RCNI Rcn (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

þ		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a- 6(e)(2) )
o		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12

 

RCN CORPORATION

(Name of Registrant as Specified In Its Charter)

 

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:
			common stock, par value $0.01 per share
	(2)		Aggregate number of securities to which transaction applies:
			35,294,030 shares of outstanding common stock (including restricted shares); options to purchase 2,274,192 shares of common stock with exercise prices below $15.00 per share; and 2,133,677 restricted stock units
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
			Solely for the purpose of calculating the filing fee, the underlying value of the transaction was calculated as the sum of: (a) 35,294,030 shares of common stock (including restricted shares) multiplied by $15.00 per share; (b) 2,274,192 shares of common stock underlying outstanding options with exercise prices less than $15.00 per share multiplied by $2.93 (which is the difference between $15.00 per share and the $12.07 weighted average exercise price per share of such options); and (c) 2,133,677 restricted stock units multiplied by $15.00 per restricted stock unit. The filing fee was determined by multiplying $0.00007130 by the maximum aggregate value of the transaction as determined in accordance with the preceding sentence.
	(4)		Proposed maximum aggregate value of transaction: $568,082,721.00
	(5)		Total fee paid: $40,504.30

o		Fee paid previously with proxy materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

196 Van Buren Street

Herndon, Virginia 20170

703-434-8200

 

[          ] , 2010

 

Dear Stockholder:

 

You are cordially invited to attend a special meeting of the stockholders of RCN Corporation, which we refer to as the Company, to be held on [          ] , 2010, at [          ] (Eastern time), at [          ] .

 

On March 5, 2010, we entered into a merger agreement among the Company, Yankee Cable Acquisition, LLC, which we refer to as Cable Buyer, Yankee Metro Parent, Inc., which we refer to as Metro Parent, and Yankee Metro Merger Sub, Inc., which we refer to as Merger Sub, pursuant to which Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation of the merger, but as a wholly owned subsidiary of Metro Parent. Cable Buyer, Metro Parent and Merger Sub are indirect wholly-owned subsidiaries of funds affiliated with ABRY Partners, a private equity fund sponsor, which we refer to as ABRY.

 

At the special meeting, you will be asked to consider and vote upon a proposal to adopt the merger agreement and to approve the transactions contemplated thereby. If the merger is completed, each share of Company common stock will be converted into the right to receive $15.00 in cash, without interest, which represents a premium of approximately 43% over the Company’s average closing share price during the 30 trading days immediately prior to the public announcement of the execution of the merger agreement.

 

Upon the closing, but immediately prior to the effective time of the merger, the merger agreement provides that the Company will transfer its Residential and Small and Medium Businesses business unit, which we refer to as the Cable Business, to Cable Buyer on the terms and conditions set forth in the merger agreement. As a result, following the consummation of the merger, the Company’s Cable Business will be owned by Cable Buyer and the Company’s Metro Optical Networks business unit, which we refer to as the Metro Business, will be owned by Metro Parent, and each of Cable Buyer and Metro Parent will be controlled by ABRY and other co-investors.

 

The proxy statement accompanying this letter is furnished in connection with the solicitation by the Board of Directors of the Company of proxies to be used at the special meeting.

 

The Board of Directors of the Company, which we refer to as the Board, and the Special Committee of the Board comprised entirely of independent directors that was established to undertake a review of the Company’s strategic alternatives and that negotiated the merger agreement with ABRY, which we refer to as the Special Committee, have carefully considered the terms and conditions of the proposed merger. Based on such consideration, and in the case of the Board based on its adoption of the unanimous recommendation of the Special Committee, each of the Board and the Special Committee has unanimously determined that the merger is fair to and in the best interests of the stockholders of the Company and has unanimously approved and declared advisable the merger agreement. Accordingly, the Board unanimously recommends that you vote FOR approval of the proposal to adopt the merger agreement and to approve the transactions contemplated thereby and FOR approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

Your vote is very important.   The merger and the other transactions contemplated by the merger agreement cannot be completed unless holders of at least a majority of shares of Company common stock outstanding and entitled to vote at the special meeting vote to adopt the merger agreement and to approve the transactions contemplated thereby. The failure to vote will have the same effect as a vote AGAINST approval of the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

Only holders of record of Company common stock at the close of business on [          ] , 2010, will be entitled to vote at the special meeting. Please complete, sign, date and return your proxy card. Completing a proxy card now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote. The failure to instruct your bank, broker or other nominee to vote your shares FOR approval of the proposal to adopt the merger agreement and to approve the transactions contemplated thereby will have the same effect as a vote AGAINST the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

This proxy statement explains the proposed merger and the merger agreement and provides specific information concerning the special meeting. A copy of the merger agreement is attached as Annex A to the proxy statement. We encourage you to read the entire proxy statement and the merger agreement carefully. You may also obtain more information about the Company from documents that we have filed with the Securities and Exchange Commission.

 

Sincerely,

 

Peter D. Aquino
President and Chief Executive Officer

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

The proxy statement is dated [          ], 2010, and is first being mailed to our stockholders on or about [          ], 2010.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [          ], 2010

 

To Stockholders of RCN Corporation:

 

A special meeting of the stockholders of RCN Corporation, which we refer to as the Company, will be held at [          ] (Eastern time), on [          ] , 2010, at [          ] , for the following purposes:

 

1. To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of March 5, 2010, as it may be amended from time to time, by and among the Company, Yankee Cable Acquisition, LLC, which we refer to as Cable Buyer, Yankee Metro Parent, Inc., which we refer to as Metro Parent, and Yankee Metro Merger Sub, Inc., which we refer to as Merger Sub, and to approve the transactions contemplated thereby. Cable Buyer, Metro Parent and Merger Sub are indirect wholly-owned subsidiaries of funds affiliated with ABRY Partners, a private equity fund sponsor, which we refer to as ABRY. If the merger and the other transactions contemplated by the merger agreement are consummated, each share of Company common stock will be converted into the right to receive $15.00 in cash, without interest. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement.

 

2. To consider and vote on a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

3. To transact any other business that may properly come before the special meeting, or any adjournment or postponement of the special meeting, by or at the direction of the Board of Directors of the Company.

 

Only holders of record of shares of Company common stock at the close of business on [          ] , 2010, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting. Each share of Company common stock is entitled to vote on all matters that properly come before the special meeting and is entitled to one vote on each matter properly brought before the special meeting. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote.

 

The Board of Directors of the Company, which we refer to as the Board, and the Special Committee of the Board comprised entirely of independent directors that was established to undertake a review of the Company’s strategic alternatives and that negotiated the merger agreement with ABRY, which we refer to as the Special Committee, have carefully considered the terms and conditions of the proposed merger. Based on such consideration, and in the case of the Board based on its adoption of the unanimous recommendation of the Special Committee, each of the Board and the Special Committee has unanimously determined that the merger is fair to and in the best interests of the stockholders of the Company and has unanimously approved and declared advisable the merger agreement. Accordingly, the Board unanimously recommends that you vote FOR approval of the proposal to adopt the merger agreement and to approve the transactions contemplated thereby and FOR approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

The Company cannot complete the merger and the other transactions contemplated by the merger agreement unless the merger agreement is adopted by stockholders of the Company. Adoption of the merger agreement requires the affirmative vote of holders of at least a majority of shares of Company common stock outstanding and entitled to vote at the special meeting.

 

The attached proxy statement describes the proposed merger and the actions to be taken in connection with the merger and provides additional information about the parties involved.

 

Whether or not you plan to attend the special meeting, please complete, sign and date the enclosed proxy card and return it promptly in the enclosed postage-paid return envelope, or give your proxy by telephone or over the Internet by following the instructions on the proxy card. You may revoke your proxy at any time prior to its exercise at the special meeting in the manner described in this proxy statement. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote. If you are a record holder, your vote at the special meeting will supersede any previously submitted proxy. If you hold your shares through a bank, broker or other nominee, you should follow the procedures provided by your bank, broker or other nominee in order to vote.

 

If you fail to return your proxy or to attend the special meeting in person, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote AGAINST the adoption of the merger agreement and approval of the transactions contemplated thereby.

 

Please do not send any stock certificates at this time.

 

By order of the Board of Directors,

 

Jennifer McGarey
Acting General Counsel and Secretary

 

[          ], 2010

 

TABLE OF CONTENTS

 

References to “RCN Corporation,” “RCN,” the “Company,” “we,” “our” or “us” in this proxy statement refer to RCN Corporation and its subsidiaries unless otherwise indicated by context.

 

The following summary highlights selected information in this proxy statement and may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that topic. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page [          ].

 

 

RCN Corporation is a competitive broadband services provider delivering all-digital and high definition video, high-speed internet and premium voice services to residential and small and medium business customers under the brand names of RCN and RCN Business Services, respectively, which we refer to as the Cable Business. In addition, through our RCN Metro Optical Networks business unit, we deliver fiber-based high-capacity data transport services to large commercial customers, primarily large enterprises and carriers, targeting the metropolitan central business districts in the Company’s geographic markets, which we refer to as the Metro Business.

 

Yankee Cable Acquisition, LLC , which we refer to as Cable Buyer, was formed by ABRY Partners solely for the purpose of entering into the merger agreement and completing the transactions contemplated thereby, specifically including the acquisition of the Company’s Cable Business.

 

Yankee Metro Parent, Inc. , which we refer to as Metro Parent, was formed by ABRY Partners solely for the purpose of entering into the merger agreement and completing the transactions contemplated thereby, specifically including the acquisition of the Company’s Metro Business.

 

Yankee Metro Merger Sub, Inc. , which we refer to as Merger Sub, was formed by Metro Parent solely for the purpose of entering into the merger agreement and completing the transactions contemplated thereby, specifically including merging with and into the Company. Upon the consummation of the proposed merger, Merger Sub will cease to exist.

 

Cable Buyer, Metro Parent and Merger Sub are indirect wholly-owned subsidiaries of funds affiliated with ABRY Partners, a private equity fund sponsor, which we refer to as ABRY. Based in Boston, Massachusetts, ABRY is a media and communications focused private equity investment firm. Since 1989, ABRY has completed over $21.0 billion of leveraged transactions and other private equity and mezzanine investments, representing investments in more than 500 media and communications properties.

 

In this proxy statement, we refer to the Agreement and Plan of Merger, dated as of March 5, 2010, as it may be amended from time to time, among the Company, Cable Buyer, Metro Parent and Merger Sub, as the merger agreement, and the merger of Merger Sub with and into the Company as the merger.

 

 

We are furnishing this proxy statement to our stockholders as part of the solicitation of proxies by our Board of Directors for use at the special meeting.

 

Date, Time and Place

 

The special meeting of stockholders of the Company will be held at [          ] (Eastern time), on [          ] , 2010, at [          ] .

Purpose

 

At the special meeting, we will ask you to approve a proposal to adopt the merger agreement, pursuant to which Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation of the merger, but as a wholly-owned subsidiary of Metro Parent. If the merger is completed, each share of Company common stock will be converted into the right to receive $15.00 in cash, without interest.

 

At the closing, but immediately prior to the effective time of the merger, the merger agreement provides that the Company will transfer its Cable Business to Cable Buyer on the terms and conditions set forth in the merger agreement. As a result, following the consummation of the merger, the Company’s Cable Business will be owned by Cable Buyer and the Company’s Metro Business will be owned by Metro Parent, and each of Cable Buyer and Metro Parent will be controlled by ABRY and other co-investors.

 

You will also be asked to vote to approve any adjournment of the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

Record Date; Stockholders Entitled to Vote

 

You are entitled to vote at the special meeting if you owned shares of Company common stock as of the close of business on [          ] , 2010, the record date for the special meeting. As of the record date, there were [          ]  shares of Company common stock outstanding. You will have one vote on each matter submitted to a vote at the special meeting for each share of Company common stock that you owned as of the close of business on the record date.

 

Voting and Proxies

 

Stockholders of record can vote their shares of Company common stock at the special meeting in four ways:

 

(a)  By Proxy.   After reading the proxy materials, you can cause your shares to be voted by signing, dating and returning the enclosed proxy card. If you do this, the proxies will vote your shares of Company common stock in the manner you indicate. All properly executed proxy cards that we receive prior to the vote at the special meeting, and that are not revoked, will be voted in accordance with the instructions indicated on the proxy cards. If you sign, date and return but do not indicate instructions on the proxy card, your shares of Company common stock will be voted FOR the proposal to adopt the merger agreement and to approve the transactions contemplated thereby and FOR the proposal to adjourn the special meeting.

 

(b)  By Telephone.   After reading the proxy materials and with your proxy card and voting instruction form in front of you, you may call the toll-free number [          ] using a touch-tone telephone. You will be prompted to enter your control number from your proxy card and voting instruction form. This number will identify you and the Company. Then you can follow the simple instructions that will be given to you to record your proxy.

 

(c)  Over the Internet.   After reading the proxy materials and with your proxy card and voting instruction form in front of you, you may use your computer to access the Web site [          ] . You will be prompted to enter your control number from your proxy card and voting instruction form. This number will identify you and the Company. Then you can follow the simple instructions that will be given to you to record your proxy.

 

(d)  In Person.   You may attend the special meeting and cast your vote in person.

 

Brokers, banks and other nominees holding shares of Company common stock in “street name” may vote your shares of Company common stock on the adoption of the merger agreement and approval of the transactions contemplated thereby and adjournments of the special meeting, if necessary or appropriate, only if you provide instructions on how to vote. Brokers, banks and other nominees will provide you with directions

on how to instruct the broker, bank or other nominee to vote your shares of Company common stock, and you should carefully follow these instructions.

 

Revocation

 

Any proxy given by a Company stockholder, whether by mail, telephone or over the Internet, may be revoked at any time before it is voted at the special meeting by doing any of the following:

 

 

Quorum

 

A quorum of stockholders is necessary to hold the special meeting. Under our bylaws, the holders of a majority of the outstanding shares of Company common stock, present in person or by proxy, constitute a quorum. If you submit a properly executed proxy card, even if you abstain from voting, your shares of Company common stock will be counted for purposes of determining whether a quorum is present at the special meeting.

 

Vote Required

 

Approval of the proposal to adopt the merger agreement and to approve the transactions contemplated thereby requires the affirmative vote of holders of at least a majority of shares of Company common stock outstanding and entitled to vote at the special meeting.

 

Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires the affirmative vote of holders of a majority of the shares of Company common stock present in person or represented by proxy and entitled to vote on the matter at the special meeting, whether or not a quorum is present.

 

As of [          ] , 2010, the record date for the special meeting, the directors and executive officers of the Company held and were entitled to vote, in the aggregate, 607,417 shares of Company common stock, representing approximately 1.70% of the shares of Company common stock entitled to vote at the special meeting. The directors and executive officers have informed the Company that they currently intend to vote all of their shares of Company common stock FOR the proposal to adopt the merger agreement and to approve the transactions contemplated thereby and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies. As of the record date, there were [          ]  shares of Company common stock outstanding.

 

Effect of Abstentions and Broker Non-Votes on Voting

 

Abstentions and shares not in attendance and not voted at the special meeting will have the same effect as a vote AGAINST the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

Abstentions will have the same effect as a vote AGAINST the proposal to adjourn the special meeting. If you fail to submit a proxy or vote in person at the special meeting, the shares of common stock not voted will not be counted in respect of, and therefore will not have an effect on, the proposal to adjourn the special meeting.

 

Because banks, brokers and other nominees holding shares of Company common stock in “street name” may vote your shares of Company common stock on the adoption of the merger agreement and adjournments

of the special meeting, if necessary or appropriate, only if you provide instructions on how to vote, your failure to provide instructions will result in your shares not being present at the meeting and not being voted on either proposal. Consequently, there will not be any broker non-votes occurring in connection with either proposal at the special meeting.

 

It is very important that ALL of our stockholders vote their shares of Company common stock, so please promptly complete and return the enclosed proxy card (either by mail, telephone or over the Internet) or give voting instructions to your bank, broker or other nominee, as applicable.

 

Expenses of Proxy Solicitation

 

Our directors, officers and other employees may solicit proxies in person, by telephone, electronically, by mail or other means, but they will not be specifically compensated for these services. Brokers, banks and other persons will be reimbursed by us for expenses they incur in forwarding proxy materials to obtain voting instructions from beneficial stockholders. We have also hired Georgeson, Inc. to assist in the solicitation of proxies. The total cost of solicitation of proxies will be borne by us. For a description of the costs and expenses to us of soliciting proxies, see “The Special Meeting — Proposals to be Considered at the Special Meeting — Solicitation Costs” on page  [  ] .

 

Stockholders should not send in their stock certificates with their proxies.   A transmittal form with instructions for the surrender of certificates representing shares of Company common stock will be mailed to stockholders if the merger is completed.

 

 

The merger agreement provides that Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation of the merger, but as a wholly-owned subsidiary of Metro Parent. At the closing, but immediately prior to the effective time of the merger, the merger agreement provides that the Company will transfer its Cable Business to Cable Buyer on the terms and conditions set forth in the merger agreement. As a result, following the consummation of the merger, the Company’s Cable Business will be owned by Cable Buyer and the Company’s Metro Business will be owned by Metro Parent, and each of Cable Buyer and Metro Parent will be controlled by ABRY and other co-investors.

 

If the merger and the other transactions contemplated by the merger agreement are consummated, each share of Company common stock (including restricted shares of Company common stock, whether vested or unvested) that is issued and outstanding immediately prior to the effective time of the merger (other than shares held by Cable Buyer, Metro Parent, Merger Sub, the Company or any of its subsidiaries or by stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) will be converted into the right to receive $15.00 in cash, without interest, which amount we refer to as the merger consideration, less any applicable withholding taxes.

 

If the merger is consummated, each Company stock option (whether vested or unvested) that is outstanding immediately prior to the effective time of the merger will be converted into the right to receive, for each share underlying such option, a cash payment equal to the excess, if any, of the merger consideration over the exercise price per share of such option, without interest, less any applicable withholding taxes. If the merger is consummated, each Company restricted stock unit (whether vested or unvested) that is outstanding immediately prior to the effective time of the merger will be converted into the right to receive a cash payment equal to the merger consideration, without interest, less any applicable withholding taxes.

 

If the merger is consummated, each warrant to purchase shares of Company common stock that is issued and outstanding immediately prior to the effective time of the merger will become exercisable in accordance with its terms for an amount in cash equal to $15.00 per share of Company common stock covered by such warrant, without interest. As a result, following the effective time of the merger, if any warrant holder validly exercises its warrants, including the payment of the $16.72 per share exercise price therefor, such warrant holder would be entitled to receive an amount in cash equal to $15.00 per share of Company common stock covered by such validly exercised warrants, without interest.

As a result of the merger, the Company will cease to be an independent, publicly traded company. Following consummation of the merger, you will not own any shares of the capital stock of the surviving corporation of the merger.

 

The rights and obligations of the parties to the merger agreement are governed by the specific terms and conditions of the merger agreement and not by any summary or other information in this proxy statement. Therefore, the information in this proxy statement regarding the merger agreement and the merger is qualified in its entirety by reference to the merger agreement, a copy of which is attached as Annex A to this proxy statement. We encourage you to read the merger agreement carefully and in its entirety because it is the principal legal agreement that governs the merger.

 

 

The Board of Directors of the Company, which we refer to as the Board, and the Special Committee of the Board comprised entirely of independent directors that was established to undertake a review of the Company’s strategic alternatives and that negotiated the merger agreement with ABRY, which we refer to as the Special Committee, have carefully considered the terms and conditions of the proposed merger. Based on such consideration, and in the case of the Board based on its adoption of the unanimous recommendation of the Special Committee, each of the Board and the Special Committee has unanimously determined that the merger is fair to and in the best interests of the stockholders of the Company and has unanimously approved and declared advisable the merger agreement.

 

Each of the Board and the Special Committee considered many factors in reaching its conclusion, including, without limitation, the value that stockholders would realize in the merger compared to the value likely to be realized by stockholders in the event the Company remained independent, the current and historical market prices of shares of Company common stock relative to the $15.00 per share merger consideration, and the fact that the merger consideration consists entirely of cash. For a discussion of other material factors considered by the Special Committee and the Board, see “The Merger — Reasons for the Merger” beginning on page  [  ] .

 

When considering the recommendation of the Board and the Special Committee with respect to the adoption of the merger agreement and the approval of the transactions contemplated thereby, you should be aware that some of our directors and executive officers have interests in the merger that may be different from, or in addition to, their interests as stockholders and the interests of stockholders generally. The Board and the Special Committee were aware of these interests during their respective deliberations on the merits of the merger and in deciding to recommend that you vote for the adoption of the merger agreement and approval of the transactions contemplated thereby at the special meeting. For a more detailed discussion of these interests, see “The Merger — Interests of Company Directors and Executive Officers in the Merger” beginning on page  [  ] .

 

The Board unanimously recommends that you vote FOR approval of the proposal to adopt the merger agreement and to approve the transactions contemplated thereby and FOR approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies.

 

 

In connection with the merger, Deutsche Bank Securities Inc., which we refer to as Deutsche Bank, financial advisor to the Special Committee, delivered to the Board and the Special Committee an oral opinion on March 4, 2010, subsequently confirmed in writing to the Board and the Special Committee on March 5, 2010, to the effect that, as of the date of such opinion, and based upon and subject to the assumptions, limitations, qualifications and conditions described in Deutsche Bank’s opinion, the per share merger consideration to be paid to holders of Company common stock (other than Cable Buyer, Metro Parent, Merger Sub and their affiliates) in the merger was fair, from a financial point of view, to such holders. The full text of the written opinion, dated March 5, 2010, of Deutsche Bank, which describes, among other things, the assumptions made, matters considered and limitations, qualifications and conditions of the review undertaken in rendering its opinion, is attached as Annex B to this proxy statement and is incorporated by reference herein in its entirety.

We encourage you to read the opinion described above carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations, qualifications and conditions on the scope of review undertaken in connection with such opinion. The opinion of Deutsche Bank was provided to the Board and the Special Committee in connection with the Board’s and the Special Committee’s evaluation of the merger consideration from a financial point of view, and Deutsche Bank’s opinion does not address any other aspect of the merger. In addition, the opinion described above does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to the merger or any other matter relating thereto.

 

•  Financing of the Merger (Page [  ])

 

Metro Parent and Cable Buyer have obtained equity and debt financing commitments for the transactions contemplated by the merger agreement, the aggregate proceeds of which are expected to be sufficient for Metro Parent and Cable Buyer to pay the aggregate merger consideration, the amounts payable with respect to Company stock options, Company restricted shares and Company restricted stock units and related fees and expenses of the transactions contemplated by the merger agreement and to repay certain indebtedness of the Company. An investment fund affiliated with ABRY, which we refer to as the sponsor, has committed to cause the purchase of equity interests in Cable Buyer and Metro Parent. In addition, Metro Parent and Cable Buyer have received debt financing commitment letters from affiliates of SunTrust Bank, General Electric Capital Corporation and Société Générale. The consummation of the merger is not subject to any financing conditions (although funding of the equity and debt financing is subject to the satisfaction of the conditions set forth in the commitment letters under which the financing will be provided). See “The Merger — Financing of the Merger” beginning on page  [  ] and “The Merger Agreement — Financing Covenant; Company Cooperation” beginning on page  [  ] .

 

•  Limited Guarantee (Page [  ])

 

In connection with the execution of the merger agreement, the sponsor delivered to the Company a limited guarantee pursuant to which the sponsor has guaranteed the payment of certain payment obligations that may be owed by Metro Parent and/or Cable Buyer pursuant to the merger agreement, including the payment of any reverse termination fee that may become payable by Metro Parent and Cable Buyer following a termination of the merger agreement by the Company in specified circumstances. See “The Merger Agreement — Termination Fees and Expenses” beginning on Page  [  ] .

 

•  Alternative Proposals (Page [  ])

 

The merger agreement provides for a post-signing “go-shop” period. Specifically, during the period beginning on March 5, 2010 and continuing until 12:01 a.m. (Eastern time) on April 15, 2010, the Company may initiate, solicit and/or encourage alternative acquisition proposals from third parties, provide non-public information and participate in discussions and negotiate with third parties with respect to alternative acquisition proposals.

 

Starting on April 15, 2010, the Company will be prohibited from soliciting alternative acquisition proposals from third parties and/or providing information to or engaging in discussions with third parties regarding alternative acquisition proposals. These “no-shop” restrictions, however, are subject to customary “fiduciary-out” provisions which allow the Company under certain circumstances, prior to the time that the Company stockholders adopt the merger agreement, to provide information to and participate in discussions with third parties with respect to any unsolicited alternative acquisition proposal that the Board or the Special Committee has determined is or could reasonably be expected to, if consummated, result in a transaction more favorable to the Company stockholders from a financial point of view than the transactions contemplated by the merger agreement, and that not taking such action would be inconsistent with its fiduciary duties.

 

•  Termination of the Merger Agreement and Termination Fees (Pages [  ] and [  ])

 

The merger agreement contains certain termination rights for the Company and Cable Buyer and Metro Parent. Upon termination of the merger agreement under specified circumstances, including if the Company

terminates the merger agreement in order to enter into an alternative acquisition agreement with respect to a superior proposal, and otherwise complies with certain terms of the merger agreement, the Company may be required to pay Cable Buyer and Metro Parent a termination fee of $17.5 million. However, if the Company terminates the merger agreement in order to enter into an alternative acquisition agreement with respect to a superior proposal prior to April 15, 2010, the Company would instead be required to pay a reduced termination fee of $10.0 million.

 

In addition, in the event that the Company’s stockholders do not vote to adopt the merger agreement at the special meeting or between March 5, 2010 and the consummation of the merger there occurs any material adverse effect with respect to the Company and its subsidiaries (taken as a whole) or either the Cable Business or the Metro Business (each taken separately), then Cable Buyer and Metro Parent would be entitled to terminate the merger agreement and receive from the Company reimbursement of up to $6.0 million in out-of-pocket costs and expenses relating to the merger agreement.

 

In certain limited circumstances, the merger agreement provides for Cable Buyer and Metro Parent to pay to the Company a reverse termination fee of $30.0 million upon valid termination of the merger agreement by the Company.

 

•  Conditions to the Merger (Page [  ])

 

Consummation of the merger is subject to customary conditions, including, the following material conditions: (i) the approval by the holders of a majority of the outstanding shares of Company common stock entitled to vote on the merger; (ii) the absence of any law, order or injunction prohibiting the consummation of the merger or the other transactions contemplated by the merger agreement; (iii) the expiration or termination of the applicable Hart-Scott-Rodino Act waiting period; (iv) the receipt of specified Federal Communications Commission, state public utility commission and local franchising authority regulatory approvals; and (v) the absence of any material adverse effect on the Company and its subsidiaries (taken as a whole) or either the Cable Business or the Metro Business (each taken separately).

 

In addition, each party’s obligation to consummate the merger is subject to certain other conditions, including the accuracy of the other party’s representations and warranties (subject to customary qualifications) and the other party’s material compliance with its covenants and agreements contained in the merger agreement. We can offer no assurance that all of the conditions will be satisfied or waived or that the merger will occur.

 

•  Governmental and Regulatory Matters (Page [  ])

 

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, and the rules promulgated thereunder by the Federal Trade Commission, which we refer to as the FTC, the merger may not be completed until notification and report forms have been filed with the FTC and the Antitrust Division of the Department of Justice, which we refer to as the DOJ, and the applicable waiting period has expired or been terminated. The Company, Cable Buyer and Metro Parent filed their respective notification and report forms under the HSR Act with the FTC and the Antitrust Division of the DOJ on March 19, 2010.

 

In addition, the consummation of the transactions contemplated by the merger agreement is subject to the receipt by the parties to the merger agreement of specified Federal Communications Commission, state public utility commission and local franchising authority regulatory approvals, including approvals with respect to specified franchises and other agreements (together with any franchises or other agreements for which no approvals are required) as would permit Cable Buyer and Metro Parent to provide video programming service to 92% or more of the Company’s video programming subscribers immediately following the effective time of the merger. The Company, Cable Buyer and Metro Parent have applied, or are applying, for regulatory approvals from the Federal Communications Commission, state public utility commissions and local franchising authorities in connection with the transactions contemplated by the merger agreement.

 

•  Certain United States Federal Income Tax Consequences (Page [  ])

 

The exchange of shares of Company common stock for cash pursuant to the merger agreement generally will be a taxable transaction for U.S. federal income tax purposes. Stockholders who exchange their shares of

Company common stock in the merger will generally recognize gain or loss in an amount equal to the difference, if any, between the cash received in the merger and the adjusted tax basis in their shares of Company common stock.

 

You should read “The Merger — Certain United States Federal Income Tax Consequences” beginning on page  [  ] for a more complete discussion of certain United States federal income tax consequences of the merger. Tax matters can be complicated, and the tax consequences of the merger to you will depend on your particular circumstances. We urge you to consult your own tax advisor to fully understand the tax consequences of the merger to you (including the application and effect of any state, local, or foreign income and other tax laws).

 

•  Market Price of the Company Common Stock (Page [  ])

 

The closing sale price of the Company common stock on the NASDAQ Stock Market on March 4, 2010, the last trading day prior to the public announcement of the proposed merger, was $12.26 per share. On [          ] , 2010, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for Company common stock on the NASDAQ Stock Market was $ [  ] per share. You are encouraged to obtain current market quotations for common stock in connection with voting your shares of Company common stock.

 

•  Appraisal Rights of Company Stockholders (Page [  ])

 

Holders of shares of Company common stock who do not wish to accept the consideration payable pursuant to the merger agreement may seek, under Section 262 of the General Corporation Law of the State of Delaware, which we refer to as the DGCL, judicial appraisal of the fair value of their shares by the Delaware Court of Chancery. This value could be more than, less than, or the same as the merger consideration for shares of Company common stock. Failure to strictly comply with all procedures required by Section 262 of the DGCL will result in a loss of the right to appraisal, in which event, each share held by the Company stockholder will be deemed to have been converted into the right to receive the $15.00 merger consideration, payable in cash, without interest, pursuant to the merger agreement.

 

Merely voting against the adoption of the merger agreement will not preserve your right to appraisal under the DGCL. Also, because a submitted proxy not marked “against” or “abstain” will be voted “for” the proposal to adopt the merger agreement and to approve the transactions contemplated thereby, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights. If you hold shares in the name of a bank, broker or other nominee, you must cause your bank, broker or other nominee to take the steps necessary to enable you to demand appraisal for your shares.

 

Annex C to this proxy statement contains the full text of Section 262 of the DGCL, which describes in detail your appraisal rights. We encourage you to read these provisions carefully and in their entirety.

 

•  Delisting and Deregistration of the Company Common Stock (Page [  ])

 

If the merger is consummated, the Company common stock will be delisted from the NASDAQ Stock Market and deregistered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. As a result, we would no longer file periodic reports with the Securities and Exchange Commission on account of the Company common stock.

 

•  Certain Litigation Relating to the Merger (Page [  ])

 

In connection with the merger, two putative stockholder class action complaints have been filed in the Court of Chancery in the State of Delaware and the United States District Court for the Eastern District of Virginia. The Company intends to defend these lawsuits vigorously.

 

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement, which you should read carefully. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on Page [  ].

 

The Merger

 

 

 

Other Special Meeting Proposals

 

 

 

Procedures

 

 

 

This proxy statement, and the documents to which we refer you in this proxy statement, as well as information included in other statements made or to be made by us, contain statements that, in our opinion, may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “project,” “estimate,” “will,” “may,” “should,” “future,” “predicts,” “potential,” “continue” and similar expressions identify these forward-looking statements, which appear in a number of places in this proxy statement (and the documents to which we refer you in this proxy statement) and include, but are not limited to, all statements relating directly or indirectly to the timing or likelihood of completing the merger to which this proxy statement relates, plans for future growth and other business development activities as well as capital expenditures, financing sources, dividends and the effects of regulation and competition and all other statements regarding our intent, plans, beliefs or expectations or those of our directors or officers. Investors are cautioned that such forward-looking statements are not assurances for future performance or events and involve risks and uncertainties that could cause actual results and developments to differ materially from those covered in such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the SEC, including our most recent filings on Forms 10-Q and 10-K, factors and matters contained or incorporated by reference in this document, and the following factors:

 

 

The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf.

 

RCN Corporation, a Delaware corporation, which we refer to as the Company, is a competitive broadband services provider delivering all-digital and high definition video, high-speed internet and premium voice services to residential and small and medium business customers under the brand names of RCN and RCN Business Services, respectively. In addition, through our RCN Metro Optical Networks business unit, we deliver fiber-based high-capacity data transport services to large commercial customers, primarily large enterprises and carriers, targeting the metropolitan central business districts in the Company’s geographic markets. Our primary service areas include Washington, D.C., Philadelphia, Lehigh Valley (PA), New York City, Boston and Chicago. Our principal executive offices are located at 196 Van Buren Street, Herndon, Virginia, 20170, and our telephone number is (703) 434-8200.

 

Yankee Cable Acquisition, LLC, a Delaware limited liability company, which we refer to as Cable Buyer, was formed solely for the purpose of entering into the merger agreement and completing the transactions contemplated thereby, specifically including acquiring the Company’s Cable Business on the terms and conditions set forth in the merger agreement. Cable Buyer has not conducted any unrelated activities since its organization. Cable Buyer’s principal executive offices are located c/o ABRY Partners, LLC at 111 Huntington Avenue, Boston, Massachusetts 02199, and its telephone number is (617) 859-2959.

 

Yankee Metro Parent, Inc., a Delaware corporation, which we refer to as Metro Parent, was formed solely for the purpose of entering into the merger agreement and completing the transactions contemplated thereby, specifically including acquiring the Company’s Metro Business on the terms and conditions set forth in the merger agreement. Metro Parent has not conducted any unrelated activities since its organization. Metro Parent’s principal executive offices are located c/o ABRY Partners, LLC at 111 Huntington Avenue, Boston, Massachusetts 02199, and its telephone number is (617) 859-2959.

 

Yankee Metro Merger Sub, Inc., a Delaware corporation, which we refer to as Merger Sub, was formed solely for the purpose of entering into the merger agreement and completing the transactions contemplated thereby, specifically including effecting the merger with the Company contemplated by the merger agreement on the terms and conditions set forth therein. Merger Sub has not conducted any unrelated activities since its organization. Upon the consummation of the proposed merger, Merger Sub will cease to exist and the Company will continue as the surviving corporation of the merger, but as a wholly-owned subsidiary of Metro Parent. Merger Sub’s principal executive offices are located c/o ABRY Partners, LLC at 111 Huntington Avenue, Boston, Massachusetts 02199, and its telephone number is (617) 859-2959.

 

Cable Buyer, Metro Parent and Merger Sub are indirect wholly-owned subsidiaries of funds affiliated with ABRY Partners, a private equity fund sponsor, which we refer to as ABRY. Based in Boston, Massachusetts, ABRY is a media and communications focused private equity investment firm. Since 1989, ABRY has completed over $21.0 billion of leveraged transactions and other private equity and mezzanine investments, representing investments in more than 500 media and communications properties.

 

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by the Board for use at the special meeting to be held at [          ] (Eastern time), on [          ], 2010, at [          ], or any postponement or adjournment thereof.

 

The record date for the special meeting is [          ] , 2010. You are entitled to receive notice of, and to vote at, the special meeting if you owned shares of Company common stock at the close of business on the record date. Stockholders will have one vote for the merger and any other matter properly brought before the special meeting for each share of Company common stock they owned at the close of business on the record date. On the record date, there were [          ]  shares of Company common stock outstanding.

 

A quorum of stockholders is necessary to hold the special meeting. Under our bylaws, the holders of a majority of the outstanding shares of Company common stock, present in person or by proxy, constitute a quorum. If you submit a properly executed proxy card, even if you abstain from voting, your shares of Company common stock will be counted for purposes of determining whether a quorum is present at the special meeting.

 

Once a share of Company common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed to solicit additional proxies.

 

Only stockholders of record or their duly authorized proxies have the right to attend the special meeting. To gain admittance, you must present valid photo identification, such as a driver’s license or passport. If your shares of Company common stock are held through a bank, broker or other nominee, please bring to the special meeting a copy of your brokerage statement evidencing your beneficial ownership of Company common stock as of the record date and valid photo identification. If you are the representative of a corporate or institutional stockholder, you must present valid photo identification along with proof that you are the representative of such stockholder.

 

PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING

 

 

At the special meeting, our stockholders will consider and vote on a proposal to adopt the merger agreement and to approve the transactions contemplated thereby. You should carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you should read in its entirety the merger agreement, which is attached as Annex A to this proxy statement.

 

The Board unanimously recommends that stockholders vote FOR the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

If you return a properly executed proxy card but do not indicate instructions on your proxy card, your shares of Company common stock represented by such proxy card will be voted FOR the adoption of the merger agreement and approval of the transactions contemplated thereby.

 

Stockholders will be asked to vote on a proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

The Board unanimously recommends that stockholders vote FOR the proposal to adjourn the special meeting.

 

If you return a properly executed proxy card but do not indicate instructions on your proxy card, your shares of Company common stock represented by such proxy card will be voted FOR a proposal to adjourn the special meeting.

 

Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to adopt the merger agreement and to approve the transactions contemplated thereby. Other than an announcement to be made at the special meeting of the time, date and place of an adjourned meeting, any adjournment may be made without notice (if the adjournment is not for more than 30 days and a new record date has not been fixed). Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow the Company’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting as adjourned or postponed.

 

Adoption of the merger agreement and approval of the transactions contemplated thereby requires the affirmative vote of the holders of at least a majority of shares of Company common stock outstanding and entitled to vote at the special meeting. All of our directors and executive officers, who collectively held and were entitled to vote approximately 1.70% of the shares of Company common stock entitled to vote at the special meeting as of [          ], 2010, the record date for the special meeting, have informed us that they currently intend to vote all of their shares of Company common stock FOR the adoption of the merger agreement and approval of the transactions contemplated thereby. Consequently, approximately 48.30% of our shares of common stock, or approximately [          ]  shares of Company common stock, not held by our directors or executive officers must be voted in favor of adoption of the merger agreement and approval of the transactions contemplated thereby for this proposal to be approved.

 

Abstentions and shares not in attendance at the special meeting will have the same effect as a vote AGAINST the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

Approval of the proposal to adjourn the special meeting, if necessary or appropriate, for the purpose of soliciting additional proxies requires the affirmative vote of holders of a majority of the shares of Company common stock present in person or represented by proxy and entitled to vote on the matter at the special meeting, whether or not a quorum is present.

 

Abstentions will have the same effect as a vote AGAINST the proposal to adjourn the special meeting. If you fail to submit a proxy or vote in person at the special meeting, the shares of Company common stock not voted will not be counted in respect of, and therefore will not have an effect on, the proposal to adjourn the special meeting.

 

Because brokers, banks and other nominees holding shares of Company common stock in “street name” may vote your shares of Company common stock on the adoption of the merger agreement and approval of the transactions contemplated thereby and adjournments of the special meeting, if necessary or appropriate, only if you provide instructions on how to vote, your failure to provide instructions will result in your shares

not being present at the meeting and not being voted on either proposal. Consequently, there will not be any broker non-votes occurring in connection with either proposal at the special meeting.

 

Stockholders of record who hold shares of Company common stock can vote shares on matters presented at the special meeting in four ways:

 

(a)  By Proxy.   After reading the proxy materials, you can cause your shares to be voted by signing, dating and returning the enclosed proxy card. If you do this, the proxies will vote your shares of Company common stock in the manner you indicate. All properly executed proxy cards that we receive prior to the vote at the special meeting, and that are not revoked, will be voted in accordance with the instructions indicated on the proxy cards. If you sign, date and return but do not indicate instructions on the proxy card, your shares of Company common stock will be voted FOR the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

(b)  By Telephone.   After reading the proxy materials and with your proxy card and voting instruction form in front of you, you may call the toll-free number [          ] using a touch-tone telephone. You will be prompted to enter your control number from your proxy card and voting instruction form. This number will identify you and the Company. Then you can follow the simple instructions that will be given to you to record your proxy.

 

(c)  Over the Internet.   After reading the proxy materials and with your proxy card and voting instruction form in front of you, you may use your computer to access the Web site [          ] . You will be prompted to enter your control number from your proxy card and voting instruction form. This number will identify you and the Company. Then you can follow the simple instructions that will be given to you to record your proxy.

 

(d)  In Person.   You may attend the special meeting and cast your vote in person.

 

The Internet and telephone voting procedures have been set up for your convenience and have been designed to authenticate your identity, allow you to give voting instructions and confirm that those instructions have been recorded properly.

 

Brokers, banks or other nominees holding shares of Company common stock in “street name” may vote your shares of Company common stock on the adoption of the merger agreement and approval of the transactions contemplated thereby and adjournments of the special meeting, if necessary or appropriate, only if you provide instructions on how to vote. Brokers, banks and other nominees will provide you with directions on how to instruct the broker, bank or other nominee to vote your shares of Company common stock, and you should carefully follow these instructions.

 

Any proxy given by a Company stockholder, whether by mail, telephone or over the Internet, may be revoked at any time before it is voted at the special meeting by doing any of the following:

 

 

We are soliciting the enclosed proxy card on behalf of our Board. In addition to solicitation by mail, our directors, officers and employees may solicit proxies in person, by telephone or by electronic means. These persons will not be specifically compensated for doing this.

 

We have retained Georgeson to assist in the solicitation process. We will pay Georgeson a fee of $15,000 for its services plus reimbursement of its out-of-pocket costs and expenses and a per call charge of $5.00. We also have agreed to indemnify Georgeson against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

 

We will ask banks, brokers and other nominees to forward our proxy solicitation materials to the beneficial owners of shares of Company common stock held of record by such nominee holders. We will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

 

If you have any questions about the merger or how to vote or direct a vote in respect of your shares of Company common stock, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, you may contact our Investor Relations Department by phone at (703) 434-8430 or by submitting a question to Georgeson, our proxy solicitor at: [          ] .

 

Stockholders should not send in their stock certificates with their proxy cards. If the merger is completed, you will receive a separate letter of transmittal with instructions for the surrender of your stock certificates. Stockholders can expect to receive payment following receipt by the paying agent of a completed and duly executed letter of transmittal and the certificate(s) representing the shares of Company common stock owned by such stockholder.

 

If your shares of Company common stock are held in “street name” by your bank, broker or other nominee, you will receive instructions from your bank, broker or other nominee as to how to effect the surrender of your “street name” shares of Company common stock in exchange for the merger consideration.

 

The discussion in this proxy statement of the merger and the principal terms of the merger agreement is subject to, and is qualified in its entirety by reference to, the merger agreement, a copy of which is attached to this proxy statement as Annex A . You should read the entire merger agreement carefully.

 

The Board of Directors of the Company, which we refer to as the Board, as part of its ongoing oversight and planning, regularly reviews and evaluates the Company’s business strategy and strategic alternatives with the goal of enhancing stockholder value. As part of these reviews and evaluations, the Board and our management team have periodically considered and received advice from outside financial and legal advisors with respect to possible strategic alternatives. Over the past twelve months, (i) ABRY, (ii) a private equity firm, which we refer to as Bidder A, (iii) a private equity firm, which we refer to as Bidder B, and (iv) a bidder consortium consisting of two private equity firms (including Bidder A) and a company engaged in the telecommunications industry, which bidder consortium we refer to collectively as Bidder C, approached members of our Board or members of our management team about a possible acquisition of the Company. In addition, we have engaged in discussions with fourteen other parties, including six private equity firms and eight companies engaged in the cable and/or telecommunications industries, in connection with various possible strategic alternatives involving the Company. Except as described below, none of these discussions proceeded past preliminary conversations nor resulted in an indication of interest that met the Company’s price expectations.

 

Beginning in April 2009, we engaged in preliminary discussions with a private equity firm, which we refer to as Private Equity Firm X, which approached the Company regarding a possible acquisition of the Company’s Pennsylvania cable operations. Over the following several months, Private Equity Firm X conducted preliminary due diligence and, on June 16, 2009, requested to add ABRY as a possible equity partner for this potential transaction. The Company approved ABRY as an equity partner and authorized ABRY to conduct preliminary due diligence after ABRY agreed to execute a confidentiality and standstill agreement. After several preliminary due diligence meetings with Company management, in late July 2009, Private Equity Firm X indicated that it would not be able to meet the Company’s price expectation with respect to the proposed acquisition of the Company’s Pennsylvania cable operations. While no further significant negotiations ensued among the Company, Private Equity Firm X and/or ABRY with respect to this potential transaction, Private Equity Firm X and ABRY indicated to the Company that they might be interested in partnering with respect to a potential acquisition of the entire Company. In response, the Company provided Private Equity Firm X and ABRY with limited non-public historical financial information regarding the entire Company.

 

On April 29, 2009, the Company entered into a confidentiality agreement with a private equity firm, which we refer to as Private Equity Firm Y, with respect to a potential acquisition of the Company’s Pennsylvania cable operations. On May 13, 2009, representatives of Company management and Private Equity Firm Y met to discuss the Company’s Pennsylvania cable operations and to address Private Equity Firm Y’s preliminary due diligence inquiries related to this potential transaction. Shortly thereafter, Company management provided Private Equity Firm Y with limited non-public business and financial information regarding the Company’s Pennsylvania cable operations in order to permit Private Equity Firm Y to conduct preliminary due diligence with respect to this potential transaction.

 

On July 23, 2009, representatives of our management team met with Bidder B to discuss possible strategic alternatives involving the Company. In early August 2009, the Company provided Bidder B with limited non-public historical financial information regarding the Company to allow Bidder B to commence preliminary due diligence. Throughout the remainder of August 2009, the Company responded to additional due diligence inquiries from Bidder B, and on September 18, 2009, representatives of the Company and Bidder B held a conference call to further discuss the limited non-public financial information that the Company had previously provided to Bidder B.

 

On September 25, 2009, members of our management team met with representatives of Bidder A to discuss possible strategic alternatives involving the Company. Following this meeting, the Company provided

Bidder A with limited non-public historical financial information to allow Bidder A to commence preliminary due diligence.

 

On September 29, 2009, the Company received a preliminary, non-binding letter of intent from Private Equity Firm Y with respect to a potential acquisition of the Company’s Pennsylvania cable operations for a purchase price of approximately $410 million. Following further discussions with Company management indicating that the proposed purchase price was insufficient, Private Equity Firm Y provided the Company with a revised preliminary, non-binding letter of intent that included an increased purchase price of approximately $420 million.

 

On October 16, 2009, in response to an inquiry and request from Private Equity Firm X, representatives of Company management met with representatives of Private Equity Firm X and ABRY to discuss a possible sale of the entire Company. Over the course of the following several weeks, the Company provided limited due diligence information to Private Equity Firm X and ABRY in response to their preliminary requests.

 

Also on October 16, 2009, Bidder A provided the Company with a written preliminary indication of interest in acquiring all of the outstanding capital stock of the Company for per share consideration between $11.50 and $12.00.

 

On October 19, 2009, representatives of Company management delivered a presentation relating to the Company’s Pennsylvania cable operations to representatives of Private Equity Firm Y and addressed additional due diligence questions and inquiries posed by Private Equity Firm Y.

 

On October 26, 2009, the Board convened to discuss various matters, including the written preliminary indication of interest submitted by Bidder A; the interest expressed by each of Bidder B and Private Equity Firm X and ABRY in pursuing a potential acquisition of the entire Company; and the preliminary, non-binding letter of intent submitted by Private Equity Firm Y relating to a potential sale of the Company’s Pennsylvania cable operations. Following a discussion, the Board instructed Company management to reject Bidder A’s written preliminary indication of interest, as it did not meet the Company’s price expectations, but to continue to engage in dialogue with each of Bidder A, Bidder B, Private Equity Firm X and ABRY regarding a potential sale of the Company at a higher price per share and to continue to engage in dialogue with Private Equity Firm Y regarding a possible sale of the Company’s Pennsylvania cable operations.

 

On November 4, 2009, Private Equity Firm Y indicated to the Company that it was no longer willing to offer $420 million to purchase the Company’s Pennsylvania cable operations, but instead was reducing its preliminary offer to $390 million.

 

On November 6, 2009, following further discussions with Company management and Lee S. Hillman, the Chairman of our Board, Bidder A provided the Company with a revised written preliminary indication of interest in acquiring all of the outstanding capital stock of the Company at a price per share of $15.00.

 

Separately, on November 9, 2009, Bidder B provided the Company with a written preliminary indication of interest in acquiring all of the outstanding capital stock of the Company at a price per share between $12.00 and $14.00.

 

On November 9, 2009, the Board convened a special meeting to discuss the preliminary indications of interest submitted by each of Bidder A and Bidder B and the potential sale of the Company’s Pennsylvania cable operations to Private Equity Firm Y. The Board discussed, among other things, valuation scenarios involving the Company on a stand alone basis as well as in connection with a possible sale of the Company or one or more of its business units (including the Company’s Pennsylvania cable operations) to a third party acquirer, the recent performance of the Company common stock and analyst research and coverage of the Company common stock. The Board agreed that it would not be in the best interests of the Company to actively solicit offers in connection with a possible sale of the Company in part due to the potential negative effects and disruption associated with a broad sale process, but that it would be willing to consider indications of interest submitted by third parties and, depending upon the terms of such indications of interest, authorize third parties to conduct due diligence relating to a potential acquisition of the Company or one or more of its business units. In particular, the Board discussed maintaining the ability to actively solicit alternative

acquisition proposals for a sale of the Company pursuant to a so-called “go-shop” provision for a period of time following the execution of any definitive agreement relating to an acquisition of the entire Company.

 

The Board also discussed the formation of a Special Committee to review any strategic alternatives available to the Company, including those described above, and agreed to form such a Special Committee subject to the execution of a unanimous written consent of the members of the Board delegating to the Special Committee the authority to review and consider any such strategic alternatives. The Board instructed Company management to continue to engage in discussions with each of Bidder A and Bidder B regarding a potential acquisition of the entire Company, but to reject the preliminary indication of interest submitted by Bidder B. The Board also instructed Company management to continue to engage in discussions with Private Equity Firm Y regarding a potential sale of the Company’s Pennsylvania cable operations.

 

On November 10, 2009, representatives of Company management met with representatives of Bidder A to provide a due diligence presentation relating to the Company’s Metro Business and to discuss various of Bidder A’s due diligence questions and inquiries relating to the Metro Business.

 

On November 11, 2009, representatives of Company management, Private Equity Firm X and ABRY met to engage in further discussions regarding a possible sale of the Company. Shortly following this meeting, Private Equity Firm X informed the Company that it was no longer interested in pursuing an acquisition of the Company. However, ABRY confirmed that it was still interested in pursuing an acquisition of the Company and that it would be willing to proceed without the involvement of Private Equity Firm X.

 

On November 12, 2009, we entered into a confidentiality agreement with a company engaged in the cable industry, which we refer to as Company 1, with respect to a possible acquisition by Company 1 of the Company’s Chicago cable operations. Over the following two months, we engaged in discussions with Company 1 regarding the potential terms of such a transaction and provided Company 1 with due diligence materials relating to our Chicago cable operations, including historical financial information and operating metrics for our Chicago cable operations.

 

On November 16, 2009, Company management met with representatives of Bidder A to provide a due diligence presentation relating to the Company’s Cable Business and to discuss various of Bidder A’s due diligence questions and inquiries relating to the Cable Business.

 

On November 18, 2009, the Board unanimously resolved by written consent to form a Special Committee of the Board, which we refer to as the Special Committee, to undertake a review of the Company’s strategic alternatives. The members of the Board appointed to the Special Committee consisted of Kurt M. Cellar, Benjamin C. Duster, IV, Lee S. Hillman and Daniel Tseung, each of whom the Board determined to be independent and disinterested in the strategic alternatives under consideration. The Board delegated to the Special Committee the full power and authority to negotiate, consider and evaluate any potential strategic transactions involving the Company and its various subsidiaries and businesses and to make a recommendation to the Board with respect to, among other things, the advisability and fairness of any such strategic transaction. The Board also authorized the Special Committee to select, retain and terminate, at the Company’s expense, any financial or legal advisors, and any other consultants or experts, that the Special Committee might determine to be necessary or appropriate.

 

On November 19, 2009, ABRY provided the Company with a written preliminary indication of interest in acquiring all of the outstanding capital stock of the Company at a price per share of $15.00.

 

On November 23, 2009, the Special Committee held its initial meeting, at which the Special Committee’s legal advisor, Jenner & Block LLP, described the rationale underlying the formation of the Special Committee, reviewed the delegation of authority from the Board to the Special Committee with respect to strategic alternatives involving the Company and discussed the fiduciary duties of the members of the Special Committee with respect to such strategic alternatives. The Special Committee unanimously elected Mr. Hillman as the Chairman of the Special Committee. The Special Committee discussed the engagement of legal and financial advisors, and unanimously resolved to engage Jenner & Block LLP as its legal advisor and to authorize the engagement of Deutsche Bank Securities Inc. as its financial advisor, subject to the execution of an engagement letter with Deutsche Bank. The Special Committee also discussed the engagement of Waller Capital as a co-financial advisor (with Deutsche Bank) to the Special Committee in connection with a potential transaction, particularly with respect to the potential solicitation of alternative acquisition proposals in the

event that the Company entered into a definitive acquisition agreement that included a “go-shop” provision permitting the Company to actively solicit alternative acquisition proposals.

 

The Special Committee also noted that, in view of the interest expressed by Bidder A, Bidder B and ABRY in a potential acquisition of the Company, the management of the Company should be instructed to abstain from engaging in discussions with potential acquirers regarding any potential equity or employment arrangements unless specifically authorized to do so by the Special Committee. The Special Committee authorized and instructed Company management to permit Bidder A, Bidder B and ABRY to conduct due diligence with respect to a possible acquisition of the Company and authorized Jenner & Block to prepare a draft merger agreement relating to a potential acquisition of the Company.

 

On November 30, 2009, Company management met with members of Bidder A’s investment committee to discuss a potential acquisition of the Company by Bidder A and addressed various of their questions and inquiries relating to a potential acquisition of the Company. On December 1, 2009, Company management also met with Bidder A’s potential lenders in connection with a potential acquisition of the Company and addressed various of their due diligence questions and inquiries regarding the Company.

 

On December 2, 2009, the full Board convened to discuss, among other things, recent developments with respect to the strategic transactions under consideration by the Company described above, including the potential transactions being considered with each of Bidder A, Bidder B and ABRY and the potential divestitures of the Company’s Pennsylvania and Chicago cable operations. Mr. Hillman, as Chairman of the Special Committee, provided the members of the Board with an update regarding the status of the due diligence efforts being undertaken by each of Bidder A, Bidder B and ABRY. In addition, representatives of Jenner & Block discussed with the members of the Board their fiduciary duties with respect to a potential sale of the Company.

 

On December 3, 2009, representatives of Company management met with ABRY to deliver a presentation regarding the Company’s Cable Business and Metro Business and to address various of ABRY’s due diligence questions and inquiries relating to the Cable Business and the Metro Business.

 

On December 9, 2009, Bidder A contacted the Company to indicate that it was no longer interested in pursuing a potential acquisition of the Company and that it was withdrawing its earlier preliminary indication of interest.

 

Also on December 9, 2009, the Special Committee convened to discuss recent developments with respect to the strategic alternatives described above. Mr. Hillman informed the other members of the Special Committee that Bidder A had withdrawn its preliminary indication of interest in an acquisition of the Company. Peter D. Aquino, the Company’s President and Chief Executive Officer, then described to the Special Committee recent communications received by the Company from ABRY and Bidder B, in each case, in connection with a possible acquisition of the Company. The Special Committee discussed the interest expressed by each of the various parties and the merits of their respective preliminary proposals to acquire the Company. Michael Sicoli, the Company’s Chief Financial Officer, provided the Special Committee with an update on the potential divestitures of the Company’s Pennsylvania and Chicago cable operations then under consideration by the Company. The Special Committee discussed these potential transactions and how they might affect any sale of the entire Company.

 

Later on December 9, 2009, Bidder B submitted a revised written preliminary indication of interest to the Company with respect to a possible acquisition of the Company at a price per share of $15.00.

 

On December 11, 2009, the Special Committee convened to discuss this preliminary indication of interest as well as the other potential strategic transactions under consideration by the Company described above. Following this discussion, the Special Committee authorized and instructed management of the Company to permit Bidder B to conduct further due diligence with respect to a possible acquisition of the Company.

 

Also on December 11, 2009, Private Equity Firm Y indicated to the Company that it was no longer interested in pursuing a potential acquisition of the Company’s Pennsylvania cable operations and that it was withdrawing its preliminary, non-binding letter of intent previously provided to the Company. No further

discussions were held with Private Equity Firm Y with respect to an acquisition of the Company’s Pennsylvania cable operations or any other strategic alternative.

 

On December 16, 2009, representatives of Company management met with ABRY to review ABRY’s preliminary financial projections for the Company and to address various of ABRY’s related due diligence questions and inquiries regarding the Company.

 

On December 21, 2009, a private equity firm, which we refer to as Private Equity Firm Z, and which had previously engaged in preliminary discussions with Company management regarding a possible acquisition of the Company’s Pennsylvania cable operations, indicated to the Company that it would be interested in partnering with Bidder A in connection with a possible acquisition of the entire Company. On December 27, 2009, Bidder A confirmed that, despite the fact that it had previously withdrawn as a potential acquirer of the Company, it was now interested in partnering with Private Equity Firm Z in connection with a possible transaction. Shortly thereafter, Bidder A and Private Equity Firm Z communicated to the Company their mutual interest in partnering with a third party, a company engaged in the telecommunications industry, which we refer to as Company 2. We refer to Bidder A, Private Equity Firm Z and Company 2 collectively as Bidder C.

 

On December 29, 2009, the Special Committee convened to discuss the status of the strategic alternatives under consideration by the Special Committee described above. Company management provided the Special Committee with an update on the due diligence then being conducted by Bidder B and ABRY. Company management also summarized for the Special Committee recent conversations between Company management and members of the bidder consortium collectively referred to as Bidder C with respect to a possible acquisition of the Company. The Special Committee discussed the possible structure of a transaction involving Bidder C and due diligence and disclosure issues that might need to be addressed in connection with such a transaction due to the involvement of Company 2, one of our strategic competitors. In addition, because the bidder consortium collectively referred to as Bidder C included Bidder A, who had previously withdrawn an indication of interest to acquire the Company, the Special Committee discussed the need to re-establish Bidder A’s interest in being involved in a transaction involving an acquisition of the Company. Following these discussions, the Special Committee agreed that the communication received from Bidder C merited further attention and authorized and instructed Company management to permit Bidder C to conduct preliminary due diligence, subject to the submission of a written proposal from Bidder C describing Bidder C’s proposed transaction in greater detail.

 

On December 31, 2009, Bidder C provided the Company with a written preliminary indication of interest in acquiring all of the outstanding capital stock of the Company at a price per share of $15.00. On January 6, 2010, the Company authorized Bidder C to conduct due diligence with respect to a potential acquisition of the Company.

 

Throughout January 2010, ABRY and Bidder C engaged in due diligence and discussions with representatives of Company management with respect to a potential acquisition and various aspects of the Company’s business. Also in January 2010, representatives of Company management met with representatives of Bidder B on several occasions to address various due diligence inquiries submitted by Bidder B and to discuss each of the Company’s business units as well as each of the Company’s principal geographic markets.

 

On January 8, 2010, we entered into a non-binding letter of intent with Company 1, which set forth preliminary terms of a strategic transaction pursuant to which Company 1 would acquire the assets of our Chicago cable operations. Company 1’s proposed purchase price reflected an enterprise value of approximately $230 million for our Chicago cable operations. Following the execution of the letter of intent, Company 1 conducted more extensive due diligence regarding our Chicago cable operations. However, no definitive agreements were executed or negotiated with Company 1 regarding this potential transaction.

 

On January 13, 2010, Mr. Hillman, as Chairman of the Special Committee, and representatives of Company management spoke with representatives of ABRY, who indicated that ABRY had completed its initial due diligence; that ABRY’s preliminary per share offer to acquire the Company remained at $15.00; and that ABRY was prepared to proceed to the final stage of its due diligence efforts and to solicit and negotiate debt financing commitments to fund a potential acquisition of the Company.

On January 15, 2010, the Special Committee convened to discuss the status of the strategic alternatives under consideration by the Special Committee, including a potential acquisition of the Company by ABRY, Bidder B or Bidder C and a potential acquisition of the Company’s Chicago cable operations by Company 1. Company management summarized the status of the due diligence work being conducted by each of ABRY, Bidder B and Bidder C and answered questions from the Special Committee relating to the timeframe to complete the remaining due diligence efforts. The Special Committee discussed the status of the indications of interest previously submitted by each of ABRY, Bidder B and Bidder C and the information that it anticipated it would need in order to evaluate these proposals in greater detail. Following the discussion, the Special Committee instructed Company management to provide a letter to each of ABRY, Bidder B and Bidder C requesting that each party submit an updated proposal with its best and final price for a possible acquisition of the Company by no later than February 8, 2010 and to submit mark-ups of the draft merger agreement, which had previously been provided to each of ABRY, Bidder B and Bidder C, by no later than February 1, 2010. The Special Committee also instructed Company management to continue to engage in discussions with Company 1 regarding a potential sale of our Chicago cable operations.

 

On January 19, 2010, ABRY provided the Company with an updated written indication of interest, which confirmed ABRY’s preliminary offer to acquire the Company at $15.00 per share.

 

On February 1, 2010, each of ABRY and Bidder B submitted a detailed mark-up of the draft merger agreement that had been previously provided to them by the Company.

 

On February 4, 2010, the Special Committee convened to discuss the status of the due diligence efforts being undertaken by each of ABRY, Bidder B and Bidder C and the comments received from each of ABRY and Bidder B on the draft merger agreement previously provided to each of them by the Company. Taking into account the advice of Deutsche Bank, the Special Committee considered various strategic alternatives for the Company in addition to a possible sale of the Company to ABRY, Bidder B or Bidder C. The Special Committee and Company management then considered various stand alone strategic alternatives, including the continuation of the Company’s then current business plan, a spin-off of the Metro Business to the Company’s stockholders, the sale of certain of the Company’s subsidiaries and businesses (including the Company’s Pennsylvania and Chicago cable operations) as well as possible acquisitions then under preliminary consideration by Company management. The Special Committee discussed the positive and negative considerations associated with each of these alternatives and how they might affect the Company’s financial performance and market value.

 

On February 5, 2010, Bidder B notified the Company that it was no longer interested in pursuing a potential acquisition of the Company on its own. Shortly thereafter, Bidder B requested that the Company waive certain provisions of the confidentiality and standstill agreement between the Company and Bidder B in order to allow Bidder B to join the bidder consortium collectively referred to as Bidder C in connection with a potential acquisition of the Company.

 

On February 8, 2010, Bidder C submitted a detailed mark-up of the draft merger agreement that had been previously provided to it by the Company, which reflected a revised proposed purchase price of $14.00 per share.

 

On February 10, 2010, the Special Committee convened to review and discuss the proposals that had been submitted on February 8, 2010 by each of ABRY and Bidder C, as well as recent conversations between representatives of the Special Committee and Deutsche Bank with each of ABRY, Bidder B and Bidder C. Deutsche Bank confirmed that Bidder B had withdrawn its earlier preliminary indication of interest, but that Bidder B had requested to join the bidder consortium collectively referred to as Bidder C in connection with a potential acquisition of the Company. Deutsche Bank discussed the financial aspects of the proposals submitted by each of ABRY and Bidder C and led a discussion regarding the proposals generally. Deutsche Bank noted that Bidder C’s proposal contemplated that the Company’s Chicago cable business would need to be divested at a specified price as a condition to the closing of the sale of the Company. In addition, Bidder C had requested a 25-day exclusivity period before it would conduct further due diligence and negotiate a definitive merger agreement. Deutsche Bank reviewed the sources and uses of funds associated with the proposals submitted by ABRY and Bidder C and summarized the draft financing commitments that had been submitted with the proposals. Jenner & Block summarized the comments submitted by ABRY and Bidder C on the

draft merger agreements. The Special Committee engaged in a detailed discussion regarding the structure, terms and conditions of the proposals submitted by ABRY and Bidder C.

 

Overall, the Special Committee viewed ABRY’s proposal more favorably than the proposal submitted by Bidder C in light of the following material factors: ABRY had proposed a price per share of $15.00, while Bidder C had proposed a revised price per share of $14.00; ABRY had included more favorable “go-shop” provisions in its mark-up of the proposed merger agreement than Bidder C; ABRY was further along in its due diligence efforts than Bidder C; the draft debt financing commitments obtained by ABRY were superior to those obtained by Bidder C; ABRY was not requesting an exclusivity period, while Bidder C was requesting a 25-day exclusivity period; and ABRY’s proposal was not conditioned on a sale of any of the Company’s businesses, while Bidder C’s proposal was conditioned on a sale of the Company’s Chicago cable operations. Notwithstanding the foregoing, the Special Committee instructed its financial and legal advisors and Company management to continue to engage in discussions and negotiations with each of ABRY and Bidder C. The Special Committee also instructed Company management to permit Bidder B to partner with Bidder C in connection with a potential acquisition of the Company.

 

On February 15, 2010, the Special Committee convened to further discuss the proposals that had been previously submitted by ABRY and Bidder C. In particular, the Special Committee discussed recent conversations between representatives of ABRY and representatives of the Special Committee, including a conference call with ABRY’s legal counsel regarding ABRY’s proposed mark-up of the draft merger agreement. The Special Committee also discussed Bidder C’s request for a period of exclusivity during which to negotiate and conduct due diligence with respect to a potential acquisition of the Company. The Special Committee authorized further discussions with Bidder C regarding its request for exclusivity and the circumstances under which Bidder C would be willing to drop this request.

 

On February 16 and February 17, 2010, the Company engaged in discussions with Bidder C regarding its request for exclusivity as well as the Special Committee’s concerns regarding an exclusivity arrangement. Bidder C indicated that it would be unwilling to move forward with further due diligence or the negotiation of definitive transaction agreements, unless the Company granted Bidder C a 25-day exclusivity period.

 

On February 18, 2010, the Special Committee convened to discuss the recent conversations with Bidder C regarding Bidder C’s request for exclusivity. Mr. Hillman communicated to the Special Committee that Bidder C would be unwilling to move forward with due diligence and negotiations, unless the Company granted Bidder C a 25-day exclusivity period. Following a discussion with its financial and legal advisors, the Special Committee determined that, in light of its ongoing negotiations with ABRY, it was unwilling to grant Bidder C a period of exclusivity during which to negotiate and conduct due diligence with respect to a potential acquisition of the Company.

 

On February 20, 2010, as a result of the ongoing negotiations between ABRY and the Company, ABRY provided the Company with a revised draft of the merger agreement, in which ABRY made material concessions, including a reduction in the termination fees payable by the Company under certain circumstances and an increase in the reverse termination fee payable to the Company in the event of a failure of the merger to be consummated under certain circumstances.

 

On February 25, 2010, the Special Committee convened to discuss the status of negotiations with ABRY and Bidder C. Mr. Hillman reported that Bidder C had withdrawn from the sale process due to the fact that the Company did not enter into an exclusivity arrangement with Bidder C and, therefore, Bidder C was no longer considered a viable acquirer of the Company. Mr. Hillman provided a report to the Special Committee that summarized key business and contract issues with ABRY, which included the following material issues: (i) the definition of Company material adverse effect to be included in the merger agreement and the impact of the occurrence of a Company material adverse effect on the rights and obligations of the parties under the merger agreement; (ii) the conditions to the closing of the transactions contemplated by the merger agreement and the “end date” after which either party could terminate the merger agreement if such conditions to closing were not then satisfied; (iii) the extent and scope of the specific performance remedy available to the Company in the event of a breach of the merger agreement by Cable Buyer and Metro Parent, in particular relating to the Company’s ability to cause Cable Buyer and Metro Parent to specifically enforce the terms of their

respective financing commitments; (iv) the amount of the termination fees payable by each of the Company and Cable Buyer and Metro Parent, and the amount of the expense reimbursement payable by the Company to Cable Buyer and Metro Parent, following termination of the merger agreement under different scenarios; (v) the terms and conditions of the “go-shop” and “no-shop” provisions of the merger agreement; and (vi) issues pertaining to the separation of the Company’s Cable Business from the Company’s Metro Business prior to the consummation of the merger. Company management, Deutsche Bank and Jenner & Block responded to questions posed by members of the Special Committee, and a detailed discussion ensued in which the Special Committee outlined and provided input on the relevant issues and anticipated timing of next steps. The Special Committee provided Deutsche Bank and Jenner & Block with further guidance and instructions with respect to the ongoing negotiations with ABRY.

 

Between February 25, 2010 and March 4, 2010, the Special Committee’s legal advisors negotiated the terms of the merger agreement, the limited guarantee and the debt and equity financing commitments with ABRY and its legal counsel in a manner consistent with the guidance and instructions previously provided by the Special Committee as well as further input and instructions received from Mr. Hillman, the Chairman of the Special Committee. During this period, ABRY concluded its due diligence review of the Company. On and prior to March 4, 2010, Mr. Hillman, as Chairman of the Special Committee, and the Special Committee’s financial advisor, acting on behalf of the Special Committee, sought an increase in ABRY’s proposed $15.00 per share offer price. However, ABRY was unwilling to increase its per share offer price.

 

On March 2, 2010, the Company entered into an engagement letter with Waller Capital to act as a co-financial advisor (with Deutsche Bank) to the Special Committee in connection with the transaction, particularly with respect to the solicitation of alternative acquisition proposals following the execution of the merger agreement with ABRY pursuant to the “go-shop” provisions set forth in the merger agreement. As compensation for Waller Capital’s services in connection with the transaction, the Company has agreed to pay Waller Capital a transaction fee of approximately $3.3 million, contingent on the consummation of the merger.

 

On March 3, 2010, Company 1, with whom we had previously entered into a non-binding letter of intent regarding a potential acquisition of our Chicago cable assets, notified us that it was no longer interested in pursuing such a transaction and informed us that it was ceasing its due diligence efforts relating to this potential transaction.

 

On March 4, 2010, the Special Committee convened to discuss the status of the negotiations with ABRY and the key remaining open business and contract issues. Mr. Hillman reported to the other members of the Special Committee that the negotiations with ABRY regarding the merger agreement, the limited guarantee and the debt and equity financing commitments were substantially complete, subject to the resolution among the parties of which regulatory approvals would be required as conditions to the closing of the merger and the receipt by the Company of executed debt financing commitments for the transactions contemplated by the merger agreement substantially in the forms previously reviewed and considered by the Special Committee and its financial and legal advisors. Mr. Hillman also reported that during the course of the merger agreement negotiations following the prior Special Committee meeting, ABRY had communicated that it was unwilling to increase its per share offer to acquire the Company.

 

The members of the Special Committee discussed various aspects of the final terms of the proposed merger agreement with ABRY, which had previously been circulated to each of the members of the Special Committee. In particular, the Special Committee discussed the risks associated with failing to obtain required regulatory approvals within the time periods contemplated by the merger agreement. The members of the Special Committee also discussed the premium being offered by ABRY for shares of the Company common stock, the ability of the Company to solicit alternative acquisition proposals for a period of 40 days following execution of the merger agreement and the rights and obligations of the parties following a termination of the merger agreement as a result of the failure to obtain required regulatory approvals within the time periods contemplated by the merger agreement. Based upon this discussion and its consideration of the factors summarized under “Reasons for the Merger” beginning on page  [  ] , the Special Committee unanimously determined that the merger is in the best interests of the stockholders of the Company, unanimously

approved and declared advisable the merger agreement and unanimously determined to recommend that the members of the Board approve the merger agreement, subject to the resolution of the remaining open regulatory issue and the receipt by the Company of executed debt financing commitment letters substantially in the forms previously reviewed and discussed by the Special Committee.

 

Following the meeting of the Special Committee on March 4, 2010, a full Board meeting was convened. Mr. Hillman reported to the members of the Board that the negotiations with ABRY regarding the merger agreement, the limited guarantee and the debt and equity financing commitments were substantially complete, subject to the resolution of the open items discussed at the meeting of the Special Committee convened immediately prior to the full Board meeting. Mr. Hillman also reported that during the course of the merger agreement negotiations, ABRY had communicated that it was unwilling to increase its per share offer to acquire the Company. Mr. Hillman communicated to the Board the Special Committee’s unanimous determinations and recommendation with respect to the advisability and approval of the merger agreement, subject to resolution of the specified open items. Mr. Hillman and the other members of the Board engaged in a discussion regarding various aspects of the proposed terms of the final merger agreement with ABRY, which had previously been circulated to each of the members of the Board.

 

Mr. Sicoli reviewed with the Board a five-year projection of the Company’s financial performance. Representatives of Deutsche Bank then reviewed the financial aspects of the proposed transactions contemplated by the merger agreement. At the conclusion of its presentation, Deutsche Bank delivered its oral opinion, subsequently confirmed in writing on March 5, 2010, to the effect that, as of the date of such opinion, and based upon and subject to the assumptions, limitations, qualifications and conditions described therein, the merger consideration to be received by the holders of shares of Company common stock (other than Cable Buyer, Metro Parent, Merger Sub and their affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders. Representatives from Jenner & Block reviewed with the members of the Board their fiduciary duties in the context of a strategic transaction involving a sale of the Company. Due to the fact that the remaining open issue in the merger agreement relating to required regulatory approvals had not been resolved and that the Company had not received executed copies of the debt commitment letters contemplated by the merger agreement prior to the completion of the full Board meeting, the Board agreed to reconvene the following morning.

 

On the morning of March 5, 2010, the members of the Board and the Special Committee reconvened to discuss the status of the remaining open issue in the merger agreement and the status of the debt commitment letters. Representatives of Jenner & Block reported that the remaining open issue in the merger agreement relating to required regulatory approvals had been resolved during negotiations between the parties on the night of March 4, 2010 and that Jenner & Block had received copies of the executed debt commitment letters contemplated by the merger agreement on the morning of March 5, 2010, which were in substantially the forms previously reviewed by the Special Committee’s advisors and discussed by the Special Committee. Following a discussion, the members of the Board unanimously adopted the recommendation of the Special Committee, and the members of the Board and the Special Committee unanimously determined that the merger is fair to and in the best interests of the stockholders of the Company, unanimously approved and declared advisable the merger agreement, unanimously resolved to recommend that Company stockholders vote to approve the merger agreement and authorized the Company’s executive officers to execute and deliver the merger agreement.

 

On March 5, 2010, each of the Company, Cable Buyer, Metro Parent and Merger Sub executed and delivered the merger agreement; the sponsor and the Company executed the limited guarantee; and the parties jointly announced the signing of the merger agreement.

 

In reaching its unanimous determination that the merger is fair to and in the best interests of the Company and its stockholders, to approve and to declare advisable the merger agreement and to recommend that the Board approve the merger agreement, the Special Committee consulted with and received advice from

its financial and legal advisors, Company management and considered a number of factors, including the following material factors:

 

 

 

 

 

The Special Committee also considered a number of potentially negative factors in its deliberations concerning the merger, including the following material factors:

 

 

 

 

 

The foregoing discussion of the factors considered by the Special Committee is not intended to be exhaustive, but rather includes certain material factors considered by the Special Committee. In reaching its decision to approve the merger, the merger agreement and the other transactions contemplated by the merger agreement, the Special Committee did not quantify or assign any relative weights to the factors considered and individual directors may have given different weights to different factors. The Special Committee based its recommendation to the Board on the totality of the information presented.

 

The Board and the Special Committee have carefully considered the terms and conditions of the proposed merger and carefully considered many factors, including those described above. Based on such consideration, and in the case of the Board based on its adoption of the unanimous recommendation of the Special Committee, each of the Board and the Special Committee has unanimously determined that the merger is fair to and in the best interests of the stockholders of the Company and has unanimously declared advisable and approved the merger agreement. The Board unanimously recommends that you vote FOR approval of the proposal to adopt the merger agreement and to approve the transactions contemplated thereby.

 

Deutsche Bank Securities Inc., which we refer to as Deutsche Bank, acted as financial advisor to the Special Committee in connection with the merger and the other transactions contemplated by the merger agreement, which we refer to collectively as the transaction. Deutsche Bank delivered its oral opinion to both

the Board and the Special Committee on March 4, 2010, subsequently confirmed in writing on March 5, 2010, to each, to the effect that, as of the date of such opinion, based upon and subject to the assumptions made, matters considered and limitations, qualifications and conditions set forth in the opinion, the per share merger consideration was fair, from a financial point of view, to the holders of Company common stock, excluding Cable Buyer, Metro Parent, Merger Sub and their affiliates.

 

The full text of Deutsche Bank’s written opinion, dated March 5, 2010, which sets forth, among other things, the assumptions made, matters considered and limitations, qualifications and conditions of the review undertaken by Deutsche Bank in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference in its entirety.

 

The Deutsche Bank opinion is addressed to, and for the use and benefit of, the Special Committee and the Board. The Deutsche Bank opinion is not a recommendation to the holders of the Company common stock to adopt the merger agreement. The Deutsche Bank opinion is limited to the fairness, from a financial point of view, of the per share merger consideration to the holders of Company common stock (excluding Cable Buyer, Metro Parent, Merger Sub and their affiliates). Deutsche Bank was not asked to, and the Deutsche Bank opinion did not, address the fairness of the transaction, or any consideration received in connection therewith, to the holders of any other class of securities, creditors or other constituencies, nor did it address the fairness of the contemplated benefits of the transaction. Deutsche Bank expressed no opinion as to the merits of the underlying decision by the Company to engage in the transaction or the relative merits of the transaction as compared to alternative business strategies, nor did it express any opinion as to how any holders of Company common stock should vote with respect to the transaction. Deutsche Bank did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of the Company’s officers, directors, or employees, or any class of such persons, in connection with the transaction relative to the per share merger consideration to be received by the holders of Company common stock. The holders of Company common stock are urged to read the Deutsche Bank opinion in its entirety. The summary of the Deutsche Bank opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the Deutsche Bank opinion set forth as Annex B .

 

In connection with Deutsche Bank’s role as financial advisor to the Special Committee, and in arriving at its opinion, Deutsche Bank has, among other things, reviewed certain publicly available financial and other information concerning the Company and certain internal analyses, financial forecasts and other information relating to the Company prepared by the management of the Company. Deutsche Bank also held discussions with certain senior officers and other representatives and advisors of the Company regarding the businesses and prospects of the Company. In addition, Deutsche Bank has:

 

 

In preparing its opinion, Deutsche Bank did not assume responsibility for the independent verification of, and did not independently verify, any information, whether publicly available or furnished to it, concerning the Company, including, without limitation, any financial information, forecasts or projections, considered in connection with the rendering of its opinion. Accordingly, for purposes of its opinion, with the Special Committee’s and the Board’s permission, Deutsche Bank assumed and relied upon the accuracy and completeness of all such information. Deutsche Bank did not conduct a physical inspection of any of the properties or

assets, and did not prepare or obtain any independent evaluation or appraisal of any of the assets or liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities), of the Company or Cable Buyer or Metro Parent or any of their respective affiliates, nor has Deutsche Bank evaluated the solvency or fair value of the Company under any state or federal law relating to bankruptcy, insolvency or similar matters. With respect to the financial forecasts made available to Deutsche Bank and used in its analysis, Deutsche Bank assumed, with the Special Committee’s and the Board’s permission, that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the matters covered thereby. In rendering its opinion, Deutsche Bank expressed no view as to the reasonableness of such forecasts or the assumptions on which they are based. The Deutsche Bank opinion was necessarily based upon economic, market and other conditions as in effect on, and the information made available to Deutsche Bank as of, the date of such opinion. Deutsche Bank expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting the Deutsche Bank opinion of which it has become aware after the date hereof.

 

For purposes of rendering its opinion, Deutsche Bank has assumed with the Special Committee’s and the Board’s permission that, in all respects material to its analysis:

 

 

Deutsche Bank is not a legal, regulatory, tax or accounting expert and Deutsche Bank relied on the assessments made by the Company and its advisors with respect to these issues.

 

Deutsche Bank’s Financial Analysis.   Set forth below is a brief summary of the material financial analyses performed by Deutsche Bank in connection with its opinion and reviewed with the Board and the Special Committee on March 4, 2010. The order of the analyses described below does not represent relative importance or weight given to those analyses by Deutsche Bank, the Special Committee or the Board. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Deutsche Bank’s financial analyses. The tables below must be read together with the full text of each summary and are alone not a complete description of Deutsche Bank’ financial analyses.

 

Historical Stock Performance.   Deutsche Bank reviewed the historical trading price for the Company common stock during the 12-month period ended March 3, 2010. The range of closing share prices for the Company common stock during this period was $3.41 to $12.47. Deutsche Bank also reviewed the closing share price of the Company common stock as of March 3, 2010, which was $12.15 and the 30-day average closing share price of the Company common stock ended March 3, 2010, which was $10.65.

 

Analysis of Equity Price Targets.   Five equity analysts, representing the publicly-available coverage of the Company, were expecting a share price for the Company common stock in the range of $9.00 to $13.00.

 

Analysis of Sum of the Parts.   Deutsche Bank performed a “sum of the parts” analysis of the Company’s Metro Business and Cable Business. Deutsche Bank compared certain financial information and commonly used valuation measurements (i) for the Company’s Metro Business to corresponding information and measurements for a group of three publicly traded telecom companies, which provide fiber-based, high bandwidth internet service, consisting of AboveNet, Inc., Cogent Communications Group, Inc. and tw telecom inc. and (ii) for the Company’s Cable Business to corresponding information and measurements for a group of four publicly traded cable companies consisting of Comcast Corporation, Cablevision Systems Corporation,

Time Warner Cable Inc. and Knology, Inc. We refer to the telecom and cable comparison companies collectively as the selected companies. The financial information and valuation measurements, included, among other things:

 

 

To calculate the financial performance measures and trading multiples for the selected companies, Deutsche Bank used publicly available information concerning historical and forecasted financial performance, including published historical financial information and forecasted estimates based on Wall Street research. In addition, to calculate the financial performance measures for the Company’s Metro Business and Cable Business, Deutsche Bank used information provided by Company management concerning historical and forecasted financial performance.

 

 

 

Using the foregoing information, among other financials measures, Deutsche Bank determined (i) an estimated enterprise value to 2010E EBITDA reference range of 6.5x to 8.5x for the Metro Business and (ii) an estimated enterprise value to 2010E EBITDA reference range of 4.0x to 5.0x for the Cable Business, resulting in a range of implied price per share for the entire Company from $11.45 to $18.37, as shown below.

 

 

None of the companies utilized as a comparison are identical to either the Metro Business or the Cable Business. Accordingly, Deutsche Bank believes the sum of the parts analysis is not simply mathematical. Rather, it involves complex considerations and qualitative judgments, reflected in Deutsche Bank’s opinion,

concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading value of the comparable companies.

 

Discounted Cash Flow Analysis.   Deutsche Bank performed a discounted cash flow analysis for the Company based on the Company forecasts. Deutsche Bank calculated the discounted cash flow value for the Company as the sum of the net present value of (i) the estimated future unlevered free cash flow, calculated as EBITDA minus cash taxes, capital expenditures and changes in working capital, that the Company will generate for the years 2010 through 2014, plus (ii) the value of the Company at the end of such period, or the terminal value. The estimated future cash flows were based on the financial projections for the Company for the years 2010 through 2014 as prepared by the Company’s management. Deutsche Bank used discount rates ranging from 9.0% to 11.0%. Deutsche Bank used such discount rates based on its judgment of the estimated weighted average cost of the Company’s capital. The terminal value of the Company was calculated using perpetuity growth rates ranging from 1.5% to 3.5%. This analysis indicated an implied equity value of $3.32 to $15.81 per share. Additionally, Deutsche Bank performed a discounted cash flow analysis that also included the net present value of the Company’s net operating losses, based on estimated usage of such net operating losses discounted at an estimated cost of equity of 13.0%. This analysis indicated an implied equity value of $8.46 to $19.77 per share.

 

Precedent Premium Analysis.   Deutsche Bank performed a precedent premium analysis to determine an implied equity value per share of Company common stock derived from premiums paid in previous transactions. Based on estimated premiums paid for shares of U.S. based target companies over the last five years involving all transactions ranging from $100 million to $2.0 billion, other than those transactions related to hostile offers, mergers of equals, real estate and financial services, Deutsche Bank determined an estimated premium range of 25% to 40%. Deutsche Bank applied the premium range to $10.65, the 30-day average share price of the Company common stock ended March 3, 2010, and $12.15, the share price as of March 3, 2010. This analysis indicated an estimated implied equity value of $13.31 to $17.01 per share.

 

The foregoing summary describes all analyses and factors that Deutsche Bank deemed material in its presentation to the Special Committee and the Board, but is not a comprehensive description of all analyses performed and factors considered by Deutsche Bank in connection with preparing its opinion. The preparation of a fairness opinion is a complex process involving the application of subjective business judgment in determining the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, is not readily susceptible to summary description. Deutsche Bank believes that its analyses must be considered as a whole and that considering any portion of such analyses and of the factors considered without considering all analyses and factors could create a misleading view of the process underlying the opinion. In arriving at its fairness determination, Deutsche Bank did not assign specific weights to any particular analyses.

 

In conducting its analyses and arriving at its opinion, Deutsche Bank utilized a variety of generally accepted valuation methods. Except as described above, the Company did not impose any limitations on the scope of the investigation made by Deutsche Bank in rendering its opinion. The analyses were prepared solely for the purpose of enabling Deutsche Bank to provide its opinion to the Special Committee and the Board as to the fairness of the per share merger consideration to the holders of Company common stock and do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold or traded, which are inherently subject to uncertainty. In connection with its analyses, Deutsche Bank made, and was provided by the Company’s management with, numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the Company’s control. Analyses based on estimates or forecasts of future results are not necessarily indicative of actual past or future values or results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the Company or their respective advisors, neither the Company nor Deutsche Bank nor any other person assumes responsibility if future results or actual values are materially different from these forecasts or assumptions.

The terms of the transaction were determined through negotiations between the Company and ABRY and were approved by the Special Committee and the Board. Although Deutsche Bank provided advice to the Special Committee during the course of these negotiations, the decision to enter into the transaction was solely that of the Special Committee and the Board. Deutsche Bank’s opinion was provided to the Board and the Special Committee to assist them in connection with their consideration of the transaction and does not constitute a recommendation to any holder of Company common stock as to how to vote with respect to the transaction.

 

The Company selected Deutsche Bank as financial advisor in connection with the transaction based on Deutsche Bank’s qualifications, expertise, reputation and experience in mergers and acquisitions. The Company has retained Deutsche Bank pursuant to a letter agreement dated February 24, 2010, which we refer to as the engagement letter. As compensation for Deutsche Bank’s services in connection with the transaction, the Company has agreed to pay to Deutsche Bank a transaction fee of approximately $7.8 million, contingent on the consummation of the transaction. The transaction fee payable to Deutsche Bank will be reduced by the amount of any opinion fees paid by the Company to Deutsche Bank. The Company has agreed to pay Deutsche Bank an opinion fee of $750,000 upon delivery of Deutsche Bank’s fairness opinion, and an additional opinion fee of $350,000 upon delivery of an additional opinion (or upon Deutsche Bank advising the Special Committee it would be unable to deliver such additional opinion). Regardless of whether the transaction is consummated, the Company has agreed to reimburse Deutsche Bank for reasonable fees and disbursements of Deutsche Bank’s counsel and all of Deutsche Bank’s reasonable travel and other out-of-pocket expenses incurred in connection with the transaction or otherwise arising out of the retention of Deutsche Bank under the engagement letter. The Company has also agreed to indemnify Deutsche Bank and certain related persons to the fullest extent lawful against certain liabilities, including certain liabilities under the federal securities laws arising out of its engagement or the transaction. In the past two years Deutsche Bank has received no compensation from the Company or its affiliates other than as described above.

 

Deutsche Bank is an internationally recognized investment banking firm experienced in providing advice in connection with mergers and acquisitions and related transactions. Deutsche Bank is an affiliate of Deutsche Bank AG, which together with its affiliates we refer to as the DB Group. One or more members of the DB Group have, from time to time, provided investment banking, commercial banking (including extensions of credit) and other financial services to the Company or its affiliates for which it has received compensation, including the Company’s acquisition of Neon Communications Group, Inc. in 2007 and the refinancing of the Company’s senior bank debt in 2007. A portion of the proceeds from the transaction will be used to repay indebtedness of the Company which has been extended in part by one or more members of the DB Group. DB Group may also provide investment and commercial banking services to Cable Buyer, Metro Parent and the Company and their respective affiliates in the future, for which the DB Group would expect to receive compensation. In the ordinary course of business, members of the DB Group may actively trade in the securities and other instruments and obligations of the Company or affiliates of Cable Buyer or Metro Parent for their own accounts and for the accounts of their customers. Accordingly, the DB Group may at any time hold a long or short position in such securities, instruments and obligations.

 

Deutsche Bank has consented to the inclusion in this proxy statement of its written opinion delivered to the Special Committee and the Board.

Certain Financial Information

 

The Company does not, as a matter of course, publicly disclose forecasts as to future financial performance, earnings or other results and is especially cautious of making forecasts for extended periods due to the unpredictability of the underlying assumptions and estimates. However, in connection with the evaluation of a possible transaction involving the Company, the Company provided the Board, the Special Committee, the Special Committee’s advisors and ABRY (and other interested bidders) with certain non-public forecasts, as described in more detail below, that were prepared by management of the Company and not for public disclosure.

 

A summary of these forecasts is being included in this document because these forecasts were made available to the Board, the Special Committee and the Special Committee’s advisors and, in the case of the Company’s 2010 budget, to ABRY (and other interested bidders), not to influence your decision whether to vote for or against the proposal to adopt the merger agreement and to approve the transactions contemplated thereby. The inclusion of this information should not be regarded as an indication that the Board, the Special Committee, the Special Committee’s advisors, ABRY or any other person considered, or now considers, such forecasts to be a reliable prediction of actual future results. The forecasts are subjective in many respects. There can be no assurance that these forecasts will be realized or that actual results will not be significantly higher or lower than forecasted. The forecasts cover multiple years and such information by its nature becomes subject to greater uncertainty with each successive year. As a result, the inclusion of the forecasts in this proxy statement should not be relied on as necessarily predictive of actual future events.

 

In addition, the forecasts were not prepared with a view toward public disclosure or toward complying with generally accepted accounting principles, which we refer to as GAAP, the published guidelines of the SEC regarding projections and the use of non GAAP measures or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The forecasts included below were prepared by, and are the responsibility of, our management. Neither our independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the forecasts contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of the independent registered public accounting firm, which is incorporated by reference in this proxy statement, relates to the Company’s historical financial information. It does not extend to the forecasts and should not be read to do so.

 

These forecasts were based on numerous variables and assumptions that are inherently uncertain and are partially or wholly beyond the control of the Company. Important factors that may affect actual results and cause these forecasts to not be achieved include, but are not limited to, risks and uncertainties relating to the Company’s business (including its ability to achieve strategic goals, objectives and targets over the applicable periods), industry performance, regulatory environment, general business and economic conditions and other factors described under “Cautionary Statement Concerning Forward-Looking Information” beginning on page  [  ] . In addition, the forecasts do not reflect revised prospects for the Company’s business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the forecasts were prepared. There can be no assurance that these forecasts will be realized or that the Company’s future results will not materially vary from these forecasts.

 

No one has made or makes any representation to any stockholder or anyone else regarding the information included in the forecasts set forth below. We have not updated and do not intend to update, or otherwise revise the forecasts to reflect circumstances existing after the date when made or to reflect the occurrence of subsequent events, even in the event that any or all of the assumptions are shown to be in error.

 

The forecasts prepared by management of the Company and given to the Board, the Special Committee and the Special Committee’s advisors, but not to ABRY (or other interested bidders), included the following material forecasts (in millions of dollars):

 

 

 

In preparing the five-year forecasts summarized above, the Company made the following assumptions for the period from 2010 to 2014:

 

 

 

 

 

Although the Company did not provide ABRY (or other interested bidders) with the five-year forecasts summarized above, the Company did provide ABRY (and other interested bidders) with a copy of its 2010 budget, which had previously been prepared for Company management for internal use in assessing strategic direction, related capital and resource needs and allocations and other management decisions and to provide performance targets for management in connection with the determination of incentive compensation. The Company’s 2010 budget reflected a more aggressive set of assumptions than the five-year forecasts summarized above, including, among other things, greater revenue growth and declines in sales, general and administrative expenses. The Company’s 2010 budget included the following material forecasts (in millions of dollars): Total Revenues of $798 ($586 for the Cable Business and $212 for the Metro Business); EBITDA of $230 ($158 for the Cable Business and $72 for the Metro Business); and Capital Expenditures of $130 ($80 for the Cable Business and $50 for the Metro Business).

 

Metro Parent and Cable Buyer have obtained equity and debt financing commitments for the transactions contemplated by the merger agreement, the aggregate proceeds of which are expected to be sufficient for Metro Parent and Cable Buyer to pay the aggregate merger consideration, the amounts payable with respect to Company stock options, Company restricted shares and Company restricted stock units and related fees and expenses of the transactions contemplated by the merger agreement and to repay certain indebtedness of the Company.

 

Equity Financing

 

An investment fund affiliated with ABRY, which we refer to as the sponsor, has committed to cause the purchase of equity interests in Cable Buyer and Metro Parent. Specifically, Cable Buyer has entered into an equity commitment letter with the sponsor pursuant to which the sponsor has committed to cause the purchase of equity securities of Cable Buyer for an aggregate amount in cash equal to $247.0 million, or a lesser amount to the extent permitted by the merger agreement, and Metro Parent has entered into an equity commitment letter with the sponsor pursuant to which the sponsor has committed to cause the purchase of equity securities of Metro Parent for an aggregate amount in cash equal to $286.5 million, or a lesser amount to the extent permitted by the merger agreement.

The funding of the equity financing is generally subject to the satisfaction or waiver by Cable Buyer and Metro Parent of the conditions to the obligations of Cable Buyer, Metro Parent and Merger Sub to consummate the transactions contemplated by the merger agreement. See “The Merger Agreement — Conditions to the Merger” beginning on page  [  ] . The obligation of the sponsor to fund the equity financing will terminate automatically upon the earliest to occur of (i) the effective time of the merger, (b) the valid termination of the merger agreement in accordance with its terms, (iii) the funding of the equity financing and (iv) November 3, 2010, unless a claim shall have been made by the Company against Cable Buyer or Metro Parent, as applicable, for specific performance of Cable Buyer’s or Metro Parent’s obligation to cause the equity financing to be funded to fund the merger in accordance with specified provisions of the merger agreement.

 

Debt Financing

 

In addition, Metro Parent and Cable Buyer have received debt financing commitment letters from affiliates of SunTrust Bank, General Electric Capital Corporation and Société Générale. Specifically, Cable Buyer has entered into a debt commitment letter with affiliates of each of SunTrust Bank, General Electric Capital Corporation and Société Générale, which we refer to as the lenders, to, severally and not jointly, provide up to $620.0 million in senior secured credit facilities (consisting of a revolving credit facility of up to $40.0 million and a term loan facility of up to $580.0 million) to Cable Buyer in connection with the transactions contemplated by the merger agreement. Metro Parent has entered into a debt commitment letter with affiliates of SunTrust Bank to provide up to $265.0 million in senior secured credit facilities (consisting of a revolving credit facility of up to $25.0 million and a term loan facility of up to $240.0 million) to Metro Parent in connection with the transactions contemplated by the merger agreement.

 

The facilities contemplated by the debt financing commitments are subject to customary closing conditions, including the following material conditions:

 

 

 

The Company is not a third-party beneficiary under any of the equity or debt commitment letters described above.

 

Notwithstanding the financing arrangements that Metro Parent and Cable Buyer have in place, the consummation of the merger is not subject to any financing conditions (although funding of the equity and debt financing is subject to the satisfaction of the conditions set forth in the commitment letters under which the financing will be provided, as described above). See “The Merger Agreement — Financing Covenant; Company Cooperation” beginning on page  [  ] .

 

Pursuant to a limited guarantee, which we refer to as the limited guarantee, delivered by the sponsor in favor of the Company, dated March 5, 2010, the sponsor has agreed to guarantee the payment of (i) the obligations of Cable Buyer and Metro Parent under the merger agreement to pay a reverse termination fee of $30.0 million to the Company and (ii) the obligations of Cable Buyer and Metro Parent under the merger agreement to reimburse the Company for certain expenses paid in respect of regulatory approvals required in connection with the transactions contemplated by the merger agreement, in each case, following a valid termination of the merger agreement giving rise to the obligations of Cable Buyer and Metro Parent to pay such $30.0 million reverse termination fee. See “The Merger Agreement — Termination Fees and Expenses” beginning on page  [  ] .

 

Subject to certain exceptions, the limited guarantee will terminate upon the earlier of (i) the effective time of the merger; (ii) the valid termination of the merger agreement under circumstances not giving rise to a claim for payment of any payment obligations subject to the limited guarantee; (iii) 90 days after any valid termination of the merger agreement under any other circumstances (provided that if the Company shall have made a claim against the sponsor under the limited guarantee prior to such date, then the sponsor’s obligations under the limited guarantee will continue until the date on which such claim is finally satisfied or otherwise resolved by agreement of the parties or by a final, non-appealable judgment of a governmental entity of competent jurisdiction); and (iv) the indefeasible payment to the Company of the full amount of the payment obligations subject to the limited guarantee.

 

In considering the recommendation of the Board and the Special Committee to approve the merger agreement, Company stockholders should be aware that some of the directors and executive officers of the Company have interests in the merger that may be different from, or in addition to, the interests of Company stockholders generally and that may create potential conflicts of interest. The Board and the Special Committee were aware of and considered the interests of the Company’s directors and executive officers when they considered, adopted and approved the merger agreement and determined to recommend to the Company

stockholders that they approve the adoption of the merger agreement and the transactions contemplated thereby.

 

Treatment of Company Stock Options

 

If the merger is consummated, each Company stock option (whether vested or unvested) that is outstanding immediately prior to the effective time of the merger will be converted into the right to receive, for each share underlying such option, a cash payment equal to the excess, if any, of $15.00 over the exercise price per share of such option, without interest, less any applicable withholding taxes. The following table shows, for our executive officers, the aggregate number of shares subject to outstanding Company stock options, both previously vested and unvested, and the cash-out value of all outstanding options with a per share exercise price less than $15.00 (excluding the effect of any applicable withholding taxes). The information in the table is as of [          ] , 2010. Other than Mr. Aquino, none of our directors held any outstanding Company stock options (whether vested or unvested) as of such date.

 

 

Treatment of Company Restricted Stock

 

If the merger is consummated, each restricted share of Company common stock (whether vested or unvested) that is outstanding immediately prior to the effective time of the merger will be converted into the right to receive a cash payment equal to $15.00, without interest, less any applicable withholding taxes. The following table shows, for our directors and executive officers, the aggregate number of previously vested restricted shares of Company common stock and the cash-out value of such previously vested restricted shares (excluding the effect of any applicable withholding taxes). The information in the table is as of [          ] , 2010. As of such date, none of our directors or executive officers held any unvested restricted shares of Company common stock.

 

Treatment of Company Restricted Stock Units

 

If the merger is consummated, each Company restricted stock unit (whether vested or unvested) that is outstanding immediately prior to the effective time of the merger will be converted into the right to receive a cash payment equal to $15.00, without interest, less any applicable withholding taxes. The following table shows, for our directors and executive officers, the aggregate number of Company restricted stock units, both previously vested and unvested, and the cash-out value of such Company restricted stock units (excluding the effect of any applicable withholding taxes). The information in the table is as of [          ] , 2010.

 

 

Treatment of Company Common Stock

 

If the merger is consummated, each share of Company common stock that is issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive $15.00 in cash, without interest, less any applicable withholding taxes. In addition to the payments described above with respect to Company stock options, Company restricted shares and Company restricted stock units, if the merger is consummated, certain of our directors and executive officers will be entitled to receive payments of merger consideration in respect of shares of Company common stock beneficially owned by such directors and executive officers.

 

Specifically, Peter D. Aquino will be entitled to receive $750,000 in respect of 50,000 shares of Company common stock; Felipe Alvarez will be entitled to receive $45,000 in respect of 3,000 shares of Company common stock; Benjamin C. Duster, IV will be entitled to receive $24,000 in respect of 1,600 shares of Company common stock; Lee S. Hillman will be entitled to receive $117,495 in respect of 7,833 shares of Company common stock; and Charles E. Levine will be entitled to receive $225,000 in respect of 15,000 shares of Company common stock. The foregoing information is as of [          ], 2010 and excludes the effect of any applicable withholding taxes.

 

Employment Agreements

 

We are a party to an amended and restated employment agreement with our President and Chief Executive Officer, Peter D. Aquino, dated December 21, 2004, as amended on December 21, 2007. Mr. Aquino’s employment agreement provides that he will be entitled to severance payments and other benefits if the Company or the surviving corporation of the merger terminates his employment without cause (as defined in his employment agreement) or Mr. Aquino terminates his employment for good reason (as defined in his employment agreement), whether before or after consummation of the merger. Such severance payments and other benefits would include:

 

 

 

We are a party to an employment agreement with our Executive Vice President and Chief Operating Officer, Jose A. Cecin, Jr., dated September 28, 2009, and an employment agreement with our Executive Vice President and Chief Financial Officer, Michael T. Sicoli, dated September 28, 2009. Each executive’s employment agreement provides for severance payments to the applicable executive if his employment is terminated within the two-year period following the consummation of the merger under either of the following circumstances:

 

 

If the executive’s employment is terminated under either of the circumstances described above within the two-year period following the consummation of the merger, the executive would be entitled to receive:

 

 

Change of Control Plan

 

Certain of our executive officers may be entitled to severance and other benefits under the Amended and Restated RCN Corporation Change of Control Severance Plan, which we refer to as the change of control plan, following consummation of the merger. If following the consummation of the merger and prior to the second anniversary of the effective time of the merger, the employment of any Company employee covered under the change of control plan is terminated by the surviving corporation of the merger without cause (as defined in the change of control plan) or by such company employee for good reason (as defined in the change of control plan), such Company employee will generally be entitled to receive the following benefits:

 

 

Excise Tax Gross-Up

 

Pursuant to the terms of the employment agreements of each of Mr. Aquino and Mr. Sicoli and the change of control plan described above for certain of our employees covered thereunder, if any payment in the nature of compensation (within the meaning of Section 280G(b)(2) of the Internal Revenue Code) to or for the benefit of the applicable executive officer, which we refer to as a Company payment, would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, which we refer to as the excise tax, then the amount of such Company payment would be automatically reduced to an amount one dollar less than the amount that would subject such executive officer to the excise tax, which amount we refer to as the safe harbor limit. However, if a Company payment exceeds the safe harbor limit by more than 10% of the safe harbor limit, then the applicable executive officer would instead be entitled to receive an additional payment, which we refer to as the gross-up payment, in an amount such that, after payment by such executive officer of all taxes, including any income taxes and excise tax imposed upon the gross-up payment, such executive officer would retain an amount of the gross-up payment equal to the excise tax imposed upon such Company payment.

 

Summary Table

 

The following table summarizes the estimated amount of the change in control and severance payments and other benefits that would be received by our executive officers if each executive officer’s employment were terminated by the surviving corporation of the merger without cause or by the applicable executive officer for good reason (in each case, as defined in such executive officer’s employment agreement or in the Company’s change of control plan, as applicable) immediately following the consummation of the merger, assuming a July 31, 2010 closing date of the merger:

 

 

Indemnification and Insurance

 

The merger agreement requires that the indemnification provisions of the certificate of incorporation, bylaws and similar organizational documents of the surviving corporation of the merger and its subsidiaries as in effect as of the effective time of the merger not be amended, repealed or otherwise modified for a period of six years from and after the effective time of the merger in any manner that would adversely affect the rights of any present or former director or officer of the Company or its subsidiaries.

 

Cable Buyer and Metro Parent have also agreed to indemnify the present and former directors and officers of the Company and its subsidiaries and, for a period of six years from and after the effective time of the merger, to cause the surviving corporation of the merger to provide directors’ and officers’ liability insurance coverage for the benefit of the present and former directors and officers of the Company and its subsidiaries, subject to certain limitations on the amount of premiums required to be paid for such insurance coverage. The surviving corporation of the merger will pay all reasonable expenses, including reasonable attorneys’ fees, which may be incurred by any present or former director or officer of the Company or its subsidiaries in enforcing the foregoing indemnity and other obligations.

 

Retention Plan

 

Prior to the consummation of the merger, the Company has the authority to establish a retention bonus plan, in which (i) employees of the Company and its subsidiaries at the level of director and below and (ii) members of the Board would be eligible to participate. The aggregate bonuses for eligible employees

would not exceed $650,000 and the aggregate bonuses for members of the Board would not exceed $350,000. The Company has agreed to consult with each of Cable Buyer and Metro Parent with respect to the terms of and participants in any such retention plan.

 

Arrangements with Cable Buyer and Metro Parent

 

As of the date of this proxy statement, none of our executive officers has entered into any agreement, arrangement, or understanding with either Cable Buyer or Metro Parent regarding employment with, or the right to purchase or participate in the equity of, any of Cable Buyer, Metro Parent or the surviving corporation of the merger. Some of our executive officers may enter into discussions with Cable Buyer or Metro Parent regarding new agreements and/or amendments to their existing agreements. However, we cannot presently determine the terms of any such agreements

 

Special Committee Fees

 

Each of the members of the Special Committee (other than Mr. Hillman) has received a monthly fee of $10,000 for his service on the Special Committee, and Mr. Hillman has received a monthly fee of $15,000 for serving as Chairman of the Special Committee.

 

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, and the rules promulgated thereunder by the Federal Trade Commission, which we refer to as the FTC, the merger may not be completed until notification and report forms have been filed with the FTC and the Antitrust Division of the Department of Justice, which we refer to as the DOJ, and the applicable waiting period has expired or been terminated. The Company, Cable Buyer and Metro Parent filed their respective notification and report forms under the HSR Act with the FTC and the Antitrust Division of the DOJ on March 19, 2010.

 

In addition, the consummation of the transactions contemplated by the merger agreement is subject to the receipt by the parties to the merger agreement of specified Federal Communications Commission, state public utility commission and local franchising authority regulatory approvals, including approvals with respect to specified franchises and other agreements (together with any franchises or other agreements for which no approvals are required) as would permit Cable Buyer and Metro Parent to provide video programming service to 92% or more of the Company’s video programming subscribers immediately following the effective time of the merger. The Company, Cable Buyer and Metro Parent have applied, or are applying, for regulatory approvals from the Federal Communications Commission, state public utility commissions and local franchising authorities in connection with the transactions contemplated by the merger agreement.

 

The following is a summary of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) whose shares of common stock are converted into the right to receive cash in the merger. This summary does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our stockholders. For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of shares of Company common stock that is, for U.S. federal income tax purposes:

 

 

If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds Company common stock, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. A partner of a partnership holding Company common stock should consult the partner’s tax advisor regarding the U.S. federal income tax consequences of the merger to such partner.

This discussion is based on the current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judicial authority and administrative rulings, all of which are subject to change, possibly with retroactive effect. The discussion applies only to beneficial owners who hold shares of Company common stock as capital assets, and does not apply to shares of Company common stock received in connection with the exercise of Company stock options, upon settlement of Company restricted stock units or otherwise as compensation, stockholders who hold an equity interest, actually or constructively, in the surviving corporation after the merger, stockholders who validly exercise their rights under the DGCL to object to the merger or to certain types of beneficial owners who may be subject to special rules (such as insurance companies, banks, tax-exempt organizations, financial institutions, broker-dealers, partnerships, S corporations or other pass-through entities, mutual funds, traders in securities who elect the mark-to-market method of accounting, stockholders subject to the alternative minimum tax, stockholders that have a functional currency other than the U.S. dollar or stockholders who hold Company common stock as part of a hedge, straddle, constructive sale or conversion transaction). This discussion also does not address the U.S. tax consequences to any stockholder who, for U.S. federal income tax purposes, is a non-resident alien individual, foreign corporation, foreign partnership or foreign estate or trust. This discussion does not address any aspect of state, local or foreign tax laws.

 

Exchange of Shares of Common Stock for Cash Pursuant to the Merger

 

The exchange of shares of Company common stock for cash in the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of Company common stock are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes) and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for such shares. Gain or loss will be determined separately for each block of shares of Company common stock (i.e., shares of common stock acquired at the same cost in a single transaction). Such gain or loss will be long-term capital gain or loss provided that the U.S. holder’s holding period for such shares of Company common stock is more than 12 months at the time of the completion of the merger. Long-term capital gains of non-corporate U.S. holders are eligible for reduced rates of taxation. Generally, capital losses are deductible only against capital gains and are not available to offset ordinary income; however, individuals are allowed to offset a limited amount of net capital losses against ordinary income. The gain or loss will generally be income or loss from sources within the U.S. for foreign tax credit limitation purposes.

 

Backup Withholding and Information Reporting

 

Backup withholding of tax (at the rate of 28%) may apply to cash payments to which a non-corporate U.S. holder is entitled under the merger agreement, unless the U.S. holder or other payee provides a taxpayer identification number, certifies that such number is correct, and otherwise complies with the backup withholding rules. Each of our U.S. holders should complete and sign, under penalty of perjury, the Substitute Form W-9 to be included as part of the letter of transmittal and return it to the paying agent, in order to provide the information and certification necessary to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent. U.S. holders who fail to provide their correct taxpayer identification numbers may be subject to penalties imposed by the Internal Revenue Service.

 

Backup withholding is not an additional tax. Any amounts withheld from cash payments to a U.S. holder pursuant to the merger under the backup withholding rules will be allowable as a refund or a credit against such U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.

 

Cash payments made pursuant to the merger will also be subject to information reporting unless an exemption applies.

 

The U.S. federal income tax consequences described above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each stockholder should consult the stockholder’s tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the merger in light of such stockholder’s particular circumstances, the

application of state, local and foreign tax laws, and, if applicable, the tax consequences of the receipt of cash in connection with the cancellation of Company stock options or Company restricted stock units.

 

If the merger is consummated, the Company common stock will be delisted from the NASDAQ Stock Market and deregistered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. As such, we would no longer file periodic reports with the Securities and Exchange Commission on account of the Company common stock.

 

On March 8, 2010 and March 11, 2010, class action complaints were filed in the Court of Chancery in the State of Delaware and the United States District Court for the Eastern District of Virginia, respectively, on behalf of putative classes of Company stockholders and naming the Company, all of the members of the Board, Cable Buyer, Metro Parent, Merger Sub and, in the case of the Delaware complaint, ABRY, as defendants. The plaintiffs allege that, in connection with approving the merger agreement, the members of the Board breached their fiduciary duties. The plaintiffs further allege that Cable Buyer, Metro Parent, Merger Sub and, in the case of the Delaware complaint, ABRY, aided and abetted the members of the Board in the alleged breaches of their fiduciary duties.

 

The plaintiffs seek a determination that the respective lawsuits are proper class actions and that the plaintiffs are proper class representatives; orders preliminarily and permanently enjoining the consummation of the transactions contemplated by the merger agreement; orders rescinding or invalidating such transactions or awarding rescissory damages if consummated; orders directing the members of the Board to exercise their duties to obtain a transaction that is in the best interests of Company stockholders; orders imposing a constructive trust, in favor of the plaintiff and the putative classes of Company stockholders, upon any benefits improperly received by members of the Board and ABRY, Cable Buyer, Metro Parent and Merger Sub as a result of their allegedly wrongful conduct; an accounting for all damages that the putative classes of Company stockholders may sustain as a result of such allegedly wrongful conduct; an accounting for all the profits and special benefits obtained as a result of such allegedly wrongful conduct; an award of the costs of the lawsuit, including reasonable attorneys’ and experts’ fees and other costs; and such other relief as the applicable courts may find just and proper.

 

The Company intends to defend these lawsuits vigorously.

 

The following description of the merger agreement describes the material provisions of the merger agreement but does not purport to describe all of the terms of the merger agreement. The full text of the merger agreement is attached to this proxy statement as Annex A and is incorporated by reference into this proxy statement. You are urged to read the merger agreement in its entirety because it is the legal document that governs the merger.

 

The merger agreement has been included in this proxy statement to provide you with information regarding its terms. The representations, warranties and covenants contained in the merger agreement were made as of a specified date and were negotiated between the parties for the principal purpose of setting the respective rights and obligations of the parties regarding closing the merger should events or circumstances change or be different from those stated in the representations and warranties. As such, the representations and warranties may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the merger agreement. While the Company does not believe that the confidential disclosures contain information that securities laws require to be publicly disclosed, such information modifies, qualifies and creates exceptions to the representations and warranties set forth in the attached merger agreement. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those generally applicable to investors. The terms of the merger agreement, such as the representations and warranties, should not be relied on as disclosures about the Company without consideration to the entirety of public disclosure by the Company as set forth in all of the Company’s public reports filed with the SEC. Moreover, it is understood that matters may change from the state of affairs contemplated by the representations and warranties set forth in the merger agreement.

 

At the effective time of the merger, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation of the merger, but as a wholly-owned subsidiary of Metro Parent. Immediately prior to the effective time of the merger, the Company will transfer its Cable Business to Cable Buyer on the terms and conditions set forth in the merger agreement. As a result, following the consummation of the merger, the Company’s Cable Business will be owned by Cable Buyer and the Company’s Metro Business will be owned by Metro Parent, and each of Cable Buyer and Metro Parent will be controlled by ABRY and other co-investors.

 

If the merger is consummated, the Company will cease to be an independent, publicly traded company and the Company common stock will be delisted from the NASDAQ Stock Market and deregistered under the Exchange Act. As such, we would no longer file periodic reports with the Securities and Exchange Commission on account of the Company common stock. Following consummation of the merger, you will not own any shares of the capital stock of the surviving corporation of the merger.

 

The board of directors of the surviving corporation will, from and after the effective time of the merger, consist of the directors of Merger Sub until their successors have been duly elected and qualified or until their earlier death, resignation or removal. The officers of the Company at the effective time of the merger will, from and after the effective time of the merger, be the officers of the surviving corporation until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal.

 

The certificate of incorporation of the surviving corporation will be amended to read in its entirety as the certificate of incorporation of Merger Sub read immediately prior to the effective time of the merger (except with respect to the name of the Company), until amended in accordance with applicable law. The bylaws of the surviving corporation will be amended to read in their entirety as the bylaws of Merger Sub as in effect immediately prior to the effective time of the merger (except with respect to the name of the Company), until amended in accordance with applicable law.

 

The merger will become effective at the time a certificate of merger is filed with the Secretary of State of the State of Delaware or such later date or time as the Company, Cable Buyer and Metro Parent mutually agree and specify in the certificate of merger, which we refer to as the effective time of the merger.

 

The closing of the merger will take place on the second business day after satisfaction or waiver of the conditions described below under “Conditions to the Merger” beginning on page  [  ] (other than those conditions that by their nature are to be satisfied at the closing but subject to the fulfillment or waiver of those conditions), unless otherwise mutually agreed by the Company, Cable Buyer and Metro Parent. However, if the marketing period (as defined below) has not ended at such time, the closing of the merger will take place on the date following the satisfaction or waiver of such conditions that is the earliest to occur of (i) a date during the marketing period specified by Cable Buyer and Metro Parent on no less than three business days’ prior written notice to the Company and (ii) the second business day immediately following the end of the marketing period (as it may be extended under the terms of the merger agreement), or on such other date as agreed to in writing by the Company, Cable Buyer and Metro Parent.

 

The marketing period is defined as the first period of 35 consecutive calendar days beginning on the later of (i) the delivery by the Company to Cable Buyer and Metro Parent of certain financial statements relating to the Cable Business and the Metro Business and certain other financial information relating to the Company, the Cable Business and the Metro Business, which information we refer to as the required information, and (ii) the first business day following the date on which the conditions to the obligations of Cable Buyer and Metro Parent to consummate the merger have been satisfied (other than the receipt of specified Federal Communications Commission, state public utility commission and local franchising authority regulatory approvals and other than those conditions that by their nature are to be satisfied at the closing of the merger), throughout and at the end of which (A) Cable Buyer and Metro Parent shall have (and their lenders or other financing sources shall have) access to the required information and (B) the conditions to the obligations of Cable Buyer and Metro Parent to consummate the merger have been satisfied (other than the receipt of specified Federal Communications Commission, state public utility commission and local franchising authority regulatory approvals and other than those conditions that by their nature are to be satisfied at the closing of the merger).

 

If the Company in good faith reasonably believes that it has delivered the required information to Cable Buyer and Metro Parent, it may deliver to Cable Buyer and Metro Parent a written notice to that effect (stating when it believes it completed such delivery), in which case the required information will be deemed to have been delivered on the date of such notice unless Cable Buyer and Metro Parent in good faith reasonably believe the Company has not completed delivery of the required information and, within three business days after the delivery of such notice by the Company, deliver a written notice to the Company to that effect (stating with specificity which required information the Company has not delivered).

 

If at any time during the marketing period (i) the required information becomes stale, ceases to comport with the SEC requirements that would apply to a registered public offering of debt securities or otherwise does not include the required information, (ii) the required information does not include audited financial statements of the Company and its subsidiaries or the Cable Business as a stand-alone entity or the Metro Business as a stand-alone entity, as of and for the year ended December 31, 2009, (iii) the independent registered public accounting firm for the Company, or for the Cable Business as a stand-alone entity, or for the Metro Business as a stand-alone entity, shall have withdrawn its audit opinion with respect to the most recently issued audited consolidated financial statements of the Company, the Cable Business as a stand-alone entity or the Metro Business as a stand-alone entity, as the case may be, (iv) the Company shall have been delinquent in filing any periodic report or material current report with the SEC required under the Exchange Act, or (v) the Company shall have announced any intention to restate any material financial information included in the required information or that any such restatement is under consideration, then the marketing period shall not be deemed to have occurred and shall be deemed to have commenced only when such deficiency or condition has been cured or no longer exists.

 

If the merger is consummated, each share of Company common stock (including shares of Company restricted stock, whether vested or unvested) that is issued and outstanding immediately prior to the effective time of the merger (other than shares held by Cable Buyer, Metro Parent, Merger Sub, the Company or any of its subsidiaries or by stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) will be converted into the right to receive $15.00 in cash, without interest, less any applicable withholding taxes, which amount we refer to as the merger consideration.

 

If the merger is consummated, each Company stock option (whether vested or unvested) that is outstanding immediately prior to the effective time of the merger will be converted into the right to receive, for each share underlying such option, a cash payment equal to the excess, if any, of the merger consideration over the exercise price per share of such option, without interest, less any applicable withholding taxes.

 

Each Company restricted stock unit (whether vested or unvested) that is outstanding immediately prior to the effective time of the merger will be converted into the right to receive a cash payment equal to the merger consideration, without interest, less any applicable withholding taxes.

 

There are no outstanding equity-based awards other than Company restricted stock, Company stock options and Company restricted stock units.

 

If the merger is consummated, each warrant to purchase shares of Company common stock that is issued and outstanding immediately prior to the effective time of the merger will become exercisable in accordance with its terms for an amount in cash equal to $15.00 per share of Company common stock covered by such warrant, without interest. As a result, following the effective time of the merger, if any warrant holder validly exercises its warrants, including the payment of the $16.72 per share exercise price therefor, such warrant holder would be entitled to receive an amount in cash equal to $15.00 per share of Company common stock covered by such validly exercised warrants, without interest.

 

Each share of Company common stock held by the Company or any of its subsidiaries (including treasury stock) and each share of Company common stock owned, directly or indirectly, by Cable Buyer, Metro Parent or Merger Sub, in each case, immediately prior to the effective time of the merger will be automatically cancelled and will not be entitled to any merger consideration nor any other payment or distribution.

 

Shares of Company common stock held by any Company stockholder that neither votes in favor of the adoption of the merger agreement nor consents thereto in writing and that properly demands payment for its shares in compliance with the appraisal rights under Section 262 of the DGCL will not be converted into the right to receive the merger consideration. Company stockholders properly exercising appraisal rights will be entitled to payment as further described below under “Appraisal Rights” beginning on page  [  ] . However, if any Company stockholder withdraws his or her demand for appraisal (in accordance with Section 262 of the DGCL) or otherwise loses the right to appraisal, then that Company stockholder will not be paid in accordance with Section 262 of the DGCL, and the shares of Company common stock held by such stockholder will be converted as of the effective time of the merger into the right to receive the merger consideration, without interest.

 

Prior to the effective time of the merger, the Company, Cable Buyer and Metro Parent will mutually agree upon a paying agent to act as paying agent for the payment of the merger consideration. Prior to the

effective time of the merger, Cable Buyer and Metro Parent will deposit, or cause to be deposited, with the paying agent funds, together with any cash held by the Company and not needed for other purposes, sufficient to pay the aggregate merger consideration payable in respect of shares of Company common stock and the aggregate amounts payable in respect of Company restricted shares, Company stock options and Company restricted stock units.

 

As soon as reasonably practicable after the effective time of the merger, but in no event later than three business days after the effective time of the merger, the paying agent will mail (i) to each record holder of shares of Company common stock as of immediately prior to the effective time of the merger a letter of transmittal containing instructions on how to surrender stock certificates or book-entry shares in exchange for the merger consideration and (ii) to each holder of Company restricted shares, Company stock options and/or Company restricted stock units, a check in an amount due and payable to such holder with respect to such Company restricted shares, Company stock options and/or Company restricted stock units.

 

You should not return your stock certificates with the enclosed proxy card.

 

No interest will be paid or accrued on the cash payable with respect to shares of Company common stock, Company restricted shares, Company stock options or Company restricted stock units, as provided above. Cable Buyer, Metro Parent, Merger Sub, the surviving corporation of the merger and the paying agent will be entitled to deduct and withhold any applicable taxes from such amounts. Any sum that is withheld will be deemed to have been paid to the person with regard to whom it is withheld.

 

At the effective time of the merger, the stock transfer books of the Company will be closed, and there will be no further registration of transfers on the stock transfer books of the surviving corporation of the merger of the shares of Company common stock that were outstanding immediately prior to the effective time of the merger. If, after the effective time of the merger, certificates or book-entry shares are presented to the surviving corporation of the merger for transfer, they will be cancelled and exchanged for a check in the proper amount pursuant to the terms of the merger agreement, as provided above.

 

Any portion of the exchange fund (including the proceeds of any investments thereof) that remains undistributed to the former holders of shares of Company common stock and the former holders of Company stock options, Company restricted shares and Company restricted stock units for one year after the effective time of the merger will be delivered to the surviving corporation of the merger upon demand, and any such holder who has not received the payments contemplated by the merger agreement, as provided above, will thereafter be entitled to look only to the surviving corporation for payment of their claim for such payments, without any interest thereon.

 

We made customary representations and warranties in the merger agreement that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement or in the disclosure schedule the Company delivered to Cable Buyer, Metro Parent and Merger Sub in connection therewith. These representations and warranties relate to, among other things:

 

 

 

Many of our representations and warranties are qualified by, among other things, exceptions relating to “materiality” or the absence of a “Company material adverse effect,” which means such facts, circumstances, events, conditions, occurrences or changes having a material adverse effect on the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, or either the Cable Business or the Metro Business, each taken separately (but in assessing the adverse effect of any such facts, circumstances, events, conditions, occurrences or changes on either the Metro Business or the Cable Business, taken separately, treating the Metro Business and the Cable Business as comparable in size and value, such that the size and value of the Company and its subsidiaries, taken as a whole, as a result of such adjustments, is neither increased nor decreased). Notwithstanding the foregoing, no fact, circumstance, event, condition, occurrence or change to the extent resulting from, attributable to or arising out of any of the following will constitute, or be considered in determining whether there has occurred, a Company material adverse effect:

 

 

 

 

 

except, in the case of the first, second, third and seventh bullet points above, to the extent such changes or developments referred to therein have a materially disproportionate impact on either the Cable Business or the Metro Business, each taken separately, or the Company and its subsidiaries, taken as a whole, relative to other companies in the industries and in the geographic markets in which the Company and its subsidiaries operate after taking into account the size of the Company and its subsidiaries relative to such other companies (but only to the extent of such materially disproportionate impact).

 

The merger agreement also contains a number of representations and warranties by Cable Buyer, Metro Parent and Merger Sub, including representations and warranties relating to:

 

 

 

Certain of the representations and warranties of Cable Buyer, Metro Parent and Merger Sub are qualified by, among other things, exceptions relating to “materiality” or the absence of a “Parent material adverse effect,” which means the prevention or a material delay or impairment of the ability of Cable Buyer, Metro Parent or Merger Sub to consummate the merger and the other transactions contemplated by the merger agreement.

 

The representations and warranties in the merger agreement of each of the Company, Cable Buyer, Metro Parent and Merger Sub will terminate upon the consummation of the merger or the termination of the merger agreement in accordance with its terms.

 

We have agreed that during the period from the date of the merger agreement until the effective time of the merger, subject to certain exceptions, we will use our commercially reasonable efforts to conduct our business in all material respects in the ordinary course and use our commercially reasonable efforts to: (i) timely file all forms, registration statements, reports and other documents required to be filed by us with the SEC; (ii) maintain and preserve our business organization and good standing under applicable law, assets, rights and properties; (iii) preserve our business relationships and contracts with customers, suppliers and others having business dealings with us in the ordinary course; (iv) continue to make capital expenditures, in the aggregate, materially in accordance with our current capital expenditure budget; and (v) keep available the services of our current officers and key employees.

 

Without limiting the foregoing, but subject to certain exceptions, we have agreed that during the period from the date of the merger agreement until the effective time of the merger, without the prior written consent of either Cable Buyer or Metro Parent, we:

 

 

 

Each of Cable Buyer, Metro Parent and Merger Sub has agreed that during the period from the date of the merger agreement until the effective time of the merger, except as may be required by applicable law or as may be consented to in writing by the Company, they will not, and will not permit any of their respective subsidiaries or affiliates to, take or agree to take any action (including entering into agreements with respect to any acquisitions, mergers, consolidations or business combinations), directly or indirectly, which would reasonably be expected to result in, individually or in the aggregate, a Parent material adverse effect.

 

Subject to certain limitations, until the effective time of the merger, we have agreed to afford to Cable Buyer and Metro Parent and their representatives and financing sources such access to the properties, contracts, commitments, books and records, facilities, personnel and other information of the Company and its subsidiaries as Cable Buyer and Metro Parent shall reasonably request. We will also make available to Cable Buyer and Metro Parent certain summary periodic reports customarily delivered to management-level employees of the Company as well as copies of certain correspondence, filings, submissions and notices made to, or received from, the Federal Communications Commission, state public utility commissions and local franchising authorities. ABRY has agreed to hold any such information provided in confidence to the extent required by the provisions of the confidentiality and standstill agreement between us and ABRY.

 

At any time prior to 12:01 a.m. (Eastern time) on April 15, 2010, which we refer to as the no-shop period start date, we have the right (acting under the direction of the Special Committee), pursuant to an acceptable confidentiality agreement:

 

 

On the no-shop period start date, we have agreed to cease and cause to be terminated any discussions or negotiations with any person that would otherwise be prohibited by the terms of the merger agreement. Promptly following the no-shop period start date, we have agreed to deliver a written notice to each such person to the effect that we are ending all discussions and negotiations with such person with respect to any alternative proposal and that we are requesting that such person promptly return or destroy all confidential information concerning us and/or our subsidiaries.

 

In addition, during the period commencing on the no-shop period start date and continuing until the earlier to occur of the effective time of the merger or the termination of the merger agreement, we have agreed not to, directly or indirectly:

 

 

 

Notwithstanding the foregoing, at all times during the period commencing on the no-shop period start date until the receipt of Company stockholder approval of the merger agreement, we may (acting under the direction of the Special Committee) participate or engage in discussions or negotiations with, furnish any non-public information relating to us and/or our subsidiaries to, and/or afford access to our business, properties, assets, books, records or other non-public information, or to our personnel, pursuant to an acceptable confidentiality agreement to any person (which may include persons with whom we held discussions or negotiations before the no-shop period start date) that has made or delivered to us an alternative proposal that was not solicited in breach of the provisions of the merger agreement summarized in the immediately preceding paragraph. However, prior to initiating any such action:

 

 

Except as provided in the immediately following paragraph, neither the Special Committee nor the Board is permitted to:

 

 

Notwithstanding anything to the contrary described above or set forth in the merger agreement, at any time prior to receipt of the Company stockholder approval of the merger agreement, (x) if we are then in receipt of a bona fide written alternative proposal from any person that is not withdrawn and that the Special Committee or the Board concludes in good faith (after consultation with its financial advisor and outside legal counsel) constitutes a superior proposal after giving effect to all adjustments to the terms of the merger agreement, the financing commitments and/or the limited guarantee which may be offered by Cable Buyer and Metro Parent, the Special Committee or the Board may (1) effect a change of recommendation, and/or (2) adopt, approve, endorse or recommend, or publicly propose to adopt, approve, endorse or recommend, to the stockholders of the Company any superior proposal and authorize the Company to terminate the merger agreement to enter into an alternative acquisition agreement with respect to such superior proposal (provided that the Company concurrently terminates the merger agreement and enters into a definitive acquisition agreement relating to the superior proposal), or (y) if an event, fact, circumstance, development or occurrence that affects, or would reasonably be expected to affect, our business, assets, operations or results of operations

and that had not occurred or was unknown to the Board as of the date of the merger agreement occurs or becomes known to the Special Committee or the Board, then the Special Committee or the Board may effect a change of recommendation, in each case, if and only if:

 

 

Nothing in the merger agreement prohibits us, the Special Committee or the Board from (i) taking and disclosing to our stockholders a position contemplated by Rules 14d-9 or 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act, or from issuing a “stop, look and listen” statement pending disclosure of its position thereunder, or (ii) making any disclosure to our stockholders if the Special Committee or the Board determines in good faith (after consultation with its outside legal counsel) that the failure to make such disclosure would be inconsistent with the directors’ exercise of their fiduciary obligations to our stockholders under applicable law or would constitute a violation of applicable law.

 

We have agreed not to take any action to exempt any other person from the restrictions on “business combinations” contained in Section 203 of the DGCL (or any similar provisions of any other law) or otherwise cause such restrictions not to apply to any other person. We have also agreed to keep Cable Buyer and Metro Parent reasonably informed regarding the matters summarized above, including by promptly (and in any event within 48 hours) notifying Cable Buyer and Metro Parent of our receipt of any proposals or offers with respect to any alternative proposal and, following the no-shop period start date, promptly (and in any event within 48 hours) notifying Cable Buyer and Metro Parent if any non-public information is requested from us or any discussions or negotiations are sought to be initiated or continued with us.

 

As used in this proxy statement, an acceptable confidentiality agreement means a customary confidentiality and standstill agreement that contains confidentiality and standstill provisions that are not materially less favorable in the aggregate to us than those contained in the confidentiality and standstill agreement between us and ABRY or, to the extent applicable, a confidentiality agreement entered into prior to the execution of the merger agreement.

As used in this proxy statement, an alternative proposal means any proposal or offer, including any proposal or offer from or to our stockholders, made by any person or group relating to, whether in a single transaction or series of related transactions, and whether directly or indirectly, any (i) merger, reorganization, share exchange, consolidation, business combination, joint venture, partnership, recapitalization, dissolution, liquidation or similar transaction involving the Company and/or any subsidiary or subsidiaries of the Company whose business or businesses constitute 25% or more of the assets, revenues or earnings of the Company and its subsidiaries, taken as a whole, (ii) acquisition of assets of the Company and/or its subsidiaries equal to 25% or more of the consolidated assets of the Company and its subsidiaries or to which 25% or more of the Company’s revenues or earnings on a consolidated basis are attributable or (iii) acquisition of beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of equity interests representing a 25% or greater economic or voting interest in the Company or tender offer or exchange offer that, if consummated, would result in any person or group (as defined under Rule 13(d) of the Exchange Act) beneficially owning equity interests representing a 25% or greater economic or voting interest in the Company.

 

As used in this proxy statement, a superior proposal means any bona fide (i) alternative proposal (except that references to “25% or more” in the definition thereof will be deemed to be references to “50% or more”) or (ii) written proposal to acquire assets or businesses of the Company and/or its subsidiaries for a purchase price in excess of $665 million in each case made by any person that is on terms that the Special Committee or the Board determines in good faith (after consultation with its financial advisor and outside legal counsel and after taking into account all legal, financial (including the financing terms thereof), regulatory, timing and other aspects of the proposal, as well as any modification to the merger agreement, the limited guarantee and/or the financing commitments (or any alternative acquisition agreement offered by Cable Buyer or Metro Parent in the case of clause (ii)) proposed by Cable Buyer and Metro Parent, are more favorable to our stockholders from a financial point of view than the transactions contemplated by the merger agreement.

 

Unless the merger agreement is validly terminated in accordance with its terms, following the clearance of this proxy statement by the SEC, we have agreed to promptly: (i) take all action necessary in accordance with the DGCL and our certificate of incorporation and bylaws to duly call, give notice of, convene and hold the special meeting as promptly as practicable following the mailing of this proxy statement (and in any event no later than 25 business days after the filing of the definitive version of this proxy statement with the SEC), and (ii) recommend approval of the merger agreement to our stockholders and use all reasonable efforts to solicit from our stockholders proxies in favor of the approval of the merger agreement.

 

We may postpone or adjourn the special meeting: (i) with the consent of either Cable Buyer or Metro Parent; (ii) for the absence of a quorum; (iii) to allow reasonable additional time for the filing and distribution of any supplemental or amended disclosure which the Special Committee or the Board has determined in good faith (after consultation with its outside legal counsel) is necessary under applicable laws and for such supplemental or amended disclosure to be disseminated to and reviewed by our stockholders prior to the special meeting; or (iv) in the event we have provided timely written notice to Cable Buyer and Metro Parent of our intention to effect a change of recommendation or terminate the merger agreement in light of a superior proposal and the deadline with respect to such notice has not been reached.

 

For a period of 12 months following the effective time of the merger, each of Cable Buyer and Metro Parent has agreed to use its commercially reasonable efforts to provide, or cause to be provided, to our current and former employees compensation, salary, wages, cash incentive opportunities, severance, medical and other welfare benefit plans, programs and arrangements (in each case excluding equity compensation) that are comparable, in the aggregate, to the compensation, salary, wages, cash incentive opportunities, severance, medical and other welfare benefit plans, programs and arrangements (in each case excluding equity compensation) provided to our employees immediately prior to the effective time of the merger. Each of Cable Buyer and Metro Parent has agreed to use its commercially reasonable efforts to provide, or cause to be provided, to our employees whose employment terminates during the twelve-month period following the effective time of

the merger severance benefits at the levels and pursuant to the terms of our existing severance guidelines and consistent with past practices.

 

For all purposes (including purposes of vesting, eligibility to participate and benefits accruals) under the employee benefit plans of Cable Buyer and Metro Parent providing benefits to our current or former employees after the effective time of the merger, which we refer to as the new plans, each such employee will be credited with his or her years of service with the Company and its subsidiaries prior to the effective time of the merger, to the same extent as such employee was entitled, prior to the effective time of the merger, to credit for such service under any similar Company employee benefit plan in which such employee participated or was eligible to participate immediately prior to the effective time of the merger, except to the extent of any duplication of benefits with respect to the same period of service. In addition, (i) each current or former employee of the Company will be immediately eligible to participate, without any waiting time, in any and all new plans to the extent coverage under such new plan is comparable to a Company employee benefit plan in which such employee participated immediately prior to the effective time of the merger, which we refer to as the old plans, and (ii) for purposes of each new plan providing medical, dental, pharmaceutical and/or vision benefits to any such employee, either Cable Buyer or Metro Parent will cause all pre-existing condition exclusions and actively-at-work requirements of such new plan to be waived for such employee and his or her covered dependents, unless such conditions would not have been waived under the comparable old plans in which such employee participated immediately prior to the effective time of the merger and either Cable Buyer or Metro Parent will cause any eligible expenses incurred by such employee and his or her covered dependents during the portion of the plan year of the old plan ending on the date such employee’s participation in the corresponding new plan begins to be taken into account under such new plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable plan year as if such amounts had been paid in accordance with such new plan.

 

Subject to the terms and conditions set forth in the merger agreement, each of the Company, Cable Buyer, Metro Parent and Merger Sub has agreed to use its reasonable best efforts (subject to, and in accordance with, applicable law) to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, and to assist and cooperate with the other parties in doing, all things reasonably necessary, proper or advisable under applicable laws to consummate and make effective the transactions contemplated by the merger agreement, including:

 

 

Without limiting the obligations set forth above, and except with respect to local franchising authority regulatory approvals (which are discussed in more detail below), each of the Company, Cable Buyer, Metro Parent and Merger Sub has agreed to:

 

 

 

In furtherance of the foregoing, each of the Company, Cable Buyer, Metro Parent and Merger Sub has agreed to take all such further actions that would not reasonably be expected to constitute, individually or in the aggregate, a Company material adverse effect, as may be necessary to resolve such objections, if any, as the United States Federal Trade Commission, the Antitrust Division of the United States Department of Justice, state antitrust enforcement authorities or competition authorities of any other nation or other jurisdiction, which we refer to as antitrust authorities, may assert under any regulatory law with respect to the transactions contemplated by the merger agreement, and, consistent with the foregoing, to avoid or eliminate each and every impediment under any law that would reasonably be expected to be asserted by any governmental entity with respect to the transactions contemplated by the merger agreement, including: (i) proposing, negotiating, committing to and effecting, by consent decree, hold separate order, trust or otherwise, the sale, divestiture or disposition of such assets or businesses of Cable Buyer, Metro Parent or any of their respective subsidiaries or affiliates or of the Company or its subsidiaries to the extent such actions would not reasonably be expected to have, individually or in the aggregate, a Company material adverse effect, and (ii) otherwise taking or committing to take actions that would not reasonably be expected to have, individually or in the aggregate, a Company material adverse effect that after the effective time of the merger would limit the freedom of either Cable Buyer’s or Metro Parent’s (or any of their subsidiaries’) freedom of action with respect to, or its ability to retain, one or more of their subsidiaries’ businesses, product lines or assets, in each case as may be required in order to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order in any suit or proceeding which would otherwise have the effect of preventing or materially delaying the consummation of the transactions contemplated by the merger agreement,

 

As soon as practicable after the date of the merger agreement, the Company, Cable Buyer, Metro Parent and Merger Sub have agreed to prepare and submit to any applicable local franchising authority, which we refer to as an LFA, FCC Form 394 transfer applications, or such other applications, notices and/or requests, as the parties reasonably agree are appropriate in order to obtain the LFA approvals required in connection with the consummation of the transactions contemplated by the merger agreement, and the Company, Cable Buyer, Metro Parent and Merger Sub have agreed to cooperate with each other to provide any information required by such applications. Subject to the terms and conditions set forth in the merger agreement, each of the Company, Cable Buyer, Metro Parent and Merger Sub has agreed to use its reasonable best efforts to obtain such LFA approvals as expeditiously as possible and to cooperate fully with each other in obtaining such LFA approvals.

If any administrative or judicial action or proceeding, including any proceeding by a private party, is instituted (or threatened to be instituted) challenging any transactions contemplated by the merger agreement as violative of any regulatory law, each of the Company, Cable Buyer and Metro Parent has agreed to cooperate in all respects with each other and has agreed to use its reasonable best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by the merger agreement. In addition, the Company, Cable Buyer and Metro Parent have agreed not to take any action (including any acquisition of businesses or assets) which would reasonably be expected to prevent or delay the consummation of the transactions contemplated by the merger agreement due to the actions of any antitrust authority, the Federal Communications Commission or any state public utility commission.

 

We have agreed to take all action necessary to ensure that no “fair price,” “moratorium,” “control share acquisition” or other form of anti-takeover statute or regulation is or becomes applicable to the merger agreement or the transactions contemplated by the merger agreement. If any such statute or regulation becomes applicable to the merger agreement or the transactions contemplated by the merger agreement, we have agreed to grant such approvals and take such actions necessary so that the transactions contemplated by the merger agreement may be consummated as promptly as practicable on the terms and conditions contemplated by the merger agreement and otherwise act to eliminate or minimize the effects of such statute or regulation.

 

The merger agreement requires that the indemnification provisions of the certificate of incorporation, bylaws and similar organizational documents of the surviving corporation of the merger and its subsidiaries as in effect as of the effective time of the merger not be amended, repealed or otherwise modified for a period of six years from and after the effective time of the merger in any manner that would adversely affect the rights of any present or former director or officer of the Company or its subsidiaries. Cable Buyer and Metro Parent have also agreed to indemnify the present and former directors and officers of the Company and its subsidiaries and, for a period of six years from and after the effective time of the merger, to cause the surviving corporation of the merger to provide directors’ and officers’ liability insurance coverage for the benefit of the present and former directors and officers of the Company and its subsidiaries, subject to certain limitations on the amount of premiums required to be paid for such insurance coverage. The surviving corporation of the merger will pay all reasonable expenses, including reasonable attorneys’ fees, which may be incurred by any present or former director or officer of the Company or its subsidiaries in enforcing the foregoing indemnity and other obligations. Notwithstanding the obligations described above, Cable Buyer’s obligations relating to indemnification and directors’ and officer’s liability insurance coverage shall cease and be of no further effect as of immediately prior to any sale of Cable Buyer following the closing of the merger.

 

Subject to the terms and conditions of the merger agreement, each of Cable Buyer, Metro Parent and Merger Sub has agreed to use its reasonable best efforts to obtain the equity and debt financing described in the equity and debt financing commitment letters obtained by Metro Parent, which we refer to as the Metro financing, and in the equity and debt financing commitments obtained by Cable Buyer, which we refer to as the Cable financing, as applicable, on the terms and conditions described in such financing commitments, including using its reasonable best efforts to:

 

 

 

Each of Cable Buyer and Metro Parent has agreed to keep the Company reasonably informed of the status of its efforts to arrange the Metro financing and the Cable financing and to give the Company prompt notice upon having knowledge of any breach by any party of any of the financing commitments or any termination of any of the financing commitments. Other than as described below, Cable Buyer and Metro Parent have agreed not to, without the prior written consent of the Company (not to be unreasonably withheld, conditioned or delayed), amend, modify, supplement or waive any of the conditions or contingencies to funding contained in the financing commitments (or any definitive agreements related thereto) or any other provision of, or remedies under, the financing commitments (or any definitive agreements related thereto), in each case to the extent such amendment, modification, supplement or waiver would reasonably be expected to have the effect of (i) adversely affecting in any material respect the ability of Cable Buyer, Metro Parent or Merger Sub to timely consummate the transactions contemplated by the merger agreement, (ii) amending, modifying, supplementing or waiving the conditions or contingencies to the financing in a manner materially adverse to the Company or the holders of shares of Company common stock or (iii) materially delaying the effective time or the closing of the merger.

 

Each of Cable Buyer, Metro Parent and Merger Sub may, and if all or any portion of the debt financing becomes unavailable (other than due to the failure of a condition to the consummation of the debt financing resulting from a breach of the representations, warranties, covenants or agreements of the Company set forth in the merger agreement), each of Cable Buyer, Metro Parent and Merger Sub has agreed to use its reasonable best efforts to: (i) arrange to promptly obtain the debt financing or such portion of the debt financing from alternative sources, in an amount sufficient, when added to the portion of the financing that is available, together with any cash or cash equivalents held by the Company (not needed for other purposes) at the effective time of the merger, to pay in cash all amounts required to be paid by Cable Buyer, Metro Parent, Merger Sub and the surviving corporation in connection with the transactions contemplated by the merger agreement, and (ii) obtain a new financing commitment letter and a new definitive agreement with respect thereto that provides for financing (A) on terms not materially less favorable, in the aggregate, to Cable Buyer, Metro Parent and Merger Sub, (B) containing conditions to draw and other terms that would reasonably be expected to affect the availability thereof that (1) are not more onerous, taken as a whole, than those conditions and terms contained in the debt financing commitments and (2) would not reasonably be expected to materially delay the effective time or the closing of the merger and (C) in an amount that is sufficient, when added to the portion of the financing that is available, together with any cash or cash equivalents held by the Company as of the effective time of the merger, to pay in cash all amounts required to be paid by Cable Buyer, Metro Parent, Merger Sub and the surviving corporation in connection with the transactions contemplated by the merger agreement.

 

We have agreed to cooperate reasonably with Cable Buyer, Metro Parent, Merger Sub and their representatives in connection with the arrangement and closing of the debt financing, including by:

 

 

 

We have also agreed to supplement and keep current certain of the financial information described above on a reasonably periodic basis and provide any supplements reasonably requested by Cable Buyer and Metro Parent so that they may access the financing markets.

 

Each of Cable Buyer, Metro Parent and Merger Sub has agreed not to (i) retain any financial advisor on an exclusive basis other than advisors to which the Special Committee consents (which consent shall not be unreasonably withheld, delayed or conditioned) or (ii) enter into any exclusivity, lock-up or other similar agreement, arrangement or understanding, with any bank or investment bank or other potential provider of debt or equity financing that could reasonably be expected to prevent such provider from providing or seeking to provide such financing to any third party in connection with a transaction relating to the Company or its subsidiaries.

 

The merger agreement contains additional agreements between us and Cable Buyer, Metro Parent and/or Merger Sub relating to, among other things:

 

 

The respective obligations of the Company, Cable Buyer, Metro Parent and Merger Sub to consummate the merger and the other transactions contemplated by the merger agreement are subject to the satisfaction (or waiver in writing by all parties, to the extent permitted by applicable law) of the following conditions:

 

 

The obligation of the Company to consummate the merger and the other transactions contemplated by the merger agreement is further subject to the satisfaction (or waiver in writing by the Company, to the extent permitted by applicable law) of the following further conditions:

 

 

 

The obligations of Cable Buyer, Metro Parent and Merger Sub to consummate the merger and the other transactions contemplated by the merger agreement are further subject to the satisfaction (or waiver in writing by Cable Buyer, Metro Parent and Merger Sub, to the extent permitted by applicable law) of the following further conditions:

 

 

 

 

The conditions to each of the parties’ obligations to consummate the merger are for the sole benefit of such parties and may be waived by such parties in whole or in part (to the extent permitted by applicable laws). We can provide no assurance that all of the conditions to each of the parties’ obligations to consummate the merger and the other transactions contemplated by the merger agreement will be satisfied or waived by the party permitted to do so.

 

The merger agreement may be terminated and abandoned at any time prior to the effective time of the merger, whether before or after any approval of the matters presented in connection with the merger by our stockholders (unless otherwise indicated below), by the mutual written consent of the Company, Cable Buyer and Metro Parent and in the other circumstances described below.

 

Either the Company, on the one hand, or Cable Buyer and Metro Parent, on the other hand, may terminate the merger agreement:

 

 

The Company may terminate the merger agreement:

 

 

Cable Buyer and Metro Parent may terminate the merger agreement:

 

 

 

We will be required to pay to Cable Buyer and Metro Parent a termination fee equal to $17.5 million, or if the merger agreement is terminated in order for the Company to enter into a transaction with respect to a superior proposal prior to 12:01 a.m. (Eastern time), on April 15, 2010, a fee equal to $10.0 million, if:

 

 

We will be required to pay to Cable Buyer and Metro Parent the amount of the actual documented, out-of-pocket expenses incurred by or on behalf of Cable Buyer, Metro Parent and either of their affiliates relating to the transactions contemplated by the merger agreement, up to a maximum of $6.0 million, if:

 

 

The Company is not required to reimburse the expenses of Cable Buyer and Metro Parent as described above if at the time of termination of the merger agreement, Cable Buyer, Metro Parent or Merger Sub is in material breach of any of its representations, warranties, covenants or other agreements contained in the merger agreement that would cause any of the conditions to the Company’s obligation to consummate the merger not to be satisfied. If the Company subsequently becomes obligated to pay the termination fee described above, then the Company will receive credit to the extent of the amount of any expenses previously paid to Cable Buyer or Metro Parent.

 

Cable Buyer and Metro Parent will be required to pay to the Company a reverse termination fee equal to $30.0 million if the merger agreement is terminated by the Company because:

 

 

The sponsor has agreed to guarantee the obligation of Cable Buyer and Metro Parent to pay the reverse termination fee described above pursuant to the limited guarantee. See “The Merger — Limited Guarantee” beginning on page  [  ] .

 

All fees paid in respect of any HSR Act or other regulatory filings (including in connection with Federal Communications Commission approvals, state public utility commission approvals and local franchising authority approvals) will be borne 50% by Cable Buyer and Metro Parent and 50% by the Company.

 

Except as described above, whether or not the transactions contemplated by the merger agreement are consummated, all costs and expenses incurred in connection with such transactions and the merger agreement will be paid by the party incurring or required to incur such expenses.

 

In addition to any other remedy to which they are entitled at law or in equity, the parties are entitled, subject to the limitations described below, to an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement, in each case, in the manner and subject to the conditions specified in the merger agreement.

 

Subject to the limitations described below, the merger agreement explicitly allows us to seek specific performance of Cable Buyer’s and Metro Parent’s obligations to seek to enforce the terms of the financing commitments obtained by Cable Buyer and Metro Parent against their lenders, the sponsor and any other applicable party to the fullest extent permissible pursuant to such financing commitments (or any definitive agreements related thereto) and applicable laws and to thereafter cause the transactions contemplated by the merger agreement to be consummated, in each case, if the conditions to the obligations of Cable Buyer, Metro Parent and Merger Sub to consummate the transactions contemplated by the merger agreement have been satisfied or waived (other than conditions which by their nature cannot be satisfied until the closing of the merger, but subject to the satisfaction or waiver of such conditions).

 

Notwithstanding the foregoing, we will be entitled to seek specific performance of Cable Buyer’s and Metro Parent’s obligations to cause the equity financing to be funded and to consummate the transactions contemplated by the merger agreement only in the event that (i) Cable Buyer, Metro Parent and Merger Sub are then required to consummate the transactions contemplated by the merger agreement pursuant to the terms and conditions thereof, (ii) the debt financing has been funded or will be funded at the closing of the merger if the equity financing is funded at the closing of the merger, (iii) Cable Buyer, Metro Parent and Merger Sub fail to complete the closing of the merger in accordance with the terms and conditions of the merger agreement, and (iv) we have irrevocably confirmed that if specific performance is granted and the equity financing and debt financing are funded, then the closing of the merger will occur.

 

At any time prior to the effective time of the merger, any provision of the merger agreement may be amended or waived if such amendment or waiver is in writing and signed, in the case of an amendment, by the Company, Cable Buyer, Metro Parent and Merger Sub, or in the case of a waiver, by the party against whom the waiver is to be effective. However, after approval of the merger agreement by the stockholders of the Company, if any such amendment or waiver requires further approval of the stockholders of the Company by applicable law or in accordance with the rules and regulations of the NASDAQ Stock Market, the effectiveness of such amendment or waiver will be subject to the approval of the stockholders of the Company.

 

At any time prior to the effective time of the merger, any party may, subject to applicable law, (i) waive any inaccuracies in the representations and warranties of any other party to the merger agreement, (ii) extend the time for the performance of any of the obligations or acts of any other party to the merger agreement or (iii) waive compliance by any other party to the merger agreement with any of the agreements contained in the merger agreement or, except as otherwise provided in the merger agreement, waive any of such party’s conditions.

MARKET PRICE OF COMPANY COMMON STOCK

 

The Company common stock is listed for trading on the NASDAQ Stock Market under the symbol “RCNI.” The table below sets forth, for the periods indicated, the high and low sales prices per share of Company common stock. No dividends were declared on the Company common stock during the periods covered by the table below. The merger agreement restricts us from paying dividends on the Company common stock prior to the consummation of the merger.

 

 

The closing price of the Company common stock on the NASDAQ Stock Market on March 4, 2010, the last trading day prior to the public announcement of the execution of the merger agreement, was $12.26 per share. On [     ] , 2010, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for the Company common stock on the NASDAQ Stock Market was $ [     ] per share of Company common stock. You are encouraged to obtain current market quotations for shares of the Company common stock in connection with voting your shares of Company common stock.

 

The table below sets forth as to each current director and executive officer of the Company and each person or entity who, to the knowledge of the Company, beneficially owns more than five percent of the Company common stock outstanding: (1) the number of shares of Company common stock beneficially owned by such person or entity and (2) the percentage of total shares of Company common stock outstanding that are beneficially owned by such person or entity. In the case of our directors and executive officers, the information presented is based upon representations made to us by our directors and executive officers and is not necessarily indicative of beneficial ownership for any other purpose.

 

In the table below, we have deemed a person or entity to be a “beneficial owner” of a security if that person or entity has or shares the power to vote or direct the voting of the security or the power to dispose of or direct the disposition of the security. Beneficial ownership includes any security with respect to which a person or entity has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. As of [     ] , 2010, there were [     ]  shares of Company common stock outstanding. Unless otherwise indicated in the footnotes to the tables, the information is presented as of [            ] , 2010.