SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
(RULE 13D-101)
Under the Securities Exchange Act of 1934
(AMENDMENT NO. __)
RCN CORPORATION
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(Name of Issuer)
COMMON STOCK, $1.00 PAR VALUE
- --------------------------------------------------------------------------------
(Title of Class of Securities)
7493 6101
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(CUSIP Number)
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
(214) 740-7300
- --------------------------------------------------------------------------------
(Name, address and telephone number of person
authorized to receive notices and communications)
April 7, 1999
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(Date of event which requires filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), (f) or (g), check the following box [ ].
(Continued on following pages)
Page 1
E:\DATA\26\52626\0591\2205\8SCHRCN1.DOC
<PAGE>
<TABLE>
<CAPTION>
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CUSIP No. 7493 6101 13D Page 2 of 24
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<S> <C>
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
MR. THOMAS O. HICKS
- --------- -------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------- -------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- --------- -------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
N/A
- --------- -------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- --------- -------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
- --------- -------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
------- ------------------------------------------------------------------
8 SHARED VOTING POWER
6,410,256**
------- ------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
------- ------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES [ ]
- --------- -------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
8.7%**
- --------- -------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------- -------------------------------------------------------------------------------------------------------------
* THE REPORTING PERSON EXPRESSLY DISCLAIMS (I) THE EXISTENCE OF ANY GROUP AND
(II) BENEFICIAL OWNERSHIP WITH RESPECT TO ANY SHARES OTHER THAN THE SHARES
OWNED OF RECORD BY SUCH REPORTING PERSON. SEE ITEM 5.
** ASSUMING CONVERSION OF ALL SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
BENEFICIALLY OWNED BY SUCH REPORTING PERSON. SEE ITEM 6.
<PAGE>
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CUSIP No. 7493 6101 13D Page 3 of 24
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- --------- -------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
HM4 RCN PARTNERS
- --------- -------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------- -------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- --------- -------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
- --------- -------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- --------- -------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------- -------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
------- ------------------------------------------------------------------
8 SHARED VOTING POWER
6,410,256**
------- ------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
------- ------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES [ ]
- --------- -------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
8.7%**
- --------- -------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- --------- -------------------------------------------------------------------------------------------------------------
* THE REPORTING PERSON EXPRESSLY DISCLAIMS (I) THE EXISTENCE OF ANY GROUP AND
(II) BENEFICIAL OWNERSHIP WITH RESPECT TO ANY SHARES OTHER THAN THE SHARES
OWNED OF RECORD BY SUCH REPORTING PERSON. SEE ITEM 5.
** ASSUMING CONVERSION OF ALL SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
BENEFICIALLY OWNED BY SUCH REPORTING PERSON. SEE ITEM 6.
<PAGE>
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CUSIP No. 7493 6101 13D Page 4 of 24
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
HM4 RCN QUALIFIED FUND, L.P.
- --------- -------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------- -------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- --------- -------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
- --------- -------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- --------- -------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------- -------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
------- ------------------------------------------------------------------
8 SHARED VOTING POWER
6,410,256**
------- ------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
------- ------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES [ ]
- --------- -------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
8.7%**
- --------- -------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- --------- -------------------------------------------------------------------------------------------------------------
* THE REPORTING PERSON EXPRESSLY DISCLAIMS (I) THE EXISTENCE OF ANY GROUP AND
(II) BENEFICIAL OWNERSHIP WITH RESPECT TO ANY SHARES OTHER THAN THE SHARES
OWNED OF RECORD BY SUCH REPORTING PERSON. SEE ITEM 5.
** ASSUMING CONVERSION OF ALL SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
BENEFICIALLY OWNED BY SUCH REPORTING PERSON. SEE ITEM 6.
<PAGE>
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CUSIP No. 7493 6101 13D Page 5 of 24
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
HM4 RCN PRIVATE FUND, L.P.
- --------- -------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
- --------- -------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- --------- -------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------- -------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
------- ------------------------------------------------------------------
8 SHARED VOTING POWER
6,410,256**
------- ------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
------- ------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES [ ]
- --------- -------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
8.7%**
- --------- -------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- --------- -------------------------------------------------------------------------------------------------------------
* THE REPORTING PERSON EXPRESSLY DISCLAIMS (I) THE EXISTENCE OF ANY GROUP AND
(II) BENEFICIAL OWNERSHIP WITH RESPECT TO ANY SHARES OTHER THAN THE SHARES
OWNED OF RECORD BY SUCH REPORTING PERSON. SEE ITEM 5.
** ASSUMING CONVERSION OF ALL SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
BENEFICIALLY OWNED BY SUCH REPORTING PERSON. SEE ITEM 6.
<PAGE>
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CUSIP No. 7493 6101 13D Page 6 of 24
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
HM4 RCN COINVESTORS, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
- --------- -------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- --------- -------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------- -------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
------- ------------------------------------------------------------------
8 SHARED VOTING POWER
6,410,256**
------- ------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
------- ------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES [ ]
- --------- -------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
8.7**
- --------- -------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- --------- -------------------------------------------------------------------------------------------------------------
* THE REPORTING PERSON EXPRESSLY DISCLAIMS (I) THE EXISTENCE OF ANY GROUP AND
(II BENEFICIAL OWNERSHIP WITH RESPECT TO ANY SHARES OTHER THAN THE SHARES
OWNED OF RECORD BY SUCH REPORTING PERSON. SEE ITEM 5.
** ASSUMING CONVERSION OF ALL SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
BENEFICIALLY OWNED BY SUCH REPORTING PERSON. SEE ITEM 6.
<PAGE>
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CUSIP No. 7493 6101 13D Page 7 of 24
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
HICKS, MUSE GP PARTNERS IV, L.P.
- --------- -------------------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------- -------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- --------- -------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
- --------- -------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- --------- -------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------- -------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
------- ------------------------------------------------------------------
8 SHARED VOTING POWER
6,410,256**
------- ------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
------- ------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES [ ]
- --------- -------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
8.7%**
- --------- -------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- --------- -------------------------------------------------------------------------------------------------------------
* THE REPORTING PERSON EXPRESSLY DISCLAIMS (I) THE EXISTENCE OF ANY GROUP AND
(II) BENEFICIAL OWNERSHIP WITH RESPECT TO ANY SHARES OTHER THAN THE SHARES
OWNED OF RECORD BY SUCH REPORTING PERSON. SEE ITEM 5.
** ASSUMING CONVERSION OF ALL SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
BENEFICIALLY OWNED BY SUCH REPORTING PERSON. SEE ITEM 6.
<PAGE>
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CUSIP No. 7493 6101 13D Page 8 of 24
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (entities only)
HICKS, MUSE FUND IV LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [X]
- --------- -------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- --------- -------------------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
- --------- -------------------------------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
- --------- -------------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------- -------------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
------- ------------------------------------------------------------------
8 SHARED VOTING POWER
6,410,256**
------- ------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
------- ------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,410,256**
- --------- -------------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES [ ]
- --------- -------------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
8.7%**
- --------- -------------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO
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</TABLE>
* THE REPORTING PERSON EXPRESSLY DISCLAIMS (I) THE EXISTENCE OF ANY GROUP AND
(II) BENEFICIAL OWNERSHIP WITH RESPECT TO ANY SHARES OTHER THAN THE SHARES
OWNED OF RECORD BY SUCH REPORTING PERSON. SEE ITEM 5.
** ASSUMING CONVERSION OF ALL SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
BENEFICIALLY OWNED BY SUCH REPORTING PERSON. SEE ITEM 6.
<PAGE>
ITEM 1. SECURITY AND ISSUER
The title of the class of equity securities of RCN
Corporation, a Delaware corporation (the "Company"), to which this Statement on
Schedule 13D (this "Statement") relates is the common stock, par value $1.00 per
share (the "Common Stock"), of the Company. The address of the principal
executive officers of the Company is 105 Carnegie Center, Princeton, New Jersey
08540-6215.
ITEM 2. IDENTITY AND BACKGROUND
(a) Name of Person(s) Filing this Statement (the "Filing Parties"):
Mr. Thomas O. Hicks
HM4 RCN Partners, a Texas partnership ("RCN Partners")
HM4 RCN Qualified Fund, L.P., a Texas limited partnership
("RCN Qualified Fund") HM4 RCN Private Fund, L.P. a Texas
limited partnership ("RCN Private Fund") HM4 RCN Coinvestors,
L.P. a Texas limited partnership ("RCN Coinvestors") Hicks,
Muse GP Partners IV, L.P., a Texas limited partnership ("HM
Partners") Hicks, Muse Fund IV, LLC, a Texas limited liability
company ("Fund IV LLC")
(b) - (c)
Mr. Thomas O. Hicks
Mr. Thomas O. Hicks is a partner of Hicks, Muse, Tate & Furst
Incorporated ("Hicks, Muse"), a private investment firm primarily engaged in
leveraged acquisitions, recapitalizations and other investment activities. Mr.
Hicks is also the sole member and sole manager of Fund IV LLC, the sole general
partner of HM Partners, the sole general partner of each of RCN Qualified Fund,
RCN Private Fund and RCN Coinvestors, the partners of RCN Partners. The business
address of Mr. Hicks is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950.
RCN Partners
RCN Partners is a Texas partnership formed to invest in the
Series A 7% Senior Convertible Preferred Stock of the Company (the "Preferred
Stock"). The business address of RCN Partners, which also serves as its
principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas 75201-6950.
Pursuant to Instruction C to Schedule 13D of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), information with respect to each of RCN
Qualified Fund, RCN Private Fund and RCN Coinvestors, the partners of RCN
Partners, is set forth below.
RCN Qualified Fund
RCN Qualified Fund is a Texas limited partnership, the
principal business of which is serving as a partner of RCN Partners. The
business address of RCN Qualified Fund, which also serves as its principal
office, is 200 Crescent Court, Suite 1600, Dallas, Texas 75201-6950. Pursuant to
Page 9
<PAGE>
Instruction C to Schedule 13D of the Exchange Act, information with respect to
HM Partners, the sole general partner of RCN Qualified Fund, is set forth below.
RCN Private Fund
RCN Private Fund is a Texas limited partnership, the principal
business of which is serving as a partner of RCN Partners. The principal
business address of RCN Private Fund, which also serves as its principal office,
is 200 Crescent Court, Suite 1600, Dallas, Texas 75201-6950. Pursuant to
Instruction C to Schedule 13D of the Exchange Act, information with respect to
HM Partners, the sole general partner of RCN Private Fund, is set forth below.
RCN Coinvestors
RCN Coinvestors is a Texas limited partnership, the principal
business of which is serving as a partner of RCN Partners. The business address
of RCN Coinvestors, which also serves as its principal office, is 200 Crescent
Court, Suite 1600, Dallas, Texas 75201-6950. Pursuant to Instruction C to
Schedule 13D of the Exchange Act, information with respect to HM Partners, the
sole general partner of RCN Coinvestors, is set forth below.
HM Partners
HM Partners is a Texas limited partnership, the principal
business of which is serving as the sole general partner in various limited
partnership whose principal business is to serve as partners in various
investment partnerships. The business address of HM Partners, which also serves
as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to Fund IV LLC, the sole general partner of HM
Partners, is set forth below.
Fund IV LLC
Fund IV LLC is a Texas limited liability company, the
principal business of which is serving as the sole general partner in various
limited partnership whose principal business is to serve as partners in various
investment partnerships. The business address of Fund IV LLC, which also serves
as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to Mr. Thomas O. Hicks, the sole member of Fund IV LLC,
is set forth above.
(d) None of the entities or persons identified in this Item 2
has, during the last five years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2
has, during the last five years, been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgement, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violations with respect to
such laws.
Page 10
<PAGE>
(f) All of the natural persons identified in this Item 2 are
citizens of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
As more fully described in Item 6 below, on April 7, 1999, RCN
Partners purchased an aggregate of 250,000 shares of Preferred Stock for a
purchase price of $250,000,000. The funds RCN Partners utilized for this purpose
were provided by capital contributions to RCN Partners from RCN Qualified Fund,
RCN Private Fund and RCN Coinvestors; each of RCN Qualified Fund, RCN Private
Fund and RCN Coinvestors obtained such funds from capital contributions provided
by their respective limited partners and HM Partners; HM Partners obtained such
funds from capital contributions provided by its limited partners and Fund IV
LLC; Fund IV LLC obtained such funds from capital contributions provided by Mr.
Thomas O. Hicks, who obtained such funds from personal funds.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Persons consummated the transactions described
herein in order to acquire an interest in the Company for investment purposes.
The Reporting Persons intend to review continuously their position in the
Company. Depending upon future evaluations of the business prospects of the
Company and upon other developments, including, but not limited to, general
economic and business conditions and stock market conditions, the Reporting
Persons may retain or from time to time increase their holdings or dispose of
all or a portion of their holdings, subject to any applicable legal and
contractual restrictions on their ability to do so.
In addition, the matters set forth in Item 6 below are
incorporated in this Item 4 by reference as if fully set forth herein.
Except as set forth in this Item 4 (including the matters
described in Item 6 below which are incorporated in this Item 4 by reference),
the Reporting Persons have no present plans or proposals that relate to or that
would result in any of the actions specified in clauses (a) through (j) of Item
4 of Schedule 13D of the Exchange Act.
ITEM 5. INTEREST IN SECURITIES OF ISSUER
(a) (1) Assuming conversion of all Preferred Stock owned of
record by RCN Partners, RCN Partners is the beneficial owner of 6,410,256 shares
of Common Stock, which, based on calculations made in accordance with Rule
13-3(d) of the Exchange Act and there being 66,522,888 shares of Common Stock
outstanding, represents approximately 8.7% of the outstanding shares of Common
Stock.
(2) Assuming conversion of all Preferred Stock owned
of record by RCN Partners, in its capacity as a partner of RCN Partners, RCN
Qualified Fund may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be
the beneficial owner of 6,410,256 shares of Common Stock, which, based on
calculations made in accordance with Rule 13d-3(d) of the Exchange Act and there
being 66,522,888 shares of Common Stock outstanding, represents approximately
8.7% of the outstanding shares of Common Stock.
Page 11
<PAGE>
(3)Assuming conversion of all Preferred Stock owned
of record by RCN Partners, in its capacity as a partner of RCN Partners, RCN
Private Fund may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be
the beneficial owner of 6,410,256 shares of Common Stock, which, based on
calculations made in accordance with Rule 13d-3(d) of the Exchange Act and there
being 66,522,888 shares of Common Stock outstanding, represents approximately
8.7% of the outstanding shares of Common Stock.
(4) Assuming conversion of all Preferred Stock owned
of record by RCN Partners, in its capacity as a partner of RCN Partners, RCN
Coinvestors may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the
beneficial owner of 6,410,256 shares of Common Stock, which, based on
calculations made in accordance with Rule 13d-3(d) of the Exchange Act and there
being 66,522,888 shares of Common Stock outstanding, represents approximately
8.7% of the outstanding shares of Common Stock.
(5) Assuming conversion of all Preferred Stock owned
of record by RCN Partners, in its capacity as the sole general partner of each
of RCN Qualified Fund, RCN Private Fund and RCN Coinvestors, HM Partners may,
pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner
of 6,410,256 shares of Common Stock, which, based on calculations made in
accordance with Rule 13d-3(d) of the Exchange Act and there being 66,522,888
shares of Common Stock outstanding, represents approximately 8.7% of the
outstanding shares of Common Stock.
(6) Assuming conversion of all Preferred Stock owned
of record by RCN Partners, in its capacity as the sole partner of HM Partners,
Fund IV LLC may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the
beneficial owner of 6,410,256 shares of Common Stock, which, based on
calculations made in accordance with Rule 13d-3(d) of the Exchange Act and there
being 66,522,888 shares of Common Stock outstanding, represents approximately
8.7% of the outstanding shares of Common Stock.
(7) Assuming conversion of all Preferred Stock owned
of record by RCN Partners, in his capacity as the sole member of Fund IV LLC,
Mr. Thomas O. Hicks may, pursuant to Rule 13d-3 of the Exchange Act, be deemed
to be the beneficial owner of 6,410,256 shares of Common Stock, which, based on
calculations made in accordance with Rule 13d-3(d) of the Exchange Act and there
being 66,522,888 shares of Common Stock outstanding, represents approximately
8.7% of the outstanding shares of Common Stock. Mr. Hicks expressly disclaims
beneficial ownership with respect to any shares of Common Stock not owned of
record by him.
(b) The information set forth in Items 7 through 11 of the
cover pages hereto is incorporated herein by reference.
(c) Except as set forth herein, none of the persons named in
response to paragraph (a) has effected any transactions in shares of Common
Stock during the past 60 days.
(d) The right to receive dividends on, and proceeds from the
sale of, the shares of Common Stock beneficially owned by RCN Qualified Fund,
RCN Private Fund and RCN Coinvestors described in (a) and (b) above is governed
by the limited partnership agreements of each such entities, and such dividends
Page 12
<PAGE>
or proceeds may be distributed with respect to numerous general and limited
partnership interests.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS, OR
RELATIONSHIPS WITH RESPECT TO THE ISSUER.
The matters set forth in Item 2 are incorporated in this Item
6 by reference as if fully set forth herein.
Stock Purchase Agreement
Pursuant to the Stock Purchase Agreement (the "Stock Purchase
Agreement"), dated as of March 18, 1999 between the Company and HMTF Live Wire
Investors LLC ("HMTF Live Wire"), as amended by amendment No. 1 thereto, dated
as of April 7, 1999 among RCN Corporation, HMTF Live Wire and RCN Partners (the
"Amendment"; the Stock Purchase Agreement, as amended, the "Amended Stock
Purchase Agreement"), the Company agreed to sell to HMTF Live Wire, and HMTF
Live Wire agreed to purchase from the Company, 250,000 shares of the Preferred
Stock for a purchase price of $250,000,000.
As contemplated by the Stock Purchase Agreement and
immediately prior to the issuance of the shares of Preferred Stock at the
Closing (as defined below), pursuant to an Assignment and Assumption Agreement,
HMTF Live Wire assigned all of its right, title and interest, in, to and under
the Stock Purchase Agreement to RCN Partners. On April 7, 1999, pursuant to the
Amended Stock Purchase Agreement, the Company sold the shares of Preferred Stock
to RCN Partners (the "Closing").
The Amended Stock Purchase Agreement provides, among other
things, that RCN Partners is entitled to designate for election to the Board of
Directors of the Company one person, for so long as RCN Partners owns either (i)
50% or more of the shares of Preferred Stock, (ii) an amount of Common Stock
issued upon conversion of 50% or more of the shares of Preferred Stock under the
Certificate of Designations, Preferences and Rights of Series A 7% Senior
Convertible Preferred Stock (the "Certificate of Designations") or (iii) any
combination of shares of Preferred Stock and Common Stock issued upon conversion
of 50% or more of the shares of Preferred Stock, subject to suspension of such
right at any time that the holders of Preferred Stock have the right to
designate a person for election to the Board of Directors of the Company under
the Certificate. Pursuant to this contractual right, RCN Partners has designated
Michael J. Levitt, a partner of Hicks, Muse, for election to the Board of
Directors of the Company. The foregoing description of the Amended Stock
Purchase Agreement is not, and does not purport to be, complete and is qualified
in its entirety by reference to the Stock Purchase Agreement and Amendment,
copies of which are filed herewith as Exhibits 10.1 and 10.2, respectively.
Registration Rights
Upon the Closing, certain registration rights of RCN Partners
under the Amended Stock Purchase Agreement became effective. Pursuant to such
provisions, the Company has agreed to effect four "demand" registrations at the
request and expense of RCN Partners, provided that each such demand registration
must be in respect of Registerable Securities (as defined below) with a fair
market value of at least $50,000,000 (or, in respect of all remaining
Page 13
<PAGE>
Registrable Securities, $5,000,000). In addition, RCN Partners has certain
piggyback registration rights in connection with registrations by the Company
under the Securities Act of 1933 (the "Securities Act").
"Registerable Securities" means (a) the Preferred Stock and
(b) the shares of Common Stock issued upon conversion of the Preferred Stock,
including any additional shares of Common Stock issued in connection with a
stock split, stock dividend or similar event with respect to the Common Stock.
The foregoing description of the registration rights
provisions of the Amended Stock Purchase Agreement is not, and does not purport
to be, complete and is qualified in its entirety by reference to the
registration rights provisions of the Amended Stock Purchase Agreement, a copy
of which is filed as an exhibit to Exhibit 10.1.
Certificate of Designations
As contemplated by the Amended Stock Purchase Agreement,
immediately prior to the Closing the Board of Directors of the Company approved
and adopted the Certificate of Designations to create the series of Preferred
Stock. Under the Certificate of Designations, any class or series of stock of
the Company will be deemed to rank (i) prior to the Preferred Stock, if the
holders of such class or series will be entitled by the terms thereof to receive
dividends in preference or priority to the holders of Preferred Stock, (ii) on a
parity with the Preferred Stock, if the holders of the Preferred Stock and the
holders thereof will be entitled to receive dividends without preference or
priority over one another and such class or series is not senior to the
Preferred Stock and (iii) junior to the Preferred Stock, if such class or series
is Common Stock or if the holders of the Preferred Stock will be entitled by the
terms thereof to receive dividends in preference or priority to the holders of
such class or series. Creation by the Company of securities senior to the
Preferred Stock requires the vote of holders of a majority of the outstanding
shares of Preferred Stock.
The holders of the Preferred Stock will be entitled to receive
with respect to each share of Preferred Stock, when and if declared by the Board
of Directors of the Company, out of funds legally available for the payment of
dividends, dividends at a rate per annum equal to seven percent (7%) of the
Liquidation Preference per share, and an additional amount at a rate per annum
equal to seven percent (7%) of all dividends and other amounts payable but which
have not been paid with respect to each share of Preferred Stock. Such dividends
shall be cumulative from the date of issuance of the Preferred Stock and shall
be payable quarterly in arrears. The Company may pay accrued dividends
(including accrued and unpaid dividends) and any other amounts accrued and
unpaid on the Preferred Stock, at its election, in cash or shares of Preferred
Stock.
The Preferred Stock will not be redeemable by the Company
prior to March 31, 2003. On and after March 31, 2003, to the extent the Company
has funds legally available for such payment, the Company may redeem at its
option shares of Preferred Stock, at any time, at a redemption price equal to
the Liquidation Preference plus any amounts accrued and unpaid on the Preferred
Stock from the last dividend payment date to the date fixed for redemption,
without interest. The Company will redeem (but only to the extent the Company
shall have funds legally available therefor), on March 31, 2014, all outstanding
Page 14
<PAGE>
shares of Preferred Stock, at a redemption price equal to the Liquidation
Preference plus (i) an amount equal to (7%) of all dividends payable but which
have not been paid with respect to each share of Preferred Stock and (ii) any
amounts accrued and unpaid on the Preferred Stock from the last dividend payment
date to such date.
The holders of shares of Preferred Stock will have the right,
generally, at any time, to convert any or all outstanding shares of Preferred
Stock into fully paid and non-assessable shares of Common Stock. The number of
shares of Common Stock deliverable upon such conversion (the "Conversion
Ratio"), as of any date, shall be an amount equal to the sum of Liquidation
Preference plus (i) an amount equal to (7%) of all dividends payable but which
have not been paid with respect to each share of Preferred Stock and (ii) any
amounts accrued and unpaid on the Preferred Stock, divided by $39.00, subject to
adjustment as a result of Common Stock dividends, reclassifications,
distributions or stock splits in connection with a merger or consolidation of
the Company or otherwise.
Upon the occurrence of a "Change of Control" (as defined in
the Certificate), the Company will be required, generally, to make an offer to
each holder of shares of Preferred Stock to repurchase such holder's shares at a
price per share equal to the Liquidation Preference, plus an amount equal to any
amounts accrued and unpaid on the Preferred Stock from the last dividend payment
date.
The holders of shares of Preferred Stock will not be entitled
to any voting rights, provided that if six quarterly dividends or additional
amounts payable on the Preferred Stock have not been paid in full or if the
Company has failed to discharge its mandatory redemption obligation or its
change of control obligation described above, the number of directors then
constituting the Board of Directors of the Company will be increased by one and
the holders of shares of Preferred Stock will be entitled to elect such
additional director to serve on the Board of Directors. When all arrears in
dividends and additional amounts payable on the shares of Preferred Stock then
outstanding shall have been paid and dividends and additional amounts payable
thereon for the current quarterly dividend period shall have been paid, or the
Company shall have fulfilled its mandatory redemption obligation or change of
change control obligation, then the right of the holders to elect such
additional director will cease, and the term of office of any person elected as
director by the holders will terminate and the number of the Board of Directors
will be reduced accordingly.
"Liquidation Preference" means an amount equal to $1,000.00
per share of Preferred Stock.
The foregoing description of the Certificate of Designations
is not, and does not purport to be, complete and is qualified in its entirety by
reference to the Certificate of Designations, a copy of which is filed as
Exhibit 10.3.
Page 15
<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 10.1: Stock Purchase Agreement dated as of March 18 1999 between RCN
Corporation and HMTF Live Wire Investors, LLC relating to the
purchase and sale of Series A 7% Senior Convertible Preferred
Stock of RCN Corporation.
Exhibit 10.2: Amendment No. 1 to Stock Purchase Agreement dated as of April 7,
1999 among RCN Corporation, HMTF Live Wire Investors, LLC and HM4
RCN Partners.
Exhibit 10.3: Certificate of Designations, Preferences and Rights of Series A
7% Senior Convertible Preferred Stock
Exhibit 99.1: Joint Filing Agreement among the parties regarding filing of
Schedule 13D.
Page 16
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 19, 1999 *
-------------------------------------
Thomas O. Hicks
* By: /s/ Michael D. Salim
-------------------------------
Michael D. Salim,
Attorney-in-Fact
Page 17
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 19, 1999 HM4 RCN PARTNERS
--------------
Date By: HM4 RCN Qualified Fund, L.P. its
Managing General Partner
By: HICKS, MUSE GP PARTNERS IV, L.P., its
General Partner
By: HICKS, MUSE FUND IV LLC, its General
Partner
By: /s/ Michael D. Salim
---------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
Page 18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 19, 1999 HM4 RCN QUALIFIED FUND, L.P.
--------------
Date By: HICKS, MUSE GP PARTNERS IV, L.P.,
its General Partner
By: HICKS, MUSE FUND IV LLC, its General
Partner
By: /s/ Michael D. Salim
-----------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
Page 19
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 19, 1999 HM4 RCN PRIVATE FUND, L.P.
- --------------
Date By: HICKS, MUSE GP PARTNERS IV, L.P.,
its General Partner
By: HICKS, MUSE FUND IV LLC, its General
Partner
By: /s/ Michael D. Salim
-------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
Page 20
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 19, 1999 HM4 RCN COINVESTORS, L.P.
- --------------
Date By: HICKS, MUSE GP PARTNERS IV, L.P., its
General Partner
By: HICKS, MUSE FUND IV LLC, its General
Partner
By: /s/ Michael D. Salim
---------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
Page 21
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 19, 1999 HICKS, MUSE GP PARTNERS IV, L.P.
- --------------
Date By: HICKS, MUSE FUND IV LLC, its General
Partner
By: /s/ Michael D. Salim
---------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
Page 22
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 19, 1999 HICKS, MUSE FUND IV LLC
- --------------
Date By: /s/ Michael D. Salim
---------------------------------------------
Michael D. Salim, Chief Financial and
Administrative Officer
Page 23
<PAGE>
EXHIBIT INDEX
10.1 Stock Purchase Agreement dated as of March 18 1999 between RCN
Corporation and HMTF Live Wire Investors LLC relating to the
purchase and sale of Series A 7% Senior Convertible Preferred
Stock of RCN Corporation.*
10.2 Amendment No. 1 to Stock Purchase Agreement dated as of April 7,
1999 among RCN Corporation, HMTF Live Wire Investors LLC and HM4
RCN Partners.*
10.3 Certificate of Designations, Preferences and rights of Series A
7% Senior Convertible Preferred Stock.*
99.1 Joint Filing Agreement among the parties regarding filing of
Schedule 13D.*
- ------------------------------
* Filed herewith.
Page 24
Exhibit 10.1
STOCK PURCHASE AGREEMENT
dated as of
March 18, 1999
between
RCN CORPORATION
and
HMTF LIVE WIRE INVESTORS, LLC
relating to the purchase and sale
of
SERIES A 7% SENIOR CONVERTIBLE PREFERRED STOCK
of
RCN CORPORATION
(NY) 17431/028/SPA/stock.purch.agt.wpd
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1 DEFINITIONS
<S> <C>
SECTION1.01. Definitions.......................................................................1
ARTICLE 2 PURCHASE AND SALE
SECTION2.01. Purchase and Sale.................................................................4
SECTION2.02. Closing...........................................................................4
SECTION2.03. Certificates for Restricted Securities............................................4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
SECTION3.01. Corporate Existence and Power.....................................................5
SECTION3.02. Corporate Authorization...........................................................5
SECTION3.03. Authorization......................................................................5
SECTION3.04. Noncontravention..................................................................5
SECTION3.05. Capitalization....................................................................6
SECTION3.06. Authorization of Preferred Shares.................................................6
SECTION3.07. Finders'Fees......................................................................7
SECTION3.08. SEC Reports........................................................................7
SECTION3.09.Financial Statements................................................................7
SECTION3.10.Absence of Certain Changes..........................................................7
SECTION3.11. Litigation........................................................................8
SECTION3.12. Offering of Preferred Shares......................................................8
SECTION3.13. Accuracy and Completeness of Information Provided.................................8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION4.01. Existence and Power...............................................................9
SECTION4.02. Authorization.....................................................................9
SECTION4.03. Authorization......................................................................9
SECTION4.04. Noncontravention..................................................................9
SECTION4.05. Purchase for Investment...........................................................9
SECTION4.06. Litigation.......................................................................10
SECTION4.07. Finders'Fees.....................................................................10
i
<PAGE>
ARTICLE 5 COVENANTS OF THE CORPORATION
SECTION5.01. Access to Information............................................................10
SECTION5.02. Certificate of Designations.......................................................10
SECTION5.03. Restrictions Pending the Closing.................................................10
SECTION5.04. Buyer Director...................................................................11
SECTION5.05. Reservation of Rights............................................................12
SECTION5.06. Other Transfers of Restricted Securities.........................................12
SECTION5.07. Venture Capital Operating Company Requirements...................................12
ARTICLE 6 COVENANTS OF BUYER
SECTION6.01. Confidentiality..................................................................12
SECTION6.02. Sale or Transfer of Restricted Securities.........................................14
ARTICLE 7 COVENANTS OF BUYER AND THE CORPORATION
SECTION7.01. Reasonable Best Efforts; Further Assurances......................................14
SECTION7.02. Certain Filings..................................................................14
SECTION7.03. Public Announcements.............................................................14
SECTION7.04. Registration Rights Agreement....................................................15
ARTICLE 8 CONDITIONS TO CLOSING
SECTION8.01. Conditions to Obligations of Buyer and the Corporation...........................15
SECTION8.02. Conditions to Obligation of Buyer................................................15
SECTION8.03. Conditions to Obligation of the Corporation......................................16
ARTICLE 9 TERMINATION
SECTION9.01. Grounds for Termination..........................................................17
SECTION9.02. Effect of Termination............................................................17
ii
<PAGE>
ARTICLE 10 SURVIVAL; INDEMNIFICATION
SECTION10.01. Survival of Representation and Warranties.......................................17
SECTION10.02. Indemnification.................................................................18
SECTION10.03. Procedures......................................................................18
SECTION10.04. Inspections; No Other Representations ..........................................19
SECTION10.05. Exclusivity.....................................................................19
ARTICLE 11 MISCELLANEOUS
SECTION11.01. Notices.........................................................................19
SECTION11.02. Amendments and Waivers..........................................................21
SECTION11.03. Expenses........................................................................21
SECTION11.04. Assignment......................................................................21
SECTION11.05. Governing Law...................................................................21
SECTION11.06. Jurisdiction....................................................................21
SECTION11.07. Counterparts; Third Party Beneficiaries.........................................22
SECTION11.08. Entire Agreement................................................................22
SECTION11.09. Captions........................................................................22
SECTION11.10. Severability....................................................................22
SECTION11.11. Specific Performance............................................................23
SECTION11.12. No Recourse.....................................................................23
</TABLE>
Exhibit A Certificate of Designations, Preferences and Rights
of Series A 7% Senior Convertible Preferred Stock
Exhibit B Registration Rights
iii
<PAGE>
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of March 18, 1999 between RCN Corporation, a
Delaware corporation (the "Corporation"), and HMTF Live Wire Investors, LLC, a
Delaware limited liability company ("BUYER").
WHEREAS, the Corporation desires to sell the Preferred Shares (as
defined herein) to Buyer, and Buyer desires to purchase the Preferred Shares
from the Corporation, upon the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. (a) The following terms, as used herein, have
the following meanings:
"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.
"CLOSING DATE" means the date of the Closing.
"COMMISSION" means the Securities and Exchange Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
<PAGE>
"HMTF" means Hicks, Muse, Tate & Furst Incorporated, a Texas
corporation.
"HMTF GROUP" means HMTF and its Affiliates and its and their respective
officers, directors, partners, members, stockholders and employees (and members
of their respective families and trusts for the primary benefit of such family
members).
"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations of
the Corporation and its Subsidiaries, taken as whole.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"PREFERRED SHARES" means 250,000 shares of Preferred Stock issued on
the Closing Date.
"PREFERRED STOCK" means the Series A 7% Senior Convertible Preferred
Stock of the Corporation.
"RESTRICTED SECURITIES" means (i) the Preferred Stock issued hereunder,
and (ii) any securities issued directly or indirectly with respect to the
securities referred to in clause (i) above upon conversion of the Preferred
Stock, including in connection with a stock split or combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
pursuant to the terms of the Preferred Stock. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) become eligible
for sale pursuant to Rule 144 (without any volume limitations) or (c) been
otherwise transferred and new certificates for them not bearing the Securities
Act legend set forth in Section 2.03(b) have been delivered by the Corporation.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2
<PAGE>
"SUBSIDIARY" means any corporation or other entity (and any predecessor
thereof) of which the securities or other ownership interests having ordinary
voting power to elect a majority of the Board of Directors or other persons
performing similar functions are directly or indirectly owned by the
Corporation.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
TERM SECTION
Buyer Director 5.04
Closing 2.02
Permitted Transferee 6.02
Purchase Price 2.01
SEC Reports 3.05
Certificate of Designations 3.06
(c) The following definitional provisions shall apply to this
Agreement:
(i) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
(ii) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(iii) The terms "Dollars" and "$" shall mean United States
Dollars.
(iv) References herein to a specific Section, Subsection or
Schedule shall refer, respectively, to Sections, Subsections or
Schedules of this Agreement, unless the express context otherwise
requires.
(v) Wherever the word "include," "includes," or "including" is
used in this Agreement, it shall be deemed to be followed by the words
"without limitation."
3
<PAGE>
ARTICLE 2
PURCHASE AND SALE
SECTION 2.1. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Corporation agrees to sell to Buyer, and Buyer
agrees to purchase from the Corporation, the Preferred Shares at the Closing.
The purchase price (the "PURCHASE PRICE") for the Preferred Shares is
$250,000,000 in cash. The Purchase Price shall be paid as provided in Section
2.02.
SECTION 2.2. Closing. The closing (the "CLOSING") of the purchase and
sale of the Preferred Shares hereunder shall take place at the offices of Davis
Polk & Wardwell, 450 Lexington Avenue, New York, New York, as soon as possible,
but no earlier than April 1, 1999 and in no event later than five business days
after satisfaction of the conditions set forth in Article 8.01, or at such other
time or place as Buyer and the Corporation may agree. At the Closing:
(a) following delivery of the certificate described in Section 8.02(d)
and the filing of the Certificate of Designations in accordance with Section
8.02(c), Buyer shall deliver to the Corporation the Purchase Price (less the
amount of a 2% transaction fee payable to Hicks, Muse & Co. Partners, L.P.,
("HM&C")) in immediately available funds by wire transfer to an account of the
Corporation with a bank designated by the Corporation, by notice to Buyer, not
later than two business days prior to the Closing Date.
(b) following delivery of the certificate described in Section
8.03(c), the Corporation shall deliver to Buyer certificates for the Preferred
Shares.
SECTION 2.3. Certificates for Restricted Securities. (a) Each
certificate for Restricted Securities shall bear the following legend for so
long as such securities constitute Restricted Securities:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended, and may not be
offered, sold, transferred or otherwise disposed of except in
compliance with such laws."
(b) The Corporation agrees that, at the request of Buyer or any
Permitted Transferee, it will remove the legend contemplated by this Section
from the certificates representing any Restricted Securities in the event that
outside counsel for Buyer or such Permitted Transferee determines that the
transfer of such Preferred Shares is no longer restricted by the Securities Act
and outside counsel for the Corporation reasonably concurs in such
determination.
4
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to Buyer as of the date hereof
and as of the Closing that:
SECTION 3.1. Corporate Existence and Power. The Corporation is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers required to carry on
its business as now conducted.
SECTION 3.2. Corporate Authorization. The execution, delivery and
performance of this Agreement by the Corporation is within the Corporation's
corporate powers and has been duly authorized by all necessary corporate action
on the part of the Corporation. This Agreement constitutes a legal and binding
agreement of the Corporation, enforceable against the Corporation in accordance
with its terms, except (a) as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally and (b) for limitations imposed by general principles of equity.
SECTION 3.3. Authorization. Except as set forth in Schedule 3.03
hereto, the execution, delivery and performance of this Agreement by the
Corporation requires no action by or in respect of, or filing with, any
governmental or non-governmental body, agency, official or authority other than
(i) compliance with any applicable requirements of the Exchange Act; (ii) with
respect to the Corporation's obligations under Section 7.04, compliance with any
applicable requirements of the Securities Act; (iii) the filing of the
Certificate of Designations in accordance with the laws of Delaware and (iv)
other filings or notifications that are immaterial to the consummation of the
transactions contemplated hereby.
5
<PAGE>
SECTION 3.4. Noncontravention. The execution, delivery and performance
of this Agreement by the Corporation do not and will not (i) violate the
certificate of incorporation or bylaws of the Corporation, (ii) assuming
compliance with the matters referred to in Section 3.03, violate any applicable
law, rule, regulation, judgment, injunction, order or decree binding upon the
Corporation, other than violations that would be immaterial to the Corporation
or Buyer, or (iii) except as to matters which would be immaterial to the
Corporation or Buyer, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Corporation or to a loss of any benefit to which the Corporation is entitled
under any provision of any agreement or other instrument binding upon the
Corporation or (iv) result in the creation or imposition of any Lien on any
asset of the Corporation except where such Lien would not have a Material
Adverse Effect.
SECTION 3.5. Capitalization. (a) As of the date hereof, the authorized
capital stock of the Corporation consists of: 200,000,000 shares of common
stock, par value $1.00 per share ("COMMON STOCK"); 400,000,000 shares of Class B
common stock, par value $1.00 per share; and 25,000,000 shares of preferred
stock, par value $1.00 per share. As of December 31, 1998, there were 64,920,493
shares of Common Stock issued and outstanding, no shares of Class B common stock
outstanding and no shares of preferred stock outstanding.
(b) All outstanding shares of Common Stock are duly authorized,
validly issued and fully paid and nonassessable. There are no preemptive or
other similar rights available to the existing holders of the capital stock of
the Corporation. As of the date hereof and other than (i) as set forth in the
financial statements contained in the forms, reports and documents filed with
the Commission (the "SEC REPORTS") (ii) as set forth on Schedule 3.05 (b)
hereto, and (iii) in connection with the transactions contemplated by this
Agreement, there are no outstanding options, warrants, rights, puts, calls,
commitments, or other contracts, arrangements, or understandings issued by or
binding upon the Corporation requiring, and there are no outstanding debt or
equity securities of the Corporation which upon the conversion, exchange or
exercise thereof would require, the issuance, sale or transfer by the
Corporation of any new or additional equity interests in the Corporation (or any
other securities of the Corporation or any of its Subsidiaries which, whether
after notice, lapse of time or payment of monies, are or would be convertible
into or exercisable or exchangeable for equity interests in the Corporation).
Except as set forth in the SEC Reports, there are no voting trusts or other
agreements or understandings to which the Corporation or any of its Subsidiaries
is a party with respect to the voting of capital stock of the Corporation.
SECTION 3.6. Authorization of Preferred Shares. The issuance, sale and
delivery of the Preferred Shares has been duly authorized by all requisite
corporate action of the Corporation and the Preferred Shares issued to Buyer in
accordance with the terms of the Certificate of Designations, Preferences and
Rights of Series A 7% Senior Convertible Preferred Stock (the "CERTIFICATE OF
DESIGNATIONS") set forth on Exhibit A hereto, when issued and delivered in
accordance with the terms of this Agreement will be validly issued and
outstanding, fully paid and nonassessable free and clear of any Liens and not
subject to preemptive or other similar rights of the stockholders of the
Corporation.
6
<PAGE>
SECTION 3.7. Finders' Fees. Except for Chase Securities, Inc., whose
fees will be paid by the Corporation, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Corporation who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.8. SEC Reports. The Corporation has filed all required SEC
Reports when due in accordance with the Exchange Act and delivered or made
available to Buyer copies thereof. As of their respective dates, the SEC Reports
complied in all material respects with all applicable requirements of the
Exchange Act or the Securities Act, as the case may be. As of their respective
dates, none of the SEC Reports contained any untrue statement of a material fact
or omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 3.9. Financial Statements. The consolidated financial
statements of the Corporation contained in the SEC Reports complied as to form
in all material respects with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present, in conformity with GAAP (except as may be
indicated in the notes thereto), the consolidated financial position of the
Corporation and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended (subject to (i) normal year-end adjustments in the case of
any unaudited interim financial statements which will not be material, either
individually or in the aggregate, and (ii) further adjustments that may be
required by the Commission with respect to allocation of the purchase price of
certain assets to in-process research and development as reflected in the
Corporation's pending Registration Statement No. 333-71525). The Corporation has
delivered to Buyer a copy of its consolidated financial statements for the year
ended December 31, 1998, together with footnotes in draft form; such financial
statements were prepared in accordance with GAAP applied on a consistent basis
during the period involved (except as may be indicated in the notes thereto) and
fairly present, in conformity with GAAP (except as may be indicated in the notes
thereto), the consolidated financial position of the Corporation and its
consolidated subsidiaries as of the date thereof and their consolidated results
of operations and changes in financial position for the period then ended
(subject to the adjustments referred to in the preceding sentence.)
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SECTION 3.10. Absence of Certain Changes. Since December 31, 1998,
there has not been any event, occurrence or development of a state of
circumstances or facts that has had or could reasonably be expected to have a
Material Adverse Effect or an adverse effect on the ability of the Corporation
to perform its obligations under this Agreement.
SECTION 3.11. Litigation. Except as set forth in Schedule 3.11, and
except as disclosed in the SEC Reports and the Company's pending Registration
Statement No. 333-71525, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of the Corporation threatened against or
affecting, the Corporation or any Subsidiary before any court or arbitrator or
any governmental body, agency or official which (i) in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement or (ii) if resolved adversely to the Corporation
or a Subsidiary would reasonably be likely to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 3.12. Offering of Preferred Shares. Neither the Corporation nor
any Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Corporation under
circumstances which would require, under the Securities Act, the integration of
such offering with the offering and sale of the Preferred Shares) which might
subject the offering, issuance or sale of the Preferred Shares to the
registration requirements of Section 5 of the Securities Act.
SECTION 3.13. Accuracy and Completeness of Information Provided. To the
Corporation's knowledge, none of the documents or written information delivered
by the Corporation to Buyer in connection with the transactions contemplated by
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading (for purposes of the preceding sentence, any preliminary
document or written information shall be disregarded if a final version of such
document or written information was delivered by Buyer to the Corporation prior
to the date hereof). There is no fact or information relating to the Corporation
or its subsidiaries that is known to the Corporation that could reasonably be
expected to be material to the Corporation and its subsidiaries taken as a whole
and that has not been disclosed to Buyer.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Corporation as of the date hereof
and as of the Closing that:
SECTION 4.1. Existence and Power. Buyer is a limited liability company
duly formed, validly existing and in good standing under the laws of its
jurisdiction of formation.
SECTION 4.2. Authorization. The execution, delivery and performance of
this Agreement by Buyer are within the Buyer's limited liability company powers
and have been duly authorized by all necessary limited liability company action
on the part of Buyer. This Agreement constitutes a legal, valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
except (a) as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and (b)
for limitations imposed by general principles of equity.
SECTION 4.3. Authorization. The execution, delivery and performance of
this Agreement by Buyer requires no action by or in respect of, or filing with,
any governmental or non-governmental body, agency or official or any other
Person other than (i) compliance with any applicable requirements of the
Exchange Act and (ii) other filings or notifications that are immaterial to the
consummation of the transactions contemplated hereby.
SECTION 4.4. Noncontravention. The execution, delivery and performance
of this Agreement by Buyer does not and will not (i) violate the certificate of
formation or limited liability company agreement of Buyer, or, (ii) assuming
compliance with the matters referred to in Section 4.03, violate any applicable
law, rule, regulation, judgment, injunction, order or decree, except for any
such violations which would not have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby.
SECTION 4.5. Purchase for Investment. Buyer is purchasing the Preferred
Shares for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Buyer (either alone or together with
its advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Preferred Shares and is capable of bearing the economic risks of such
investment.
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SECTION 4.6. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body, agency
or official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
SECTION 4.7. Finders' Fees. Except for HM&C, whose transaction fee
shall be paid by the Corporation in accordance with Section 2.02, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Buyer who might be entitled to any fee
or commission from the Corporation or any of its Affiliates upon consummation of
the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF THE CORPORATION
The Corporation agrees that:
SECTION 5.1. Access to Information. From the date hereof until the
Closing Date, the Corporation will (i) furnish to Buyer and its authorized
representatives such financial and operating data and other information relating
to the Corporation and its Subsidiaries as such Persons may reasonably request
and (ii) instruct its counsel, independent accountants and financial advisors to
cooperate with Buyer and its authorized representatives in its investigation of
the Corporation. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business
of the Corporation. In addition, during any time that Buyer has the right to
designate a Buyer Director pursuant to Section 5.04, the Corporation will
provide Buyer with copies of all financial information, reports and
presentations delivered to the lenders under the Corporation's principal credit
facilities, subject to the confidentiality agreement set forth in Section 6.01.
SECTION 5.2. Certificate of Designations. Prior to the Closing, the
Corporation shall cause to be filed the Certificate of Designations set forth as
Exhibit A hereto as required pursuant to the law of Delaware.
SECTION 5.3. Restrictions Pending the Closing. After the date hereof
and prior to the Closing Date, except as expressly provided for in this
Agreement or as consented to in writing by Buyer, the Corporation will not:
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(i) amend its Certificate of Incorporation or By-laws or
similar organizational documents;
(ii) split, combine or reclassify any shares of the
Corporation's capital stock;
(iii) declare or pay any dividend or distribution (whether in
cash, stock or property) in respect of its capital stock;
(iv) take any action, or knowingly omit to take any action,
that would, or that would reasonably be expected to, result in (A) any
of the representations and warranties of the Corporation set forth in
Article 3 becoming untrue or (B) any of the conditions to the
obligations of Buyer set forth in Section 8.02 not being satisfied; or
(v) enter into any agreement or commitment to do any of the
foregoing.
SECTION 5.4. Buyer Director. Buyer shall be entitled to designate for
election to the Board of Directors one person (the "BUYER DIRECTOR"), for so
long as Buyer owns either (i) 50% or more of the Preferred Shares issued and
outstanding on the Closing Date (the "ISSUED PREFERRED SHARES"), (ii) an amount
of Common Stock issued upon conversion of 50% or more of the Issued Preferred
Shares or (iii) any combination of Issued Preferred Shares and Common Stock
issued upon conversion of Issued Preferred Shares which, taken together,
represent an amount of Common Stock issuable upon conversion of 50% or more of
the Issued Preferred Shares; provided, however, that the right to designate the
Buyer Director under this Section shall be suspended at any time that the
holders of Preferred Stock have the right to designate a person for election to
the Board of Directors under the terms of the Preferred Stock set forth in the
Certificate of Designations. In the event Buyer elects to have the Board of
Directors appoint a Buyer Director, it shall so notify the Corporation in
writing and the Corporation shall (a) increase the size of the Board of
Directors by one and fill the vacancy created thereby by electing the Buyer
Director and (b) in connection with the meeting of shareholders of the
Corporation next following such election, nominate such Buyer Director for
election as director by the shareholders and use its best efforts to cause the
Buyer Director to be so elected. If a vacancy shall exist in the office of a
Buyer Director, Buyer shall be entitled to designate a successor and the Board
of Directors shall elect such successor and, in connection with the meeting of
shareholders of the corporation next following such election, nominate such
successor for election as director by the shareholders and use its best efforts
to cause the successor to be such elected.
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SECTION 5.5. Reservation of Rights. For so long as any of the Preferred
Stock is outstanding, the Corporation shall keep reserved for issuance a
sufficient number of shares of Common Stock to satisfy its conversion
obligations under the Certificate of Designations.
SECTION 5.6. Other Transfers of Restricted Securities. The Corporation
shall take all actions reasonably necessary to enable holders of the Restricted
Securities to sell such securities without registration under the Securities Act
pursuant to Rule 144 under the Securities Act or any successor rule or
regulation, subject in each case to the provisions of this Agreement and,
specifically, the filing on a timely basis of all reports required to be filed
under the Exchange Act.
SECTION 5.7. Venture Capital Operating Company Requirements. The
Corporation agrees that for so long as Buyer has the right to designate a Buyer
Director pursuant to Section 5.04 of this Agreement, Hicks, Muse, Tate & Furst
Equity Fund IV, L.P. and Hicks, Muse, Tate & Furst Private Equity Fund IV, L.P.
(the "FUNDS") (which upon the Closing will collectively own substantially all of
the membership interests of Buyer) shall have the right: (a) to receive the same
information that is provided to members of the Corporation's board of directors;
(b) upon reasonable request and at reasonable times during normal business
hours, to receive income statements, balance sheets, budgets, business plans and
other financial information and to inspect the books and records of the
Corporation; and (c) upon reasonable request and at reasonable times during
normal business hours, to meet and consult with management with respect to the
business of the Corporation. The foregoing rights are intended to satisfy the
requirement of management rights for purposes of qualifying the Funds' indirect
ownership interests in the Corporation as venture capital investments for
purposes of the Department of Labor's "plan assets" regulations, and in the
event such rights are not satisfactory for such purpose, the Corporation and the
Funds shall reasonably cooperate in good faith to agree upon mutually
satisfactory management rights which satisfy such regulations. The Funds hereby
agree to treat all information received by them pursuant to this Section 5.07 in
accordance with the provisions of Section 6.01.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
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SECTION 6.1. Confidentiality. (a) Buyer will hold, and will use its
best efforts to cause its officers, directors, members, employees, accountants,
counsel, consultants, advisors, financing sources, financial institutions, and
agents (the "REPRESENTATIVES") to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law
or national stock exchange, all confidential documents and information
concerning the Corporation or any of its Affiliates furnished to Buyer, except
to the extent that such information can be shown to have been (i) previously
known on a nonconfidential basis by Buyer, (ii) in the public domain through no
fault of Buyer or (iii) later acquired by Buyer from sources other than the
Corporation or any of its Affiliates not known by Buyer to be bound by any
confidentiality obligation; provided that Buyer may disclose such information to
any of the Representatives in connection with the transactions contemplated by
this Agreement so long as such Persons are informed by Buyer of the confidential
nature of such information and are directed by Buyer to treat such information
confidentially. Buyer shall be responsible for any failure to treat such
information confidentially by such Persons. The obligation of Buyer to hold and
to cause the Representatives to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such information as
they would take to preserve the confidentiality of their own similar
information. Buyer agrees that it shall not and it shall cause the
Representatives not to use any confidential documents or information for any
purpose other than monitoring and evaluating its investment in the Corporation
and in connection with the transactions contemplated by this Agreement. If this
Agreement is terminated, Buyer will, and will use its reasonable best efforts to
cause its respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Corporation, upon
request, all documents and other materials, and all copies thereof, obtained by
Buyer or on its behalf from the Corporation, or any of the Representatives, in
connection with this Agreement that are subject to such confidence.
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(b) In the event Buyer or anyone to whom Buyer transmits confidential
information is requested or required (by oral questions, interrogatories,
requests for information or documents, subpoenas, civil investigative demand or
similar process) to disclose any such information, Buyer will provide the
Corporation with prompt notice so that the Corporation may seek a protective
order or other appropriate remedy and/or waive Buyer's compliance with the
provisions of this Section. In the event that such protective order or other
remedy is not obtained sufficiently promptly so as not to adversely affect Buyer
or those of its officers, directors, employees, accountants, counsel,
consultants, advisors and agents as to whom the information has been requested
or required, or the Corporation waives Buyer's compliance with the provisions of
this Agreement, Buyer will furnish only that portion of such information that
Buyer is advised by counsel is legally required and, at the Corporation's
expense, will exercise its commercially reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such information.
SECTION 6.2. Sale or Transfer of Restricted Securities. Buyer will not
sell, pledge, encumber or otherwise transfer, or agree to sell, pledge, encumber
or otherwise transfer, directly or indirectly, any Restricted Securities;
provided, that Buyer may sell, pledge, encumber or otherwise transfer Preferred
Stock and Common Stock (a) (i) in any transaction in compliance with Rule 144
under the Securities Act or any successor rule or regulation, (ii) in a public
offering, registered under the Securities Act or (iii) in a private transaction
exempt from the registration requirements of the Securities Act and (b) to
Permitted Transferees. A "PERMITTED TRANSFEREE" means a Person that (A) has
agreed in writing to be bound by the terms of Sections 2.03, 6.02, 7.04 and
Exhibit B of this Agreement and (B) is a member of the HMTF Group and any person
investing, directly or indirectly, in or in parallel with HMTF or any Affiliate
of HMTF in connection with the consummation of the transactions contemplated
hereby.
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
SECTION 7.1. Reasonable Best Efforts; Further Assurances. Subject to
the terms and conditions of this Agreement, Buyer and the Corporation will use
their reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary or desirable under applicable laws
and regulations to consummate the transactions contemplated by this Agreement.
The Corporation and Buyer agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by this Agreement.
SECTION 7.2. Certain Filings. The Corporation and Buyer shall cooperate
with one another (i) in determining whether any action by or in respect of, or
filing with, any governmental body, agency, official or authority is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
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SECTION 7.3. Public Announcements. Prior to the Closing, the parties
agree to consult with each other before issuing any press release or making any
public statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with any national securities exchange, will not issue any such press release or
make any such public statement prior to such consultation. Following the
Closing, the parties agree to consult with each other before issuing any press
release or making any public filing that describes any terms of this Agreement.
SECTION 7.4. Registration Rights Agreement. The terms set forth in
Exhibit B hereto are hereby incorporated by reference.
ARTICLE 8
CONDITIONS TO CLOSING
SECTION 8.1. Conditions to Obligations of Buyer and the Corporation .
The obligations of Buyer and the Corporation to consummate the Closing are
subject to the satisfaction of the condition that no provision of any applicable
law or regulation and no judgment, injunction, order or decree shall prohibit
the consummation of the Closing.
SECTION 8.2. Conditions to Obligation of Buyer. The obligation of Buyer
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) The Corporation shall have performed in all material respects all
of its obligations hereunder required to be performed by it on or prior to the
Closing.
(b) The representations and warranties of the Corporation contained in
this Agreement shall in each case, if specifically qualified by materiality, be
true and correct and, if not so qualified, be true and correct in all material
respects at and as of the Closing, as if made at and as of such date (except to
the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true and
correct on and as of such earlier date).
(c) The Certificate of Designations shall have been filed in
accordance with the laws of Delaware.
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(d) The Corporation shall have delivered to Buyer (i) a copy of the
resolutions adopted by the Board of Directors, certified by the Secretary of the
Corporation, authorizing this Agreement and (ii) a certificate dated the Closing
Date, signed by an officer of the Corporation, certifying as to the fulfillment
of the conditions set forth in Sections 8.02(a) and (b).
(e) The Corporation shall have delivered to Buyer an opinion
reasonably acceptable to Buyer from the General Counsel of the Corporation, with
respect to the due incorporation, due authorization, non-contravention,
capitalization of the Corporation and the validity of the Preferred Shares.
(f) The Corporation shall have delivered to Buyer an opinion
reasonably acceptable to Buyer from Davis Polk & Wardwell, special counsel to
the Corporation, with respect to the valid, binding and enforceable nature of
this Agreement.
(g) There shall not have occurred (i) any event, circumstance,
condition, fact, effect, or other matter which has had or could reasonably be
expected to have a material adverse effect (x) on the business, assets,
financial condition, prospects, or results of operations of the Corporation and
its subsidiaries taken as a whole or (y) on the ability of the Corporation and
such subsidiaries to perform on a timely basis any material obligation under
this Agreement or to consummate the transactions contemplated hereby; or (ii)
any material disruption of or material adverse change in financial, banking or
capital market conditions.
SECTION 8.3. Conditions to Obligation of the Corporation. The
obligation of the Corporation to consummate the Closing is subject to the
satisfaction of the following further conditions:
(a) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date.
(bi The representations and warranties of Buyer contained in this
Agreement shall be true in all material respects at and as of the Closing Date,
as if made at and as of such date.
(ci The Corporation shall have received a certificate signed by an
appropriate officer of Buyer to the foregoing effect.
(di Buyer shall have delivered to the Corporation an opinion
reasonably acceptable to Buyer from Weil, Gotshal & Manges LLP, special counsel
to Buyer, with respect to the valid, binding and enforceable nature of this
Agreement.
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ARTICLE 9
TERMINATION
SECTION 9.1. Grounds for Termination. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written agreement of the Corporation and Buyer;
(b) by either the Corporation or Buyer if the Closing shall not have
been consummated on or before April 30, 1999; or
(c) by either the Corporation or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses 9.01(b) or
9.01(c) shall promptly give notice of such termination to the other party.
SECTION 9.2. Effect of Termination. If this Agreement is terminated as
permitted by Section 9.01, such termination shall be without liability of either
party (or any stockholder, director, officer, partner, employee, agent,
consultant or representative of such party) to the other party to this
Agreement; provided that if such termination shall result from the willful (a)
failure of either party to fulfill a condition to the performance of the
obligations of the other party, (b) failure to perform a covenant of this
Agreement or (c) breach by either party hereto of any representation or warranty
or agreement contained herein, such party shall be fully liable for any and all
losses incurred or suffered by the other party as a result of such failure or
breach. The provisions of Sections 6.01, 11.01, 11.03, 11.05, 11.06, 11.07,
11.08, 11.09, 11.10, and 11.12 shall survive any termination hereof pursuant to
Section 9.01.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
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SECTION 10.1. Survival of Representation and Warranties. All
representations and warranties contained in this Agreement and all claims with
respect thereto shall terminate upon the expiration of 18 months after the
Closing Date, except that the representations and warranties contained in
Sections 3.01, 3.02, 3.03, 3.06, 4.01, 4.02, and 4.03 shall survive
indefinitely. Notwithstanding the preceding sentence, any covenant, agreement,
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if notice of the inaccuracy or breach
thereof giving rise to such right of indemnity shall have been given to the
party against whom such indemnity may be sought prior to such time.
SECTION 10.2. Indemnification. (ai The Corporation hereby indemnifies
Buyer against and agrees to hold Buyer harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("DAMAGES") incurred or suffered by Buyer arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by the Corporation pursuant to this Agreement; provided that
(i) the Corporation shall not be liable under this Section 10.02(a) unless the
aggregate amount of Damages with respect to all matters referred to in this
Section 10.02(a) exceeds $5,000,000, in which event the Buyer shall be entitled
to make a claim against the Corporation for the full amount of such Damages and
(ii) the Corporation's maximum liability under this Section 10.02(a) shall not
exceed $200,000,000.
(bi Buyer hereby indemnifies the Corporation against and agrees to
hold the Corporation harmless from any and all Damages incurred or suffered by
the Corporation arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by Buyer pursuant to this
Agreement; provided that (i) Buyer shall not be liable under this Section
10.02(b) unless the aggregate amount of Damages with respect to all matters
referred to in this Section 10.02(b) exceeds $5,000,000, in which event the
Corporation shall be entitled to make a claim against the Buyer for the full
amount of such Damages and (ii) Buyer's maximum liability under this Section
10.02(b) shall not exceed $200,000,000.
SECTION 10.3. Procedures. The party seeking indemnification under
Section 10.02 (the "INDEMNIFIED Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "INDEMNIFYING PARTY") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The Indemnifying
Party may at the request of the Indemnified Party participate in and control the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 10.02 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
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SECTION 10.4. Inspections; No Other Representations . Buyer is an
informed and sophisticated purchaser, and has undertaken such investigation and
has been provided with and has evaluated such documents and information as it
has deemed necessary to enable it to make an informed and intelligent decision
with respect to the execution, delivery and performance of this Agreement. Buyer
will undertake prior to the Closing such further investigation and request such
additional documents and information as it deems necessary. Buyer agrees to
accept the Preferred Shares based upon its own inspection, examination and
determination with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature made by or on
behalf of or imputed to the Corporation, except as expressly set forth in this
Agreement. Without limiting the generality of the foregoing, Buyer acknowledges
that the Corporation makes no representation or warranty with respect to (i) any
projections, estimates or budgets delivered to or made available to Buyer of
future revenues, future results of operations (or any component thereof), future
cash flows or future financial condition (or any component thereof) of the
Corporation and the Subsidiaries or the future business and operations of the
Corporation and the Subsidiaries or (ii) any other information or documents made
available to Buyer or its counsel, accountants or advisors with respect to the
Company or the Subsidiaries or their respective businesses or operations, except
as expressly set forth in this Agreement.
SECTION 10.5. Exclusivity. Except as specifically set forth in this
Agreement and except in the case of fraud, effective as of the Closing Buyer
waives any rights and claims Buyer may have against the Corporation, whether in
law or in equity, relating to the Corporation or the Preferred Shares or the
transactions contemplated hereby. The rights and claims waived by Buyer include,
without limitation, claims for breach of contract, breach of representation or
warranty, negligent misrepresentation and all other claims for breach of duty.
After the Closing, Section 10.02 will provide the exclusive remedy for any
misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated hereby,
except in the case of fraud.
ARTICLE 11
MISCELLANEOUS
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SECTION 11.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be deemed duly given,
effective (i) three Business Days later, if sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) when sent if sent by
telecopier or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof, (iii) when served, if delivered personally to
the intended recipient, and (iv) one Business Day later, if sent by overnight
delivery via a national courier service, and in each case, addressed,
if to Buyer, to:
HMTF Live Wire Investors, LLC
c/o Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas
25th Floor
New York, New York 10019
Attention: Michael Levitt
Fax: (212) 424-1450
with a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
Attention: Lawrence D. Stuart, Jr., Esq.
Fax: (214) 740-7313
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Simeon Gold, Esq.
Fax: (212) 310-8007
if to the Corporation, to:
RCN Corporation
105 Carnegie Center
Princeton, NJ 08540-6215
Attention: John J. Jones, Esq.
Fax: (609) 734-3830
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with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Taylor, Esq.
Fax: (212) 450-4800
Any party may change the address to which notices or other communications
hereunder are to be delivered by giving the other party notice in the manner
herein set forth.
SECTION 11.2. Amendments and Waivers. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative.
SECTION 11.3. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 11.4. Assignment. The rights and obligations of the parties
hereunder cannot be assigned or delegated except (i) that Buyer may assign any
or all of its rights and obligations under this Agreement to any one or more of
its Affiliates and (ii) that Buyer may assign its rights and obligations under
Sections 2.03, 6.02, 7.04 and Exhibit B of this Agreement to any one or more
Permitted Transferees.
SECTION 11.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
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SECTION 11.6. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may only
be brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.01 shall be deemed
effective service of process on such party.
SECTION 11.7. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder, except for rights provided to
Permitted Transferees under Section 7.04.
SECTION 11.8. Entire Agreement. This Agreement (including the Exhibits
hereto) and the Certificate of Designations constitute the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement (except
for the letter agreement dated March 9, 1999 with respect to confidential
treatment of information provided by the Corporation, which remains in effect).
SECTION 11.9. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
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SECTION 11.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
SECTION 11.11. Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that any
party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to a court of competition jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
SECTION 11.12. No Recourse. Notwithstanding any of the terms or
provisions of this Agreement, (i) the Corporation agrees that neither it nor any
person acting on its behalf may assert any claims or cause of action against any
officer, director, partner, member or stockholder of the Buyer or any of its
Affiliates in connection with or arising out of this Agreement or the
transactions contemplated hereby and (ii) the Buyer agrees that neither it nor
any person acting on its behalf may assert any claims or cause of action against
any officer, director, partner, member or stockholder of the Corporation or any
of its Affiliates in connection with or arising out of this Agreement or the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
RCN CORPORATION
By: /s/ Bruce Godfrey
----------------------------------
Name: Bruce Godfrey
Title: Executive Vice President
and CFO
HMTF LIVE WIRE INVESTORS, LLC
By: /s/ Michael Levitt
----------------------------------
Name: Michael Levitt
Title: President
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EXHIBIT B
REGISTRATION RIGHTS
This constitutes Exhibit B to the Stock Purchase Agreement (as it may be
amended from time to time, the "STOCK PURCHASE AGREEMENT") dated as of March 18,
1999 between RCN Corporation, a Delaware corporation (the "CORPORATION") and
HMTF Live Wire Investments, LLC, a Delaware limited liability company ("BUYER").
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. Terms defined in the Stock Purchase Agreement
are used herein as therein defined. In addition, the following terms, as used
herein, have the following meanings:
"COMMISSION" means the Securities and Exchange Commission.
"DEMAND REGISTRATION STATEMENT" means the Demand Registration Statement as
defined in Section 2.01.
"HOLDER" means a person who owns Registrable Securities and is either (a)
the Buyer or (b) a direct or an indirect transferee of the Buyer who has agreed
in writing to be bound by the terms of Sections 2.03(b), 6.02 and 7.04 of the
Stock Purchase Agreement and this Exhibit B.
"PIGGYBACK REGISTRATION" means a Piggyback Registration as defined in
Section 2.02.
"REGISTRABLE COMMON STOCK" means the shares of Common Stock issued upon
conversion of the Preferred Stock, including any additional shares of Common
Stock issued the respect thereof in connection with a stock split, stock
dividend or similar event with respect to the Common Stock.
"REGISTRABLE SECURITIES" means (a) the Preferred Stock and (b) the
Registrable Common Stock. As to any particular Registrable Securities, such
Registrable Securities shall cease to be Registrable Securities as soon as they
(i)
(NY) 17431/028/RR/reg.rts.wpd
<PAGE>
have been sold or otherwise disposed of pursuant to a registration statement
that was filed with the Commission and declared effective under the Securities
Act, (ii) are eligible for sale pursuant to Rule 144 without being subject to
applicable volume limitations thereunder, (iii) have been otherwise sold,
transferred or disposed of by a Holder to any Person that is not a Holder, or
(iv) have ceased to be outstanding.
"RULE 144" means Rule 144 (or any successor rule of similar effect)
promulgated under the Securities Act.
"SELLING HOLDER" means any Holder who is selling Registrable Securities
pursuant to a public offering registered hereunder.
"UNDERWRITER" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
SECTION 1.02. Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the corresponding
articles, sections and paragraphs in this Exhibit B, and references to the
parties shall mean the parties to the Stock Purchase Agreement.
ARTICLE 2
REGISTRATION RIGHTS
SECTION 2.01. Demand Registration. (a) The Buyer, on its own behalf and on
behalf of the other Holders, may make up to four written requests for
registration under the Securities Act of all or any part of the Registrable
Securities held by the Holders (each, a "DEMAND REGISTRATION"); provided that
(i) no Demand Registration may be requested within 180 days after the preceding
request for a Demand Registration, and (ii) each Demand Registration must be (x)
in respect of Registrable Securities with a fair market value of at least
$50,000,000 or (y) in respect of all remaining Registrable Securities and have a
fair market value of at least $5,000,000. Such request will specify the
aggregate number of shares of Registrable Securities proposed to be sold and
will also specify the intended method of disposition thereof. A registration
will not count as a Demand Registration until it has become effective. Should a
Demand Registration not become effective due to the failure of a Holder to
perform its obligations under this Exhibit B or the inability of the requesting
Holders to reach agreement with the underwriters for the proposed sale (the
"UNDERWRITERS") on price or other customary terms for such transaction, or in
the event the requesting
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Holders withdraw or do not pursue the request for the Demand Registration (in
each of the foregoing cases, provided that at such time the Corporation is in
compliance in all material respects with its obligations under this Exhibit B),
then such Demand Registration shall be deemed to have been effected (provided
that if the Demand Registration does not become effective because of a material
adverse change in the condition (financial or otherwise), business, assets or
results of operations of the Corporation and its subsidiaries taken as a whole
that occurs subsequent to the date of the written request made by the requesting
Holders, then the Demand Registration shall not be deemed to have been
effected).
(b) In the event that Buyer withdraws or does not pursue a request for a
Demand Registration and, pursuant to Section 2.01(a) hereof, such Demand
Registration is deemed to have been effected, the Holders may reacquire such
Demand Registration (such that the withdrawal or failure to pursue a request
will not count as a Demand Registration hereunder) if the Selling Holders
reimburse the Corporation for any and all Registration Expenses incurred by the
Corporation in connection with such request for a Demand Registration; provided
that the right to reacquire a Demand Registration may be exercised a maximum of
two times.
(c) If the Selling Holders so elect, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. A majority in interest of the Selling Holders shall have
the right to select the managing Underwriters and any additional investment
bankers and managers to be used in connection with any offering under this
Section 2.01, subject to the Corporation's approval, which approval shall not be
unreasonably withheld.
(d) The Selling Holders will inform the Corporation of the time and manner
of any disposition of Registrable Common Stock, and agree to reasonably
cooperate with the Corporation in effecting the disposition of the Registrable
Common Stock in a manner that does not unreasonably disrupt the public trading
market for the Common Stock.
(e) The Corporation will have the right to preempt any Demand Registration
with a primary registration by delivering written notice (within five business
days after the Corporation has received a request for such Demand Registration)
of such intention to the Buyer indicating that the Corporation has identified a
specific business need and use for the proceeds of the sale of such securities
and the Corporation shall use commercially reasonable efforts to effect a
primary registration within 60 days of such notice. In the ensuing primary
registration, the Holders will have such piggyback registration rights as are
set forth in Section 2.02 hereof. Upon the Corporation's preemption of a
requested Demand Registration, such requested registration will not count as the
Holders'
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Demand Registration; provided that a Demand Registration will not be deemed
preempted if the Holders are permitted to sell all requested securities in
connection with the ensuing primary offering by exercising their piggyback
registration rights as set forth in Section 2.02. The Corporation may exercise
the right to preempt only twice in any 360-day period; provided, that during any
360 day period there shall be a period of at least 120 consecutive days during
which the Selling Holders may effect a Demand Regulation.
SECTION 2.02. Piggyback Registration. If the Corporation proposes to file
a registration statement under the Securities Act with respect to an offering of
Common Stock for its own account or for the account of another Person (other
than a registration statement on Form S-4 or S-8 or pursuant to Rule 415 (or any
substitute form or rule, respectively, that may be adopted by the Commission)),
the Corporation shall give written notice of such proposed filing to the Holders
at the address set forth in the share register of the Corporation as soon as
reasonably practicable (but in no event less than 10 days before the anticipated
filing date), undertaking to provide each Holder the opportunity to register on
the same terms and conditions such number of shares of Registrable Common Stock
as such Holder may request (a "PIGGYBACK REGISTRATION"). Each Holder will have
five business days after receipt of any such notice to notify the Corporation as
to whether any it wishes to participate in a Piggyback Registration; provided
that should a Holder fail to provide timely notice to the Corporation, such
Holder will forfeit any rights to participate in the Piggyback Registration with
respect to such proposed offering. In the event that the registration statement
is filed on behalf of a Person other than the Corporation, the Corporation will
use its best efforts to have the shares of Registrable Common Stock that the
Holders wish to sell included in the registration statement. If the Corporation
shall determine in its sole discretion not to register or to delay the proposed
offering, the Corporation may, at its election, provide written notice of such
determination to the Holders and (i) in the case of a determination not to
effect the proposed offering, shall thereupon be relieved of the obligation to
register such Registrable Common Stock in connection therewith, and (ii) in the
case of a determination to delay a proposed offering, shall thereupon be
permitted to delay registering such Registrable Common Stock for the same period
as the delay in respect of the proposed offering. As between the Corporation and
the Selling Holders, the Corporation shall be entitled to select the
Underwriters in connection with any Piggyback Registration.
SECTION 2.03. Reduction of Offering. Notwithstanding anything contained
herein, if the managing Underwriter of an offering described in Section 2.01 or
2.02 states in writing that the size of the offering that Holders, the
Corporation and any other Persons intend to make is such that the inclusion of
the Registrable Securities would be likely to materially and adversely affect
the price, timing or
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distribution of the offering, then the amount of Registrable Securities to be
offered for the account of Holders shall be reduced to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by such managing Underwriter; provided that in the case of a
Piggyback Registration, if securities are being offered for the account of
Persons other than the Corporation, then the proportion by which the amount of
Registrable Securities intended to be offered for the account of Holders is
reduced shall not exceed the proportion by which the amount of securities
intended to be offered for the account of such other Persons (other than any
Person exercising a demand registration right) is reduced; provided further that
in the case of a Demand Registration, the amount of Registrable Securities to be
offered for the account of the Holders making the Demand Registration shall be
reduced only after the amount of securities to be offered for the account of the
Corporation and any other Persons has been reduced to zero.
SECTION 2.04. Preservation of Rights. The Corporation will not grant any
registration rights to third parties which contravene the rights granted
hereunder.
ARTICLE 3
REGISTRATION PROCEDURES
SECTION 3.01. Filings; Information. In connection with the registration of
Registrable Securities pursuant to Section 2.01 and Section 2.02 hereof, the
Corporation will use its reasonable best efforts to effect the registration of
such Registrable Securities as promptly as is reasonably practicable, and in
connection with any such request:
(a) The Corporation will expeditiously prepare and file with the Commission
a registration statement on any form for which the Corporation then
qualifies and which counsel for the Corporation shall deem appropriate and
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof,
and use its reasonable best efforts to cause such filed registration
statement to become and remain effective for such period, not to exceed 60
days, as may be reasonably necessary to effect the sale of such
securities; provided that if the Corporation shall furnish to the Buyer a
certificate signed by the Corporation's Chairman, President or any
Vice-President stating that in his or her good faith judgment it would be
detrimental or otherwise disadvantageous to the Corporation or its
shareholders for such a registration statement to be filed as
expeditiously
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<PAGE>
as possible (because the sale of Registrable Securities covered by such
Registration Statement or the disclosure of information in any related
prospectus or prospectus supplement would materially interfere with any
acquisition, financing or other material event or transaction which is
then intended or the public disclosure of which at the time would be
materially prejudicial to the Corporation), the Corporation may postpone
the filing or effectiveness of a registration statement for a period of
not more than 120 days; provided, that during any 360 day period there
shall be a period of at least 120 consecutive days during which the
Corporation will make a registration statement available under this
Exhibit B; and provided further, that if (i) the effective date of any
registration statement filed pursuant to a Demand Registration would
otherwise be at least 45 calendar days, but fewer than 90 calendar days,
after the end of the Corporation's fiscal year, and (ii) the Securities
Act requires the Corporation to include audited financials as of the end
of such fiscal year, the Corporation may delay the effectiveness of such
registration statement for such period as is reasonably necessary to
include therein its audited financial statements for such fiscal year.
(b) The Corporation will, if requested, prior to filing such registration
statement or any amendment or supplement thereto, furnish to the Selling
Holders, and each applicable managing Underwriter, if any, copies thereof,
and thereafter furnish to the Selling Holders and each such Underwriter,
if any, such number of copies of such registration statement, amendment
and supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein) and the prospectus included
in such registration statement (including each preliminary prospectus) as
the Selling Holders or each such Underwriter may reasonably request in
order to facilitate the sale of the Registrable Securities by the Selling
Holders.
(c) After the filing of the registration statement, the Corporation will
promptly notify the Selling Holders of any stop order issued or, to the
Corporation's knowledge, threatened to be issued by the Commission and
take all reasonable actions required to prevent the entry of such stop
order or to remove it if entered.
(d) The Corporation will use its reasonable best efforts to qualify the
Registrable Securities for offer and sale under such other securities or
blue sky laws of such jurisdictions in the United States as the Selling
Holders reasonably request; provided that the Corporation will not be
required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph
3.01(d),
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<PAGE>
(ii) subject itself to taxation in any such jurisdiction or (iii) consent
to general service of process in any such jurisdiction.
(e) The Corporation will as promptly as is practicable notify the Selling
Holders, at any time when a prospectus relating to the sale of the
Registrable Securities is required by law to be delivered in connection
with sales by an Underwriter or dealer, of the occurrence of any event
requiring the preparation of a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and promptly make
available to the Selling Holders, and to the Underwriters any such
supplement or amendment. Upon receipt of any notice of the occurrence of
any event of the kind described in the preceding sentence, Selling Holders
will forthwith discontinue the offer and sale of Registrable Securities
pursuant to the registration statement covering such Registrable
Securities until receipt by the Selling Holders and the Underwriters of
the copies of such supplemented or amended prospectus and, if so directed
by the Corporation, the Selling Holders will deliver to the Corporation
all copies, other than permanent file copies then in the possession of
Selling Holders, of the most recent prospectus covering such Registrable
Securities at the time of receipt of such notice. In the event the
Corporation shall give such notice, the Corporation shall extend the
period during which such registration statement shall be maintained
effective as provided in Section 3.01(a) hereof by the number of days
during the period from and including the date of the giving of such notice
to the date when the Corporation shall make available to the Selling
Holders such supplemented or amended prospectus.
(f) The Corporation will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as
are required in order to expedite or facilitate the sale of such
Registrable Securities.
(g) At the request of any Underwriter in connection with an underwritten
offering the Corporation will furnish (i) an opinion of counsel, addressed
to the Underwriters, covering such customary matters as the managing
Underwriter may reasonably request and (ii) a comfort letter or comfort
letters from the Corporation's independent public accountants covering
such customary matters as the managing Underwriter may reasonably request.
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(h) The Corporation will make generally available to its security holders,
as soon as reasonably practicable, an earnings statement covering a period
of 12 months, beginning within three months after the effective date of
the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(i) The Corporation will use its commercially reasonable efforts to cause
all such Registrable Common Stock and, in the event of a public offering
of Series A Preferred Stock, the Series A Preferred Stock (subject to
applicable listing requirements) to be listed on each securities exchange
or quoted on each inter-dealer quotation system on which the Common Stock
is then listed or quoted.
The Corporation may require Selling Holders promptly to furnish in writing
to the Corporation such information regarding such Selling Holders, the plan of
distribution of the Registrable Securities and other information as the
Corporation may from time to time reasonably request or as may be legally
required in connection with such registration.
SECTION 3.02. Registration Expenses. In connection with any Demand
Registration, the Corporation shall pay the following expenses incurred in
connection with such registration (the "REGISTRATION EXPENSES"): (i)
registration and filing fees with the Commission and the National Association of
Securities Dealers, Inc., (ii) fees and expenses of compliance with securities
or blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
printing expenses, (iv) fees and expenses incurred in connection with the
listing or quotation of the Registrable Securities, (v) fees and expenses of
counsel to the Corporation and the reasonable fees and expenses of independent
certified public accountants for the Corporation (including fees and expenses
associated with the special audits or the delivery of comfort letters) and (vi)
the reasonable fees and expenses of any additional experts retained by the
Corporation in connection with such registration. In connection with any
Piggyback Registration, the Corporation shall pay the Registration Expenses set
forth in clauses (ii) through (vi) of the preceding sentence. The Selling
Holders shall pay (i) any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities, (ii) fees and expenses of
counsel for the Selling Holders and (iii) any out-of-pocket expenses of the
Selling Holders. In connection with any Piggyback Registration, the Selling
Holders shall pay, in addition to items (i) through (iii) of the preceding
sentence, registration and filing fees with the Commission and National
Association of Securities Dealers Inc., in proportion to the ratio that the
number of
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shares of Registrable Common Stock being registered for the account of the
Selling Holders bears to the aggregate number of shares of Common Stock being
included in the applicable registration statement.
ARTICLE 4
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01. Indemnification by the Corporation. The Corporation agrees
to indemnify and hold harmless each Selling Holder and its Affiliates and their
respective officers, directors, partners, stockholders, members, employees,
agents and representatives and each Person (if any) which controls a Selling
Holder within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) caused
by, arising out of resulting from or related to any untrue statement or alleged
untrue statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented if
the Corporation shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by or contained in or based upon any
information furnished in writing to the Corporation by or on behalf of such
Selling Holder or any Underwriter expressly for use therein or by the Selling
Holder or Underwriter's failure to deliver a copy of the registration statement
or prospectus or any amendments or supplements thereto after the Corporation has
furnished the Buyer or Underwriter with copies of the same. The Corporation also
agrees to indemnify any Underwriters of the Registrable Securities, their
officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Selling
Holders provided in this Section 4.01.
SECTION 4.02. Indemnification by the Buyer. Each Selling Holder agrees to
indemnify and hold harmless the Corporation, its officers and directors, and
each Person, if any, which controls the Corporation within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Corporation to each Selling Holder,
but only with reference to information furnished in writing by or on behalf of
such Selling Holder expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or
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any preliminary prospectus. Each Selling Holder also agrees to indemnify and
hold harmless any Underwriters of the Registrable Securities, their officers and
directors and each person who controls such Underwriters on substantially the
same basis as that of the indemnification of the Corporation provided in this
Section 4.02.
SECTION 4.03. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 4.01 or Section 4.02, such Person (the "INDEMNIFIED PARTY") shall
promptly notify the Person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and, in the written
opinion of counsel for the Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent (not to
be unreasonably withheld), or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment.
SECTION 4.04. Contribution. If the indemnification provided for in this
Article 4 is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities in respect of which indemnity is to be provided
hereunder, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall to the fullest extent permitted by law contribute to
the amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or
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liabilities in such proportion as is appropriate to reflect the relative fault
of such party in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Corporation, a Selling
Holder and the Underwriters shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Corporation and each Selling Holder agrees that it would not be just
and equitable if contribution pursuant to this Section 4.04 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 that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Article 4, 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, and each Selling
Holder shall not be required to contribute any amount in excess of the amount by
which the net proceeds of the offering (before deducting expenses) received by
such Selling Holder exceeds the amount of any damages which such Selling Holder
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 Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
ARTICLE 5
MISCELLANEOUS
SECTION 5.01. Participation in Underwritten Registrations. No Person may
participate in any underwritten registered offering contemplated hereunder
unless such Person (a) agrees to sell its securities on the basis provided in
any
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underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, (b) completes and executes all questionnaires, powers of
attorney, custody arrangements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements
and this Exhibit B and (c) furnishes in writing to the Corporation such
information regarding such Person, the plan of distribution of the Registrable
Securities and other information as the Corporation may from time to time
request or as may be legally required in connection with such registration.
SECTION 5.02. Rule 144. The Corporation covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as the Holders may reasonably request
to the extent required from time to time to enable the Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. Upon the request of the Buyer, the
Corporation will deliver to the Buyer a written statement as to whether it has
complied with such reporting requirements.
SECTION 5.03. Holdback Agreements. Each Holder agrees, in the event of an
underwritten offering for the Corporation (whether for the account of the
Corporation or otherwise) not to offer, sell, contract to sell or otherwise
dispose of any Registrable Securities, or any securities convertible into or
exchangeable or exercisable for such securities, including any sale pursuant to
Rule 144 under the Securities Act (except as part of such underwritten
offering), during the 14 days prior to, and during the 180-day period (or such
lesser period as the lead or managing underwriters may require) beginning on,
the effective date of the registration statement for such underwritten offering
(or, in the case of an offering pursuant to an effective shelf registration
statement pursuant to Rule 415, the pricing date for such underwritten
offering).
SECTION 5.04. Termination. The registration rights granted under this
Agreement will terminate on March 31, 2014; provided, however, that if the
shares of Preferred Stock outstanding on such date shall not have been redeemed
in full in accordance with Section 6(b) of the Certificate of Designations, this
Agreement shall remain in full force and effect with respect to such shares (and
the shares of Common Stock issuable upon the conversion of such shares) until
such time as such shares have been so redeemed in full.
12
Exhibit 10.2
AMENDMENT NO. 1
TO
STOCK PURCHASE AGREEMENT
dated as of
April 7, 1999
among
RCN CORPORATION
and
HMTF LIVE WIRE INVESTORS, LLC
and
HM4 RCN PARTNERS
(NY) 17431/028/SPA/amend1.spa.wpd
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. Definitions; References..............................1
SECTION 2. Representations and Warranties of Buyer..............1
SECTION 3. Representations and Warranties of Assignee...........1
SECTION 4. Covenants of the Assignee............................2
SECTION 5. Amendment to Article 3...............................2
SECTION 6. Amendment to Article 5...............................2
SECTION 7. Certificate of Designations..........................2
SECTION 8. Amendments...........................................2
SECTION 9. Governing Law........................................2
SECTION 10. Counterparts........................................2
Exhibit A Certificate of Designations, Preferences and Rights
of Series A 7% Senior Convertible Preferred Stock
<PAGE>
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT dated as of April 7, 1999
among RCN Corporation, a Delaware corporation (the "CORPORATION"), HMTF Live
Wire Investors, LLC, a Delaware limited liability company ("BUYER") and HM4 RCN
Partners, a Texas general partnership ("ASSIGNEE").
WHEREAS, the Corporation and Buyer have entered into a Stock Purchase
Agreement (the "STOCK PURCHASE AGREEMENT") dated as of March 18, 1999;
WHEREAS, Buyer and Assignee have entered into an Assignment and Assumption
Agreement (the "ASSIGNMENT AGREEMENT") dated as of April 7, 1999, in accordance
with Section 11.04 of the Stock Purchase Agreement, pursuant to which Buyer
assigned and Assignee assumed all of Buyers rights and obligations under the
Stock Purchase Agreement (and the Corporation acknowledged such assignment and
assumption);
WHEREAS, the Corporation, Buyer and Assignee have agreed to amend the
Stock Purchase Agreement as set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Stock Purchase Agreement
shall have the meaning assigned to such term in the Stock Purchase Agreement.
Each reference to "hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and each other similar
reference contained in the Stock Purchase Agreement shall from and after the
date hereof refer to the Stock Purchase Agreement as amended hereby.
SECTION 2. Representations and Warranties of Buyer. Buyer represents and
warrants to the Corporation as of the date hereof that Assignee is an Affiliate
of Buyer.
SECTION 3. Representations and Warranties of Assignee. Assignee represents
and warrants to the Corporation as of the date hereof that each representation
and warranty of Buyer set forth in Article 4 of the Stock Purchase Agreement is
true and correct as of the date hereof with respect to Assignee (except that
references to limited liability company status, power and authority in
<PAGE>
Sections 4.01, 4.02 and 4.04 shall be deemed references to general partnership
status, power and authority).
SECTION 4. Covenants of the Assignee. The Assignee agrees with the
Corporation that, pursuant to the Assignment Agreement, it will perform all of
the obligations of Buyer under the Stock Purchase Agreement subject to and in
accordance with the terms and conditions of the Stock Purchase Agreement.
SECTION 5. Amendment to Article 3. Section 3.03 of the Stock Purchase
Agreement is amended by (i) deleting "Except as set forth in Schedule 3.03
hereto, the" and (ii) inserting "The" in its place.
SECTION 6. Amendment to Article 5. Section 5.04 of the Stock Purchase
Agreement is amended by adding the following sentence to the end of such
section:
"At such time as Buyer ceases to hold the minimum amount of Preferred
Shares or Common Stock that would entitle Buyer to designate a Buyer
Director under this Section 5.04, then Buyer's right to designate such
additional director shall cease and, upon notice of termination from the
Corporation to Buyer, the term of office of the Buyer Director shall
forthwith terminate and the size of the Board of Directors shall be
reduced accordingly."
SECTION 7. Certificate of Designations. The form of Certificate of
Designations attached to the Stock Purchase Agreement as Exhibit A thereto is
amended and restated in its entirety to read as set forth on Exhibit A attached
hereto.
SECTION 8. Amendments. Except as expressly set forth herein, the
amendments contained herein shall not constitute an amendment of any term or
condition of the Stock Purchase Agreement and all such terms and conditions
shall remain in full force and effect and are hereby ratified and confirmed in
all respects.
SECTION 9. Governing Law. This Amendment shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 10. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This
2
<PAGE>
Amendment shall become effective when each party hereto shall have received a
counterpart hereof signed by the other party hereto.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
RCN CORPORATION
By: /s/ Bruce Godfrey
----------------------------------------
Name: Bruce Godfrey
Title: Executive Vice President and CFO
HMTF LIVE WIRE INVESTORS, LLC
By: /s/ Andrew Rosen
----------------------------------------
Name: Andrew Rosen
Title: Vice President
HM4 RCN PARTNERS
By: HM4 RCN Qualified Fund, L.P., its
managing partner
By: Hicks, Muse GP Partners IV, L.P., its
general partner
By: Hicks, Muse Fund IV LLC, its
general partner
By: /s/ Andrew Rosen
----------------------------------------
Name: Andrew Rosen
Title: Principal
4
Exhibit 10.3
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.
(NY) 17431/028/CD/cert.desig.pref.wpd(2)
<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
4
<PAGE>
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
5
<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,
6
<PAGE>
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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<PAGE>
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.
9
<PAGE>
(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.
10
<PAGE>
(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
11
<PAGE>
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
12
<PAGE>
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
13
<PAGE>
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
14
<PAGE>
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
15
<PAGE>
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
<PAGE>
IN WITNESS WHEREOF, RCN Corporation has caused this Certificate of
Designations to be signed and attested by the undersigned this day of April,
1999.
RCN CORPORATION
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
21
Exhibit 99.1
JOINT FILING AGREEMENT
The undersigned, and each of them, do hereby agree and consent
to the filing of a single statement on behalf of all of them on Schedule 13D and
amendments thereto, in accordance with the provisions of Rule 13d-1(f)(1) under
the Securities Exchange Act of 1934, as amended.
April 19, 1999 HMR RCN PARTNERS
Date
By: HM4 RCN QUALIFIED FUND, L.P., its
Managing General Partner
By: HICKS, MUSE GP PARTNERS IV, L.P., its
General Partner
By: HICKS, MUSE FUND IV LLC, its General
Partner
By: /s/ Michael D. Salim
-----------------------------------------
Michael D. Salim, Chief Financial and
Administrative Officer
HM4 RCN QUALIFIED FUND, L.P.
By: HICKS, MUSE GP PARTNERS IV, L.P.,
its General Partner
By: HICKS, MUSE FUND IV LLC,
its General Partner
By: /s/ Michael D. Salim
-----------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
<PAGE>
HM4 RCN PRIVATE FUND, L.P.
By: HICKS, MUSE GP PARTNERS IV, L.P.,
its General Partner
By: HICKS, MUSE FUND IV LLC,
its General Partner
By: /s/ Michael D. Salim
-----------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
HM4 RCN COINVESTORS, L.P.
By: HICKS, MUSE GP PARTNERS IV, L.P.,
its General Partner
By: HICKS, MUSE FUND IV LLC,
its General Partner
By: /s/ Michael D. Salim
-----------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
HICKS, MUSE GP PARTNERS IV, L.P.
By: HICKS, MUSE FUND IV LLC,
its General Partner
By: /s/ Michael D. Salim
-----------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
<PAGE>
HICKS, MUSE FUND IV LLC
By: /s/ Michael D. Salim
-----------------------------------------
Michael D. Salim,
Chief Financial and Administrative
Officer
*
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Thomas O. Hicks
* By: /s/ Michael D. Salim
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Michael D. Salim,
Attorney-in-Fact
