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, 2003, or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission file number 0-13865
SKYTERRA COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2368845
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
19 West 44th Street, Suite 507
New York, New York 10036
(Address of principal executive offices) (Zip Code)
Registrant's former name--Rare Medium Group, Inc.
Registrant's telephone number, including area code: (212) 730-7540
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(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 periods 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 / /
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 the registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes / / No /x/
The aggregate market value of the voting common stock held by non-affiliates of
the registrant, as of June 30, 2003, was $7,135,730. All non-voting common stock
was held by affiliates of the registrant.
As of April 27, 2004, 6,074,098 shares of our voting common stock and 8,990,212
shares of our non-voting common stock were outstanding.
EXPLANATORY PARAGRAPH
The purpose of this amendment is to amend and restate Part III of the
Registrant's Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the "SEC") on March 30, 2004 (the "Form 10-K"). The amended and
restated items are as follows:
Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions.
Item 14. Principal Accounting Fees and Services.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
These items were omitted from the Form 10-K in reliance on instructions included
in Form 10-K permitting the Registrant to incorporate such items by reference to
the Registrant's proxy statement, provided such proxy statement is filed within
120 days of the Registrant's fiscal year-end. As the Registrant intends to file
its proxy statement later than 120 days from its fiscal year-end, it is
providing these items as part of this Form 10-K/A.
PART III
Item 10. Directors and Executive Officers of the Registrant
See Item 4A of Form 10-K for information with respect to the Company's
executive officers. The following table sets forth information concerning the
Company's directors and executive officers as of April 27, 2004:
Name Age Position
-------------------------------------------------------------------------------
Jeffrey M. Killeen (1)(2) 50 Director
William F. Stasior (1) 63 Director
Andrew D. Africk (1)(2) 37 Director
Marc J. Rowan 41 Director
Michael S. Gross 42 Director
----------------
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
Jeffrey M. Killeen - Director. Mr. Killeen has been a director of the Company
since October 1998. Since January 1, 2002, Mr. Killeen has been Chairman and
Chief Executive Officer of Globalspec, Inc., an information services company.
Mr. Killeen was the Chief Executive Officer of Forbes.com from August 1999 to
March 2001. Prior to that, from January 1998 to March 1999, Mr. Killeen was the
Chief Operating Officer of barnesandnoble.com. Before joining
barnesandnoble.com, Mr. Killeen served as President and Chief Executive Officer
of Pacific Bell Interactive Media from August 1994 to January 1998.
William F. Stasior - Director. Mr. Stasior has been a director of the Company
since April 2000. Mr. Stasior was the Chairman and Chief Executive Officer of
Booz Allen & Hamilton Inc., a management and technology consulting firm, from
1991 to 1999 and served on Booz Allen's Board of Directors from 1979 to 2000.
Mr. Stasior also serves on the Board of Directors of OPNET, a software company
that specializes in enhancing network performance, and Vanu, Inc., a pioneer in
the development of software defined radio.
Andrew D. Africk - Director. Mr. Africk has been a director of the Company since
June 1999. Mr. Africk is a partner of Apollo Advisors, L.P. Mr. Africk is also a
director of Superior Essex, Inc. and several private venture companies.
Marc J. Rowan - Director. Mr. Rowan has been a director of the Company since
June 1999. Mr. Rowan is one of the founding principals of Apollo Advisors, L.P.
Mr. Rowan is also a director of AMC Entertainment, Inc., Quality Distribution,
Inc., National Financial Partners, Inc., Wyndham International, Cablecom GmbH
and iesy Hessen GmbH & Co. KG.
Michael S. Gross - Director. Mr. Gross has been a director of the Company since
August 1999. Mr. Gross is one of the founding principals of Apollo Advisors,
L.P. Mr. Gross is also a director of Apollo Investment Corporation, Allied Waste
Industries, Inc., Pacer International, Inc., United Rentals, Inc. and Saks Inc.
Audit Committee
Our Audit Committee is currently composed of two outside directors, Mr.
Killeen and Mr. Stasior, both of whom are independent under Rule 4200(a)(15) of
the National Association of Securities Dealers' ("NASD") listing standards, and
Mr. Africk, who continues to serve on the Audit Committee as the Board of
Directors determined that exceptional and limited circumstances exist pursuant
to Rule 4350(d)(2)(B) of the NASD listing standards. The Board of Directors has
determined that Mr. Africk is an "audit committee financial expert" within the
applicable definition of the SEC.
Code of Ethics
The Company has adopted a Code of Ethics for its Senior Executive and
Senior Financial Officers. A copy of the Code is publicly available on the
Company's website at www.skyterracom.com. Amendments to the Code or any grant of
a waiver from a provision of the Code requiring disclosure under applicable SEC
rules will also be disclosed on the Company's website.
Section 16(a) Beneficial Ownership Reporting Compliance
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 securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of our common
stock and other equity securities. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, the Company believes that during the year
ended December 31, 2003 its officers, directors and greater than 10%
stockholders complied with all Section 16(a) filing requirements, with the
exception of the late filing of an Initial Statement of Beneficial Ownership of
Securities on Form 4 for each of Mr. Leddy and Mr. Lewis in connection with an
option grant in April 2003.
Item 11. Executive Compensation
Summary Compensation Table
The following Summary Compensation Table sets forth, for the three years
ended December 31, 2003, the compensation for services in all capacities earned
by the Company's Chief Executive Officer and its next most highly compensated
executive officers.
Other Securities
Annual Underlying LTIP
Bonus Compensation Options/SARs Payouts All Other
Name and Principal Position Year Salary (1) (2) (#) ($) Compensation
--------------------------- ---- ------ -------- ------------- ----------- -------- ------------
Jeffrey A. Leddy 2003 $232,950 $168,750 $-- 100,000 $-- $--
Chief Executive Officer and 2002 138,462 140,000 -- 100,000 -- --
President
Robert C. Lewis 2003 187,615 90,000 -- 40,000 -- 3,304 (4)
Senior Vice President, 2002 196,250 90,000 -- 20,000 -- --
General
Counsel and Secretary 2001 140,000 90,000 6,000 10,000 -- 2,500 (4)
Erik J. Goldman 2003 105,769 50,000 -- 40,000 -- 1,060 (4)
Vice President
Keith C. Kammer 2003 75,288 15,000 -- 40,000 -- 754 (4)
Vice President
Craig J. Kaufmann 2003 94,490 37,500 -- 15,000 -- 1,465 (4)
Controller and Treasurer 2002 109,583 25,000 -- -- -- --
2001 74,903 17,500 -- -- -- 1,954 (4)
Glenn S. Meyers (3) 2003 86,832 -- 5,250 -- -- --
Former Chairman and 2002 332,553 375,000 18,000 155,000 -- --
Chief Executive Officer 2001 278,096 -- 18,000 -- -- --
Craig C. Chesser (3) 2003 53,423 -- -- -- -- 253,560 (5)
Former Senior Vice President 2002 196,250 70,000 -- 20,000 -- --
Finance and Treasurer 2001 164,077 90,000 1,500 10,000 -- 2,500 (4)
Michael A. Hultberg (3) 2003 53,615 -- -- -- -- 183,629 (6)
Former Senior Vice President 2002 223,333 70,000 -- 20,000 -- --
and Controller 2001 177,135 90,000 3,000 10,000 -- --
--------------
(1) Bonuses for services provided in the year ended December 31, 2002 for
Messrs. Leddy, Lewis, Kaufmann, Chesser and Hultberg were granted in April
2003 and are reflected in 2002. Bonuses for services provided in the year
ended December 31, 2003 were granted in January 2004 and are reflected in
2003.
(2) Represents non-accountable expense allowance.
(3) Effective April 15, 2003, Messrs. Meyers, Chesser and Hultberg ceased
employment with the Company.
(4) Represents employer matching contributions to retirement accounts.
(5) Represents the following compensation paid to Mr. Chesser: (i) severance
and benefits in accordance with an employment agreement, (ii) a payment
made upon the resolution of an outstanding matter between Mr. Chesser and
the Company, and (iii) employer matching contribution to a retirement
account.
(6) Represents severance and benefits paid in accordance with Mr. Hultberg's
employment agreement and employer matching contribution to a retirement
account.
Option / SAR Grants in the Last Year
The following table sets forth information concerning grants of stock
options to purchase common stock during the year ended December 31, 2003 to the
named executive officers.
Percent of Potential Realizable Value
Number of Total at Assumed Annual Rates of
Securities Options/SARs Stock Appreciation for
Underlying Granted to Exercise or Option Term
Options /SARs Employees in Base Price Expiration ---------------------------
Name Granted Fiscal Year ($/Share) Date 5% 10%
---- ------- ----------- --------- ---------- ----------- ------------
Jeffrey A. Leddy 100,000 (1) 42.6% $0.91 4/08/13 $57,229 $145,031
Robert C. Lewis 40,000 (1) 17.0% $0.91 4/08/13 $22,892 $58,012
Erik J. Goldman 40,000 (1) 17.0% $0.91 4/08/13 $22,892 $58,012
Keith C. Kammer 40,000 (2) 17.0% $1.55 8/14/13 $38,991 $98,812
Craig J. Kaufmann 15,000 (1) 6.4% $0.91 4/08/13 $8,584 $21,755
Glenn S. Meyers (3) -- 0.0% N/A N/A N/A N/A
Craig C. Chesser (3) -- 0.0% N/A N/A N/A N/A
Michael A. Hultberg (3) -- 0.0% N/A N/A N/A N/A
--------------
(1) These options were granted on April 8, 2003 at an exercise price of $0.91,
the per share fair market value of the common stock at that time. The
options have a term of ten years. These options are exercisable
cumulatively in three equal annual installments, beginning on April 8,
2004.
(2) This option was granted on August 14, 2003 at an exercise price of $1.55,
the per share fair market value of the common stock at that time. The
option has a term of ten years. The option is exercisable cumulatively in
three equal annual installments, beginning on August 14, 2004.
(3) Effective April 15, 2003, Messrs. Meyers, Hultberg and Chesser ceased
employment with the Company. At such time, all outstanding options held by
each of Messrs. Meyers, Hultberg and Chesser became fully vested.
Aggregated Option/SAR Exercises in the Last Year and Year-End Option/SAR Values
The following table sets forth information concerning the exercise of
options to purchase shares of common stock by the named executive officers
during the year ended December 31, 2003, as well as the number and potential
value of unexercised options (both options which are presently exercisable and
options which are not presently exercisable) as of December 31, 2003.
Number of Value of
Number of Securities Unexercised
Securities Underlying In-the-Money
Underlying Options/SARs at Options/SARs
Options/SARs Fiscal Y/E (#) at Fiscal Y/E ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
---- ------------ -------- ------------- -------------
Jeffrey A. Leddy -- -- 43,750/156,250 16,250/91,500
Robert C. Lewis 3,200 $7,840 22,967/53,333 5,594/32,266
Erik J. Goldman -- -- 0/40,000 0/23,600
Keith C. Kammer -- -- 0/40,000 0/0
Craig J. Kaufmann -- -- 1,000/15,000 200/8,850
Glenn S. Meyers (1) -- -- 295,000/0 191,750/0
Craig C. Chesser (1) 1,167 $2,859 34,666/0 13,933/0
Michael A. Hultberg (1) -- -- 37,500/0 14,500/0
(1) Effective April 15, 2003, Messrs. Meyers, Chesser and Hultberg ceased
employment with the Company.
Employment Contracts And Change In Control Arrangements
Expired Meyers Employment Agreement
In connection with the transactions consummated pursuant to the 1998
acquisition by the Company of Rare Medium, Inc., the Company entered into an
Employment Agreement effective April 15, 1998 with Mr. Meyers, as amended (the
"Meyers Employment Agreement"). Pursuant to the Meyers Employment Agreement, Mr.
Meyers was engaged as Chairman, President and Chief Executive Officer of the
Company to serve for a term of five years, expiring April 15, 2003. Pursuant to
the Meyers Employment Agreement, during its last year, Mr. Meyer received an
annual base salary of $292,465, with a minimum annual increase during the term
of not less than 4% per annum. The Meyers Employment Agreement also contains a
covenant not to compete with the Company or any of its affiliates for the term
of the agreement, plus one additional year. Concurrently with the execution of
the Meyers Employment Agreement, Mr. Meyers was granted options to acquire an
aggregate of 200,000 shares of common stock at exercise prices equal to $23.75
per share (the fair market value at the time of issuance), which options become
exercisable ratably on a monthly basis over a period of 60 months from the date
of grant and expire ten years from the date of grant. On October 15, 2002, in
recognition of Mr. Meyers' contribution to the Company, among other things, the
Compensation Committee approved the repricing of the exercise prices of Mr.
Meyers' outstanding options to purchase an aggregate of 140,000 shares of common
stock to $0.85 per share, the fair market value at the date of the repricing.
Additionally, on that date, Mr. Meyers received an additional option to purchase
155,000 shares of common stock at $0.85 per share. On April 15, 2003, the Meyers
Employment Agreement expired, and Mr. Meyers ceased to be employed by the
Company and resigned from the Board of Directors.
Leddy Employment Agreement
The Company is a party to an amended and restated employment agreement with
Mr. Leddy. The term of the agreement is from January 1, 2004 to December 31,
2005 and calls for a base salary of $300,000 per year. Annual increases are at
the sole discretion of the Compensation Committee of the Board of Directors. In
addition, Mr. Leddy is eligible, based upon the achievement of certain
subjective goals established by the Compensation Committee, to receive a bonus
of up to 75% of his base salary following the end of each calendar year during
the term of the agreement. Under this agreement, if Mr. Leddy is terminated for
other than "cause" as such term is defined in the agreement, then Mr. Leddy is
entitled to receive compensation in a lump sum payment consisting of one year of
his then current salary and the right to exercise all vested stock options and
unvested stock options through the option expiration date for such options.
Other Executive Employment Agreements
The Company has or had employment agreements with each of Mr. Chesser, Mr.
Hultberg, and Mr. Lewis, each of who is or was an executive officer. Under these
agreements, if, either (i) after 90 days following a change in control, the
executive terminates his employment or (ii) the executive is terminated for
other than "cause" as such term is defined in his respective agreement, then the
executive is entitled to receive severance compensation and benefits in a lump
sum payment consisting of one year of his then current salary and the right to
exercise all vested stock options and unvested stock options through the option
expiration date for such options. For purposes of these agreements, a change in
control occurs when, among other things, our stockholders approve a merger.
As part of the Company's efforts to further reduce costs, the Company
reached agreements with each of Mr. Hultberg and Mr. Chesser pursuant to which
his employment ceased as of April 15, 2003. At that time, Mr. Hultberg was paid
severance and benefits in accordance with his employment agreement. In September
2003, Mr. Chesser was paid severance and benefits in accordance with his
employment agreement, concurrent with the resolution of an outstanding matter
between Mr. Chesser and the Company.
The Company is a party to an employment agreement with Mr. Kammer. Under
the agreement, if Mr. Kammer is terminated for other than "cause" as such term
is defined in the agreement, then Mr. Kammer is entitled to receive compensation
in a lump sum payment consisting of six months of his then current salary.
Compensation of Directors
Each non-employee director receives a per meeting fee of $1,000 for each
meeting of the Board of Directors and $500 for each committee meeting attended,
along with expenses incurred in connection with attending each meeting.
Furthermore, from time to time, directors may be granted options to purchase
common stock under our 1998 Long-Term Incentive Plan.
Item 12. Security Ownership Of Certain Beneficial Owners And Management and
Related Stockholder Matters
Beneficial Ownership
The following table and notes thereto set forth certain information, as of
April 27, 2004 (except as noted otherwise), regarding beneficial ownership of
the shares of the Company's common stock by (1) each person who is known to the
Company to be the beneficial owner of more than 5% of the outstanding shares of
common stock, (2) each of the named executive officers under the Summary
Compensation Table under the heading "Executive Compensation," (3) each director
and nominee for director, and (4) all of the executive officers and directors as
a group. Unless otherwise indicated, the stockholders listed possess sole voting
and investment power with respect to the shares indicated as owned by them.
Number of Shares of
Common Stock
Beneficially Owned Percentage
Name and Address Position (1) of Class
---------------- -------- ------------------ -----------
Jeffrey A. Leddy Chief Executive Officer and President 83,333 * (2)
Robert C. Lewis Senior Vice President, General Counsel 39,500 * (3)
and Secretary
Erik J. Goldman Vice President 13,333 * (4)
Keith C. Kammer Vice President -- *
Craig J. Kaufmann Controller and Treasurer 7,300 * (5)
Glenn S. Meyers Former Chairman and Chief Executive 295,000 1.9% (6)
Officer
Craig C. Chesser Former Senior Vice President Finance and 37,499 * (7)
Treasurer
Michael A. Hultberg Former Senior Vice President and 37,500 * (8)
Controller
Jeffrey M. Killeen Director 23,333 * (2)
William F. Stasior Director 21,667 * (2)
Andrew D. Africk Director 13,803,821 76.1% (9)
c/o SkyTerra Communications, Inc.
19 West 44th Street, Suite 507
New York, New York 10036
Marc J. Rowan Director 13,803,821 76.1% (10)
c/o SkyTerra Communications, Inc.
19 West 44th Street, Suite 507
New York, New York 10036
Michael S. Gross Director 13,792,155 76.1% (11)
c/o SkyTerra Communications, Inc.
19 West 44th Street, Suite 507
New York, New York 10036
Apollo Investment Fund IV, L.P. 13,772,988 76.1% (12)
Two Manhattanville Road
Purchase, New York 10577
All executive officers, directors and 14,042,287 76.5% (13)
nominees as a group (10 persons)
----------------------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership has been determined pursuant to Rule 13d-3 under the
Exchange Act.
(2) Represents options to purchase shares of common stock that are currently
exercisable, but does not include options that become exercisable upon a
change of control and upon termination of employment with the Company.
(3) Includes options to purchase 32,500 shares of common stock that are
currently exercisable, but does not include options that become
exercisable upon a change of control of the Company and upon certain
other conditions.
(4) Represents options to purchase shares of common stock that are currently
exercisable.
(5) Includes options to purchase 6,000 shares of common stock that are
currently exercisable.
(6) Represents options to purchase shares of common stock that are currently
exercisable. Mr. Meyers' employment with the Company ceased on April 15,
2003, and he resigned from the Board of Directors on the same day. His
beneficial ownership is stated as of that date.
(7) Includes options to purchase 33,833 shares of common stock that are
currently exercisable. Mr. Chesser's employment with the Company ceased
on April 15, 2003. His beneficial ownership is stated as of that date.
(8) Represents options to purchase shares of common stock that are currently
exercisable. Mr. Hultberg's employment with the Company ceased on April
15, 2003. His beneficial ownership is stated as of that date.
(9) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,037,401 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr. Africk
is a principal of Apollo Advisors IV, L.P, which together with an
affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Africk disclaims beneficial ownership of such
shares. Includes options to purchase 30,833 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control.
(10) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,037,401 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr. Rowan
is a principal of Apollo Advisors IV, L.P, which together with an
affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Rowan disclaims beneficial ownership of such
shares. Includes options to purchase 30,833 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control.
(11) Includes an aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,037,401 shares of common stock issuable to Apollo Stockholders
upon conversion of the Series A Preferred Stock and exercise of the
Series 1-A warrants and the Series 2-A warrants owned by them. Mr. Gross
is a principal of Apollo Advisors IV, L.P, which together with an
affiliated investment manager, serves as the manager of each of the
Apollo Stockholders. Mr. Gross disclaims beneficial ownership of such
shares. Includes options to purchase 19,167 shares of common stock that
are currently exercisable, but does not include options that become
exercisable upon a change of control.
(12) Represents the aggregate of (i) 1,270,948 shares of common stock acquired
through the exercise of Series 1-A warrants, (ii) 474,427 shares of
common stock acquired in a tender offer, (iii) 8,990,212 shares of
non-voting common stock acquired pursuant to the rights offering, and
(iv) 3,037,401 shares of common stock issuable upon conversion of the
aggregate of 1,185,230 shares of our Series A Preferred Stock and the
exercise of an aggregate of 220,854 Series 1-A warrants and 9,810,033
Series 2-A warrants held by the Apollo Stockholders. Assuming conversion
of all the Series A Preferred Stock and the exercise of all the Series
1-A warrants and Series 2-A warrants held by the Apollo Stockholders,
such 13,772,988 shares of common stock would consist of 11,870,128 shares
of common stock beneficially owned by Apollo Investment Fund IV, L.P.,
596,554 shares of common stock beneficially owned by Apollo Overseas
Partners IV, L.P., 831,879 shares of common stock beneficially owned by
AIF IV/ RRRR LLC and 474,427 shares of common stock owned by AP/RM
Acquisition, LLC. The holders of our Series A Preferred Stock are only
entitled to an aggregate of 975,000 votes with respect to the Series A
Preferred Stock as of April 27, 2004, or 0.823 votes per share of Series
A Preferred Stock. Messrs. Africk, Rowan and Gross, members of our board
of directors and associated with Apollo Advisors IV, L.P., disclaim
beneficial ownership of the shares held by the Apollo Stockholders.
(13) Messrs. Africk, Rowan and Gross, members of the Board of Directors and
associated with Apollo Advisors IV, L.P., disclaim beneficial ownership
of shares held by the Apollo Stockholders. See footnote numbers 9, 10 and
11 above. Includes options to purchase an aggregate of 260,999 shares of
common stock that are currently exercisable, but does not include options
that become exercisable upon a change of control.
Securities Authorized for Issuance Under Equity Compensation Plans and
Individual Arrangements
The following table and notes thereto set forth, as of December 31, 2003,
information with respect to shares of the Company's common stock which may be
issued under existing equity compensation plans and individual arrangements.
Number of Shares
Number of of Common Stock
Shares of Remaining for
Common Stock To Future Issuance
Be Issued upon Weighted-Average under Equity
Exercise of Exercise Price Compensation
Outstanding of Outstanding Plans (Excluding
Options, Options, Securities
Warrants and Warrants and Reflected in
Plan Category Rights Rights First Column)
--------------- ---------------- ---------------- ------------------
Equity compensation plans approved by
stockholders 947,940 $8.26 1,203,887
Equity compensation plans and individual
arrangements not approved by stockholders (1) 168,867 10.33 --
---------------- ---------------- ------------------
Total 1,116,807 $8.58 1,203,887
================ ================ ==================
(1) Includes an option to purchase 140,000 shares of common stock issued in
1998 to Mr. Meyers under the Meyers' Employment Agreement, options to
purchase 12,200 shares of common stock issued to certain former
consultants in settlement of various disputes and an option to purchase
16,667 shares of common stock issued to a former director for services
provided.
Item 13. Certain Relationships and Related Transactions.
Interest in Miraxis
In May 2002, the Company acquired Series B Preferred Shares and a warrant
from Miraxis for approximately $0.4 million, representing an ownership of
approximately 30%. Miraxis is a development stage, privately held
telecommunications company that has access to a Ka-band license with which it
intends to provide satellite based multi-channel, broadband data and video
services in North America. The Company has the right to appoint two of the five
directors of the manager of Miraxis. Additionally, the Company entered into a
management support agreement with Miraxis under which the Company's current
Chief Executive Officer and President provided certain services to Miraxis
through February 2003 in exchange for additional Series B Preferred Shares and
warrants being issued to the Company. In addition, in December 2002, the Company
acquired Series C Preferred Shares and warrants from Miraxis for approximately
$0.1 million.
In February 2003, the Company entered into a consulting agreement with
Miraxis pursuant to which Miraxis personnel provided services to the Company
through May 2003. In addition, Miraxis extended the management support agreement
whereby the Company's current Chief Executive Officer and President continued to
provide certain services to Miraxis through May 2003. In connection with these
agreements, the Company paid Miraxis approximately $40,000 but also received
additional Series C Preferred Shares and warrants.
In April 2003, the Company acquired additional Series C Preferred Shares
and warrants for approximately $40,000. Between June 2003 and September 2003,
the Company purchased promissory notes from Miraxis with an aggregate principal
amount of approximately $0.1 million. In November 2003, the promissory notes
were converted to Series D Preferred Shares. Currently, the Company holds
approximately 40% of the ownership interests of Miraxis. The Company's President
and Chief Executive Officer currently holds an approximate 1% interest in
Miraxis.
Miraxis License Holdings, LLC ("MLH"), an entity unaffiliated with Miraxis,
other than as described herein, holds the rights to certain orbital slots that
Miraxis has acquired access to in order to implement its business plan. Miraxis
issued 10% of its outstanding common equity on a fully diluted basis to MLH as
partial consideration for access to those slots. Prior to becoming affiliated
with the Company, its Chief Executive Officer and President acquired a 2%
interest in MLH. In addition, an affiliate of the Apollo Stockholders holds an
approximate 70% interest in MLH.
Employment Agreements
For a description of the employment agreements between the Company and
certain of its executive officers, please see the descriptions above in Item 11.
Executive Compensation under the heading "Employment Contracts and Change in
Control Arrangements."
Item 14. Principal Accounting Fees and Services
The firm of KPMG LLP, independent accountants, audited the financial
statements of the Company for the years ended December 31, 2003 and 2002.
Pursuant to a pre-approval policy adopted during 2003, the Audit Committee
approved all audit and audit related fees and $85,000 (or approximately 92%) of
the tax fees paid to the independent accounts during year ended December 31,
2003. Prior to the adoption of this policy, the Audit Committee only approved
the audit fee. The following table presents the aggregate fees billed by the
independent accountant for services provided to the Company for the fiscal years
ended December 31, 2003 and 2002.
2003 2002
------------- -------------
Audit fees (1) $200,000 $180,000
Audit related fees (2) 30,500 60,400
Tax fees (3) 92,200 144,250
All other fees -- --
------------- -------------
$322,700 $384,650
============= =============
(1) Audit fees consisted of professional services rendered for the audit of
the Company's annual financial statements and the reviews of the
financial statements included in the Company's Forms 10-Q.
(2) Audit related fees for the year ended December 31, 2003 consisted of fees
paid for accounting and auditing consultation services and the review of
a Company Form 8-K filing. For the year ended December 31, 2002, audit
related fees consisted of fees paid accounting and auditing consultation
services, the review of and consent issued in connection with the
Company's Form S-3 and audits of the Company's employee benefit plan.
(3) Tax fees consisted primarily of assistance related to tax compliance and
reporting.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following is a list of certain documents filed as a part of this
report:
(1) Financial Statements of the Registrant.
(i) Report of Independent Auditors.
(ii) Consolidated Balance Sheets as of December 31, 2003 and
2002.
(iii) Consolidated Statements of Operations for the years
ended December 31, 2003, 2002 and 2001.
(iv) Consolidated Statements of Cash Flows for the years
ended December 31, 2003, 2002 and 2001.
(v) Consolidated Statements of Changes in Stockholders'
Equity (Deficit) for the years ended December 31, 2003,
2002 and 2001.
(vi) Notes to Consolidated Financial Statements.
(vii) Schedule II - Valuation and Qualifying Accounts.
All other schedules specified in Item 8 or Item 15(d) of Form 10-K are
omitted because they are not applicable or not required, or because the required
information is included in the Financial Statements or notes thereto.
(b) Reports on Form 8-K. The following Current Reports on Form 8-K were
filed with the Securities and Exchange Commission during the quarterly
period ending December 31, 2003:
On December 23, 2003, the Company filed a report on Form 8-K announcing
the termination of the definitive purchase agreement to acquire equity
of Verestar, Inc.
(c) The following sets forth those exhibits filed pursuant to Item 601 of
Regulation S-K.
Exhibit
Number Description
------- -----------
2.1 -- Merger Agreement and Plan of Reorganization, dated as of April
8, 1998, by and among ICC Technologies, Inc., RareMedium
Acquisition Corp., Rare Medium, Inc. and the Founding
Stockholders named therein ("Rare Medium Merger Agreement") was
filed as Exhibit 2.1 to the Company's Current Report on Form 8-K
dated April 15, 1998 and is hereby incorporated herein by
reference.
2.2 -- Stock Purchase Agreement, dated as of August 18, 2003, between
Rare Medium Group, Inc. and Arris International, Inc. was filed
as Exhibit 2.1 to the Company's Current Report on Form 8-K filed
September 3, 2003 and is hereby incorporated herein by
reference.
2.3 -- Securities Purchase Agreement, dated as of August 29, 2003, by
and among the Company, American Tower Corporation, Verestar
Manager, LLC, and Verestar, Inc., was filed as Exhibit 2.2 to
the Company's Current Report on Form 8-K filed September 3, 2003
and is hereby incorporated herein by reference.
3.1.1 -- Restated Certificate of Incorporation of the Company which was
filed as Exhibit 3.1.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003, and is
hereby incorporated herein by reference.
3.1.2 -- Certificate of Amendment, dated July 17, 2002, to the Restated
Certificate of Incorporation of the Company which was
filed as Exhibit 3.1.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003, and is
hereby incorporated herein by reference.
3.1.3 -- Certificate of Ownership and Merger, dated September 23, 2003,
merging SkyTerra Communications, Inc. into Rare Medium Group,
Inc. which was filed as Exhibit 3.1.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
2003, and is hereby incorporated herein by reference.
3.2 -- Amended and Restated By-Laws of the Company, was filed as
Exhibit 3.2 to the Company's Form 10-K for the year ended
December 31, 1999, and is hereby incorporated herein by
reference.
10.1 -- Employment Agreement between the Company and Glenn S. Meyers,
dated April 14, 1998, which was filed as Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1998, and is hereby incorporated herein by reference.
10.2 -- The Company's Incentive Stock Option Plan, as amended, which was
filed as Exhibit 4(g) to the Company's Registration Statement on
Form S-8, No. 33-85636, filed on October 26, 1994, and is hereby
incorporated herein by reference.
10.3 -- The Company's Nonqualified Stock Option Plan as amended and
restated, which was filed as Exhibit C to the Company's
Definitive Proxy Statement dated November 18, 1994, for
Stockholders Meeting held December 15, 1994, and is hereby
incorporated herein by reference.
10.4 -- The Company's Equity Plan for Directors is hereby incorporated
herein by reference from ICC's Definitive Proxy Statement dated
November 18, 1994, for Stockholders Meeting held December 15,
1994.
10.5 -- The Company's 1998 Long-Term Incentive Plan was filed as
Appendix I to the Company's Definitive Proxy Statement dated
February 17, 1999, for the Stockholders Meeting held March 16,
1998, and is hereby incorporated herein by reference.
10.6 -- The Company's Amended and Restated Equity Plan for Directors,
which was filed as Exhibit 10.22 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1998, and is hereby
incorporated herein by reference.
10.7 -- Amended and Restated Securities Purchase Agreement, dated as of
June 4, 1999, among the Company, Apollo Investment Fund IV,
L.P., Apollo Overseas Partners IV, L.P. and AIF/RRRR LLC, which
was filed as Exhibit 10.1 to the Company's Current Report on
Form 8-K filed on June 21, 1999, and is hereby incorporated
herein by reference.
10.8 -- Form of Series 1-A Warrant of the Company, which was filed as
Exhibit 4.3 to the Company's Current Report on Form 8-K filed on
June 21, 1999, and is hereby incorporated herein by reference.
10.9 -- Form of Series 2-A Warrant of the Company, which was filed as
Exhibit 4.5 to the Company's Current Report on Form 8-K filed on
June 21, 1999, and is hereby incorporated herein by reference.
10.10 -- Pledge, Escrow and Disbursement Agreement, dated as of June 4,
1999, among the Company, Apollo Investment Fund IV, L.P., and
The Chase Manhattan Bank, which was filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K filed on June 21, 1999, and
is hereby incorporated herein by reference.
10.11 -- Form of Stock Option Agreement, dated April 15, 1998, by and
between the Company and Glenn S. Meyers, which was filed as
Exhibit 4(e) to the Company's Form S-8 filed on April 23, 1999,
and is hereby incorporated herein by reference.
10.12 -- The Company's Amended and Restated 1998 Long-Term Incentive
Plan, which was filed as Exhibit 4(d) to the Company's Form S-8
filed on November 3, 2000, and is hereby incorporated herein by
reference.
10.13 -- Amended and Restated Investment Agreement, dated as of October
12, 2001, by and among Motient Corporation, Mobile Satellite
Ventures LLC, TMI Communications and Company, Limited
Partnership, MSV Investors, LLC and the other investors named
therein, which was filed as Exhibit 99.1 to the Company's
Current Report on Form 8-K dated December 3, 2001 and is
incorporated herein by reference.
10.14 -- Form of Stockholders' Agreement of Mobile Satellite Ventures GP
Inc., which was filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K dated December 3, 2001 and is incorporated
herein by reference.
10.15 -- Form of Limited Partnership Agreement of Mobile Satellite
Ventures LP, which was filed as Exhibit 99.3 to the Company's
Current Report on Form 8-K dated December 3, 2001 and is
incorporated herein by reference.
10.16 -- Form of Convertible Note of Mobile Satellite Ventures LP in the
principal amount of $50 million, issued to MSV Investors, LLC,
which was filed as Exhibit 99.4 to the Company's Current Report
on Form 8-K dated December 3, 2001 and is incorporated herein by
reference.
10.17 -- Amendment to Employment Agreement, dated as of February 15,
2001, between the Company and Craig C. Chesser, which was filed
as exhibit 10.1 to the Company's Form 10-Q for the period ended
March 31, 2001 and is hereby incorporated by reference.
10.18 -- Amendment to Employment Agreement, dated as of February 15,
2001, between the Company and Michael A. Hultberg, which was
filed as exhibit 10.2 to the Company's Form 10-Q for the period
ended March 31, 2001 and is hereby incorporated by reference.
10.19 -- Amendment to Employment Agreement, dated as of February 15,
2001, between the Company and Robert C. Lewis, which was filed
as exhibit 10.3 to the Company's Form 10-Q for the period ended
March 31, 2001 and is hereby incorporated by reference.
10.20 -- Investment Agreement, dated as of April 2, 2002, between the
Company and the Apollo Stockholders, which was filed as Exhibit
99.2 to the Company's Current Report filed on Form 8-K, filed on
April 4, 2002, and is hereby incorporated by reference.
10.21 -- Stipulation of Settlement in the matter In Re Rare Medium Group,
Inc. Shareholders Litigation, Consolidated C.A. No. 18879 NC,
which was filed as Exhibit 99.3 to the Company's Current Report
on Form 8-K, filed on April 4, 2002, and is hereby incorporated
by reference.
10.22 -- Senior Indebtedness Note in the amount of $19.0 million, dated
May 1, 2002, issued by MVH Holdings, Inc. to the Company which
was filed as Exhibit 10.3 to the Company's Form 10-Q for the
period ended June 30, 2002 and is hereby incorporated by
reference.
10.23 -- Employment Agreement, dated May 23, 2002, between the Company
and Jeffrey A. Leddy which was filed as Exhibit 10.4 to the
Company's Form 10-Q for the period ended June 30, 2002 and is
hereby incorporated by reference.
10.24 -- Stock Option Agreement, dated October 17, 2002, between the
Company and Glenn S. Meyers which was filed as Exhibit 10.28 to
the Company's Form 10-K for the year ended December 31, 2002 and
is hereby incorporated herein by reference.
10.25 -- Note Purchase and Revolving Credit Agreement, dated August 29,
2003, between the Company and Verestar, Inc. which was filed as
Exhibit 10.1 to the Company's Current Report filed on Form 8-K,
filed on September 3, 2003, and is hereby incorporated by
reference.
10.26 -- Amended and Restated Employment Agreement, effective as of
January 1, 2004, between the Company and Jeffrey A. Leddy which
was filed as Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003, and is
hereby incorporated by reference.
21 -- Subsidiaries of the Company are Electronic System Products,
Inc., an Illinois corporation; Rare Medium, Inc., a New York
corporation; Notus Communications, Inc., a Georgia corporation;
and MSV Investors Holdings, Inc., a Delaware corporation.
23.1 -- Consent of KPMG LLP, Independent Auditors which was filed as
Exhibit 23.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, and is hereby incorporated
by reference.
23.2 -- Independent Auditors' Report on Schedule which was filed as
Exhibit 23.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, and is hereby incorporated
by reference.
23.3 -- Consent of KPMG LLP, Independent Auditors.
31.1 -- Certification of Jeffrey A. Leddy, Chief Executive Officer and
President of the Company, required by Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (regarding the Annual
Report on Form 10-K for the fiscal year ended December 31, 2003)
which was filed as Exhibit 31.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2003, and is
hereby incorporated by reference.
31.2 -- Certification of Craig J. Kaufmann, Controller and Treasurer of
the Company, required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (regarding the Annual Report on Form
10-K for the fiscal year ended December 31, 2003) which was
filed as Exhibit 31.2 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2003, and is hereby
incorporated by reference.
31.3 -- Certification of Jeffrey A. Leddy, Chief Executive Officer and
President of the Company, required by Rule 13a-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (regarding Amendment No.1
on Form 10-K/A for the fiscal year ended December 31, 2003).
31.4 -- Certification of Craig J. Kaufmann, Controller and Treasurer of
the Company, required by Rule 13a-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (regarding Amendment No.1 on Form
10-K/A for the fiscal year ended December 31, 2003).
32.1 -- Certification of Jeffrey A. Leddy, Chief Executive Officer and
President of the Company, Pursuant to 18 U.S.C Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 which was filed as exhibit 32.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2003,
and is hereby incorporated by reference.
32.2 -- Certification of Craig J. Kaufmann, Controller and Treasurer of
the Company, Pursuant to 18 U.S.C Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 which
was filed as exhibit 32.2 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2003, and is hereby
incorporated by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, this Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SKYTERRA COMMUNICATIONS, INC.
Date: April 29, 2004 By: /s/ JEFFREY A. LEDDY
--------------------
Name: Jeffrey A. Leddy
Title: Chief Executive Officer and President
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, thereunto duly authorized.
Signature Title Date
--------- ----- ----
/s/ JEFFREY A. LEDDY Chief Executive Officer and President April 29, 2004
-------------------- (Principal Executive Officer and
Jeffrey A. Leddy Principal Financial Officer)
/s/ CRAIG J. KAUFMANN Controller and Treasurer (Principal April 29, 2004
--------------------- Accounting Officer)
Craig J. Kaufmann
/s/ ANDREW D. AFRICK Director April 29, 2004
--------------------
Andrew D. Africk
/s/ MICHAEL S. GROSS Director April 29, 2004
--------------------
Michael S. Gross
/s/ JEFFREY M. KILLEEN Director April 29, 2004
----------------------
Jeffrey M. Killeen
/s/ MARC J. ROWAN Director April 29, 2004
-----------------
Marc J. Rowan
/s/ WILLIAM F. STASIOR Director April 29, 2004
----------------------
William F. Stasior
Exhibit 31.3
CERTIFICATIONS
I, Jeffrey A. Leddy, certify that:
1. I have reviewed this Amendment No. 1 on Form 10-K/A of SkyTerra
Communications, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
Date: April 29, 2004 By: /s/ JEFFREY A. LEDDY
------------------------------------
Jeffrey A. Leddy
Chief Executive Officer and President
(Principal Executive Officer and
Principal Financial Officer)
Exhibit 31.4
CERTIFICATIONS
I, Craig J. Kaufmann, certify that:
1. I have reviewed this Amendment No. 1 on Form 10-K/A of SkyTerra
Communications, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report.
Date: April 29, 2004 By: /s/ CRAIG J. KAUFMANN
-------------------------
Craig J. Kaufmann
Controller and Treasurer
(Principal Accounting Officer)
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of SkyTerra Communications, Inc.:
We consent to incorporation by reference in the registration statements
Nos. 33-37036, 33-37037, 33-85634, 33-85636, 33-89122, 33-89124, 333-76957 and
333-49290 on Form S-8 of our reports dated March 29, 2004 with respect to the
consolidated balance sheets of SkyTerra Communications, Inc. and subsidiaries as
of December 31, 2003 and 2002, and the related consolidated statements of
operations, changes in stockholders' equity (deficit), and cash flows for each
of the years in the three-year period ended December 31, 2003, and with respect
to the related financial statement schedule, which reports are incorporated by
reference in the December 31, 2003 annual report on Form 10-K/A Amendment
No. 1 of SkyTerra Communications, Inc.
/s/ KPMG LLP
New York, New York
April 29, 2004