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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 29549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
June 14, 1995 (June 13, 1995)
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MERCOM, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 0-17750 38-2728175
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(State of other jurisdiction (Commission IRS Employer
of incorporation) File Number) Identification No.)
105 Carnegie Center, Princeton, NJ 08640-8215
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609)734-3700
NA
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(Former name or former address, if changed since last report)
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ITEM 5. Other Events
On June 13, 1995, the Company and Morgan Guaranty Trust Company of New York
("Morgan Guaranty") entered into a Commitment Letter (the "Commitment Letter")
pursuant to which they agreed, subject to certain conditions as described below,
to amend the Credit Agreement dated November 26, 1989, as previously amended
(the "Credit Agreement"), between the Company and Morgan Guaranty, 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 this Form 8-K.
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 after the date of such
facility (the "364 Day Facility"). Indebtedness of $5,000,000 evidenced by a
demand note held by Morgan Guaranty (the "Morgan Demand Note") will be
refinanced as follows: (a) the Morgan Demand Note will be canceled 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:
<TABLE>
<CAPTION>
Year Aggregate Amount
---- ----------------
<S> <C>
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
</TABLE>
/1/ In 1995 three installment payments will be made 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.
In addition, the Company will be required to make the following mandatory
prepayments from the following sources:
(i) The first $5,000,000 of net proceeds of the Company's proposed equity
rights offering (which amount is included in the $6,039,000 to be
repaid in 1995);
(ii) 60% of the gross proceeds of the Company's proposed equity rights
offering in excess of $8,500,000;
(iii) 25% of the net proceeds of any future equity offerings, other than
equity offerings
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fully subscribed by an Affiliate;
(iv) 100% of the net proceeds of any debt offerings;
(v) 75% of the net cash proceeds of any permitted asset sales;
(vi) 75% of Excess Cash Flow in excess of $350,000.
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. The Term Loan will be secured by a pledge of the
Company's common stock as well as the material assets and owned real estate of
the Company.
The obligation of Morgan Guaranty to so 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 proposed equity rights offering must be at least
$8,500,000. There can be no assurance that these conditions will be satisfied.
ITEM 7. Exhibits
(c) Exhibits
10.13 Commitment Letter between Mercom, Inc. and Morgan Guaranty Trust
Company of New York.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
MERCOM, INC.
(Registrant)
By: /s/ Bruce Godfrey
Executive Vice President and
Chief Financial Officer
Date: June 14, 1995
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June 13, 1995
Mr. Bruce Godfrey
Executive Vice President and Chief Financial Officer
Mercom Inc.
105 Carnegie Center
Princeton, NJ
Dear Bruce:
You have asked Morgan Guaranty Trust Company of New York ("Morgan") to refinance
existing indebtedness of $25,039,000 and to arrange a $2,000,000 revolving
credit facility for Mercom Inc. (the "Borrower"). Attached is an outline of the
principal terms and conditions of proposed loans to be made by Morgan pursuant
to loan documentation mutually acceptable to Morgan and the Borrower.
Morgan hereby commits to lend up to $27,039,000 on the attached terms and
conditions. All commitments are subject to the negotiation, execution and
delivery of mutually acceptable definitive loan documentation (to be prepared by
Morgan's counsel, Davis Polk & Wardwell).
The Borrower by signing below agrees to indemnify and defend Morgan and its
respective affiliates and the respective directors, officers, agents and
employees of the foregoing from, and hold each of them harmless against, any and
all losses, liabilities, claims, direct damages or expenses of any kind,
including without limitation the reasonable fees and disbursements of counsel,
incurred by any of them arising out of or by reason of their role hereunder or
any investigation, litigation or other proceeding brought or threatened relating
to any loan made or proposed to be made to the Borrower in connection with the
matters herein referred to (and regardless of whether any loans are actually
made) (including, but without limitation, any use made or proposed to be made by
the Borrower or any of its affiliates of the proceeds of such loans, but
excluding any such losses, liabilities, claims, damage or expenses incurred by
reason of the gross negligence or willful misconduct of the indemnitee as
determined by a final judgment of a court of competent jurisdiction).
Finally, the Borrower hereby agrees to pay Morgan's reasonable out-of-pocket
costs and expenses in connection herewith, including fees and disbursements of
its counsel, regardless of whether any loan documents are agreed to and signed
by Morgan and the Borrower and regardless of whether any loans are actually
made.
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If you accept and agree to this proposal, please so indicate by signing in the
space provided below and returning a copy of this letter to us. This proposal
will expire at the close of business on June 14, 1995 if not accepted by you in
writing by that time.
Very truly yours,
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Eugenia Wilds
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Title: Vice President
60 Wall Street
New York, New York 10260-0060
Telephone: 212/648-7175
Telecopier: 212/648-5018
ACCEPTED AND AGREED TO
this 14 day of June, 1995:
MERCOM INC.
By:/s/ Bruce Godfrey
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Name: Bruce Godfrey
Title: EVP/CPO
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SUMMARY OF TERMS AND CONDITIONS
FOR MERCOM, INC.
Borrower: Mercom, Inc. ("Mercom").
Guarantors: Direct and indirect subsidiaries of Mercom,
including Communications and Cablevision, Inc.
("CCV") and Mercom of Florida, Inc.
Amount: Facility A: $25,039,000.
Facility B: $ 2,000,000.
Morgan's Initial Commitment: Facility A: $25,039,000.
Facility B: $ 2,000,000.
Purpose: Facility A: Refinance existing indebtedness
Facility B: General Corporate Purposes
Lender: Morgan Guaranty Trust Company of New York
("Morgan").
Facility Description: Facility A: a 7.5 year amortizing term loan
with a final maturity on 12/31/2002
Facility B: a 364 day revolving credit
facility maturing on June [12], 1996.
Documentation: Facility A and Facility B will each be documented
in separate agreements, and will contain the same
terms and conditions as indicated herein (unless
otherwise noted).
Security: To be determined. To include a pledge of the
stock of all operating companies and material
assets, including FCC licenses, subject to
regulatory constraints, franchise agreements, and
material physical assets including headends and
owned buildings.
Borrowing Options: Adjusted LIBOR, Adjusted CD and Base Rate.
LIBOR and CD will be automatically adjusted for
reserves and other regulatory requirements.
June 13, 1995 Page 1
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Base Rate means the higher of Morgan's prime rate
or the federal funds rate + 0.50%.
Pricing: Pricing on the commitments and loans will be at
the following rates per annum, expressed in basis
points per annum;
Facility A & B:
LIBOR +100 bps.
CD + 112.5 bps.
Base Rate 0
Commitment Fee: Facility B only:
A per annum fee of 37.5 bps. calculated on
a 360 day basis payable on the unused portion of
the facility quarterly in arrears and on
termination of the facility.
Reference Lender: Morgan.
Interest Payments: At the end of each applicable Interest Period or
quarterly, if earlier.
Mandatory Repayments: Facility A only: In equal quarterly installments
per annum, aggregating the following amounts per
annum:
1995 $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
Mandatory Prepayments: Mandatory Prepayments will be required from the
following sources:
(i) The first $5,000,000 of net proceeds of the
equity rights offering ;
(ii) 60% of the proceeds of the equity rights
offering in excess of $8,500,000;
(iii) 25% of the net proceeds of any future equity
offerings, other than equity offerings fully
subscribed by an Affiliate;
(iv) 100% of the net proceeds of any debt
offerings;
(v) 75% of the net cash proceeds of any
permitted asset sales;
(vi) 75% of Excess Cash Flow in excess of
$350,000;
Excess Cash Flow will be defined as:
Net Income
June 13, 1995 Page 2
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+ Depreciation and Amortization
+ Other non-cash charges
+/- Change in Net Working Investment
- Capital Expenditures
- Principal Payments
- Lahey Payments( to the extent not already
deducted)
Mandatory Prepayments will be applied first to
Facility A, until all outstandings thereunder are
repaid in full. Mandatory prepayments from (i)
above will be used to reduce scheduled
amortizations of Facility A in order of maturity.
All other Mandatory Prepayments will be used to
reduce scheduled amortizations of Facility A in
inverse order of maturity.
Interest Periods: Base Rate - 30 days.
Adjusted LIBOR Loans - 1, 2, 3, or 6 months.
Adjusted CD Loans - 30, 60, 90, or 180 days.
Drawdowns: Facility A: Facility A will be available in a
single drawdown when the conditions to closing and
borrowing have been met.
Facility B: Subject to the Conditions to
Borrowing, in minimum amounts of $200,000 with
additional increments of $50,000. Drawdowns are
at the Borrower's option with one business day's
notice for Base Rate Loans, two business days'
notice for Adjusted CD Loans and three business
days' notice for Adjusted LIBOR Loans.
Prepayments: Base Rate Loans may be prepaid at any time on one
business day's notice. Adjusted LIBOR and
Adjusted CD Loans may not be prepaid before the
end of an Interest Period.
Optional Termination or
Reduction of Commitments: Facility B only: The Borrower may terminate the
commitments in amounts of at least $200,000 at any
time on three business days' notice.
Representations and Customary for credit agreements of this nature,
Warranties: with respect to the Borrower and its
Subsidiaries, including but not limited to:
1. Corporate existence.
2. Corporate and governmental authorization; no
contravention; binding effect.
3. Financial information.
4. No material adverse change.
5. Environmental matters.
June 13, 1995 Page 3
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6. Compliance with laws, including ERISA.
7. No material litigation.
8. Existence, incorporation, etc. of
subsidiaries.
9. Payment of taxes.
10. Full disclosure.
11. All material licenses and franchises in
full force and effect.
Conditions to Effectiveness Customary in credit agreements of this nature,
and First Borrowing: including but not limited to:
1. Absence of default.
2. Accuracy of representations and warranties,
including with respect to no material adverse
change and absence of other debt of the
Borrower and its subsidiaries.
3. Negotiation and execution of satisfactory
closing documentation, including receipt of
security as practicable.
4. Deal-specific requirements if any;
regulatory approvals, licenses, proceeds of
equity rights offering in a minimum amount of
$8.5 million.
Conditions to Borrowing: Customary in credit agreements of this nature,
including but not limited to:
1. Absence of Default.
2. Accuracy of representations and warranties.
Covenants: Customary in credit agreements of this nature,
with respect to the Borrower and its subsidiaries,
including but not limited to:
1. Information.
2. Maintenance of property; insurance coverage.
3. Conduct of business; maintenance of
existence.
4. Compliance with laws, including ERISA and
environmental regulations.
5. Negative pledge (including subsidiary stock
and assets).
6. Consolidations, mergers and sale of assets.
7. Subsidiary debt limitation.
8. Use of proceeds.
9. Total Borrowed Funds to Cable EBITDA
(calculated after management fees):
calculated on a rolling 4 quarter basis and
not to exceed:
1995 5.0x
1996 4.0x
1997 3.5x
June 13, 1995 Page 4
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1998 3.0x
1999 2.5x
2000 2.0x
2001 2.0x
2002 2.0x
10. Fixed Charge Coverage: Cable EBITDA
(calculated after management fees) ./.
Interest + Principal + Capital Expenditures;
calculated on a rolling 4 quarter basis and
to be equal to or greater than:
1995 0.85:1
1996 1.0:1
1997 1.10:1
1998 1.10:1
1999 1.10:1
2000 1.10:1
2001 1.10:1
2002 1.10:1
11. Cash Flow Coverage: Cable EBITDA (as
defined above) ./.Interest Expense;
calculated on a rolling 4 quarter basis and
to be equal to or greater than:
1995 2.0:1
1996 3.0:1
1997 3.5:1
1998 4.0:1
1999 and after 4.5:1
12. Restrictions on Investments and Capital
Expenditures. Capital expenditures not to
exceed:
1995 $2,149,000
1996 $2,084,000
1997 $1,731,000
1998 $1,756,000
1999 $1,661,000
2000 $1,637,000
2001 $1,670,000
2002 $1,714,000
provided that Mercom may carry over to the
next fiscal year up to $600,000 of the prior
year's permitted capital expenditure
limitation.
June 13, 1995 Page 5
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13. Limitations on restricted payments including
management fees. Management fees paid in
cash not to exceed:
1995 $1,231,000
1996 $1,292,000
1997 $1,357,000
1998 $1,424,000
1999 $1,496,000
2000 $1,570,000
2001 $1,649,000
2002 $1,731,000
14. Transactions with affiliates on arms-length
basis.
Events of Default: Customary in credit agreements of this nature,
including but not limited to the following:
1. Failure to pay any interest, principal, or
fees payable under the Credit Agreement when
due.
2. Failure to meet covenants (with grace
periods, where appropriate).
3. Representations or warranties false in any
material respect when made.
4. Cross default to other debt of the Borrower
and its Subsidiaries which is triggered by an
event which permits or, with the giving of
notice or lapse of time (or both), would
permit the holder to accelerate its debt or
terminate its commitment.
5. Change of ownership or control.
6. Other usual defaults with respect to the
Borrower and Subsidiaries, including but not
limited to insolvency, bankruptcy, ERISA, and
judgment defaults.
7. Failure to have a perfected first security
interest in the collateral, including
collateral to be pledged pursuant to this
amendment and restatement no later than
October 31, 1995.
Increased Costs/Change of The credit agreement will contain customary
Circumstances: provisions protecting Morgan in the event of
unavailability of funding, illegality, increased
costs and funding losses. Capital adequacy
compensation will be required only with respect
to capital requirements adopted after the date
hereof.
June 13, 1995 Page 6
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Indemnification: The Borrower will indemnify Morgan against all
losses, liabilities, claims, damages, or expenses
relating to its loans, the Borrower's use of loan
proceeds or the commitments, including but not
limited to reasonable attorneys' fees and
settlement costs (except such as result from the
indemnitee's gross negligence or willful
misconduct).
Transfers and Participations: Morgan will have the right to transfer or sell
participations in its loans or commitments with
the transferability of voting rights limited to
changes in principal, rate, fees and term.
Assignments, which must be in amounts of at least
$ 3 million, (Facility A only; no minimum for
Facility B) will be allowed with notice to the
Borrower.
Expenses: Borrower will pay all legal and other
out-of-pocket expenses of Morgan related to this
transaction and any subsequent amendments or
waivers, including the reasonable fees and
expenses of Davis Polk & Wardwell, special
counsel to Morgan.
Governing Law: State of New York.
June 13, 1995 Page 7
