by publication at least once in an Authorized
Newspaper in The City of New York, or with respect to any Security the
interest on which is based on the offered quotations in the interbank
Eurodollar market for dollar deposits at least once in an Authorized Newspaper
in London. Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any
event as required by any provision of this Indenture, then any method of
giving such notice as shall be satisfactory to the Trustee shall be deemed to
be a sufficient giving of such notice.
SECTION 1.08. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with any provision of the Trust
Indenture Act or another provision which is required or deemed to be included
in this Indenture by any of the provisions of the Trust Indenture Act, such
provision or requirement of the Trust Indenture Act shall control.
If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision
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shall be deemed to apply to this Indenture as so modified or excluded, as the
case may be.
SECTION 1.09. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.10. Successors and Assigns. All covenants and agreements
in this Indenture by the Company shall bind its successors and assigns, whether
so expressed or not.
SECTION 1.11. Separability Clause. In case any provision in this
Indenture or in the Securities issued pursuant hereto shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.12. Benefits of Indenture. Nothing in this Indenture or in
the Securities issued pursuant hereto, express or implied, shall give to any
person (other than the parties hereto and their successors hereunder, any
Paying Agent and the Holders) any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.13. Governing Law. THIS INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
SECTION 1.14. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or
for any claim based on, in respect of or by reason of such obligations or
their creation.
SECTION 1.15. Independence of Covenants. All covenants and agreements
in this Indenture shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that
it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a Default
if such action is taken or condition exists.
SECTION 1.16. Exhibits. All exhibits attached hereto are by this
reference made a part hereof with the same effect as if herein set forth in
full.
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SECTION 1.17. Counterparts. This Indenture may be executed in any
number of counterparts and by telecopier, each of which shall be an original;
but such counterparts shall together constitute but one and the same
instrument.
SECTION 1.18. Duplicate Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
ARTICLE 2
SECURITY FORMS
SECTION 2.01. Form and Dating. The Securities of each series and the
Trustee's certificate of authentication with respect thereto shall be in
substantially such form or forms (not inconsistent with this Indenture) as
shall be established by or pursuant to one or more Board Resolutions or in one
or more indentures supplemental hereto, in each case, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have such letters, numbers or other marks
of identification and such legends or endorsements, not inconsistent with the
provisions of this Indenture, placed thereon as may be required to comply with
any applicable law or with the rules of the Depository, any clearing agency or
any securities exchange or as may, consistently herewith, be determined by the
officers executing such Securities, as evidenced by their execution thereof.
Unless otherwise so established, Unregistered Securities shall have coupons
attached.
The definitive Securities shall be printed, typewritten, lithographed
or engraved or produced by any combination of these methods or may be produced
in any other manner permitted by the rules of any securities exchange on which
the Securities may be listed, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
Each Security shall be dated the date of its issuance and shall show
the date of its authentication. The terms and provisions contained in the
Securities shall constitute, and are expressly made, a part of this Indenture.
ARTICLE 3
THE SECURITIES
SECTION 3.01. Amount Unlimited; Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
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The Securities may be issued in one or more series. There shall be
established in or pursuant to Board Resolution or one or more indentures
supplemental hereto, prior to the initial issuance of Securities of any
series, subject to the last sentence of this Section 3.01,
(1) the designation of the Securities of the series, which shall
distinguish the Securities of the series from the Securities of all
other series;
(2) any limit upon the aggregate principal amount of the Securities
of the series that may be authenticated and delivered under this
Indenture and any limitation on the ability of the Company to
increase such aggregate principal amount after the initial issuance
of the Securities of that series (except for Securities authenticated
and delivered upon registration of transfer of, or in exchange for,
or in lieu of, or upon redemption of, other Securities of the series
pursuant hereto);
(3) the date or dates on which the principal of the Securities of
the series is payable (which date or dates may be fixed or
extendible);
(4) the rate or rates (which may be fixed or variable) per annum at
which the Securities of the series shall bear interest, if any, the
date or dates from which such interest shall accrue, on which such
interest shall be payable and (in the case of Registered Securities)
on which a record shall be taken for the determination of Holders to
whom interest is payable and/or the method by which such rate or
rates or date or dates shall be determined;
(5) if other than as provided in Section 10.02, the place or places
where the principal of and any interest on Securities of the series
shall be payable, any Registered Securities of the series may be
surrendered for exchange, notices, demands to or upon the Company in
respect of the Securities of the series and this Indenture may be
served and notice to Holders may be published;
(6) the right, if any, of the Company to redeem Securities of the
series, in whole or in part, at its option and the period or periods
within which, the price or prices at which and any terms and
conditions upon which Securities of the series may be so redeemed,
pursuant to any sinking fund or otherwise;
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(7) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any mandatory redemption,
sinking fund or analogous provisions or at the option of a Holder
thereof and the price or prices at which and the period or periods
within which and any of the terms and conditions upon which
Securities of the series shall be redeemed, purchased or repaid, in
whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable
upon declaration of acceleration of the maturity thereof;
(10) if other than the coin or currency in which the Securities of
the series are denominated, the coin or currency in which payment of
the principal of or interest on the Securities of the series shall be
payable or if the amount of payments of principal of and/or interest
on the Securities of the series may be determined with reference to
an index based on a coin or currency other than that in which the
Securities of the series are denominated, the manner in which such
amounts shall be determined;
(11) if other than the currency of the United States of America, the
currency or currencies, including composite currencies, in which
payment of the Principal of and interest on the Securities of the
series shall be payable, and the manner in which any such currencies
shall be valued against other currencies in which any other
Securities shall be payable;
(12) whether the Securities of the series or any portion thereof
will be issuable as Registered Securities (and if so, whether such
Securities will be issuable as Registered Global Securities) or
Unregistered Securities (with or without coupons), or any combination
of the foregoing, any restrictions applicable to the offer, sale or
delivery of Unregistered Securities or the payment of interest
thereon and, if other than as provided herein, the terms upon which
Unregistered Securities of any series may be exchanged for Registered
Securities of such series and vice versa;
(13) whether and under what circumstances the Company will pay
additional amounts on the Securities of the series held by a person
who is not a U.S. person in respect of any tax, assessment or
governmental charge
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withheld or deducted and, if so, whether the Company will have the
option to redeem such Securities rather than pay such additional
amounts;
(14) if the Securities of the series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions,
the form and terms of such certificates, documents or conditions;
(15) any trustees, depositaries, authenticating or paying agents,
transfer agents or the registrar or any other agents with respect to
the Securities of the series;
(16) provisions, if any, for the defeasance of the Securities of the
series (including provisions permitting defeasance of less than all
Securities of the series), which provisions may be in addition to, in
substitution for, or in modification of (or any combination of the
foregoing) the provisions of Article 4;
(17) if the Securities of the series are issuable in whole or in
part as one or more Registered Global Securities, the identity of the
Depository for such Registered Global Security or Securities;
(18) any other events of default or covenants with respect to the
Securities of the series; and
(19) any other terms of the Securities of the series (which terms
shall not be inconsistent with the provisions of this Indenture).
All Securities of any one series and coupons, if any, appertaining
thereto shall be substantially identical, except in the case of Registered
Securities as to date and denomination, and except as may otherwise be
provided by or pursuant to the Board Resolution referred to above or as set
forth in any such indenture supplemental hereto. All Securities of any of
series need not be issued at the same time and may be issued from time to
time, consistent with the terms of this Indenture, if so provided by or
pursuant to such Board Resolution or in any such indenture supplemental hereto
and any forms and terms of Securities to be issued from time to time may be
completed and established from time to time prior to the issuance thereof by
procedures described in such Board Resolution or supplemental indenture.
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SECTION 3.02. Registrar and Paying Agent. The Company shall maintain
an office or agency (which shall be located in the Borough of Manhattan in The
City of New York, State of New York) where Securities may be presented for
registration of transfer or for exchange (the "Registrar"), an office or
agency (which shall be located in the Borough of Manhattan in The City of New
York, State of New York) where Securities may be presented for payment (the
"Paying Agent" or "Agent") and an office or agency where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may have one or more co-registrars and one
or more additional paying agents. The term "Paying Agent" or "Agent" includes
any additional paying agent. The Company may act as its own Paying Agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the Trust Indenture Act. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee of
the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such and shall be entitled to appropriate compensation in
accordance with Section 6.07 hereof.
The Company initially appoints the Trustee as the Registrar and
Paying Agent and agent for service of notices and demands in connection with
the Securities. If, at any time, the Trustee is not the Registrar, the
Registrar shall make available to the Trustee ten days prior to each Interest
Payment Date and at such other times as the Trustee may reasonably request the
names and addresses of the Holders as they appear in the Security Register.
SECTION 3.03. Execution and Authentication. The Company shall approve
the form of the Securities and any notation, legend or endorsement thereon.
Each Security shall be dated the date of issuance and shall show the date of
its authentication.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to
the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
Two Officers, or an Officer and an Assistant Secretary, shall sign,
or one Officer shall sign, and one Officer or an Assistant Secretary (each of
whom shall,
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in each case, have been duly authorized by all requisite corporate actions)
shall attest to, the Securities for the Company by manual or facsimile
signature.
If an Officer or Assistant Secretary whose signature is on a Security
was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Security, the Security shall nevertheless be valid.
A Security (other than coupons) shall not be valid until the Trustee
manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series having
attached thereto appropriate coupons, if any, executed by the Company to the
Trustee for authentication together with the applicable documents referred to
below in this Section, and the Trustee shall thereupon authenticate and
deliver such Securities to or upon the written order of the Company. In
authenticating any Securities of a series, the Trustee shall be entitled to
receive prior to the first authentication of any Securities of such series,
and (subject to Article 6) shall be fully protected in relying upon, unless
and until such documents have been superseded or revoked:
(1) any Board Resolution and/or executed supplemental
indenture referred to in Sections 2.01 and 3.03 by or pursuant to
which the forms and terms of the Securities of that series were
established;
(2) an Officers' Certificate setting forth the form or forms
and terms of the Securities, stating that the form or forms and terms
of the Securities of such series have been, or will be when
established in accordance with such procedures as shall be referred
to therein, established in compliance with this Indenture; and
(3) an Opinion of Counsel substantially to the effect that
the form or forms and terms of the Securities of such series have
been, or will be when established in accordance with such procedures
as shall be referred to therein, established in compliance with this
Indenture and that the supplemental indenture, to the extent
applicable, and Securities have been duly authorized and, if executed
and authenticated in accordance with the provisions of the Indenture
and delivered to and duly paid for by the purchasers thereof on the
date of such opinion, would be entitled to the benefits of the
Indenture and would be valid and binding obligations of the
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Company, enforceable against the Company in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization,
receivership, moratorium and other similar laws affecting creditors'
rights generally, general principles of equity, and such other
matters as shall be specified therein.
If the Company shall establish pursuant to Section 3.01 that the
Securities of a series or a portion thereof are to be issued in the form of
one or more Registered Global Securities, then the Company shall execute and
the Trustee shall authenticate and deliver one or more Registered Global
Securities that (i) shall represent and shall be denominated in an amount
equal to the aggregate principal amount of all of the Securities of such
series issued in such form and not yet canceled, (ii) shall be registered in
the name of the Depository for such Registered Global Security or Securities
or the nominee of such Depository, (iii) shall be delivered by the Trustee to
such Depository or its custodian or pursuant to such Depository's instructions
and (iv) shall bear a legend substantially to the effect of Exhibit A hereto.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the
Company.
SECTION 3.04. Denomination and Date of Securities; Payments of
Interest. The Securities of each series shall be issuable as Registered
Securities or Unregistered Securities in denominations established as
contemplated by Section 3.01 or, if not so established with respect to
Securities of any series, in denominations of $1,000 and any integral multiple
thereof. The Securities of each series shall be numbered, lettered or
otherwise distinguished in such manner or in accordance with such plan as the
Officers of the Company executing the same may determine, as evidenced by
their execution thereof.
Each Security shall be dated the date of its authentication. The
Securities of each series shall bear interest, if any, from the date, and such
interest and shall be payable on the dates, established as contemplated by
Section 3.01.
The person in whose name any Registered Security of any series is
registered at the close of business on any record date applicable to a
particular series with respect to any interest payment date for such series
shall be entitled to receive the interest, if any, payable on such interest
payment date notwithstanding
(
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any transfer or exchange of such Registered Security subsequent to the record
date and prior to such interest payment date, except if and to the extent the
Company shall default in the payment of the interest due on such interest
payment date for such series, in which case the provisions of Section 3.08
shall apply. The term "record date" as used with respect to any interest
payment date (except a date for payment of defaulted interest) for the
Securities of any series shall mean the date specified as such in the terms of
the Registered Securities of such series established as contemplated by
Section 3.01, or, if no such date is so established, the fifteenth day next
preceding such interest payment date, whether or not such record date is a
Business Day.
SECTION 3.05. Temporary Securities. Until definitive Securities of
any series are prepared and ready for delivery, the Company may execute and
upon a Company Order the Trustee shall authenticate and deliver temporary
Securities of such series. Temporary Securities of any series shall be
substantially in the form of definitive Securities of such series, in any
authorized denominations, but may have variations that the Company reasonably
considers appropriate for temporary Securities of such series as conclusively
evidenced by the Company's execution of such temporary Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities of any series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series and tenor upon surrender of the temporary Securities
at the office or agency of the Company designated for such purpose pursuant to
Section 10.02 hereof, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities of any series, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of such
series and tenor and authorized denominations. Until so exchanged the
temporary Securities of any series shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities of such series.
SECTION 3.06. Transfer and Exchange. The Company shall cause to be
kept at the Corporate Trust Office of the Trustee a register (the register
maintained in such office and in any other office or agency designated
pursuant to Section 10.02 hereof being sometimes referred to herein as the
"Security Register") in which, subject to such reasonable regulations as the
Registrar may prescribe, the Company shall provide for the registration of
Securities and of transfers and exchanges of Securities. The Trustee is hereby
initially appointed Registrar for the purpose of registering Securities and
transfers of Securities as herein provided.
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Unregistered Securities (except for any temporary global Unregistered
Securities) and coupons (except for coupons attached to any temporary global
Unregistered Securities) shall be transferable by delivery.
At the option of the Holder thereof, Registered Securities of any
series (other than a Registered Global Security, except as set forth below)
may be exchanged for a Registered Security or Registered Securities of such
series and tenor having authorized denominations and an equal aggregate
principal amount, upon surrender of such Registered Securities to be exchanged
at the agency of the Company that shall be maintained for such purpose in
accordance with Section 3.02 and upon payment, if the Company shall so
require, of the charges hereinafter provided. If the Securities of any series
are issued in both registered and unregistered form, except as otherwise
established pursuant to Section 3.01, at the option of the Holder thereof,
Unregistered Securities of any series may be exchanged for Registered
Securities of such series and tenor having authorized denominations and an
equal aggregate principal amount, upon surrender of such Unregistered
Securities to be exchanged at the agency of the Company that shall be
maintained for such purpose in accordance with Section 10.02, with, in the
case of Unregistered Securities that have coupons attached, all unmatured
coupons and all matured coupons in default thereto appertaining, and upon
payment, if the Company shall so require, of the charges hereinafter provided.
At the option of the Holder thereof, if Unregistered Securities of any series,
maturity date, interest rate and original issue date are issued in more than
one authorized denomination, except as otherwise established pursuant to
Section 3.01, such Unregistered Securities may be exchanged for Unregistered
Securities of such series and tenor having authorized denominations and an
equal aggregate principal amount, upon surrender of such Unregistered
Securities to be exchanged at the agency of the Company that shall be
maintained for such purpose in accordance with Section 10.02, with, in the
case of Unregistered Securities that have coupons attached, all unmatured
coupons and all matured coupons in default thereto appertaining, and upon
payment, if the Company shall so require, of the charges hereinafter provided.
Registered Securities of any series may not be exchanged for Unregistered
Securities of such series. Whenever any Securities are so surrendered for
exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
When Registered Securities are presented to the Registrar or a
co-Registrar with a request from the Holder of such Securities to register the
transfer or exchange for an equal principal amount of Securities of other
authorized denominations, the Registrar shall register the transfer or make
the exchange as requested; provided, however, that every Registered Security
presented or surrendered for registration of transfer or exchange shall be
duly endorsed or be
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accompanied by a written instrument of transfer or exchange in form
satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing. Whenever any Securities
are so presented for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive. No service charge shall be made to the
Securityholder for any registration of transfer or exchange. The Company may
require from the Securityholder payment of a sum sufficient to cover any
transfer taxes or other governmental charge that may be imposed in relation to
a transfer or exchange, but this provision shall not apply to any exchange
pursuant to Section 9.06 hereof (in which events the Company will be
responsible for the payment of all such taxes which arise solely as a result
of the transfer or exchange and do not depend on the tax status of the
Holder).
Notwithstanding any other provision of this Section 3.06, unless and
until it is exchanged in whole or in part for Securities in definitive
registered form, a Registered Global Security representing all or a portion of
the Securities of a series may not be transferred except as a whole by the
Depository for such series to a nominee of such Depository or by a nominee of
such Depository to such Depository or another nominee of such Depository or by
such Depository or any such nominee to a successor Depository for such series
or a nominee of such successor Depository.
If at any time the Depository for any Registered Global Securities of
any series notifies the Company that it is unwilling or unable to continue as
Depository for such Registered Global Securities or if at any time the
Depository for such Registered Global Securities shall no longer be eligible
under applicable law, the Company shall appoint a successor Depository
eligible under applicable law with respect to such Registered Global
Securities. If a successor Depository eligible under applicable law for such
Registered Global Securities is not appointed by the Company within 90 days
after the Company receives such notice or becomes aware of such ineligibility,
the Company will execute, and the Trustee, upon receipt of the Company's order
for the authentication and delivery of definitive Registered Securities of
such series and tenor, will authenticate and deliver Registered Securities of
such series and tenor, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of such Registered Global
Securities, in exchange for such Registered Global Securities.
The Company may at any time and in its sole discretion determine that
any Registered Global Securities of any series shall no longer be maintained
in global form. In such event the Company will execute, and the Trustee, upon
receipt of
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the Company's order for the authentication and delivery of definitive
Registered Securities of such series and tenor, will authenticate and deliver,
Registered Securities of such series and tenor in any authorized
denominations, in an aggregate principal amount equal to the principal amount
of such Registered Global Securities, in exchange for such Registered Global
Securities.
Any time the Registered Securities of any series are not in the form
of Registered Global Securities pursuant to the preceding two paragraphs, the
Company agrees to supply the Trustee with a reasonable supply of certificated
Registered Securities without the legend required by Section 3.03 and the
Trustee agrees to hold such Registered Securities in safekeeping until
authenticated and delivered pursuant to the terms of this Indenture.
If established by the Company pursuant to Section 3.01 with respect
to any Registered Global Security, the Depository for such Registered Global
Security may surrender such Registered Global Security in exchange in whole or
in part for Registered Securities of the same series and tenor in definitive
registered form on such terms as are acceptable to the Company and such
Depository. Thereupon, the Company shall execute, and the Trustee shall
authenticate and deliver, without service charge,
(i) to the Person specified by such Depository new Registered
Securities of the same series and tenor, of any authorized
denominations as requested by such Person, in an aggregate principal
amount equal to and in exchange for such Person's beneficial interest
in the Registered Global Security; and
(ii) to such Depository a new Registered Global Security in a
denomination equal to the difference, if any, between the principal
amount of the surrendered Registered Global Security and the
aggregate principal amount of Registered Securities authenticated and
delivered pursuant to clause (i) above.
Registered Securities issued in exchange for a Registered Global
Security pursuant to this Section 3.06 shall be registered in such names and
in such authorized denominations as the Depository for such Registered Global
Security, pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee or an agent of the Company or the
Trustee. The Trustee or such agent shall deliver such Securities to or as
directed by the Persons in whose names such Securities are so registered.
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Notwithstanding anything herein or in the forms or terms of any
Securities to the contrary, none of the Company, the Trustee or any agent of
the Company or the Trustee shall be required to exchange any Unregistered
Security for a Registered Security if such exchange would result in adverse
Federal income tax consequences to the Company (such as, for example, the
inability of the Company to deduct from its income, as computed for Federal
income tax purposes, the interest payable on the Unregistered Securities)
under then applicable United States Federal income tax laws. The Trustee and
any such agent shall be entitled to rely on an Officers' Certificate or an
Opinion of Counsel in determining such result.
The Trustee shall not be required to exchange or register the
transfer of any Security of any series for a period of 15 days immediately
preceding the first mailing of notice of redemption of Securities of such
series to be redeemed or of any Security of such series selected, called or
being called for redemption except, in the case of any Security of any series
where public notice has been given that such Security of such series is to be
redeemed in part, the portion thereof not to be redeemed.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the
same indebtedness, and entitled to the same benefits under this Indenture, as
the Securities surrendered upon such registration of transfer or exchange.
Any Holder of a beneficial interest in a Global Security shall, by
acceptance of such Global Security, agree that transfers of beneficial
interests in such Global Securities may be effected only through a book-entry
system maintained by the Holder of such Global Security (or its agent), and
that ownership of a beneficial interest in the Security shall be required to
be reflected in a book-entry system.
SECTION 3.07. Mutilated, Destroyed, Lost and Stolen. If a mutilated
Security of any series is surrendered to the Trustee or if the Holder of a
Security of any series claims that the Security of such series has been lost,
destroyed or wrongfully taken, the Company shall execute and upon a Company
Order, the Trustee shall authenticate and deliver a replacement Security of
such series and tenor and principal amount, bearing a number not
contemporaneously outstanding if the Holder of such Security of such series
furnishes to the Company and to the Trustee evidence reasonably acceptable to
them of the ownership and the destruction, loss or theft of such Security of
such series and an indemnity bond shall be posted by such Holder, sufficient
in the judgment of the Company or the Trustee, as the case may be, to protect
the Company, the Trustee or any Agent
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from any loss that any of them may suffer if such Security is replaced. The
Company may charge such Holder for the Company's expenses in replacing such
Security of such series (including (i) expenses of the Trustee charged to the
Company and (ii) any tax or other governmental charge that may be imposed) and
the Trustee may charge the Company for the Trustee's expenses in replacing
such Security of such series.
Every replacement Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.08. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date and interest on such
defaulted interest at the then applicable interest rate borne by the
Securities, to the extent lawful (such defaulted interest and interest thereon
herein collectively called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the Regular Record Date; and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in
subsection (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security and the date
of the proposed payment, and at the same time the Company shall deposit with
the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit on or prior to the date of the
proposed payment, such money when
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deposited to be held in trust for the benefit of the persons entitled to such
Defaulted Interest as provided in this subsection (a). Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company in writing of such Special Record Date. In the name and at
the expense of the Company, the Trustee shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at its address as it
appears in the Security Register, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the persons in whose names the Securities (or their
respective Predecessor Securities) are registered on such Special Record Date
and shall no longer be payable pursuant to the following subsection (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after written notice given by the Company to
the Trustee of the proposed payment pursuant to this subsection (b), such
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.09. Persons Deemed Owners. Prior to and at the time of due
presentment for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name any
Registered Security is registered in the Security Register, the person who
holds any Unregistered Security and the person who holds any coupon as the
owner of such Security for the purpose of receiving payment of principal of,
premium, if any, and (subject to Section 3.08 hereof) interest on such
Security and for all other purposes whatsoever, whether or not such Security
shall be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
SECTION 3.10. Cancellation. All Securities surrendered for payment,
redemption, registration of transfer or exchange shall be delivered to the
Trustee
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and, if not already canceled, shall be promptly canceled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly canceled by the Trustee. The Registrar and the Paying Agent shall
forward to the Trustee any Securities surrendered to them for registration of
transfer or exchange, redemption or payment. The Trustee and no one else shall
cancel all Securities surrendered for registration of transfer, exchange,
payment, replacement or cancellation. No Securities shall be authenticated in
lieu of or in exchange for any Securities canceled as provided in this Section
3.10 hereof, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be destroyed and certification of their
destruction delivered to the Company unless by a Company Order the Company
shall timely direct that the canceled Securities be returned to it. The
Trustee shall provide the Company a list of all Securities that have been
canceled from time to time as requested by the Company.
SECTION 3.11. Computation of Interest. Interest on the Securities
shall be computed as provided for in the applicable supplemental Indenture.
SECTION 3.12. Legal Holidays. In any case where any Interest Payment
Date, Redemption Date, date established for the payment of Defaulted Interest
or stated maturity of any Security shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal, premium, if any, or interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, date
established for the payment of Defaulted Interest or at the stated maturity,
as the case may be. In such event, no interest shall accrue with respect to
such payment for the period from and after such Interest Payment Date,
Redemption Date, date established for the payment of Defaulted Interest or
stated maturity, as the case may be, to the next succeeding Business Day and,
with respect to any Interest Payment Date, interest for the period from and
after such Interest Payment Date shall accrue with respect to the next
succeeding Interest Payment Date.
SECTION 3.13. CUSIP and CINS Numbers. The Company in issuing the
Securities may use "CUSIP" and "CINS" numbers (if then generally in use), and
if so, the Trustee shall use the CUSIP or CINS numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to
the correctness or accuracy of the CUSIP or CINS number, as the case may be,
printed in the notice or on the Securities, and that reliance may be placed
only on the other identification numbers printed on the Securities. The
Company shall
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promptly notify the Trustee in writing of any change in the CUSIP or CINS
number of any type of Securities.
SECTION 3.14. Paying Agent to Hold Money in Trust. Each Paying Agent
shall hold in trust for the benefit of the Securityholders or the Trustee all
money held by the Paying Agent for the payment of principal of, premium, if
any, or interest on the Securities, and shall notify the Trustee of any
default by the Company in making any such payment. Money held in trust by the
Paying Agent need not be segregated except as required by law and in no event
shall the Paying Agent be liable for any interest on any money received by it
hereunder. The Company at any time may require the Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Event of Default, upon a
Company Order to the Paying Agent, require such Paying Agent to pay forthwith
all money so held by it to the Trustee and to account for any funds disbursed.
Upon making such payment, the Paying Agent shall have no further liability for
the money delivered to the Trustee.
SECTION 3.15. Treasury Securities. In determining whether the Holders
of the required aggregate principal amount of Securities of any series have
concurred in any direction, waiver, consent or notice, Securities of such
series owned by the Company or an Affiliate of the Company shall be considered
as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities of such series which a
Responsible Officer of the Trustee actually knows are so owned shall be so
considered. The Company shall notify the Trustee, in writing, when it or any
of its Affiliates repurchases or otherwise acquires Securities of such series,
of the aggregate principal amount of such Securities of such series so
repurchased or otherwise acquired.
SECTION 3.16. Deposits of Monies. Prior to 1:00 p.m. New York City
time on each Interest Payment Date and maturity date, the Company shall have
deposited with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date
and maturity date, as the case may be, in a timely manner which permits the
Paying Agent to remit payment to the Holders on such Interest Payment Date and
maturity date, as the case may be.
SECTION 3.17. Book-entry Provisions for Global Securities.
(a) The Global Securities of any series initially shall (i) be
registered in the name of the Depository or the nominee of such Depository,
(ii) be delivered to
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the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit A.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
of any series held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Security of such series, and the Depository may
be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of the Global Security of such series for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Security.
(b) Transfers of Global Securities of any series shall be limited to
transfers in whole, but not in part, to the Depository, its successors or
their respective nominees. Securities issued in permanent certificated form
("Physical Securities") shall be transferred to all beneficial owners, in
exchange for their beneficial interests in Global Securities of such series if
(i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for any Global Security, or that it will cease to be a
"Clearing Agency" under the Exchange Act, and in either case a successor
Depository is not appointed by the Company within 90 days of such notice or
(ii) an Event of Default has occurred and is continuing and the Registrar has
received a written request from the Depository to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Security of any series to beneficial owners
pursuant to paragraph (b), the Registrar shall (if one or more Physical
Securities are to be issued) reflect on its books and records the date and a
decrease in the principal amount at maturity of the Global Security of such
series in an amount equal to the principal amount at maturity of the
beneficial interest in the Global Security of such series to be transferred,
and the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Physical Securities of such series and tenor and principal amount
of authorized denominations.
(d) In connection with the transfer of Global Securities of any
series as an entirety to beneficial owners pursuant to paragraph (b), the
Global Securities of such series shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each
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beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Securities of such series , an equal aggregate
principal amount at maturity of Physical Securities of such series and tenor
of authorized denominations.
(e) The Holder of any Global Security of any series may grant
proxies and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take any action
which a Holder is entitled to take under this Indenture or the Securities.
SECTION 3.18. Series May Include Tranches. A series of Securities may
include one or more tranches (each a "tranche") of Securities, including
Securities issued on a Periodic Offering. The Securities of different tranches
may have one or more different terms, including authentication dates and
public offering prices, but all the Securities within each such tranche shall
have identical terms, including authentication date and public offering price.
Notwithstanding any other provision of this Indenture, with respect to
Sections 3.01, 3.03 (other than the sixth paragraph thereof) through 3.07,
4.01 through 4.06, 5.01 through 5.16, 9.02, 10.02, 11.01, 11.02 and 12.01
through 12.08, if any series of Securities includes more than one tranche, all
provisions of such sections applicable to any series of Securities shall be
deemed equally applicable to each tranche of any series of Securities in the
same manner as though originally designated a series unless otherwise provided
with respect to such series or tranche pursuant to Section 3.01. In
particular, and without limiting the scope of the next preceding sentence, any
of the provisions of such sections which provide for or permit action to be
taken with respect to a series of Securities shall also be deemed to provide
for and permit such action to be taken instead only with respect to Securities
of one or more tranches within that series (and such provisions shall be
deemed satisfied thereby), even if no comparable action is taken with respect
to Securities in the remaining tranches of that series.
ARTICLE 4
DEFEASANCE OR COVENANT DEFEASANCE
SECTION 4.01. Company's Option to Effect Defeasance or Covenant
Defeasance. The Company may, at its option by Board Resolution, at any time,
with respect to the Securities, elect to have either Section 4.02 or Section
4.03 hereof be applied to all of the Outstanding Securities of any series (the
"Defeased Securities"), upon compliance with the conditions set forth below in
this Article 4.
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SECTION 4.02. Defeasance and Discharge. Upon the Company's exercise
under Section 4.01 hereof of the option applicable to this Section 4.02, the
Company shall be deemed to have been discharged from its obligations with
respect to the Defeased Securities of any series on the date the conditions
set forth below are satisfied (hereinafter, "defeasance"). For this purpose,
such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Defeased Securities of
such series, which shall thereafter be deemed to be "Outstanding" only for the
purposes of Section 4.05 and the other Sections of this Indenture referred to
in (a) and (b) below, and to have satisfied all its other obligations under
such Securities and this Indenture insofar as such Securities are concerned
(and the Trustee, at the expense of the Company, and, upon Company Request,
shall execute proper instruments acknowledging the same), except for the
following, which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of Defeased Securities of such series to
receive, solely from the trust fund described in Section 4.04 hereof and as
more fully set forth in such Section, payments in respect of the principal of,
premium, if any, and interest on such Securities when such payments are due
(b) the Company's obligations with respect to such Defeased Securities of such
series under Sections 3.05, 3.06, 3.07, 10.02 and 10.03 hereof, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder,
including, without limitation, the Trustee's rights under Sections 4.05 and
6.07 hereof, and (d) this Article 4. Subject to compliance with this Article
4, the Company may exercise its option under this Section 4.02 notwithstanding
the prior exercise of its option under Section 4.03 hereof with respect to the
Securities.
SECTION 4.03. Covenant Defeasance. Upon the Company's exercise under
Section 4.01 hereof of the option applicable to this Section 4.03, the Company
shall be released from its obligations under any covenant or provisions
contained in Article 10 hereof (other than Sections 10.01 through 10.04
hereof), the provisions of clause (c) of Section 8.01 shall not apply, with
respect to the Defeased Securities of any series, on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Defeased Securities of such series shall thereafter be deemed not to
be "Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the Defeased Securities of such series, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such Section or Article,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such Section or Article or by reason of any reference in any such Section
or Article to any other provision herein or in any other document
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and such omission to comply shall not constitute a Default or an Event of
Default under Section 5.01(c) or 5.01(f) hereof, but, except as specified
above, the remainder of this Indenture and such Defeased Securities of such
series shall be unaffected thereby.
SECTION 4.04. Conditions to Defeasance or Covenant Defeasance. The
following shall be the conditions to application of either Section 4.02 or
Section 4.03 hereof to the Defeased Securities of any series:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 6.09 hereof who shall agree to comply with
the provisions of this Article 4 applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (a) money in an amount, or (b) U.S.
Government Obligations which through the scheduled payment of
principal, premium, if any, and interest in respect thereof in
accordance with their terms will provide, not later than the due date
of any payment, money in an amount, or (c) a combination thereof, in
any such case, sufficient without reinvestment, in the opinion of a
nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, to pay and discharge, the principal of, premium, if any, and
interest on the Defeased Securities of such series at the stated
maturity of such principal or installment of principal, premium, if
any, or interest or (if the Company has made irrevocable arrangements
satisfactory to such Trustee for the giving of notice of redemption
by such Trustee in the name and at the expense of the Company) the
redemption date thereof, as the case may be, in accordance with the
terms of the Indenture and the Securities of such series; provided,
however, that the Trustee shall have been irrevocably instructed to
apply such cash or the proceeds of such U.S. Government Obligations
to said payments with respect to the Securities of such series;
(2) No Default with respect to the Outstanding Securities of
such series shall have occurred and be continuing on the date of such
deposit or, insofar as Section 4.02 hereof is concerned, at any time
during the period ending on the ninety-first day after the date of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period) no Default
relating to Section 5.01(d), 5.01(e) or 5.01(f) hereof;
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(3) Neither the Company nor any Subsidiary of the Company is an
"insolvent person" within the meaning of any applicable Bankruptcy
Law on the date of such deposit or at any time during the period
ending on the ninety-first day after the date of such deposit (it
being understood that this condition shall not be deemed satisfied
until the expiration of such period);
(4) Such defeasance or covenant defeasance shall not cause the
Trustee for the Securities to have a conflicting interest in
violation of Section 6.08 hereof and for purposes of the Trust
Indenture Act with respect to any securities of the Company;
(5) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company is
a party or by which it is bound;
(6) In the case of an election under Section 4.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (y) since the
date hereof, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such
opinion shall confirm that, the Holders of the Outstanding Securities
of such series will not recognize income, gain or loss for federal
income tax purposes as a result of such deposit, defeasance and
discharge to be effected with respect to the Securities of such
series and will be subject to federal income tax on the same amount,
in the same manner and at the same times as would have been the case
if such deposit, defeasance and discharge had not occurred;
(7) In the case of an election under Section 4.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the Outstanding Securities of such
series will not recognize income, gain or loss for federal income tax
purposes as a result of the deposit and covenant defeasance to be
effected with respect to the Securities of such series and will be
subject to Federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and
covenant defeasance had not occurred;
(8) The Company shall have delivered to the Trustee, an Opinion
of Counsel to the effect that, immediately following the ninety-first
day after the deposit, the trust funds established pursuant to this
Article will
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not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally
under any applicable U.S. Federal or state law;
(9) The Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit made by the Company pursuant to
its election under Section 4.02 or 4.03 hereof was not made by the
Company with the intent of preferring the Holders over the other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others;
(10) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent (other than conditions requiring the passage of
time) provided for relating to either the defeasance under Section
4.02 or the covenant defeasance under Section 4.03 (as the case may
be) have been complied with as contemplated by this Section 4.04; and
(11) Such defeasance or covenant defeasance shall not result in a
trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act of 1940, as amended,
unless such trust shall be registered under the Act or exempt from
registration thereunder.
Opinions required to be delivered under this Section may have such
qualifications as are customary for opinions of the type required and
reasonably acceptable to the Trustee.
SECTION 4.05. Deposited Money and U.S. Government Obligations To
Be Held in Trust; Other Miscellaneous Provisions.
Subject to the proviso of the last paragraph of Section 10.03, all
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 4.05, the "Trustee") pursuant to Section 4.04 in
respect of the Defeased Securities of any series shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Securities
of such series and this Indenture, to the payment, either directly or through
any Paying Agent (other than the Company) as the Trustee may determine, to the
Holders of such Securities of such series of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
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The Company shall pay and indemnify the Trustee, its officers,
directors and agents and hold such harmless against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 4.04 or the principal, premium, if any, and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Defeased
Securities of such series.
Anything in this Article 4 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 4.04 which, in the opinion of an internationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
SECTION 4.06. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with Section
4.02 or 4.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the obligations of the Company under this
Indenture and the Securities of such series shall be revived and reinstated as
though no deposit had occurred pursuant to Section 4.02 or 4.03 hereof, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money and U.S. Government Obligations in accordance with
Section 4.02 or 4.03 hereof, as the case may be; provided, however, that if
the Company makes any payment of principal, premium, if any, or interest on
any Security of such series following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such
Securities of such series to receive such payment from the money and U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE 5
REMEDIES
SECTION 5.01. Events of Default. "Event of Default," wherever used
herein, means with respect to the Securities of any series any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
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(a) default in the payment of interest on the Securities of such
series when it becomes due and payable and continuance of such default for a
period of 30-days or more; or
(b) default in the payment of the principal of, or premium, if any,
on the Securities of such series when due; or
(c) default in the performance, or breach, of any covenant under
Article 8 or Article 10 of this Indenture (other than defaults specified in
clause (a) or (b) above), and continuance of such default or breach for a
period of 30 days or more after written notice to the Company by the Trustee
or to the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the outstanding Securities of such series (in each case,
when such notice is deemed received in accordance with this Indenture); or
(d) the Company or any Material Subsidiary of the Company pursuant
to or under or within the meaning of any Bankruptcy Law;
(i) commences a voluntary case or proceeding;
(ii) consents to the making of a Bankruptcy Order in an
involuntary case or proceeding or the commencement of any case against
it;
(iii) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(iv) makes a general assignment for the benefit of its creditors;
(v) files an answer or consent seeking reorganization or relief;
(vi) shall admit in writing its inability to pay its debts
generally; or
(vii) consents to the filing of a petition in bankruptcy; or
(e) a court of competent jurisdiction in any involuntary case or
proceeding enters a Bankruptcy Order against the Company or any Material
Subsidiary, and such Bankruptcy Order remains unstayed and in effect for 60
consecutive days; or
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(f) any other Event of Default established pursuant to Section 3.01
with respect to the Securities of such series occurs.
SECTION 5.02. Acceleration of Maturity Rescission Annulment. If an
Event of Default (other than an Event of Default specified in clause (d) or
(e) of Section 5.01 with respect to the Company) with respect to the
Securities of any series occurs and is continuing, then the Trustee or the
holders of at least 25% in aggregate principal amount of the Outstanding
Securities of such series may, by written notice, and the Trustee upon the
request of the holders of not less than 25% in aggregate principal amount of
the Outstanding Securities of such series shall, declare the entire principal
amount of (or, if the Securities of any such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified
in the terms of such series established pursuant to Section 3.01) all
Outstanding Securities of such series, and the interest accrued thereon, if
any, to be immediately due and payable and upon any such declaration such
amounts shall become immediately due and payable. If an Event of Default
specified in clause (d) or (e) of Section 5.01 with respect to the Company
occurs and is continuing, then the principal amount of (or, if any Securities
are Original Issue Discount Securities, such portion of the principal as may
be specified in the terms thereof established pursuant to Section 3.01) all
Outstanding Securities of such series shall ipso facto become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder.
After a declaration of acceleration or any ipso facto acceleration as
related to clause (d) or (e) of Section 5.01, the holders of a majority in
aggregate principal amount of the Outstanding Securities of such series may,
by notice to the Trustee, rescind such declaration of acceleration and its
consequences if all existing Events of Default, other than nonpayment of the
principal of and accrued and unpaid interest on, the Securities of such series
that has become due solely as a result of such acceleration, have been cured
or waived and if the rescission of acceleration would not conflict with any
judgment or decree.
For all purposes under this Indenture, if a portion of the principal
of any Original Issue Discount Securities shall have been accelerated and
declared due and payable pursuant to the provisions hereof, then, from and
after such declaration, unless such declaration has been rescinded and
annulled, the principal amount of such Original Issue Discount Securities
shall be deemed, for all purposes hereunder, to be such portion of the
principal thereof as shall be due and payable as a result of such
acceleration, and payment of such portion of the principal thereof as shall be
due and payable as a result of such acceleration, together with interest, if
any, thereon and all other amounts owing thereunder, shall constitute payment
in full of such Original Issue Discount Securities.
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SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee.
The Company covenants that if an Event of Default specified in
Sections 5.01(a) or 5.01(b) shall have occurred and be continuing with respect
to the Securities of any series, the Company will, upon demand of the Trustee,
pay to the Trustee, for the benefit of the Holders of such Securities of such
series, the whole amount then due and payable on such Securities of such
series for principal, premium, if any, and interest, with interest upon the
overdue principal, premium, if any, and, to the extent that payment of such
interest shall be legally enforceable, upon overdue installments of interest,
at the rate then borne by the Securities of such series; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may, but is
not obligated under this paragraph to, institute a judicial proceeding for the
collection of the sums so due and unpaid and may, but is not obligated under
this paragraph to, prosecute such proceeding to judgment or final decree, and
may, but is not obligated under this paragraph to, enforce the same against
the Company or any other obligor upon the Securities of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the
Securities of such series , wherever situated.
If an Event of Default occurs and is continuing with respect to the
Securities of any series, the Trustee may in its discretion, but is not
obligated under this paragraph to, (i) proceed to protect and enforce its
rights and the rights of the Holders under this Indenture by such appropriate
private or judicial proceedings as the Trustee shall deem most effectual to
protect and enforce such rights, whether for the specific enforcement of any
covenant or agreement contained in this Indenture or in aid of the exercise of
any power granted herein or (ii) proceed to protect and enforce any other
proper remedy. No recovery of any such judgment upon any property of the
Company shall affect or impair any rights, powers or remedies of the Trustee
or the Holders.
SECTION 5.04. Trustee May File Proofs of Claims. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities of
any series or the property of
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the Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Securities of such series shall
then be due and payable as therein expressed or by declaration or otherwise
and irrespective of whether the Trustee shall have made any demand on the
Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the Securities of
such series and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, fees, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any Custodian, in any such judicial proceeding, is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay the Trustee as administrative expenses associated with any such
proceeding, and in the event that the Trustee shall consent to the making of
such payments directly to Holders, any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.07 hereof.
To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 6.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any
plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
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SECTION 5.05. Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture, or the
Securities of any series may be prosecuted and enforced by the Trustee without
the possession of any of the Securities of such series or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name and as trustee of an express
trust, and any recovery of judgment shall, after provision for the payment of
the reasonable compensation, fees, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Securities of such series in respect of which such judgment has been
recovered.
SECTION 5.06. Application of Money Collected. Any money collected by
the Trustee pursuant to this Article shall be applied in the following order,
at the date or dates fixed by the Trustee and, in case of the distribution of
such money on account of principal, premium, if any, or interest, upon
presentation of the Securities of any series and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 6.07;
Second: to Holders for interest accrued on the Securities of
such series, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities of such
series for interest;
Third: to Holders of principal and premium, if any, owing
under the Securities of such series, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities of such series for principal; and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to
this Section 5.06.
SECTION 5.07. Limitation on Suits. No Holder of any Securities of any
series shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of such
series;
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(b) the Holders of not less than 25% in aggregate principal amount
of the Outstanding Securities of such series shall have made written request
to the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee indemnity
satisfactory to it against the costs, expenses and liabilities to be incurred
in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Securities of such series;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture or any Security of such series to affect, disturb or prejudice
the rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture
or any Security of such series, except in the manner provided in this
Indenture and for the equal and ratable benefit of all the Holders.
SECTION 5.08. Unconditional Right of Holders to Receive Principal,
Premium and Interest. Notwithstanding any other provision in this Indenture,
the Holder of any Security of any series shall have the right, which is
absolute and unconditional, to receive cash payment of the principal of,
premium, if any, and (subject to Section 3.08 hereof) interest on such
Security of such series on the respective Stated Maturities expressed in such
Security of such series (or, in the case of redemption, on the respective
Redemption Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.
SECTION 5.09. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture or any Security of any series and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all
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rights and remedies of the Trustee and the Holders shall continue as though no
such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. Except as provided in
Section 3.07, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 5.11. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder of any Security of any series to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article 5 or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the
case may be.
SECTION 5.12. Control by Majority. The Holders of a majority in
principal amount of the Outstanding Securities of any series shall 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, provided, however, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture or any Security of any series or expose the Trustee to
personal liability; and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 5.13. Waiver of past Defaults. The Holders of not less than a
majority in principal amount (or, if the Securities are Original Issue
Discount Securities, such portion of the principal as is then accelerable
under Section 5.02) of the Outstanding Securities of any series may on behalf
of the Holders of all the Securities of such series waive any past Default
hereunder and its consequences, except a Default:
(a) in the payment of the principal of, or interest on any
Outstanding Security of such series; or
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(b) in respect of a covenant or provision hereof which under Article
9 cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected thereby.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
SECTION 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Security of any series by his acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require,
in any suit for the enforcement of any right or remedy under this Indenture,
or in any suit against the Trustee for any action taken, suffered or omitted
by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities
of any series, or to any suit instituted by any Holder for the enforcement of
the payment of the principal of, premium, if any, or interest on any Security
on of such series or after the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on or after the respective Redemption
Dates).
SECTION 5.15. Waiver of Stay, Extension or Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, which would prohibit
or forgive the Company from paying all or any portion of the principal of,
premium, if any, or interest on the Securities of any series contemplated
herein or in the Securities of any series or which may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
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SECTION 5.16. Unconditional Right of Holders to Receive Payment.
Notwithstanding any other provision in this Indenture and any other provision
of any Security of any series , the right of any Holder of any Security of
such series to receive payment of the principal of, premium, if any, and
interest on such Security on or after the respective Stated Maturities (or the
respective Redemption Dates, in the case of redemption) expressed in such
Security, or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
ARTICLE 6
THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities. (a) Except during
the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) During the existence of an Event of Default, the Trustee is
required to exercise such rights and powers vested in it under this Indenture
use the same degree of care and skill in its exercise thereof as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that no provision of this
Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
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(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.01.
SECTION 6.02. Notice of Defaults. Within 45 days after the occurrence
of any Default with respect to the Securities of any series, the Trustee shall
(i) transmit by mail to all Holders, as their names and addresses appear in
the Security Register, or (ii) if any Unregistered Securities of such series
are then outstanding, publish at least once in an Authorized Newspaper in the
Borough of Manhattan, the City of New York and at least once in an Authorized
Newspaper in London and notice of such Default hereunder actually known to a
Responsible Officer, the Trustee, unless such Default shall have been cured or
waived; provided, however, that, except in the case of a Default in the
payment of the principal of, premium, if any, or interest on any Security of
such series, the Trustee shall be protected in withholding such notice if and
so long as a trust committee of Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interest of the
Holders.
SECTION 6.03. Certain Rights of Trustee. Subject to Section 6.01
hereof and the provisions of Section 315 of the Trust Indenture Act:
(a) the Trustee may conclusively rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, Security, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board may be sufficiently evidenced by a Board Resolution
thereof;
(c) the Trustee may consult with counsel and any advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon in accordance with such advice or
Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the
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Trustee reasonable security or indemnity satisfactory to it against the costs,
expenses and liabilities which might be incurred by the Trustee in compliance
with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture other than
any liabilities arising out of its own negligence;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, Security, coupon, security, other
evidence of indebtedness or other paper or document unless requested in
writing so to do by the Holders of not less than a majority in aggregate
principal amount of the Securities of any series then Outstanding; provided,
however, that, if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of
such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require indemnity satisfactory to it against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of every
such investigation shall be paid by the Company or, if paid by the Trustee or
any predecessor Trustee, shall be repaid by the Company upon demand; provided,
further, the Trustee in its discretion may make such further inquiry or
investigation into such facts or matters as it may deem fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
attorneys, custodian or nominees and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent, attorney, custodian or
nominee appointed with due care by it hereunder;
(h) except with respect to Section 10.01, the Trustee shall have no
duty to inquire as to the performance of the Company's covenants in Article
10. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default with respect to the Securities of any series
except (i) any Event of Default occurring pursuant to Sections 5.01(a),
5.01(b) and 10.01 or (ii) any Default or Event of Default of which the Trustee
shall have received written notification or a Responsible Officer obtained
actual knowledge; and
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(i) if the Trustee is acting in the capacity of Registrar and/or
Paying Agent, then the rights afforded to the Trustee under this Section 6.03
shall also be afforded to such Registrar and/or Paying Agent.
SECTION 6.04. Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof. The recitals contained herein
and in the Securities of any series, except the Trustee's certificate of
authentication, shall be taken as the statements of the Company, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities of any series except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
of such series and perform its obligations hereunder and that the statements
made by it in a Statement of Eligibility and Qualification on Form T-1, if
any, to be supplied to the Company are true and accurate subject to the
qualifications set forth therein. The Trustee shall not be accountable for the
use or application by the Company of Securities of any series or the proceeds
thereof.
SECTION 6.05. Trustee and Agents May Hold Securities; Collections;
Etc. The Trustee, any Paying Agent, Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner or
pledgee of Securities of any series, with the same rights it would have if it
were not the Trustee, Paying Agent, Registrar or such other agent and, subject
to Section 6.08 hereof and Sections 310 and 311 of the Trust Indenture Act,
may otherwise deal with the Company and receive, collect, hold and retain
collections from the Company with the same rights it would have if it were not
the Trustee, Paying Agent, Registrar or such other agent.
SECTION 6.06. Money Held in Trust. All moneys received by the Trustee
shall, until used or applied as herein provided, be held in trust for the
purposes for which they were received, but need not be segregated from other
funds except to the extent required herein or by law. The Trustee shall not be
under any liability for interest on any moneys received by it hereunder.
SECTION 6.07. Compensation and Indemnification of Trustee and Its
Prior Claim. The Company covenants and agrees:
(a) to pay to the Trustee from time to time, and the Trustee shall
be entitled to, reasonable compensation for all services rendered by it
hereunder (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust); (b) to reimburse the Trustee
and each predecessor
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Trustee upon its request for all reasonable expenses, fees, disbursements and
advances incurred or made by or on behalf of it in accordance with any of the
provisions of this Indenture (including the reasonable compensation, fees, and
the expenses and disbursements of its counsel and of all agents and other
persons not regularly in its employ), except any such expense, disbursement or
advance as may arise from its negligence or bad faith; and (c) to indemnify
the Trustee and any of its officers, directors, employees and agents and each
predecessor Trustee for, and to hold it harmless against any loss, liability
or expense (including attorneys' fees and expenses incurred in defending
themselves) incurred without negligence or bad faith on its part, arising out
of or in connection with the acceptance or administration of this Indenture or
the trusts hereunder and its duties hereunder, including enforcement of this
Section 6.07.
To secure the Company's payment obligations in this Section 6.07, the
Trustee shall have a Lien prior to the Securities of any series on all money
or property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Securities of such series. Such Lien
shall survive the satisfaction and discharge of this Indenture.
The obligations of the Company under this Section to compensate and
indemnify the Trustee and each predecessor Trustee and to pay or reimburse the
Trustee and each predecessor Trustee for expenses, disbursements and advances
shall constitute an additional obligation hereunder and shall survive the
satisfaction and discharge of this Indenture or the rejection or termination
of this Indenture under bankruptcy law. Such additional indebtedness shall be
a senior claim to that of the Securities of any series upon all property and
funds held or collected by the Trustee as such, except funds held in trust for
the benefit of the Holders of particular Securities of such series of such
series, and the Securities of such series are hereby subordinated to such
senior claim. If the Trustee renders services and incurs expenses following an
Event of Default under Section 5.01(d) or Section 5.01(e) hereof, the parties
hereto and the Holders by their acceptance of the Securities of any series
hereby agree that such expenses are intended to constitute expenses of
administration under any bankruptcy law.
SECTION 6.08. Conflicting Interests. The Trustee shall be subject to
and comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 6.09. Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee hereunder which shall be eligible to act as Trustee
under Trust Indenture Act Sections 310(a)(1) and (2) and which shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of any Federal,
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state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the
effect hereinafter specified in this Article.
SECTION 6.10. Resignation and Removal; Appointment of Successor
Trustee. (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee, or any trustee or trustees hereinafter appointed,
may at any time resign by giving written notice thereof to the Company at
least 20 Business Days prior to the date of such proposed resignation. Upon
receiving such notice of resignation, the Company shall, after all monies due
and owing have been paid to the Trustee, promptly appoint a successor trustee
by written instrument executed by authority of the Board, a copy of which
shall be delivered to the resigning Trustee and a copy to the successor
Trustee. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 20 Business Days after the giving of such
notice of resignation, the resigning Trustee may, or any Holder who has been a
bona fide Holder of a Security of any series for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee. Such court
may thereupon, after such notice, if any, as it may deem proper, appoint a
successor Trustee.
(c) The Trustee may be removed at any time by an Act of the Holders
of a majority in principal amount of the Outstanding Securities of any series,
delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act in accordance with Section
6.08 hereof after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security of such series
for at least six months, or
(ii) the Trustee shall cease to be eligible under Section 6.09
hereof and shall fail to resign after written request therefor by the
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Company or by any Holder who has been a bona fide Holder of a Security
of such series for at least six months, or
(iii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for
the purpose or rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, the Holder of any Security of such
series who has been a bona fide Holder of a Security of such series for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee. Such court may thereupon, after
such notice, if any, as it may deem proper and prescribe, remove the Trustee
and appoint a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause,
the Company, by a Board Resolution, shall promptly appoint a successor
Trustee. If, within one year after such resignation, removal or incapability,
or the occurrence of such vacancy, a successor Trustee shall be appointed by
Act of the Holders of a majority in principal amount of the Outstanding
Securities of any series delivered to the Company and the retiring Trustee,
the successor Trustee so appointed shall, forthwith upon its acceptance of
such appointment, become the successor Trustee and supersede the successor
Trustee appointed by the Company. If no successor Trustee shall have been so
appointed by the Company or the Holders of the Securities of any series and
accepted appointment in the manner hereinafter provided, the Holder of any
Security of any series who has been a bona fide Holder for at least six months
may, subject to Section 5.14, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
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and thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee as if originally named as Trustee hereunder; but,
nevertheless, on the written request of the Company or the successor Trustee,
upon payment of amounts due to it pursuant to Section 6.07, such retiring
Trustee shall duly assign, transfer and deliver to the successor Trustee all
moneys and property at the time held by it hereunder and shall execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers, duties and obligations of the retiring Trustee. Upon request of any
such successor Trustee, the Company shall execute any and all instruments for
more fully and certainly vesting in and confirming to such successor Trustee
all such rights and powers. Any Trustee ceasing to act shall, nevertheless,
retain a prior claim upon all property or funds held or collected by such
Trustee to secure any amounts then due it pursuant to the provisions of
Section 6.07.
No successor Trustee with respect to the Securities of any series
shall accept appointment as provided in this Section 6.11 unless at the time
of such acceptance such successor Trustee shall be eligible to act as Trustee
under this Article.
Upon acceptance of appointment by any successor Trustee as provided
in this Section 6.11, the successor shall give notice thereof to the Holders
of the Securities of such series, by mailing such notice to such Holders. If
the acceptance of appointment is substantially contemporaneous with the
resignation, then the notice called for by the preceding sentence may be
combined with the notice called for by Section 6.10. If the Company fails to
give such notice within 10 days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be given
at the expense of the Company.
SECTION 6.12. Merger, Conversion, Amalgamation, Consolidation or
Succession to Business. Any corporation into which the Trustee may be merged
or converted or with which it may be consolidated or amalgamated, or any
corporation resulting from any merger, conversion, amalgamation or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, provided such corporation shall be eligible under this Article 6 to
serve as Trustee hereunder.
In case at the time such successor to the Trustee under this Section
6.12 shall succeed to the trusts created by this Indenture any of the
Securities of any
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series shall have been authenticated but not delivered, any such successor to
the Trustee may adopt the certificate of authentication of any predecessor
Trustee and deliver such Securities so authenticated; and, in case at that
time any of the Securities of any series shall not have been authenticated,
any successor to the Trustee under this Section 6.12 may authenticate such
Securities either in the name of any predecessor hereunder or in the name of
the successor Trustee; and in all such cases such certificate shall have the
full force which it is anywhere in the Securities of any series or in this
Indenture provided that the certificate of the Trustee shall have been
authenticated.
ARTICLE 7
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 7.01. Preservation of Information; Company To Furnish Trustee
Names and Addresses of Holders. (a) The Trustee shall preserve the names and
addresses of the Securityholders and otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Company shall furnish or cause the
Registrar to furnish to the Trustee before each Interest Payment Date, and at
such other times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Securityholders. Neither the Company nor the Trustee shall be
under any responsibility with regard to the accuracy of such list.
(b) The Company will furnish or cause to be furnished to the
Trustee:
(i) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date; and
(ii) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such
request, a list of similar form and content as of a date not more
than 15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Registrar,
no such list need be furnished pursuant to this Subsection 7.01(b).
SECTION 7.02. Communications of Holders. Holders may communicate with
other Holders with respect to their rights under this Indenture or under the
Securities of any series pursuant to Section 312(b) of the Trust Indenture
Act. The Company and the Trustee and any and all other persons benefitted by
this
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Indenture shall have the protection afforded by Section 312(c) of the Trust
Indenture Act.
SECTION 7.03. Reports by Trustee. Within 60 days after May 15 of each
year commencing with the first May 15 following the date of this Indenture,
the Trustee shall mail to all Holders, as and to the extent provided in
Section 313(c) of the Trust Indenture Act, a brief report dated as of such May
15, in accordance with, and to the extent required under Section 313 of the
Trust Indenture Act. At the time of its mailing to Holders, a copy of each
such report shall be filed by the Trustee with the Company, the SEC and with
each stock exchange on which the Securities of any series are listed. The
Company shall notify the Trustee when the Securities of any series are listed
on any stock exchange.
SECTION 7.04. Reports by Company.
The Company shall:
(a) file with the SEC the copies of annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may from time to time by rules and regulations
prescribe) required to be filed with the SEC pursuant to Section 13 or Section
15 of the Exchange Act, whether or not the Company has a class of securities
registered under the Exchange Act;
(b) file with the Trustee within 15 days after it files or would be
required to file the information specified in subsection (a) of this Section
7.04 reports and documents with the SEC copies of such information;
(c) file with the Trustee and the SEC in accordance with rules and
regulations prescribed from time to time by the SEC, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from
time to time by such rules and regulations; and
(d) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof with
the Trustee, such summaries of any information, documents and reports required
to be filed by the Company pursuant to subsections (a) and (c) of this Section
as may be required by rules and regulations prescribed from time to time by
the SEC.
Notwithstanding anything to the contrary herein, the Trustee shall
have no duty to review information provided pursuant to subsection (b) of this
Section
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7.04 for purposes of determining compliance with any provisions of this
Indenture.
ARTICLE 8
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC
SECTION 8.01. Company May Consolidate, Etc., Only on Certain Terms.
The Company 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 its properties and assets to
any person or persons in a single transaction or through a series of
transactions if it would result in the disposition of all or substantially all
of the properties or assets of the Company [and its Restricted subsidiaries on
a consolidated basis], unless (a) the Company shall be the continuing person
or, if the Company is not the continuing person, the resulting, surviving or
transferee person (the "surviving entity") shall be a company organized and
existing under the laws of the United States or any State or territory
thereof; (b) the surviving entity shall expressly assume all of the
obligations of the Company under the Securities and this Indenture, and shall,
if required by law to effectuate such assumption, execute a supplemental
indenture to effect such assumption which supplemental indenture shall be
delivered to the Trustee and shall be in form and substance reasonably
satisfactory to the Trustee; (c) immediately after giving effect to such
transaction or series of transactions on a pro forma basis, no Default shall
have occurred and be continuing; and (d) the Company or the surviving entity,
as the case may be, shall have delivered to the Trustee an Officers'
Certificate and Opinion of Counsel stating that such transaction or series of
transactions, and, if a supplemental indenture is required in connection with
such transaction or series of transactions to effectuate such assumption, such
supplemental indenture, complies with this covenant and that all conditions
precedent in this Indenture relating to the transaction or series of
transactions have been satisfied.
SECTION 8.02. Successor Substituted. Upon any consolidation or merger
or any sale, assignment, conveyance, lease, transfer or other disposition of
all or substantially all of the assets of the Company in accordance with the
foregoing in which the Company is not the continuing corporation, the
successor corporation formed by such a consolidation or into which the Company
is merged or to which such transfer is made will succeed to, and be
substituted for, and may exercise every right and power of the Company under
this Indenture and the Securities with the same effect as if such successor
corporation had been named as the Company therein; and thereafter, except in
the case of (i) any lease or (ii) any sale, assignment, conveyance, transfer,
lease or other disposition to a Subsidiary of the
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Company, the Company shall be discharged from all obligations and covenants
under this Indenture and the Securities.
ARTICLE 9
SUPPLEMENTAL INDENTURES AND WAIVERS
SECTION 9.01. Supplemental Indentures, Agreements and Waivers Without
Consent of Holders. Without the consent of any Holders, the Company, when
authorized by a Board Resolution of the Board, and the Trustee, at any time
and from time to time, may amend, waive, modify or supplement this Indenture
or the Securities of any series for any of the following purposes:
(a) to evidence the succession of another person to the Company, and
the assumption by any such successor of the covenants of the Company in the
Securities of any or all series;
(b) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the Company,
herein, in the Securities;
(c) to cure any ambiguity, to correct or supplement any provision
herein, in the Securities of such series which may be defective or
inconsistent with any other provision herein or to make any other provisions
with respect to matters or questions arising under this Indenture or the
Securities of such series; provided, however, that, in each case, such
provisions shall not materially adversely affect the legal rights of the
Holders;
(d) to comply with the requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act, as
contemplated by Section 9.05 hereof or otherwise;
(e) to mortgage, pledge, hypothecate or grant a security interest in
any property or assets in favor of the Trustee for the benefit of the Holders
as security for the payment and performance of the Indenture Obligations;
(f) to make any other change that does not materially adversely
affect the legal rights of any Holder;
(g) to add Guarantors with respect to the Securities of any series;
or
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(h) to establish the form or forms or terms of Securities of any
series or of the coupons appertaining to such Securities as permitted by
Section 3.01;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such change, agreement or waiver does not materially
adversely affect the legal rights of any Holder.
SECTION 9.02. Supplemental Indentures, Agreements and Waivers with
Consent of Holders. With the written consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securities of all
series affected delivered to the Company and the Trustee, the Company when
authorized by a Board Resolution, together with the Trustee, may amend, waive,
modify or supplement any other provision of this Indenture or the Securities
of any series; provided, however, that no such amendment, waiver, modification
or supplement may, without the written consent of the Holder of each
Outstanding Security of all series affected thereby:
(i) reduce the principal amount of, or extend the fixed maturity
of, or alter the redemption provisions of, such Holder's Security;
(ii) change the currency in which such Securities or amounts
owing thereon is payable;
(iii) reduce the percentage of principal amount outstanding of
such Securities which must consent to an amendment, supplement or
waiver or consent to take any action under this Indenture or such
Securities;
(iv) impair the right to institute suit for the enforcement of
any payment on or with respect to such Securities;
(v) waive a default in payment with respect to such Securities
or any Guarantee;
(vi) reduce the rate or extend the time for payment of interest
on such Securities;
(vii) affect the ranking of such Securities in a manner adverse to
the holder of such Securities; or
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(viii) release any Guarantor from any of its obligations under its
Guarantee or this Indenture except in compliance with the terms of
this Indenture.
Upon the written request of the Company accompanied by a copy of a
Board Resolution of the Board authorizing the execution of any such
supplemental indenture or other agreement, instrument or waiver, and an
Officers' Certificate and an Opinion of Counsel upon which the Trustee shall
be fully protected in relying upon as conclusive evidence that such change,
agreement, supplement or waiver is permitted by this Indenture and upon the
filing with the Trustee of evidence of the consent of Holders as aforesaid,
the Trustee shall join with the Company in the execution of such supplemental
indenture or other agreement, instrument or waiver.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture or other
agreement, instrument or waiver, but it shall be sufficient if such Act shall
approve the substance thereof.
SECTION 9.03. Execution of Supplemental Indentures, Agreements and
Waivers. In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement, instrument or waiver permitted by this
Article 9 or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
from each obligor under the Securities entering into such supplemental
indenture, agreement, instrument or waiver, each stating that the execution of
such supplemental indenture, agreement, instrument or waiver (a) is authorized
or permitted by this Indenture and (b) that all requisite consents have been
obtained or that no consents are required. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture, agreement,
instrument or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture, the Securities or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture under this Article 9, this Indenture and/or the
Securities, if applicable, shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture and/or the
Securities, if applicable, as the case may be, for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
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SECTION 9.05. Conformity with Trust Indenture Act. Every supplemental
indenture executed pursuant to this Article 9 shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 9.06. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for
in such supplemental indenture. If the Company shall so determine, new
Securities so modified as to conform, in the opinion of the Trustee and the
Board, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee upon a Company Order in
exchange for Outstanding Securities.
SECTION 9.07. Record Date. The Company may, but shall not be
obligated to, fix, a record date for the purpose of determining the Holders
entitled to consent to any supplemental indenture, agreement or instrument or
any waiver, and shall promptly notify the Trustee of any such record date. If
a record date is fixed those persons who were Holders at such record date (or
their duly designated proxies), and only those persons, shall be entitled to
consent to such supplemental indenture, agreement or instrument or waiver or
to revoke any consent previously given, whether or not such persons continue
to be Holders after such record date. No such consent shall be valid or
effective for more than 90 days after such record date.
SECTION 9.08. Revocation and Effect of Consents. Until an amendment
or waiver becomes effective, a consent to it by a Holder of a Security is a
continuing consent by the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if a notation of the consent is not made on any Security.
However, any such Holder, or subsequent Holder, may revoke the consent as to
his Security or portion of a Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. An
amendment or waiver shall become effective in accordance with its terms and
thereafter bind every Holder.
ARTICLE 10
COVENANTS
SECTION 10.01. Payment of Principal, Premium and Interest. The
Company shall duly and punctually pay the principal of, premium, if any, and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
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The interest on Securities with coupons attached (together with any
additional amounts payable pursuant to the terms of such Securities) shall be
payable only upon presentation and surrender of the several coupons for such
interest installments as are evidenced thereby as they severally mature. The
interest on any temporary Unregistered Securities (together with any
additional amounts payable pursuant to the terms of such Securities) shall be
paid, as to the installments of interest evidenced by coupons attached
thereto, if any, only upon presentation and surrender thereof, and, as to the
other installments of interest, if any, only upon presentation of such
Unregistered Securities for notation thereon of the payment of such interest.
The interest on Registered Securities (together with any additional amounts
payable pursuant to the terms of such Securities) shall be payable only to the
Holders thereof and at the option of the Company may be paid by mailing checks
for such interest payable to or upon the written order of such Holders at
their last addresses as they appear on the Security Register of the Company.
SECTION 10.02. Maintenance of Office or Agency. The Company shall
maintain in the Borough of Manhattan in The City of New York, State of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of
the Securities and this Indenture may be served. The office of the Trustee at
its Corporate Trust Office will be such office or agency of the Company,
unless the Company shall designate and maintain some other office or agency
for one or more of such purposes. The Company will give prompt written notice
to the Trustee of any change in the location of any such office or agency. If
at any time the Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices
and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York, State of New York)
where the Securities may be presented or surrendered for any or all such
purposes, and may from time to time rescind such designation; provided,
however, that no such designation or rescission shall in any manner relieve
the Company of its obligation to maintain an office or agency in The City of
New York, State of New York for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and any
change in the location of any such other office or agency.
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SECTION 10.03. Money for Security Payments to Be Held. If the Company
shall at any time act as its own Paying Agent, it will, on or before each due
date of the principal of, premium, if any, or interest on any of the
Securities, segregate and hold in trust for the benefit of the Holders
entitled thereto a sum sufficient to pay the principal, premium, if any, or
interest so becoming due until such sums shall be paid to such persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company will, on or
before each due date of the principal of, premium, if any, or interest on, any
Securities, deposit with a Paying Agent a sum in same day funds sufficient to
pay the principal, premium, if any, or interest so becoming due, such sum to
be held in trust for the benefit of the Holders entitled to such principal,
premium or interest, and (unless such Paying Agent is the Trustee) the Company
will promptly notify the Trustee of such action or any failure so to act.
If the Company is not acting as Paying Agent, the Company will cause
each Paying Agent other than the Trustee to execute and deliver to the Trustee
an instrument in which such Paying Agent will agree with the Trustee, subject
to the provisions of this Section 10.03, that such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities in trust for the benefit of the
Holders entitled thereto until such sums shall be paid to such Holders or
otherwise disposed of as herein provided;
(b) give the Trustee notice of any Default by the Company (or any
other obligor upon the Securities) in the making of any payment of principal
of, premium, if any, or interest on the Securities;
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held
in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and liabilities of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee
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upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent will be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Security and remaining unclaimed for two years after
such principal, premium, if any, or interest has become due and payable shall
be paid to the Company upon receipt of a Company Request therefor, or (if then
held by the Company) will be discharged from such trust; and the Holder of
such Security will thereafter, as an unsecured general creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, will thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, at
the option of the Company in the New York Times or the Wall Street Journal
(national edition), notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining shall be
repaid to the Company.
SECTION 10.04. Corporate Existence. Subject to Article 8, the Company
shall do or cause to be done all things necessary to preserve and keep in full
force and effect the corporate existence, rights (charter and statutory),
licenses and franchises of the Company; provided, however, that the Company
will not be required to preserve any such right, license or franchise if the
Board shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company as a whole and that the loss
thereof is not adverse in any material respect to the Holders; provided,
further, that the foregoing will not prohibit a sale, transfer or conveyance
of a Subsidiary of the Company or any of its assets in compliance with the
terms of this Indenture.
SECTION 10.05. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company will furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenants compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with, and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that, in the case of any such application or request as to which the
furnishing of such documents, certificates
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and/or opinions is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate
or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture will include:
(i) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions
herein relating thereto;
(ii) brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether such covenant or
condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
ARTICLE 11
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to surviving rights
or registration of transfer or exchange of Securities herein expressly
provided for) and the Trustee, on written demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when:
(1) either (a) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section
3.07 hereof and (ii) Securities for whose payment money has
theretofore been irrevocably deposited or caused to be deposited in
trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.03) have been delivered to the Trustee for cancellation;
or (b) all such Securities not theretofore delivered to the Trustee
for cancellation have become due and
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payable under irrevocable arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee in the name,
and at the expense, of the Company, and the Company has irrevocably
deposited or caused to be deposited with the Trustee in trust an
amount of money in dollars sufficient to pay and discharge all sums
payable hereunder by the Company with respect to such issue of
Securities not theretofore delivered to the Trustee for cancellation,
for the principal of, premium, if any, and interest to the date of
such deposit or maturity date of redemption; and
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with; provided, that
such Opinion of Counsel may rely, as to matters of fact, upon an
Officers' Certificate.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Sections 4.05 and 6.07 and, if
money shall have been deposited with the Trustee pursuant to subclause (1)(b)
of this Section 11.01, the obligations of the Trustee under Section 11.02 and
the last paragraph of Section 10.03 shall survive.
SECTION 11.02. Application of Trust Money. Subject to the provisions
of the last paragraph of Section 10.03, all money deposited with the Trustee
pursuant to Section 11.01 shall be held in trust and applied by it, in
accordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the persons
entitled thereto, of the principal of, premium, if any, and interest on the
Securities for whose payment such money has been deposited with the Trustee.
ARTICLE 12
REDEMPTION
SECTION 12.01. Applicability of Article. The provisions of this
Article shall be applicable to the Securities of any series which are
redeemable before their maturity or to any sinking fund for the retirement of
Securities of a series except as otherwise specified as contemplated by
Section 3.01 for Securities of such series.
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SECTION 12.02. Notices to the Trustee. If the Company elects to
redeem Securities of any series, it shall notify the Trustee of the Redemption
Date and principal amount such Securities to be redeemed.
The Company shall notify the Trustee of any redemption at least 45
days before the Redemption Date by an Officers' Certificate, stating that such
redemption will comply with the provisions hereof and such Securities.
SECTION 12.03. Selection of Securities to Be Redeemed. In the event
that less than all of the Securities of a series are to be redeemed at any
time, selection of such Securities for redemption will be made by the Trustee
in compliance with any applicable requirements of the principal national
securities exchange, if any, on which the Securities of such series are listed
or, if the Securities of such series are not then listed on a national
securities exchange (or if the Securities of such series are so listed but the
exchange does not impose requirements with respect to the selection of debt
securities for redemption), on a pro rata basis, by lot or by such method as
the Trustee in its sole discretion shall deem fair and appropriate; provided,
however, that no Securities of a principal amount at maturity of $1,000 or
less shall be redeemed in part.
The Trustee shall promptly notify the Company and the Registrar in
writing of the Securities of such series selected for redemption and, in the
case of any Securities of such series selected for partial redemption, the
principal amount at maturity thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal amount of such Security which has been or is to be
redeemed.
SECTION 12.04. Notice of Redemption. Notice of redemption to the
Holders of Registered Securities of any series shall be given by first-class
mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to
the Redemption Date, to each Holder of Securities of such series to be
redeemed, at the address of such Holder appearing in the Security register
maintained by the Registrar.
Notice of redemption to the Holders of Unregistered Securities of any
series to be redeemed as a whole or in part who have filed their names and
addresses with the Trustee pursuant to Section 313(c)(2) of the Trust
Indenture Act, shall be given by mailing notice of such redemption, by first
class mail, postage prepaid, at least 30 days and not more than 60 days prior
to the date fixed
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for redemption, to such Holders at such addresses as were so furnished to the
Trustee (and, in the case of any such notice given by the Company, the Trustee
shall make such information available to the Company for such purpose). Notice
of redemption to all other Holders of Unregistered Securities of any series to
be redeemed as a whole or in part shall be published in an Authorized
Newspaper in The City of New York or with respect to any Security the interest
on which is based on the offered quotations in the interbank Eurodollar market
for dollar deposits in an Authorized Newspaper in London, in each case, once
in each of three successive calendar weeks, the first publication to be not
less than 30 days nor more than 60 days prior to the date fixed for
redemption. Any notice which is mailed or published in the manner herein
provided shall be conclusively presumed to have been duly given, whether or
not the Holder receives the notice. Failure to give notice by mail, or any
defect in the notice to the Holder of any Security of a series designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security of such series.
All notices of redemption shall identify the Securities of such
series to be redeemed and shall state:
(a) the Redemption Date;
(b) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(c) that, unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on and
after the Redemption Date, and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price plus unpaid interest
on the Securities through the Redemption Date, upon surrender to the Paying
Agent of the Securities redeemed;
(d) if any Security of such series is to be redeemed in part, the
portion of the principal amount at maturity (equal to $1,000 or any integral
multiple thereof) of such Security to be redeemed and that on and after the
Redemption Date, upon surrender for cancellation of such Security to the
Paying Agent, a new Security or Securities of such series in the aggregate
principal amount at maturity equal to the unredeemed portion thereof will be
issued without charge to the Securityholder;
(e) that Securities of such series called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price and the name
and address of the Paying Agent; and
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(f) the CUSIP or CINS number, if any, relating to such Securities.
Notice of redemption of Securities of any series to be redeemed at
the election of the Company shall be given by the Company or, at the Company's
written request, by the Trustee in the name and at the expense of the Company.
SECTION 12.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Securities of a series called for redemption become due
and payable on the Redemption Date and at the Redemption Price. Upon surrender
to the Paying Agent, such Securities called for redemption shall be paid at
the Redemption Price plus accrued interest, if any, to the Redemption Date,
but interest installments whose maturity is on or prior to such Redemption
Date will be payable on the relevant Interest Payment Dates to the Holders of
record at the close of business on the relevant record dates referred to in
the Securities of such series.
SECTION 12.06. Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Paying Agent an amount of
money in same day funds sufficient to pay the Redemption Price of, and any
accrued interest on, all the Securities of a series or portions thereof which
are to be redeemed on that date, other than Securities of such series or
portions thereof called for redemption on that date which have been delivered
by the Company to the Trustee for cancellation.
If the Company complies with the preceding paragraph, then, unless
the Company defaults in the payment of such Redemption Price, interest on the
Securities of a series to be redeemed will cease to accrue on and after the
applicable Redemption Date, whether or not such Securities are presented for
payment, and the Holders of such Securities shall have no further rights with
respect to such Securities except for the right to receive the Redemption
Price plus unpaid interest on the Securities of such series through the
Redemption Date, upon surrender of such Securities. If any Security of a
series called for redemption shall not be so paid upon surrender thereof for
redemption, the principal, premium, if any, and, to the extent lawful, accrued
interest thereon shall, until paid, bear interest from the Redemption Date at
the rate provided in the Securities of such series.
SECTION 12.07. Securities Redeemed or Purchased in Part. Upon
surrender to the Paying Agent of a Security of any series which is to be
redeemed in part, the Company shall execute and the Trustee shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities of such series, of any authorized denomination as
requested by such Holder in
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aggregate principal amount equal to, and in exchange for, the unredeemed
portion of the principal of the Security so surrendered that is not redeemed.
SECTION 12.08. Mandatory and Optional Sinking Funds. The minimum
amount of any sinking fund payment provided for by the terms of Securities of
any series is herein referred to as a "mandatory sinking fund payment", and
any payment in excess of such minimum amount provided for by the terms of the
Securities of any series is herein referred to as an "optional sinking fund
payment". The date on which a sinking fund payment is to be made is herein
referred to as the "sinking fund payment date".
In lieu of making all or any part of any mandatory sinking fund
payment with respect to any series of Securities in cash, the Company may at
its option (a) deliver to the Trustee Securities of such series theretofore
purchased or otherwise acquired (except through a mandatory sinking fund
payment) by the Company or receive credit for Securities of such series (not
previously so credited) theretofore purchased or otherwise acquired (except as
aforesaid) by the Company and delivered to the Trustee for cancellation
pursuant to Section 3.10, (b) receive credit for optional sinking fund
payments (not previously so credited) made pursuant to this Section, or (c)
receive credit for Securities of such series (not previously so credited)
redeemed by the Company through any optional sinking fund payment. Securities
so delivered or credited shall be received or credited by the Trustee at the
sinking fund redemption price specified in such Securities.
On or before the sixtieth day next preceding each sinking fund
payment date for any series, or such shorter period as shall be acceptable to
the Trustee, the Company will deliver to the Trustee an Officers' Certificate
(a) specifying the portion of the mandatory sinking fund payment to be
satisfied by payment of cash and the portion to be satisfied by credit of
specified Securities of such series and the basis for such credit, (b) stating
that none of the specified Securities of such series has theretofore been so
credited, (c) stating that no defaults in the payment of interest or Events of
Default with respect to such series have occurred (which have not been waived
or cured) and are continuing and (d) stating whether or not the Company
intends to exercise its right to make an optional sinking fund payment with
respect to such series and, if so, specifying the amount of such optional
sinking fund payment which the Company intends to pay on or before the next
succeeding sinking fund payment date. Any Securities of such series to be
credited and required to be delivered to the Trustee in order for the Company
to be entitled to credit therefor as aforesaid which have not theretofore been
delivered to the Trustee shall be delivered for cancellation pursuant to
Section 3.10 to the Trustee with such Officers' Certificate (or reasonably
promptly thereafter if acceptable to the Trustee). Such Officers' Certificate
shall be
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irrevocable and upon its receipt by the Trustee the Company shall become
unconditionally obligated to make all the cash payments or delivery of
securities therein referred to, if any, on or before the next succeeding
sinking fund payment date. Failure of the Company, on or before any such
sixtieth day, to deliver such Officer's Certificate and Securities specified
in this paragraph, if any, shall not constitute a default but shall
constitute, on and as of such date, the irrevocable election of the Company
(i) that the mandatory sinking fund payment for such series due on the next
succeeding sinking fund payment date shall be paid entirely in cash without
the option to deliver or credit Securities of such series in respect thereof
and (ii) that the Company will make no optional sinking fund payment with
respect to such series as provided in this Section.
If the sinking fund payment or payments (mandatory or optional or
both) to be made in cash on the next succeeding sinking fund payment date plus
any unused balance of any preceding sinking fund payments made in cash shall
exceed $50,000 (or a lesser sum if the Company shall so request with respect
to the Securities of any series), such cash shall be applied on the next
succeeding sinking fund payment date to the redemption of Securities of such
series at the sinking fund redemption price thereof together with accrued
interest thereon to the date fixed for redemption. If such amount shall be
$50,000 (or such lesser sum) or less and the Company makes no such request
then it shall be carried over until a sum in excess of $50,000 (or such lesser
sum) is available. The Trustee shall select, in the manner provided in Section
12.04, for redemption on such sinking fund payment date a sufficient principal
amount of Securities of such series to absorb said cash, as nearly as may be,
and shall (if requested in writing by the Company) inform the Company of the
serial numbers of the Securities of such series (or portion thereof) so
selected. Securities shall be excluded from eligibility for redemption under
this Section if they are identified by registration and certificate number in
an Officers' Certificate delivered to the Trustee at least 60 days prior to
the sinking fund payment date as being owned of record and beneficially by,
and not pledged or hypothecated by either (a) the Company or (b) an entity
specifically identified in such Officers' Certificate as directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company. the Trustee, in the name and at the expense of the
Company (or the Company, if it shall so request the Trustee in writing) shall
cause notice of redemption of the Securities of such series to be given in
substantially the manner provided in Section 12.04 (and with the effect
provided in Section 12.05) for the redemption of Securities of such series in
part at the option of the Company. The amount of any sinking fund payments not
so applied or allocated to the redemption of Securities of such series shall
be added to the next cash sinking fund payment for such series and, together
with such payment, shall be applied in accordance with the provisions of this
Section. Any and all sinking fund moneys held on the stated maturity date of
the Securities of any particular series (or
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earlier, if such maturity is accelerated), which are not held for the payment
or redemption of particular Securities of such series shall be applied,
together with other moneys, if necessary, sufficient for the purpose, to the
payment of the Principal of, and interest on, the Securities of such series at
maturity.
On or before 10:00 a.m. New York City time on each sinking fund
payment date, the Company shall pay to the Trustee in cash or shall otherwise
provide for the payment of all interest accrued to the date fixed for
redemption on Securities to be redeemed on the next following sinking fund
payment date.
The Trustee shall not redeem or cause to be redeemed any Securities
of a series with sinking fund moneys or mail any notice of redemption of
Securities of such series by operation of the sinking fund during the
continuance of a Default in payment of interest on such Securities or of any
Event of Default except that, where the mailing of notice of redemption of any
Securities shall theretofore have been made, the Trustee shall redeem or cause
to be redeemed such Securities, provided that it shall have received from the
Company a sum sufficient for such redemption. Except as aforesaid, any moneys
in the sinking fund for such series at the time when any such Default or Event
of Default shall occur, and any moneys thereafter paid into the sinking fund,
shall, during the continuance of such default or Event of Default, be deemed
to have been collected under Article 5 and held for the payment of such
Securities. In case such Event of Default shall have been waived as provided
in Section 5.13 or the Default cured on or before the sixtieth day preceding
the sinking fund payment date in any year, such moneys shall thereafter be
applied on the next succeeding sinking fund payment date in accordance with
this Section to the redemption of such Securities.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first written above.
RCN CORPORATION
By:
----------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Trustee
By:
----------------------------
Name:
Title:
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EXHIBIT A
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF
THIS INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR
DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS
NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR
ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
A-1
EXHIBIT 5.1
April 16, 1999
RCN Corporation
105 Carnegie Center
Princeton, NJ 08540-6215
Ladies and Gentlemen:
We have acted as counsel in connection with the Registration
Statement on Form S-3 (File No. 333-71525) (the "Registration Statement")
filed by RCN Corporation (the "Company") with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, for the
registration of the sale by the Company from time to time of up to
$1,000,000,000 aggregate principal amount of debt securities (the "Debt
Securities"), preferred stock, par value $1.00 per share, (the "Preferred
Stock") of the Company and common stock, par value $1.00 per share, (the
"Common Stock") of the Company. The Debt Securities are to be issued pursuant
to an indenture (the "Indenture") between the Company and The Chase Manhattan
Bank, as trustee (the "Trustee").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary for the purposes of rendering this opinion.
On the basis of the foregoing, we are of the opinion that:
1. When the Indenture and any supplemental indenture to be entered
into in connection with the issuance of any Debt Securities have been duly
authorized, executed and delivered by the Trustee and the Company, the
specific terms of a particular series of Debt Securities have been duly
authorized and established in accordance with the Indenture and such Debt
Securities have been duly authorized, executed, authenticated, issued and
delivered in accordance with the Indenture and the applicable underwriting or
other agreement, such Debt Securities will constitute a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
(a) the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or similar laws now or
hereinafter in effect relating to or affecting the enforcement of creditors'
rights generally and (b) the availability of equitable remedies may be limited
by equitable principles of general applicability (regardless of whether
considered in a proceeding at law or in equity).
2. Upon designation of the relative rights, preferences and
limitations of any series of Preferred Stock by the Board of Directors of the
Company and the proper filing with the Secretary of State of the State of
Delaware of a Certificate of Designation relating to such series of Preferred
Stock, all necessary corporate action on the part of the Company will have
been taken to authorize the issuance and sale of such series of Preferred
Stock proposed to be sold by the Company, and when such shares of Preferred
Stock are issued and delivered in accordance with the applicable underwriting
or other agreement, such shares of Preferred Stock will be validly issued,
fully paid and non-assessable, enforceable in accordance with their terms,
except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or similar laws
now or hereinafter in effect relating to or affecting the enforcement of
creditors' rights generally and (b) the availability of equitable remedies may
be limited by equitable principles of general applicability (regardless of
whether considered in a proceeding at law or in equity).
3. When necessary corporate action on the part of the Company has
been taken to authorize the issuance and sale of such shares of Common Stock
proposed to be sold by the Company, and when such shares of Common Stock are
issued and delivered in accordance with the applicable underwriting or other
agreement, such shares of Common Stock will be validly issued, fully paid and
non-assessable.
In connection with the opinions expressed above, we have assumed
that, at or prior to the time of the delivery of any such security, (i) the
Board of Directors shall have duly established the terms of such security and
duly authorized the issuance and sale of such security and such authorization
shall not have been modified or rescinded; (ii) the Registration Statement
shall have been declared effective and such effectiveness shall not have been
terminated or rescinded; and (iii) there shall not have occurred any change in
law affecting the validity or enforceability of such security. We have also
assumed that none of the terms of any security to be established subsequent to
the date hereof, nor the issuance and delivery of such security, nor the
compliance by the Company with the terms of such security will violate any
applicable law or will result in a violation of any provision of any
instrument or agreement then binding upon the Company, or any restriction
imposed by any court or governmental body having jurisdiction over the
Company.
<PAGE>
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In addition, we consent to the reference to us under
the caption "Legal Matters" in the prospectus.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by or furnished to any other person without our prior written
consent.
Very truly yours,
/s/ Davis Polk & Wardwell
EXHIBIT 12.1
RCN Corporation
Ratio of Earnings to Fixed Charges
----------------------------------
(Dollars in Thousands)
<TABLE>
1993 1994 1995 1996 1997 1998
-------- --------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from
continuing operations
before income taxes $ 10,711 $ 6,171 $ 6,838 $ (4,068) $ (73,522) $ (214,242)
-------- -------- -------- --------- ---------
Minority interest in
income of consolidated
entities (85) (95) (144) -- -- --
-------- -------- -------- --------- --------- ----------
Fixed Charges:
Interest on long-
term and short-term
debt including
amortization of
debt expense 1,167 16,669 16,517 16,046 25,602 112,239
-------- -------- -------- --------- --------- ----------
Total fixed charges 1,167 16,669 16,517 16,046 25,602 112,239
-------- -------- -------- --------- --------- ----------
Earnings before income
taxes and fixed charges $ 11,793 $ 22,745 $ 23,211 $ 11,978 $ (47,920) $(102,003)
======== ======== ======== ========= ========= =========
Ratio of earnings to
fixed charges 10.11 1.36 1.41 0.75 (1.87) (0.91)
</TABLE>
For purposes of computing the ratio, earnings are income from continuing
operations less minority interest in income of consolidated entities and plus
fixed charges. Fixed charges consist of interest on long-term and short-term
debt including amortization of debt expense. The ratio of earnings to fixed
charges for the year ended December 31, 1997 is less than 1 and therefore the
earnings are inadequate to cover the fixed charges by $73,522.
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 and the related Prospectus, of our
report dated 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
of our Firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 16, 1999
Exhibit 25.1
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
RCN CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 22-3498533
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
105 Carnegie Center
Princeton, NJ 08540-6215
(Address of principal executive offices) (Zip Code)
---------------------------------------------
Debt Securities
(Title of the indenture securities)
-------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551.
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
-2-
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939 (see Exhibit 6 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by reference. On
July 14, 1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving
corporation, was renamed The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York and State of New York, on the 7th day
of April, 1999.
THE CHASE MANHATTAN BANK
By /s/ James P. Freeman
----------------------------------
James P. Freeman
Vice President
-3-
