<PAGE>
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For fiscal year ended December 31, 1997
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
Commission File No. 0-17750
MERCOM, INC.
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(Exact name of registrant as specified in its charter)
Delaware 38-2728175
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 Carnegie Center, Princeton, NJ 08540-6215
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(Address of principle executive offices) (Zip Code)
Registrant's telephone number including area code: 609-734-3737
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K (X).
As of February 28, 1998, 4,787,060 shares of Common Stock were outstanding. The
aggregate market value of the shares held by non-affiliates of the registrant
(based upon the average of the bid and asked prices of these shares quoted by
the National Quotation Bureau, Inc. and the OTC Bulletin Board on February 28,
1998, of $9.75 per share) was approximately $17,772,463.
Documents Incorporated by Reference - None
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PART III
Item 10. Directors and Executive Officers of the Registrant
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<TABLE>
<CAPTION>
Director
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Name of Director Age Since
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<S> <C> <C> <C>
Bruce C. Godfrey 42 Corporate Secretary of the Company since October 1994
1997 and Executive Vice President and Chief Financial
Officer of the Company from April 1994 to October 1997;
Director, Executive Vice President, Chief Financial
Officer and Corporate Secretary of RCN Corporation
("RCN") since September 1997; Executive Vice President
and Chief Financial Officer of Commonwealth Telephone
Enterprises, Inc., formerly known as C-TEC Corporation
("CTE") since April 1994, Director since 1995 and
Corporate Secretary since September 1997; Director and
Corporate Secretary of Cable Michigan, Inc. ("Cable
Michigan") since September 1997; Senior Vice President
and Principal of Daniels and Associates from
January 1984 to April 1994.
Clifford L. Jones 70 President, Capital Region Economic Development 1991
Corporation from September 1992 to February 1994.
He also served as President, Pennsylvania Chamber
of Business & Industry from 1983 to 1991. Mr. Jones
is a Director of Pennsylvania Power & Light, Delta
Development Group, Inc. and Benatec Associates.
Michael J. Mahoney 47 President and Chief Operating Officer of the Company 1994
from February 1994 to September 1997; President and
Chief Operating Officer, as well as a Director of RCN
since September 1997; Director of CTE since May 1995,
President and Chief Operating Officer from March 1994
to September 1997, Executive Vice President of CTE's
Cable Television Group from June 1991 to February 1994;
and Executive Vice President of the Company from
December 1991 to February 1994.
</TABLE>
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Item 10. Directors and Executive Officers of the Registrant, Continued
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<TABLE>
<CAPTION>
Director
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Name of Director Age Since
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<S> <C> <C> <C>
David C. McCourt 41 Chairman and Chief Executive Officer of the 1993
Company since October 1993; Chairman, Director
and Chief Executive Officer of RCN and Chairman,
Director and Chief Executive Officer of Cable
Michigan since September 1997; Chairman, Director
and Chief Executive Officer of CTE since October
1993; President and Director of Level 3 Telecom
Holdings, Inc. ("LTH"); Director of MFS Communications
Company Inc. from July 1990 to December 1996; President
and Director of Metropolitan Fiber Systems/McCourt,
Inc., a subsidiary of MFS Telecom, Inc. since 1988;
Director of Cable Satellite Public Affairs Network
(C-SPAN) since June 1995; Director of WorldCom,
Inc. from December 1996 to March 1998 and Director
of Level 3 Communications, Inc. ("Level 3") since
January 1998.
Raymond B. Ostroski 43 Director of Cable Michigan since September 1997; 1994
Executive Vice President and General Counsel
of CTE from February 1995 to September 1997 and
Corporate Secretary of CTE from October 1989 to
September 1997; Executive Vice President and
General Counsel of the Company from February 1995
to September 1997; Vice President and General Counsel
of CTE from December 1990 to February 1995; Vice
President and General Counsel of the Company from
December 1991 to February 1995; and Corporate
Secretary of the Company from December 1991 to
December 1994.
Harold J. Rose, Jr. 62 Chairman of the Board of Pennsylvania Millers 1991
Mutual Insurance Company and Director of American
Millers Insurance Company. He previously was a
partner of RK Associates, a real estate management
consulting firm. In 1990, Mr. Rose retired from
Merchants Bancorp, Inc. where he served as Chairman
of the Board of both Merchants Bank, N.A. and
Merchants Bank North, both subsidiaries of Merchants
Bancorp, Inc.
George C. Stephenson 52 Managing Director of PaineWebber, Inc. since 1991
January 1987.
</TABLE>
The information required under Item 10 of Part III with respect to the Executive
Officers of the Registrant is set forth at the end of Part I of the Mercom, Inc.
Form 10-K for the fiscal year ended December 31, 1997.
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Item 11. Executive Compensation
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Except with respect to the Company's management agreement dated January
1, 1997 (the "Management Agreement"), with Cable Michigan, no executive officer
of the Company received any compensation for services rendered on behalf of the
Company during the fiscal year ended December 31, 1997, see Item 13. Certain
Relationships and Related Transactions.
Directors' Compensation
Each Director of the Company is paid an annual retainer of $6,000, plus
$500 for each Board meeting attended during 1997. Committee Chairmen are paid
$1,000 for each committee meeting attended while other committee members are
paid $500 for each meeting attended. Members of the Executive Committee are not
compensated for participating in the meetings of said committee. Directors who
are also employees of RCN have authorized the payment of such fees to their
employer, RCN Services, Inc. consistent with the terms of their employment with
RCN. The following fees were paid in 1997: Clifford L. Jones $12,000; Harold J.
Rose, Jr. $13,500; George C. Stephenson $14,500 and RCN Services, $36,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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Security Ownership of Management
The following table sets forth the beneficial ownership of the
Company's Common Stock, as of April 1, 1998, by each director, the named
executive officers and by all persons, as a group, who are currently directors
and executive officers of the Company. Each director or executive officer has
sole investment and voting power over the shares listed opposite his name except
as set forth in the footnotes hereto:
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned of Class
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<S> <C> <C>
John J. Gdovin -- --
Bruce C. Godfrey -- --
Mark Haverkate -- --
Clifford L. Jones 300 *
Michael J. Mahoney -- --
David C. McCourt --(1) --
Raymond B. Ostroski 4,000 *
Harold J. Rose, Jr -- --
George C. Stephenson 5,000 *
Timothy J. Stoklosa -- --
All Directors and Current Executive
Officers as a Group (10 persons) 9,300 *
</TABLE>
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* Less than 1%.
(1) Excludes 50,000 shares which are owned by Mr. McCourt's wife. Mr. McCourt
disclaims beneficial ownership with respect to said shares.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management,
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Continued
Cable Michigan
Set forth below is certain information regarding the beneficial
ownership of the Common Stock of Cable Michigan as of April 1, 1998, by each
director, the named executive officers and by all persons, as a group, who are
currently directors and executive officers of the Company. Each director or
executive officer has sole investment and voting power over the shares listed
opposite his name except as set forth in the footnotes hereto:
Directors and Named Number of Shares Percent of
Executive Officers Beneficially Owned (1) Outstanding Shares
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John J. Gdovin (2) 1,743 *
Bruce C. Godfrey (2) 4,741 *
Mark Haverkate (2) 4,596 *
Clifford L. Jones -- *
Michael J. Mahoney (2) 4,878 *
David C. McCourt (2)(3) 12,382 *
Raymond B. Ostroski 609 *
Harold J. Rose, Jr. -- *
George C. Stephenson -- *
Timothy J. Stoklosa 1,014 *
All Directors and Executive
Officers as a Group 29,963 *
(1) Includes forfeitable Matching Shares (as defined below), and Share Units (as
defined below).
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Item 12. Security Ownership of Certain Beneficial Owners and Management,
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Continued
(2) Under the Cable Michigan Executive Stock Purchase Plan ("ESPP"),
participating executive officers who forgo current compensation are
credited with Cable Michigan "Share Units", the value of which is
based on the value of a share of Cable Michigan Common Stock. ESPP
participants who elect to receive Share Units in lieu of current
compensation are also credited with restricted "Matching Shares,"
which vest over a period of 3 years from the grant date, subject to
continued employment. Matching Shares, unless forfeited, have voting
and dividend rights. (In connection with the Restructuring, Share
Units and Matching Shares will be adjusted in an equitable manner.)
The holdings indicated include Share Units and Matching Shares. The
table below shows, in respect of each named executive officer, the
number of shares of Cable Michigan Common Stock purchased outright,
Share Units relating to Cable Michigan Common Stock acquired by each
named executive officer in lieu of current compensation, and the
forfeitable Matching Shares of Cable Michigan Common Stock held by
each named executive officer:
<TABLE>
<CAPTION>
Share Units Total Shares
Acquired Under Purchased and
Shares the ESPP In Total Shares Restricted Acquired and
Purchased Lieu of Current Purchased Matching Restricted
Outright Compensation And Acquired Shares Matching Shares
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<S> <C> <C> <C> <C> <C>
John J. Gdovin 677 533 1,210 533 1,743
Bruce C. Godfrey 1,251 1,745 2,996 1,745 4,741
Mark Haverkate 2,392 1,102 3,494 1,102 4,596
David C. McCourt 2,894 4,744 7,638 4,744 12,382
</TABLE>
(3) Includes 56 shares of Cable Michigan Common Stock which are owned by
Mr. McCourt's wife. Mr. McCourt disclaims beneficial ownership of such
shares. Does not include 3,330,121 shares of Cable Michigan Common
Stock held by LTH. David C. McCourt owns 10% of the Common Stock of
LTH. The remaining 90% of Common Stock of LTH is owned by Level 3.
Security Ownership of Certain Beneficial Owners
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So far as is known to the Company, as of April 1, 1998 no persons,
except those listed below, owned beneficially more than five percent (5%) of the
outstanding Common Stock. With respect to the named persons, the following
information is based on Schedules 13D, 13G or Form 4 filed with the Securities
and Exchange Commission ("SEC"), copies of which were supplied to the Company by
said persons. The table below discloses the name and address of such beneficial
owners, the total number of shares beneficially owned by each and their
percentage of ownership in relation to the total shares outstanding and entitled
to vote.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management,
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Continued
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class
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Cable Michigan, Inc. (2) 2,964,250 61.92%
105 Carnegie Center
Princeton, New Jersey 08540
Lappin Capital Management, L.P. (3) 600,951 12.55%
767 Third Avenue, 16th Floor
New York, New York 10017
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(1) The number of shares stated in this column includes shares owned directly
or indirectly, through any contract, arrangement, understanding,
relationship or which the indicated beneficial owner otherwise has the
power to vote, or direct the voting of, and/or has investment power.
(2) Based on information set forth in Cable Michigan's Schedule 13D filed on
September 30, 1997.
(3) Based on information obtained from Form 4 for the Common Stock of the
Company filed through December 3, 1997, with the SEC by Lappin Capital
Management, L.P. and LBL Group, L.P.
Item 13. Certain Relationships and Related Transactions
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Transactions with Management and Certain Concerns
Effective January 1, 1997, the Company entered into a management
agreement with Cable Michigan pursuant to which Cable Michigan would manage the
Company's cable television systems' operations. The Company was charged
$1,204,000 in 1997 based on the management agreement approved by the Board of
Directors. RCN and its subsidiaries also supplied other services not covered by
the management agreement for approximately $27,000 in 1997. The new Management
Agreement provides that the Company will pay Cable Michigan: (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 million of revenues, as defined, to 4%
of revenues in excess of $20 million); and (b) an annual incentive bonus equal
to twenty-five percent (25%) of the Company's earnings before interest, taxes,
depreciation and amortization ("EBITDA") as adjusted, during the applicable
fiscal year less the base year EBITDA of $5 million.
RCN is under common control with Cable Michigan and certain of the
Company's officers and directors are also officers and directors of RCN and
Cable Michigan.
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SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MERCOM, INC.
Date: April 30, 1998 By /s/ David C. McCourt
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David C. McCourt, Chairman
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
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<S> <C> <C>
/s/ David C. McCourt Chairman April 30, 1998
- -------------------------- Chief Executive Officer
David C. McCourt
/s/ Mark Haverkate President April 30, 1998
- -------------------------- Chief Operating Officer
Mark Haverkate
Executive Vice President,
/s/ Timothy J. Stoklosa Chief Financial Officer and April 30, 1998
- -------------------------- Treasurer
Timothy J. Stoklosa (Principal Financial Officer)
</TABLE>
