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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
Amendment No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ____ to ____
Commission File Number 00-21315
ON COMMAND CORPORATION
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(Exact name of Registrant as specified in its charter)
State of Delaware 77-04535194
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7900 E. Union Ave
Denver, Colorado 80237
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (720) 873-3200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Series A Common Stock Purchase Warrants
Series B Common Stock Purchase Warrants
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
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. [ ]
The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant as of March 28, 2001, was $191,033,000 based
upon a price of $6.25 per share, which was the last sales price of such stock on
March 28, 2001, as reported on the NASDAQ National Market Reporting System. As
of March 28, 2001, there were 30,565,362 shares of the Registrant's Common Stock
issued and outstanding.
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EXPLANATORY NOTE
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as
amended, On Command Corporation (the "Company" or "On Command") hereby amends
the Company's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission on April 2, 2001 (the "Annual Report"). This Amendment No. 1
to the Annual Report adds the information required by Part III of Form 10-K in
accordance with General Instruction G to Form 10-K and includes certain exhibits
that were inadvertently omitted from the Annual Report.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages, at March 1, 2001, and titles
of executive officers of the Company, and biographical information with respect
to such officers.
NAME AGE POSITION
---- --- --------
Jerome H. Kern 63 Chairman and Chief Executive Officer
Gregory B. Armstrong 54 Senior Vice President, Operations,
International and Special Projects
Ganesh R. Basawapatna 58 Senior Vice President, Strategic Development
Kathryn L. Hale 51 Senior Vice President, Finance and Chief
Financial Officer
Jerry M. Hodge 58 Senior Vice President, Sales
Marianne G. Morgan 43 Senior Vice President, Human Resources
Bertram Perkel 71 Senior Vice President and General Counsel
David A. Simpson 43 Senior Vice President, Engineering
Jerome H. Kern has been Chairman and Chief Executive Officer of On Command since
April 1, 2000. Prior to joining On Command, Mr. Kern served as Vice Chairman and
a member of the board of directors for Tele-Communications, Inc. (TCI). Prior to
joining TCI, Mr. Kern was Special Counsel at Baker & Botts, LLP, where he was
the senior corporate lawyer in the New York office. For more than twenty years,
he was the principal outside legal counsel to TCI and Liberty Media, and
currently serves on Liberty Media's board of directors. Mr. Kern is a member of
the board of trustees for the New York University Law Center Foundation, and
serves as a director on the boards of Volunteers of America (Colorado Chapter),
City Meals-on-Wheels in New York, the Colorado Symphony Foundation and the
Institute for Children's Mental Disorders. Jerome H. Kern is the father of Peter
M. Kern, a director of the Company.
Gregory B. Armstrong has been Senior Vice President for International and
Special Projects since September 1, 2000. Prior to joining On Command, Mr.
Armstrong has held numerous senior management positions with leading
international organizations, including Chief Executive for British Cable
Services, Ltd., Managing Director of Latin American Operations for
Telecommunications, Inc., Vice President and General Manager for Mid-West
Communications, Inc. and Chief Operating Officer for Satellink Corporation. Most
recently he was Managing Director for Liberty Media International's Latin
American operations.
Ganesh R. Basawapatna has been Senior Vice President of Strategic Development
since June 1, 2000. Prior to joining On Command, Mr. Basawapatna served as Vice
President and Chief Technology Officer of TSAT, Inc., a Liberty Media Group
company. Prior to joining TSAT, Mr. Basawapatna was a co-founder of Asvan
Technology, LLC. Prior to Asvan Technology, Mr. Basawapatna was President and
Chief Operating Officer for Encore International, Inc. ("EI") founded in March
1995.
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Kathryn L. Hale has been Senior Vice President, Finance and Chief Financial
Officer since March 2001 having been promoted from Vice President, Finance, a
title Ms. Hale held since August 7, 2000. Prior to joining On Command, Ms. Hale
served as Chief Financial Officer for InterComm Holdings, LLC, an international
cable holding company. Ms. Hale has held several senior executive positions in
the cable industry, including Vice President and Controller for Rifkin &
Associates, Inc. and Tax Director for American Television and Communications
Corporation.
Jerry M. Hodge has been Senior Vice President and Division Chief Executive
Officer, Casinos and Resorts since December 6, 2000. Prior to joining On
Command, Mr. Hodge served as President and Chief Executive Officer of
Hospitality Network, Inc. (a Cox Communications company). He has held several
senior executive positions in the communications industry, including Executive
Vice President of F & M Communications and vice president of Sonitrol
Corporation.
Marianne G. Morgan has been Senior Vice President of Human Resources since March
2001 having been promoted from Vice President of Human Resources, a title Ms.
Morgan held since August 22, 2000. Prior to joining On Command, Ms. Morgan was
Vice President of Human Resources for Westell Technologies, Inc.
Bertram Perkel has been Senior Vice President and General Counsel since November
1, 2000. Prior to joining On Command, Mr. Perkel spent the last nine years with
the New York office of the law firm of Baker & Botts, LLP, where he was "of
counsel," specializing in the areas of securities and antitrust litigation.
While at Baker & Botts, Perkel worked with a number of clients, including TCI
and Liberty Media. Before that, Perkel was with two other New York law firms,
Shea & Gould and Hartman & Craven. Mr. Perkel also has served as special counsel
to two New York City police commissioners and was on the Advisory Committee on
Law Enforcement under former New York Governor Hugh Carey.
David A. Simpson has been Senior Vice President, Regional Operations and
Engineering since October 2000, having been promoted from Vice President,
Operations, a title Mr. Simpson held since July 1, 1998. Prior to joining On
Command, Mr. Simpson founded a high-tech startup venture and participated at the
Texas Technology Summit. He also was division manager, information systems and
engineering services at Electrospace Systems, a defense electronics manufacturer
based in Richardson, Texas.
DIRECTORS OF THE REGISTRANT
Jerome H. Kern, 63, Chairman of the Board, has been a Director of On Command
since April 2000. Mr. Kern served as Vice Chairman of TCI from June 1998 to
March 1999. Prior to joining TCI, Mr. Kern was Special Counsel with the law firm
of Baker Botts, L.L.P. from July 1996 to June 1998, and a Senior Partner of
Baker Botts L.L.P. from September 1992 to July 1996. Mr. Kern is a director of
Liberty Media and TCI Pacific Communications, Inc. Jerome H. Kern is the father
of Peter M. Kern, a director of the Company.
Richard D. Goldstein, 48, has been a Director of On Command Corporation since
November 1998. Mr. Goldstein has served as a Managing Director or Senior
Managing Director and as one of three principals of Alpine Capital Group Inc., a
merger advisory and investment/merchant banking firm in New York and related
entities (including Alpine Equity Partners L.P.) since 1990. From 1976 to 1990
Mr. Goldstein was with the law firm of Paul, Weiss, Rifkand, Wharton & Garrison,
where he became a partner in 1984. Mr. Goldstein is also a Director of US
Franchise Systems, Inc., a NASDAQ company that is a hotel franchiser.
Paul A. Gould, 55, has been a director of On Command Corporation since April
2000. Mr. Gould has served as a Managing Director and Executive Vice President
of Allen & Company Incorporated, an investment banking services company, for
over five years. Mr. Gould is a director of Liberty Media and Ascent.
Gary S. Howard, 50, has been a director of On Command Corporation since April
2000. Mr. Howard has served as Executive Vice President, Chief Operating Officer
and a director of Liberty Media since July 1998. Mr. Howard has also served as
Chief Executive Officer of TCI Satellite Entertainment, Inc. since December
1996. Mr. Howard served as Executive Vice President of Tele-Communications, Inc.
("TCI") from December 1997 to March 1999; as Chief Executive Officer, Chairman
of the Board and a director of TV Guide, Inc. from June 1997 to March 1999; and
as President and Chief Executive Officer of TCI Ventures Group, LLC from
December 1997 to March 1999. Mr. Howard served as President of TV Guide, Inc.
from June 1997 to September 1997; as President of TCI Satellite Entertainment,
Inc. from February 1995 through August 1997; and as Senior Vice President of TCI
Communications, Inc. ("TCIC") from October 1994 to December 1996. Mr. Howard is
a director of Liberty Digital, Inc., Liberty Living Corporation and TCI
Satellite Entertainment, Inc.
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Peter M. Kern, 33, has been a Director of On Command Corporation since April
2000. Mr. Kern has served as President of Gemini Associates, Inc., a firm that
provides strategic advisory services primarily to media companies, since April
1996. From December 1993 to January 1996, he served as Senior Vice President of
Strategic Development and Corporate Finance of Home Shopping Network, Inc. and
served as its Vice President of Strategic Development and Assistant to the Chief
Executive Officer from March 1993 to December 1993. Mr. Kern also serves as a
director of Liberty Digital, Inc. Peter M. Kern is the son of Jerome H. Kern,
Chairman and Chief Executive Officer of the Company.
Carl E. Vogel, 42, has been a Director of On Command Corporation since April
2000. Mr. Vogel has served as a Senior Vice President of Liberty Media since
December 1999. Mr. Vogel's President, Chief Executive Officer and a director of
Liberty Survelliance & Technology, Inc. Mr. Vogel served as Executive Vice
President/Chief Operating Officer of Field Operations for A T & T Broadband, LLC
from June 1999 until joining Liberty Media. He served as Chairman and Chief
Executive Officer of Primestar, Inc. from June 1998 to June 1999. From October
1997 to June 1998, Mr. Vogel was Chief Executive Officer of Star Choice
Communications. From March 1994 to March 1997, he served initially as Executive
Vice President and Chief Operating Officer, and later as President of EchoStar
Communications Corporation.
J. David Wargo, 46, has been a Director of On Command Corporation since November
1998. Mr. Wargo is President of Wargo & Company, Inc. Mr. Wargo is also a
Director of Gemstar-TV Guide, International, Inc. and Liberty Digital, Inc.
Gary L. Wilson, 61, has been a Director of On Command Corporation since
September 1996. Mr. Wilson is chairman of the board and a principal investor in
NWA, Inc., parent of Northwest Airlines and several other transportation-related
subsidiaries. He served as co-chairman since 1991 and was named chairman in
1997. Mr. Wilson is a director of The Walt Disney Company. He joined The Walt
Disney Company in 1985 and served as executive vice president and chief
financial officer until 1990. He also serves on the board of trustees at Duke
University, the board of visitors at the Fuqua School of Business at Duke, and
also the board of overseers of The Wharton School at the University of
Pennsylvania. Mr. Wilson is a member of the board of directors of CB Richard
Ellis, Inc. and the National Collegiate Athletic Association Foundation.
COMPLIANCE WITH SECURITIES LAWS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file initial
reports of ownership and reports of changes in ownership with the SEC and the
NASDAQ National Market System. Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. The
Company has undertaken the obligation to make these filings on behalf of its
directors and executive officers.
Based solely on its review of copies of such forms received and filed by it
with respect to 2000, or written representations from certain reporting persons,
the Company believes that all of its directors and executive officers and
persons who own more than 10% of the Company's registered equity have complied
with the reporting requirements of Section 16(a).
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ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the compensation received for each of the three
fiscal years ended December 31, 2000 by the (i) Chairman and Chief Executive
Officer, (ii) the Senior Vice President of Operations, (iii) the Chief Financial
Officer, (iv) the Senior Vice President, Engineering, (v) the Senior Vice
President, Programming and Marketing, and (vi) the former Senior Vice President,
Engineering (the officers being hereafter referred to as the "Named Executive
Officers").
ANNUAL COMPENSATION LONG TERM COMPENSATION
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OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS COMPENSATION
POSITION YEAR ($) ($) ($)(6) ($) (#) ($)(7)
Jerome Kern (1) 2000 390,000 -- -- -- -- 667
Chairman and Chief 1999 -- -- -- -- -- --
Executive Officer 1998 -- -- -- -- -- --
James A Cronin, III (2) 2000 49,259 200,000 -- -- -- 2,311
Chairman and Acting 1999 500,000 200,000 -- -- -- 33,699
Chief Executive Officer 1998 498,846 375,000 -- -- -- 16,069
Ronald D. Lessack (3) 2000 325,000 88,000 56,940 -- -- 6,471
Senior Vice 1999 294,617 250,000 -- -- 50,000 5,832
President, 1998 290,000 203,000 -- -- 48,200 6,320
Operations
Paul J. Milley (3) 2000 265,438 90,312 -- -- -- 6,471
Chief Operating 1999 194,375 57,500 -- -- 50,000 5,528
Officer and CFO 1998 181,249 54,000 -- -- 50,000 5,000
David Simpson (4) 2000 212,855 19,812 -- -- 100,000 6,231
Senior Vice 1999 155,308 -- -- -- 35,000 5,478
President, Engineering 1998 75,000 40,000 72,464 -- 30,000 20
Jean DeVera 2000 291,294 67,475 -- -- -- 6,475
Senior Vice President, 1999 178,000 38,000 -- -- 50,000 5,790
Sales 1998 152,500 -- 65,251 -- 40,000 5,770
Richard C. Fenwick, Jr (5) 2000 300,000 76,125 254,869 -- -- 6,471
Senior Vice 1999 204,375 50,500 -- -- 50,000 5,324
President, 1998 178,958 45,000 -- -- 35,300 6,320
Engineering
(1) Mr. Kern was hired as Chairman and Chief Executive Officer of the Company on
April 1, 2000. The compensation above is compensation for the period from
April 1, 2000 to December 31, 2000.
(2) Mr. Cronin's compensation was paid by Ascent for fiscal years 2000, 1999 and
1998.
(3) Mr. Lessack's employment with the Company was terminated on December 31,
2000.
(4) Mr. Simpson was promoted to Senior Vice President, Engineering on October
16, 2000. He was hired by the Company on July 1, 1998.
(5) Mr. Fenwick was dismissed from the Company on September 8, 2000.
(6) Other Annual Compensation consists of a SAR exercise by Mr. Lessack,
relocation bonus for Mr. Simpson, and proceeds from stock option and SAR
exercises for Mr. Fenwick.
(7) For 2000, other compensation includes: (i) contributions by the Company on
behalf of the executive to the Company's 401(k) plan, (ii) life insurance
premiums for policies in excess of $50,000 face value and (iii) in the case
of Mr. Cronin, the value of certain fringe benefits.
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401(k) INSURANCE
NAME MATCHING PREMIUM TOTAL
Jerome Kern $ - $ 667 $ 667
James A. Cronin 2,311 -- 2,311
Ronald Lessack 5,250 1,221 6,471
Paul Milley 5,250 1,221 6,471
David Simpson 5,250 981 6,231
Jean DeVera 5,250 1,225 6,475
Richard Fenwick 5,250 1,221 6,471
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
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NUMBER OF PERCENT OF TOTAL GRANT DATE
SECURITIES OPTIONS GRANTED TO EXERCISE OR EXPIRATION DATE PRESENT VALUE
UNDERLYING EMPLOYEES IN FISCAL BASE PRICE ($)
NAME OPTIONS YEAR (2) ($/SH)
GRANTED (#)(1)
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David Simpson 100,000 4% $ 15.1875 6/13/10 $ 760,000
(1) The options expire ten years from grant date and vest 20% annually over five
years.
(2) The total number of options granted to OCC employees in 2000 was 2,611,500.
(3) On Command used the Black-Scholes option pricing model to determine grant
date present values using the following assumptions for the year 2000: stock
price volatility of 47.7%, a five year option term, a risk-free rate of
return range from 4.99% to 6.71%, and no dividend yield. Forfeitures are
reflected as they occur. The use of this model is in accordance with SEC
rules; however the actual value of an option will be measured by the
difference between the stock price and the exercise price on the date the
option is exercised.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information on (i) options exercised by
the Named Executive Officers in 2000, and (ii) the number and value of their
unexercised options at December 31, 2000.
AGGREGATED OPTION EXERCISES IN 2000, AND YEAR-END OPTION VALUES
NAME OPTION DATE TYPE Granted Price Exercised Vested Cancelled Unvested Outstanding Exercisable
- ---- ----------- ------- ----- --------- ------ --------- -------- ----------- -----------
Ronald D. Lessack 2-14-94 ISO 56,800 11.4400 - 56,800 - - 56,800 56,800
11-21-96 NQ 65,000 15.8750 - 52,000 - 13,000 65,000 52,000
2-4-98 NQ 48,200 13.0000 - 28,920 - 19,280 48,200 28,920
12-7-99 NQ 50,000 16.0000 - 25,000 - 25,000 50,000 25,000
Paul J. Milley 12-17-96 NQ 50,000 15.8130 - 40,000 - 10,000 50,000 40,000
2-4-98 NQ 50,000 13.0000 - 30,000 - 20,000 50,000 30,000
12-7-99 NQ 50,000 16.0000 - 25,000 - 25,000 50,000 25,000
David Simpson 8-4-98 NQ 30,000 12.7500 - 12,000 - 18,000 30,000 12,000
12-7-99 NQ 35,000 16.0000 - 17,500 - 17,500 35,000 17,500
6-13-00 NQ 100,000 15.1875 - - - 100,000 100,000 -
Jean DeVera 11-21-96 NQ 20,000 15.8750 - 16,000 - 4,000 20,000 16,000
2-4-98 NQ 20,000 13.000 - 8,000 - 12,000 20,000 8,000
2-4-98 NQ 20,000 13.000 - 12,000 - 8,000 20,000 12,000
12-7-99 NQ 50,000 16.000 - 25,000 - 25,000 50,000 25,000
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Richard C. Fenwick, Jr. 9-3-92 ISO 49,700 5.9200 49,700 49,700 - - - -
11-21-96 NQ 65,000 15.8750 - 52,000 - 13,000 65,000 52,000
2-4-98 NQ 35,300 13.0000 - 21,180 - 14,120 35,300 21,180
12-7-99 NQ 50,000 16.0000 - 25,000 - 25,000 50,000 25,000
6-13-00 NQ 150,000 15.1875 - - - 150,000 150,000 -
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF IN-THE MONEY
OPTIONS AT 12/31/00 OPTIONS AT 12/31/00
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SHARES
UNDERLYING UN- UN-
OPTIONS VALUE EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
NAME EXERCISED REALIZED (#) (#) ($) ($)
Jerome Kern - - - - - -
James A. Cronin - - - - $ - $ -
Ronald D. Lessack - - 153,080 66,920 $ - $ -
Paul J. Milley - - 85,000 65,000 $ - $ -
David Simpson - - 29,500 135,500 $ - $ -
Jean DeVera - - 61,000 49,000 $ - $ -
Richard Fenwick, Jr 24,700 $198,239 150,300 - $ - $ -
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
In September 1996, the Company and Mr. Steel entered into an employment
agreement that was to expire on September 11, 2000. Pursuant to the agreement,
Mr. Steel's initial base salary was $290,000 per year, subject to increases at
the discretion of the Board of Directors of the Company. Under the agreement,
Mr. Steel was eligible for annual bonuses based on performance measures
determined by the Compensation Committee with a target bonus equal to 70% of Mr.
Steel's base salary for achieving 100% of the target level for the performance
measures. In addition, Mr. Steel was granted options to purchase 385,312 shares
of On Command Common Stock, exercisable at the following per-share prices: (i)
80% of such options at a per-share price equal to $15.33 and (ii) 20% of such
options at a per-share price equal to $16.40. The options vested 25% on
September 11, 1997 and an additional 25% on September 11, 1998, and the
remaining 50% were to vest on September 11, 1999. The agreement provided that
the options would expire at the earlier of (i) three months after the date upon
which Mr. Steel is terminated for "cause" (as defined in the employment
agreement); (ii) one year after Mr. Steel's employment agreement is terminated
as a result of death; or (iii) on September 11, 2006.
In addition, the employment agreement for Mr. Steel provides that upon a
"Change of Control Event" (as defined in the agreement), Mr. Steel will be
entitled to elect to terminate his employment with the Company and, for the
longer of (a) the remainder of the term of his employment agreement as if such
agreement had not been terminated and (b) one year following the date of such
termination (such period being the "Duration Period"), will receive: (i) his
then current base salary; (ii) an annual bonus equal to 70% of his then current
base salary for each year during the Duration Period; and (iii) all other
benefits provided pursuant to the employment agreement. A "Change of Control
Event" is defined in the employment agreement as an affirmative determination,
either jointly by Mr. Steel and the Board of Directors or pursuant to an
arbitration which Mr. Steel has the right to invoke, that any "change of
control" of the Company (defined as an event as result of which (i) a single
person or entity other than Ascent or its affiliates owns 50% or more of the
voting stock of the Company or (ii) a single person or entity other than COMSAT
Corporation ("COMSAT") or its affiliates (which as of the date of the employment
agreements held approximately 80% of the outstanding Common Stock of Ascent, but
which consummated the distribution of its 80.67% ownership interest in Ascent to
the COMSAT shareholders on June 27, 1997) owns directly or indirectly 50% or
more of the voting stock of Ascent) or prospective change of control would be
reasonably likely to have a materially detrimental effect on either the
day-to-day circumstances of Mr. Steel's employment, or the compensation payable
to Mr. Steel under his employment agreement.
On December 28, 1998, On Command and Mr. Steel entered into an amendment
to Mr. Steel's employment agreement. Pursuant to the amendment, Mr. Steel
assumed the title of President and Chief Operating Officer of the Company
through September
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11, 2000, while reporting directly to the Chief Executive Officer and Board of
Directors of the Company, and if there was no Chief Executive Officer, then to
the Chairman. In addition, under the terms of the amendment (i) Mr. Steel's base
salary was increased to $375,000 per year and (ii) if the Company failed to
review Mr. Steel's compensation prior to June 1, 1999 or revise such
compensation prior to August 1, 1999, then Mr. Steel would be entitled to
terminate his employment with the Company and receive (a) his then base salary
for a year from such termination, and (b) a pro-rated annual bonus for the year
in which employment was terminated, and (iii) if Mr. Steel terminated his
employment pursuant to the foregoing clause (ii), then a pro-rated portion of
the options previously granted to Mr. Steel under the Company's stock option
plans that were scheduled to vest during the year of such termination, would
vest as of the date of such termination and would expire on the first
anniversary of such termination. Although the Company and Mr. Steel entered into
negotiations regarding his position and compensation at the Company during the
above time periods, Mr. Steel's compensation was not revised prior to August 1,
1999 and on August 6, 1999, Mr. Steel resigned from the Company pursuant to the
terms of his amended employment agreement.
On January 7, 2000, On Command and Allan Goodson entered into an
employment agreement that expires on January 7, 2002. Pursuant to the agreement,
Mr. Goodson's initial base salary under the agreement is $300,000 per year,
subject to increases at the discretion of the Board of Directors of the Company.
Under the agreement, Mr. Goodson is eligible for annual bonuses based on
performance measures determined by the Company's Compensation Committee with a
target bonus equal to 70% of Mr. Goodson's base salary for achieving 100% of the
target level for the performance measures. In addition, Mr. Goodson has been
granted options to purchase 100,000 shares of On Command Common Stock,
exercisable at a per-share price equal to $15.90625. The options vest 50% on
January 7, 2001 and 50% on January 7, 2002. The options will expire at the
earliest of: (i) three months after the date upon which Mr. Goodson is
terminated for "cause" (as defined in the employment agreement); (ii) one year
after Mr. Goodson's employment agreement is terminated as a result of death; or
(iii) on January 7, 2010. Mr. Goodson's agreement does not contain
"change-of-control" provisions.
In addition, Mr. Goodson's agreement provides that if Mr. Goodson is
terminated without "cause" (as defined in the agreement) or upon any substantial
reduction (except in connection with the termination of his employment
voluntarily by Mr. Goodson, or by the Company for "cause") by the Company of Mr.
Goodson's responsibilities as Executive Vice President and Chief Operating
Officer of the Company, or the Company is in material default of the agreement,
then: (i) there shall be no forfeiture of any rights or interests related to
fringe benefits granted under the agreement, including, without limitation, the
SARs and any other stock-based incentives, except that half of his 100,000
options will vest, to the extent not previously vested, and the other half of
which will be canceled, immediately upon such termination becoming effective and
final; (ii) the executive shall receive current base salary, fringe benefits and
the annual bonus outlined in the agreement for the longer of (a) the remainder
of the employment period under the agreement or (b) one year following the date
of such termination, with no obligation to seek other employment and no offset
to the amounts paid by the Company if other employment is obtained; and (iii)
all other benefits provided pursuant to the agreement shall be received by the
executive. In May 2000, Mr. Goodson's employment was terminated.
In February 1999, the Company adopted a change of control severance plan
for the Company's executive officers at or above the level of vice president
(the "Severance Plan"). Under the Severance Plan, such employees are eligible
for certain payments and benefits, if within one year of a Change of Control,
such employee's employment is either terminated by the Company for any reason
other than death, disability or cause, or is terminated by the employee for good
reason. "Change of Control" is defined as any event as a result of which any
single entity or "group" (as defined in Rule 13d-5 of the Exchange Act) other
than Ascent or a group of which Ascent is a part owns more than fifty percent
(50%) of the voting stock of the Company.
Under the Severance Plan eligible employees would be entitled to salary
continuation of from six months to twelve months depending upon the employee's
length of service, an annual bonus prorated to the effective date of
termination, and during the relevant period of salary continuation, continued
participation in the Company's benefit plans. In addition, stock options held by
an eligible employee would become 100% vested immediately and remain exercisable
for one year.
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DIRECTORS COMPENSATION
In May 1997 the Company adopted a compensation plan for Independent
Directors (defined as directors who are not employees of the Company).
Independent Directors are entitled to receive an annual retainer of $6,000 in
cash, payable quarterly; $500 for each Board meeting attended; and $500 for each
meeting of a Committee of the Board attended. Each Independent Director who is
also a chairman of a Committee of the Board is entitled to receive an additional
annual fee of $2,000, payable in equal quarterly amounts. In addition, pursuant
to the 1997 Non-Employee Directors Stock Plan, as amended (the "Directors
Plan"), each Independent Director is entitled to (a) an annual award of 400
shares of the Company's Common Stock, awarded immediately following the
Company's annual meeting of stockholders and (b) a one-time grant of an option
to purchase 50,000 shares of the Company's Common Stock (an "Option"). Any
Independent Director who receives a grant of an Option will not be eligible to
receive an additional grant of an Option until the fifth annual meeting after
the original grant. The Options vest 25% on the first anniversary of grant, and
25% and 50%, respectively, on the second and third anniversaries, or 100% upon a
change in control of the Company, as defined in the Directors Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK OWNERSHIP OF FIVE PERCENT HOLDERS
As of February 28, 2001, 30,556,768 shares of the Company's Common Stock were
issued and outstanding. To the knowledge of the Company, based upon Schedules
13G or 13D filed with the Securities and Exchange Commission (the "SEC" or
"Commission"), the following persons were the only beneficial owners of more
than five percent of the Company's Common Stock as of February 28, 2001.
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNERSHIP PERCENT OF COMMON STOCK
BENEFICIAL OWNER (IN THOUSANDS) ISSUED AND OUTSTANDING (1)
Liberty Media Corporation (2) 18,274 57.68%
9197 South Peoria Street
Englewood, CO 80112
Jerome H. Kern (3) 3,574 11.20%
7900 E. Union Ave.
Denver, CO 80237
Credit Suisse First Boston (4) 2,970 9.72%
11 Madison Avenue
New York, NY 10010
Merrill Lynch & Co., Inc.(5) 2,153 7.05%
800 Scudders Mill Road
Plainsboro, NJ 08536
Gary Wilson(6) 1,827 5.64%
300 Delfern Drive
Los Angeles, CA 90077
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(1) Based on shares of Common Stock outstanding at February 28, 2001. Pursuant
to the rules of the SEC, shares of Common Stock over which a person has the
right to acquire sole or shared voting power within 60 days through the
exercise of any stock option or other right are deemed to be outstanding for
the purpose of computing the percentage ownership of such person but are not
deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Liberty Media Corporation, through its wholly-owned subsidiary Ascent
Entertainment Group, Inc., holds 17,150,299 shares of Common Stock and
1,123,792 Series A Warrants to purchase shares of Common Stock.
(3) Mr. Kern holds 2,224,155 shares of Common Stock and 13,500 shares of Series
A Preferred Stock, which are convertible at the option of the holder into an
aggregate of 1,350,000 shares of Common Stock. Does not include (a)
18,274,091 shares of Common Stock beneficially owned by Liberty Media
Corporation, of which Mr. Kern is a director, or (b) 21,000 shares of Common
Stock owned by members of Mr. Kern's immediate family. Mr. Kern disclaims
beneficial ownership of any shares of Common Stock referred to in clause (a)
or (b) of the previous sentence.
(4) Based on information contained in Schedule 13G/A filed with the Commission
and dated February 15, 2001. Credit Suisse First Boston shares voting and
dispositive power over 2,969,952 shares of Common Stock with its
consolidated subsidiaries to the extent that they constitute a part of the
Credit Suisse First Boston business unit which is engaged in corporate and
investment banking, trading, private equity investment and derivatives
business on a world-wide basis.
(5) Based on information contained in Schedule 13G/A filed with the Commission
and dated February 7, 2001. Merrill Lynch & Co., Inc., ("MLI") is the
beneficial owner of 2,153,239 shares of OCC Common Stock (7.05%) (sole
voting and dispositive power: 0 shares and shared voting and dispositive
power: 2,153,239 shares) as parent holding company of Merrill Lynch Asset
Management Group, which is comprised of registered investment advisors to
various registered investment companies.
(6) Mr. Wilson holds 1,810,000 Series C Warrants to purchase shares of Common
Stock having an exercise price of $15.33 per share and vested options to
purchase 16,500 shares of Common Stock.
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the ownership by
each director and each of the Named Executive Officers and by all directors and
executive officers as a group of shares of On Command Common Stock, AT&T Common
Stock, Class A AT&T Liberty Media Group Common Stock, Class B AT&T Liberty Media
Group Common Stock and AT&T Wireless Group Common Stock. AT&T Common Stock,
Class A Liberty Media Group Common Stock, Class B Liberty Media Group Common
Stock and AT&T Wireless Group Common Stock are all equity securities of AT&T
Corp., which owns 100% of AT&T Broadband LLC, which in turn indirectly owns 100%
of the outstanding common stock of Liberty Media.
The following information is given as of February 28, 2001 and, in the case
of percentage ownership information, is based on (1) 30,556,768 shares of On
Command Common Stock; (2) 3,807,460,036 shares of AT&T Common Stock; (3)
2,376,765,123 shares of Class A AT&T Liberty Media Group Common Stock; (4)
212,045,288 shares of Class B AT&T Liberty Media Group Common Stock; and (5)
362,750,025 shares of AT&T Wireless Group Common Stock, in each case outstanding
on that date. Shares of common stock issuable upon exercise or conversion of
options, warrants and convertible securities that were exercisable or
convertible on or within 60 days after February 28, 2001, are deemed to be
outstanding and to be beneficially owned by the person holding the options,
warrants or convertible securities for the purpose of computing the percentage
ownership of that person, but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person. So far as is known to On
Command, the persons indicated below have sole voting power with respect to the
shares indicated as owned by them except as otherwise stated in the notes to the
table.
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AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNERSHIP PERCENT OF
BENEFICIAL OWNER TITLE OF CLASS (IN THOUSANDS) CLASS
---------------- -------------- -------------- -----
Richard D. Goldstein On Command Common Stock 50 (1) *
AT&T Common Stock 0 --
Class A Liberty Media Group 0 --
Class B Liberty Media Group 0 --
AT&T Wireless Group 0 --
Paul A. Gould On Command Common Stock 0 --
AT&T Common Stock 0 --
Class A Liberty Media Group 1,498 (2) *
Class B Liberty Media Group 438 *
AT&T Wireless Group 0 --
Jerry M. Hodge On Command Common Stock 150 4
AT&T Common Stock -- --
Class A Liberty Media Group -- --
Class B Liberty Media Group -- --
AT&T Wireless Group -- --
Gary S. Howard On Command Common Stock 0 --
AT&T Common Stock 16 *
Class A Liberty Media Group 1,370 (3) *
Class B Liberty Media Group 0 --
AT&T Wireless Group 0 --
Jerome H. Kern On Command Common Stock 3,595 (4) 11.76%
AT&T Common Stock 1,415 (5) *
Class A Liberty Media Group 6,237 (6) *
Class B Liberty Media Group 0 --
AT&T Wireless Group 0 --
Peter M. Kern On Command Common Stock 0 --
AT&T Common Stock 64 *
Class A Liberty Media Group 51 *
Class B Liberty Media Group 0 --
AT&T Wireless Group 0 --
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AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNERSHIP PERCENT OF
BENEFICIAL OWNER TITLE OF CLASS (IN THOUSANDS) CLASS
---------------- -------------- -------------- -----
$
David A. Simpson On Command Common Stock 30 (7) --
AT&T Common Stock 0 --
Class A Liberty Media Group 0 --
Class B Liberty Media Group 0 --
AT&T Wireless Group 0 --
Carl E. Vogel On Command Common Stock 0 --
AT&T Common Stock 0 --
Class A Liberty Media Group 219 (8) $
Class B Liberty Media Group 0 --
AT&T Wireless Group 0 --
J. David Wargo On Command Common Stock 50 (9) *
AT&T Common Stock 0 --
Class A Liberty Media Group 556 (10) *
Class B Liberty Media Group 4 *
AT&T Wireless Group 0 --
Gary L. Wilson On Command Common Stock 1,827 (11) 5.64%
AT&T Common Stock 0 --
Class A Liberty Media Group 0 --
Class B Liberty Media Group 0 --
AT&T Wireless Group 0 --
All directors and executive
officers as a group
(15 persons) On Command Common Stock 5,702 16.76%
AT&T Common Stock 1,495 *
Class A Liberty Media Group 9,712 *
Class B Liberty Media Group 442 *
AT&T Wireless Group 0 --
(1) Includes vested options to purchase 50,000 shares of On Command Common
Stock.
(2) Includes beneficial ownership of 91,400 shares of Class A AT&T Liberty
Media Group Common Stock that may be acquired within 60 days after February
28, 2001 pursuant to stock options granted in tandem with stock
appreciation rights.
(3) Includes 582,177 restricted shares of Class A AT&T Liberty Media Group
Common Stock, none of which is currently vested.
(4) Mr. Kern holds 2,224,155 shares of Common Stock and 13,500 shares of Series
A Preferred Stock, which are convertible at the option of the holder into
an aggregate of 1,350,000 shares of Common Stock. Includes 21,000 shares of
Common Stock owned by members of Mr. Kern's immediate family, as to which
Mr. Kern has disclaimed beneficial ownership.
(5) Includes beneficial ownership of 1,396,261 shares of AT&T Common Stock that
may be acquired within 60 days after February 28, 2001 pursuant to stock
options granted in tandem with stock appreciation rights. Includes 12,798
shares of AT&T Common Stock held by Mr. Kern's wife, Mary Rossick Kern, as
to which shares Mr. Kern has disclaimed beneficial ownership.
(6) Includes beneficial ownership of 5,904,600 shares of Class A AT&T Liberty
Media Group Common Stock that may be acquired within 60 days after February
28, 2001 pursuant to stock options granted in tandem with stock
appreciation rights. Includes 80,400 shares of Class A AT&T Liberty Media
Group Common Stock held by Mr. Kern's wife, Mary Rossick Kern, as to which
shares Mr. Kern has disclaimed beneficial ownership.
(7) Includes vested options to purchase 29,500 shares of On Command Common
Stock.
(8) Includes 200,000 vested options granted in tandem with stock appreciation
rights.
(9) Includes vested options to purchase 50,000 shares of On Command Common
Stock.
(10) Includes 514,598 shares of Class A AT&T Liberty Media Group Common Stock
held in investment accounts managed by Mr. Wargo as to which he shares
voting and investment power and as to which he disclaims beneficial
ownership.
(11) Mr. Wilson holds 1,810,000 Series C Warrants to purchase shares of Common
Stock having an exercise price of $15.33 per share and vested options to
purchase 16,500 shares of Common Stock.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 22, 2000, Ascent entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Liberty and Liberty AEG Acquisition, Inc.
("Merger Sub"), an indirect wholly-owned subsidiary of Liberty. Prior to Ascent
entering into the Merger Agreement, the Company's Board of Directors approved
Liberty's indirect acquisition of shares of Common Stock through its acquisition
of Ascent in such Merger. Pursuant to the Merger Agreement, Merger Sub commenced
a tender offer (the "Offer") offering Ascent stockholders $15.25 in cash for
each share of Ascent common stock. Liberty commenced the Offer on February 29,
2000 and under its terms and subject to its conditions, the Offer expired on
March 27, 2000, Pursuant to the Offer, Merger Sub purchased 85% of the common
stock of Ascent. Pursuant to Merger Agreement, on June 8, 2000, Merger Sub
merged with and into Ascent (the "Merger") with Ascent as the surviving entity.
As a result of the Merger, Liberty acquired beneficial ownership of the shares
of Common Stock held by Ascent and succeeded to certain of Ascent's rights with
respect to the Company as described below.
Through its ownership of Ascent, Liberty indirectly owned approximately
56.13% of the Company's issued and outstanding Common Stock at December 31,
2000. For so long as Liberty continues to own more than 50% of the outstanding
voting stock of the Company, it will be able, among other things, to approve any
corporate action requiring majority stockholder approval, including the election
of a majority of the Company's directors, effect amendments to the Company's
Amended and Restated Certificate of Incorporation and Bylaws and approve any
other matter submitted to a vote of the stockholders without the consent of the
other stockholders of the Company. In addition, through its representation on
the Board of Directors, Liberty is able to influence certain decisions,
including decisions with respect to the Company's dividend policy, the Company's
access to capital (including the decision to incur additional indebtedness or
issue additional shares of Common Stock or Preferred Stock), mergers or other
business combinations involving the Company, the acquisition or disposition of
assets by the Company and any change in control of the Company.
The Company and Ascent were previously parties to a Management Services
Agreement (the "Services Agreement") pursuant to which Ascent provided certain
management services, including insurance, administration, coordination and
advisory services regarding corporate financing, employee benefits
administration, public relations and other corporate functions to the Company
and made available certain of its employee benefit plans to the Company's
employees. Pursuant to the Services Agreement, Ascent was entitled to the
payment of (i) an annual fee of $1.2 million, (ii) the actual cost to Ascent of
the benefits provided to the Company's employees and (iii) certain of Ascent's
actual out-of-pocket expenses in connection with the Services Agreement (not
including overhead and the cost of its personnel). Further, the Company agreed
to indemnify Ascent from all damages from Ascent's performance of services under
the Services Agreement unless such damages are caused by willful breach by
Ascent or willful misconduct or gross negligence by Ascent's employees in
fulfilling its obligations under the Services Agreement. Ascent agreed to
indemnify the Company from damages arising from willful breach by Ascent or
gross negligence or willful misconduct by Ascent's employees in the performance
of the Services Agreement. The Services Agreement was for an initial term
through December 31, 1999, renewable for additional one-year terms by Ascent
upon notice to On Command which election Ascent could exercise as long as it and
its subsidiaries owned at least 50% of the outstanding Common Stock. The
Services Agreement was terminated in August 2000. No charges were incurred by
the Company or billed by Ascent pursuant to the Services Agreement during its
term.
The Company and Ascent also were parties to a Corporate Agreement
governing certain other relationships and arrangements between the Company and
Ascent. Pursuant to the Corporate Agreement, for so long as Ascent beneficially
owned, directly or indirectly, the largest percentage (and at least 40%) of the
outstanding securities of the Company entitled to be cast for the election of
directors, Ascent could propose, at each election of directors, a slate of
directors, or in the case of vacancies, individual directors, for election so
that at all times during the term of the Corporate Agreement, a majority of the
Board of Directors of the Company would be comprised of persons designated by
Ascent. In addition, pursuant to the Corporate Agreement, as amended, for so
long as Ascent owned the largest percentage (and at least 40%) of the
outstanding Common Stock (i) the Company agreed not to incur any indebtedness,
other than that under its existing Credit Facility (and refinancings thereof)
and indebtedness incurred in the ordinary course of business which together
would not exceed $200 million in the aggregate through June 30, 2000, or issue
any equity securities or any securities convertible into equity securities
without Ascent's prior consent, (ii) the Company agreed not to amend its
Certificate of Incorporation or Bylaws without Ascent's prior consent, and (iii)
the Company agreed to utilize reasonable cash management procedures and use its
reasonable best efforts to minimize the Company's excess cash holdings. The
Corporate Agreement was terminated in August 2000.
The Company has made arrangements for the use of an airplane owned by a
limited liability company of which Jerome H. Kern is the sole member. When that
airplane is used for purposes related to the conduct of the Company's business,
the Company reimburses the limited liability company for such use at market
rates. On Command reimbursed that limited liability company an aggregate of
approximately $437,000 during the year ended December 31, 2000.
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At a meeting of the Board held on April 6, 2000, Jerome H. Kern was
appointed Chairman of the Board of Directors and Chief Executive Officer of the
Company. Also at that meeting, the Board approved the principal terms of a
purchase by Mr. Kern from the Company of 2,700,000 shares of Common Stock at a
per share price of $15.625, which price was less than the closing price for a
share of Common Stock on that date. Thereafter, Mr. Kern and representatives of
the Company engaged in discussions relating to the structure of Mr. Kern's
equity purchase. On August 4, 2000, following the approval of the Board of
Directors, the Company and Mr. Kern entered into a Stock Purchase and Loan
Agreement (the "Stock Purchase Agreement") relating to the purchase by Mr. Kern
of 13,500 shares of Series A Preferred Stock. Pursuant to the Stock Purchase
Agreement, on August 10, 2000, Mr. Kern purchased 13,500 shares of Series A
Preferred Stock at a purchase price of $1,562.50 per share, or an aggregate of
$21,093,750. Mr. Kern paid the purchase price for these shares of Series A
Preferred Stock by payment of $13,500 in cash and the execution of a promissory
note, dated August 10, 2000 (the "Secured Note"), payable to the order of the
Company and bearing an initial principal amount of $21,080,250. The payment of
principal of and interest on the Secured Note is secured by a pledge of the
13,500 shares of Series A Preferred Stock issued to Mr. Kern, and any proceeds
thereof, pursuant to the terms of a Pledge and Security Agreement, dated August
10, 2000 (the "Pledge and Security Agreement"), between the Company and Mr.
Kern.
Pursuant to the terms of the Certificate of Designations for the Series
A Preferred Stock (the "Certificate of Designations"), each share of Series A
Preferred Stock may be converted at any time, at the option of the holder, into
100 shares of Common Stock (subject to certain customary adjustments) (the
"Conversion Rate"). In addition, each share of Series A Preferred Stock will,
subject to the receipt of any required governmental consents and approvals,
automatically be converted into shares of Common Stock at the then effective
Conversion Rate upon the satisfaction of all of Mr. Kern's obligations under the
Secured Note. Shares of Series A Preferred Stock will participate in any
dividends or distributions on the Common Stock on an as-converted basis, but
otherwise are not entitled to receive any regular dividends. Shares of Series A
Preferred Stock are entitled to a preference on liquidation equal to $.01 per
share, and thereafter will participate with the shares of Common Stock in any
liquidating distributions on an as-converted basis. Shares of Series A Preferred
Stock vote together with the Common Stock on all matters presented to a vote of
the stockholders of the Company, and holders of Series A Preferred Stock are
entitled to one vote per share of Series A Preferred Stock held. Pursuant to the
terms of the Stock Purchase Agreement, Mr. Kern has agreed that if the shares of
Series A Preferred Stock held by him become entitled to vote as a separate class
on any matter presented to the stockholders of the Company he will cause such
shares of Series A Preferred Stock to be voted for or against such matter in the
same proportion as the holders of shares of Common Stock vote upon such matter.
The Secured Note has an initial principal amount of $21,080,250 and,
unless accelerated earlier, will mature and become payable, together with
accrued interest, on August 1, 2005. Interest on the Secured Note will accrue at
a rate of 7% per annum, compounded quarterly. Upon the occurrence of certain
events of default, the interest rate will increase to 9% per annum. The Secured
Note is nonrecourse against Mr. Kern personally except for an amount equal to
25% of the principal of and accrued interest on the Secured Note. In determining
Mr. Kern's personal liability under the Secured Note, the Company must first
proceed against the shares of Series A Preferred Stock (or proceeds thereof)
held as collateral for the Secured Note, with such proceeds being applied first
to the obligations for which Mr. Kern is personally liable. Except in connection
with the repurchase by the Company of shares of Series A Preferred Stock, or
shares of Common Stock issued upon conversion thereof, as described below,
neither the principal of nor interest on the Secured Note may be prepaid. In the
event of such a repurchase, the proceeds thereof will be applied to the
repayment of principal of and interest on the Secured Note.
The Stock Purchase Agreement provides that Mr. Kern and the Company will
enter into a mutually acceptable registration rights agreement having customary
terms and conditions and providing Mr. Kern with two demand registration rights
(each of which may be a "shelf" registration) in respect of shares of Common
Stock issuable upon conversion of shares of Series A Preferred Stock, but will
not provide any rights to participate in registrations initiated by the Company
or others. If Mr. Kern's employment with the Company is terminated before April
6, 2005 by the Company for cause (as defined in the Stock Purchase Agreement) or
by Mr. Kern without good reason (as defined in the Stock Purchase Agreement),
the Company will have the right to repurchase all or a specified portion
(depending upon the date on which Mr. Kern's employment is terminated) of the
shares of Series A Preferred Stock, or shares of Common Stock issued upon
conversion thereof, for a purchase price that is equivalent to the amount of Mr.
Kern's indebtedness related thereto under the Secured Note. The Company will be
entitled to offset the purchase price of any such shares of Series A Preferred
Stock or Common Stock against the principal of and interest on the Secured Note.
The Stock Purchase Agreement and the Pledge and Security Agreement
provide that Mr. Kern may not directly or indirectly sell, exchange or otherwise
dispose of, or grant any option or other right with respect to, or create or
suffer any lien or other encumbrance on, any of the collateral under the Pledge
and Security Agreement (including the shares of Series A Preferred Stock issued
to Mr. Kern or shares of Common Stock issued upon conversion thereof) except
that (a) to the extent that the Company's repurchase right under the Stock
Purchase Agreement has expired, Mr. Kern may direct the Company to effect a sale
of the portion of the collateral with respect to which such repurchase right has
expired, provided that the proceeds of any such sale are held in an
14
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escrow account pending the date all amounts under the Secured Note become due
and owing and (b) Mr. Kern is entitled to assign his rights to the pledged
collateral to an entity if (i) Mr. Kern holds at least 50% of the equity
interests of such entity, (ii) Mr. Kern "controls" (as that term is defined in
the Stock Purchase Agreement) such entity, (iii) the financial obligations of
such entity under the Secured Note and the Pledge and Security Agreement have
been personally guaranteed by Mr. Kern and (iv) such entity becomes a party to
and bound by Mr. Kern's obligations under the Pledge and Security Agreement. In
addition, the shares of Series A Preferred Stock issued to Mr. Kern are
"restricted securities" within the meaning of Rule 144 under the Securities Act,
and accordingly may not be sold, transferred or otherwise disposed of unless
such sale, transfer or other disposition is effected pursuant to an effective
registration statement under the Securities Act or pursuant to a valid exemption
from the registration requirements of the Securities Act.
On March 5, 2001, the Company 15,000 shares of the Company's Cumulative
Redeemable Preferred Stock, Series B, par value $.01 per share (the "Series B
Preferred Stock"), to Ascent in consideration of $15,000,000 in cash, pursuant
to a Preferred Stock Purchase Agreement, dated March 5, 2001 (the "Ascent
Purchase Agreement"), between the Company and Ascent.
The liquidation preference (the "Liquidation Preference") of each share
of the Series B Preferred Stock as of any date of determination is equal to the
sum of (a) the stated value per share of $1,000, plus (b) an amount equal to all
dividends accrued on such share which have been added to and remain a part of
the Liquidation Preference as of such date, plus (c) for purposes of the
liquidation and redemption provisions of the Series B Preferred Stock, an amount
equal to all unpaid dividends accrued on the sum of the amounts specified in
clauses (a) and (b) above during the period from and including the immediately
preceding dividend payment date to but excluding the date in question.
The holders of Series B Preferred Stock are entitled to receive
cumulative dividends, when and as declared by the Company, in preference to
dividends on junior securities, including the common stock and the Series A
Preferred Stock. Dividends accrue on the Series B Preferred Stock on a daily
basis at the rate of 8.5% per annum of the Liquidation Preference from and
including March 5, 2001 to but excluding April 15, 2001 and at the rate of 12%
per annum of the Liquidation Preference from and including April 15, 2001 to but
excluding the date on which the Liquidation Preference is made available
pursuant to a redemption of the Series B Preferred Stock or a liquidation of the
Company. Accrued dividends are payable monthly, commencing on April 15, 2001, in
cash. Dividends not paid on any dividend payment date are added to the
Liquidation Preference on such date and remain a part of the Liquidation
Preference until such dividends are paid. Dividends added to the Liquidation
Preference shall accrue dividends on a daily basis at the rate of 12% per annum.
Accrued dividends not paid as provided above on any dividend payment date
accumulate and such accumulated unpaid dividends may be declared and paid at any
time without reference to any regular dividend payment date, to holders of
record of Series B Preferred Stock as of a special record date fixed by the
Company. Subject to certain specified exceptions, the Company is prohibited from
paying dividends on any parity securities or any junior securities (including
common stock) during any period in which the Company is in arrears with respect
to payment of dividends on Series B Preferred Stock.
Upon any liquidation, dissolution or winding up of the Company, the
holders of Series B Preferred Stock are entitled to receive from the assets of
the Company available for distribution to stockholders an amount in cash per
share equal to the Liquidation Preference of a share of Series B Preferred
Stock, after payment is made on any senior securities and before any
distribution or payment is made on any junior securities, which payment will be
made ratably among the holders of Series B Preferred Stock and the holders of
any parity securities. The holders of Series B Preferred Stock will be entitled
to no other or further distribution of or participation in the remaining assets
of the Company after receiving the Liquidation Preference per share. Series B
Preferred Stock is not convertible into any other security of the Company.
Shares of Series B Preferred Stock are redeemable at the option of the
Company at any time after March 5, 2001 at a redemption price per share payable
in cash equal to the Liquidation Preference of such share on the redemption
date. Any redemptions by the Company are required to be made pro rata if less
than all shares of Series B Preferred Stock are to be redeemed.
At any time on or after April 15, 2001, or prior to that date if an
event described as a "default" below has occurred and is continuing, any holder
of Series B Preferred Stock has the right to require the Company to redeem all
or any portion of such holder's shares for a redemption price per share payable
in cash equal to the Liquidation Preference of that share on the redemption
date. The Company will redeem shares at the option of the holder out of funds
that are legally available for that purpose and not restricted pursuant to the
Company's Credit Agreement. If the legally available funds are insufficient for
that purpose, the Company will redeem the maximum number possible of the shares
requested to be redeemed on the redemption date and will redeem the balance of
such shares as additional funds become legally available.
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If and so long as the Company fails to redeem all shares of Series B
Preferred Stock required to be redeemed on a particular redemption date, the
Company may not redeem or discharge any sinking fund obligation with respect to
any shares of Series B Preferred Stock or any parity securities or junior
securities or pay any dividends on any junior securities, and neither the
Company nor any of its subsidiaries may purchase or otherwise acquire any shares
of Series B Preferred Stock, parity securities or junior securities unless all
shares of Series B Preferred Stock required to be redeemed are redeemed. The
foregoing prohibitions do not apply to certain purchase or exchange offers made
to all holders of Series B Preferred Stock.
Series B Preferred Stock will not rank junior to any other capital stock
of the Company in respect of rights of redemption or rights to receive dividends
or liquidating distributions. The Company may not issue any senior securities
without the consent of the holders of at least 66 2/3% of the number of shares
of Series B Preferred Stock then outstanding.
Holders of Series B Preferred Stock are not entitled to vote on any
matters submitted to a vote of the stockholders of the Company, except as
required by law and except that without the consent of the holders of at least
66 2/3% of the number of shares of Series B Preferred Stock then outstanding,
the Company may not take any action, including by merger, to amend any of the
provisions of the certificate of designations of the Series B Preferred Stock
(the "Certificate of Designations") or amend any of the provisions of the
Amended and Restated Certificate of Incorporation of the Company so as to
adversely affect any preference or right of the Series B Preferred Stock Any
provision of the Certificate of Designations which, for the benefit of the
holders of Series B Preferred Stock, prohibits, limits or restricts actions by,
or imposes obligations on, the Company may be waived in whole or in part by the
affirmative vote or with the consent of the holders of record of at least 66
2/3% of the number of shares of Series B Preferred Stock then outstanding.
Holders of Series B Preferred Stock do not have any preemptive right to purchase
any class of securities that may be issued by the Company.
A default under the Certificate of Designations occurs if any of the
following occur: (1) the entry of a decree or order for relief in respect of the
Company under any Bankruptcy law or the appointment of a Receiver of the Company
or of any substantial part of its properties, or ordering the winding up or
liquidation of the affairs of the Company or the filing of an involuntary
petition and the entry of a temporary stay and such petition and stay are not
diligently contested or continue undismissed for a period of 60 consecutive
days; or (2) the filing by the Company of a petition, answer or consent seeking
relief under any Bankruptcy Law or the consent by the Company to the institution
of proceedings under any Bankruptcy Law or to the filing of any such petition or
to the appointment or taking of possession of a Receiver of the Company or any
substantial part of its properties or the Company failing generally to pay its
respective debts as they become due or taking any action in furtherance of any
such action.
In the event of any action at law or suit in equity with respect to the
Series B Preferred Stock, the Company may be required to pay reasonable sums for
attorneys' fees incurred by the holder thereof in connection with such action or
suit and all other costs of collections.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following items are included as exhibits to this Amendment No. 1 to
the Annual Report on Form 10-K:
EXHIBIT
NUMBER DESCRIPTION
10.8* Amended and Restated On Command Corporation 1996 Key Employee
Stock Plan.
10.16 Credit Agreement, dated as of July 18, 2000, by and among On
Command Corporation, the lenders party thereto, Toronto
Dominion (Texas), Inc., Fleet National Bank, Bank of America,
N.A., and the Bank of New York.
10.17 Amendment No. 1, dated as of March 27, 2001, to the Credit
Agreement, dated as of July 18, 2000, by and among On Command
Corporation, the lenders party thereto, Toronto Dominion
(Texas), Inc., Fleet National Bank, Bank of America, N.A., and
the Bank of New York.
* Indicates compensatory plan or arrangement
16
17
17
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Denver, State of Colorado on April 30, 2001.
On Command Corporation
By: /s/ Jerome H. Kern
Jerome H. Kern
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Jerome H. Kern
________________________________ Chairman of the Board April 30, 200
Jerome H. Kern (Principal Executive Officer)
/s/Katgrtn L. Hale
_________________________________ Senior Vice President, Finance April 30, 2001
Kathryn L. Hale (Principal Accounting and Financial Officer)
/s/ Richard D. Goldstein
_________________________________ Director April 30, 2001
Richard D. Goldstein
/s/ Paul A. Gould
_________________________________ Director April 30, 2001
Paul A. Gould
/s/ Gary S. Howard
_________________________________ Director April 30, 2001
Gary S. Howard
/s/ Peter M. Kern
_________________________________ Director April 30, 2001
Peter M. Kern
/s/ Carl E. Vogel
_________________________________ Director April 30, 2001
Carl E. Vogel
_________________________________ Director April ___, 2001
J. David Wargo
_________________________________ Director April ___, 2001
Gary L. Wilson
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INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
10.8* Amended and Restated On Command Corporation 1996 Key Employee
Stock Plan.
10.16 Credit Agreement, dated as of July 18, 2000, by and among On
Command Corporation, the lenders party thereto, Toronto
Dominion (Texas), Inc., Fleet National Bank, Bank of America,
N.A., and the Bank of New York.
10.17 Amendment No. 1, dated as of March 27, 2001, to the Credit
Agreement, dated as of July 18, 2000, by and among On Command
Corporation, the lenders party thereto, Toronto Dominion
(Texas), Inc., Fleet National Bank, Bank of America, N.A., and
the Bank of New York.
* Indicates compensatory plan or arrangement
19