As filed with the Securities and Exchange Commission on June 13, 1995
Registration No. 33-58715
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MERCOM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 38-2728175
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Carnegie Center
Princeton, New Jersey 08540
(609) 734-3700
(Address, including zip code, and telephone number,
including area code of Registrant's principal executive offices)
Raymond B. Ostroski
Executive Vice President
and General Counsel
105 Carnegie Center
Princeton, New Jersey 08540
(609) 734-3700
(Name, address, including zip code,
and telephone number,
including area code, of agent for
service)
-------------------------
Copy to:
Peter R. Douglas
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
-------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ ]
-------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
PROSPECTUS (Subject to Completion) [LOGO]
Issued June 14, 1995
2,393,530 Shares
Mercom, Inc.
Common Stock
----------------
Mercom, Inc., a Delaware corporation (the "Company"), is distributing
to holders of record ("Holders") of shares of its Common Stock, par value
$1.00 per share (the "Common Stock"), non-transferable subscription rights
(the "Rights") to subscribe for and purchase additional shares of the Common
Stock for a price of $[ ] per share (the "Subscription Price"). Such
shareholders will receive one Right for every share of Common Stock held by
them as of the close of business on _________ __, 1995 (the "Record Date").
Rights holders may purchase one share of Common Stock for each whole Right
held upon payment of the Subscription Price (the "Basic Subscription
Privilege"). Each Right also carries the right to subscribe (the
"Oversubscription Privilege") at the Subscription Price for additional shares
of Common Stock that are not otherwise purchased pursuant to the exercise of
Rights. See "The Rights Offering--Subscription Privileges--Oversubscription
Privilege." The Rights will be evidenced by non-transferable certificates.
Once a holder has exercised any Rights, such exercise may not be revoked,
unless (i) a material change in the terms of the Rights Offering adversely
affecting such Rights holder has been made or (ii) C-TEC (as defined below)
does not exercise the Basic Subscription Privilege in respect of the Rights it
receives or does not exercise the Oversubscription Privilege to purchase all
other shares of Common Stock offered hereby.
The Rights will expire at 5:00 p.m., New York City time, on _________
__, 1995, unless extended (as it may be extended, the "Expiration Date"),
provided that the Expiration Date shall in no event be later than ________ __,
1995 [30 days after the original Expiration Date]. Shareholders who do not
exercise their Rights will relinquish the value inherent in the Rights. See
"Risk Factors--Dilution." The Company currently has a negative net worth.
The net tangible book value of the shares of Common Stock as of March 31, 1995
was a deficiency of approximately $(15,900,000), or $(6.63) per share. See
"Dilution."
As of April 18, 1995, C-TEC Corporation, a Pennsylvania corporation
("C-TEC"), indirectly owned, through C-TEC Properties, Inc., a Delaware
corporation and wholly owned subsidiary of C-TEC (C-TEC and C-TEC Properties,
Inc. are referred to collectively herein as "C-TEC" except as the context
otherwise requires), 1,044,194 shares of Common Stock, representing 43.63% of
the outstanding Common Stock. C-TEC will receive 1,044,194 Rights in respect
of the shares of Common Stock it owns. C-TEC has agreed with the Company to
exercise the Rights it receives for an aggregate subscription price of $[
] and to exercise the Oversubscription Privilege to purchase at the
Subscription Price all other shares of Common Stock being offered for sale
hereby. The opportunity to exercise the Oversubscription Privilege is
available to all holders of Rights on the same terms. If no Rights are
exercised by other stockholders and all shares of Common Stock offered hereby
are purchased by C-TEC, C-TEC will beneficially own 3,437,724 shares of Common
Stock (including shares owned prior to the Rights Offering), representing
approximately 71.81% of the outstanding shares of Common Stock of the Company.
The Common Stock is traded in the over-the-counter market and is
quoted on the OTC Bulletin Board (with such quotes reported in the pink sheets
of the National Quotations Bureau, Inc.) under the symbol "MEEO." On April
18, 1995, the last day on which bid and ask prices were quoted prior to the
public announcement of the Rights Offering, the closing bid price of the
Common Stock on the OTC Bulletin Board was $3.75 per share and the closing ask
price of the Common Stock on the OTC Bulletin Board was $4.25 per share. On
________ __, 1995, the closing bid price of the Common Stock on the OTC
Bulletin Board was $[ ] per share and the closing ask price of the Common
Stock on the OTC Bulletin Board was $[ ] per share. These are inter-dealer
quotations, which do not reflect mark-up, mark-down or commissions and may not
reflect actual transactions. Trading in the Common Stock has been limited and
sporadic and thus does not constitute an established public trading market.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
SHAREHOLDERS WHO DO NOT EXERCISE THEIR RIGHTS IN FULL WILL EXPERIENCE
DILUTION IN THEIR RELATIVE PERCENTAGE OWNERSHIP IN THE COMPANY UPON
ISSUANCE OF THE COMMON STOCK TO SHAREHOLDERS EXERCISING THEIR RIGHTS.
-------------------------
THE COMMON STOCK AND RIGHTS OFFERED HEREBY INVOLVE A HIGH DEGREE OF
RISK. BEFORE MAKING AN INVESTMENT DECISION, POTENTIAL INVESTORS SHOULD
CAREFULLY CONSIDER THE FACTORS SET FORTH IN "RISK FACTORS".
Underwriting Discounts Proceeds to the
Price to Public and Commissions Company(1)
--------------- ---------------------- ---------------
Per Share........ $ N/A $
Total............ $ N/A $
(1) Before deduction of estimated expenses of $500,000 payable by the
Company, including registration fees, NASD review fees, financial
advisory, legal and accounting fees, subscription agent fees,
information agent fees, printing expenses and other miscellaneous
fees and expenses.
The date of this Prospectus is _________ __, 1995.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Reports,
proxy statements and other information filed by the Company can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Regional
Offices of the Commission located at 7 World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material can be obtained upon
written request addressed to the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with any amendments thereto, the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of Common Stock issuable upon exercise of the Rights.
This Prospectus does not contain all the information set forth in the
Registration Statement. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained in
this Prospectus or in any document incorporated in this Prospectus by
reference as to the contents of any contract or other document referred to
herein or therein summarize all material elements of the relevant document but
are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement being
qualified in all respects by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company (File No. 0-17750) with
the Commission pursuant to Section 13 of the Exchange Act are incorporated
herein by reference: (i) the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, as amended on _____________, 1995, (ii)
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, (iii) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on May 22,
1990, (iv) the Company's Current Report on Form 8-K filed with the
Commission on May 4, 1995, (v) the Company's Current Report on Form 8-K
filed with the Commission on June 14, 1995 and (vi) the Company's Proxy
Statement dated April 25, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Common Stock shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which is also deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. The Company will provide without
charge to each person, including each beneficial owner, to whom a copy of this
Prospectus has been delivered, on the written or oral request of such person,
a copy of any or all documents referred to above which have been incorporated
by reference into this Prospectus except the exhibits to such documents unless
such exhibits are specifically incorporated by reference into the information
that the Prospectus incorporates. Telephone requests for such copies should
be directed to the Information Agent at (212) 929-5500 or (800) 322-2885, or,
if made in writing, to MacKenzie Partners, Inc., 156 Fifth Avenue, 9th Floor,
New York, NY 10010. Such requests may also be directed to Valerie C. Haertel,
Director, Investor Relations at (609) 734-3816 or, if made in writing, to
Mercom, Inc., 105 Carnegie Center, Princeton, New Jersey 08540, attention:
Valerie C. Haertel, Director, Investor Relations.
The Rights Offering is not being made, and Subscription Certificates
will not be distributed, to residents of the State of California, as the
California Department of Corporations has determined that the Rights
Offering does not meet the requirements of the Code of Regulations
promulgated under the California Corporate Securities Law of 1968, as
amended.
PROSPECTUS SUMMARY
The following material is qualified in its entirety by the
information appearing elsewhere in this Prospectus and in the documents
incorporated in this Prospectus by reference.
THE COMPANY
The Company is a cable television operator with three cable systems
in Southern Michigan serving 36,569 subscribers as of March 31, 1995 and one
cable system in Port St. Lucie, Florida serving 1,235 subscribers as of March
31, 1995 (the "Systems"). The Michigan Systems are operated through the
Company's wholly owned subsidiary, Communications and Cablevision, Inc.
("CCV"). The Florida System is operated through a wholly owned subsidiary,
Mercom of Florida, Inc. As of March 31, 1995, the Systems had 37,804
subscribers.
The three Michigan Systems provide cable service to Monroe, Allegan
County and the Coldwater and Sturgis areas. The Florida System serves St.
Lucie West, a planned community in Southeastern Florida, approximately 90
miles north of Palm Beach.
During 1993 and 1994, the Company restructured rates and channel
offerings to comply with the basic rate regulations and to minimize the impact
on revenue of the Cable Television Consumer Protection and Competition Act of
1992 (the "Cable Act"). The future impact of the Cable Act on the Company and
the cable television industry is still unclear. The Company's 1994 and first
quarter 1995 operating results were negatively affected by the Act. See "Risk
Factors--Adverse Effect of Regulation." The Company believes it is in
compliance with applicable rate regulation rules, but there can be no
assurance that the Company's rates will not be challenged.
The Company's performance is dependent to a large extent on its
ability to obtain and renew its franchise agreements from local government
authorities on acceptable terms. To date, all of the Company's franchises
have been renewed or extended, generally at or prior to their stated
expirations and on acceptable terms. During 1994, the Company completed
negotiations with 10 communities resulting in franchise renewals on terms
which are acceptable to the Company. The Company has 76 franchises, 14 of
which were in the three-year Federal Communications Commission (the "FCC")
franchise renewal window at December 31, 1994. No one franchise accounts for
more than 12% of the Company's total revenue.
Competition for the Company's services traditionally has come from a
variety of providers including broadcast television, video cassette recorders
and home satellite dishes. Technological and regulatory changes are expected
to increase competition. Direct broadcast satellite ("DBS"), which allows
consumers to receive cable programming for a fee once they purchase or lease a
receiving dish and a set-top terminal, may increase competition in the future.
Two DBS companies launched their services in 1994. These services are
generally available throughout the country, including areas in which the
Company operates. In addition, recent changes in federal regulation allow
telephone companies to lease their networks to video programmers under the
video dial-tone platform. Also, the current regulatory environment appears to
be fostering competition in cable television directly by telephone companies,
and in telephone by cable companies. Regulation in a competitive environment
is still evolving. The Company continues to monitor the progress of
regulations affecting the telecommunications industry and continually
reassesses its business plans to address future competition. It is impossible
to quantify at this time the negative impact of these technological and
regulatory developments on the cable television industry in general or on the
Company in particular.
As of March 31, 1995, the Company had 42 full-time employees, none of
whom were represented by collective bargaining units.
The Company's independent auditors have expressed substantial doubt about
the Company's ability to continue as a going concern unless the debt and
equity of the Company are restructured. The Company has on a number of
occasions been unable to make scheduled payments under a Credit Agreement (as
defined below) with Morgan Guaranty Trust Company of New York ("Morgan
Guaranty") and has consequently had to reschedule such payments. See "Risk
Factors--Going Concern Risks." On June 13, 1995, the Company and Morgan
Guaranty entered into a Commitment Letter (the "Commitment Letter") pursuant
to which they agreed, subject to certain conditions including the condition
that the gross proceeds to the Company from the Rights Offering must be at
least $8,500,000, to revise the scheduled maturity of the borrowings under the
Credit Agreement. See "Recent Developments--Morgan Guaranty Debt Refinancing."
The Company's principal executive offices are located at 105 Carnegie
Center, Princeton, New Jersey 08540 (telephone: (609) 734-3700).
THE RIGHTS OFFERING
Risk Factors........... There are substantial risks in connection with the
Rights Offering that should be considered by
prospective purchasers, including risks relating
to continuing net losses, going concern issues,
litigation liability, the adverse effect of
regulation, market risks associated with the
Common Stock and dilution resulting from the
Rights Offering. See "Risk Factors."
Rights................. Each record holder ("Holder") of Common Stock will
receive one non-transferable Right for every share
of Common Stock held of record on __________ __,
1995 (the "Record Date"). An aggregate of
2,393,530 Rights will be distributed pursuant to
the Rights Offering. Each Right will be
exercisable for one share of Common Stock. An
aggregate of 2,393,530 shares of Common Stock (the
"Underlying Shares") will be sold upon exercise of
the Rights assuming exercise of all Rights. The
distribution of the Rights and sale of Underlying
Shares is referred to herein as the "Rights
Offering." See "The Rights Offering--The Rights."
Basic Subscription
Privilege............ Rights holders are entitled to purchase for the
Subscription Price one share of Common Stock for
each Right held (the "Basic Subscription
Privilege"). See "The Rights
Offering--Subscription Privileges--Basic
Subscription Privilege."
Oversubscription
Privilege............ Each holder of Rights who elects to exercise in full
his or her Basic Subscription Privilege may also
subscribe at the Subscription Price for additional
Underlying Shares available as a result of
unexercised Rights, if any (the "Oversubscription
Privilege"). If an insufficient number of
Underlying Shares is available to satisfy fully all
elections to exercise the Oversubscription
Privilege, the available Underlying Shares will be
prorated among holders who exercise their
Oversubscription Privilege based on the respective
numbers of Rights exercised by such holders
pursuant to the Basic Subscription Privilege. See
"The Rights Offering--Subscription
Privileges--Oversubscription Privilege."
Subscription Price..... $[ ] in cash per share of Common Stock subscribed
for pursuant to the Basic Subscription Privilege or
the Oversubscription Privilege.
Shares of Common Stock
Outstanding after
Rights Offering...... A total of 4,787,060 shares, based on the number of
shares outstanding on __________ __, 1995 and
assuming exercise of all Rights.
C-TEC Rights Exercise
Agreement............ The Company and C-TEC have entered into a Rights
Exercise Agreement dated as of the date hereof
(the "C-TEC Rights Exercise Agreement").
Pursuant to the Rights Exercise Agreement, and
subject to the terms and conditions set forth
therein, C-TEC has agreed to exercise the
1,044,194 Rights it will receive in respect of
the shares of Common Stock currently owned by C-
TEC for an aggregate subscription price of $[ ]
and to exercise the Oversubscription Privilege
to subscribe for all other Underlying Shares.
See "The Rights Offering--C-TEC Rights Exercise
Agreement." The opportunity to exercise the
Oversubscription Privilege is available to all
holders of Rights on the same terms. See "The
Rights Offering--Subscription Privileges--
Oversubscription Privilege." If C-TEC does not
exercise the Basic Subscription Privilege in
respect of the Rights it receives or does not
exercise the Oversubscription Privilege to
subscribe for all other Underlying Shares, each
other Rights holder who has previously exercised
Rights will be provided the opportunity to
revoke such exercise.
Non-Transferability of
Rights............... The Rights are non-transferable. See "The Rights
Offering--Non-Transferability of Rights."
Record Date............ ________ __, 1995.
Expiration Date........ ________ __, 1995, at 5:00 p.m., New York City time,
unless extended (as it may be extended, the
"Expiration Date"), provided that the Expiration
Date shall in no event be later than ________
__, 1995 [30 days after the original Expiration
Date].
Procedure for Exer-
cising Rights........ Basic Subscription Privileges and Oversubscription
Privileges may be exercised by properly
completing and signing the Subscription
Certificate evidencing the Rights (a
"Subscription Certificate") and forwarding such
Subscription Certificate (or following the
Guaranteed Delivery Procedures), with payment of
the Subscription Price for each Underlying Share
subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription
Privilege, to the Subscription Agent on or prior
to the Expiration Date. Any Rights holder
subscribing for an aggregate of more than 25,000
Underlying Shares pursuant to the
Oversubscription Privilege prior to the
Expiration Date shall not be required to deliver
payment for such number of Underlying Shares in
excess of 25,000 until the Expiration Date. The
Company, in its sole discretion, may determine
to waive payment for such number of Underlying
Shares in excess of 25,000 subscribed for
pursuant to the Oversubscription Privilege until
after the Expiration Date and after all
prorations and adjustments contemplated by the
terms of the Rights Offering have been effected.
The Company has agreed pursuant to the C-TEC
Rights Exercise Agreement to grant such a waiver
to C-TEC. If the mail is used to forward
Subscription Certificates, it is recommended
that insured, registered mail be used. No
interest will be paid on funds delivered in
payment of the Subscription Price. See "The
Rights Offering--Exercise of Rights."
Once a holder of Rights has exercised the Basic
Subscription Privilege or the Oversubscription
Privilege, such exercise may not be revoked,
unless (i) a material change in the terms of the
Rights Offering adversely affecting such Rights
holder has been made or (ii) C-TEC does not
exercise the Basic Subscription Privilege in
respect of the Rights it receives or does not
exercise the Oversubscription Privilege to
subscribe for all other Underlying Shares. See
"The Rights Offering--Exercise of Rights" and
"The Rights Offering--No Revocation."
Procedure for Exer-
cising Rights by
Foreign and Certain
Other Shareholders.... Subscription Certificates will not be mailed to
Holders of Common Stock whose addresses are
outside the United States or who have an APO or
FPO address, but will be held by the
Subscription Agent for their account. To
exercise such Rights, such a Holder must notify
the Subscription Agent and must establish to the
satisfaction of the Subscription Agent that such
exercise is permitted under applicable law. If
the procedures set forth in the preceding
sentence are not followed prior to the
Expiration Date, the Rights will expire. See
"The Rights Offering--Foreign and Certain Other
Shareholders."
Persons Holding Shares,
or Wishing to Exer-
cise Rights, Through
Others............... Persons holding shares of Common Stock and receiving
the Rights distributable with respect thereto,
through a broker, dealer, commercial bank, trust
company or other nominee, as well as persons
holding certificates of Common Stock personally
who would prefer to have such institutions
exercise the Rights on their behalf, should
contact the appropriate institution or nominee
and request it to effect the transactions for
them. If a beneficial owner wishes to obtain a
separate Subscription Right Certificate, such
beneficial owner should contact the nominee as
soon as possible and request that a separate
Subscription Right Certificate be issued. A
nominee may request any Subscription Right
Certificate held by it to be split into such
smaller denominations as it wishes, provided
that the Subscription Right Certificate is
received by the Subscription Agent, properly
endorsed, no later than the Expiration Date.
See "The Rights Offering--Exercise of Rights."
Issuance of Common
Stock................ Certificates representing shares of Common Stock
purchased pursuant to the Basic Subscription
Privilege will be delivered to subscribers as soon
as practicable after the corresponding Rights have
been validly exercised and full payment for shares
has been received and cleared. For shares
purchased pursuant to the Oversubscription
Privilege, delivery of certificates will occur as
soon as practicable after the Expiration Date and
after all prorations and adjustments contemplated
by the terms of the Rights Offering have been
effected. See "The Rights Offering--Subscription
Privileges."
Use of Proceeds........ The net cash proceeds to the Company from the sale of
the shares of Common Stock offered hereby, after
payment of fees and expenses, are estimated to
be approximately $8,000,000. Such net
proceeds will be used (i) to repay $5,000,000 of
outstanding indebtedness to Morgan Guaranty
under the Credit Agreement (as defined below),
(ii) to make the payment of $1,400,000 to be
paid under the Lahey Settlement Agreement (as
defined below) on or before July 1, 1995 and
(iii) to repay up to $887,000 of outstanding
indebtedness to C-TEC under a demand note (the
"C-TEC Demand Note"). The remaining proceeds of
approximately $713,000 will be used for
general corporate purposes including capital
expenditures. C-TEC owns 43.63% of the
outstanding Common Stock. See "Use of Proceeds"
and "Recent Developments."
Subscription Agent..... The First National Bank of Boston. See "Subscription
Agent."
Information Agent...... MacKenzie Partners, Inc. See "Information Agent."
SELECTED FINANCIAL AND OPERATING INFORMATION
The following selected historical financial information as of and for the
three months ended March 31, 1995 and 1994 is unaudited but, in the opinion of
the Company's management, includes all recurring adjustments necessary for a
fair presentation of the results of operations for such periods. Information
as of and for the three months ended March 31, 1995 and 1994 has been derived
from, and should be read in conjunction with, the Company's unaudited
consolidated condensed financial statements for such periods, which are
included in the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 1995, which report is incorporated by reference in this
Prospectus. The results for such interim periods are not necessarily
indicative of the results for the full fiscal year. The information as of and
for the three fiscal years ended December 31, 1994 has been derived from, and
should be read in conjunction with, the Company's Consolidated Financial
Statements for the three fiscal years ended December 31, 1994, which have been
audited by independent public accountants and are included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as
such Report was amended on _________, 1995, which report as so amended is
incorporated by reference in this Prospectus, and the Company's Consolidated
Financial Statements for the three fiscal years ended December 31, 1993, which
have been audited by independent public accountants and are included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993, as previously filed with the Commission. The information with respect
to the fiscal years ended December 31, 1991 and December 31, 1990 has been
derived from, and should be read in conjunction with, the Company's
Consolidated Financial Statements for the three fiscal years ended December
31, 1993, 1992 and 1991, which have been audited by independent public
accountants and are included in the Company's Annual Reports on Form 10-K for
the fiscal years ended December 31, 1993, 1992 and 1991, respectively, as
previously filed with the Commission.
Summary Financial and Operating Data
(dollars in thousands except per share and operating data)
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,(1)
------------------------------------------------ -------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Sales........................................ $9,667 $11,041 $11,986 $12,606 $12,927 $3,162 $3,303
Operating income before depreciation
and amortization........................... 3,256 3,588 4,790 5,116 5,052 1,195 1,200
Depreciation and amortization................ 2,977 3,329 3,399 3,219 3,010 768 763
Operating income............................. 279 259 1,391 1,897 2,042 427 437
Interest Expense............................. 2,262 3,299 2,731 2,132 2,067 482 494
(Loss) before income taxes................... (3,483) (9,606) (1,144) (219) (662) (34) (95)
Provision (benefit) for income taxes......... (1,132) (1,822) 0 17 (4) 0 0
(Loss) before cumulative effect of
change in accounting principle.............. (2,351) (7,784) (1,144) (236) (658) (34) (95)
Net (loss)................................... (1,103) (7,784) (1,144) (236) (658) (34) (95)
Net (loss) per share......................... (0.94) (3.25) (0.48) (0.10) (0.27) (0.01) (0.04)
Balance Sheet Data:
Cash and temporary cash investments.......... 115 226 376 989 96 819 836
Total assets................................. 30,557 26,657 23,873 22,244 19,823 21,588 19,869
Total debt................................... 29,281 30,200 29,847 28,184 25,926 27,680 25,926
Common shareholders' capital deficiency...... (3,374) (11,158) (12,302) (12,538) (13,196) (12,571) (13,291)
Operating Data:<F1>
Homes passed<F2>............................. 57,736 58,726 59,988 61,730 63,721 61,914 63,882
Basic subscribers<F3>........................ 32,319 33,692 34,118 34,714 37,324 35,431 37,804
Basic subscribers as a
percentage of homes passed.................. 56.0% 57.3% 56.9% 56.2% 58.6% 57.2% 59.2%
Tier subscribers<F4>......................... 32,299 33,122 32,814 32,945 34,789 33,424 35,183
Tier subscribers as a
percentage of basic subscribers............. 99.9% 98.3% 96.2% 94.9% 93.2% 94.3% 93.1%
Premium service units<F5>.................... 16,593 15,324 12,762 12,816 14,312 12,496 14,728
Premium service units as a
percentage of basic subscribers (pay to
basic ratio)................................ 51.3% 45.5% 37.4% 36.9% 38.3% 35.3% 39.0%
Average revenue per subscriber for
the last month of the period<F6>............ $27.64 $27.60 $30.05 $29.70 $29.36 $30.29 $29.26
- ------------------
<FN>
<F1> Unaudited.
<F2> A home is deemed to be "passed" by cable if it can be connected to the
distribution system without any further extension of the distribution
plant.
<F3> A home with one or more television sets connected to a cable television
system is counted as one basic subscriber.
<F4> A home with one or more television sets receiving both basic and tier
service is counted as one tier subscriber. Tier service is not available
in the St. Lucie System.
<F5> A basic subscriber may purchase more than one premium service, each of
which is counted as a separate premium service unit. As a result,
the pay-to-basic ratio can exceed 100%. A premium service unit
includes only single channel services offered for a monthly fee.
<F6> Calculated by dividing total cable related revenues for the relevant
month by the number of basic subscribers at the end of such month.
</FN>
</TABLE>
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk.
Continuing Net Losses
The Company has experienced net losses since 1989 and may incur net
losses in the future. The Company incurred losses of $658,000, $236,000,
$1,144,000, $7,784,000 and $1,103,000 for the years ended December 31, 1994,
1993, 1992, 1991 and 1990, respectively. There can be no assurance as to
when, if ever, the Company will recognize a net profit.
Going Concern Risks
The Company's independent auditors have expressed substantial doubt
about the Company's ability to continue as a going concern unless the debt and
equity of the Company are restructured. The Company has suffered recurring
losses and has a shareholders' capital deficiency. The Company has on a
number of occasions been unable to make scheduled payments under a Credit
Agreement with Morgan Guaranty dated November 26, 1989 as amended on April 5,
1990, December 22, 1992, December 15, 1993, December 23, 1994 and March 31,
1995 (as amended, the "Credit Agreement") and has consequently had to
reschedule such payments. On June 13, 1995, the Company and Morgan Guaranty
entered into a Commitment Letter pursuant to which they agreed, subject to
certain conditions including the condition that the gross proceeds to the
Company from the Rights Offering must be at least $8,500,000, to revise the
scheduled maturity of the borrowings under the Credit Agreement. See "Recent
Developments--Morgan Guaranty Debt Refinancing." If the conditions specified
in the Commitment Letter are not satisfied and the Credit Agreement is not
amended in accordance with the terms of the Commitment Letter, the Company
believes it will be unable to make the payments scheduled under the Credit
Agreement. In such event, the Company would review all available options,
which would include the sale of assets, the raising of equity and the issuance
of subordinated debt, among other things. There can be no assurances under
such circumstances that the Company would be able to pursue any such options
successfully and thereby restructure its debt and equity. See "Recent
Developments--Morgan Guaranty Debt Refinancing."
Further, the Company has substantial liability under the Lahey
Settlement Agreement (as defined below). See "Risk Factors--Substantial
Litigation Liability" and "Recent Developments--Lahey Litigation and
Settlement Agreement." Additionally, previous deferrals of capital
expenditures due to the significant uncertainties regarding adequacy of
working capital, along with the negative effect regulation will have on future
rate increases and operating expenses (see "Risk Factors--Adverse Effect of
Regulation"), will adversely affect future operating income.
Substantial Litigation Liability
CCV, a subsidiary of the Company, was party to a lawsuit commenced in
1988 in the Circuit Court for the County of Ottawa, Michigan, relating to
termination of Kenneth E. Lahey as president of CCV. On April 18, 1995, Mr.
Lahey and the Company entered into a Settlement Agreement and Mutual Release
(the "Lahey Settlement Agreement") pursuant to which the Company has agreed to
cause CCV to make payments totaling $4.3 million in full satisfaction of all
claims Mr. Lahey may have had against the Company or its affiliates. See
"Recent Developments--Lahey Litigation and Settlement Agreement."
Prohibition on Payment of Dividends
The Company has not paid dividends in recent years due to the Company's
financial condition and does not expect to pay dividends in the foreseeable
future. In addition, the Credit Agreement prohibits the payment of dividends
on the Common Stock.
Highly Competitive Industry
The cable television industry is highly competitive. Competition for
the Company's services traditionally has come from a variety of providers
including broadcast television, video cassette recorders and home satellite
dishes. Technological and regulatory changes are expected to increase
competition. Direct broadcast satellite, which allows consumers to receive
cable programming for a fee once they purchase or lease a receiving dish and a
set-top terminal, may increase competition in the future. Two DBS companies
have launched their services in 1994. These services are generally available
throughout the country, including areas in which the Company operates. In
addition, recent changes in federal regulation allow telephone companies to
lease their networks to video programmers under the video dial-tone platform.
Also, the current regulatory environment appears to be fostering competition
in cable television directly by telephone companies, and in telephone by cable
companies. Regulation in a competitive environment is still evolving.
Adverse Effect of Regulation
The Company is subject to regulation at the federal, state and local
levels. Many aspects of such regulations are currently the subject of
judicial proceedings and administrative or legislative proceedings or
proposals. On October 5, 1992, Congress passed the Cable Act, which regulated
certain subscriber rates and a number of other matters in the cable industry,
such as mandatory carriage of local broadcast stations and retransmission
consent, and which will increase the administrative costs of complying with
such regulations. The most significant provision of the Cable Act requires
the FCC to establish rules to ensure that rates for basic services are
reasonable for subscribers in areas without effective competition as defined
in the Cable Act. Few municipalities served by the Company are subject to
effective competition. The FCC has adopted rules regulating cable television
rates and these rules have adversely affected the Company's operating results.
The Company's 1994 statement of operations includes charges aggregating
approximately $150,000 relating to cable rate regulation liabilities.
The Company anticipates that certain provisions of the Cable Act that do
not relate to rate regulation -- such as the provisions relating to
retransmission consent and customer service standards -- will reduce the
operating margins of the Company.
No assurance can be given at this time that the above matters will not
have a material adverse effect on the Company's business and results of
operations in the future. Also, no assurance can be given as to what other
future actions Congress, the FCC or other regulatory authorities may take or
the effects thereof on the cable industry in general or the Company in
particular.
Dependency on Franchise Renewals
The Company's performance is dependent to a large extent on its ability
to obtain and renew its franchise agreements from local government authorities
on acceptable terms.
Significant Influence of Principal Shareholder
C-TEC, through its wholly owned subsidiary C-TEC Properties, Inc., a
Delaware corporation, owns approximately 43.63% of the outstanding shares of
Common Stock, and C-TEC nominees constitute a majority of the Board of
Directors of the Company. In addition, the Company has entered into a
Management Agreement dated January 1, 1992 (the "Management Agreement") with
C-TEC Cable Systems, Inc., a Delaware corporation and wholly owned subsidiary
of C-TEC ("CCS"). Through its ownership of Common Stock and its
representation on the Board of Directors of the Company, and as a result of
the existence of the Management Agreement, C-TEC has significant influence
over the management and operations of the Company. C-TEC's substantial
ownership interest in, and significant influence over, the Company may tend
to deter nonnegotiated tender offers or other efforts to obtain control of
the Company and thereby preclude shareholders from having the opportunity
to sell shares at prices higher than those otherwise prevailing.
Pursuant to the C-TEC Rights Exercise Agreement, C-TEC has agreed,
subject to the terms and conditions set forth in such Agreement, to exercise
the Rights it receives and oversubscribe for all other Underlying Shares. If
no other Holders exercise their Rights, C-TEC will own 71.81% of the Common
Stock after the Rights Offering and will control the Company. The
opportunity to exercise the Oversubscription Privilege is available to all
Holders of Rights on the same terms. See "The Rights Offering--
Subscription Privileges--Oversubscription Privilege."
The Management Agreement provides that the Company will pay CCS: (a) an
annual fee equal to the greater of (i) $500,000 or (ii) a percentage of the
Company's annual revenues (ranging from 5% of $10,000,000 of revenues, as
defined, to 4% of revenues in excess of $20,000,000); and (b) an annual
incentive bonus equal to 25% of the Company's earnings before interest,
depreciation, amortization and taxes ("EBIDAT") as adjusted, during the
applicable fiscal year less the base year EBIDAT of $3,850,000. During 1994,
CCS earned management and incentive fees of approximately $1,100,000 pursuant
to the Management Agreement.
Relationship with C-TEC; Conflicts of Interest
C-TEC owns and operates cable television systems and is engaged in other
aspects of the telecommunications industry. Certain persons serve as officers
or directors of the Company and as officers or directors of one or more of
C-TEC and its controlling entities. Additionally, the entities that control
C-TEC also control MFS Communications Company, Inc., which provides a variety
of telecommunications services, primarily over its digital fiber optic
telecommunications networks. These relationships may lead to conflicts of
interest. The Company has established an Audit/Affiliated Transactions Review
Committee of the Board of Directors (the "ATR Committee") to evaluate certain
transactions in which a potential conflict of interest may be involved. The
ATR Committee comprises three members, none of whom are affiliated with
C-TEC.
All of the Company's executive officers are officers of C-TEC. The
executive officers of the Company devote a majority of their time and
attention to the business and affairs of C-TEC.
Market Risks Associated with the Common Stock
There can be no assurance that the market price of the Common Stock will
not decline during the period the Rights are outstanding or that, following
the issuance of the Rights and the sale of the Underlying Shares upon exercise
of Rights, a subscribing Rights holder will be able to sell shares purchased
in the Rights Offering at a price equal to or greater than the Subscription
Price. Once a holder of Rights has exercised the Basic Subscription Privilege
or the Oversubscription Privilege, such exercise may not be revoked, absent
certain material changes adversely affecting such holder. See "The Rights
Offering--No Revocation." Moreover, until certificates are delivered,
subscribing Rights holders may not be able to sell the shares of Common Stock
that they have purchased in the Rights Offering.
There is currently only a limited public market for the Common Stock.
The Common Stock is traded in the over-the-counter market and is quoted on the
OTC Bulletin Board (with such quotes reported in the pink sheets of the
National Quotations Bureau, Inc.). Holders who purchase Common Stock pursuant
to the Rights Offering may have difficulty selling their Common Stock due to a
lack of an active trading market.
Dilution
Holders who do not exercise their Rights will experience a decrease in
their proportionate interest in the equity ownership and voting power of the
Company.
The Subscription Price per shares of Common Stock exceeds the net
tangible book value per shares of Common Stock, which is negative.
Accordingly, the purchasers of the Common Stock in the Rights Offering will
experience immediate and substantial dilution. See "Dilution."
Based on the 2,393,530 shares of Common Stock outstanding as of March
31, 1995, the consummation of the Rights Offering would result (on a pro forma
basis as of such date) in an increase of 2,393,530 shares of Common Stock
outstanding.
USE OF PROCEEDS
The net cash proceeds from the Rights Offering after payment of fees and
expenses are estimated to be approximately $8,000,000. Such net proceeds
will be used (i) to repay $5,000,000 of outstanding indebtedness to Morgan
Guaranty under the Credit Agreement, (ii) to make the payment of $1,400,000 to
be paid under the Lahey Settlement Agreement on or before July 1, 1995 and
(iii) to repay $887,000 of outstanding indebtedness to C-TEC under the C-TEC
Demand Note. The remaining proceeds of approximately $713,000 will be used
for other corporate purposes including capital expenditures.
Interest under the Credit Agreement is based on the base rate, Libor or
CD rates depending on the type of loan and terms of the agreement. At March
31, 1995, the weighted average effective interest rate under the Credit
Agreement was 7.69%. Borrowings under the Credit Agreement are currently
scheduled to mature as follows: $887,000 on June 30, 1995, $4,032,000 on
December 31, 1995, and $5,040,000 on December 31, 1996, 1997 and 1998.
Pursuant to the Commitment Letter, and subject to the terms and conditions set
forth therein, (i) the indebtedness of $5,000,000 evidenced by the Morgan
Demand Note (as defined below) will be refinanced by cancelling such Note and
increasing by $5,000,000 the amount outstanding under the Term Loan (as
defined below) provided for under the Credit Agreement and (ii) borrowings
under the Term Loan will be rescheduled to mature as set forth in "Recent
Developments--Morgan Guaranty Debt Refinancing--Commitment Letter." See
"Recent Developments--Morgan Guaranty Debt Refinancing."
The C-TEC Demand Note has no stated maturity, is payable upon demand and
bears interest at a rate equal to the rate charged under the Credit Agreement.
On March 31, 1995, the effective interest rate under the C-TEC Demand Note was
7.125%. C-TEC owns 43.63% of the outstanding Common Stock.
The C-TEC Rights Exercise Agreement provides, subject to the terms
and conditions set forth therein, that on or before June 30, 1995, C-TEC
will exercise ___ of the Rights it receives for an aggregate subscription
price of approximately $1,400,000. The Company will use the proceeds of
such exercise to make the payment of $1,400,000 to be paid under the Lahey
Settlement Agreement on or before July 1, 1995.
RECENT DEVELOPMENTS
Lahey Litigation and Settlement Agreement
CCV, a subsidiary of the Company, was party to a lawsuit commenced in
1988 in the Circuit Court for the County of Ottawa, Michigan, relating to
termination of Kenneth E. Lahey as president of CCV. Mr. Lahey asserted that
as a result of the termination he is entitled to an amount equal to the fair
market value of 10 percent of the outstanding shares of CCV stock (the "Lahey
Interest"). The trial court determined that Mr. Lahey was entitled to an
amount equal to the fair market value of the Lahey Interest and ordered, among
other things, that an appraisal proceeding be held to determine such fair
market value. The Company appealed such order, but the Michigan Court of
Appeals upheld the trial court's decision on December 27, 1993. On December
16, 1994, a panel of three appraisers ("Panel") rendered a decision in favor
of Mr. Lahey in the amount of $2,949,000. The Company requested the Circuit
Court for the City of Ottawa to remand this proceeding back to the Panel for
further consideration of certain factors which were not included in their
decision on December 16, 1994. A hearing was held on January 16, 1995 before
the Circuit Court for the City of Ottawa. The Court issued an Opinion on
February 14, 1995 denying the Company's motions and sustaining the decision of
the Panel in the amount of $2,949,000 and awarded pre-judgment interest in the
amount of approximately $1,200,000. The Company filed a Motion for
Reconsideration with the Court. On March 27, 1995, the Court issued an Order
denying the Company's Motion for Reconsideration.
On April 18, 1995, Mr. Lahey and the Company entered into the Lahey
Settlement Agreement pursuant to which the Company has agreed to cause CCV to
make payments totaling $4,300,000 in full satisfaction of all claims Mr. Lahey
may have had against the Company or its affiliates. The payment schedule
under the Lahey Settlement Agreement is as follows: (i) $100,000 upon signing
of the Agreement, (ii) $1,400,000 on or before July 1, 1995 and (iii) $700,000
on or before July 1, 1996, 1997, 1998 and 1999. The initial payment of
$100,000 has been paid. C-TEC has agreed to ensure that the payment of
$1,400,000 due on or before July 1, 1995 is paid. The Company had accrued
approximately $4,400,000 as of December 31, 1994, representing management's
best estimate of the Company's potential liability in respect of the
matter.
The C-TEC Rights Exercise Agreement provides, subject to the terms
and conditions set forth therein, that on or before June 30, 1995, C-TEC
will exercise ____ of the Rights it receives for an aggregate subscription
price of approximately $1,400,00. The Company will use the proceeds of
such exercise to make the payment of $1,400,000 to be paid under the Lahey
Settlement Agreement on or before July 1, 1995.
Morgan Guaranty Debt Refinancing
General
The Company had total outstanding debt of $25,926,000 at March 31, 1995,
consisting of: (i) $5,000,000 of indebtedness to Morgan Guaranty under a
demand note (the "Morgan Demand Note"), (ii) $20,039,000 of indebtedness under
the Credit Agreement and (iii) $887,000 due under the C-TEC Demand Note.
The Morgan Demand Note has no stated maturity, is payable on demand and
has an interest rate equal to a base rate (higher of (i) Morgan Guaranty's
prime rate or (ii) the federal funds rate plus 1/2%) plus 1-3/4%. As of March
31, 1995, the effective rate of interest on the Morgan Demand Note was 10.75%.
Interest under the Credit Agreement is based on the base rate, Libor or
CD rates depending on the type of loan and terms of the agreement. As of
March 31, 1995, the weighted average effective rate of interest on borrowings
under the Credit Agreement was 7.69%. In December 1992 and December 1993,
Morgan Guaranty agreed to allow the Company to restructure principal payments
of $1,008,000 due in December 1992 and $2,016,000 due in December 1993 into
three installments due in December 1992, March 1993 and June 1993 with respect
to the December 1992 restructuring and December 1993, March 1994 and June 1994
with respect to the December 1993 restructuring. These restructured payments
have been paid in full. In December 1994, Morgan Guaranty again agreed to
allow the Company to restructure a principal payment of $3,024,000 due in
December 1994 into three installments of $1,250,000 due and paid in December
1994, $887,000 due and paid in March and $887,000 due in June 1995,
respectively. The remaining scheduled principal payment amounts and due dates
were not affected. C-TEC loaned $887,000 to the Company on March 31, 1995 to
enable the Company to make the principal payment of $887,000 scheduled for
that date under the Credit Agreement. The loan from C-TEC is evidenced by the
C-TEC Demand Note. Borrowings under the Credit Agreement are currently
scheduled to mature as follows: $887,000 on June 30, 1995, $4,032,000 on
December 31, 1995, and $5,040,000 on December 31, 1996, 1997 and 1998.
Commitment Letter
On June 13, 1995, the Company and Morgan Guaranty entered into the
Commitment Letter pursuant to which they agreed, subject to certain conditions
as described below, to further amend the Credit Agreement and to enter into an
additional 364-day facility as described below. Set forth below is a summary
of the material provisions of the Commitment Letter. Such summary is not
necessarily complete and is qualified in its entirety by reference to the
Commitment Letter, which is included as an exhibit to the Company's Current
Report on Form 8-K dated June 14, 1995.
Subject to the terms and conditions of the Commitment Letter, (i) the
Credit Agreement will be amended to be a 7.5 year amortizing term loan of
approximately $25,039,000 with a final maturity of December 31, 2002 (the
"Term Loan") and (ii) Morgan Guaranty and the Company will enter into a 364-day
revolving credit facility of $2,000,000 maturing 364 days from the date of
the facility (the "364-Day Facility"). The indebtedness of $5,000,000
evidenced by the Morgan Demand Note will be refinanced as follows: (a) the
Morgan Demand Note will be cancelled and (b) the amount outstanding under
the Term Loan will be increased by $5,000,000 from $20,039,000 to
$25,039,000.
The Company will be required to repay the Term Loan in equal quarterly
installments aggregating the following amounts for the following years:
Year Aggregate Amount
----------------------- ------------------
1995(1) $6,039,000
1996 $1,500,000
1997 $1,750,000
1998 $2,100,000
1999 $2,600,000
2000 $3,750,000
2001 $4,300,000
2002 $3,000,000
- ---------------
(1) In 1995, the installment payments will be as follows: (i) $5,000,000
on or before the completion of the Rights Offering, (ii) $346,333 on June 30,
(iii) $346,333 on September 30 and (iv) $346,334 on December 31.
The Company will also be required to make prepayments (first to the Term
Loan) from the following sources: (i) the first $5,000,000 of net proceeds
from the Rights Offering (which amount is included in the $6,039,000 to be
repaid in 1995); (ii) 60% of any gross proceeds of the Rights Offering in
excess of $8,500,000; (iii) 25% of the net proceeds of any future equity
offerings (excluding equity placements, if any, with C-TEC); (iv) 100% of
the net proceeds of any debt offerings; (v) 75% of the net cash proceeds
of any permitted asset sales; and (vi) 75% of Excess Cash generated by the
Company. For any given fiscal year, Excess Cash is generally defined as
cash flow provided by operations less (a) $350,000, (b) capital
expenditures, (c) principal payments and (d) payments under the Lahey
Settlement Agreement. The Company has previously pledged the common stock
of its operating subsidiaries to secure its obligations under the Credit
Agreement. Such pledge will continue and will secure the obligations under
both the Credit Agreement and the 364-Day Facility. The Company will
endeavor to supplement this pledge by granting to Morgan Guaranty a first
lien on certain material assets of the Company and its subsidiaries.
As menextioned above, the obligation of Morgan Guaranty to amend the
Credit Agreement, and to enter into the 364-Day Facility, in accordance with
the Commitment Letter is subject to certain conditions, including the
condition that the gross proceeds to the Company from the Rights Offering must
be at least $8,500,000. Although the Company believes that these conditions
will be satisfied, no assurance can be given in that regard. In the event
that the Credit Agreement is not amended in accordance with the Commitment
Letter, the Company will review all available options, which would include the
sale of assets, the raising of equity and the issuance of subordinated debt,
among other things. There can be no assurances that, in such an event, the
Company would be able to pursue any such options successfully and thereby
restructure its debt and equity.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock trades on the over-the-counter market. From May 1989
until February 1992 the principal market for the Common Stock was The Nasdaq
Stock Market ("Nasdaq"). However, the Common Stock's Nasdaq designation was
terminated on February 6, 1992 because the Company did not meet Nasdaq's
minimum capital and surplus requirements. Since then, the Common Stock has
been, and presently is, quoted on the OTC Bulletin Board (with such quotes
reported in the pink sheets of the National Quotations Bureau, Inc.) under the
symbol "MEEO." The following table indicates the high and low per-share bid
prices for the Common Stock as quoted on the OTC Bulletin Board since February
7, 1992, the first date quotes were available for the Common Stock on the OTC
Bulletin Board following termination of the Nasdaq designation. Prices listed
below represent inter-dealer quotations without adjustment for retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions. Trading of the Common Stock has been limited and sporadic and
thus does not constitute an established public trading market.
High Low
------ ------
1992
First Quarter(1)......... $4.00 $3.50
Second Quarter........... 4.00 3.50
Third Quarter............ 3.50 3.00
Fourth Quarter........... 3.00 2.50
1993
First Quarter............ 3.50 2.75
Second Quarter........... 3.50 2.75
Third Quarter............ 4.00 2.75
Fourth Quarter........... 4.125 3.125
1994
First Quarter............ 4.00 3.75
Second Quarter........... 4.00 3.25
Third Quarter............ 3.50 3.00
Fourth Quarter........... 3.75 3.00
1995
First Quarter............ 3.75 3.75
Second Quarter(2)........ 3.75 3.75
____________________________
(1) From February 7, 1992.
(2) Through the close of business on June 13, 1995.
The Company has not paid dividends in recent years due to the Company's
financial condition and does not expect to pay dividends in the foreseeable
future. In addition, the Credit Agreement prohibits the payment of dividends
on the Company's Common Stock.
DILUTION
The Company currently has a negative net worth. The net tangible book
value of the shares of Common Stock as of March 31, 1995 was a deficiency of
approximately $(15,900,000), or $(6.63) per share. "Net tangible book value"
per share represents the amount of total tangible assets (total assets less
intangible assets) less total liabilities, divided by the number of shares of
Common Stock outstanding. After giving effect to the sale by the Company of
the 2,393,530 shares of Common Stock offered hereby (assuming full exercise
of the Rights) and after deducting the estimated offering expenses, the pro
forma net tangible book value of the Company as of March 31, 1995 would have
been approximately $[ ], or $[ ] per share, representing an immediate and
substantial dilution of $[ ] per share in respect of shares of Common Stock
purchased pursuant to this Rights Offering. The following table illustrates
this per share dilution:
Subscription Price...................................... $[ ]
Net tangible book value per share before offering... $(6.63)
Increase per share attributable to shareholders
exercising Rights................................ [ ]
------
Pro forma net tangible book value per share after offering [ ]
------
Dilution to shareholders exercising Rights(1)........... $ [ ]
======
- ---------------
(1) Dilution is determined by subtracting the net tangible book value per
share from the Subscription Price paid by an investor for a share of
Common Stock in the Rights Offering.
THE RIGHTS OFFERING
The Rights
The Company is distributing non-transferable Rights at no cost to the
record holders ("Holders") of outstanding shares of Common Stock as of
________ __, 1995 (the "Record Date"). The Company will distribute one Right
for every share of Common Stock held on the Record Date. The Rights will be
evidenced by non-transferable subscription certificates (the "Subscription
Certificates") and each such Right entitles the holder thereof to subscribe
for one share of Common Stock.
The Subscription Price of $________ per share of Common Stock represents
a discount of __% from the closing bid price of $______ for the Common
Stock as quoted on the OTC Bulletin Board on ________ __, 1995, the day of
the commencement of the Rights Offering. There can be no assurance that
the Common Stock will trade at prices above the Subscription Price. See
"Risk Factors--Market Risks Associated with the Common Stock."
The issuance by the Company of shares of Common Stock pursuant to the
Rights Offering is not conditioned upon the subscription of any minimum number
of shares of Common Stock by holders of the Rights. Pursuant to the C-TEC
Rights Exercise Agreement, C-TEC has agreed, subject to the terms and
conditions set forth in such Agreement, to exercise the Rights it receives for
an aggregate subscription price of $[ ] and to exercise the
Oversubscription Privilege to subscribe for all other Underlying Shares. See
"The Rights Offering--C-TEC Rights Exercise Agreement." The opportunity to
exercise the Oversubscription Privilege is available to all holders of Rights
on the same terms. See "The Rights Offering--Subscription
Privileges--Oversubscription Privilege." If C-TEC does not exercise the Basic
Subscription Privilege in respect of the Rights it receives or does not
exercise the Oversubscription Privilege to subscribe for all other Underlying
Shares, each other Rights holder who has previously exercised Rights will be
provided the opportunity to revoke such exercise.
BEFORE EXERCISING ANY RIGHTS, POTENTIAL INVESTORS ARE URGED TO READ
CAREFULLY THE INFORMATION SET FORTH UNDER "RISK FACTORS."
Expiration Date
The Rights will expire at 5:00 p.m., New York City time, on ________ __,
1995, unless extended (as it may be extended, the "Expiration Date"), provided
that the Expiration Date shall in no event be later than ________ __, 1995 [30
days after the initial Expiration Date]. After such time, unexercised Rights
will be null and void. The Company will not be obligated to honor any
purported exercise of Rights received by the Subscription Agent after 5:00
p.m., New York City time, on the Expiration Date, regardless of when the
documents relating to such exercise were sent, except pursuant to the
Guaranteed Delivery Procedures described below.
Subscription Privileges
Basic Subscription Privilege. Each Right will entitle the Holder
thereof to receive, upon payment of the Subscription Price, one share of
Common Stock (the "Basic Subscription Privilege"). Certificates representing
shares of Common Stock purchased pursuant to the Basic Subscription Privilege
will be delivered to subscribers as soon as practicable after the
corresponding Rights have been validly exercised and full payment for shares
has been received and cleared.
Oversubscription Privilege. Subject to the allocation described below,
each Right also carries the right to subscribe at the Subscription Price for
additional shares of Common Stock (the "Oversubscription Privilege") up to the
amount offered hereby. All beneficial holders who exercise the Basic
Subscription Privilege in full will be entitled to exercise the
Oversubscription Privilege.
Underlying Shares will be available for purchase pursuant to the
Oversubscription Privilege only to the extent that any Underlying Shares are
not subscribed for through the Basic Subscription Privilege. If the
Underlying Shares not subscribed for through the Basic Subscription Privilege
(the "Excess Shares") are not sufficient to satisfy all subscriptions pursuant
to the Oversubscription Privilege, the Excess Shares will be allocated pro
rata (subject to the elimination of fractional shares) among those holders of
Rights exercising the Oversubscription Privilege, in proportion, not to the
number of shares requested pursuant to the Oversubscription Privilege, but to
the number of shares each beneficial holder exercising the Oversubscription
Privilege has purchased pursuant to the Basic Subscription Privilege;
provided, however, that if such pro rata allocation results in any Rights
holder being allocated a greater number of Excess Shares than such holder
subscribed for pursuant to the exercise of such holder's Oversubscription
Privilege, then such holder will be allocated only such number of Excess
Shares as such holder subscribed for and the remaining Excess Shares will be
allocated among all other holders exercising the Oversubscription Privilege.
Certificates representing shares of Common Stock purchased pursuant to the
Oversubscription Privilege will be delivered to subscribers as soon as
practicable after the Expiration Date and after all prorations and adjustments
contemplated by the terms of the Rights Offering have been effected.
Banks, brokers and other nominee holders of Rights who exercise the
Basic Subscription Privilege and the Oversubscription Privilege on behalf of
beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company, in connection with the exercise of the Oversubscription
Privilege, as to the aggregate number of Rights that have been exercised and
the number of Underlying Shares that are being subscribed for pursuant to the
Oversubscription Privilege by each beneficial owner of Rights on whose behalf
such nominee holder is acting.
Exercise of Rights
Rights may be exercised by delivering to The First National Bank of
Boston (the "Subscription Agent"), at or prior to 5:00 p.m., New York City
time, on the Expiration Date, the properly completed and executed Subscription
Certificate evidencing such Rights with any signatures required to be
guaranteed so guaranteed, together with payment in full of the Subscription
Price for each Underlying Share subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription Privilege. Any Rights holder
subscribing for an aggregate of more than 25,000 Underlying Shares pursuant to
the Oversubscription Privilege prior to the Expiration Date shall not be
required to deliver payment for such number of Underlying Shares in excess of
25,000 until the Expiration Date. As of June 13, 1995, five unaffiliated
holders of record held more than 25,000 shares of Common Stock. The Company,
in its sole discretion, may determine to waive payment for such excess number
of Underlying Shares until after the Expiration Date and after all prorations
and adjustments contemplated by the terms of the Rights Offering have been
effected. The Company has agreed pursuant to the C-TEC Rights Exercise
Agreement to grant such a waiver to C-TEC. All payments must be by (a) check
or bank draft drawn upon a U.S. bank or postal or express money order payable
to The First National Bank of Boston, as Subscription Agent, or (b) by wire
transfer of same-day funds, in which case please contact the Subscription
Agent at (617) 575-2700 for such information. Payments will be deemed to have
been received by the Subscription Agent only upon (i) clearance of any
uncertified check, (ii) receipt by the Subscription Agent of any certified
check or bank draft upon a U.S. bank or of any postal or express money order
or (iii) receipt of good funds in the Subscription Agent's account designated
above. If paying by uncertified personal check, please note that the funds
paid thereby may take at least five business days to clear. Accordingly,
holders of Rights who wish to pay the Subscription Price by means of
uncertified personal check are urged to make payment sufficiently in advance
of the Expiration Date to ensure that such payment is received and clears by
such date and are urged to consider payment by means of certified or cashier's
check, money order or wire transfer of funds.
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
By Mail:
The First National Bank of Boston
P.O. Box 1872
Mail Stop 45-01-19
Boston, Massachusetts
02105-1872
By Hand:
BancBoston Trust Company of
New York
55 Broadway
3rd Floor
New York, New York
10006
By Overnight Courier:
The First National Bank of Boston
Shareholder Services Division
150 Royall Street
Mail Stop 45-01-19
Canton, Massachusetts
02021
If a Rights holder wishes to exercise Rights, but time will not permit such
holder to cause the Subscription Certificate or Subscription Certificates
evidencing such Rights to reach the Subscription Agent on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such holder has caused payment in full of the Subscription Price
for each Underlying Share being subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription Privilege (subject to
the right of the Company to waive advance payment in respect of the
Oversubscription Privilege as described above) to be received (in the
manner set forth above) by the Subscription Agent on or prior to the
Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guarantee notice ("Notice of Guaranteed Delivery"),
substantially in the form provided with the instructions as to use of
Mercom, Inc. Subscription Certificates (the "instructions") distributed
with the Subscription Certificates, from a member firm of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. ("NASD"), or from a commercial bank or trust
company having an office or correspondent in the United States or from a
bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program,
pursuant to Rule 17Ad-15 of the Exchange Act (each, an "Eligible
Institution"), stating the name of the exercising Rights holder, the
number of Rights represented by the Subscription Certificate or
Subscription Certificates held by such exercising Rights holder, the
number of Underlying Shares being subscribed for pursuant to the Basic
Subscription Privilege and the number of Underlying Shares, if any,
being subscribed for pursuant to the Oversubscription Privilege, and
guaranteeing the delivery to the Subscription Agent of any Subscription
Certificate evidencing such Rights within five business days following
the Expiration Date; and
(iii) the properly completed Subscription Certificate evidencing the
Rights being exercised, with any signatures required to be guaranteed so
guaranteed, is received by the Subscription Agent within five business
days following the Expiration Date. The Notice of Guaranteed Delivery
may be delivered to the Subscription Agent in the same manner as
Subscription Certificates at the address set forth above, or may be
transmitted to the Subscription Agent by facsimile transmission
(telecopy no. (617) 575-2232 or -2233). Additional copies of the form
of Notice of Guaranteed Delivery are available upon request from the
Information Agent, whose address and telephone number are set forth
under "Information Agent."
Funds received in payment of the Subscription Price for Excess Shares
subscribed for pursuant to the Oversubscription Privilege will be held in a
segregated account pending issuance of such Excess Shares. If a Rights holder
exercising the Oversubscription Privilege is allocated less than all of the
shares of Common Stock which such holder subscribed for pursuant to the
Oversubscription Privilege, the excess funds paid by such holder in respect of
the Subscription Price for shares not issued shall be returned by mail without
interest or deduction as soon as practicable after the Expiration Date and
after all prorations and adjustments contemplated by the terms of the Rights
Offering have been effected.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Rights represented thereby are
to be delivered to the record holder of such Rights or (ii) is submitted for
the account of an Eligible Institution, signatures on such Subscription
Certificate must be guaranteed by an Eligible Institution or other eligible
guarantor institution which is a member of or a participant in a medallion
guarantee program acceptable to the Subscription Agent.
Holders who hold shares of Common Stock for the account of others, such
as brokers, trustees or depositories for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Rights should complete Subscription Certificates and submit them to the
Subscription Agent with the proper payment. In addition, beneficial owners of
Common Stock or Rights held through a record holder should contact the holder
and request the holder to act in accordance with such beneficial owner's
instructions. If a beneficial owner wishes to obtain a separate Subscription
Right Certificate, such beneficial owner should contact the nominee as soon as
possible and request that a separate Subscription Right Certificate be issued.
A nominee may request any Subscription Right Certificate held by it to be
split into such smaller denominations as it wishes, provided that the
Subscription Right Certificate is received by the Subscription Agent, properly
endorsed, no later than the Expiration Date. In no event will a Subscription
Certificate be issued in the name of a resident of the State of California.
The instructions accompanying the Subscription Certificates should be
read carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES
TO THE COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK
OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED
PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE
STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Company, whose
determinations will be final and binding. The Company in its sole discretion
may waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported
exercise of any Right. Subscriptions will not be deemed to have been received
or accepted until all irregularities have been waived or cured within such
time as the Company determines in its sole discretion. Neither the Company,
the Subscription Agent, nor the Information Agent will be under any duty to
give notification of any defect or irregularity in connection with the
submission of Subscription Certificates or incur any liability for failure to
give such notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
Instructions or the Notice of Guaranteed Delivery should be directed to the
Information Agent, MacKenzie Partners, Inc., at its address set forth under
"Information Agent" (telephone: (212) 929-5500 or (800) 322-2885).
No Revocation
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE
AND/OR THE OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED,
UNLESS (1) A MATERIAL CHANGE TO THE TERMS OF THE RIGHTS OFFERING IS MADE THAT
ADVERSELY AFFECTS THE RIGHTS HOLDER OR (2) C-TEC DOES NOT EXERCISE THE BASIC
SUBSCRIPTION PRIVILEGE IN RESPECT OF THE RIGHTS IT RECEIVES OR DOES NOT
EXERCISE THE OVERSUBSCRIPTION PRIVILEGE TO SUBSCRIBE FOR ALL OTHER UNDERLYING
SHARES.
Non-Transferability of Rights
The Rights are not transferable and will not be traded on any securities
exchange or quoted on any inter-dealer quotation system. Rights may only be
exercised or permitted to expire. Holders of shares of Common Stock who
determine not to exercise their Rights may not transfer their Rights and, at
the Expiration Date, Rights which have not been exercised will expire and be
null and void and have no value, provided that Rights may be transferred by
operation of law in the case of death, dissolution, liquidation or bankruptcy
of the Rights holder, or pursuant to an order of an appropriate court.
Procedures for Book Entry Transfer Facility Participants
The Company anticipates that the exercise of the Basic Subscription
Privilege (but not the Oversubscription Privilege) may be effected through,
the facilities of the Depository Trust Company, Midwest Securities Trust
Company and Philadelphia Depository Trust Company (collectively, the "Book
Entry Facilities"; Rights exercised through any such facility are referred to
as "Book Entry Exercised Rights"). The holder of a Book Entry Exercised Right
may exercise the Oversubscription Privilege in respect of such Book Entry
Exercised Right by properly executing and delivering to the Subscription
Agent, at or prior to 5:00 p.m., New York City time, on the Expiration Date, a
Nominee Holder Oversubscription Form, together with payment of the
Subscription Price for the number of Underlying Shares for which the
Oversubscription Privilege is to be exercised. Any Rights holder subscribing
for an aggregate of more than 25,000 Underlying Shares pursuant to the
Oversubscription Privilege prior to the Expiration Date shall not be required
to deliver payment for such number of Underlying Shares in excess of 25,000
until the Expiration Date. The Company, in its sole discretion, may determine
to waive payment for such excess number of Underlying Shares until after the
Expiration Date and after all prorations and adjustments contemplated by the
terms of the Rights Offering have been effected. The Company has agreed
pursuant to the C-TEC Rights Exercise Agreement to grant such a waiver to
C-TEC. Copies of the Nominee Holder Oversubscription Form may be obtained
from the Subscription Agent.
Determination of Subscription Price
The Subscription Price was determined by the Company and its Board of
Directors. In making this determination, the material factors considered by
the Company were the market price of the Common Stock, the pro rata nature of
the offering and pricing discounts customarily applied in transactions of this
type. The Subscription Price should not be considered an indication of the
actual value of the Company or the Common Stock.
C-TEC Rights Exercise Agreement
C-TEC will receive 1,044,194 Rights in respect of the shares of Common
Stock it owns, and such Rights represent 43.63% of the total Rights to be
distributed. C-TEC and the Company have entered into the C-TEC Rights
Exercise Agreement dated as of the date hereof. Pursuant to the C-TEC Rights
Exercise Agreement, C-TEC has agreed, subject to certain terms and conditions,
to exercise the Rights it receives for an aggregate subscription price of $[
] and to exercise the Oversubscription Privilege to subscribe for all other
Underlying Shares. The opportunity to exercise the Oversubscription Privilege
is available to all holders of Rights on the same terms. See "The Rights
Offering--Subscription Privileges--Oversubscription Privilege."
In order to provide the Company with sufficient funds to make a
payment due prior to the Expiration Date, C-TEC has agreed to exercise a
portion of its Rights prior to the date such payment is due. Specifically,
the C-TEC Rights Exercise Agreement provides, subject to the terms and
conditions set forth therein, that on or before June 30, 1995, C-TEC will
exercise ___ of the Rights it receives for an aggregate subscription price
of approximately $1,400,000. The Company will use the proceeds of such
exercise to make the payment of $1,400,000 to be paid under the Lahey
Settlement Agreement on of before July 1, 1995.
If no Holders other than C-TEC exercise their Rights, C-TEC will own
approximately 71.81% of the Common Stock after the Rights Offering and will
control the Company. If C-TEC does not exercise the Basic Subscription
Privilege in respect of the Rights it receives or does not exercise the
Oversubscription Privilege to subscribe for all other Underlying Shares,
each other Rights holder who has previously exercised Rights will be
provided the opportunity to revoke such exercise.
C-TEC has significant influence over the Company, and its nominees
constitute a majority of the Board of Directors of the Company. The C-TEC
Rights Exercise Agreement was approved by the ATR Committee.
Foreign and Certain Other Shareholders
Subscription Certificates will not be mailed to Holders whose addresses
are outside the United States or who have an APO or FPO address, but will be
held by the Subscription Agent for their account. To exercise such Rights,
such a Holder must notify the Subscription Agent, and must establish to the
satisfaction of the Subscription Agent that such exercise is permitted under
applicable law. If the procedures set forth in the preceding sentence are not
followed prior to the Expiration Date, the Rights will expire.
Other Matters
The Rights Offering is not being made in any state or other jurisdiction
in which it is unlawful to do so, nor is the Company selling or accepting any
offers to purchase any shares of Common Stock from Rights holders who are
residents of any such state or other jurisdiction. The Company may delay the
commencement of the Rights Offering in certain states or other jurisdictions,
or change the terms of the Rights Offering, in order to comply with the
securities law requirements of such states or other jurisdictions. It is not
anticipated that there will be any changes in the terms of the Rights
Offering. If any such change is made that is material and has an adverse
effect on any holder that has previously exercised Rights, such holder will be
provided the opportunity to revoke such exercise. The Company, if it so
determines in its sole discretion, may decline to make modifications to the
terms of the Rights Offering requested by certain states or other
jurisdictions, in which event Rights holders resident in those states or
jurisdictions will not be eligible to participate in the Rights Offering.
The Rights Offering is not being made, and Subscription Certificates
will not be distributed, to residents of the State of California, as the
California Department of Corporations has determined that the Rights Offering
does not meet the requirements of the Code of Regulations promulgated under
the California Corporate Securities Law of 1968, as amended. By executing a
Subscription Certificate, the Holder will be deemed to have represented that
it is not a resident of the State of California.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
considerations applicable to U.S. Holders who hold Common Stock as a
capital asset and who receive Rights in respect of such Common Stock in the
initial issuance of the Rights (the "Issuance"). This summary is based
upon laws, regulations, rulings and decisions currently in effect. This
summary does not discuss all aspects of federal income taxation that may be
relevant to a particular investor or to certain types of investors subject
to special treatment under the federal income tax laws (for example, banks,
dealers in securities, life insurance companies, tax exempt organizations
and foreign taxpayers), nor does it discuss any aspect of state, local or
foreign tax laws.
Issuance of the Rights
Holders of Common Stock will not recognize taxable income in connection
with the receipt or exercise of the Rights.
Basis and Holding Period of the Rights
Except as provided in the following sentence, the basis of the Rights
received by a shareholder as a distribution with respect to such shareholder's
Common Stock will be zero. If either (i) the fair market value of the Rights
on the date of Issuance is 15% or more of the fair market value (on the date
of Issuance) of the Common Stock with respect to which they are received or
(ii) the shareholder elects, in his or her federal income tax return for the
taxable year in which the Rights are received, to allocate part of the basis
of such Common Stock to the Rights, then upon exercise of the Rights, the
shareholder's basis in such Common Stock will be allocated between the Common
Stock and the Rights in proportion to the fair market values of each on the
date of Issuance. The holding period of a shareholder with respect to the
Rights received as a distribution on such shareholder's Common Stock will
include the shareholder's holding period for the Common Stock with respect to
which the Rights were issued.
Lapse of the Rights
Shareholders who allow the Rights received by them at the Issuance to
lapse will not recognize any gain or loss, and no adjustment will be made to
the basis of the Common Stock, if any, owned by such holders of the Rights.
Exercise of the Rights; Basis
and Holding Period of Common Stock
Holders of Rights will not recognize any gain or loss upon the exercise
of such Rights. The basis of the Common Stock acquired through exercise of
the Rights will be equal to the sum of the Subscription Price therefor and the
Rights holder's basis in such Rights (if any) as described above. The holding
period for the Common Stock acquired through exercise of the Rights will begin
on the date the Rights are exercised.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH SHAREHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON HIS OR
HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF
STATE AND LOCAL INCOME AND OTHER TAX LAWS.
DESCRIPTION OF CAPITAL STOCK
The following general summary of the Common Stock summarizes certain
material elements of the Company's Certificate of Incorporation (the
"Certificate of Incorporation"). Such summary is not necessarily complete and
is qualified in its entirety by reference to the Certificate of Incorporation,
a copy of which is on file with the Commission. See "Available Information."
The authorized capital stock of the Company is 5,150,000 shares,
consisting of 5,000,000 shares of Common Stock, par value $1.00 per share, and
150,000 shares of Preferred Stock, par value $100 per share ("Preferred
Stock"). As of March 31, 1995, the Company had outstanding 2,393,530 shares
of Common Stock and no shares of Preferred Stock.
With respect to all matters upon which shareholders are entitled to vote
(including the election of directors), every holder of Common Stock is
entitled to cast one vote for each share of the Common Stock held. Holders of
Common Stock are not permitted to cumulate their votes for the election of
directors. The Certificate of Incorporation does not provide for preemptive
rights for the Common Stock.
The Certificate of Incorporation authorizes the Company Board of
Directors, to the full extent permitted by law, to issue shares of Preferred
Stock and to fix by resolution such voting rights, designations, powers,
preferences, privileges, limitations, options, conversion rights or other
special rights, as it deems fit.
The transfer agent and registrar for the Common Stock is The First
National Bank of Boston.
The number of shares of Common Stock that will be issued in connection
with the Rights Offering is 2,393,530. The issuance of such shares pursuant
to the Rights Offering will result in a 100% increase in the number of
outstanding Common Shares.
The outstanding shares of the Common Stock trade on the over-the-counter
market under the symbol "MEEO."
SUBSCRIPTION AGENT
The Company has appointed The First National Bank of Boston as
Subscription Agent for the Rights Offering. The Subscription Agent's address,
which is the address to which the Subscription Certificates and payment of the
Subscription Price (other than wire transfers) should be delivered, as well as
the address to which any Notice of Guaranteed Delivery must be delivered, is:
By Mail:
The First National Bank of Boston
P.O. Box 1872
Mail Stop 45-01-19
Boston, Massachusetts
02105-1872
By Hand:
BancBoston Trust Company of
New York
55 Broadway
3rd Floor
New York, New York
10006
By Overnight Courier:
The First National Bank of Boston
Shareholder Services Division
150 Royall Street
Mail Stop 45-01-19
Canton, Massachusetts
02021
The Company will pay the fees and expenses of the Subscription Agent, and has
also agreed to indemnify the Subscription Agent from certain liabilities in
connection with the Rights Offering.
INFORMATION AGENT
The Company has appointed MacKenzie Partners, Inc. as Information Agent
for the Rights Offering. Any questions or requests for additional copies of
this Prospectus, the Instructions or the Notice of Guaranteed Delivery may be
directed to the Information Agent at the telephone number and address below.
MacKenzie Partners, Inc.
156 Fifth Avenue
9th Floor
New York, New York
10010
or
Call Toll Free
(800) 322-2885
The Company will pay the fees and expenses of the Information Agent and has
also agreed to indemnify the Information Agent from certain liabilities in
connection with the Rights Offering.
LEGAL MATTERS
The validity of the authorization and issuance of the securities offered
hereby is being passed upon by Raymond B. Ostroski, Executive Vice President
and General Counsel of the Company. Davis Polk & Wardwell, New York, New
York, will advise the Company with respect to certain other matters relating
to the Rights Offering.
EXPERTS
The Company's consolidated balance sheets as of December 31, 1994 and
1993 and the consolidated statements of operations, shareholders' capital
deficiency and cash flows for each of the three years in the period ended
December 31, 1994, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report, which includes an explanatory
paragraph expressing substantial doubt about the Company's ability to continue
as a going concern and an explanatory paragraph referring to the Company's
change in method of accounting for income taxes, of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
=================================== ======================================
No dealer, salesperson or any other
person has been authorized to give
any information or to make any
representations other than those
contained or incorporated by [LOGO]
reference in this Prospectus in
connection with the offer made by
this Prospectus, and, if given or
made, such information or represen-
tation must not be relied upon as
having been sanctioned or authorized 2,393,530 Shares
by the Company. Neither the delivery
of this Prospectus nor any sale made
hereunder shall under any circum-
stances create any implication that
there has been no change in the Common Stock
affairs of the Company since the date
hereof. This Prospectus does not
constitute an offer or solicitation by
anyone in any jurisdiction in which ----------
the person making such offer or solici- PROSPECTUS
tation is not qualified to do so or to ----------
any person to whom it is unlawful to
make such offer or solicitation.
TABLE OF CONTENTS
Page
----
Available Information............
Documents Incorporated by
Reference......................
Prospectus Summary...............
Risk Factors.....................
Use of Proceeds..................
Recent Developments..............
Price Range of Common Stock and
Dividend Policy..............
Dilution.........................
The Rights Offering..............
Certain Federal Income Tax
Consequences.................
Description of Capital Stock.....
Subscription Agent............... Dated ________ __, 1995
Information Agent................
Legal Matters....................
Experts..........................
=================================== ======================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth expenses in connection with the
issuance and distribution of the securities being registered. All amounts
shown are estimated, except the SEC registration fee and the NASD review fee.
SEC registration fee................................. $ 3,302
NASD review fee...................................... $ 1,458
Financial Advisor's fees and expenses................ $ 125,000
Subscription Agent's fees and expenses............... $ 20,000
Information Agent's fees and expenses................ $ 20,000
Accounting fees...................................... $ 20,000
Legal fees and expenses (including Blue Sky fees
and expenses)...................................... $ 125,000
Printing and engraving fees.......................... $ 20,000
Miscellaneous........................................ $ 165,240
--------
Total.......................................... $ 500,000
========
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") grants each corporation organized thereunder the power to
indemnify its directors and officers against liabilities for certain of
their acts. Article 8 of the Company's Certificate of Incorporation
provides for indemnification of directors, except for liability (i) for
breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for intentional misconduct or knowing violation of law,
(iii) under DGCL Section 174 or (iv) for any transaction from which the
director derived an improper personal benefit. Article VIII of the Company
By-Laws provides that, except as prohibited by law, any director, officer,
employee or agent of the Company is entitled to be indemnified in any
action or proceeding in which he or she may be involved by virtue of
holding such position to the fullest extent permissible under DGCL Section
145.
In addition, the Company maintains a directors' and officers'
liability insurance policy.
For the undertaking with respect to indemnification, see Item 17
herein.
Item 16. Exhibits
1 - Form of C-TEC Rights Exercise Agreement*
5 - Opinion of Raymond B. Ostroski*
23(a) - Consent of Coopers & Lybrand L.L.P.
23(b) - Consent of Raymond B. Ostroski (included in Exhibit 5)*
24(a) - Power of attorney (included in the signature page to the
Registration Statement)**
99(a) - Form of Subscription Certificate
99(b) - Form of Instructions for Subscription Certificates
99(c) - Form of Notice of Guaranteed Delivery
99(d) - Form of Subscription Agency Agreement*
99(e) - Form of Nominee Holder Oversubscription Exercise Form
99(f) - Form of Nominee Holder Certification**
99(g) - Important Tax Information**
- ---------------
* To be supplied by amendment.
** Previously filed.
Item 17. Undertakings
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended, that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form
of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the registrant pursuant to the provisions
referred to in Item 15 of this registration statement, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereby, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in such Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Amendment to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Princeton, State of New
Jersey, on the 14th day of June, 1995.
MERCOM, INC.
By /s/ Bruce C. Godfrey
-------------------------------
Bruce C. Godfrey
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacity and on the dates indicated.
Signature Title Date
Director, Chairman and
* Chief Executive Officer June 14, 1995
- -------------------------
David C. McCourt
Director, President and
* Chief Operating Officer June 14, 1995
- -------------------------
Michael J. Mahoney
Director, Executive Vice
President and Chief Financial
Officer (Principal Financial
* and Accounting Officer) June 14, 1995
- -------------------------
Bruce C. Godfrey
Director, Executive Vice
President and June 14, 1995
* General Counsel
- -------------------------
Raymond B. Ostroski
* Director June 14, 1995
- -------------------------
Clifford L. Jones
* Director June 14, 1995
- -------------------------
Harold J. Rose, Jr.
* Director June 14, 1995
- -------------------------
George C. Stephenson
*By: /s/ Raymond B. Ostroski
------------------------
Raymond B. Ostroski
Attorney-in-Fact
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------- -----------------------
1 Form of C-TEC Rights Exercise Agreement*
5 Opinion of Raymond B. Ostroski*
23(a) Consent of Coopers & Lybrand L.L.P.
23(b) Consent of Raymond B. Ostroski (included in Exhibit 5)*
24(a) Power of attorney (included in the signature page to the
Registration Statement)**
99(a) Form of Subscription Certificate
99(b) Form of Instructions for Subscription Certificates
99(c) Form of Notice of Guaranteed Delivery
99(d) Form of Subscription Agency Agreement*
99(e) Form of Nominee Holder Oversubscription Exercise Form
99(f) Form of Nominee Holder Certification**
99(g) Important Tax Information**
____________________________
* To be supplied by amendment.
** Previously filed
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement on Form S-3 (file no. 33-58715) of our report, which
includes an explanatory paragraph expressing substantial doubt about the
Company's ability to continue as a going concern and an explanatory
paragraph referring to the Company's change in method of accounting for
income taxes, dated March 10, 1995 on our audits of the financial
statements and the financial statement schedule of Mercom, Inc. We also
consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
June 14, 1995
Exhibit 99(a)
MERCOM, INC. SUBSCRIPTION CERTIFICATE NO.
CUSIP NO. [ ]
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN THE
COMPANY'S PROSPECTUS DATED ________, 1995 (THE "PROSPECTUS") AND ARE
INCORPORATED HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE AVAILABLE
UPON REQUEST FROM THE SUBSCRIPTION AGENT AND THE INFORMATION AGENT. THIS
CERTIFICATE OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
SUBSCRIPTION AGENT WITH PAYMENT IN FULL BY 5:00 P.M., NEW YORK CITY TIME,
ON ________, 1995, UNLESS EXTENDED (AS IT MAY BE EXTENDED, THE "EXPIRATION
DATE"), PROVIDED THAT THE EXPIRATION DATE SHALL IN NO EVENT BE LATER THAN
______ __, 1995 [30 DAYS AFTER THE ORIGINAL EXPIRATION DATE].
___________________________________________________________________________
|The Rights represented by this subscription certificate may be exercised |
|by duly completing Form 1. Rights holders are advised to review the |
|Prospectus and instructions, copies of which are available from the |
|Subscription Agent or the Information Agent, before exercising their |
|Rights. IMPORTANT: Complete FORM 1 and, if applicable, delivery |
|instructions in FORM 2, and SIGN on reverse side. |
___________________________________________________________________________
SUBSCRIPTION PRICE $__ PER SHARE NON-TRANSFERABLE RIGHTS TO PURCHASE
COMMON SHARES OF MERCOM, INC.
[Name and Address of Registered Holder]
The registered owner whose name is inscribed hereon is entitled to subscribe
for shares of Common Stock upon the terms and subject to the conditions set
forth in the Prospectus and instructions relating thereto.
By........................... By...................................
Michael J. Mahoney Bruce Godfrey
President Executive Vice President and
Chief Financial Officer
THIS SUBSCRIPTION CERTIFICATE IS NOT TRANSFERABLE AND MAY NOT BE COMBINED OR
DIVIDED EXCEPT BY THE COMPANY IN THE EVENT A HOLDER SHALL CHOOSE TO EXERCISE
LESS THAN ALL OF THE RIGHTS EVIDENCED HEREBY.
RIGHTS HOLDERS SHOULD BE AWARE THAT IF THEY CHOOSE TO EXERCISE LESS THAN ALL
OF THE RIGHTS EVIDENCED HEREBY, THEY MAY NOT RECEIVE A NEW SUBSCRIPTION
CERTIFICATE IN SUFFICIENT TIME TO EXERCISE THE REMAINING RIGHTS EVIDENCED
THEREBY.
EXECUTION OF THIS SUBSCRIPTION CERTIFICATE CONSTITUTES A REPRESENTATION BY THE
HOLDER THAT IT IS NOT A RESIDENT OF THE STATE OF CALIFORNIA.
FORM 1--EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocably
exercises one or more Rights to subscribe for shares of Common Stock, as
indicated below, on the terms and subject to the conditions specified in the
Prospectus, receipt of which is hereby acknowledged.
(a) Number of shares subscribed for pursuant to the Basic Subscription
Privilege (one Right needed to subscribe for each full share): __________
(b) Number of shares subscribed for pursuant to the Oversubscription
Privilege: __________
(c) Total Subscription Price (total number of shares subscribed for--pursuant
to both the Basic Subscription Privilege and the Oversubscription
Privilege--times the Subscription Price of $___): $__________(1)
(1) If the amount enclosed or transmitted is not sufficient to pay the
Subscription Price for all shares that are stated to be subscribed for, or if
the number of shares being subscribed for is not specified, the number of
shares subscribed for will be assumed to be the maximum number that could be
subscribed for upon payment of such amount. If the number of shares to be
subscribed for pursuant to the Oversubscription Privilege is not specified and
the amount enclosed or transmitted exceeds the Subscription Price for all
shares represented by this Subscription Certificate (the "Subscription
Excess"), the person subscribing pursuant hereto shall be deemed to have
exercised the Oversubscription Privilege to purchase, to the extent available,
that number of whole shares of Common Stock equal to the quotient obtained by
dividing the Subscription Excess by $_____. Any amount remaining after such
division shall be returned to the subscriber.
METHOD OF PAYMENT (CHECK ONE)
[ ] CHECK, BANK DRAFT OR MONEY ORDER PAYABLE TO
"THE FIRST NATIONAL BANK OF BOSTON"
[ ] WIRE TRANSFER DIRECTED TO [ ] ABA NO. [ ]
(MARKED: "MERCOM, INC. SUBSCRIPTION").
(d) If the number of Rights being exercised pursuant to the Basic
Subscription Privilege is less than all of the Rights represented by the
Subscription Certificate, deliver to me a new Subscription Certificate
evidencing the remaining Rights to which I am entitled.
[ ] CHECK HERE IF RIGHTS ARE BEING EXERCISED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE SUBSCRIPTION AGENT PRIOR TO THE DATE
HEREOF AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s)..............................
Window Ticket number (if any)...............................
Date of Execution of Notice of Guaranteed Delivery..........
Name of Institution which Guaranteed Delivery...............
FORM 2--DELIVERY INSTRUCTIONS: Address (not within the State of California)
for mailing any stock certificates or cash payment if other than shown on the
reverse hereof:
Address.......................
..............................
(Including Zip Code)
_____________________________________________________________________________
| |
| IMPORTANT |
| RIGHTS HOLDER SIGN HERE |
| AND, IF RIGHTS ARE BEING EXERCISED, |
| COMPLETE SUBSTITUTE FORM W-9 |
| |
|............................................................................|
| |
|............................................................................|
| (Signature(s) of Holder(s)) |
|Dated................................................................., 1995|
| |
|(Must be signed by the registered holder(s) exactly as name(s) appear(s) on |
|this Subscription Certificate. If signature is by trustee(s), executor(s), |
|administrator(s), guardian(s), attorney(s)-in-fact, agent(s), officer(s) of |
|a corporation or another acting in a fiduciary or representative capacity, |
|please provide the following information. See Instructions.) |
| |
|Name(s).....................................................................|
| |
|............................................................................|
| (Please Print) |
| |
|Capacity....................................................................|
| |
|Address.....................................................................|
| |
|............................................................................|
| (Including Zip Code) |
| |
|Area Code and |
|Telephone Number............................................................|
| (Home) |
| |
|............................................................................|
| (Business) |
|Tax Identification or |
|Social Security No..........................................................|
| (Complete Substitute Form W-9) |
| |
| GUARANTEE OF SIGNATURE(S) |
| Note: See Section 5(c) of Instructions |
| |
|Authorized Signature........................................................|
| |
|Name........................................................................|
| |
|Title.......................................................................|
| |
|Name of Firm................................................................|
| |
|Address.....................................................................|
| |
|Area Code and Telephone Number..............................................|
| |
|Dated:..............................................................., 1995 |
_____________________________________________________________________________
Exhibit 99(b)
INSTRUCTIONS AS TO USE OF MERCOM, INC.
SUBSCRIPTION CERTIFICATES
CONSULT THE INFORMATION AGENT, YOUR BANK
OR BROKER AS TO ANY QUESTIONS
The following instructions relate to a rights offering (the
"Rights Offering") by Mercom, Inc., a Delaware corporation (the "Company"), to
the holders of record of its Common Stock, par value $1.00 per share (the
"Common Stock"), as described in the Company's Prospectus dated ________,
1995 (the "Prospectus"). Holders of record of Company Stock at the close of
business on _____________, 1995 (the "Record Date") are receiving one
non-transferable subscription right (the "Rights") for every one share of
Common Stock held by them on the Record Date. An aggregate of 2,393,530
Rights exercisable to purchase an aggregate of 2,393,530 shares of Common
Stock (the "Underlying Shares") are being distributed in connection with the
Rights Offering. Each Right is exercisable, upon payment of $[ ] in cash
(the "Subscription Price"), to purchase one share of Common Stock (the "Basic
Subscription Privilege"). In addition, subject to the allocation described
below, each Right also carries the right to subscribe at the Subscription
Price for additional shares of Common Stock available as a result of
unexercised Rights, if any (the "Oversubscription Privilege") up to the amount
offered by the Prospectus. Any Rights holder subscribing for an aggregate of
more than 25,000 Underlying Shares pursuant to the Oversubscription Privilege
prior to 5:00 p.m., New York City time, on __________, 1995, unless extended
(as it may be extended, the "Expiration Date", provided that the Expiration
Date shall in no event be later than __________, 1995, [30 days after the
original Expiration Date]), shall not be required to deliver payment for such
number of Underlying Shares in excess of 25,000 until the Expiration Date.
The Company, in its sole discretion, may determine to waive payment for such
excess number of Underlying Shares until after the Expiration Date and after
all prorations and adjustments contemplated by the terms of the Right Offering
have been effected. Underlying Shares will be available for purchase pursuant
to the Oversubscription Privilege only to the extent that all the Underlying
Shares are not subscribed for through the exercise of the Basic Subscription
Privilege by the Expiration Date. If the Underlying Shares so available (the
"Excess Shares") are not sufficient to satisfy all subscriptions pursuant to
the Oversubscription Privilege, the available Excess Shares will be allocated
pro rata (subject to the elimination of fractional shares) among the holders
of Rights who exercise the Oversubscription Privilege, in proportion, not to
the number of shares requested pursuant to the Oversubscription Privilege, but
to the number of shares each beneficial holder has purchased pursuant to the
Basic Subscription Privilege; provided, however, that if such pro rata
allocation results in any holder being allocated a greater number of Excess
Shares than such holder subscribed for pursuant to the exercise of such
holder's Oversubscription Privilege, then such holder will be allocated only
such number of Excess Shares as such holder subscribed for and the remaining
Excess Shares will be allocated among all other holders exercising the
Oversubscription Privilege. See "The Rights Offering-Subscription Privileges"
in the Prospectus.
The Rights will expire at 5:00 p.m., New York City time, on the
Expiration Date. The Rights are not transferable and will not be traded on
any securities exchange or quoted on any inter-dealer quotation system. See
"The Rights Offering -- Non-Transferability of Rights" in the Prospectus.
The number of Rights to which you are entitled is printed on
the face of your subscription certificate. You should indicate your wishes
with regard to the exercise of your Rights by completing the appropriate form
or forms on your subscription certificate and returning the certificate to the
Subscription Agent in the envelope provided.
YOUR SUBSCRIPTION CERTIFICATES MUST BE RECEIVED BY THE
SUBSCRIPTION AGENT, OR GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR
SUBSCRIPTION CERTIFICATES MUST BE COMPLIED WITH, AND PAYMENT OF THE
SUBSCRIPTION PRICE, INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE RECEIVED
BY THE SUBSCRIPTION AGENT, ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE. ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION
PRIVILEGE AND/OR THE OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE
REVOKED EXCEPT UNDER LIMITED CIRCUMSTANCES AS DESCRIBED IN THE PROSPECTUS.
The Rights Offering is not being made, and Subscription
Certificates will not be distributed, to residents of the State of California,
as the California Department of Corporations has determined that the Rights
Offering does not meet the requirements of the Code of Regulations promulgated
under the California Corporate Securities Law of 1968, as amended. Execution
of a Subscription Certificate constitutes a representation by the holder that
it is not a resident of the State of California
1. Subscription Privilege.
To exercise Rights, complete Form 1 and send your properly
completed and executed subscription certificate, together with payments in
full of the Subscription Price for each Underlying Share subscribed for
pursuant to the Basic Subscription Privilege and the Oversubscription
Privilege, to the Subscription Agent. Any Rights holder subscribing for an
aggregate of more than 25,000 Underlying Shares pursuant to the
Oversubscription Privilege prior to the Expiration Date shall not be required
to deliver payment for such number of Underlying Shares in excess of 25,000
until the Expiration Date. The Company, in its sole discretion, may determine
to waive payment for such excess number of Underlying Shares until after the
Expiration Date and after all prorations and adjustments contemplated by the
terms of the Rights Offering have been effected. All payments must be made in
U.S. dollars (a) by check or bank draft drawn upon a U.S. bank or postal or
express money order payable to The First National Bank of Boston, as
Subscription Agent, or (b) if by wire transfer please contact the Bank of
Boston. Payments will be deemed to have been received by the Subscription
Agent only upon (i) the clearance of any uncertified check, (ii) the receipt
by the Subscription Agent of any certified check or bank draft drawn upon a
U.S. bank or any postal express money order or (iii) the receipt of good funds
in the Subscription Agent's account designated above. If paying by
uncertified personal check, please note that the funds paid thereby may take
at least five business days to clear. Accordingly, holders of Rights who wish
to pay the Subscription Price by means of uncertified personal check are urged
to make payment sufficiently in advance of the Expiration Date to ensure that
such payment is received and clears by such date and are urged to consider
payment by means of certified or cashier's check, money order or wire transfer
of funds. You may cause a written guarantee substantially in the form
available from the Subscription Agent (the "Notice of Guaranteed Delivery")
from a member firm of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., or from a commercial
bank or trust company having an office or correspondent in the United States
or from a bank, stockbroker, savings and loan association or credit union with
membership in an approved signature guarantee medallion program, pursuant to
Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934 (each of
the foregoing being an "Eligible Institution"), to be received by the
Subscription Agent at or prior to the Expiration Date together with payment in
full of the applicable Subscription Price. Such Notice of Guaranteed Delivery
must state your name, the number of Rights represented by your subscription
certificate, the number of Rights being exercised pursuant to the Basic
Subscription Privilege and the number of Underlying Shares, if any, being
subscribed for pursuant to the Oversubscription Privilege, and will guarantee
the delivery to the Subscription Agent of your properly completed and executed
subscription certificate within five business days following the date of the
Notice of Guaranteed Delivery. If this procedure is followed, your
subscription certificate must be received by the Subscription Agent within
five business days of the Notice of Guaranteed Delivery. Additional copies of
the Notice of Guaranteed Delivery may be obtained upon request from the
Subscription Agent at the address, or by calling the telephone number,
indicated below.
Banks, brokers and other nominee holders of Rights who exercise
the Basic Subscription Privilege and the Oversubscription Privilege on behalf
of beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company (by delivery to the Subscription Agent of a Nominee
Holder Certification substantially in the form available from the Subscription
Agent), the aggregate number of Rights that have been exercised, and the
number of Underlying Shares that are being subscribed for pursuant to the
Oversubscription Privilege, by each beneficial owner of Rights (including such
nominee itself) on whose behalf such nominee holder is acting. In the event a
Nominee Holder Certification is not delivered in respect of a Subscription
Certificate, the Subscription Agent shall for all purposes (including for
purposes of any allocation in connection with the Oversubscription Privilege)
be entitled to assume that such certificate is exercised on behalf of a single
beneficial owner. If more Excess Shares are subscribed for pursuant to the
Oversubscription Privilege than are available for sale, Excess Shares will be
allocated, as described above, among beneficial owners exercising the
Oversubscription Privilege in proportion to such owners' exercise of Rights
pursuant to the Basic Subscription Privilege.
The address and telecopier numbers of the Subscription Agent
are as follows:
If by Mail: If by Hand:
The First National Bank BancBoston Trust Company
of Boston of New York
P.O. Box 1872 55 Broadway
Mail Stop 45-01-19 3rd Floor
Boston, MA 02105-1872 New York, NY 10006
If by Overnight Courier:
The First National Bank
of Boston
Shareholder Services Division
150 Royall Street
Mail Stop 45-01-19
Canton, MA 02021
Telecopier: (617) 575-2232 or 2233
If you exercise less than all of the Rights evidenced by your
subscription certificate by so indicating in Form 1 of your subscription
certificate, the Subscription Agent will issue to you a new non-
transferable subscription certificate evidencing the unexercised Rights.
However, if you choose to have a new subscription certificate sent to you,
you may not receive any such new subscription certificate in sufficient
time to permit exercise of the Rights evidenced thereby. If you have not
indicated the number of Rights being exercised, or if the amount you have
forwarded is not sufficient (subject to the second sentence of Section 1
above) to purchase the number of shares subscribed for, you will be deemed
to have exercised the Basic Subscription Privilege with respect to the
maximum number of whole Rights which may be exercised for the Subscription
Price payment delivered by you, and to the extent that the Subscription
Price payment delivered by you exceeds the product of the Subscription
Price multiplied by the number of Rights evidenced by the subscription
certificates delivered by you (such excess being the "Subscription
Excess"), you will be deemed to have exercised your Oversubscription
Privilege to purchase, to the extent available, that number of whole shares
of Common Stock equal to the quotient obtained by dividing the Subscription
Excess by the Subscription Price.
2. Delivery of Stock Certificates, Etc.
The following deliveries and payments will be made to the
address shown on the face of your subscription certificate unless you provide
instructions to the contrary in Form 2.
(a) Basic Subscription Privilege. As soon as practicable
after the valid exercise of Rights, the Subscription Agent will mail to each
exercising Rights holder certificates representing shares of Common Stock
purchased pursuant to the Basic Subscription Privilege.
(b) Oversubscription Privilege. As soon as practicable after
the Expiration Date and after all prorations and adjustments contemplated by
the terms of the Rights Offering have been effected, the Subscription Agent
will mail to each Rights holder who validly exercises the Oversubscription
Privilege the number of shares allocated to such Rights holder pursuant to the
Oversubscription Privilege. See "The Rights Offering-Subscription
Privileges-Oversubscription Privilege" in the Prospectus.
(c) Cash Payments. As soon as practicable after the
Expiration Date and after all prorations and adjustments contemplated by the
terms of the Rights Offering have been effected, the Subscription Agent will
mail to each Rights holder who exercises the Oversubscription Privilege any
excess funds received in payment of the Exercise Price for Excess Shares that
are subscribed for by such Rights holder but not allocated to such Rights
holder pursuant to the Oversubscription Privilege.
3. Execution.
(a) Execution by Registered Holder. The signature on the
subscription certificate must correspond with the name of the registered
holder exactly as it appears on the face of the subscription certificate
without any alteration or change whatsoever. Persons who sign the
subscription certificate in a representative or other fiduciary capacity must
indicate their capacity when signing and, unless waived by the Subscription
Agent in its sole and absolute discretion, must present to the Subscription
Agent satisfactory evidence of their authority to so act.
(b) Execution by Person Other than Registered Holder. If the
subscription certificate is executed by a person other than the holder named
on the face of the subscription certificate, proper evidence of authority of
the person executing the subscription certificate must accompany the same
unless, for good cause, the Subscription Agent dispenses with proof of
authority.
(c) Signature Guarantees. Your signature must be guaranteed
by an Eligible Institution if you wish to specify special payment or delivery
instructions pursuant to Form 2.
4. Method of Delivery.
The method of delivery of subscription certificates and payment
of the Exercise Price to the Subscription Agent will be at the election and
risk of the Rights holder, but, if sent by mail, it is recommended that they
be sent by registered mail, properly insured, with return receipt requested,
and that a sufficient number of days be allowed to ensure delivery to the
Subscription Agent and the clearance of any checks sent in payment of the
Exercise Price prior to 5:00 p.m., New York City time, on the Expiration Date.
5. Special Provisions Relating to the Delivery of Rights
Through Depository Facility Participants.
In the case of holders of Rights that are held of record
through The Depository Trust Company, Midwest Securities Trust Company and
Philadelphia Depository Trust Company or any other depository (each a
"Depository"), exercises of the Basic Subscription Privilege (but not the
Oversubscription Privilege) may be effected by instructing the Depository to
transfer Rights (such Rights "Depository Rights") from the Depository's
account of such holder to the Depository account of the Subscription Agent,
together with payment of the Subscription Price for each Underlying Share
subscribed for pursuant to the Basic Subscription Privilege. The
Oversubscription Privilege in respect of Depository Rights may not be
exercised through the Depository. The holder of a Depository Right may
exercise the Oversubscription Privilege in respect of such Depository Right by
properly executing and delivering to the Subscription Agent at or prior to
5:00 p.m., New York City time, on the Expiration Date, a Nominee Holder
Oversubscription Exercise Form, in the form available from the Subscription
Agent, or a Notice of Guaranteed Delivery, together with payment of the
appropriate Subscription Price for the number of Underlying Shares for which
the Oversubscription Privilege is to be exercised. Any Rights holder
subscribing for an aggregate of more than 25,000 Underlying Shares pursuant to
the Oversubscription Privilege prior to the Expiration Date shall not be
required to deliver payment for such number of Underlying Shares in excess of
25,000 until the Expiration Date. The Company, in its sole discretion, may
determine to waive payment for such excess number of Underlying Shares until
after the Expiration Date and after all prorations and adjustments
contemplated by the terms of the Rights Offering have been effected.
If a Notice of Guaranteed Delivery relates to Rights with
respect to which exercise of the Basic Subscription Privilege will be made
through a Depository and such Notice of Guaranteed Delivery also relates to
the exercise of the Oversubscription Privilege, a Nominee Holder
Oversubscription Exercise Form must also be received by the Subscription Agent
in respect of such exercise of the Oversubscription Privilege within five
business days of the Notice of Guaranteed Delivery.
6. Substitute Form W-9.
Each Rights holder who elects to exercise Rights should provide
the Subscription Agent with a correct Taxpayer Identification Number ("TIN")
on Substitute Form W-9, substantially in the form provided with these
instructions. A copy of Substitute Form W-9 may be obtained upon request from
the Subscription Agent at the address indicated above. Failure to provide the
information on the form may subject such holder to a $50.00 penalty and to 31%
federal income tax withholding with respect to dividends that may be paid by
the Company on shares of Common Stock purchased upon the exercise of Rights.
Exhibit 99(c)
NOTICE OF GUARANTEED DELIVERY
for
SUBSCRIPTION CERTIFICATES
issued by
MERCOM, INC.
This form, or one substantially equivalent hereto, must be used to
exercise Rights pursuant to the Basic Subscription Privilege and the
Oversubscription Privilege pursuant to the Rights Offering described in the
Prospectus dated ________ __, 1995 (the "Prospectus") of Mercom, Inc., a
Delaware corporation (the "Company"), if a holder of Rights cannot deliver the
subscription certificate(s) evidencing the Rights (the "Subscription
Certificate(s)"), to the Subscription Agent listed below (the "Subscription
Agent") at or prior to 5:00 p.m. New York City time on _____________, 1995,
unless extended (as it may be extended, the "Expiration Date"), provided that
the Expiration Date shall in no event be later than _______ __, 1995 [30 days
after the original Expiration Date]. Such form must be delivered by hand or
sent by facsimile transmission or mail to the Subscription Agent, and must be
received by the Subscription Agent on or prior to the Expiration Date. See
"The Rights Offering--Exercise of Rights" in the Prospectus. Payment of the
Subscription Price of $[ ] per share for each share of the Company's
Common Stock, par value $1.00 per share (the "Common Stock"), subscribed for
upon exercise of such Rights must be received by the Subscription Agent in the
manner specified in the Prospectus at or prior to 5:00 p.m. New York City time
on the Expiration Date even if the Subscription Certificate evidencing such
Rights is being delivered pursuant to the procedure for guaranteed delivery
thereof.
The Subscription Agent is:
The First National Bank
of Boston
If by Mail: Facsimile Transmission: If by Hand:
The First National Bank (617) 575-2232 BancBoston Trust Company
of Boston (617) 575-2233 of New York
P.O. Box 1872 55 Broadway
Mail Stop 45-01-19 3rd Floor
Boston, MA 02105-1872 New York, NY 10006
If by Overnight Courier:
The First National Bank of Boston
Shareholder Services Division
150 Royall Street
Mail Stop 45-01-19
Canton, MA 02021
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
Gentlemen:
The undersigned hereby represents that (i) he or she is the
holder of Subscription Certificate(s) representing _______________ Rights,
(ii) that such Subscription Certificate(s) cannot be delivered to the
Subscription Agent at or before 5:00 p.m., New York City time on the
Expiration Date and (iii) that he or she is not a resident of the State of
California. Upon the terms and subject to the condition set forth in the
Prospectus, receipt of which is hereby acknowledged, the undersigned hereby
elects to exercise (i) the Basic Subscription Privilege to subscribe for one
share of Common Stock per Right with respect to each of _________________
Rights represented by such Subscription Certificate and (ii) the
Oversubscription Privilege relating to each such Right, to the extent that
Excess Shares (as defined in the Prospectus) are available therefor, for an
aggregate of up to __________ Excess Shares. The undersigned understands that
payment of the Subscription Price of $[ ] per share for each share of
Common Stock subscribed for pursuant to the Basic Subscription Privilege and
Oversubscription Privilege must be received by the Subscription Agent at or
before 5:00 p.m., New York City time, on the Expiration Date and represents
that such payment, in the aggregate amount of $__________, either (check
appropriate box):
[ ] is delivered herewith or [ ] was delivered separately;
in the manner set forth below (check appropriate box and complete information
relating thereto):
[ ] wire transfer of funds
- name of transferor institution................................
- date of transfer..............................................
- confirmation number (if available)............................
[ ] money order
- name of maker.................................................
- date and number of check, draft or money order number.........
- bank on which check is drawn or issuer of money order.........
[ ] uncertified check (Payment by uncertified check will not be deemed
to have been received by the Subscription Agent until such check
has cleared. Holders paying by such means are urged to make
payment sufficiently in advance of the Expiration Date to ensure
that such payment clears by such date.)
[ ] certified check or [ ] bank draft (cashier's check)
Signature(s)..................... Address..................................
................................. .........................................
Name(s).......................... .........................................
................................. Area Code and Tel. No(s).................
Please Type or Print .........................................
Subscription Certificate No(s). (if available)...............................
GUARANTEE OF DELIVERY
(Not to be used for Subscription Certificate signature guarantee)
The undersigned, a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States or a bank, stockbroker, savings and loan association or credit
union with membership in an approved signature guarantee medallion program,
guarantees that the undersigned will deliver to the Subscription Agent the
certificates representing the Rights being exercised hereby, with any required
signature guarantees and any other required documents, all within five
business days after the date hereof.
....................................... Dated:......................., 1995
(Name of Firm)
.......................................
(Address)
....................................... ...................................
(Area Code and Telephone Number) (Authorized Signature)
The institution which completes this form must communicate
the guarantee to the Subscription Agent and must deliver the Subscription
Certificate(s) to the Subscription Agent within the time period shown herein.
Failure to do so could result in a financial loss to such institution.
Exhibit 99(e)
MERCOM, INC.
RIGHTS OFFERING
NOMINEE HOLDER OVERSUBSCRIPTION EXERCISE FORM
PLEASE COMPLETE ALL APPLICABLE INFORMATION
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Express Mail or Overnight:
C
The First National Bank of Boston BancBoston Trust Company of New York The First National Bank of Boston
P.O. Box 1872 55 Broadway Shareholder Services Division
Mail Stop 45-01-19 3rd Floor 150 Royall Street
Boston, Massachusetts 02105-1872 New York, New York Mail Stop 45-01-19
Canton, Massachusetts 02021
</TABLE>
THIS FORM IS TO BE USED ONLY BY NOMINEE HOLDERS TO EXERCISE THE
OVERSUBSCRIPTION PRIVILEGE IN RESPECT OF RIGHTS WITH RESPECT TO WHICH THE
BASIC SUBSCRIPTION PRIVILEGE WAS EXERCISED TO THE FULLEST EXTENT POSSIBLE
AND DELIVERED THROUGH THE FACILITIES OF A COMMON DEPOSITORY. ALL OTHER
EXERCISES OF OVERSUBSCRIPTION PRIVILEGES MUST BE EFFECTED BY THE DELIVERY
OF SUBSCRIPTION CERTIFICATES.
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE SET FORTH IN MERCOM,
INC.'S ("THE COMPANY'S") PROSPECTUS DATED _______________, 1995 (THE
``PROSPECTUS'') AND ARE INCORPORATED HEREIN BY REFERENCE. COPIES OF THE
PROSPECTUS ARE AVAILABLE UPON REQUEST FROM THE INFORMATION AGENT, MACKENZIE
PARTNERS, INC. AT (800) 322-2885.
THIS FORM OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
SUBSCRIPTION AGENT WITH PAYMENT IN FULL BY 5:00 P.M., NEW YORK CITY TIME,
ON _______________, 1995, UNLESS EXTENDED (AS IT MAY BE EXTENDED, THE
``EXPIRATION DATE''), PROVIDED THAT THE EXPIRATION DATE SHALL IN NO EVENT
BE LATER THAN ______ __, 1995 [30 DAYS AFTER THE ORIGINAL EXPIRATION DATE].
1. The undersigned hereby certifies to the Company and the Subscription Agent
that it is a participant in _________________________[Name of Depository] (the
``Depository'') and that it has either (1) exercised the Basic Subscription
Privilege in respect of Rights and delivered such exercised Rights to the
Subscription Agent by means of transfer to the Depository Account of the
Company or (ii) delivered to the Subscription Agent a Notice of Guaranteed
Delivery in respect of the exercise of the Basic Subscription Privilege and
will deliver the Rights called for in such Notice of Guaranteed Delivery to
the Subscription Agent by means of transfer to such Depository Account of the
Company.
2. The undersigned hereby exercises the Oversubscription Privilege to
purchase, to the extent available, _______ shares of Common Stock and
certifies to the Company and the Subscription Agent by execution of a Nominee
Holder Certification that such Oversubscription Privilege is being exercised
for the account or accounts of persons (which may include the undersigned) on
whose behalf all Basic Subscription Rights have been exercised to the fullest
extent possible.
3. The undersigned understands that payment of the Subscription Price of
$[ ] per share for each share of Common Stock subscribed for pursuant to the
Oversubscription Privilege must be received by the Subscription Agent at or
before 5:00 p.m., New York City time, on the Expiration Date and represents
that such payment, in the aggregate amount of $____________, either (check
appropriate box):
[ ] has been or is being delivered to the Subscription Agent pursuant to the
Notice of Guaranteed Delivery referred to above
or
[ ] is being delivered to the Subscription Agent herewith
or
[ ] has been delivered separately to the Subscription Agent and, in the case
of funds not delivered pursuant to a Notice of Guaranteed Delivery, is
or was delivered in the manner set forth below (check appropriate box and
complete information relating thereto):
[ ]wire transfer of funds
- -- name of transferor institution.............................................
- -- date of transfer...........................................................
- -- confirmation number (if available).........................................
[ ] uncertified check
[ ] certified check
[ ] bank draft (cashier's check)
Basic Subscription Confirmation Number..................
Depository Participant Number...........................
Name of Depository Participant..........................
By......................................................
Name:
Title:
Dated: _______________, 1995
PARTICIPANTS EXERCISING THE OVERSUBSCRIPTION PRIVILEGE PURSUANT HERETO MUST
SEPARATELY SUBMIT A NOMINEE HOLDER CERTIFICATION TO THE SUBSCRIPTION AGENT.
SUCH NOMINEE HOLDER CERTIFICATIONS ARE AVAILABLE FROM THE SUBSCRIPTION AGENT.
