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EX-31.3 - EX-31.3 - RCN CORP /DE/ | w78258exv31w3.htm |
EX-31.4 - EX-31.4 - RCN CORP /DE/ | w78258exv31w4.htm |
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K/A
(Amendment No. 1)
(Mark One) | ||
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2009 | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Commission file number 1-16805
RCN Corporation
(Exact name of registrant as
specified in charter)
Delaware | 22-3498533 | |
(State or other jurisdiction
of incorporation or organization) 196 Van Buren Street, Herndon, VA (Address of principal executive offices) |
(I.R.S. Employer Identification No.) 20170 (Zip Code) |
Registrants telephone number, including area code:
(703) 434-8200
Securities Registered Pursuant to Section 12(b) of the
Act:
None
Securities Registered Pursuant to Section 12(g) of the
Act:
Common stock, par value $0.01 per share
(Title of Classes)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act.): Yes o No þ
The aggregate market value of the outstanding common stock of
the Registrant held by non-affiliates as of June 30, 2009
based on the closing price of $9.30 on the NASDAQ was
$243.8 million. Shares reported on Schedule 13D or 13G
as being beneficially owned by a holder or group of holders who
collectively beneficially own 15% or more of the
registrants outstanding common stock have been excluded
from such calculation. Such exclusion, however, shall not
constitute an admission that such persons possess the power to
direct or cause the direction of the management and policies of
the registrant. There were 35,301,291 shares of voting
common stock with a par value of $0.01 outstanding at
April 12, 2010.
Indicate by check mark whether the registrant has filed all
documents and reports to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act 1934 subsequent to the
distribution of securities under a plan confirmed by a
court. Yes þ No o
DOCUMENTS
INCORPORATED BY REFERENCE
None.
RCN
CORPORATION AND SUBSIDIARIES
Form 10-K/A Annual Report
For the year ended December 31, 2009
(Amendment No. 1)
Form 10-K/A Annual Report
For the year ended December 31, 2009
(Amendment No. 1)
Table of Contents
2
Explanatory
Note
RCN Corporation (the Company, RCN,
we, us or our) is filing
this Amendment No. 1 on
Form 10-K/A
(this Amendment) to its Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 (the
Original Filing), which was originally filed with
the U.S. Securities and Exchange Commission (the
SEC) on March 9, 2010, solely to set forth
information required by Items 10, 11, 12, 13 and 14 of
Part III of
Form 10-K
because a definitive proxy statement containing such information
will not be filed within 120 days after the end of the
fiscal year covered by the Original Filing. This Amendment
amends and restates in its entirety Items 10, 11, 12, 13
and 14 of Part III and amends Part IV of the Original
Filing. Except as expressly set forth herein, this Amendment
does not reflect events occurring after the date of the Original
Filing or modify or update any of the other disclosures
contained therein in any way other than as required to reflect
the amendments described above. Accordingly, this Amendment
should be read in conjunction with the Original Filing and the
Companys other filings with the SEC.
3
PART III
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Information
About Our Directors
At the Annual Meeting of RCN stockholders held on June 2,
2009, the following individuals were elected to serve as
directors of the Company: Peter D. Aquino, RCNs President
and Chief Executive Officer, Jose A. Cecin, Jr., Benjamin
C. Duster, IV, Lee S. Hillman, Charles E. Levine and Daniel
Tseung. Mr. Hillman was appointed Non-Executive Chairman of
the Board of Directors. On April 7, 2009, in accordance
with RCNs Bylaws, the Board of Directors approved a
reduction in the number of seats on RCNs Board of
Directors from seven to six members, effective immediately
following the 2009 Annual Meeting. In October 2009, the Board of
Directors approved an increase in the number of seats on
RCNs Board of Directors from six to eight members. On
October 15, 2009, Mr. Kurt M. Cellar and
Mr. Casimir S. Skrzypczak were appointed to the Board of
Directors. During 2009, the Board of Directors retained a
professional search firm to identify potential candidates for
the Board of Directors.
Director
Qualifications
The Board of Directors is comprised of individuals with diverse
experience. In evaluating the suitability of individual
candidates for the Board of Directors, the Board considers a
number of relevant factors, including, but not limited to:
(i) a general understanding of marketing, finance,
corporate strategy and other elements relevant to the operations
of a publicly-traded company in todays business
environment; (ii) an understanding of the Companys
business; (iii) educational and professional background;
and (iv) character.
The following paragraphs provide information about each member
of our Board of Directors. The information presented includes
information that each director has given us about his age, all
positions he holds, his principal occupation and business
experience for the past five years and the names of other
publicly-held companies of which he currently serves as a
director or has served as a director during the past five years.
In addition to the information presented below regarding each
directors specific experience, qualifications, attributes
and skills that led our Board of Directors to the conclusion
that he should serve as a director, we also believe that all of
our directors have a reputation for integrity, honesty and
adherence to high ethical standards.
4
Director |
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Name of Director
|
Age
|
Since
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Peter D. Aquino
|
49 | Mr. Aquino is President and Chief Executive Officer of RCN Corporation and has been a board member since December 2004. Under his leadership, RCN has expanded beyond the competitive residential Triple Play cable business and into enterprise and carrier accounts primarily through utilizing existing RCN fiber and through acquisitions, including: Starpower in Washington, D.C., ConEd Communications in New York, and Northeast Optical Networks (NEON) in New England. Prior to joining RCN, Mr. Aquino was Senior Managing Director of Communications Technology Advisors LLC, focused on restructuring telecom and media companies from 2001 to 2004. During RCNs restructuring in 2003 and 2004, the Company retained Mr. Aquino as its operations advisor, and later named him President and CEO as part of the new management team at emergence from bankruptcy in December 2004. Mr. Aquinos international experience includes the launch of Veninfotel (now NetUno) in Caracas, Venezuela and eight other cities from 1995 through 2000. As Veninfotels Chief Operating Officer, Mr. Aquino led the design, construction, and operation of the first integrated Triple Play and fiber private network company in Latin America. Prior to living overseas, Mr. Aquino worked at Bell Atlantic (now Verizon) from 1983 to 1995. There he advanced through various departments including: finance, marketing, regulatory, and ultimately corporate development in the early 1990s focused on cable and wireless acquisitions. Mr. Aquino is a graduate of Montclair State University in New Jersey and the Graduate School of Business at George Washington University in Washington, D.C. He currently serves on the boards of Primus Telecom and the United Way of America. We believe Mr. Aquinos qualifications to serve on our Board of Directors include his more than 25 years of experience in the telecommunications industry, including five years as our Chief Executive Officer. | 2004 | |||||||
José A. Cecin, Jr.
|
46 | Mr. Cecin is Executive Vice President and Chief Operating Officer of RCN Corporation and has been a board member since April 2009. Prior to assuming his current position as Chief Operating Officer in September 2009, Mr. Cecin was the President and founder of Lumina Advisors, a strategy, operations and corporate development advisory company. From 2003 to 2008, Mr. Cecin was Managing Director and Group Head of the Communications Investment Banking practice at BB&T Capital Markets, the investment banking division of BB&T Corporation. In 1999, he co-founded Cambrian Communications, a facilities-based telecommunications service provider, where he served as Chief Operating Officer. Mr. Cecin was also a founder of Wave International, a financier and builder of telecommunications infrastructure in emerging markets, where from 1996 to 1999 he helped acquire, fund and build out competitive telecommunications infrastructure in Venezuelas five largest cities. Mr. Cecin also previously served as Managing Director of Corporate Development at Bell Atlantic Corporation (now Verizon). Mr. Cecin is a director of Arbinet-the Exchange Inc. From 2008 to 2010, he served as an independent director of SkyTerra Communications, a satellite services company. From 2004 to 2007, he served as a director of NEON Group, Inc., which was acquired by RCN in 2007. He also served as an officer in the United States Armys 25th Infantry Division. Mr. Cecin earned a BS degree in Electrical Engineering from the United States Military Academy at West Point and an MBA from Stanford University. We believe Mr. Cecins qualifications to serve on our Board of Directors include his experience in both the telecommunications and finance sectors, as well as his service on the Board of Directors of other public companies. | 2009 |
5
Director |
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Name of Director
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Age
|
Since
|
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Kurt M. Cellar
|
40 | Since January 2008, Mr. Cellar has been a consultant to companies in the telecommunications, retail, home building and insurance industries. He has extensive experience in telecommunications as both an investor and board member. As the lead director in Telcove (formerly known as Adelphia Business Solutions), he was instrumental in the companys turnaround, growth and eventual sale to Level 3 Communications. Mr. Cellar worked for the hedge fund Bay Harbour Management L.C. from 1999 to 2008 and was partner and portfolio manager from 2003 until 2008. Prior to joining Bay Harbour, Mr. Cellar was with the private equity firm Remy Investors. Before that, he was a strategy consultant at LEK/Alcar. He is currently a director of Home Buyers Warranty. Mr. Cellar has a Masters in Business Administration from the Wharton School of Business and a BA in Economics/Business from the University of California, Los Angeles. Mr. Cellar is a Chartered Financial Analyst. We believe Mr. Cellars qualifications to serve on our Board of Directors include his expertise in the telecommunications sector and his financial acumen. | 2009 | |||||||
Benjamin C. Duster, IV
|
49 | Mr. Duster owns and manages B. Duster & Company, LLC, a strategic and financial consulting firm located in Atlanta, Georgia. He is also a senior advisor at Watermark Advisors LLC, a broker-dealer headquartered in Greenville, South Carolina specializing in providing mergers and acquisitions, private capital financing, valuation, and financial and strategic modeling solutions to middle market, privately-owned businesses. From October 2001 through May 2005, Mr. Duster was a partner at Masson & Company, LLC, an interim and crisis management and financial restructuring firm and has extensive experience in turnaround management and restructuring. From 1997 to 2001, Mr. Duster was a Managing Director at Wachovia Securities where he headed the Mergers & Acquisitions advisory business focusing on middle market companies. From 1980 to 1997, Mr. Duster was at Salomon Brothers Inc., where his positions included associate in Salomons proprietary Venture Capital Group and, later, Vice President in the Mergers & Acquisitions Group specializing in bankruptcy reorganizations, financial restructurings and acquisitions of distressed companies. Mr. Duster is a graduate of Yale College, Harvard Business School and Harvard Law School. He served as Chairman of the Board of Algoma Steel, Inc. from February 2002 through June 2007, and currently serves as a director of Catalyst, Inc. and River Cities Capital Fund as an Advisory Board member. We believe that Mr. Dusters qualifications to serve on our Board of Directors include his extensive financial advisory experience across a number of sectors. | 2004 |
6
Director |
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Name of Director
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Age
|
Since
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Lee S. Hillman
|
54 | Since 2003, Mr. Hillman has served as President of Liberation Advisory Group and Liberation Management Services, both private management consulting firms. Since January 2009, Mr. Hillman has also served as Chief Executive Officer of Performance Health Systems, LLC, an early-stage business distributing bioDensity branded, specialty health and exercise equipment. From February 2006 to May 2008, Mr. Hillman served as Executive Chairman and Chief Executive Officer of Power Plate International, a global business manufacturing and distributing high-tech, Power Plate branded health and exercise equipment. From 2005 to February 2006, he was President of Power Plate North America, then the exclusive, independent distributor of Power Plate International in North America. From 1996 to 2002 Mr. Hillman served as Chief Executive Officer, President and a director (and from 2000 to 2002 Chairman of the Board) of Bally Total Fitness Holding Corporation, a publicly-traded operator of health and fitness clubs, and from 1991 to 1996, he was Executive Vice President and Chief Financial Officer of Bally Entertainment Corporation, a publicly-traded diversified operator of hotels, casino resorts and other leisure properties. Mr. Hillman is a graduate of the Wharton School of Finance of the University of Pennsylvania and the Graduate School of Business of the University of Chicago. Mr. Hillman serves as a director of Lawson Products Inc. and a trustee of Adelphia Recovery Trust. We believe Mr. Hillmans qualifications to serve on the Board of Directors include his considerable experience in the consumer-service industry and financial restructuring, as well as his corporate governance expertise. | 2004 | |||||||
Charles E. Levine
|
57 | Mr. Levine was appointed to the RCN Board of Directors in July 2008. He is an independent director of technology focused companies and a management consultant. Mr. Levine has developed brands for large businesses, most notably Sprint PCS (now Sprint Nextel) and AT&T. Mr. Levine began his career at Procter & Gamble Company, where he managed leading brands, and General Electric, where he rose to the position of general manager, Home Control Products, Consumer Electronics. He has held senior management positions at CAD Forms Technology and Octel Communications (now part of Lucent). He currently serves as Chairman of the Board of Directors of Openwave Systems and Sierra Wireless. He also serves on the board of Sagem Wireless in Paris. Mr. Levine holds a masters degree in business administration (Marketing) from the J.L. Kellogg Graduate School of Management-Northwestern University, and a bachelors degree in Economics from Trinity College. We believe Mr. Levines qualifications to serve on the Board of Directors include his extensive marketing experience in the consumer goods sector, as well as his executive leadership experience. | 2008 | |||||||
Casimir S. Skrzypczak
|
69 | Mr. Skrzypczak is the former Senior Vice President of Customer Advocacy for Cisco Systems. He was responsible for the delivery and support of Ciscos Products and Solutions for the Service Provider Market. He also oversaw Ciscos worldwide Professional Services Group. Prior to assuming this position, he was Corporate Vice President and Group President of Professional Services at Telecordia Technologies. Mr. Skrzypczak was formerly the president -- NYNEX Science & Technology and vice president Network & Technology Planning responsible for the formulation of NYNEXs technology plans and network architecture, including the management and direction of its standards strategies and activities, and for the direction of NYNEXs research and development programs, including the operation of the NYNEX Science & Technology Center. He is a widely recognized expert on telecommunications network planning and evolution. Mr. Skrzypczak serves on the board of RF Microdevices and JDS Uniphase Corporation. Mr. Skrzypczak holds a bachelors degree in mechanical engineering from Villanova University and a masters degree in operations research from Hofstra University. He served as a Lieutenant in the U.S. Navy from 1963-1967. We believe Mr. Skrzypczaks qualifications to serve on the Board of Directors include his many years of experience in the technology sector and his operational expertise. | 2009 |
7
Director |
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Name of Director
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Age
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Since
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Daniel Tseung
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38 | Mr. Tseung currently serves as Managing Director at Sun Hung Kai Properties Direct Investments Ltd., the private equity division of Sun Hung Kai Properties Group, one of Asias largest conglomerates, which he joined in 2000 and whose business interests include telecommunications, real estate, financial services and infrastructure. From 1997 to 2000, Mr. Tseung worked in the Technology & Communications Group of GE Equity, the private equity arm of GE Capital and from 1993 to 1995, at DE Shaw, a major global hedge fund. He also serves as a director of Owens Corning, a Fortune 500 company and world leader in supplying building materials and composite solutions, and Chinacast Education Corporation, a premier educational services provider in the Peoples Republic of China. Mr. Tseung holds a bachelors degree from Princeton University and a masters degree from Harvard University. We believe Mr. Tseungs qualifications to serve on the Board of Directors include his experience in the financial and investment sectors. | 2004 |
Corporate
Governance
The Board of Directors is responsible for oversight of our
operations and is committed to corporate governance practices
that ensure that the Company operates with the highest
professional, ethical, and legal standards.
Corporate
Governance Guidelines
RCNs Board of Directors has adopted corporate governance
guidelines. These guidelines address items such as the
qualifications of RCNs directors and nominees and
corporate governance policies applicable to the Companys
day to day business operations. The corporate governance
guidelines are posted under the Board of Directors
section of our website under About RCN at
www.rcn.com. The charters for each of the standing
Committees of the Board of Directors can also be found in the
Board of Directors section of the Companys
website.
Board
Leadership Structure
We separate the roles of our Chief Executive Officer and
Chairman of the Board in recognition of the differences between
these two roles. The CEO is responsible for setting the
strategic direction of the Company and managing the day to day
leadership and performance of the Company, while the Chairman of
the Board provides guidance to the CEO and other senior
executives of the Company and sets the agenda for Board meetings
and presides over meetings of the full Board. The Chairman of
the Board is not an employee of the Company and is
independent as defined by the listing requirements
of The Nasdaq Global Select Market (Nasdaq).
Both the CEO and the COO of the Company currently serve as
non-independent members of the Board of Directors. We have found
that the CEO is the most knowledgeable member of the Board of
Directors with respect to the risks that the Company may be
facing. The COO is most familiar with the financial and
operational aspects of the residential/SMB segment, which
comprises approximately 75% of the Companys revenue. Since
both the CEO and COO are not independent as defined
by the listing requirements of Nasdaq, we have six independent
members of the Board of Directors. In addition, each of our
primary Board Committees Audit, Compensation and
Nominating/Corporate Governance is comprised solely
of independent directors, which we believe provides an
appropriate balance that best serves the needs of the Company
and its stockholders.
Board
Oversight of Risk
Our Board of Directors recognizes that, although risk management
is primarily the responsibility of our management team, the
board plays a critical role in the oversight of risk. The Board
of Directors believes that an important part of its
responsibility is to assess the major risks the Company faces
and to review the
8
Companys options for monitoring and controlling these
risks. The Board of Directors has delegated responsibility for
the Companys overall risk assessment and risk management
policies to the Audit Committee. The Audit Committee also has
specific responsibility for oversight of risks associated with
financial accounting and audit, internal control over financial
reporting and investments, including the Companys risk
assessment and management policies. The Compensation Committee
oversees the risks relating to the Companys compensation
policies and practices, as well as management development and
leadership succession in the Company. Through the regular
reports from the Audit and Compensation Committees, the Board of
Directors is able to better understand the Companys risk
identification, risk management and risk mitigation strategies.
The Board of Directors as a whole examines specific business
risks in its regular reviews of the individual business units
and also on a Company-wide basis as part of its strategic
reviews.
Director
Attendance
With one exception, all directors attended at least 75% of the
Board of Directors meetings and meetings held by Committees of
which they were members. Prior to becoming COO of the Company,
Mr. Cecin was an independent member of the Compensation
Committee. During negotiations between Mr. Cecin and the
Compensation Committee related to his employment agreement for
the COO role, Mr. Cecin recused himself from all meetings
of the Compensation Committee. In 2009, the Board of Directors
met 18 times, the Audit Committee met nine times, the
Nominating/Corporate Governance Committee met six times, the
Compensation Committee met 11 times and the Special Committee
met four times. The Executive Committee did not meet during
2009. In addition, the Board of Directors believes it is
important for its members to attend the Annual Meetings of
stockholders of the Company and therefore the directors are
encouraged to attend all Annual Meetings. All members of the
Board elected at the Companys 2009 Annual Meeting also
attended the Companys 2009 Annual Meeting, other than
Mr. Cecin who was absent from the meeting for personal
reasons.
Contacting
the Board of Directors
Stockholders and other interested parties who wish to
communicate with RCNs directors may address their
correspondence to the Board, to a particular director, to the
non-employee directors or to any other group of directors or
Committee(s) of the Board, in care of Secretary, RCN
Corporation, 196 Van Buren Street, Herndon, VA 20170. All such
communications are reviewed promptly and, as appropriate,
forwarded to either the Board, the relevant Committee(s) of the
Board or individual Board or Committee member(s) based on the
subject matter of the communication.
Committees
Committee
Composition
RCN has established Audit, Compensation, Nominating/Corporate
Governance, Special and Executive Committees. Set forth below is
information regarding the composition of each Committee. Note
that Mr. Cellar and Mr. Skrzypczak were appointed to
the Board of Directors effective October 15, 2009.
Following his appointment as the Chief Operating Officer of the
Company on September 28, 2009, Mr. Cecin resigned from
the Audit and Compensation Committees but remained on the Board
of Directors as a non-independent member of the Board of
Directors.
Executive
Committee
The Executive Committee, pursuant to the Executive Committee
Charter, assists the Board of Directors in the oversight of RCN,
including reviewing, evaluating and making recommendations or
taking action on behalf of the Board regarding any such matters
the Board delegates to the Executive Committee. The Executive
Committee consists of the following three directors:
Mr. Hillman (Chairman), Mr. Aquino and Mr. Tseung.
9
Nominating/Corporate
Governance Committee
The Nominating/Corporate Governance Committee, pursuant to the
Nominating/Corporate Governance Committee Charter, has
responsibility for developing, reviewing and recommending to the
Board of Directors, as part of the Corporate Governance
Guidelines, the criteria for the selection of new members of the
Board and its Committees. This includes criteria relating to
conflicts of interest applicable to the members of the Board of
Directors, expertise required for members of the Board of
Directors and outside demands on members of the Board of
Directors, including other directorships. While the
Nominating/Corporate Governance Committee does not have a formal
policy with regard to the consideration of diversity in
identifying director nominees, the Nominating/Corporate
Governance Committee endeavors to identify directors with a
variety of complementary skills so that, as a group, the Board
of Directors will possess the appropriate talent, skills and
expertise to oversee the Companys businesses. The
Nominating/Corporate Governance Committee evaluates for the
Board the Committee structure and the effectiveness, frequency
and productiveness of Board and Committee meetings. The
Nominating/Corporate Governance Committee also evaluates and
makes recommendations to the Board regarding the adequacy of
corporate governance policies.
The Nominating/Corporate Governance Committee Charter requires
the Committee to employ a process to identify and evaluate
individuals qualified to become members of the Board of
Directors, including individuals proposed for consideration by
RCNs stockholders and existing members of the Board of
Directors. The Nominating/Corporate Governance Committee has
developed an identification and evaluation process and intends
for stockholder nominees to be viewed in substantially the same
manner as other nominees. To recommend a prospective nominee for
the Nominating/Corporate Governance Committees
consideration, stockholders should submit the candidates
name, qualifications and other information as required by the
Companys Bylaws to RCNs Secretary in writing at the
following address: 196 Van Buren Street, Herndon, VA 20170. The
Nominating/Corporate Governance Committee consists of the
following three directors, each of whom is independent, as
defined under the listing standards of Nasdaq: Mr. Levine
(Chairman), Mr. Skrzypczak and Mr. Tseung.
Compensation
Committee
The Compensation Committee, pursuant to the Compensation
Committee Charter, discharges the Board of Directors
responsibilities on matters relating to the compensation of the
Chief Executive Officer and other senior executives. The
Compensation Committee annually reevaluates the Companys
strategic objectives and the performance of the executive team
and, if necessary, makes compensation adjustments that it
believes are necessary to keep management incentives aligned
with Company objectives, while assuring the retention of key
employees. The Compensation Committee also has the
responsibility to make recommendations to the Board of Directors
on matters related to director compensation and to review plans
concerning the orderly succession of senior officers and key
management personnel. The Compensation Committee also
administers the Companys 2005 Stock Compensation Plan (the
2005 Stock Plan). The Compensation Committee
consists of the following three directors, each of whom is
independent, as defined under the listing standards of Nasdaq:
Mr. Tseung (Chairman), Mr. Cellar and Mr. Levine.
Audit
Committee
The Audit Committee, pursuant to the Audit Committee Charter,
has responsibility for overseeing and evaluating (1) the
integrity of RCNs financial statements,
(2) RCNs compliance with legal and regulatory
requirements, (3) the qualifications and independence of
RCNs independent registered public accounting firm and
(4) the performance of RCNs internal audit function
and independent registered public accounting firm. In addition,
the Audit Committee prepares an Audit Committee Report as
required by the SEC, which is included in this Amendment. The
Audit Committee consists of the following three directors, each
of whom is independent, as defined by applicable SEC rules and
the listing standards of Nasdaq: Mr. Duster (Chairman),
Mr. Cellar and Mr. Skrzypczak. The Board of Directors
has determined that Mr. Duster is an audit committee
financial expert, as defined under applicable rules of the
SEC.
10
Special
Committee
The Special Committee has responsibility for reviewing,
negotiating and otherwise responding to any proposals related to
any strategic transactions with the Company that may be received
from time to time. The Special Committee is also empowered to
establish, approve, modify, monitor and direct the process and
procedures related to the receipt, review and evaluation and
negotiation of any potential strategic transaction, including
the authority to determine not to proceed with any such process,
procedures, review or evaluation. The Special Committee has the
authority to retain financial, legal and other advisors as
deemed necessary to advise the Special Committee in carrying out
its responsibilities. The Special Committee is authorized to
negotiate the terms of any potential transaction and to make a
recommendation to the Board of Directors with respect to the
advisability of the transaction. The Special Committee consists
of the following four directors, each of whom is independent, as
defined under the listing standards of Nasdaq: Mr. Hillman
(Chairman), Mr. Cellar, Mr. Duster and Mr. Tseung.
The Special Committee is not a standing committee of the Board
of Directors. The Special Committee was formed in November 2009
for the specific purpose of overseeing recent inquiries received
by the Company relating to proposed mergers and acquisitions
activity. As previously disclosed by the Company, the Company
entered into an Agreement and Plan of Merger on March 5,
2010 pursuant to which, and subject to the terms and conditions
of which, the Company has agreed to be acquired by affiliates of
ABRY Partners.
Executive
Officers of the Company
Peter D. Aquino, 49, serves as President and Chief
Executive Officer. See Director Qualifications above
for Mr. Aquinos biographical information.
Jose A. Cecin, 46, serves as Executive Vice President and
Chief Operating Officer. See Director Qualifications
above for Mr. Cecins biographical information.
Michael T. Sicoli, 39, serves as Executive Vice President
and Chief Financial Officer. Since joining RCN in May 2005,
Mr. Sicoli has played a lead role in establishing and
executing the Companys strategy, driving revenue growth
and significant margin expansion in the Companys core
residential business, diversifying into the commercial fiber
business through acquisitions and organic investments, improving
the Companys capital structure through divestitures, a
large recapitalization and share repurchases, and positioning
the Company to generate substantial free cash flow. Prior to
joining RCN, Mr. Sicoli spent over seven years at Nextel,
where he held a number of positions of increasing authority
within the companys finance organization, including his
most recent position of Vice President & Assistant
Treasurer, which he held beginning in 2002. From 1998-2002,
Mr. Sicoli was instrumental in helping Nextel successfully
plan for and manage acquisitions, network deployment, subscriber
growth and margin expansion. From 2002-2005, he played a key
role in Nextels dramatic capital structure transformation.
Prior to joining Nextel, he worked for both Deloitte Consulting
and Accenture in Washington, D.C. Mr. Sicoli holds an
M.B.A. from The University of Virginia, Darden Graduate School
of Business Administration, and a B.A. in Economics from The
College of William and Mary.
Felipe Alvarez, 49, serves as Senior Vice President and
President of RCN Metro Optical Networks where he is responsible
for the performance of RCNs telecommunications business
unit. From 1999 until joining RCN in 2006, he was Chief
Operating Officer of Con Edison Communications Inc. Prior to
joining Con Edison Communications in 1999, Mr. Alvarez was
responsible for marketing and sales for an
IP-based
solutions
start-up
company funded by NYNEX/Bell Atlantic. Mr. Alvarez holds a
Bachelor of Engineering degree from the City College of New York
as well as an M.B.A. from New York University.
PK Ramani, 52, serves as Senior Vice President, Sales and
has served in various other capacities at RCN since 1999. Prior
to serving in his current role, Mr. Ramani was President,
RCN Business Services and Senior Vice President, Customer Care.
Mr. Ramani was Senior Vice President and General Manager of
our New York Market from October 2003 to March 2007 and Senior
Vice President, Operations Support, with responsibility for
managing RCNs Customer Care and Information Technology
groups from June 2001 to October 2003. From May 1999 through
June 2001, Mr. Ramani was Senior Vice President of Customer
Care. Prior to joining
11
RCN, Mr. Ramani served as Group Vice President, Customer
Operations at Primestar, Inc. Mr. Ramani holds an M.B.A.
from the New York Institute of Technology.
Richard Ramlall, 52, serves as Senior Vice President,
Strategic and External Affairs and Programming. Prior to joining
RCN in March 2005, Mr. Ramlall served as Senior Managing
Director and Executive Vice President of Spencer Trask Media and
Communications Group, LLC (a division of New York based venture
capital firm Spencer Trask & Company) based in Reston,
Virginia, from June 1999 to March 2005. From March 1997 to June
1999, Mr. Ramlall served as Vice President and Managing
Director for Strategy, Marketing and International Government
Affairs for Bechtel Telecommunications. Prior to that,
Mr. Ramlall was Executive Director for International
Business Affairs for Bell Atlantic International and spent over
18 years at Bell Atlantic. In 1990, Mr. Ramlall was
selected to serve a one year appointment under the Presidential
Exchange Executive Program of the White House. Mr. Ramlall
holds a B.S. in Business Administration and an M.G.A.
(Technology Management) from the University of Maryland.
Leslie Sears, 44, serves as our Senior Vice President and
Controller and has served in that role since May 2006.
Prior to joining RCN, Ms. Sears spent over seven years at
Gannett, where she held a number of positions of increasing
authority within the companys finance organization,
including her most recent position of Assistant Controller.
Prior to joining Gannett, Ms. Sears was a Senior Audit
Manager with PriceWaterhouseCoopers, LLP where she worked from
August 1989 to June 1998. Ms. Sears received her B.S.
degree in Accounting from the University of Virginia and is a
Certified Public Accountant.
Code of
Business Conduct
RCN adopted a revised Code of Business Conduct on July 1,
2007 that applies to all directors, officers and employees of
RCN. This Code can be found through the RCN website at
www.rcn.com (under About RCN and then
Board of Directors). If RCN makes any substantive
amendments to this Code or grants to any of its executive
officers or members of its Board of Directors any waiver,
including any implicit waiver, from any of the provisions of
this Code, RCN will disclose the nature of such amendment or
waiver on its website or in a report on
Form 8-K.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires directors, executive officers, and holders of
more than 10% of our common stock to file with the SEC initial
reports of ownership and reports of changes in ownership of
common stock and other equity securities of RCN. To the
knowledge of RCN and based solely on a review of such reports
and amendments thereto furnished to RCN during the fiscal year
ended December 31, 2009, all Section 16(a) filing
requirements applicable to our directors, executive officers and
greater than 10% beneficial owners were complied with during the
fiscal year ended December 31, 2009, except that Plainfield
Asset Management LLC, a beneficial owner of more than 10% of our
common stock, and certain of its affiliates failed to make
numerous Form 4 filings on a timely basis.
ITEM 11. | EXECUTIVE COMPENSATION |
Compensation
Discussion and Analysis
Background
The Companys President and Chief Executive Officer, Peter
D. Aquino, its Executive Vice President and Chief Operating
Officer, Jose A. Cecin, its Executive Vice President and Chief
Financial Officer, Michael T. Sicoli, its Senior Vice President
of Sales, PK Ramani, and the President of its RCN Metro
business, Felipe Alvarez, are each Named Executive
Officers of the Company. In addition, we include John
Filipowicz, the Companys former President of Residential
Markets, who left the Company in August 2009, among our
Named Executive Officers.
The Company entered into a new employment agreement with
Mr. Aquino to continue as the Companys President and
Chief Executive Officer effective as of December 21, 2007,
which employment agreement provides for an employment term
ending on December 21, 2010. The Company entered into an
employment
12
agreement with Mr. Cecin at the time that he commenced
employment with the Company on September 28, 2009. On that
same date, the Company also entered into an employment agreement
with Mr. Sicoli. The Company does not maintain employment
agreements that provide for an employment term with any of its
other Named Executive Officers.
Compensation
Philosophy
The Board of Directors seeks to attract and retain senior
executives who possess the leadership and managerial skills to
develop corporate strategy and to execute that strategy
successfully under the oversight of the Board of Directors. The
Compensation Committee therefore designs compensation programs
that offer total compensation opportunities substantial enough
to attract and retain talented executives, but which are closely
tied to the Company achieving performance milestones identified
by the Board of Directors. The Company has established
pay-for-performance
compensation programs for all levels within RCN, including the
Named Executive Officers. For our executive officers who perform
their jobs at a corporate level, we design the incentive
compensation to reward Company-wide performance. The design of
the incentive compensation program for these executive officers
differs from those officers and employees whose responsibilities
are specific to our business units, for whom we design incentive
compensation to reward achievement based on a combination of
both Company-wide objectives and business unit/geographic market
achievement.
For 2009, Mr. Aquino and Mr. Sicoli were awarded
incentive compensation based on Company-wide objectives. Upon
commencing employment on September 28, 2009, Mr. Cecin
assumed responsibility for the revenue and substantially all of
the operations of our Residential-Small/Medium Business (SMB)
segment. Therefore, Mr. Cecin was awarded compensation
based on a combination of both Company-wide objectives, the
performance of the Residential/SMB segment and the performance
of the SMB group. Mr. Ramani functioned for most of the
year as the head of Customer Care for the Residential/SMB
segment and for part of the year as the head of the SMB group,
and was therefore awarded incentive compensation based on a
combination of Company-wide objectives and the performance of
the Residential/SMB segment. Mr. Alvarez functioned as the
President of RCN Metro, the Companys commercial
telecommunications business unit, and was therefore awarded
incentive compensation based on a combination of both
Company-wide objectives and the performance of RCN Metro. Until
he left the Company in August 2009, Mr. Filipowicz
functioned as both the President of Residential Markets, as well
as the general manager of our Pennsylvania market, and was
therefore awarded incentive compensation based on a combination
of Company-wide objectives and the performance of both the
Residential/SMB segment as well as our Pennsylvania market.
In 2009, we offered a total compensation opportunity to senior
executives that we believed was competitive on the whole with
that offered by our peer group companies, taking into account
the Companys financial and competitive position. During
2009, the Company suspended its recurring annual wage increase
and, effective March 2009, the Company suspended its matching
contributions to the Companys 401(k) plan.
Similar to 2008, the key element of our total compensation
opportunity for Named Executive Officers in 2009 related to the
grants of equity compensation made by the Company. Prior to
2008, the Compensation Committee made grants of equity
compensation to executives in amounts designed to provide
compensation over a three-year period. As such, prior to 2008, a
substantial majority of outstanding equity compensation had been
granted in 2005. Our 2005 grants of equity compensation were
intended to provide, together with cash compensation, a
competitive compensation opportunity for our executives premised
on the Companys performance in 2005, 2006 and 2007. The
final vesting of these grants of equity compensation occurred in
May 2008.
In 2009, the Compensation Committee again determined that the
interests of our stockholders and senior executives were more
closely aligned by retaining an equity compensation program that
provides for annual grants of equity compensation. The
Companys annual grant program was designed to
set the target value of equity awards based upon a target dollar
value, with a portion of that value subject to achievement by
the Company of 2009 performance objectives set by the
Compensation Committee in early 2009. The achievement
percentages were determined in March 2010, based on the
Companys 2009 audited financial statements. These grants
vest over three years in June 2010, 2011 and 2012. Because the
value of equity
13
awards made under this annual grant program is calculated based
on actual achievement of performance objectives established one
year earlier, the Board is able to deliver compensation to the
Named Executive Officers that is more closely aligned with the
Companys overall performance.
In addition, during 2009, the Company offered a stock option
exchange program pursuant to which eligible employees could
exchange certain outstanding options for new options issued with
a more current strike price. The exchange program was structured
as a
value-for-value
exchange. Eligible employees that surrendered options received
new options covering a fraction of the number of shares that
were covered by the surrendered options. The exchange ratio
applied to a surrendered option depended on the original
exercise price and remaining term of the surrendered option.
Eligible employees were permitted to exchange all or none of
their eligible options on a
grant-by-grant
basis. The new options had a three year vesting period with
one-third of the new options vesting on each anniversary of the
grant date. 1,179,651 options were exchanged through the
program, and 383,975 options were issued with a strike price of
$9.05. Mr. Aquino was not eligible to participate in the
program, and Mr. Sicoli chose not to participate.
Mr. Cecin was not an employee at the time that the option
exchange program was offered.
As discussed in more detail below, our compensation programs
consist of the following components:
| base salary; | |
| short-term bonus; and | |
| equity compensation. |
Our compensation programs seek to pay short-term cash
compensation at or below the average short-term cash
compensation paid to executives at comparable companies. Our
compensation programs emphasize long-term, non-cash
compensation, and we seek to offer long-term non-cash
compensation having a potential realizable value at or above the
average fair value of long-term equity compensation paid to
executives at comparable companies. Despite the Companys
excellent operating results, the drop in the price of
U.S. stocks in 2009 significantly reduced the value of the
stock awards. The equity awards granted in August 2009 reflect
the reduced value of the Companys stock price during 2009.
However, the relatively low price at which the equity was issued
also provides the employees with the opportunity to earn a
significant profit if the stock rises in value.
In 2009, we again emphasized performance-based compensation as a
meaningful element of our executives total compensation
opportunity by granting restricted stock units to senior
executives which are half performance-based and half time-based
(with a three year vesting period on each).
The Compensation Committee retained Hay Group as independent
executive compensation consultants in 2009 to provide
benchmarking data and analysis to assist with designing and
implementing compensation programs that are consistent with this
philosophy for 2009. For our 2009 compensation program design,
we benchmarked ourselves against a peer group of the
following companies: Cbeyond, Cincinnati Bell, Consolidated
Communications Holdings, Earthlink, Knology, Mediacom, Ntelos
Holdings, Paetec Holding, Surewest Communications, TW Telecom,
Vonage and XO Communications. In addition, we also benchmarked
the RCN Metro segment against Abovenet, Cogent Communications,
Equinix, Switch & Data Facilities and Terremark.
The Company annually reviews the compensation payable to each
Named Executive Officer and senior executive for the coming
year. In the case of Mr. Aquino, this review occurred prior
to the Company negotiating the terms of a new employment
agreement with Mr. Aquino that was entered into on
December 21, 2007. Notwithstanding the Companys
compensation philosophy of providing short-term cash
compensation at or below the average of our peer group, the
Company determined to pay Mr. Aquino total cash
compensation slightly above the median cash compensation paid to
the chief executives of our peer group companies. In addition,
the Company agreed to pay Mr. Aquino long-term incentive
compensation in the form of performance-based and time-based
RSUs, which is in excess of the median long-term compensation
paid to executives at our peer group companies. The Company
determined that these compensation awards were appropriate in
light of both (i) the new responsibilities assumed by
Mr. Aquino following the departure of
14
James F. Mooney, our former Executive Chairman who was not
replaced, and (ii) the diminution in value of equity awards
made to Mr. Aquino in 2005. Mr. Aquino has satisfied
the performance objectives established by the Compensation
Committee. In January 2009, Mr. Aquino voluntarily
surrendered a portion of his outstanding stock options due to
the amount by which the exercise price of such stock options
exceeded the levels at which the Companys common stock
then traded.
With respect to the other Named Executive Officers, the Company
evaluates compensation based on the following factors:
| overall performance and effectiveness; | |
| increases or decreases in functional responsibilities from prior years; | |
| remaining unvested equity compensation; | |
| value of vested options; | |
| the availability of qualified successors to the executive; and | |
| developments in compensation practices at comparable companies, as well as at other companies that pose a recruitment threat to us for our key employees. |
During 2009, the Company entered into employment agreements with
Mr. Cecin and Mr. Sicoli. In accordance with the
Companys overall compensation philosophy, as discussed in
more detail above, Mr. Cecin and Mr. Sicoli will
receive total cash compensation at or slightly below the median
cash compensation paid to similar executives at our peer group
companies. The Company also agreed to pay Mr. Sicoli and
Mr. Cecin long-term compensation in the future in the form
of performance-based and time-based equity as determined by the
Compensation Committee. Neither Mr. Cecin nor
Mr. Sicoli have received an equity grant since the
execution of their respective employment agreements, other than
the 125,000 restricted stock units that Mr. Cecin received
in connection with the execution of his employment agreement. In
general, the Chief Executive Officer determines the compensation
offered to the other Named Executive Officers. The Compensation
Committee, in consultation with independent executive
compensation consultants retained by the Compensation Committee,
reviews those compensation levels for the coming year and
recommends any modifications to the Chief Executive Officer that
the Compensation Committee deems appropriate.
Components
of Executive Compensation
Salary. Base salary is one component of the
Companys overall compensation program, with our objective
to set base salary at a rate that is at or slightly below the
average base salary paid to executives at our peer group
companies. We annually review and adjust the base salary of our
Named Executive Officers to be commensurate with each such
executives rank and responsibilities (and consistent with
our overall compensation philosophy). For 2009, we evaluated
executive compensation with the assistance of Hay Group and
adopted an approach for setting executives base salaries
and other forms of compensation reflecting each individual
executives responsibilities and role with the Company. The
approach included an evaluation of the seniority of the
individual, the functional role of the position, the level of
the individuals responsibility, the importance of the
individual to the strategic plan of the Company, and the
availability of well-qualified candidates to replace that
individual. Following this evaluation, the Compensation
Committee reviewed the base salaries that had been recommended
by Mr. Aquino for all of the Named Executive Officers
(other than Mr. Aquino). These salary amounts ranged from
$235,000 to $350,000. We believe that such compensation levels
are consistent with our philosophy to pay base salary at or
below the average base salary paid at our peer group companies.
Annual Bonus. Annual, short-term cash bonuses
are intended to reward the Named Executive Officers (and the
other senior executives of the Company) for performance during
the year and are paid upon the achievement by the Company of
objectives determined by the Board of Directors at the beginning
of the year. We believe that the annual bonuses that we paid in
2010 with respect to the Companys 2009 performance are
consistent with our philosophy to pay annual bonuses in amounts
at or below the average annual bonuses paid
15
at comparable companies. These bonuses are recorded on the
Summary Compensation Table below in the column titled
Non-Equity Incentive Plan Compensation.
During 2009, the Company adopted the 2009 Short Term Incentive
Plan, or the 2009 Bonus Plan, which resulted in the payment of
bonuses to the Named Executive Officers in the aggregate amount
of approximately $1.16 million. The 2009 Bonus Plan used
the following Company-wide performance metrics and aggregate
bonus opportunity weighting:
Percentage of |
Achievement |
|||||||||||
Performance Metric
|
Annual Bonus | 2009 Target | Percentage | |||||||||
($ in millions) | ||||||||||||
Revenue
|
33.3 | % | 783 | 69 | % | |||||||
EBITDA
|
33.3 | % | 220 | 109 | % | |||||||
Free Cash Flow(1)
|
33.3 | % | 50 | 115 | % |
(1) | Excluding changes in working capital and other. |
We selected the performance metrics of the 2009 Bonus Plan
because each metric corresponded to a key 2009 business
objective of the Company and, taken as a whole, performance
against these objectives generally drives shareholder value.
Revenue represents overall growth in the business,
EBITDA represents improved operating margins and
ability to deliver services cost-effectively, and Free
Cash Flow is viewed by management and the overall markets
as a key metric of financial health. While we believed that the
specific goals of each metric were achievable at the time
established, the Company was required to exceed the prior
years financial performance and meet the strategic
operating objectives set by the Board of Directors in order to
receive the target payment amounts, and in most cases, any
payment amount, under the 2009 Bonus Plan. In addition, with
respect to the residential markets and SMB group, we conditioned
50% of the annual bonus target for business unit/geographic
market-level management employees on the revenue and EBITDA of
their specific market/group, and 25% of the annual bonus target
on the performance of the entire Residential/SMB segment, with
the remainder based on consolidated RCN performance. With
respect to the RCN Metro business segment, 75% of the annual
bonus target was based upon the performance of the RCN Metro
segment, with the remainder based on consolidated RCN
performance. A few other employees who support several business
segments
and/or
corporate level functions had an annual bonus target that was
weighted based on the units that they supported throughout the
year. If the Company or the applicable market exceeded the
performance metrics, the 2009 Bonus Plan provided for the
payment of greater than 100% of the prescribed bonus amount, up
to but not exceeding 150% of the prescribed bonus amount. In
March 2010, we paid approximately 98% of the corporate bonus
target for the 2009 fiscal year based on the revenue, EBITDA and
free cash flow results described above. Payments were made to
market-based employees at varying levels depending upon
market/business unit financial results.
In February 2010, the Compensation Committee approved the
financial objectives for the 2010 Short Term Bonus Plan (the
2010 Bonus Plan). The 2010 Bonus Plan continues to
place greater emphasis on performance within the Companys
two reporting segments: Residential/SMB and RCN Metro. Below is
the manner in which the employees total bonus opportunity
is allocated based on the achievement of performance objectives
set for the entire Company, for its two reporting segments, and
within the specific geographic markets of Residential/SMB.
Employees who do not work within one of the Companys
reporting segments, which we refer to as corporate employees,
receive a bonus based solely on the Companys overall
performance.
Percentage of |
||||||
Employee Business Unit
|
Performance Category
|
2010 Bonus | ||||
Residential/SMB
|
Total Company Results | 25 | % | |||
Residential/SMB Segment Results | 25 | % | ||||
Residential/SMB Market/Group Results | 50 | % | ||||
RCN Metro
|
Total Company Results | 25 | % | |||
RCN Metro Segment Results | 75 | % | ||||
Corporate
|
Total Company Results | 100 | % |
16
The 2010 Bonus Plan also establishes quantitative objectives
within each of the performance categories discussed above as
follows: (1) Total Company comprised of revenue (1/3),
EBITDA (1/3) and free cash flow (1/3); (2) Residential/SMB
segment, comprised of Residential/SMB revenue (40%), EBITDA
(40%) and EBITDA less CPE Capex (20%); (3) Residential/SMB
geographic markets comprised of market revenue (50%) and EBITDA
(50%); and (4) RCN Metro segment, comprised of Metro total
revenue (25%), gross and net install revenue (25%) and EBITDA
(50%).
Equity Compensation. The Company established
the 2005 Stock Plan in June 2005. The 2005 Stock Plan is the
primary means by which we provide long-term compensation and is
intended to further the growth and profitability of RCN by
increasing incentives and encouraging ownership of shares of
common stock by RCNs executives, employees and directors.
The 2005 Stock Plan is a primary compensation platform by which
RCN can attract and retain key executives and link executive
compensation to appreciation of RCNs stock price. In
designing equity compensation programs, we believe that the
compensation of our senior-most executives the
executives who have the greatest ability to influence our
performance should have substantial
performance-based vesting criteria, whereas lower-level
executives who execute the initiatives of our senior team should
generally have time-based vesting criteria.
Under the terms of the 2005 Stock Plan, the Company can issue,
among other instruments, options to purchase common stock as
well as shares of common stock that during their vesting period
cannot be sold for prescribed periods, which we refer to as
restricted stock. We are also able to issue restricted stock
units, or RSUs, which are a contractual right to receive
compensation in the form of shares of RCN common stock, and
which can appreciate in value as the trading price of RCN common
stock increases. The grants of RSUs made to each of the Named
Executive Officers in 2009 are set forth below in the
Grants of Plan Based Awards table. The RSU grants
made to the Named Executive Officers are consistent with our
philosophy to provide equity compensation with potential
realizable value at or above the average fair value of equity
compensation granted at comparable companies.
We deliver grants to award recipients on the grant date
equivalent in value to the targeted equity award dollar value
approved by the Compensation Committee in advance of the grant
date. The specific number of options, shares of restricted stock
or restricted stock units to be granted is determined by
dividing the targeted equity award dollar value applicable to
each type of award by the estimated potential realizable value
of each type of award on the grant date. In the case of stock
options, the estimated potential realizable value is determined
based on the Black Scholes formula, and in the case of
restricted stock or restricted stock units, the value is based
on the trailing
30-day
average closing price of the Companys common stock on the
grant date. We believe that delivering substantial compensation
to our senior executives based on the Companys success is
the most effective means of aligning the interests of our
management and stockholders. In general, grants of stock
options, restricted stock and RSUs under the 2005 Stock Plan are
subject to vesting over three years; however, in certain
instances where the option grant date appreciably lags the
initiation of the qualifying service period, the vesting
schedule is adjusted to reflect three year vesting from the
commencement of the applicable service period.
For 2009, the Company continued to follow the philosophy it had
developed in 2008 with respect to making annual grants based on
a targeted equity award dollar value. All of the Named Executive
Officers received restricted stock units, 50% of which will be
subject to performance based vesting (based on the
Companys achievement of 2009 financial performance
milestones) and 50% of which are subject to time-based vesting,
each vesting over a three year period. This program replaced the
Companys prior practice (before 2008) of making
multi-year grants to executives and employees, which practice
commenced upon the Companys emergence from bankruptcy in
2004. Because the value of equity awards made under this
newly-established annual grant program is determined based on
the Companys performance in 2009, the Board is able to
deliver compensation to the Named Executive Officers that is
more closely aligned with the Companys overall performance.
The Company determined the targeted equity award dollar value of
its 2009 RSU grants based on several factors, including
comparisons to (i) the estimated potential realizable value
(as of the grant date) of grants made in the prior year as well
as (ii) the value of equity awards made to executives at
peer group companies.
17
For comparison purposes, the targeted equity award dollar value
was expressed as a multiple of the Named Executive
Officers short-term cash compensation. Consistent with our
past practice of awarding equity compensation at or above the
levels awarded at our peer group companies, Mr. Aquino
received a grant of equity compensation equal to twice his
short-term cash compensation, and Mr. Sicoli received a
grant of equity compensation equal to 1.75 times his short-term
cash compensation, while the other Named Executive Officers
received equity compensation awards equal in value to 1.5 times
their base salaries. Mr. Sicolis award was granted
prior to the date that he entered into an employment agreement
in September 2009. Mr. Cecin was awarded 125,000 RSUs upon
joining the Company in September 2009.
Previously, the Compensation Committee had preferred to issue
stock options rather than restricted stock or RSUs because stock
options convey value only as our common stock price appreciates.
However, in certain cases we have issued restricted stock and
RSUs, particularly to our senior executives, to provide a
meaningful retention benefit for the Company when no other
significant retention incentive is in place. In addition, during
periods such as 2009, when the Companys share price
remained low (primarily as a result of the drop in prices of US
stocks) in spite of the Companys consistent financial
performance, we have issued RSUs to all of our employees,
including the Named Executive Officers, to improve retention by
ensuring some value in respect of the equity component of their
overall compensation, and to use the authorized share pool more
efficiently.
We generally grant equity compensation only during periods where
the Companys window for trading the common stock is open
pursuant to our Insider Trading Policy (which is formally
entitled the Companys Trading Policies and
Procedures & Section 16 Reporting and Filing
Responsibilities), other than when the Compensation
Committee determines that a grant is necessary, for example, in
connection with new hires or promotions. Because the
Compensation Committees schedule is generally determined
months in advance of its meetings, the proximity of any awards
to earnings announcements or other market events is coincidental.
Other
Benefits
The Company also provided benefits to its Named Executive
Officers in the form of life insurance and a matching
contribution to the Companys 401(k) plan. The Company
provided life insurance benefits in amounts up to two times the
Named Executive Officers base salary. Furthermore, the
Company provides a matching benefit to the Named Executive
Officers contributions to the Companys 401(k) plan
equal to 100% of the first three percent of contributions. The
Company contributions are 100% vested when made. The Company
suspended the 401(k) matching benefit in March 2009.
Severance
Payments
With respect to senior management, including Named Executive
Officers, the Company provides severance benefits that are
competitive in the market as consideration for employees
entering into non-competition agreements designed to protect the
Company for the period of time the Company believes appropriate
to maintain its competitive position. Upon termination of
employment (other than for cause), Mr. Aquino is entitled
to severance payments under his employment agreement, including
up to two years of continuation of salary, annual bonus and
health benefits. Pursuant to the terms of their respective
employment agreements, Mr. Cecin and Mr. Sicoli are
also entitled to receive severance benefits upon termination of
employment (other than for cause). The severance benefits
include 6 to 18 months of continuation of salary (depending
on the circumstances of the termination), annual bonus and
health benefits. With respect to other executives, RCN maintains
severance guidelines administered by the Compensation Committee
that provide for the other Named Executive Officers (for
terminations prior to a change of control and other than for
cause) to receive a lump-sum, cash severance payment in the
amount determined by the Company and the Named Executive Officer.
Upon termination of his employment in August 2009, John
Filipowicz, our former President, Residential Markets, received
the following benefits: (a) a gross severance payment of
$256,665 paid in one lump sum in September 2009,
(b) agreement by RCN to pay a ratable portion of his 2009
annual bonus, which payment of
18
$80,251 was paid in March 2010, and (c) continued vesting
of his outstanding equity awards scheduled to vest prior to
August 31, 2010.
Change
of Control
On July 3, 2008, the Company adopted the Amended and
Restated RCN Corporation Change of Control Severance Plan (the
Severance Plan), in which the Named Executive
Officers, other than Mr. Aquino, Mr. Cecin and
Mr. Sicoli, are participants. The purposes of the Severance
Plan are: (a) to encourage the Named Executive Officers to
remain with the Company until any change of control is completed
and (b) to encourage Named Executive Officers to remain
with the Company in the event that any such change of control is
not consummated. The Severance Plan was amended in July 2008
primarily to provide that outstanding equity awards of
participants in the Severance Plan would vest and become
exercisable if such participants are terminated following a
change of control, rather than upon the occurrence of a change
of control. In addition, the cash severance payments available
to participants in the Severance Plan were increased by the
amount of such participants annual target bonus. The
Severance Plan was also amended to provide that the Company
would not revoke the Severance Plan at the request of a third
party in contemplation of a change of control.
In general, a change of control under the Severance
Plan occurs when: (i) any person is or becomes a beneficial
owner of 50% or more of RCNs voting stock, (ii) any
merger, consolidation or other similar corporate transaction is
consummated or all or substantially all of the assets of RCN are
disposed of, in each case subject to certain exceptions,
(iii) a majority of the Board consists of individuals other
than the directors on the effective date of the Severance Plan
(or any successor to any such individual if such successor was
approved by a majority of the directors who then comprised the
incumbent directors) or (iv) RCN adopts any plan of
liquidation providing for the distribution of all or
substantially all of its assets. In addition, in general, a
qualifying termination means a termination of
employment that entitles a participant to severance benefits
provided for under the Severance Plan. In the event that both
triggers occur, a participant is entitled to continued payment
of base salary for twelve months, a payment equal to the
participants target bonus then in effect, a pro rated
annual bonus for the year of termination (based on an assumption
that the target bonus is achieved), and accelerated vesting of
all unvested, outstanding equity awards. The Severance Plan
would supersede the Companys ordinary severance
guidelines, such that participants in the Severance Plan would
be paid severance benefits under either the Severance Plan or
the Companys ordinary severance guidelines, not both.
Pursuant to his employment agreement, Mr. Aquino is
entitled to accelerated vesting of all unvested, outstanding
equity awards following the occurrence of a change of control.
Pursuant to the terms of their respective employment agreements,
Mr. Cecin and Mr. Sicoli are entitled to accelerated
vesting of all unvested, outstanding equity awards if their
employment is terminated (other than for cause) following the
occurrence of a change of control.
Set forth below are the severance and change of control benefits
that would have been payable to the Named Executive Officers,
assuming that a change of control had occurred on
December 31, 2009, and if their employment had been
terminated on that date (other than for cause) at a transaction
price of $10.85 per share of common stock, the closing price of
common stock on the Nasdaq on December 31, 2009.
Accelerated Equity |
Total Equity |
|||||||||||||||||||
Compensation |
Compensation |
Tax-Related Gross |
Continued Medical |
|||||||||||||||||
Executive
|
Severance ($) | Value(1)($) | Value(1)(2)($) | Up(3)($) | Benefits ($) | |||||||||||||||
Peter D. Aquino(4)
|
2,400,000 | 6,751,347 | 8,667,457 | 0 | 22,779 | |||||||||||||||
Jose A. Cecin(5)
|
853,125 | 1,519,716 | 1,571,840 | 0 | 17,085 | |||||||||||||||
Michael T. Sicoli(6)
|
866,250 | 1,579,771 | 2,330,070 | 0 | 17,085 | |||||||||||||||
Felipe Alvarez
|
375,000 | 794,269 | 892,733 | 0 | 0 | |||||||||||||||
PK Ramani
|
331,338 | 819,645 | 967,553 | 0 | 11,701 | |||||||||||||||
John D. Filipowicz(7)
|
375,000 | 226,000 | NA | 0 | 0 |
19
(1) | Based on the difference between stock option exercise price and an assumed transaction price of $10.85 per share, and not giving effect to any applicable federal, state, or local taxes applicable to such proceeds. With respect to shares that were not vested as of December 31, 2009, amounts do not give effect to any reduction in shares in respect of applicable taxes. Amounts include the benefit of a dividend of $9.33 per share applicable to shares of restricted stock outstanding and unvested as of December 31, 2009. | |
(2) | For the portion of any grant of restricted stock or restricted stock units that vested prior to December 31, 2009, amounts give effect to reduction in the overall shares held by such executive due to the repurchase of shares of such grant by the Company sufficient to cover any applicable tax withholding on the vesting date. | |
(3) | Represents payments to which the executive would be entitled pursuant to his employment agreement with the Company or the Severance Plan. Actual payments and the assumptions used in arriving at such amounts can only be determined at the time of such executives termination or a change of control and may differ materially from the amounts that would be set forth in this table based on assumptions as of December 31, 2009. Does not include any cost to the executive of non-competition or other restrictive covenants. Mr. Cecin is not entitled to any tax related gross up under the terms of his employment agreement. | |
(4) | Assuming that Mr. Aquino was terminated other than for cause (as defined in his employment agreement with the Company), amounts reflected under Severance are equal to two years of salary and bonus, as contemplated by his December 21, 2007 employment agreement. | |
(5) | Assuming that Mr. Cecin was terminated other than for cause (as defined in his employment agreement with the Company), amounts reflected under Severance are equal to 1.5 years of salary and bonus, as contemplated by his September 28, 2009 employment agreement. | |
(6) | Assuming that Mr. Sicoli was terminated other than for cause (as defined in his employment agreement with the Company), amounts reflected under Severance are equal to 1.5 years of salary and bonus, as contemplated by his September 28, 2009 employment agreement. | |
(7) | Mr. Filipowicz entered into a Severance and Release Agreement with the Company in September 2009, pursuant to which 5,329 RSUs and 10,889 stock options were immediately cancelled and of no further effect as of such date. Amounts reflected in this table relate to the then-outstanding shares of restricted stock and RSUs that the Company agreed to vest on or prior to August 2010. Note that the total equity compensation value is not included for Mr. Filipowicz because his employment terminated in August 2009, and the Company does not track fully vested shares following termination. |
Tax
and Accounting Considerations
The Compensation Committee periodically reviews our compensation
practices for purposes of obtaining the maximum tax
deductibility of compensation paid. From time to time, the
Compensation Committee has awarded, and may award in the future,
compensation that is not fully deductible if it determines that
such award is consistent with its overall compensation
philosophy and is in the best interests of the Company and its
stockholders. The Compensation Committee also endeavors to
ensure that any compensation that could be characterized as
non-qualified deferred compensation complies with
Section 409A of the Internal Revenue Code, including by
amending existing compensatory arrangements. The Compensation
Committee also takes into account, from time to time as
appropriate, the accounting treatment of compensation elements
in determining types or levels of compensation for our Named
Executive Officers.
20
Summary
Compensation Table
Non-Equity |
||||||||||||||||||||||||||||||||
Name and |
Fiscal |
Stock |
Option |
Incentive Plan |
All Other |
|||||||||||||||||||||||||||
Principal Position
|
Year | Salary ($) | Bonus ($) | Awards ($)(1) | Awards ($)(2) | Compensation ($) | Compensation ($)(3) | Total($) | ||||||||||||||||||||||||
Peter D. Aquino
|
2009 | 600,000 | 0 | 4,097,900 | 0 | 585,499 | 3,786 | 5,287,185 | ||||||||||||||||||||||||
President & CEO
|
2008 | 600,000 | 0 | 2,990,938 | 1,090,530 | 574,004 | 15,389 | 5,270,861 | ||||||||||||||||||||||||
2007 | 540,000 | 0 | 0 | 0 | 246,780 | 11,254 | 798,034 | |||||||||||||||||||||||||
Michael T. Sicoli
|
2009 | 331,250 | 10,000 | 1,096,791 | 0 | 244,202 | 2,199 | 1,684,442 | ||||||||||||||||||||||||
EVP & CFO
|
2008 | 321,154 | 10,000 | 453,389 | 412,991 | 184,344 | 9,274 | 1,391,152 | ||||||||||||||||||||||||
2007 | 275,000 | 10,000 | 0 | 0 | 100,540 | 18,841 | 404,381 | |||||||||||||||||||||||||
Jose A. Cecin, Jr.
|
2009 | 81,250 | 10,000 | 1,201,250 | 0 | 53,889 | 324 | 1,346,713 | ||||||||||||||||||||||||
EVP & COO
|
||||||||||||||||||||||||||||||||
Felipe Alvarez
|
2009 | 250,000 | 10,000 | 439,927 | 0 | 156,977 | 1,766 | 858,670 | ||||||||||||||||||||||||
Senior Vice President
|
2008 | 244,231 | 0 | 186,835 | 0 | 115,894 | 6,274 | 553,234 | ||||||||||||||||||||||||
President of RCN Metro
|
2007 | 214,645 | 0 | 410,250 | 0 | 52,227 | 11,324 | 688,446 | ||||||||||||||||||||||||
PK Ramani
|
2009 | 236,700 | 2,500 | 439,927 | 0 | 85,854 | 1,689 | 766,670 | ||||||||||||||||||||||||
Senior Vice President
|
2008 | 234,874 | 5,322 | 186,835 | 147,977 | 92,318 | 5,182 | 672,508 | ||||||||||||||||||||||||
Sales
|
2007 | 225,000 | 15,000 | 683,750 | 0 | 72,254 | 9,490 | 1,005,494 | ||||||||||||||||||||||||
John D. Filipowicz(4)
|
2009 | 125,000 | 0 | 0 | 0 | 37,369 | 257,779 | 420,148 | ||||||||||||||||||||||||
President
|
2008 | 246,154 | 5,322 | 186,835 | 147,977 | 110,184 | 7,032 | 703,504 | ||||||||||||||||||||||||
Retail Markets
|
2007 | 225,000 | 15,000 | 683,750 | 0 | 72,254 | 13,474 | 1,009,478 |
(1) | This column represents the aggregate grant date fair value of restricted stock awards (including RSUs) granted during each of the fiscal years represented to the Named Executive Officers. Fair market values in this column were calculated using the common stock closing price on the date of grant and multiplying it by the number of shares or units subject to grant. See the Grants of Plan Based Awards table below for information on awards made in 2009. | |
(2) | This column represents the aggregate grant date fair value of stock option awards granted during each of the fiscal years represented to the Named Executive Officers. For information on the valuation assumptions with respect to these grants please refer to the footnotes to our financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC on March 9, 2010. See the Grants of Plan Based Awards table below for information on option grants made in 2009. The only option grants in 2009 were made in connection with our option exchange program. | |
(3) | All Other Compensation amounts in 2009 were comprised of (a) RCN employer match of employee contributions to the Companys 401(k) plan prior to the suspension of the employer match in March 2009 and (b) employee life insurance premiums, as follows: |
401(k) |
Life Insurance |
|||||||||||
Match($) | Premiums($) | Total ($) | ||||||||||
Peter D. Aquino
|
3,462 | 324 | 3,786 | |||||||||
Michael T. Sicoli
|
1,875 | 324 | 2,199 | |||||||||
Jose A. Cecin, Jr.
|
0 | 324 | 324 | |||||||||
Felipe Alvarez
|
1,442 | 324 | 1,766 | |||||||||
PK Ramani
|
1,365 | 324 | 1,689 | |||||||||
John Filipowicz
|
865 | 249 | 1,114 |
(4) | In addition to the amounts reflected for his 401(k) match and life insurance premiums, Other Compensation for Mr. Filipowicz includes a severance payment in the gross amount of $256,665 paid pursuant to his Severance Agreement with the Company dated September 2009. |
21
Grants
of Plan Based Awards in Fiscal Year 2009
Grant |
||||||||||||||||||||||||||||||||||||||||||||
All Other |
Date |
|||||||||||||||||||||||||||||||||||||||||||
All Other |
Option |
Fair |
||||||||||||||||||||||||||||||||||||||||||
Stock |
Awards: |
Exercise |
Value of |
|||||||||||||||||||||||||||||||||||||||||
Awards: |
Number of |
or Base |
Stock |
|||||||||||||||||||||||||||||||||||||||||
Number of |
Securities |
Price of |
and |
|||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under |
Estimated Future Payouts Under |
Shares of |
Underlying |
Option |
Option |
|||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Awards | Equity Incentive Plan Awards |
Stock or |
Options |
Awards |
Awards |
|||||||||||||||||||||||||||||||||||||||
Name
|
Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | Units (#) | (#) | ($/Sh) | ($)(1) | |||||||||||||||||||||||||||||||||
Peter D. Aquino
|
8/20/2009 | 131,579 | 1,205,264 | |||||||||||||||||||||||||||||||||||||||||
8/20/2009 | 157,895 | 1,446,318 | ||||||||||||||||||||||||||||||||||||||||||
8/20/2009 | 0 | 157,895 | 236,843 | 1,446,318 | ||||||||||||||||||||||||||||||||||||||||
Jose A. Cecin
|
4/6/2009 (2 | ) | 7,252 | 30,966 | ||||||||||||||||||||||||||||||||||||||||
8/20/2009 (2 | ) | 15,066 | 138,005 | |||||||||||||||||||||||||||||||||||||||||
9/28/2009 | 125,000 | 1,201,250 | ||||||||||||||||||||||||||||||||||||||||||
Michael T. Sicoli
|
8/20/2009 | 59,868 | 548,391 | |||||||||||||||||||||||||||||||||||||||||
8/20/2009 | 0 | 58,869 | 89,804 | 548,400 | ||||||||||||||||||||||||||||||||||||||||
Felipe Alvarez
|
8/12/2009 (3 | ) | 31,471 | 9.05 | 0 | |||||||||||||||||||||||||||||||||||||||
8/20/2009 | 24,013 | 219,959 | ||||||||||||||||||||||||||||||||||||||||||
8/20/2009 | 0 | 24,014 | 36,021 | 219,968 | ||||||||||||||||||||||||||||||||||||||||
PK Ramani
|
8/12/2009 (4 | ) | 8,185 | 9.05 | 0 | |||||||||||||||||||||||||||||||||||||||
8/20/2009 | 24,013 | 219,959 | ||||||||||||||||||||||||||||||||||||||||||
8/20/2009 | 0 | 24,014 | 36,021 | 219,968 | ||||||||||||||||||||||||||||||||||||||||
John Filipowicz
|
N/A |
(1) | Assumes achievement of Target level, as applicable. | |
(2) | These grants represent awards made to Mr. Cecin while he was an independent member of the Board of Directors. | |
(3) | This grant represents stock options received by Mr. Alvarez upon the surrender of Company stock options granted prior to fiscal year 2009 pursuant to the Companys stock option exchange program offered during fiscal year 2009. The fair value of the new Company stock options received by Mr. Alvarez upon the surrender of previously granted Company stock options was $108,575; however, the incremental fair value of the new Company stock options received by Mr. Alvarez was $0. | |
(4) | This grant represents stock options received by Mr. Ramani upon the surrender of Company stock options granted prior to fiscal year 2009 pursuant to the Companys stock option exchange program offered during fiscal year 2009. The fair value of the new Company stock options received by Mr. Ramani upon the surrender of previously granted Company stock options was $28,238; however, the incremental fair value of the new Company stock options received by Mr. Ramani was $0. |
22
Outstanding
Equity Awards at Fiscal Year-End 2009
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Equity |
||||||||||||||||||||||||||||||||||||
Incentive |
||||||||||||||||||||||||||||||||||||
Plan |
||||||||||||||||||||||||||||||||||||
Awards: |
||||||||||||||||||||||||||||||||||||
Number |
Equity |
|||||||||||||||||||||||||||||||||||
Equity |
of |
Incentive |
||||||||||||||||||||||||||||||||||
Incentive |
Unearned |
Plan Awards: |
||||||||||||||||||||||||||||||||||
Plan |
Market |
Shares, |
Market or |
|||||||||||||||||||||||||||||||||
Awards: |
Number |
Value of |
Units, or |
Payout Value |
||||||||||||||||||||||||||||||||
Number of |
Number of |
Number of |
of Shares |
Shares or |
Other |
of Unearned |
||||||||||||||||||||||||||||||
Securities |
Securities |
Securities |
or Units |
Units of |
Rights |
Shares, Units, |
||||||||||||||||||||||||||||||
Underlying |
Underlying |
Underlying |
of Stock |
Stock That |
That |
or Other |
||||||||||||||||||||||||||||||
Unexercised |
Unexercised |
Unexercised |
Option |
Option |
That Have |
Have Not |
Have Not |
Rights That |
||||||||||||||||||||||||||||
Options |
Options |
Unearned |
Exercise |
Expiration |
Not |
Vested |
Vested |
Have Not |
||||||||||||||||||||||||||||
Exercisable (#) | Unexercisable (#) | Options (#) | Price ($) | Date | Vested (#) | ($) | (#) | Vested ($) | ||||||||||||||||||||||||||||
Peter D. Aquino
|
278,147 | 13.79 | 12/31/11 | 106,667 | 1,157,337 | 68,208 | 740,057 | |||||||||||||||||||||||||||||
70,175 | 140,352 | 11.22 | 3/13/15 | 131,579 | 1,427,632 | 157,895 | 1,713,161 | |||||||||||||||||||||||||||||
157,895 | 1,713,161 | |||||||||||||||||||||||||||||||||||
Jose A. Cecin
|
15,066 | 649,568 | ||||||||||||||||||||||||||||||||||
125,000 | 1,356,250 | |||||||||||||||||||||||||||||||||||
Michael T. Sicoli
|
224,989 | 13.79 | 3/23/12 | 59,868 | 649,568 | 25,864 | 280,624 | |||||||||||||||||||||||||||||
26,423 | 52,846 | 11.22 | 3/13/15 | 59,869 | 649,579 | |||||||||||||||||||||||||||||||
Felipe Alvarez
|
31,471 | 9.05 | 8/12/16 | 2,500 | 27,125 | 2,500 | 27,125 | |||||||||||||||||||||||||||||
24,013 | 260,541 | 10,657 | 115,628 | |||||||||||||||||||||||||||||||||
24,014 | 260,552 | |||||||||||||||||||||||||||||||||||
PK Ramani
|
99,972 | 13.79 | 5/23/12 | 4,167 | 45,212 | 4,167 | 45,212 | |||||||||||||||||||||||||||||
10,888 | 21,778 | 11.22 | 3/13/15 | 24,013 | 260,541 | 10,658 | 115,639 | |||||||||||||||||||||||||||||
8,185 | 9.05 | 8/12/16 | 24,014 | 260,552 | ||||||||||||||||||||||||||||||||
John D. Filipowicz
|
121,738 | 13.79 | 8/21/10 | 4,167 | 45,212 | 4,167 | 45,212 | |||||||||||||||||||||||||||||
12,173 | 14.29 | 8/21/10 | 5,329 | 57,820 | ||||||||||||||||||||||||||||||||
10,888 | 10,889 | 11.22 | (1 | ) |
(1) | The 10,888 stock options (exercisable) expire on 2/21/10, and the 10,889 stock options (unexercisable) expire on 11/28/10. |
Restricted
Stock
On February 28, 2007, Messrs. Filipowicz and Ramani
each received a grant of 25,000 shares of restricted stock,
and Mr. Alvarez received a grant of 15,000 shares of
restricted stock. One-sixth of such shares vested on each of
March 17, 2008, March 17, 2009 and March 17,
2010. In addition, approximately 91% of one-sixth of such shares
vested in March 2008, approximately 96% of one-sixth of such
shares vested in February 2009 and approximately 98% of
one-sixth of such shares vested in March 2010 based on the
Companys achievement of operational and financial
performance objectives set by the Compensation Committee for
2007, 2008 and 2009, respectively.
Restricted
Stock Units
131,579 restricted stock units, or RSUs, were granted to
Mr. Aquino on August 20, 2009, one-third of which
vested on January 1, 2010 with an additional one-third of
such RSUs scheduled to vest on each of January 1, 2011 and
January 1, 2012. In addition, 315,790 RSUs were granted to
Mr. Aquino on August 20, 2009, one half of which are
subject to time-based vesting. One-third of such time-based RSUs
are scheduled to vest on each of June 10, 2010,
June 10, 2011 and June 10, 2012. The other half of
these RSUs are subject to performance vesting based on the
Companys achievement of operational and financial
performance objectives set by the Compensation Committee for
2009. 98% of one-third of such performance-based RSUs will vest
on each of June 10, 2010, June 10, 2011 and
June 10, 2012.
23
160,000 RSUs were granted to Mr. Aquino on
March 14, 2008, one-third of which vested on each of
January 1, 2009 and January 1, 2010 and with an
additional one-third scheduled to vest on January 1, 2011.
In addition, 106,572 RSUs were granted to Mr. Aquino on
March 14, 2008, all of which were subject to performance
based vesting based on the Companys achievement of
operational and financial performance objectives set by the
Compensation Committee for 2008. 96% of one-third of such RSUs
vested in February 2009, and 96% of one-third of such RSUs are
scheduled to vest on each of June 1, 2010 and June 1,
2011.
Pursuant to the terms of the employment agreement entered into
with Mr. Cecin on September 28, 2009, Mr. Cecin
was awarded 125,000 RSUs. One third of the RSUs granted are
scheduled to vest on each of September 28, 2010,
September 28, 2011 and September 28, 2012.
Mr. Cecin also received a grant of 7,252 RSUs on
April 6, 2009 while still an independent member of the
Board of Directors, all of which vested in June 2009. In
addition, Mr. Cecin received a grant of 15,066 RSUs on
August 20, 2009 while still an independent member of the
Board of Directors, all of which are scheduled to vest on
September 1, 2010.
119,737 RSUs were granted to Mr. Sicoli on
August 20, 2009, one half of which are subject to
time-based vesting. One-third of such time-based RSUs are
scheduled to vest on each of June 10, 2010, June 10,
2011 and June 10, 2012. The other half of these RSUs are
subject to performance vesting based on the achievement by the
Company of operational and financial performance objectives set
by the Compensation Committee for 2009. 98% of one-third of such
performance-based RSUs are scheduled to vest on each of
June 10, 2010, June 10, 2011 and June 10, 2012.
40,409 RSUs were granted to Mr. Sicoli on
March 14, 2008. 96% of one-third of such RSUs vested in
February 2009, and 96% of one-third of such RSUs are scheduled
to vest on each of June 1, 2010 and June 1, 2011 based
on achievement by the Company of operational and financial
performance objectives set by the Compensation Committee for
2008.
Messrs. Ramani and Alvarez each received a grant of 48,027
RSUs on August 20, 2009, one half of which are subject to
time-based vesting. One-third of such
time-based
RSUs are scheduled to vest on each of June 10, 2010,
June 10, 2011 and June 10, 2012. The other half of
these RSUs are subject to performance vesting based on the
achievement by the Company of operational and financial
performance objectives set by the Compensation Committee for
2009. 98% of one-third of such performance-based RSUs are
scheduled to vest on each of June 10, 2010, June 10,
2011 and June 10, 2012.
Messrs. Ramani and Alvarez also each received a grant of
16,652 RSUs on March 14, 2008. 96% of one-third of such
RSUs vested in February 2009 and 96% of one-third of such RSUs
are scheduled to vest on each of June 1, 2010 and
June 1, 2011 based on the achievement by the Company of
operational and financial performance objectives set by the
Compensation Committee for 2008.
Stock
Options
On March 14, 2008, Mr. Aquino received a grant of
options to purchase 210,527 shares of the Companys
common stock, Mr. Sicoli received a grant of options to
purchase 79,269 shares of the Companys common stock,
and Messrs. Filipowicz, Ramani and Alvarez each received a
grant of options to purchase 32,666 shares of the
Companys common stock, all at an exercise price of $11.22
per share. One-third of such stock options vested on
June 1, 2009 and one-third of such stock options are
scheduled to vest on each of June 1, 2010 and June 1,
2011 (with the exception of Mr. Filipowicz).
Messrs. Ramani and Alvarez participated in the RCN stock
option exchange program in 2009. Pursuant to this program,
Mr. Alvarez exchanged 60,869 options with a strike price of
$17.42 for 14,458 options with a strike price of $9.05 and
32,666 options with a strike price of $11.22 for 17,013 options
with a strike price of $9.05. Mr. Ramani exchanged 12,173
options with a strike price of $14.29 for 3,170 options with a
strike price of $9.05 and 21,766 options with a strike price of
$13.79 for 5,015 options with a strike price of $9.05. The
options vest ratably over a three year period beginning on
August 12, 2010.
24
Option
Exercises and Stock Vested Table
Option Awards | Stock Awards | |||||||||||||||
Number of |
Number of |
|||||||||||||||
Shares Acquired |
Value Realized |
Shares Acquired |
Value Realized on |
|||||||||||||
Name
|
on Exercise (#) | on Exercise ($) | on Vesting (#) | Vesting ($) | ||||||||||||
Peter D. Aquino
|
0 | 0 | 3,334 | 14,603 | ||||||||||||
53,333 | 314,665 | |||||||||||||||
34,104 | 125,162 | |||||||||||||||
Michael T. Sicoli
|
0 | 0 | 3,334 | 14,603 | ||||||||||||
12,931 | 47,457 | |||||||||||||||
Jose A. Cecin, Jr.
|
0 | 0 | 7,252 | 45,035 | ||||||||||||
Felipe Alvarez
|
0 | 0 | 2,500 | 10,125 | ||||||||||||
0 | 0 | 2,400 | 8,808 | |||||||||||||
0 | 0 | 5,328 | 19,554 | |||||||||||||
PK Ramani
|
0 | 0 | 4,167 | 16,876 | ||||||||||||
0 | 0 | 4,001 | 14,684 | |||||||||||||
0 | 0 | 5,328 | 19,554 | |||||||||||||
John Filipowicz
|
0 | 0 | 4,167 | 16,876 | ||||||||||||
4,001 | 14,684 | |||||||||||||||
5,328 | 19,554 |
Pension
Benefits and Nonqualified Deferred Compensation
The Company does not offer any pension benefits other than the
Companys 401(k) plan benefits described above. In
addition, the Company does not offer any nonqualified deferred
compensation benefits. Therefore, these tables are omitted.
Executive
Officers Employment Agreements
Below is a summary of the employment agreements entered into
with Messrs. Aquino, Cecin and Sicoli.
Peter
D. Aquino
The Company entered into a new employment agreement with
Mr. Aquino on December 21, 2007. The initial term of
the employment agreement expires on December 21, 2010, with
one-year annual extensions, unless either party provides the
other party with 90 days prior written notice of its
intention not to extend the employment term. The employment
agreement provides for a base salary of $600,000 per year,
subject to annual review for increase by the Compensation
Committee and Board of Directors, and an annual
performance-based cash bonus of 100% of base salary, payable
upon achievement of goals established by the Compensation
Committee. We believe that this base cash compensation for
Mr. Aquino is consistent with the Companys
compensation philosophy to compensate our executives at or below
the short term cash compensation offered to chief executive
officers at our peer group companies.
Upon execution of the employment agreement, the Company
authorized the grant to Mr. Aquino of an award of 160,000
RSUs. One-third of the RSUs subject to this initial award vest
and become payable on each of the first three anniversaries of
the effective date of the employment agreement. Mr. Aquino
shall also be eligible for discretionary annual awards of equity
incentives under the 2005 Stock Plan in future calendar years,
as determined by the Compensation Committee in its discretion.
The employment agreement provides that these annual awards, if
any, (a) shall be determined with reference to a targeted
value of two times Mr. Aquinos base salary plus 100%
of his target bonus, (b) shall be allocated as not less
than 25% restricted stock units with performance vesting and not
more than 75% as stock options, (c) would become vested
over a period not to exceed 36 months and (d) if stock
options, the exercise price shall equal the fair market value of
RCNs common stock on the date of the grant.
25
The employment agreement also provides that, in general, the
initial RSU award and any annual awards shall be
(a) subject to forfeiture until vested as provided in the
employment agreement, (b) non-transferable except for
permitted transfers as approved by the Compensation Committee
pursuant to the terms of the 2005 Stock Plan, (c) fully
vested and, in the case of stock options, exercisable upon a
change in control (as defined in the 2005 Stock Plan), with
respect to the unvested portion of the initial RSU award and any
annual equity awards then held by Mr. Aquino, fully vested
and, in the case of stock options, exercisable.
The employment agreement provides that Mr. Aquinos
employment with the Company and the employment term shall
terminate upon the earliest to occur of
(a) Mr. Aquinos death, (b) the termination
of Mr. Aquinos employment by the Company by reason of
Mr. Aquinos disability, (c) the termination of
Mr. Aquinos employment by the Company for cause (as
defined in the employment agreement) or without cause,
(d) the termination of Mr. Aquinos employment by
Mr. Aquino without good reason (as defined in the
employment agreement) upon 60 days written notice or for
good reason in accordance with the employment agreement and
(e) the expiration of Mr. Aquinos employment
term.
The employment agreement provides that upon any termination of
Mr. Aquinos employment, he shall be entitled to
payment of any earned but unpaid portion of the base salary,
bonus, benefits and unreimbursed business expenses, in each case
with respect to the period ending on the date of termination. In
addition to the payments and benefits in the preceding sentence,
if Mr. Aquinos employment is terminated (x) by
the Company without cause (other than due to death or
disability), (y) by Mr. Aquino for good reason, or
(z) by Mr. Aquino immediately after the expiration of
the initial three-year employment term due to the Companys
provision of a non-renewal notice (as defined in the employment
agreement), then: (i) the Company shall pay Mr. Aquino
the Severance Payments (as defined below) in equal monthly
installments beginning with the month following the month in
which the date of termination occurs for the duration of the
applicable Severance Period (as defined below), (ii) the
Company shall provide Mr. Aquino with continued medical
coverage at active-employee rates for the duration of the
applicable Severance Period or, if earlier, until
Mr. Aquino receives subsequent employer-provided coverage,
and (iii) Mr. Aquino shall vest as of the date of
termination in the portion of the Equity Awards (as defined
below) that would otherwise have become vested during the
applicable Severance Period, with the vested portion of any
stock options remaining exercisable for the shorter of the
one-year period following Mr. Aquinos date of
termination and the remainder of the original term. For these
purposes, the following terms have the following definitions:
| Severance Payments shall be an amount equal to 1/12 the sum of the base salary and 100% target bonus, in each case as in effect on Mr. Aquinos date of termination and as defined in the employment agreement. | |
| Severance Period shall be a number of months that for purposes of clauses (x) and (y) above shall be 24 months and that for purposes of clause (z) above shall be 12 months. | |
| Equity Awards shall be the portion of the initial RSU award, the annual equity awards, if any, and any prior equity awards. |
Under certain circumstances, Mr. Aquino is entitled to
receive an additional payment from the Company equal to the
amount of any excise tax he would be required to pay pursuant to
Section 4999 of the Internal Revenue Code. Payment of the
Severance Payments and other benefits are conditioned upon
Mr. Aquinos execution and delivery of an irrevocable
general release in form satisfactory to the Company and
Mr. Aquino. The employment agreement also contains
confidentiality, non-compete, non-solicit and non-disparagement
clauses restricting certain activities of Mr. Aquino during
and for certain specified periods following his employment term.
Jose
A. Cecin
The Company entered into an employment agreement with
Mr. Cecin on September 28, 2009. The initial term of
the employment agreement expires on September 28, 2012;
provided, however, that at least 180 days prior to the end
of the contract period, either party may provide written notice
of interest in extending the term of the agreement. The Company
will then have 60 days to make a reasonable offer to
Mr. Cecin
26
regarding an extension. Failure of the Company to make a good
faith offer within 60 days will constitute
non-renewal by the Company. If Mr. Cecin does
not engage in good faith negotiations with the Company after
receiving its offer, such will be deemed to be non-renewal by
Mr. Cecin. The employment agreement provides for a base
salary of $325,000 per year, subject to annual review by the
Compensation Committee and Board of Directors, and an annual
performance-based cash target bonus of 75% of base salary,
payable upon achievement of goals established by the
Compensation Committee. We believe that this base cash
compensation for Mr. Cecin is consistent with the
Companys compensation philosophy to compensate our
executives at or below the short term cash compensation offered
to chief operating officers at our peer group companies.
Upon execution of the employment agreement, the Company
authorized the grant to Mr. Cecin of an award of 125,000
RSUs. One-third of the RSUs subject to this initial award shall
vest and become payable on each of the first three anniversaries
of the effective date of the employment agreement.
Mr. Cecin shall also be eligible for discretionary annual
awards of equity incentives under the 2005 Stock Plan beginning
in 2010 and in future calendar years, as determined by the
Compensation Committee in its discretion. The employment
agreement provides that these annual awards, if any, shall be
determined with reference to a targeted value of 1.75 times
Mr. Cecins base salary plus his actual bonus for the
prior calendar year. In general, the initial RSU award and any
annual awards shall be (a) subject to forfeiture until
vested and (b) non-transferable except for permitted
transfers as approved by the Compensation Committee pursuant to
the terms of the 2005 Stock Plan.
The employment agreement provides that Mr. Cecins
employment with the Company and the employment term shall
terminate upon the earliest to occur of
(a) Mr. Cecins death, (b) the termination
of Mr. Cecins employment by the Company by reason of
Mr. Cecins disability, (c) the termination of
Mr. Cecins employment by the Company for cause (as
defined in the employment agreement) or without cause,
(d) the termination of Mr. Cecins employment by
Mr. Cecin without good reason (as defined in the employment
agreement) upon 30 days written notice or for good reason
in accordance with the employment agreement and (e) the
expiration of Mr. Cecins employment term.
The employment agreement provides that upon any termination of
Mr. Cecins employment, he shall be entitled to
payment of any earned but unpaid portion of the base salary,
bonus, benefits and unreimbursed business expenses, in each case
with respect to the period ending on the date of termination. In
addition to the payments and benefits in the preceding sentence,
(i) if Mr. Cecins employment is terminated prior
to a change in control by the Company without cause or if he
resigns for good reason (as defined in the employment
agreement), Mr. Cecin will receive a lump sum payment equal
to 100% of his base salary and target bonus as in effect at the
time of termination, twelve months of health benefits
continuation, his pro-rata bonus and twelve months of equity
vesting; (ii) if Mr. Cecins employment is
terminated by non-renewal of his employment agreement by the
Company, he will receive a single lump sum payment equal to 50%
of his base salary and target bonus, six months of health
benefits continuation, his pro-rata bonus and six months of
equity vesting; (iii) if Mr. Cecins employment
is terminated by reason of death or disability, Mr. Cecin
or his beneficiaries will receive six months of health benefits,
his pro-rata bonus and full vesting of all outstanding equity
awards; and (iv) if, within 24 months following a change in
control, Mr. Cecins employment is terminated without
cause or he resigns for good reason, then Mr. Cecin will
receive a lump sum payment equal to 150% of his base salary and
target bonus, 18 months of benefits continuation, his pro
rata bonus and immediate vesting of all equity awards.
Payment of the severance payments and other benefits is
conditioned upon Mr. Cecins execution and delivery of
an irrevocable general release in form satisfactory to the
Company and Mr. Cecin. The employment agreement also
contains confidentiality, non-compete, non-solicit and
non-disparagement clauses restricting certain activities of
Mr. Cecin during and for certain specified periods
following his employment term.
Michael
T. Sicoli
The Company entered into an employment agreement with
Mr. Sicoli on September 28, 2009. The initial term of
the employment agreement expires on September 28, 2012;
provided, however, that at least 180 days
27
prior to the end of the contract period, either party may
provide written notice of interest in extending the term of the
agreement. The Company will then have 60 days to make a
reasonable offer to Mr. Sicoli regarding an extension.
Failure of the Company to make a good faith offer within
60 days will constitute non-renewal by the
Company. If Mr. Sicoli does not engage in good faith
negotiations with the Company after receiving its offer, such
will be deemed to be non-renewal by Mr. Sicoli. The
employment agreement provides for a base salary of $350,000 per
year, subject to annual review by the Compensation Committee and
Board of Directors, and an annual performance-based cash target
bonus of 65% of base salary, payable upon achievement of goals
established by the Compensation Committee. We believe that this
base cash compensation for Mr. Sicoli is consistent with
the Companys compensation philosophy to compensate our
executives at or below the short term cash compensation offered
to chief financial officers at our peer group companies.
Mr. Sicoli is eligible for discretionary annual awards of
equity incentives under the 2005 Stock Plan beginning in 2010
and in future calendar years, as determined by the Compensation
Committee in its discretion. The employment agreement provides
that these annual awards, if any, shall be determined with
reference to a targeted value of 1.75 times
Mr. Sicolis base salary plus his actual bonus for the
prior calendar year. In general, any annual awards shall be
(a) subject to forfeiture until vested and
(b) non-transferable except for permitted transfers as
approved by the Compensation Committee pursuant to the terms of
the 2005 Stock Plan.
The employment agreement provides that Mr. Sicolis
employment with the Company and the employment term shall
terminate upon the earliest to occur of
(a) Mr. Sicolis death, (b) the termination
of Mr. Sicolis employment by the Company by reason of
Mr. Sicolis disability, (c) the termination of
Mr. Sicolis employment by the Company for cause (as
defined in the employment agreement) or without cause,
(d) the termination of Mr. Sicolis employment by
Mr. Sicoli without good reason (as defined in the
employment agreement) upon 30 days written notice or for
good reason in accordance with the employment agreement and
(e) the expiration of Mr. Sicolis employment
term.
The employment agreement provides that upon any termination of
Mr. Sicolis employment, he shall be entitled to
payment of any earned but unpaid portion of the base salary,
bonus, health benefits and unreimbursed business expenses, in
each case with respect to the period ending on the date of
termination. In addition to the payments and benefits in the
preceding sentence, (i) if Mr. Sicolis
employment is terminated prior to a change in control by the
Company without cause or he resigns for good reason (as defined
in the employment agreement), Mr. Sicoli will receive a
lump sum payment equal to 100% of his base salary and target
bonus as in effect at the time of termination, twelve months of
health benefits continuation, his pro-rata bonus and twelve
months of equity vesting; (ii) if Mr. Sicolis
employment is terminated by non-renewal of his employment
agreement by the Company, he will receive a single lump sum
payment equal to 50% of his base salary and target bonus, six
months of health benefits continuation, his pro-rata bonus and
six months of equity vesting; (iii) if
Mr. Sicolis employment is terminated by reason of
death or disability, Mr. Sicoli or his beneficiaries will
receive six months of health benefits, his pro-rata bonus and
full vesting of all outstanding equity awards; and (iv) if,
within 24 months following a change in control,
Mr. Sicolis employment is terminated without cause or
he resigns for good reason, then Mr. Sicoli will receive a
lump sum payment equal to 150% of his base salary and target
bonus, 18 months of health benefits continuation, his pro
rata bonus and immediate vesting of all equity awards. Under
certain circumstances, Mr. Sicoli may be entitled to
receive an additional payment from the Company equal to the
amount of any excise tax that he would be required to pay
pursuant to Section 4999 of the Internal Revenue Code
Payment of the severance payments and other benefits is
conditioned upon Mr. Sicolis execution and delivery
of an irrevocable general release in form satisfactory to the
Company and Mr. Sicoli. The employment agreement also
contains confidentiality, non-compete, non-solicit and
non-disparagement clauses restricting certain activities of
Mr. Sicoli during and for certain specified periods
following his employment term.
28
Director
Compensation
In November 2007, the Board of Directors adopted revised
director compensation guidelines. Under this director
compensation program, each member of the Board is paid an annual
cash retainer of $60,000. In addition, the members of the
Compensation and Audit Committees receive an annual fee of
$10,000, with the chairman of each such committee receiving
$15,000. The members of the Nominating/Corporate Governance
Committee receive annual membership fees of $5,000, with the
chairman receiving $10,000. Mr. Hillman, as Non-Executive
Chairman of the Board, received annual compensation of $75,000,
which was paid one half in RSUs and one half in cash. In
November 2009, the Board of Directors established a Special
Committee and approved compensation for the Special Committee
members. Mr. Hillman, as Chairman of the Special Committee,
received a payment of $15,000 each month. The other Special
Committee members, Messrs. Cellar, Duster and Tseung,
received a payment of $10,000 each month.
The Board also adopted an annual equity compensation program for
non-employee members of the Board. On February 12, 2009,
the Compensation Committee approved a grant of restricted stock
units to each director (other than Mr. Cecin) with such
grant to be effective on March 2, 2009. The restricted
stock units vested in June 2009, on the date of the
Companys Annual Meeting of Stockholders. These grants
provided equity-based compensation for the six month period from
January 2009 through June 2009, and were made as a transitional
grant reflecting a change in the timing of the boards
equity compensation grants. The grant award cycle was changed
from a January grant date to a June grant date, so that future
grant awards can be coincident with the annual election of
directors. On April 6, 2009, Mr. Cecin received a
pro-rata grant of restricted stock units in connection with
joining the Board of Directors.
On August 20, 2009, the directors other than
Messrs. Cellar and Skrzypczak (who had not yet joined the
Board of Directors) received a grant of 15,066 RSUs, which had a
target value of $114,500 (based on the 30 day trailing
average). This value was equivalent to the value of RSUs
distributed to the directors in the prior year. The RSUs granted
will vest on September 1, 2010. On December 2, 2009
(after joining the Board of Directors), Mr. Cellar and
Mr. Skrzypczak received a grant of 8,868 RSUs, which
represented a grant with a target value of $76,333 (based on the
trailing 30 day average), pro-rated for the period from
October 2009 until June 2010, when the next equity grants are
usually made following the Annual Meeting of Stockholders.
RCNs Board of Directors may adjust compensation to current
and future non-employee directors as appropriate based on market
conditions. The fees and stock awards for 2009 are summarized
below.
Special |
||||||||||||||||
Fees Earned |
Stock |
Committee |
||||||||||||||
or Paid in |
Awards |
Compensation |
||||||||||||||
Name
|
Cash ($) | ($)(1) | ($)(2) | Total ($) | ||||||||||||
Kurt Cellar
|
16,667 | 76,265 | 10,000 | 102,932 | ||||||||||||
Jose A. Cecin(3)
|
40,000 | 168,971 | | 208,971 | ||||||||||||
Benjamin Duster
|
75,000 | 198,257 | 10,000 | 283,257 | ||||||||||||
Lee Hillman
|
115,000 | 256,985 | 15,000 | 386,985 | ||||||||||||
Charles Levine
|
76,250 | 198,257 | | 274,507 | ||||||||||||
Casimir Skrzypczak
|
15,625 | 76,265 | | 91,890 | ||||||||||||
Daniel Tseung
|
83,750 | 198,257 | 10,000 | 292,007 |
(1) | This column represents the aggregate grant date fair value with respect to the RSUs granted in fiscal year 2009. Fair market values in this column were calculated using the common stock closing price on the date of grant and multiplying it by the number of units subject to grant. | |
(2) | This column represents payments that were made to the members of the Special Committee from its formation in November 2009 through December 31, 2009. | |
(3) | Represents payments made to Mr. Cecin prior to his assuming the position of Executive Vice President and Chief Operating Officer on September 28, 2009. |
29
Compensation
Committee Report
The Compensation Committee of the Board of Directors of RCN has
reviewed and discussed the Compensation Discussion and Analysis
required by Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included herein.
THE COMPENSATION COMMITTEE
Daniel Tseung, Chairman
Kurt M. Cellar
Charles E. Levine
Risk
Considerations in Our Compensation Program
Our Compensation Committee has discussed risk as it relates to
our compensation program and does not believe that our
compensation program encourages excessive or inappropriate risk
taking due to its balance between fixed and variable
compensation, short and long-term compensation, and financial
and operational performance measures.
As discussed in more detail above, we structure our pay to
consist of both fixed and variable compensation. The fixed (or
salary) portion of compensation is designed to provide a steady
income regardless of the Companys stock price performance
so that executives do not feel pressured to focus exclusively on
stock price performance to the detriment of other important
business metrics. Variable (cash bonus and equity) portions of
compensation are designed to reward both short-term and
long-term corporate performance. For short-term performance, our
cash bonus is awarded annually based on results of metrics
approved by the Compensation Committee. All executives and
employees are included in the same bonus program. If the Company
or any of the applicable markets exceeds the performance
metrics, the bonus plan provides for payment of greater than
100% of the prescribed bonus amount, up to but not exceeding
150% of the prescribed bonus amount. We believe that this cap
minimizes excessive risk taking. We also have minimum
performance thresholds that must be realized before all or a
portion of the annual bonus will be paid out.
For 2009, corporate performance was determined using the
financial metrics of revenue, EBITDA and free cash flow. Those
executives and employees who support a specific market or
segment as part of their job function have a portion of their
annual bonus determined on both market and segment performance.
For example, an employee who supports the Pennsylvania market
will have his annual bonus determined based on the financial
results of (i) the Pennsylvania market; (ii) the
Residential/SMB segment; and (iii) overall corporate
performance. We believe this encourages employees to work to
support the financial performance of all markets and overall
corporate performance rather than just an individual market.
We have strict internal controls over the calculation of
financial results for purposes of determining annual bonuses,
with such calculations reviewed by the both the Finance and
Human Resources Departments. These controls are designed to keep
the measurement of the financial results used to determine
annual bonuses from being susceptible to manipulations by any
employees, including our executives. In addition, all of our
employees are required to take training on our Code of Conduct,
which covers a number of topics, including the accuracy of books
and records.
To reward employees for our long-term performance, we grant
equity awards. During 2009, all of our employees received a
grant of restricted stock units vesting over three years. The
equity guidelines approved by the Compensation Committee provide
that equity grants will be based on each employees salary
grade. We believe that the use of these equity guidelines
reduces the ability of management to issue disproportionately
large grants to any one employee. With respect to employees at
the director level and above, fifty percent of the RSUs will
vest based on time and fifty percent will vest based on
operational and financial performance
30
targets set by the Compensation Committee. Performance is
determined based on the same metrics used to determine the
annual bonus payments.
We believe that our focus on operational and financial
performance (through our cash bonus program) and stock price
performance (through our equity compensation program) provides
balance in our overall program and acts as a check on excessive
risk taking. In addition, providing a significant portion of
compensation to our executives in the form of equity provides
additional incentive for executives to make decisions that will
not be harmful to the long-term health of the Company.
Similarly, if our executives were to add revenue sources at low
margins in order to generate an increase in revenue and customer
growth, which could result in higher stock prices in the
near-term, our short-term incentive program is structured in
such a way as to limit the value of the executives cash
bonuses.
Compensation
Committee Interlocks and Insider Participation
Through September 28, 2009, the Compensation Committee was
comprised of Messrs. Tseung (Chairman), Cecin and Levine.
From October 15, 2009, the Compensation Committee has been
comprised of Messrs. Tseung (Chairman), Cellar and Levine.
Except for Mr. Cecins service as an officer of RCN
after he ceased to be a member of the Compensation Committee,
none of these directors has ever served as an officer or
employee of RCN or any of its subsidiaries, nor does any such
director have any relationship required to be disclosed pursuant
to Item 407(e)(4) of
Regulation S-K.
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Security
Ownership of Certain Beneficial Owners and Management
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.
31
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
April 12, 2010, there were 35,301,291 shares of
Company common stock outstanding. Unless otherwise indicated in
the footnotes to this table, the information is presented as of
April 12, 2010.
Number of Shares |
Percent |
|||||||
Name and Address of Beneficial Owner**
|
Beneficially Owned | of Shares | ||||||
JGD Management Corp.
|
6,071,212 | (1) | 17.2 | % | ||||
c/o York
Capital Management
767 Fifth Avenue, 17th Floor New York, New York 10153 |
||||||||
Plainfield Asset Management LLC
|
4,703,813 | (2) | 11.8 | % | ||||
100 West Putnam Avenue
Greenwich, Connecticut 06830 |
||||||||
New South Capital Management, Inc.
|
3,317,573 | (3) | 9.4 | % | ||||
100 Ridgeway Loop Rd., Suite 144
Memphis, TN 38120 |
||||||||
BlackRock, Inc
|
2,735,223 | (4) | 7.7 | % | ||||
40 East 52nd Street
New York, NY 10022 |
||||||||
Mast Capital Management, LLC
|
2,405,529 | (5) | 6.6 | % | ||||
200 Clarendon Street, 51st Floor
Boston, MA 02116 |
||||||||
Peter D. Aquino
|
847,975 | (6) | 2.4 | % | ||||
Michael T. Sicoli
|
399,349 | (7) | 1.1 | % | ||||
Jose A. Cecin, Jr.
|
4,804 | (8) | * | |||||
Felipe Alvarez
|
20,548 | (9) | * | |||||
PK Ramani
|
161,774 | (10) | * | |||||
Richard Ramlall
|
147,713 | (11) | * | |||||
Leslie J. Sears
|
44,486 | (12) | * | |||||
Kurt Cellar
|
| * | ||||||
Benjamin C. Duster IV
|
56,644 | (13) | * | |||||
Lee S. Hillman
|
58,716 | (14) | * | |||||
Charles E. Levine
|
32,724 | (15) | * | |||||
Casimir Skrzypczak
|
| * | ||||||
Daniel Tseung
|
38,302 | (16) | * | |||||
All current directors and executive officers as a group
(13 persons)
|
1,813,035 | 5.1 | % |
* | Represents less than 1% of the outstanding shares of Company common stock. | |
** | The address of each director and executive officer of the Company listed in the table is c/o RCN Corporation, 196 Van Buren Street, Herndon, Virginia 20170. | |
(1) | Based on information provided in the Schedule 13G filed by the reporting persons on April 12, 2010. As of March 31, 2010, 909,670 shares of Company common stock were directly owned by York Capital Management, L.P. (York Capital); 1,819,952 shares of Company common stock were directly owned by York Investment Master Fund, L.P. (York Investment); 780,321 shares of Company common stock were directly owned by York Select, L.P. (York Select); 432,148 shares of Company common stock were directly owned by York Credit Opportunities Fund, L.P. (York Credit Opportunities); 722,874 shares of Company common stock were directly owned by York Select Master Fund, L.P. (York Select Master); |
32
88,080 shares of Company common stock were directly owned by York Global Value Master Fund, L.P. (York Global Value); 17,812 shares of Company common stock were directly owned by York Long Enhanced Fund, L.P. (York Long Enhanced); 818,733 shares of Company common stock were directly owned by York Credit Opportunities Master Fund, L.P. (York Credit Opportunities Master); 206,671 shares of Company common stock were directly owned by Jorvick Multi-Strategy Master Fund, L.P. (Jorvick); and 274,951 shares of Company common stock were directly owned by certain accounts managed by JGD Management Corp. York Capital Management Global Advisors, LLC, the sole managing member of the general partner of each of York Capital, York Investment, York Select, York Credit Opportunities, York Select Master, York Global Value, York Long Enhanced, York Credit Opportunities Master and Jorvick, exercises investment discretion over such investment funds and accordingly may be deemed to have beneficial ownership of such shares of Company common stock. | ||
(2) | Based on information provided in the Schedule 13G filed by the reporting persons on February 16, 2010. As of December 31, 2009, the shares beneficially owned by Plainfield Asset Management LLC (PAMLLC) were attributable to 3,681,952 shares of Company common stock that Plainfield Special Situations Master Fund Limited (Master Fund) has the right to acquire upon the exercise of warrants; 126,877 shares of Company common stock owned by Plainfield Special Situations Master Fund II Limited (Master Fund II) and 506,896 shares of Company common stock that Master Fund II has the right to acquire upon the exercise of warrants; 68,087 shares of Company common stock owned by Plainfield OC Master Fund Limited (the OC Fund) and 314,965 shares that the OC Fund has the right to acquire upon the exercise of warrants; and 5,036 shares of Company common stock owned directly by Plainfield Liquid Strategies Master Fund Limited (Liquid Strategies Fund). PAMLLC is the manager of the Master Fund, Master Fund II, the OC Fund, and the Liquid Strategies Fund, and Max Holmes is the chief investment officer of PAMLLC and, therefore, PAMLLC and Max Holmes may be deemed to be the beneficial owners of such shares. PAMLLC and Max Holmes disclaim any beneficial ownership of such shares. | |
(3) | Based on the Schedule 13G filed by the reporting person on February 12, 2010. Of the shares beneficially owned by New South Capital Management, Inc. (New South), (i) 10,875 shares are held in accounts placed in the management control of New South through a Morgan Keegan Preferred Program, the holders of which continue to retain SEC reporting responsibility with respect to such shares and (ii) 40,486 shares are managed by New South through a Thomas Weisel Partners LLC Asset Management Consulting Program, the holders of which continue to retain SEC reporting responsibility with respect to such shares. | |
(4) | Based on the Schedule 13G filed by the reporting person on January 29, 2010. As of December 31, 2009, the shares beneficially owned by BlackRock, Inc. were attributable to 2,735,223 shares of Company common stock. | |
(5) | Based on information provided in the Schedule 13G filed by the reporting persons on January 29, 2010. As of December 31, 2009, the shares beneficially owned by Mast Capital Management, LLC (Capital) were attributable to 358,977 shares of Company common stock directly owned by Mast OC I Master Fund L.P. (LP) and 2,000,386 shares of Company common stock, which includes the right to acquire 902,868 shares of Company common stock through the exercise of warrants, owned by Mast Credit Opportunities I Master Fund (Fund). Capital, as the investment adviser to the Fund and the investment adviser and general partner of LP, and Christopher B. Madison and David J. Steinberg, as the managers of Capital, each beneficially own 2,359,363 shares of Company common stock. In addition, David J. Steinberg owns an additional 46,166 shares of Company common stock in his individual capacity. The Fund and the LP each has the power to vote and dispose all of the shares of Company common stock beneficially owned by such entity (as described above). Capital, as the investment adviser of the Fund and the investment adviser and general partner of the LP, has the authority to vote and dispose of all of the shares of Company common stock beneficially owned by the Fund and LP. Each of Messrs. Madison and Steinberg, by virtue of his position as manager of Capital, has the authority to vote and dispose of all of the shares of Company common stock beneficially owned by the Fund and LP. In addition, Mr. Steinberg has the sole authority to vote and dispose of all of the Company common stock held by him individually (as described above). |
(6) | Represents 291,382 shares of Company common stock (including 241,382 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted |
33
stock units); 138,095 shares of Company common stock issuable upon settlement of Company restricted stock units that will vest within 60 days of April 12, 2010; and 418,498 shares of Company common stock issuable upon exercise of Company stock options that have vested or will vest within 60 days of April 12, 2010. | ||
(7) | Represents 69,152 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted stock units; 52,362 shares of Company common stock issuable upon settlement of Company restricted stock units that will vest within 60 days of April 12, 2010; and 277,835 shares of Company common stock issuable upon exercise of Company stock options that have vested or will vest within 60 days of April 12, 2010. | |
(8) | Represents 4,804 shares of Company common stock acquired in connection with prior vesting of Company restricted stock units. | |
(9) | Represents 15,219 shares of Company common stock (including 12,219 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted stock units); and 5,329 shares of Company common stock issuable upon settlement of Company restricted stock units that will vest within 60 days of April 12, 2010. | |
(10) | Represents 18,881 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted stock units; 21,144 shares of Company common stock issuable upon settlement of Company restricted stock units that will vest within 60 days of April 12, 2010; and 121,749 shares of Company common stock issuable upon exercise of Company stock options that have vested or will vest within 60 days of April 12, 2010. | |
(11) | Represents 12,424 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted stock units; 17,677 shares of Company common stock issuable upon settlement of Company restricted stock units that will vest within 60 days of April 12, 2010; and 117,612 shares of Company common stock issuable upon exercise of Company stock options that have vested or will vest within 60 days of April 12, 2010. | |
(12) | Represents 9,169 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted stock units; 17,677 shares of Company common stock issuable upon settlement of Company restricted stock units that will vest within 60 days of April 12, 2010; and 17,640 shares of Company common stock issuable upon exercise of Company stock options that have vested or will vest within 60 days of April 12, 2010. | |
(13) | Represents 56,644 shares of Company common stock (including 55,044 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted stock units). | |
(14) | Represents 58,716 shares of Company common stock (including 50,883 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted stock units). | |
(15) | Represents 32,724 shares of Company common stock (including 17,724 shares of Company common stock acquired in connection with prior vesting of Company restricted stock units). | |
(16) | Represents 38,302 shares of Company common stock acquired in connection with prior vesting of Company restricted shares and Company restricted stock units. |
34
Equity
Compensation Plan Information
The table below presents information as of December 31,
2009 for the Companys 2005 Stock Plan, which has been
approved by Company stockholders. The Company does not have any
equity compensation plans that have not been approved by its
stockholders.
(a) |
(c) |
|||||||||||
Number of Shares of |
Number of Securities |
|||||||||||
Common Stock to be |
(b) |
Remaining Available |
||||||||||
Issued Upon |
Weighted Average |
for Future Issuance |
||||||||||
Exercise of |
Exercise Price of |
Under Equity |
||||||||||
Outstanding |
Outstanding |
Compensation Plans |
||||||||||
Options, Warrants |
Options, Warrants |
(excluding securities |
||||||||||
and Rights | and Rights | reflected in column (a)) | ||||||||||
Equity Compensation Plans Approved by Stockholders
|
4,835,165 | $ | 6.54 | 1,269,533 | ||||||||
Equity Compensation Plans Not Approved by Stockholders
|
| | | |||||||||
Total
|
4,835,165 | $ | 6.54 | 1,269,533 |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
The Board of Directors has adopted Related Party Transaction
Policies and Procedures (the Related Party Transaction
Policy). Pursuant to the Related Party Transaction Policy,
the Nominating/Corporate Governance Committee will review all
transactions in which any of RCNs directors, director
nominees, significant shareholders and executive officers and
their immediate families are participants to determine whether
such person has a direct or indirect material interest in the
transaction. All directors, director nominees and executive
officers are required to promptly notify our General Counsel,
Compliance Officer
and/or the
Nominating/Corporate Governance Committee of any proposed
transaction involving RCN in which such person has a direct or
indirect material interest. Such transaction is then reviewed by
the Nominating/Corporate Governance Committee, which determines
whether or not to approve the transaction based on the following
criteria:
| the nature of the related persons interest in the relationship or transaction; | |
| the material terms of the transaction, including the amount and type of payments or other consideration received by participants in the transaction; | |
| the importance of the relationship or transaction to the related person; | |
| the importance of the relationship or transaction to the Company; and | |
| whether the transaction would impair the judgment of a director or executive officer to act in the Companys best interests. |
After such review, the Nominating/Corporate Governance Committee
approves the transaction only if it determines that the
transaction is in the best interests of the Company and its
stockholders. The Nominating/Corporate Governance Committee
reports the results of its review to the full Board of Directors.
In 2009, the Company did not engage in any related party
transactions and, based on the procedures outlined above, as of
the date of this Amendment we are not aware of any existing or
potential related party transaction.
Director
Independence
RCNs Board of Directors has affirmatively determined,
after considering all of the relevant facts and circumstances,
that all of the directors, other than Peter D. Aquino and Jose
A. Cecin, are independent from management under the standards
set forth in RCNs Corporate Governance Guidelines and that
each director, other than Peter D. Aquino and Jose
A. Cecin, is an independent director as
defined by the listing
35
requirements of Nasdaq. As a result, RCN has a majority of
independent directors on our Board of Directors as required by
the listing requirements of Nasdaq.
ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
Report of
the Audit Committee
The Audit Committee of the Board, pursuant to its Charter
adopted by the Board of Directors on April 7, 2005 and
amended effective December 1, 2009, oversees RCNs
financial reporting process on behalf of the Board of Directors.
The Audit Committee currently consists of four directors, who
each individually meet the independence criteria prescribed by
the applicable SEC rules and regulations and Nasdaq
Rule 5605(c). Mr. Duster is designated by the Board of
Directors as the audit committee financial expert as
defined under applicable SEC rules and regulations.
The Audit Committee has reviewed and discussed with management
the audited financial statements for the year ended
December 31, 2009; discussed with the independent
registered public accounting firm the matters required to be
discussed by Statement on Auditing Standards No. 61, as may
be modified or supplemented; and received from the independent
accountants written disclosures and the letter regarding their
independence required by PCAOB Rule 3526, as currently in
effect, and discussed with the independent registered public
accounting firm their independence.
Based on the review and discussions noted above, the Audit
Committee has recommended to the Board of Directors that the
audited financial statements be included in the Companys
Annual Report on
Form 10-K
for the year ended December 31, 2009 for filing with the
Securities and Exchange Commission.
THE AUDIT COMMITTEE
Benjamin C. Duster, IV, Chairman
Kurt M. Cellar
Casimir S. Skrzypczak
Audit
Committee Pre-Approval Policies and Procedures.
The Audit Committee has adopted a policy requiring the
pre-approval of all audit and permissible non-audit services
provided by RCNs independent registered public
accountants. Under the policy, the Audit Committee is to
pre-approve any recurring audit and audit-related services to be
provided. The Audit Committee also may generally pre-approve, up
to a specified maximum amount, any non-recurring audit and audit
related services for the following fiscal year. All pre-approved
matters must be detailed as to the particular services or
category of services to be provided, whether recurring or
non-recurring, and reported to the Audit Committee at its next
scheduled meeting. Permissible non-audit services are to be
pre-approved on a
case-by-case
basis. The Audit Committee may delegate its pre-approval
authority to any of its members, provided that such member
reports all pre-approval decisions to the Audit Committee at its
next scheduled meeting. RCNs independent registered public
accountants and members of management are required to report
periodically to the Audit Committee the extent of all services
provided in accordance with the pre-approval policy, including
the amount of fees attributable to such services.
36
Principal
Accountants Fees and Services
BDO
Seidman, LLP
The following table summarizes the fees billed to RCN for
professional services rendered by BDO Seidman, LLP for the
fiscal year ended December 31, 2009.
Fee Category
|
2009 | |||||||
(In thousands of |
||||||||
dollars) | ||||||||
Audit Fees
|
$ | 425 | ||||||
Audit-Related Fees(1)
|
20 | |||||||
Tax Fees
|
| |||||||
All Other Fees(2)
|
5 | |||||||
Total Fees
|
$ | 450 | ||||||
(1) | Audit-Related Fees for the fiscal year ended December 31, 2009 included fees incurred for the audit of RCNs 401(k) Plan. | |
(2) | All Other Fees for the fiscal year ended December 31, 2009 included fees incurred in connection with the audit of certain RCN franchise agreements. |
Friedman
LLP
The following table summarizes the fees billed to RCN for
professional services rendered by Friedman LLP for the fiscal
years ended December 31, 2009 and December 31, 2008.
Fee Category
|
2009 | 2008 | ||||||
(In thousands of |
||||||||
dollars) | ||||||||
Audit Fees(1)
|
$ | 25 | $ | 697 | ||||
Audit-Related Fees(2)
|
| 25 | ||||||
Tax Fees
|
| | ||||||
All Other Fees(3)
|
48 | 17 | ||||||
Total Fees
|
$ | 72 | $ | 739 | ||||
(1) | Audit Fees for the fiscal year ended December 31, 2009 included fees incurred in connection with the review of our Form 10-Q and related financial statements for the first quarter of fiscal year 2009. | |
(2) | Audit-Related Fees for the fiscal year ended December 31, 2008 included fees incurred for the audit of RCNs 401(k) Plan. | |
(3) | All Other Fees for the fiscal year ended December 31, 2009 included fees incurred in connection with our consideration of a possible debt offering during fiscal year 2009. |
All Other Fees for the fiscal year ended December 31, 2008
included fees incurred in connection with (i) the
audit of certain RCN franchise agreements; (ii) our
response to an SEC comment letter; and (iii) assurance and
related services.
PART IV
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(a) The following documents are filed as part of this
report:
(3) The index to the Exhibits begins on
page E-1
of this report.
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: April 30, 2010
RCN Corporation
By: |
/s/ Peter
D. Aquino
|
Peter D. Aquino
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
Name
|
Title
|
Date
|
||||
/s/ Peter
D. Aquino Peter D. Aquino |
President and Chief Executive Officer, Director | April 30, 2010 | ||||
/s/ Michael
T. Sicoli Michael T. Sicoli |
Executive Vice President and Chief Financial Officer | April 30, 2010 | ||||
/s/ Leslie
J. Sears Leslie J. Sears |
Senior Vice President and Controller | April 30, 2010 | ||||
/s/ Jose
A. Cecin, Jr. Jose A. Cecin, Jr. |
Director | April 30, 2010 | ||||
/s/ Kurt
Cellar Kurt Cellar |
Director | April 30, 2010 | ||||
/s/ Benjamin
C. Duster, IV Benjamin C. Duster, IV |
Director | April 30, 2010 | ||||
/s/ Lee
S. Hillman Lee S. Hillman |
Non-Executive Chairman, Director | April 30, 2010 | ||||
/s/ Charles
E. Levine Charles E. Levine |
Director | April 30, 2010 | ||||
/s/ Casimir
Skrzypczak Casimir Skrzypczak |
Director | April 30, 2010 | ||||
/s/ Daniel
Tseung Daniel Tseung |
Director | April 30, 2010 |
S-1
EXHIBITS INDEX
(Exhibits
are listed by numbers corresponding to the Exhibit Table of
Item 601 in
Regulation S-K).
Exhibit No.
|
Description
|
|||
3 | .1 | Amended and Restated Certificate of Incorporation of RCN Corporation, dated as of December 21, 2004 (incorporated by reference to Exhibit 3.1 of RCNs Current Report on Form 8-K filed on December 27, 2004 8-K). | ||
3 | .2 | Amended and Restated Bylaws of RCN Corporation (incorporated by reference to Exhibit 3.2 of RCNs Current Report on Form 8-K filed on December 27, 2004). | ||
4 | .1 | Registration Rights Agreement, dated as of December 21, 2004, by and between RCN Corporation and the Stockholders listed on the signature pages thereto (incorporated by reference to Exhibit 4.2 of RCNs Current Report on Form 8-K filed on December 27, 2004). | ||
4 | .2 | Warrant Agreement, dated as of May 25, 2007, by and between RCN Corporation and HSBC Bank USA National Association (incorporated by reference to Exhibit 4.1 of RCNs Current Report on Form 8-K filed on May 25, 2007). | ||
4 | .3 | Registration Rights Agreement, dated as of May 25, 2007, by and among RCN Corporation and the Holders, as defined therein (incorporated by reference to Exhibit 4.2 of RCNs Current Report on Form 8-K filed on May 25, 2007). | ||
10 | .1 | Dark Fiber IRU Agreement dated as of May 8, 1997 among Metropolitan Fiber Systems/McCourt, Inc. and RCN Telecom Services of Massachusetts, Inc. (incorporated by reference to Exhibit 10.2 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997 (Commission File No. 0-22825)). | ||
10 | .2 (**) | First Amendment dated as of November 28, 2006 between MCImetro Access Transmission Services of Massachusetts, as successor-in-interest to Metropolitan Fiber Systems McCourt, Inc. and RCN Telecom Services, Inc. as successor-in-interest to RCN Telecom Services of Massachusetts, Inc. amending the Dark Fiber IRU Agreement dated as of May 8, 1997 among Metropolitan Fiber Systems/McCourt, Inc. and RCN Telecom Services of Massachusetts, Inc. (incorporated by reference to Exhibit 10.20 of RCNs Annual Report on Form 10-K filed on March 15, 2007). | ||
10 | .3 | Dark Fiber IRU Agreement dated as of May 8, 1997 among Metropolitan Fiber Systems of New York, Inc. and RCN Telecom Services of New York, Inc. (incorporated by reference to Exhibit 10.3 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997 (Commission File No. 0-22825)). | ||
10 | .4 (**) | First Amendment to Dark Fiber IRU Agreement between Metropolitan Fiber Systems of New York, Inc. and RCN Telecom Services, Inc. dated as of December 5, 2007 (incorporated by reference to Exhibit 10.4 of RCNs Amendment No. 1 to Form 10-K/A filed on March 26, 2008). | ||
10 | .5 | Second Amendment to Dark Fiber IRU Agreement between Metropolitan Fiber Systems of New York, Inc. and RCN Telecom Services, Inc. dated as of June 18, 2008 (incorporated by reference to Exhibit 10.5 of RCNs Annual Report on Form 10-K filed on February 24, 2009). | ||
10 | .6 | Third Amendment to Dark Fiber IRU Agreement between Metropolitan Fiber Systems of New York, Inc. and RCN Telecom Services, Inc. dated as of November 18, 2008 (incorporated by reference to Exhibit 10.6 of RCNs Annual Report on Form 10-K filed on February 24, 2009). | ||
10 | .7 | Second Amended and Restated Operating Agreement of RCN-Becocom, LLC made and effective as of June 19, 2002 (incorporated by reference to Exhibit 10.01 of RCNs Current Report on Form 8-K filed on June 21, 2002). | ||
10 | .8 | Management Agreement dated as of June 17, 1997 among RCN Operating Services, Inc. and RCN-Becocom, Inc. (incorporated by reference to Exhibit 10.9 to RCNs Amendment No. 2 to Form 10K/A filed September 5, 1997 (Commission File No. 0-22825)). | ||
10 | .9 | Construction and Indefeasible Right of Use Agreement dated as of June 17, 1997 between RCN-Becocom, Inc. and RCN-Becocom, LLC (incorporated by reference to Exhibit 10.10 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997 (Commission File No. 0-22825)). | ||
10 | .10 | License Agreement dated as of June 17, 1997 between Boston Edison Company and RCN-Becocom, Inc. (incorporated by reference to Exhibit 10.11 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997 (Commission File No. 0-22825)). |
E-1
Exhibit No.
|
Description
|
|||
10 | .11 | Joint Investment and Non-Competition Agreement dated as of June 17, 1997 among RCN Telecom Services of Massachusetts, Inc., RCN-Becocom, Inc. and RCN-BecoCom, LLC (incorporated by reference to Exhibit 10.12 to RCNs Amendment No. 2 to Form 10/A filed September 5, 1997 (Commission File No. 0-22825)). | ||
10 | .12 | Amended and Restated Operating Agreement of Starpower Communications, L.L.C. by and between Pepco Communications, L.L.C. and RCN Telecom Services of Washington, D.C. Inc. dated October 28, 1997 (incorporated by reference to Exhibit 10.13 to RCNs Annual Report on Form 10-K for the year ended December 31, 1997 (Commission File No. 0-22825)). | ||
10 | .13 | Form of Second Amended and Restated Agreement for the Provision of Fiber Optic Facilities and Services between Northeast Utilities Service Company, The Connecticut Light & Power Company, Western Massachusetts Electric Company, Public Service Company of New Hampshire, and Neon Optica, Inc. as Successor in Interest to Necom LLC as of December 23, 2002 Phase One (incorporated by reference to Exhibit 10.11 of RCNs Amendment No. 1 to Form 10-K/A filed on March 26, 2008). | ||
10 | .14 | Form of Second Amended and Restated Agreement for the Provision of Fiber Optic Facilities and Services between Northeast Utilities Service Company, The Connecticut Light & Power Company, Western Massachusetts Electric Company, Public Service Company of New Hampshire, and Neon Optica, Inc. as Successor in Interest to Necom LLC dated as of December 23, 2002 Phase Two (incorporated by reference to Exhibit 10.4 of RCNs Amendment No. 1 to Form 10-K/A filed on March 26, 2008). | ||
10 | .15 | Form of Agreement Concerning the Reimbursement of Fees Among The Connecticut Light & Power Company Western Massachusetts Electric Company, Public Service Company of New Hampshire and Mode 1 Communications, Inc. and Neon Optica, Inc. dated as of November 5, 2004 (incorporated by reference to Exhibit 10.13 of RCNs Amendment No. 1 to Form 10-K/A filed on March 26, 2008). | ||
10 | .16 (**) | Master Service Agreement, dated as of September 27, 2007, by and between RCN Telecom Services and Sitel Operating Corporation (incorporated by reference to Exhibit 10.1 of RCNs Quarterly Report on Form 10-Q filed on November 8, 2007). | ||
10 | .17 | Credit Agreement, dated as of May 25, 2007, by and among RCN Corporation, the various lenders party to the Credit Agreement, and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 10.1 of RCNs Current Report on Form 8-K filed on May 25, 2007). | ||
10 | .18 | Incremental Commitment Agreement, dated as of November 13, 2007, by and among RCN Corporation, the various lenders party to the Credit Agreement, and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by reference to Exhibit 10.1 of RCNs Current Report on Form 8-K filed on November 13, 2007). | ||
10 | .19 | Security Agreement, dated as of May 25, 2007, by and among RCN Corporation, certain subsidiaries of RCN Corporation, and Deutsche Bank Trust Company Americas, as First-Lien Collateral Agent (incorporated by reference to Exhibit 10.2 of RCNs Current Report on Form 8-K filed on May 25, 2007). | ||
10 | .20 | Pledge Agreement, dated as of May 25, 2007, by and among RCN Corporation, certain subsidiaries of RCN Corporation, and Deutsche Bank Trust Company Americas, as First-Lien Collateral Agent (incorporated by reference to Exhibit 10.3 of RCNs Current Report on Form 8-K filed on May 25, 2007). | ||
10 | .21 | Subsidiary Guaranty, dated as of May 25, 2007, by and among certain subsidiaries of RCN Corporation and Deutsche Bank Trust Company Americas, as Collateral Agent (incorporated by reference to Exhibit 10.4 of RCNs Current Report on Form 8-K filed on May 25, 2007). | ||
10 | .22+ | RCN Corporation 2005 Stock Compensation Plan, as amended effective December 29, 2009 (incorporated by reference to Exhibit 10.22 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
10 | .23+ | RCN Amended and Restated Change of Control Severance Plan dated July 3, 2008 (incorporated by reference to Exhibit 10.1 to RCNs Quarterly Report on Form 10-Q filed on August 7, 2008). |
E-2
Exhibit No.
|
Description
|
|||
10 | .24+ | RCN Corporation 2009 Short-Term Incentive Plan (incorporated by reference to Exhibit 10.24 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
10 | .25+ | Amended Form Non-Qualified Option Agreement (incorporated by reference to Exhibit 10.29 to RCNs Amendment No. 1 to its Annual Report on Form 10-K as filed on April 10, 2006). | ||
10 | .26+ | Amended Form Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.30 to RCNs Amendment No. 1 to its Annual Report on Form 10-K as filed on April 10, 2006). | ||
10 | .27+ | Form Director Restricted Stock Agreement (incorporated by reference to Exhibit 10.3 of RCNs Current Report on Form 8-K, filed on January 6, 2006). | ||
10 | .28+ | Amended Form Executive Restricted Stock Agreement (incorporated by reference to Exhibit 10.20 of RCNs Annual Report on Form 10-K filed on March 15, 2007). | ||
10 | .29+ | Form of Director Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 of RCNs Current Report on Form 8-K filed on February 7, 2008). | ||
10 | .30+ | Form of Deferral Election Form (incorporated by reference to Exhibit 10.2 of RCNs Current Report on Form 8-K filed on February 7, 2008). | ||
10 | .31+ | Form of Executive Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.30 of RCNs Amendment No. 1 to Form 10-K/A filed on March 26, 2008). | ||
10 | .32+ | Form of Performance-Based Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 of RCNs Quarterly Report on Form 10-Q filed on May 8, 2008). | ||
10 | .33+ | Form of Restricted Stock Unit Award for Officer RSU Deferral Election Form (incorporated by reference to Exhibit 10.2 of RCNs Quarterly Report on Form 10-Q filed on May 8, 2008). | ||
10 | .34+ | Amended and Restated Employment Agreement, effective as of December 21, 2007, by and between RCN Corporation and Peter D. Aquino (incorporated by reference to Exhibit 10.1 of RCNs Current Report on Form 8-K filed on December 27, 2007). | ||
10 | .35+ | Restricted Stock Unit Agreement effective as of August 20, 2009 by and between RCN Corporation and Peter D. Aquino (incorporated by reference to Exhibit 10.35 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
10 | .36+ | Form of Director Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.36 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
10 | .37+ | Form of Director Deferral Election Form (incorporated by reference to Exhibit 10.37 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
10 | .38+ | Form of Executive Officer Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.38 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
10 | .39+ | Employment Agreement effective as of September 28, 2009 by and between RCN Corporation and Jose A. Cecin, Jr. (incorporated by reference to Exhibit 10.1 of RCNs Current Report on Form 8-K filed on October 1, 2009). | ||
10 | .40+ | Employment Agreement effective as of September 28, 2009 by and between RCN Corporation and Michael T. Sicoli (incorporated by reference to Exhibit 10.2 of RCNs Current Report on Form 8-K filed on October 1, 2009). | ||
10 | .41+ | Restricted Stock Unit Agreement effective as of September 28, 2009 by and between RCN Corporation and Joe Cecin (incorporated by reference to Exhibit 10.41 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
21 | .1 | Subsidiaries of Registrant (incorporated by reference to Exhibit 21.1 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
23 | .1 | Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm (incorporated by reference to Exhibit 23.1 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
23 | .2 | Consent of Friedman LLP, Independent Registered Public Accounting Firm (incorporated by reference to Exhibit 23.2 of RCNs Annual Report on Form 10-K filed on March 9, 2010). |
E-3
Exhibit No.
|
Description
|
|||
31 | .1 | Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities and Exchange Act of 1934, as amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 31.1 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
31 | .2 | Certification of the Executive Vice President and Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities and Exchange Act of 1934, as amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 31.2 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
31 | .3 (*) | Certification of Chief Executive Officer pursuant to Rule 13a-14 and 15d-14 promulgated under the Securities and Exchange Act of 1934, as amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. | ||
31 | .4 (*) | Certification of the Executive Vice President and Chief Financial officer pursuant to Rule 13a-14 and 15d-14 promulgated under the Securities and Exchange Act of 1934, as amended, as adopted pursuant to section 302 of the Sarbanes-Oxley Act of 2002. | ||
32 | .1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 32.1 of RCNs Annual Report on Form 10-K filed on March 9, 2010). | ||
32 | .2 | Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (incorporated by reference to Exhibit 32.2 of RCNs Annual Report on Form 10-K filed on March 9, 2010). |
* | Document attached. | |
** | Confidential treatment requested as to certain portions of the document, which portions have been omitted and filed separately with the Securities and Exchange Commission. | |
+ | Management compensatory plan or arrangement. |
E-4