AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1998
REGISTRATION NO. 333-12619
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-3
(FORMERLY FORM S-1)
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HYPERION TELECOMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 4813 25-1669404
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
MAIN AT WATER STREET
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
DANIEL R. MILLIARD, PRESIDENT
HYPERION TELECOMMUNICATIONS, INC.
MAIN AT WATER STREET
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
CARL E. ROTHENBERGER, JR., ESQUIRE
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
21ST FLOOR, 301 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219
(412) 562-8826
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
<PAGE>
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROEPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 12, 1998
Prospectus
HYPERION TELECOMMUNICATIONS, INC.
329,000 Warrants to purchase an aggregate of 1,993,638 shares of Class B Common
Stock and 1,993,638 shares of Class B Common Stock ($.01 par value) issuable
upon exercise of 329,000 Warrants
This Prospectus is being used in connection with the offering from time
to time by certain holders (the "Selling Securityholders") of warrants (the
"Warrants"), each to purchase 6.06 shares of Class B Common Stock, $.01 par
value per share (the "Class B Common Stock"), of Hyperion Telecommunications,
Inc., a Delaware corporation (together with its subsidiaries, the "Company" or
"Hyperion"), at an exercise price of $0.00308 per share (subject as to both the
number of shares and the exercise price to anti-dilution provisions), and the
shares of Class B Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares"). This Prospectus may also be used by the Company in connection
with the issuance from time to time of the Warrant Shares. The Warrants may be
exercised at any time after the earlier to occur of (i) May 1, 1997 or (ii) in
the event of a Change in Control (as defined), the date the Company mails notice
thereof to the holders of the Warrants. Unless exercised, the Warrants will
expire on April 1, 2001.
The Warrants and the Warrant Shares may be offered by the Selling
Securityholders in transactions in the over-the-counter-market at prices
obtainable at the time of sale or in privately negotiated transactions at prices
determined by negotiation. The Selling Securityholders may effect such
transactions by selling the Warrants or the Warrant Shares to or through
securities broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling
Securityholders and/or the purchasers of the Warrants or the Warrant Shares for
whom such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation as to a particular broker-dealer might be in excess of
customary commissions). Additionally, agents or dealers may acquire Warrants,
Warrant Shares or interest therein as a pledgee and may, from time to time,
effect distribution of the Warrants or Warrant Shares or interest in such
capacity. See "The Selling Securityholders" and "Plan of Distribution." The
Selling Securityholders, the broker-dealers through whom sales of the Warrants
or Warrant Shares are made and any agent or dealer who distributes Warrants or
Warrant Shares acquired as pledgee may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act") and any
profits realized by them on the sale of the Warrants or Warrant Shares may be
considered to be underwriting discounts.
The Company will receive proceeds from the exercise of the Warrants.
Except for the sale of the Warrant Shares upon exercise of the Warrants, the
Company is not selling any of the Warrants or the Warrant Shares and will not
receive any of the proceeds from the sale of the Warrants or the Warrant Shares
by the Selling Securityholders. The cost of registering the Warrants and the
Warrant Shares is being borne by the Company.
The Company has not and does not currently intend to apply for the
listing of the Warrants or the Warrant Shares on any securities exchange or
quotation through the Nasdaq National Market. The Class A Common Stock, $.01 par
value per share (the "Class A Common Stock") of Hyperion, into which the Class B
Common Stock is convertible on a one-for-one basis, is quoted on the Nasdaq
National Market under the symbol "HYPT". The closing price of the Class A Common
Stock on June 11, 1998 was $15.25 per share.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 10.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
The date of this Prospectus is June __, 1998.
AVAILABLE INFORMATION
In accordance with Sections 13(a) and 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), Hyperion is subject to the
information requirements of the Exchange Act and files reports and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports and other information may be inspected and copied at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and will also be available for inspection
and copying at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048, and the Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661.
The Company has filed with the Commission in Washington, D.C. a
registration statement under the Securities Act with respect to the securities
offered by this Prospectus. This Prospectus, which is part of the registration
statement, does not contain all of the information set forth in the registration
statement and the exhibits and schedules thereto. For further information with
respect to the Company, reference is made to such registration statement and the
exhibits and schedules filed as part thereof. The registration statement and the
exhibits and schedules thereto filed with the Commission may be inspected
without charge at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and will also
be available for inspection and copying at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048, and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661.
Copies of all or any portion of the registration statement may be
obtained from the Public Reference Section of the Commission upon payment of
certain prescribed fees. Electronic registration statements made through the
Electronic Data Gathering, Analysis and Retrieval system are publicly available
through the Commission's Web site (http://www.sec.gov), which is maintained by
the Commission and which contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference: (a) the
Annual Report on Form 10-K for the fiscal year ended March 31, 1997; (b) the
Quarterly Report on Form 10-Q for the period ended June 30, 1997, the Quarterly
Report on Form 10-Q for the period ended September 30, 1997, the Quarterly
Report on Form 10-Q for the period ended December 31, 1997; (c) Hyperion's
Current Reports on Form 8-K for certain events dated June 20, 1997, June 30,
1997, August 13, 1997, August 14, 1997, August 27, 1997, October 2, 1997,
October 9, 1997 and May 4, 1998; and (d) the descriptions of the Company's
capital stock contained in the registration statement filed under Section 12(g)
of the Exchange Act on April 21, 1998, including any amendments or reports for
the purpose of updating such descriptions.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the respective date of filing of each such document.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
<PAGE>
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. These documents are available upon
request from Edward E. Babcock, Jr., Vice President, Finance, Hyperion
Telecommunications, Inc., Main at Water Street, Coudersport, PA 16915, telephone
number 814-274-9830.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto of the
Company appearing elsewhere in, or incorporated into, this Prospectus.
Prospective investors should consider carefully the information under "Risk
Factors."
THE COMPANY
Hyperion is a leading facilities-based provider of local
telecommunications services with state-of-the-art fiber optic networks located
in regionally clustered markets primarily within the eastern half of the United
States. As of March 31, 1998, Hyperion had 22 networks (the "Existing
Networks"), including four networks under construction. The Existing Networks
serve 46 cities and include approximately 5,363 route miles of fiber optic
cable. In addition, as of March 31, 1998, the Company's 18 networks in operation
were connected to 1,909 buildings and the Company's facilities were collocated
in 113 local exchange carrier ("LEC") central offices. Management believes that
the Company's Existing Networks represent an addressable market opportunity of
approximately 6.8 million business access lines or approximately $13.3 billion
annually, substantially all of which is currently serviced by incumbent LECs and
interexchange carriers ("IXCs"). This addressable market estimate does not
include the enhanced data services market which the Company has entered, or the
Internet access market which it plans to enter in the near future.
Over the eighteen months following May 1, 1998, the Company plans to
complete development and construction of 14 new networks serving 29 additional
cities (the "New Networks") with the goal of expanding the Company's regionally
focused networks and further facilitating the regional interconnection of
certain of its markets. The Company believes that with the addition of these New
Networks, it will have a total addressable market opportunity of approximately
13.2 million business access lines or approximately $26.0 billion annually. Once
fully constructed, management believes the Company's Existing Networks and New
Networks will include at least 8,100 route miles of fiber optic cable and will
be connected to at least 210 LEC central offices. The Company has installed in
17 of its Existing Networks, and will install in all of its networks, a standard
switching platform based on the Lucent Technologies ("Lucent") 5ESS switch
technology.
In early 1997, Hyperion began to implement a business strategy focused
on selling communications services directly to targeted business end users in
addition to other telecommunications service providers. As part of this
strategy, the Company accelerated the installation of its Lucent 5ESS-based
standard switching platform in its Existing Networks and increased the size of
its direct sales force and customer service organization. In addition, the
Company has begun to use resold services and unbundled network elements to
provide rapid market entry and to develop its customer base in advance of
capital deployment in its Existing Networks and New Networks. The Company has
experienced significant growth in the sale of access lines from approximately
7,000 as of March 31, 1997 to approximately 41,500 as of March 31, 1998. Of the
current access lines sold, approximately 81% are provisioned using Company owned
networks (which lines are referred to as "on-net"), though this percentage will
decline as the Company continues to offer switched services on an unbundled
network element and total service resale basis. However, the Company believes it
will provision a majority of its access lines on its own networks for the
foreseeable future.
Hyperion intends to offer a complete range of telecommunications
services to its customers in all of its markets. The Company's current service
offerings include local switched dialtone, long distance, dedicated access and
enhanced services such as frame relay, high speed Internet access and video
conferencing. The Company also plans to become an Internet Service Provider
("ISP") in all of its markets, and expects to provide such services in a
majority of its markets during 1998. The Company has begun selling long distance
services pursuant to a resale agreement with IXC Communications, Inc. ("IXCC")
and expects to begin offering facilities-based long distance services through
the regional interconnection of the Company's networks in the near future.
Hyperion's targeted customers include medium and large businesses,
governmental and educational end users, and other telecommunications service
<PAGE>
providers, such as value added resellers ("VARs"), ISPs and IXCs. As of March
31, 1998, the Company served customers through a dedicated sales force of
approximately 128 highly trained professionals focused on selling the Company's
portfolio of service offerings. The Company expects to increase its marketing
efforts by doubling the size of its current sales force during fiscal 1999.
Hyperion's Existing Networks have typically been developed by
partnering with a local cable operator or utility provider (the "Local Partner")
who generally owns or controls extensive conduits and rights-of-way. In all but
three of the Company's Existing Networks, Hyperion retains at least a 50% equity
stake in the respective Operating Companies. In all of its Operating Companies,
Hyperion is responsible for the design, management and operation of the
Operating Companies' networks pursuant to management agreements. As of December
31, 1997, as adjusted for the recent purchase of certain partners' interests
(see "--Recent Developments"), the Company and its partners have invested $401.6
million in the gross property, plant and equipment of the Company, its networks
and the Company's Network Operations and Control Center (the "NOCC"), including
the Company's investment in Telergy, Inc., and the Company's proportionate share
of this gross property, plant and equipment investment was approximately $305.1
million.
The Company has increased, and intends to continue to increase, its
ownership interests in Operating Companies when it can do so on attractive
economic terms. To date, this goal has been facilitated by the substantial
completion of a number of Hyperion's networks, along with the desire of certain
Local Partners to reduce their telecommunications investments and focus on their
core cable or utility operations. For Operating Companies in which the Company
does not own a majority interest, partnership agreements generally provide for
rights of first refusal or buy/sell arrangements enabling the Company to have an
opportunity to acquire additional equity interests or sell its equity interests
in the network. Since September 1997, the Company has increased its ownership
interest to 100% in Operating Companies in seven of its markets. As a result,
since December 31, 1995, the Company's weighted average ownership interest
(based on gross property, plant and equipment) in its Operating Companies has
increased to 76.0% from 44.0%.
The location of the Company's executive offices is Main at Water
Street, Coudersport, Pennsylvania 16915, and its telephone number is (814)
274-9830.
Ownership of the Company and the Operating Companies
Hyperion is a 66.0% owned subsidiary, on a fully diluted basis as of
June 5, 1998, of Adelphia Communications Corporation ("Adelphia"). See "--Recent
Developments" and "Description of Capital Stock." As of March 31, 1998, Adelphia
was the seventh largest cable television company in the United States and, as of
March 31, 1998, owned or managed cable television systems that served
approximately 1.97 million subscribers in 12 states. In addition, senior
executives of the Company owned 6.7% of the Common Stock of the Company, on a
fully diluted basis as of May 31, 1998. As of March 31, 1998, the Company's 22
Existing Networks were owned through (i) eight partnerships or limited liability
companies with Local Partners (together with the entities described in clause
(iv) below, the "Operating Partnerships"), encompassing nine networks, (ii) 10
wholly owned subsidiaries of the Company, encompassing 11 networks, (iii) one
corporation, encompassing one network, in which the Company is a minority
shareholder and (iv) one company, encompassing one network, in which the Company
is the majority equityholder (the entities described in clauses (ii) and (iii)
are collectively referred to as the "Operating Corporations," and the Operating
Corporations and the Operating Partnerships are collectively referred to as the
"Operating Companies"). The Company is responsible for the network design,
management, billing and operation of the Operating Companies, for which it
receives management fees.
The following is an overview of Hyperion's networks and respective
ownership interests as of March 31, 1998.
<PAGE>
<TABLE>
<CAPTION>
Actual or
Expected Date of Hyperion Local Partner
Company Networks Operation (a) Interest
Northeast Cluster
<S> <C> <C> <C>
Vermont 11/94 100.0% --
Syracuse, NY 8/92 100.0 --
Buffalo, NY 1/95 100.0 --
Albany, NY 12/98 100.0 --
Mid-Atlantic Cluster
Charlottesville, VA 11/95 100.0 --
Scranton/Wilkes-Barre, PA 5/98 100.0 --
Harrisburg, PA 4/95 100.0 --
Morristown, NJ 7/96 100.0 --
New Brunswick, NJ 11/95 100.0 --
Philadelphia, PA 8/96 50.0 PECO Energy
Allentown/Bethlehem/Easton/Reading, PA ("ABER") 5/98 50.0 PECO Energy
York, PA 5/97 50.0 Susquehanna Cable
State College/Altoona, PA 10/98 50.0 Allegheny Energy
Richmond, VA 9/93 37.0 MediaOne
Mid-South Cluster
Lexington, KY 6/97 100.0 --
Louisville, KY 3/95 100.0 --
Nashville, TN 11/94 95.0 InterMedia Partners
Baton Rouge, LA 12/97 50.0 Entergy
Jackson, MS 12/97 50.0 Entergy
Little Rock, AR 12/97 50.0 Entergy
Other Networks
Wichita, KS 9/94 49.9 Gannett
Jacksonville, FL 9/92 20.0 MediaOne
Weighted Average Ownership (b) -- 76.0% --
<FN>
(a) Refers to the date on which (i) the network is connected to at least one
IXC POP, (ii) the network is capable of accepting traffic from IXCs and end
users, (iii) the Company's central office is fully functional and (iv) the
initial network SONET fiber ring has been completed.
(b) Based upon gross property, plant and equipment of the Company and the
Operating Companies as of December 31, 1997, as adjusted for the purchase
of certain partners' interests pursuant to the Rollups.
</FN>
</TABLE>
Recent Developments
Initial Public Offering of Class A Common Stock and Related
Transactions. On May 8, 1998, the Company issued and sold 10,000,000 shares of
Class A Common Stock at a purchase price of $16.00 per share (less underwriting
discounts and commissions of $1.00 per share) to a syndicate of underwriters
represented by Smith Barney Inc., Credit Suisse First Boston Corporation and
Nationsbanc Montgomery Securities LLC (the "U.S. Offering"). Simultaneously
therewith, the Company issued and sold an additional 2,500,000 shares of Class A
Common Stock at a purchase price of $16.00 per share (less underwriting
discounts and commissions of $1.00 per share) to a syndicate of underwriters
managed by Smith Barney Inc., Credit Suisse First Boston (Europe) Limited and
Nationsbanc Montgomery Securities LLC (the "International Offering"). The U.S.
<PAGE>
Offering and the International Offering (together, the "Offerings") netted
aggregate proceeds to the Company of approximately $187.5 million.
Simultaneously with the closing of the Offerings, the Company issued
and sold an additional 3,324,001 shares of Class A Common Stock to Adelphia at a
purchase price of $15.00 per share (or an aggregate of approximately $49.9
million). In addition, at such closing, the Company issued 3,642,666 shares of
Class A Common Stock to Adelphia in exchange for certain of the Company's
indebtedness and payables owed to Adelphia at a purchase price of $15.00 per
share (or an aggregate of $54.6 million). For information regarding other
transactions related to the Offerings, see "Description of Capital Stock".
On June 5, 1998, the Company issued and sold 350,000 shares of Class A
Common Stock to the underwriters of the U.S. Offering at a purchase price of
$16.00 per share (less underwriting discounts and commissions of $1.00 per
share). Such shares were purchased pursuant to an over-allotment option
available to the underwriters. The net proceeds to the Company upon the closing
of the exercise of the over-allotment option totaled approximately $5,250,000.
Increased Network Ownership. On September 12, 1997 and February 12,
1998, the Company consummated purchase agreements with former Local Partners,
Time Warner Entertainment Advance/Newhouse ("TWEAN"), Tele-Communications, Inc.
and Lenfest Telephony, Inc., thereby increasing the Company's ownership interest
in seven of its networks to 100% (collectively, the "Rollups"). As a result of
the Rollups, the Company's weighted average ownership in its networks, based
upon gross property plant and equipment, increased to 76.0%. The Rollups are
consistent with the Company's goal to own at least a 50% interest in each of its
Operating Companies and to dispose of its interests in those in which acquiring
a controlling interest is not economically attractive. The Company may consider
similar transactions from time to time in its other markets.
Completed Strategic Agreements. The Company has recently completed a
number of strategic agreements that expand the number of markets served by the
Company. In April 1998, the Company entered into agreements with Metromedia
Fiber Network Services, Inc. to lease long haul fiber from Washington D.C. to
Stamford, CT. On December 1, 1997, the Company entered into an agreement with
Allegheny Energy to provide communications services over networks to be
constructed in State College and Altoona, Pennsylvania. Also in December 1997,
the Company initiated service on three networks pursuant to an agreement with
Entergy Corporation ("Entergy") whereby the Company and Entergy each have a 50%
stake in networks located in Little Rock, Arkansas, Jackson, Mississippi, and
Baton Rouge, Louisiana. In addition, in June 1997, the Company entered into
agreements (collectively, the "MCI Preferred Provider Agreement") with MCImetro
Access Transmission Services, Inc. (together with its affiliate, MCI
Communications, Inc., "MCI") designating the Company as MCI's preferred provider
of end user dedicated access circuits for new MCI customers and of end users
dedicated access circuits resulting from conversions from the incumbent LEC in
the Company's markets. In addition, Hyperion has a right of first refusal to
provide MCI all new dedicated local network access circuits in the Company's
markets. The Company also granted certain warrants to MCI to purchase Class A
Common Stock (the "MCI Warrant") which warrant was recently purchased by
Adelphia from MCI in connection with the transactions consummated with the
Offerings. For further information with respect to the MCI Warrant and related
matters, see "Description of Capital Stock".
Completed Recent Financings. On October 9, 1997, Hyperion sold $200.0
million aggregate liquidation preference (the "Preferred Stock Offering") of 12
7/8% Senior Exchangeable Redeemable Preferred Stock due 2007 (the "Preferred
Stock") and on August 27, 1997, the Company sold $250.0 million aggregate
principal amount (the "Senior Secured Note Offering") of 12 1/4% Senior Secured
Notes due 2004 (the "Senior Secured Notes"). The combined net proceeds from
these offerings were approximately $438.7 million, with $83.4 million from the
Senior Secured Note Offering being placed in an escrow account to provide for
payment of the first six scheduled interest payments on the Senior Secured
Notes, and the remainder of the proceeds used to fund capital expenditures, the
acquisition of increased ownership interests in certain networks, the continued
expansion of its networks and for general corporate and working capital
purposes.
On December 31, 1997, the Company consummated an agreement for a $24.5
million long term lease facility with AT&T Capital Corporation (the "AT&T Lease
<PAGE>
Agreement"). The lease facility provides financing for certain of the Operating
Companies' switching equipment and includes the sale and leaseback of certain
switching equipment, for which the Company received $14.9 million.
Participation in LMDS Auction. On March 25, 1998, the Federal
Communications Commission ("FCC") completed the auction of licenses for Local
Multipoint Distribution Service ("LMDS"). The Company, through a limited
partnership in which it is a 49.9% limited partner, was the successful bidder at
a net cost of $25.6 million for 232 31-GHz licenses, which cover approximately
38% of the nation's population - in excess of 90 million people in the eastern
half of the United States. The Company funded $10 million of such purchase in
January 1998, and is committed to provide further funding to consummate such
purchase upon the final granting of such licenses by the FCC. LMDS is a fixed
broadband point-to-multipoint service which the FCC anticipates will be used for
the deployment of wireless local loop, high-speed data transfer and video
broadcasting services. The Company plans to use such spectrum for "last-mile"
connectivity in certain of its markets, and believes the spectrum to be highly
complementary to its fiber-based systems. There can be no assurances that LMDS
spectrum will provide a cost-effective means to connect to end user locations.
<PAGE>
<TABLE>
<CAPTION>
Summary Description of Warrants
<S> <C>
Total Number of Warrants....................................329,000 Warrants, which, when exercised, currently entitle
the holders thereof to acquire an aggregate of
1,993,638 shares of Class B Common Stock of the Company.
Expiration of Warrants......................................The Warrants will automatically expire on April 1, 2001
(the "Expiration Date"). The Company will give notice
of expiration not less than 90 nor more than 120 days
prior to the Expiration Date to the registered holders
of the then outstanding Warrants. If the Company fails
to give such notice, the Warrants will not expire until
90 days after the Company gives such notice.
Exercise....................................................Each Warrant, when exercised, will entitle the holder
thereof to purchase 6.06 shares of the Class B Common Stock
at an exercise price of $0.00308 per share. The Warrants
are exercisable at any time on or after the earlier to occur
of (i) May 1, 1997 and (ii) in the event a Change of
Control occurs, the date the Company mails notice thereof
to holders of the Warrants. The number of shares of Class B
Common Stock for which, and the price per share at which,
a Warrant is exercisable are subject to adjustment upon the
occurrence of certain events, as provided in the warrant agreement
relating to the Warrants dated April 15, 1996 (the "Warrant
Agreement").
The Offering of Warrant Shares
Shares of Class B Common Stock to be Offered by Hyperion
Upon Exercise of the Warrants............................. 1,993,638(1)
Shares of Class B Common Stock to be Outstanding after
the Offering of Warrant Shares............................. 34,493,638(2)
Shares of Class A Common Stock Outstanding as of June 5,
1998....................................................... 21,291,079(3)
Use of Proceeds........................................... Any proceeds received by the Company upon exercise of
the Warrants will be used for general corporate
purposes.
<FN>
(1) As of June 5, 1998, assuming no exercise of the Warrants. Subject to
adjustment upon the occurrence of certain events, as provided in the
Warrant Agreement.
(2) As of June 5, 1998, assuming the exercise of all Warrants and no conversion
of the Warrant Shares into Class A Common Stock.
(3) To the Company's knowledge, as of June 5, 1998, approximately 113,713 Warrants
had been exercised for 689,101 shares of Class B Common Stock, of which 287,788
shares were converted in Class A Common Stock.
</FN>
</TABLE>
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider carefully the following risk factors in evaluating the
Company and its business before purchasing the Warrants or Warrant Shares
registered hereby.
Certain information included or incorporated by reference in this
Prospectus is forward-looking, such as information relating to the effects of
future regulation, future capital commitments and the effects of competition.
This includes statements regarding the intent, belief and current expectations
of the Company and its directors and officers. Such forward-looking information
involves important risks and uncertainties that could significantly affect
expected results in the future from those expressed in any forward-looking
statements made by, or on behalf of, the Company. These risks and uncertainties
include, but are not limited to, uncertainties relating to the Company's ability
to successfully market its services to current and new customers, access markets
on a nondiscriminatory basis, identify, design and construct fiber optic
networks, install cable and facilities (including switching electronics), and
obtain rights-of-way, building access rights and any required governmental
authorizations, franchises and permits, all in a timely manner, at reasonable
costs and on satisfactory terms and conditions, as well as risks and
uncertainties relating to general economic conditions, acquisitions and
divestitures, government and regulatory policies, the pricing and availability
of equipment, materials, and inventories, technological developments and changes
in the competitive environment in which the Company operates. Persons reading
this Prospectus are cautioned that such statements are only predictions and that
actual events or results may differ materially. In evaluating such statements,
readers should specifically consider the various factors which could cause
actual events or results to differ materially from those indicated by such
forward-looking statements.
Absence of a Public Market for the Warrants and Warrant Shares
The Warrants were issued by the Company as part of a private placement
of units in April 1996 (the "Private Placement"). Neither the Warrants nor the
Warrant Shares are listed on any securities exchange or for quotation through
the Nasdaq National Market. Accordingly, there can be no assurance as to the
liquidity of or the development of any market for the Warrants or the Warrant
Shares. The Company's Class A Common Stock is quoted on the Nasdaq National
Market under the symbol "HYPT".
Negative Cash Flow and Operating Losses; Limited History of Operations
The Company has experienced significant losses since its inception,
with operating losses of approximately $2.6 million, $3.6 million, $9.1 million,
$6.0 million and $12.7 million for the fiscal years ended March 31, 1995, 1996
and 1997 and the nine months ended December 31, 1996 and 1997, respectively. The
Company expects to continue to incur substantial operating losses in the
foreseeable future as it pursues its plans to expand its networks, service
offerings and customer base. There can be no assurance that such losses will not
continue indefinitely. The Company currently accounts for its ownership
interests in the Operating Companies in which it does not have majority
ownership interest using the equity method and, therefore, the Company's
consolidated financial statements include only the Company's pro rata share of
such Operating Companies' net losses as equity in net losses of joint ventures.
The Company was formed in October 1991 and, as of March 31, 1998, only
11 of its 18 operational networks had been in operation for more than 24 months
and four Existing Networks were not yet in operation. Prospective investors
therefore have limited historical financial information about the Company upon
which to base an evaluation of the Company's performance. The development of the
Company's businesses and the installation and expansion of its Existing Networks
and New Networks require significant expenditures, a substantial portion of
which are made before any revenues may be realized. Certain of the expenditures,
including marketing, sales and general and administrative costs, are expensed as
incurred, while certain other expenditures, including network design and
construction, negotiation of rights-of-way and costs to obtain legal and
regulatory approval, are deferred until the applicable network is operational.
The Company will continue to incur significant expenditures in connection with
the construction, acquisition, development and expansion of the Company's and
Operating Companies' networks, services and customer base.
<PAGE>
In light of the Company's limited operating history, its history of
significant operating losses and its expectation that it will continue to incur
significant expenses and operating losses for the foreseeable future, there can
be no assurance that the Company will be able to implement its growth strategy
or achieve or sustain profitability.
Significant Future Capital Requirements
Expansion of the Company's Existing Networks and services and the
development of New Networks and additional networks and services requires
significant capital expenditures. The Company's operations have required and
will continue to require substantial capital investment for (i) the installation
of electronics for switched services in the Company's networks, (ii) the
expansion and improvement of the Company's NOCC and Existing Networks and (iii)
the design, construction and development of New Networks. The Company plans to
make substantial capital investments and investments in Operating Companies in
connection with the installation of 5ESS switches or remote switching modules in
all of its Existing Networks and will install additional 5ESSs or remote
switching modules in each of the Company's future operational markets. To date,
the Company has installed switches in 17 of its Existing Networks and plans to
install in all of its New Networks a standard switching platform based on the
Lucent 5ESS switch technology. In addition, the Company intends to increase
spending on marketing and sales significantly in the foreseeable future in
connection with the expansion of its sales force and marketing efforts
generally. The Company estimates that it will require approximately $420 million
to fund anticipated capital expenditures, working capital requirements and
operating losses of the Company and investments in its Existing Networks and New
Networks through the end of 1999. The Company believes that it has sufficient
capital resources, including recent capital infusions, to fund the Company's
capital expenditures, working capital requirements, operating losses and pro
rata investments in the Operating Companies (exclusive of future increases in
ownership interests in the Operating Companies and the funds necessary to
acquire LMDS spectrum as a result of the LMDS Auction and any additional funds
allocated to the construction and deployment of associated facilities) through
mid-2000. However, there can be no assurance (i) that the Company's future cash
requirements will not vary significantly from those presently planned due to a
variety of factors including acquisition of additional networks, successful
bidding in the LMDS Auction, continued acquisition of increased ownership in its
networks and material variances from expected capital expenditure requirements
for Existing Networks and New Networks or (ii) that anticipated financings,
Local Partner investments and other sources of capital will become available to
the Company. Accordingly, there can be no assurance that the Company will not
seek to raise additional capital prior to the end of 1999. In addition, it is
possible that expansion of the Company's networks may include the geographic
expansion of the Company's existing clusters and the development of other new
markets not currently planned. The Company expects to continue to build new
networks in additional markets with utility partners, which have broader
geographic coverage and require higher capital outlays than those with cable
partners in the past. The Company also has funded the purchase of certain
partnership interests and expects to fund additional purchases of partnership
interests. See "--Risks Associated with Joint Ventures" and "Prospectus
Summary--Recent Developments."
The Company expects to fund its capital requirements through existing
resources, credit facilities and vendor financings at the Company and Operating
Company levels, internally generated funds, equity invested by Local Partners in
Operating Companies and additional debt or equity financings, as appropriate,
and expects to fund its purchase of partnership interests of Local Partners
through existing resources, internally generated funds and additional debt or
equity financings, as appropriate. There can be no assurance, however, that the
Company will be successful in generating sufficient cash flow or in raising
sufficient debt or equity capital on terms that it will consider acceptable, or
at all.
The expectations of required future capital expenditures are based on
the Company's current estimates. There can be no assurance that actual
expenditures will not significantly exceed current estimates or that the Company
will not accelerate its capital expenditure spending.
<PAGE>
Risk of New Service Acceptance by Customers
The Company is currently in the process of introducing a number of
services, primarily local exchange services, that the Company believes are
important to its long-term growth. The success of these services will be
dependent upon, among other things, the willingness of customers to accept the
Company as a new provider of such new telecommunications services. No assurance
can be given that such acceptance will occur, and the lack of such acceptance
could have a material adverse effect on the Company.
Expansion Risk; Additional Personnel
The Company is experiencing a period of rapid expansion which the
Company believes will accelerate in the foreseeable future. The operating
complexity of the Company, as well as the responsibilities of management
personnel, have increased as a result of this expansion. The Company's ability
to manage such growth effectively will require it to continue to expand and
improve its operational and financial systems and to expand, train and manage
its employee base. In addition, the Company and the Operating Companies intend
to significantly increase the hiring of additional sales and marketing
personnel. There can be no assurance that such new personnel will be
successfully integrated into the Company or the Operating Companies, as the case
may be, or whether a sufficient number of qualified personnel will be available
at all. The Company's inability to effectively manage its hiring of additional
personnel and expansion could have a material adverse effect on its business and
results of operations.
Holding Company Structure; Inability to Access Cash Flow
The Company is a holding company with substantially all of its
operations conducted through the Operating Companies, and the Company expects
that it may develop new networks and operations in the future through joint
ventures. In addition, as of March 31, 1998, 10 of the Company's 22 Existing
Networks were owned by Joint Ventures in which the Company owned 50% or less of
the equity interests, and future Joint Ventures may be developed in which the
Company will own less than 50% of the equity interests. Accordingly, the
Company's cash flow and, consequently, its ability to service its debt,
including the Senior Notes, the Senior Secured Notes, the Exchange Debentures
(as defined), if any, any other indebtedness and its obligations with respect to
the Preferred Stock, is dependent on the Company receiving its pro rata share of
the cash flow of the Operating Companies and the payment of funds by those
Operating Companies in the form of management fees, loans, dividends,
distributions or otherwise. The Operating Companies are separate and distinct
legal entities and have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the Senior Notes, the Senior Secured Notes, the
Preferred Stock or to make any funds available therefor, whether in the form of
loans, dividends, distributions or otherwise. Furthermore, the Company may be
unable to access its portion of the cash flow of certain of the Operating
Companies because it holds a 50% or less ownership interest in certain of such
entities and, therefore, does not have the requisite control to cause such
entities to make distributions or pay dividends to the partners or equity
holders. In addition, such entities will be permitted to incur indebtedness that
may severely restrict or prohibit the making of distributions, the payment of
dividends or the making of loans. See "--Risks Associated with Joint Ventures"
and "--Substantial Leverage."
Substantial Leverage
As of December 31, 1997, the Company's total amount of debt and
redeemable preferred stock outstanding was $722.7 million and the Company had a
stockholders' deficiency of $106.2 million. In addition, in each year since its
inception, despite increasing revenues, the Company's earnings have been
inadequate to cover its combined fixed charges and preferred stock dividends by
a substantial and increasing margin. Moreover, the Company anticipates that
earnings will be insufficient to cover combined fixed charges and preferred
stock dividends for the foreseeable future. Commencing on October 15, 2001,
semi-annual cash interest payments of $21.4 million will be due and payable on
the Company's 13% Senior Discount Notes due April 15, 2003 (the "Senior Notes"),
commencing on March 1, 1998, semi-annual cash payments of $15.3 million on the
Senior Secured Notes are due and payable, and commencing on October 15, 2002,
quarterly cash dividends of $12.2 million on the Preferred Stock (assuming that
all dividends prior to such date are paid in additional shares of Preferred
Stock) will become due and payable.
<PAGE>
Because the Company currently has, and anticipates that it will
continue to have, a substantial consolidated operating cash flow deficit, its
ability to (i) make cash interest payments on the Senior Notes commencing on
October 15, 2001 and to repay its obligations on the Senior Notes at maturity,
(ii) make cash interest payments on the Senior Secured Notes commencing on March
1, 1998, and to repay its obligations on the Senior Secured Notes at maturity
and (iii) make cash dividend payments on the Preferred Stock commencing on
October 15, 2002, and to redeem the Preferred Stock at maturity, will be
dependent on developing one or more sources of cash flow prior to the date on
which such cash payment obligations arise. To accomplish this, the Company may
seek to (i) refinance all or a portion of the Senior Notes, the Senior Secured
Notes and/or the Preferred Stock (or the debentures exchanged therefor,
including any such debentures issued in lieu of cash interest thereon, as the
case may be, the "Exchange Debentures"), (ii) sell all or a portion of its
interests in one or more of the Operating Companies, (iii) negotiate with its
current Local Partners to permit any excess cash generated by its Operating
Companies to be distributed to the partners rather than invested in the
businesses of such Operating Companies and/or (iv) invest in companies that will
make substantial cash distributions. There can be no assurance that (i) there
will be a market for the debt or equity securities of the Company in the future,
(ii) the Company will be able to sell assets in a timely manner or on
commercially reasonable terms or in an amount that will be sufficient to make
cash interest or dividend payments and to repay the Senior Notes, the Senior
Secured Notes and/or redeem the Preferred Stock (or repay the Exchange
Debentures, as the case may be) when due, (iii) the Company will be able to
persuade its Local Partners that cash generated by the operations of the
Operating Companies should be distributed to partners, members or shareholders
or (iv) the Company will be able to locate and invest in companies that will be
mature enough to make substantial cash contributions to the Company prior to the
time such payments are due.
Control by Principal Stockholder; Effect of Transfer of Class B Common Stock;
Potential Conflicts of Interest
Assuming no prior exercise of the Warrants, as of June 5, 1998,
Adelphia owned approximately 66.0%, on a fully diluted basis, of the Company
with an additional 6.7%, on a fully diluted basis, owned by Messrs. Milliard,
Drenning, Fajerski and Fowler, all of whom are senior executives of the Company.
Assuming no conversion of the Class B Common Stock into Class A Common Stock,
Adelphia owns 84.4% of the fully diluted Class B Common Stock of the Company,
which is entitled to ten votes per share, whereas the holders of Class A Common
Stock are entitled to one vote per share. There are no restrictions in the
Company's certificate of incorporation regarding the ability to transfer the
Class B Common Stock. See "Description of Capital Stock." As of June 5, 1998,
Adelphia controlled approximately 85.1% of the outstanding combined voting power
of both classes of Common Stock. Accordingly, Adelphia is able to control the
vote on corporate matters requiring stockholder approval, including, but not
limited to, electing directors, amending the Company's certificate of
incorporation and approving mergers or sales of substantially all of the
Company's assets. In addition, Adelphia will be able to transfer control of the
Company through the transfer of its Class B Common Stock to an unrelated third
party.
Through its ownership of the outstanding capital stock of the
Company, Adelphia has substantial influence over certain corporate transactions
of the Company, including its ability to enter into joint ventures and other
business relationships. As a result, the Company may be subject to possible
conflicts of interest arising from the relationship with Adelphia in connection
with the pursuit of business opportunities in the telecommunications industry.
Although certain officers and directors of the Company, who are also officers
and directors of Adelphia, have certain fiduciary obligations to the Company
under Delaware law, such officers and directors are in positions that may create
conflicts of interest. There can be no assurance that any such conflict will be
resolved in favor of the Company. Three directors of Adelphia serve on the
Special Nominating Committee of the Board of Directors of the Company, which is
empowered to expand the number of seats on the Company's Board of Directors to
up to 14 and to fill the vacancies created thereby.
Need to Obtain and Maintain Permits and Rights-of-Way
<PAGE>
The Company expects that in connection with its planned construction
and development of certain of its New Networks that it will be required to
obtain and maintain permits and rights-of-way to develop and operate such
networks. There can be no assurance that the Company or the Operating Companies,
through Local Partners, Adelphia or their own efforts, will be able to obtain
new permits and rights-of-way, maintain existing permits and rights-of-way or to
obtain and maintain the other permits and rights-of-way needed to develop and
operate Existing Networks and New Networks. In addition, the Company and the
Operating Companies may require pole attachment or conduit use agreements with
incumbent LECs, utilities or other LECs to operate Existing Networks and New
Networks, and there can be no assurance that such agreements will be obtained or
will be obtainable on reasonable terms. Failure to obtain or maintain such
permits, rights-of-way and agreements could have a material adverse effect on
the Company's ability to operate and expand its networks.
The amount of lease payments could be affected by the costs the Local
Partners incur for attachments to poles, or use of conduit, owned by incumbent
LECs or electric utilities. Various State PUCs and the FCC are reviewing whether
use of Local Partner facilities for telecommunications purposes (as occurs when
the Operating Companies lease fiber optic capacity from Local Partners) should
entitle incumbent LECs and electric utilities to raise pole attachment or
conduit occupancy fees. Such increased fees could result in an increase in the
amount of the lease payments made by the Operating Companies to the Local
Partners and could have a significant impact on the profitability of the
Operating Companies.
Competition
In each of the markets served by the Company's networks, the services
offered by the Company compete principally with the services offered by the
incumbent LEC serving that area. Incumbent LECs have long-standing relationships
with their customers, have the potential to subsidize competitive services from
monopoly service revenues, and benefit from favorable state and federal
regulations. In light of the passage of the Telecommunications Act of 1996 (the
"Telecommunications Act"), federal and state regulatory initiatives will provide
increased business opportunities to CLECs such as the Company, but regulators
are likely to provide incumbent LECs with increased pricing flexibility for
their services as competition increases. If incumbent LECs are allowed by
regulators to lower their rates substantially or selectively engage in excessive
volume and term discount pricing practices for their customers or charge CLECs
excessive fees for interconnection to the incumbent LECs' networks, the net
income and cash flow of CLECs, including the Operating Companies, could be
materially and adversely affected.
The Telecommunications Act also establishes procedures under which the
Regional Bell Operating Companies ("RBOCs") can obtain authority to provide long
distance services if they comply with certain interconnection requirements. To
date, the FCC authority to provide in-region interLATA service has been sought
by Ameritech in Michigan, Southwestern Bell in Oklahoma, and BellSouth in
Louisiana and South Carolina. The Department of Justice has opposed each
request, and each request has been denied by the FCC. An approval could result
in decreased market share for the major IXCs, which are among the Operating
Companies' significant customers. Such a result could have an adverse effect on
the Company.
There has been significant merger activity among the RBOCs in
anticipation of entry into the long distance market, including the merger of
Bell Atlantic and NYNEX, whose combined territory covers a substantial portion
of the Company's markets. If RBOCs are permitted to provide such services, they
will ultimately be in a position to offer single source service for local and
long distance communications and subsidize the price of their long distance
prices with charges on local service. Other combinations are occurring in the
industry, which may have an effect on the Company, such as the pending
combination between Worldcom and MCI or between AT&T Corp. and Teleport
Communications Group Inc. ("TCG"). The effects of these combinations, if
consummated, are unknown at this time. The Company believes that, if
consummated, such combinations will also affect the Company's strategy of
originating and terminating a significant proportion of its customers'
communications traffic over its own networks, rather than relying on the network
of the incumbent LEC.
The Company also faces, and will continue to face, competition from
other current and potential market entrants, including other CLECs, incumbent
LECs which are not subject to RBOC restrictions on long distance, AT&T, MCI,
<PAGE>
Sprint and other IXCs, cable television companies, electric utilities, microwave
carriers, wireless telecommunications providers and private networks built by
large end users. The Telecommunications Act facilitates such entry by requiring
incumbent LECs to allow new entrants to acquire local services at wholesale
prices for resale, and to purchase unbundled networks at cost-based rates.
Substantially all of the Company's markets are served by one or more CLECs other
than the Company. In addition, all of the major IXCs are expected to enter the
market for local telecommunications services. Both AT&T and MCI have announced
that they have begun to offer local telephone services in some areas of the
country, and AT&T recently announced a new wireless technology for providing
local telephone service. Although the Company has good relationships with the
IXCs, there are no assurances that any of these IXCs will not build their own
facilities, purchase other carriers or their facilities, or resell the services
of other carriers rather than use the Company's services when entering the
market for local exchange services.
The Company also competes with equipment vendors and installers, and
telecommunications management companies with respect to certain portions of its
business.
Many of the Company's current and potential competitors, particularly
incumbent LECs, have financial, personnel and other resources substantially
greater than those of the Company, as well as other competitive advantages over
the Company.
Regulation and Risks of the Telecommunications Act
The Company is subject to varying degrees of federal, state and local
regulation. The Company is not currently subject to price cap or rate of return
regulation by the FCC, nor is it currently required to obtain FCC authorization
for the installation, acquisition or operation of its network facilities.
However, the Operating Companies that provide intrastate services are generally
subject to certification and tariff filing requirements by state regulators and
may also be subject to state reporting, customer service, service quality,
unbundling, universal service or other requirements. Challenges to these tariffs
and certificates by third parties or independent action by state public utility
commissions ("State PUCs") could cause the Company to incur substantial legal
and administrative expenses.
Although the Telecommunications Act is intended to eliminate many legal
barriers to entry, no assurance can be given that changes in current or future
regulations adopted by the FCC or State PUCs or other legislative or judicial
initiatives relating to the telecommunications industry, including initiatives
that address access charge and universal service requirements, will not have a
material adverse effect on the Company. In particular, the Company's belief that
the entire $97 billion local exchange market may ultimately be open to CLEC
competition depends upon favorable interpretations of the Telecommunications
Act. The ability of the Company and the Operating Companies to compete in these
new market segments may be adversely affected if incumbent LECs are granted
greater pricing flexibility and other regulatory relief that enables them to
impose costs on potential competitors or otherwise restrict the Company's
ability to serve its customers and attract new customers. In addition, the
Telecommunications Act removes entry barriers for all companies and could
increase substantially the number of competitors offering comparable services in
the Company's markets.
While the Telecommunications Act requires incumbent LECs, including
RBOCs, to enter into agreements to interconnect with, and generally to sell
unbundled network elements or to resell services to, CLECs, LEC-CLEC
interconnection agreements may have short terms, requiring the CLEC to
renegotiate the agreements repeatedly. LECs may not provide timely provisioning
or adequate service quality thereby impairing a CLEC's reputation with customers
who can easily switch back to the LEC. In addition, the prices set in the
agreements may be subject to significant rate increases if State PUCs establish
prices designed to pass on to the CLECs part of the cost of providing universal
service.
The Company also depends on timely and high-quality provisioning by
LECs for purposes of interconnecting the Company's and LEC's networks,
purchasing elements of the LEC's network to serve the Company's customers,
transferring the phone numbers of new Company customers from the LEC that
formerly served them and obtaining other facilities and services. While the
Telecommunications Act requires LECs to provide the same quality of service to
the Company and other CLECs as LECs provide to their own end user customers, on
<PAGE>
some occasions LECs have provided poor-quality service. The Company cannot
attract and maintain customers for which such facilities and services must be
purchased from LECs if the quality of service is less than the customer has
experienced or obtained from the LEC.
Risks Associated with Joint Ventures
Most of the Operating Companies' agreements with Local Partners ("Local
Partner Agreements") contain mandatory buy/sell provisions that, after a certain
number of years, can be initiated by either partner and result in one partner
purchasing all of the other partner's interests. Accordingly, there can be no
assurance that the Company and its subsidiaries will continue to be in
partnership with their current Local Partner, or any other partner, in each of
their respective markets, or that the Company or its subsidiaries will have
sufficient funds to purchase the partnership interest of such other partner. In
addition, if a partner triggers such buy/sell provisions and the Company is
unable to purchase the initiating partner's interests, the Company will be
forced to sell its interests to the partner, thereby terminating the
partnership, which could result in a material adverse effect on the future cash
flow of the Company.
The bankruptcy or insolvency of a Local Partner or an Operating Company
could result in the termination of the respective Local Partner Agreement and
the related fiber lease agreement. The effect of such terminations could be
materially adverse to the Company and the respective Operating Company.
Similarly, all of the management agreements, two of the Local Partner Agreements
and five of the fiber lease agreements can be terminated by the respective Local
Partner at various times during the next seven years. While the Company believes
such agreements will be renewed, there can be no assurance that the Local
Partner will not seek to terminate the agreements. Accordingly, the failure to
renew such agreements could materially adversely affect the Company and the
respective Operating Companies. In addition, the failure of a Local Partner to
make required capital contributions could have a material adverse effect on the
Company and the respective Operating Company.
Neither the Senior Indenture, the Senior Secured Indenture, nor the
Preferred Stock Certificate of Designation restricts the amount of indebtedness
that can be incurred by Operating Companies in which the Company owns a less
than 45% interest. The Company expects that certain of the Operating Companies
may begin to incur substantial indebtedness in the foreseeable future.
Accordingly, the Company's ability to access the cash flow and assets of such
Operating Companies may be severely limited.
Risk Related to LMDS Strategy
LMDS is a new service, and major telecommunications equipment
manufacturers have yet to introduce infrastructure products for the LMDS
frequency band. As a result, no wireless local loop systems are currently
operating under LMDS, and implementation of such systems could be subject to
unforeseen delays, costs and possible quality and implementation issues.
Material aspects of the Company's LMDS implementation strategy are still being
developed and defined, and there can be no assurance that the Company will
develop and implement a successful and profitable LMDS strategy, or that
implementation of its LMDS strategy will not involve substantial expense.
Rapid Technological Changes
The telecommunications industry is subject to rapid and significant
changes in technology. While the Company believes that for the foreseeable
future these changes will neither materially affect the continued use of fiber
optic telecommunications networks nor materially hinder the Company's ability to
acquire necessary technologies, the effect of technological changes on the
businesses of the Company cannot be predicted. Thus, there can be no assurance
that technological developments will not have a material adverse effect on the
Company.
Impact of the Year 2000 Issue
<PAGE>
The year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have data-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities. The Company has
received assurance from its major software vendors that the products used by the
Company are year 2000 compliant and will function adequately. If the systems of
other companies on whose services the Company depends or with whom the Company's
systems interface are not year 2000 compliant, it could have a material adverse
effect on the Company. The Company will continue its year 2000 issue assessment
and, if it comes to the attention of the Company's management that any of its
systems, or the systems of those on whom the Company relies, are not year 2000
compliant, the Company intends to develop an action plan, and assess the
resources it would be required to devote, to address such problem. There can be
no assurance that devoting further resources of the Company will prevent the
year 2000 issue from having a material adverse effect on the Company.
Dependence upon Network Infrastructure; Risk of System Failure; Security Risks
The Company's success in marketing its services to business and
government users requires that the Company provide superior reliability,
capacity and security via its network infrastructure. The Company's networks are
subject to physical damage, power loss, capacity limitations, software defects,
breaches of security (by computer virus, break-ins or otherwise) and other
factors, certain of which may cause interruptions in service or reduced capacity
for the Company's customers. Interruptions in service, capacity limitations or
security breaches could have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Key Personnel
The success of the Company and its growth strategy depends in large
part on the Company's ability to attract and retain key management, marketing
and operations personnel. Currently, the Company's businesses are managed by a
small number of management and operating personnel with certain other services,
including financial and certain accounting services, provided by Adelphia. There
can be no assurance that the Company will attract and retain the qualified
personnel needed to manage, operate and further develop its business. In
addition, the loss of the services of any one or more members of the Company's
senior management team could have a material adverse effect on the Company.
Dependence on Business from IXCs
For the fiscal year ended March 31, 1997 and for the nine months ended
December 31, 1997, approximately 61% and 50%, respectively, of the Operating
Companies' combined revenues were attributable to access services provided to
MCI, AT&T and other IXCs. The loss of access revenues from IXCs in general or
the loss of MCI or AT&T as a customer could have a material adverse effect on
the Company's current revenue stream.
In addition, the Telecommunications Act establishes procedures under
which RBOCs can obtain authority to compete with the IXCs in the long distance
market, which could result in a decreased market share for IXCs. See
"--Competition." Due to the Operating Companies' dependence on business from
IXCs, any significant loss of market share by the IXCs could have a material
adverse effect on the Company.
Restrictions on the Company's Ability to Pay Dividends
To date, the Company has not paid cash dividends on its shares of
Common Stock. The ability of the Company to pay cash dividends on the Preferred
Stock, the Common Stock or other capital stock and to redeem the Preferred Stock
upon maturity is substantially restricted under various covenants and conditions
contained in the indentures with respect to the Senior Notes (the "Senior
Indenture"), the Senior Secured Notes ("the Senior Secured Indenture") and the
Certificate of Designation with respect to the Preferred Stock. In addition to
the limitations imposed on the payment of dividends by the Senior Indenture and
the Senior Secured Indenture, under Delaware law the Company is permitted to pay
dividends on its capital stock only out of its surplus, or in the event that it
has no surplus, out of its net profits for the year in which a dividend is
declared or for the immediately preceding fiscal year. At December 31, 1997, the
Company had a stockholders' deficiency of $106.2 million. In order to pay
dividends in cash, the Company must have surplus or net profits equal to the
full amount of the cash dividend at the time such dividend is declared. The
Company cannot predict what the value of its assets or the amount of its
liabilities will be in the future and, accordingly, there can be no assurance
that the Company will be able to pay cash dividends on its capital stock.
Lack of Dividend History
The Company has never declared or paid any cash dividends on its Common
Stock and does not expect to declare any such dividends on its Common Stock in
the foreseeable future. Payment of any future dividends on its Common Stock will
depend upon earnings and capital requirements of the Company, the Company's debt
facilities and other factors the Board of Directors considers appropriate. The
Company intends to retain its earnings, if any, to finance the development and
expansion of its business, and therefore does not anticipate paying any
dividends on its Common Stock in the foreseeable future. The Company's ability
to declare dividends on its Common Stock is also restricted by certain covenants
in the Senior Indenture, Senior Secured Indenture and the Preferred Stock
Certificate of Designation.
Anti-Takeover Provisions
The Company's Certificate of Incorporation and Bylaws, the provisions
of the Delaware General Corporation Law and the Indentures with respect to the
Senior Secured Notes and the Senior Notes may make it difficult in some respects
to effect a change of control of the Company and replace incumbent management.
The existence of these provisions may have a negative impact on the price of the
Common Stock, may discourage third party bidders from making a bid for the
Company, or may reduce any premiums paid to stockholders for their shares of
Common Stock. In addition, the Board has the authority to fix the rights and
preferences of and issue shares of the Company's Preferred Stock, which may have
the effect of delaying or preventing a change of control of the Company without
action by its stockholders.
The Company and its Operating Companies are subject to regulation by
State PUCs in the states in which they operate. Certain states have statutes and
certain State PUCs have passed or are considering passing regulations that would
require an investor who acquires a specified percentage of the Company's or the
relevant Operating Company's securities to obtain approval to own such
securities from such state or State PUC.
USE OF PROCEEDS
Except for the sale of the Warrant Shares upon the exercise of the
Warrants, the Company is not selling any of the Warrants or the Warrant Shares
and will not receive any of the proceeds from the sale of the Warrants and the
Warrant Shares by the Selling Securityholders. Any proceeds received by the
Company upon the exercise of the Warrants will be used for general corporate
purposes.
<PAGE>
THE SELLING SECURITYHOLDERS
The Selling Securityholders (which term includes their transferees,
pledgees, donees or their successors) may from time to time offer and sell
pursuant to this Prospectus any or all of the Warrants and Warrant Shares issued
upon exercise of the Warrants. The following table sets forth certain
information regarding the Selling Securityholders' ownership of the Warrant
Shares and of the Warrants, to the knowledge of the Company as of May 1, 1998,
and prior to the exercise of any Warrants by the Selling Securityholders. No
Selling Securityholder has held any position, office or had any other material
relationship with the Company, its predecessors or affiliates during the past
three years. Although the Selling Securityholders may offer some or all of their
respective Warrants or Warrant Shares pursuant to the Prospectus, the following
table assumes that all such Warrants or Warrant Shares have been sold upon
termination of any such sales. In addition, the Selling Securityholders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their respective Warrants or Warrant Shares since the date on which
they provided information thereon in transactions exempt from the registration
requirements of the Securities Act, or may have acquired and/or sold shares of
Class A Common Stock on or after May 8, 1998, the date of the Offerings. To the
knowledge of the Company, except as disclosed in the table below, the Selling
Securityholders did not own, nor have any rights to acquire, any other shares of
Common Stock as of May 1, 1998.
<TABLE>
<CAPTION>
- ---------------------- -------------------------------------------------- -----------------------------------------------
Common Stock Warrants
Name of Selling Beneficially Owned Beneficially Owned
Securityholder Prior to This Offering Beneficially Prior to This Offering Beneficially
Offered Owned Offered Owned
Number of Percent of for Sale After This Number Percent of for Sale After This
Shares Total Offering of Total Offering
Outstanding Warrants Outstanding
Shares(1) Warrants
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. B.B. Sneed 3,030 0.01 3,030 0 500 0.15 500 0
2. Beneficia 12,120 0.02 12,120 0 2,000 0.61 2,000 0
Standard Life
High Yield
3. Fidelity 145,379 0.26 145,379 0 23,990 7.29 23,990 0
Investments
4 Harriet Rothkopf 121 0.00 121 0 20 0.01 20 0
1993 Annuity Trust
dated 7/24/93
5. Illinois 33,451 0.06 33,451 0 5,520 1.68 5,520 0
Municipal
Retirement Fund
6. Investors 2,424 0.00 2,424 0 400 0.12 400 0
Fiduciary
Services, Inc.
7. Judith Sidney 303 0.00 303 0 50 0.02 50 0
8. Lincoln National 1,212 0.00 1,212 0 200 0.06 200 0
Putnam Mst Fund
9. Lutheran 145,440 0.26 145,440 0 24,000 7.29 24,000 0
Brotherhood
Research Corp.
10.ManUSA New 24,240 0.04 24,240 0 4,000 1.22 4,000 0
Money High Yield
Fund
11.Massachusetts 1,515 0.00 1,515 0 250 0.08 250 0
Mutual Life
Insurance
12.Mellon Bank 34,845 0.06 34,845 0 5,750 1.75 5,750 0
Account Set
Up Unit
13.Northstar 61,812 0.11 61,812 0 10,200 3.10 10,200 0
Advantage High
Total Return
Fund
14.Northstar 909 0.00 909 0 150 0.05 150 0
Multisector
Fund
15.Northstar 909 0.00 909 0 150 0.05 150 0
Yield Bond
Fund
16.PCM 3,030 0.01 3,030 0 500 0.15 500 0
Diversified
Income Trust
17.PCM Global 2,575 0.00 2,575 0 425 0.13 425 0
Assets
Allocation
- ------------------- ----------- ------------- ----------- ---------- ---------- ------------ --------- -------
<PAGE>
- ---------------------- ---------------------------------------------------- ---------------------------------------------
Common Stock Warrants
Name of Selling Beneficially Owned Beneficially Owned
Securityholder Prior to This Offering Beneficially Prior to This Offering Beneficially
Offered Owned Offered Owned
Number of Percent of for Sale After This Number Percent of for Sale After This
Shares Total Offering of Total Offering
Outstanding Warrants Outstanding
Shares(1) Warrants
18.PCM High Yield 28,694 0.05 28,694 0 4,735 1.44 4,735 0
Fund
19.Penn Capital 181 0.00 181 0 30 0.01 30 0
Management
20.Prospect 3,030 0.01 3,030 0 500 0.15 500 0
Street High
Income
Portfolio
21.Prudential 133,320 0.23 133,320 0 22,000 6.69 22,000 0
High Yield
Fund
22.Putnam Asset 5,454 0.01 5,454 0 900 0.27 900 0
Allocation
Fund
23.Putnam Asset 606 0.00 606 0 100 0.03 100 0
Allocation Fund
24.Putnam 1,515 0.00 1,515 0 250 0.08 250 0
Convertible
Opportunities
25.Putnam Diverse 55,539 0.10 55,539 0 9,165 2.79 9,165 0
Income Fund
26.Putnam Equity 272 0.00 272 0 45 0.01 45 0
Income Fund
27.Putnam High 1,515 0.00 1,515 0 250 0.08 250 0
Income
Convertible
Fund
28.Putnam High 19,907 0.04 19,907 0 3,285 1.00 3,285 0
Yield Advantage
29.Putnam High 96,687 0.17 96,687 0 15,955 4.85 15,955 0
Yield Fund
30.Putnam Managed 1,636 0.00 1,636 0 270 0.08 270 0
High-Yield
Trust
31.Putnam Master 5,696 0.01 5,696 0 940 0.29 940 0
Income Fund
32.Putnam Master 4,666 0.01 4,666 0 770 0.23 770 0
Intermediate
Income
33.Putnam 17,058 0.03 17,058 0 2,815 0.86 2,815 0
Premiere Income
Fund
34.Putnam Short 2,424 0.00 2,424 0 400 0.12 400 0
Term Investment
Grade Bond Fund
35.Richard S. 90 0.00 90 0 15 0.00 15 0
Trutanic IRA
36.Richard S. 90 0.00 90 0 15 0.00 15 0
Trutanic IRA
Rollover
37.Richard S. 90 0.00 90 0 15 0.00 15 0
Trutanic SEP IRA
38.Sunamerica 24,240 0.04 24,240 0 4,000 1.22 4,000 0
Asset
Management High
Income Fund
39.Any other 1,117,706 1.97 1,117,706 0 184,440 56.06 184,440 0
holder of
Warrants or
Warrant Shares
(including Cede
& Co. on behalf
of such
holders) or
future
transferee from
such holders
TOTAL 1,993,638(2) 12.32 1,993,638(2) 0 329,000 100% 329,000 0
- ------------------- ----------- ------------- ----------- ---------- ---------- ------------ --------- -------
<PAGE>
<FN>
(1) Based on shares issued and outstanding as of May 31, 1998.
(2) Total shares reflects the number of shares of Class B Common Stock which
may be issued upon exercise of all outstanding Warrants. The actual number
of Warrant Shares may be lower since the Warrant Agreement provides for
rounding to the next lowest whole number upon any given exercise of
Warrants; fractional shares will not be issued by the Company.
</FN>
</TABLE>
The Warrants owned by the Selling Securityholders represent all of the
Warrants covered by the Registration Statement. Many of the Selling
Securityholders acquired their Warrants in April 1996 pursuant to the Private
Placement by the Company of units, each unit consisting of $1,000 principal
amount at maturity of Senior Notes and one Warrant. Cede & Co. may hold Warrants
pursuant to a global warrant on behalf of beneficial owners of the Warrants. It
is contemplated that this Prospectus may be supplemented from time to time to
include information with respect to such Selling Securityholders.
PLAN OF DISTRIBUTION
The Warrants and Warrant Shares may be sold from time to time to
purchasers directly by the Selling Securityholders. Alternatively, if permitted
pursuant to the Class B Warrant Registration Rights Agreement, the Selling
Securityholders may from time to time offer the Warrants and Warrant Shares to
or through underwriters, broker-dealers or agents, who may receive compensation
in the form of underwriting discounts, concessions or commissions from the
Selling Securityholders or the purchasers of Warrants and Warrant Shares for
whom they may act as agents. The Selling Securityholders and any underwriters,
broker-dealers or agents that participate in the distribution of Warrants and
Warrant Shares may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of Warrants and Warrant Shares by them
and any discounts, commissions, concessions or other compensation received by
any such underwriter, broker-dealer or agent may be deemed to be underwriting
discounts and commissions under the Securities Act.
The Warrants and Warrant Shares may be sold by a Selling Securityholder
from time to time, in one or more transactions at fixed prices, at prevailing
market prices at the time of sale, at varying prices determined at the time of
sale or at negotiated prices. Such prices will be determined by the Selling
Securityholders. The sale of the Warrants and Warrant Shares may be effected (i)
in transactions (which may involve crosses or block transactions) on any
national securities exchange or quotation service on which the Warrants or
Warrant Shares may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or in the over-the-counter market or (iv) through the writing of options. At the
time a particular offering of the Warrants or Warrant Shares is made, if
required, a prospectus supplement will be distributed which will set forth the
names of the Selling Securityholders, the aggregate amount and type of Warrants
and Warrant Shares being offered, the number of such securities owned prior to
and after the completion of any such offering, and, to the extent required, the
terms of the offering, including the name or names of any underwriters,
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the Selling Securityholders and any discounts,
commissions or concession allowed or reallowed or paid to broker-dealers.
To comply with the securities laws of certain jurisdictions, if
applicable, the Warrants and Warrant Shares will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Warrants and Warrant Shares may not be
offered or sold unless they have been registered or qualified for sale in such
jurisdiction or any exemption from registration or qualification is available
and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Warrants or Warrant Shares may be
limited in its ability to engage in market activities with respect to such
Warrants or Warrant Shares. In addition and without limiting the foregoing, each
Selling Securityholder will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
time of purchases and sales of any of the Warrants and Warrant Shares by the
Selling Securityholders. All of the foregoing may affect the marketability of
the Warrants and Warrant Shares.
<PAGE>
All expenses of the registration of the Warrants and Warrant Shares
pursuant to the Class B Warrant Registration Rights Agreement will be paid by
the Company, including, without limitation, Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; provided, however, that
the Selling Securityholders will pay all underwriting discount and selling
commissions, if any. The Selling Securityholders will be indemnified by the
Company against certain civil liabilities, including certain liabilities under
the Securities Act, or will be entitled to contribution in connection therewith.
The Company will be indemnified by the Selling Securityholders against certain
civil liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection therewith.
This Prospectus may also be used by the Company in connection with the
issuance from time to time of the Warrant Shares upon exercise of the Warrants.
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of Hyperion and certain
provisions of Hyperion's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by Hyperion's Certificate of Incorporation and
Bylaws, each as amended, which documents are filed as exhibits with the
Commission and are incorporated herein by reference.
Hyperion's authorized capital stock consists of 300,000,000 shares of
Class A Common Stock, par value $.01 per share, 150,000,000 shares of Class B
Common Stock, par value $.01 per share, and 5,000,000 shares of preferred stock,
par value $0.01 per share.
Common Stock
Shares of Class A Common Stock and Class B Common Stock are
substantially identical, except that holders of Class A Common Stock are
entitled to one vote per share and holders of Class B Common Stock are entitled
to 10 votes per share on all matters submitted to a vote of stockholders.
Class A Common Stock
The holders of Class A Common Stock are entitled to one vote per share
on all matters to be voted on by the stockholders. Subject to preferences that
may be applicable to any outstanding preferred stock, the holders of Class A
Common Stock and Class B Common Stock are entitled to receive dividends ratably,
if any such dividends are declared, from time to time by the Board of Directors
out of funds legally available therefor. Stock dividends declared on Class A
Common Stock shall be in shares of Class A Common Stock, and stock dividends on
Class B Common Stock shall be in shares of Class B Common Stock. In the event of
a liquidation, dissolution or winding up of the Company, the holders of Class A
Common Stock and Class B Common Stock are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior rights of the
holders of the preferred stock then outstanding. There are no redemption or
sinking fund provisions available to the Class A Common Stock.
Class B Common Stock
The holders of Class B Common Stock are entitled to ten votes per share
on all matters to be voted on by the stockholders. Each share of Class B Common
Stock is convertible at the option of the holder into one share of Class A
Common Stock. In all other respects, the provisions of the Class B Common Stock
are identical to those of the Class A Common Stock. There are no restrictions
contained in the Certificate of Incorporation regarding the ability to transfer
shares of Class B Common Stock.
Neither the holders of Class A Common Stock nor the holders of Class B
Common Stock have cumulative voting rights. For a discussion of the effects of
the voting rights of Adelphia, see "Risk Factors--Control by Principal
Stockholder."
<PAGE>
Preferred Stock
The Board of Directors is authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue from time to
time such shares of preferred stock, in one or more classes or series. Each
class or series of preferred stock shall have such number of shares,
designations, preferences, voting powers, qualifications and special or relative
rights or privileges as shall be determined by the Board of Directors, which may
include, among others, dividend rights, voting rights, redemption and sinking
fund provisions, liquidation preferences, conversion rights and preemptive
rights. The ownership and control of the Company by the holders of Common Stock
would be diluted if the Company were to issue preferred stock that had voting
rights or that was convertible into Common Stock. In addition, the holders of
preferred stock issued by the Company would be entitled by law to vote on
certain transactions such as a merger or consolidation, and thus the issuance of
preferred stock could dilute the voting rights of the holders of Common Stock on
such issues.
On October 9, 1997, the Company issued $200.0 million aggregate
liquidation preference of 12 7/8% Senior Exchangeable Redeemable Preferred Stock
due 2007 (the "Preferred Stock") in a private placement. The Company is required
to redeem all of the Preferred Stock on October 15, 2007 at 100% of the
liquidation preference of the Preferred Stock then outstanding. Dividends are
payable quarterly, commencing January 15, 1998, at 12 7/8% of the liquidation
preference of outstanding Preferred Stock. Through October 15, 2002, dividends
are payable in cash or additional shares of Preferred Stock at the Company's
option. Subsequent to October 15, 2002, dividends are payable in cash. Prior to
October 15, 2000, subject to certain conditions, the Company may redeem up to
35% of the aggregate liquidation preference of the originally issued Preferred
Stock at 112.875% of the liquidation preference thereof with the net proceeds of
one or more Qualified Equity Offerings (as defined). Commencing October 15,
2002, the Company may redeem the Preferred Stock in whole or in part at 106.438%
of the liquidation preference thereof declining annually to par on October 15,
2005. Holders of the Preferred Stock have the right to require the Company to
redeem their Preferred Stock at 101% of the liquidation preference thereof upon
a Change of Control (as defined). The Certificate of Designation provides for,
among other things, one vote per share of Preferred Stock on matters with the
Common Stock, and limitations on (i) additional borrowings, (ii) payment of
dividends or distributions, (iii) transactions with affiliates and (iv) the sale
of assets.
MCI Warrant and Lenfest Warrant
On June 13, 1997, the Company entered into the MCI Preferred Provider
Agreement pursuant to which the Company is designated MCI's preferred provider
of new end user dedicated access circuits and of end user dedicated access
circuits resulting from conversion from the incumbent LEC in the Company's
markets. In addition, Hyperion has a right of first refusal to provide MCI all
new dedicated local network access circuits such as POP-to-POP or POP-to-LSO
connections. These arrangements will apply to virtually all of the Company's
current networks and the term of these arrangements is five years with a five
year renewal option. The agreements allow MCI to purchase local loop transport
services from Hyperion where Hyperion is collocated with the incumbent LEC. The
agreement also provides that the parties negotiate in good faith the terms of a
separate agreement for the utilization of the Company's local switches and
operating support systems to provide MCI branded local service. In connection
with the transaction, the Company issued the MCI Warrant to purchase 913,380
shares of Class A Common Stock, of the Company, which expires June 13, 2000, at
the lower of (i) $6.15 per share of Class A Common Stock or (ii) the public
offering price of the Company's Class A Common Stock for the Company's initial
public offering of its Class A Common Stock. MCI could receive additional
warrants to purchase Class A Common Stock with an exercise price equal to the
fair market value of the Class A Common Stock at the time of issuance if MCI
meets certain agreed upon purchase volume revenue thresholds. Collectively, the
warrants would entitle MCI to purchase Class A Common Stock of the Company
representing between 2.5% and 8.5% of the Common Stock of the Company, with
adjustments for future issuances of Common Stock. Pursuant to an agreement with
the Company, MCI was also granted registration rights that granted MCI certain
shelf registration rights one year after the effective date for the Company's
initial public offering and certain piggyback registration rights, and that
allowed MCI to request registration of its shares of Class A Common Stock
beginning 180 days after the effective date of the Offerings. Upon completion of
the Offerings and the issuance of the Adelphia Shares, the Company was obligated
<PAGE>
to issue and did issue additional warrants to MCI to purchase 499,146 shares of
Class A Common Stock (such number of shares was increased by an additional 8,975
shares of Class A Common Stock upon the exercise of a portion of the
over-allotment option available to the underwriters of the U.S. Offering and the
closing of the purchase and sale of shares in connection therewith on June 5,
1998) (the "Additional MCI Warrants"). The Additional MCI Warrants may be
exercised at any time within three years after the issuance thereof at $6.15 per
share. In connection with the Offerings, the Company and MCI entered into a
letter of understanding that provides as follows with respect to the MCI Warrant
and MCI's right to receive Additional MCI Warrants: (i) the Additional MCI
Warrants issued with respect to the shares sold to the public in the Offerings
(including any underwriters' overallotment options) and with respect to the
Adelphia Shares will have an exercise price equal to the lower of $6.15 per
share or the price per share to the public in the Offerings (the "IPO Price"),
and (ii) Adelphia agreed to purchase from MCI the MCI Warrant and the Additional
MCI Warrants described in clause (i) above for a purchase price equal to the
number of Class A Common Stock shares issuable under the warrants being
purchased times the IPO Price minus the underwriting discount, less the
aggregate exercise price of such warrants, which purchase was completed on May
8, 1998. Furthermore, in consideration of the obligations undertaken by Adelphia
to facilitate the agreements between MCI and Hyperion, Hyperion paid to Adelphia
a fee of $500,000 and the Adelphia Warrant, which expires three years after its
issuance, to purchase 200,000 shares of Class A Common Stock at an exercise
price equal to the IPO Price.
On February 12, 1998, the Company consummated an agreement with Lenfest
Telephony, Inc. ("Lenfest") whereby Lenfest received a warrant to obtain 731,624
shares of Class A Common Stock of the Company (the "Lenfest Warrant") in
exchange for its partnership interest in the Harrisburg, Pennsylvania network.
The Lenfest Warrant, which was exercisable for no additional consideration, was
exercised on May 15, 1998.
Dividend Restrictions
The terms of the Senior Indenture, the Senior Secured Indenture and the
Certificate of Designation contain restrictions on the ability of the Company to
pay dividends on the Common Stock. The payment of dividends on the Common Stock
is also subject to the preferences that may be applicable to any then
outstanding preferred stock.
Transfer Agent And Registrar
The Transfer Agent and Registrar for the Common Stock is the American
Stock Transfer & Trust Company. The Transfer Agent and Registrar for the Class B
Warrants is Bank of Montreal Trust Company, New York, New York.
Anti-Takeover Effects Of Provisions Of The Certificate Of Incorporation And
Delaware Law
Delaware General Corporation Law
Although the Company's Certificate of Incorporation currently provides
that the Company is not subject to Section 203 of the Delaware General
Corporation Law ("Section 203"), the Company could become subject to Section 203
through stockholder action in the future. Section 203, subject to certain
exceptions, prohibits a Delaware corporation, the voting stock of which is
generally publicly traded (i.e., listed on a national securities exchange or
authorized for quotation on an inter-dealer quotation system of a registered
national securities association) or held of record by more than 2,000
stockholders, from engaging in any "business combination" with any "interested
stockholder" for a period of three years following the time that such
stockholder became an interested stockholder, unless (i) prior to such time, the
Board of Directors of the corporation approved either such business combination
or the transaction which resulted in such stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in such
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time such
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (y) by persons who are directors and also
officers and (z) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) at or subsequent
to such time, such business combination is approved by the board of directors
and authorized at an annual or special meeting of stockholders, and not by
<PAGE>
written consent, by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation; (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transactions involving the corporation which has the effect of increasing
the proportionate share of any class or series of stock of the corporation which
is beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning (or within the past three years having owned) 15% or more of
the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
Certificate of Incorporation
In addition to the voting rights of the Class A and Class B Common
Stock described above, the Company's Certificate of Incorporation, as amended,
by means of a "blank check preferred" provision authorizes the Board of
Directors, at any time, to divide any or all of the shares of preferred stock
into one or more series and to fix and determine the number of shares and the
designation of such series so as to distinguish it from the shares of all other
series. Further, the Board of Directors, when issuing a series of preferred
stock, may fix and determine the voting rights, designations, preferences,
qualifications, privileges, limitations, options, conversion rights,
restrictions and other special or relative rights of the preferred stock of such
series.
This blank check preferred provision gives the Board of Directors
flexibility in dealing with methods of raising capital and responding to
possible hostile takeover attempts. The provision may have the effect of making
it more difficult for a third party to acquire the Company, discourage a third
party from attempting to acquire the Company or deter a third party from paying
a premium to acquire a majority of the outstanding voting stock of the Company.
Additionally, depending on the rights and preferences of any series of preferred
stock issued and outstanding, the issuance of preferred stock may adversely
affect the voting and other rights of the holders of the Common Stock, including
the possibility of the loss of voting control to others.
DESCRIPTION OF WARRANTS
The Warrants were issued pursuant to the Warrant Agreement between the
Company and Bank of Montreal Trust Company, as warrant agent (the "Warrant
Agent") on April 15, 1996 as part of a private placement by the Company of
329,000 units consisting of $329.0 million aggregate principal amount at
maturity of Senior Notes and Warrants to purchase, initially, an aggregate of
613,427 shares of common stock of the Company (which has been reclassified as
Class B Common Stock). As a result of certain recapitalization transactions
consummated by the Company prior to and in connection with its initial public
offering and the antidilution provisions applicable to the Warrants, the
aggregated number of shares of Class B Common Stock purchasable by the
Warrantholders has been adjusted to 1,993,638 shares at an exercise price of
$0.00308 per share. The following summary of certain provisions of the Warrant
Agreement and the Warrants does not purport to be complete and is qualified in
its entirety by reference to the Warrant Agreement and the Warrants, including
the definitions therein of certain terms. As used in this section, the term
"Company" refers only to Hyperion Telecommunications, Inc. and not to its
subsidiaries.
General
Each Warrant, when exercised, will entitle the holder thereof to
purchase 6.06 Warrant Shares at the Exercise Price of $0.00308 per share. The
Exercise Price and the number of Warrant Shares issuable on exercise of a
Warrant are both subject to adjustment in certain cases referred to below. The
Warrants are exercisable at any time on or after the earlier to occur of (i) May
1, 1997 and (ii) in the event a Change of Control occurs, the date the Company
<PAGE>
mails notice thereof to holders of the Senior Notes and to the holders of the
Warrants, Warrant Shares and any other securities issued or issuable with
respect thereto. Unless exercised, the Warrants will automatically expire on
April 1, 2001, the Expiration Date. The Warrants will entitle the holders
thereof to purchase in the aggregate approximately 3.73% of the outstanding
Common Stock of the Company as of June 5, 1998. The Company will give notice of
expiration not less than 90 and not more than 120 days prior to the Expiration
Date to the registered holders of the then outstanding Warrants. If the Company
fails to give such notice, the Warrants will not expire until 90 days after the
Company gives such notice. In no event will holders be entitled to any damages
or other remedy for the Company's failure to give such notice other than any
such extension.
The Warrants may be exercised by surrendering to the Company the
Warrant certificates evidencing such Warrants, if any, with the accompanying
form of election to purchase, properly completed and executed, and upon payment
of the Exercise Price. Payment of the Exercise Price may be in cash or by
certified or official bank check, payable to the order of the Company, or by
surrender of additional Warrants. Upon surrender of the Warrant certificate and
payment of the Exercise Price, the Warrant Agent will deliver or cause to be
delivered, to or upon the written order of such holder, stock certificates
representing the number of whole Warrant Shares or other securities or property
to which such holder is entitled under the Warrants and Warrant Agreement,
including without limitation any cash payment to adjust for fractional interests
in Warrant Shares issuable upon such exercise of Warrants. If less than all of
the Warrants evidenced by a Warrant certificate are exercised, a new Warrant
certificate will be issued for the remaining number of Warrants.
The exercise of Warrants by holders of beneficial interests in the
Global Warrant (see below) shall be effected in accordance with the Warrant
Agreement and the procedures of the Depositary.
No fractional Warrant Share will be issued upon exercise of the
Warrants. If any fraction of a Warrant Share would, except for the foregoing
provision, be issuable on the exercise of any Warrants (or specified portion
thereof), the Company must pay to the holder an amount in cash equal to the then
current market price per Warrant Share, as determined on the day immediately
preceding the date the Warrant is exercised, multiplied by such fraction,
computed to the nearest whole cent.
Certificates for Warrants will be issued in registered form only, and
no service charge will be made for registration of transfer or exchange upon
surrender of any Warrant certificate at the office of the Warrant Agent
maintained for that purpose. The Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration or transfer or exchange of Warrant certificates.
The holders of the Warrants have no right to vote on matters
submitted to the stockholders of the Company and have no right to receive cash
dividends. The holders of the Warrants are not entitled to share in the assets
of the Company in the event of the liquidation, dissolution or winding up of the
Company's affairs.
Adjustments
The number and kind of Warrant Shares purchasable upon the exercise of
the Warrants and the Exercise Price both will be subject to adjustment in
certain events including: (i) the payment by the Company of dividends (or other
distributions) on Common Stock of the Company payable in Common Stock or the
Company or other shares of the Company's capital stock, (ii) subdivisions,
combinations and reclassifications of Common Stock of the Company, (iii) the
issuance to all holders of Common Stock of the Company, or of securities
convertible into or exchangeable for shares of Common Stock of the Company, in
either case for a consideration per share of Common Stock which is less than the
current market price per share (as defined) of Common Stock of the Company and
(iv) the distribution to all holders of Common Stock of the Company of any of
the Company's assets, debt securities or any rights or warrants to purchase
securities (excluding those rights and warrants referred to in clause (iii)
above and excluding cash dividends or other cash distributions from current or
retained earnings).
<PAGE>
No adjustment in the Exercise Price will be required unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the Exercise Price, provided, however, that any adjustment which is not made
will be carried forward and taken into account in any subsequent adjustment.
In case of certain consolidations or mergers of the Company, or the
sale of all or substantially all of the assets of the Company to another
corporation, each Warrant shall thereafter be exercisable for the right to
receive the kind and amount of shares of stock or other securities or property
to which such holder would have been entitled as a result of such consolidation,
merger or sale had the Warrants been exercised immediately prior thereto.
Reservation of Shares
The Company has authorized and reserved for issuance and will at all
times reserve and keep available such number of shares of Class B Common Stock
as will be issuable upon the exercise of all outstanding Warrants. Such shares
of Class B Common Stock, when paid for and issued, will be duly and validly
issued, fully paid and non-assessable, free of preemptive rights and free from
all taxes, liens, charges and security interests with respect to the issued
thereof.
Amendment
From time to time, the Company and the Warrant Agent, without consent
of the holders of the Warrants, may amend or supplement the Warrant Agreement
for certain purposes, including curing defects or inconsistencies or making
changes that do not materially adversely affect the rights of any holder. Any
amendment or supplement to the Warrant Agreement that has a material adverse
effect on the interests of the holders of the Warrants requires the written
consent of the holders of a majority of the then outstanding Warrants. The
consent of each holder of the Warrants affected is required for any amendment
pursuant to which the Exercise Price would be increased or the number of Warrant
Shares purchasable upon exercise of Warrants would be decreased (other than
pursuant to adjustments provided in the Warrant Agreement as generally described
above).
Registration Rights
In connection with the issuance of the Class B Warrants, the Company
agreed to file Class B Warrant shelf registration statements under the
Securities Act (i) covering the Warrants, on or prior to October 1, 1996, and
(ii) covering the Class B Warrant Shares, on or prior to January 1, 1997, and to
use its best efforts to cause such Class B Warrant Shelf registration statements
to be declared effective by the Commission on or prior to 90 days after the
dates specified for such filings. The Company filed a Class B Warrant shelf
registration statement covering the Class B Warrants and the Class B Warrant
Shares on September 25, 1996 (the "Class B Warrant Shelf Registration
Statement") and the Class B Warrant Shelf Registration Statement was declared
effective by the Commission on December 30, 1996. The Company has agreed to keep
the Class B Warrant Shelf Registration Statement with respect to the Class B
Warrants and the Class B Warrant Shares as described in the immediately
preceding paragraph effective until October 1, 1999 and January 1, 2000,
respectively. If the Company does not comply with its registration obligations
under the Class B Warrant Registration Rights Agreement, it will be required to
pay liquidated damages to holders of the Class B Warrants or Class B Warrant
Shares under certain circumstances.
Reports
Whether or not required by the rules and regulation of the Commission,
so long as any of the Warrants remain outstanding, the Company shall cause
copies of (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants; (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports; and (iii) on a quarterly basis, certain financial
information and operating data with respect to each Subsidiary and Joint Venture
engaged in a Telecommunications Business in the form specified by Section E of
the Indenture with respect to the Senior Notes to be filed with the Warrant
<PAGE>
Agent and the Commission and mailed to the holders at their addresses appearing
in the register of Warrants maintained by the Warrant Agent.
Book-Entry, Delivery and Form
Except as set forth in the next paragraph, the Warrants to be resold as
set forth herein have been issued in the form of one Global Warrant. The Global
Warrant has been deposited with, or on behalf of, DTC, the Depositary and
registered in the name of the Global Warrant Holder.
Warrants that were issued as described below under "Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer to a qualified institutional
buyer of Certificated Securities initially issued to a purchaser of the Warrants
who does not hold its interest in the Warrants (a "Non-Global Purchaser"), such
Certificated Securities may, unless the Global Warrant has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Warrant representing the amount of warrants being transferred.
The Depositary is a limited-purpose trust company that was created to
hold securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between Participants
through electronic book-entry changes in accounts of its Participants. The
Depositary's Participants include securities brokers and dealers, banks and
trust companies, clearing corporations and certain other organizations. Access
to the Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect Participants"
or the "Depositary's Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of the Depositary only through the Depositary's Participants or the
Depositary's Indirect Participants.
Certificated Securities
Subject to certain conditions, any Person having a beneficial interest
in the Global Warrant may, upon request to the Warrant Agent, exchange such
beneficial interest for Warrants in the form of Certificated Securities. Upon
any such issuance, the Warrant Agent is required to register such Certificated
Securities in the name of, and cause the same to be delivered to, such Person or
Persons (or the nominee of any thereof), with any required legends set forth
thereon. In addition, if (i) the Company notifies the Warrant Agent in writing
that the Depositary is no longer willing or able to act as a depositary and the
Company is unable to locate a qualified successor within 90 days or (ii) the
Company, at its option, notifies the Warrant Agent in writing that it elects to
cause the issuance of Warrants in the form of Certificated Securities under the
Indenture, then, upon surrender by the Global Warrant Holder of its Global
Warrant, Warrants in such form will be issued to each person that the Global
Warrant Holder and the Depositary identify as being the beneficial owner of the
related Warrants.
Neither the Company nor the Warrant Agent will be liable for any delay
by the Global Warrant Holder or the Depositary in identifying the beneficial
owners of Warrants and the Company and the Warrant Agent may conclusively rely
on, and will be protected in relying on, instructions from the Global Warrant
Holder or the Depositary for all purposes.
LEGAL MATTERS
The validity of the Warrants and Warrant Shares has been passed upon on
behalf of the Company by Buchanan Ingersoll Professional Corporation,
Pittsburgh, Pennsylvania.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference from the Company's Annual Report on Form 10-K for the year ended
March 31, 1997 have been audited by Deloitte & Touche LLP, independent auditors,
<PAGE>
as stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
<PAGE>
No dealer, salesman or any other person has
been authorized to give any information or to
make any representations other than those
contained in this Prospectus in connection HYPERION
with the offer made by this Prospectus and, TELECOMMUNICATIONS, INC.
if given or made, such information or
representations must not be relied upon as
having been authorized. Neither the delivery
of this Prospectus nor any sale made
hereunder shall under any circumstances
create any implication that there has been no
change in the affairs of Hyperion since the
date hereof. This Prospectus does not
constitute an offer or solicitation by anyone
in any jurisdiction in which such offer or
solicitation is not authorized or in which
the person making such offer or solicitation
is not qualified to do so or to anyone to
whom it is unlawful to make such offer or
solicitation.
---------------------
329,000 Warrants to purchase an aggregate of
1,993,638 shares of Class B Common Stock and
1,993,638 shares of Class B Common Stock issuable
upon exercise of the Warrants
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of Certain Documents
by Reference 2
Prospectus Summary 4
Risk Factors 10
Use of Proceeds 18
The Selling Stockholders 19
Plan of Distribution 21
Description of Capital Stock 22
Description of Warrants 25 PROSPECTUS
Legal Matters 28
Experts 28
June ____, 1998
<PAGE>
II-5
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following is an estimate of expenses which will be incurred in
connection with the issuance and distribution of the securities registered.
Payable by
the Company
-------------
SEC filing fee.................................................$ 100
Legal fees and expenses........................................ 30,000
Accounting fees and expenses................................... 7,500
Miscellaneous expense.......................................... 5,400
- ---------------------
------------
Total................................................. $43,000
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides in general
that a corporation may indemnify its directors, officers, employees or agents
against expenditures (including judgments, fines, amounts paid in settlement and
attorneys' fee) made by them in connection with certain lawsuits to which they
may be made parties by reason of their being directors, officers, employees or
agents and shall so indemnify such persons against expenses (including
attorneys' fees) if they have been successful on the merits or otherwise. The
bylaws of Hyperion provide for indemnification of the officers and directors of
Hyperion to the full extent permissible under Delaware law.
Hyperion's Certificate of Incorporation also provides, pursuant to
Section 102(b)(7) of the Delaware General Corporation Law, that directors of
Hyperion shall not be personally liable to Hyperion or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that
directors shall nonetheless be liable for breaches of the duty of loyalty, bad
faith, intentional misconduct, knowing violations of law, unlawful distributions
to stockholders, or any transaction from which a director derived an improper
person benefit.
<TABLE>
<CAPTION>
Item 16. Exhibits
EXHIBIT NO. DESCRIPTION
<S> <C>
4.1 Indenture, dated as of April 15, 1996, between the Registrant and Bank of Montreal Trust Company.
(Incorporated herein by reference is Exhibit 4.1 to Registration Statement No. 333-06957 on Form
S-4.)
4.2** First Supplemental Indenture, dated as of September 11,
1996, between the Registrant and Bank of Montreal Trust
Company.
4.3 Form of Class A Common Stock Certificate. (Incorporated herein by reference is Exhibit 4.1 to
Registrant's Registration Statement on Form 8-A, dated October 23, 1996.)
4.4 Second Supplemental Indenture, dated as August 27, 1997,
between the Registrant and the Bank of Montreal Trust
Company, regarding the Registrant's 13% Senior Discount
Notes due 2003. (Incorporated herein by reference is
Exhibit 4.06 to Form 8-K dated August 27, 1997 (File No.
0-21605).)
4.5 Certificate of Incorporation of Registrant, together with all amendments thereto. (Incorporated
herein by reference is Exhibit 3.01 to Registrant's Current Report on Form 8-K for the event dated
October 9, 1997.)
4.6 Bylaws of Registrant. (Incorporated herein by reference is Exhibit 3.2 to Registration Statement
No. 333-12619 on Form S-1.)
<PAGE>
4.7 Warrant Agreement dated as of April 15, 1996, by and among Hyperion Telecommunications, Inc. and
Bank of Montreal Trust Company. (Incorporated herein by reference is Exhibit 10.13 to
Registration Statement No. 333-06957 on Form S-4.)
4.8 Warrant Registration Agreement dated as of April 15, 1996, by and among Hyperion
Telecommunications, Inc. and the Initial Purchasers. (Incorporated herein by reference is Exhibit
10.13 to Registration Statement No. 333-06957 on Form S-4.)
5.1** Opinion of Buchanan Ingersoll Professional Corporation
23.1** Consent of Buchanan Ingersoll Professional Corporation (contained in its opinion filed as Exhibit
5.1 hereto)
23.2* Consent of Deloitte & Touche LLP
24.1** Power of Attorney (appearing on signature page)
- ----------------------
<FN>
* Filed herewith.
** Previously filed.
</FN>
</TABLE>
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
<PAGE>
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirement for filing on Form S-3 and has duly caused this
post-effective amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Pittsburgh.,
Commonwealth of Pennsylvania, on June 11, 1998.
HYPERION TELECOMMUNICATIONS, INC.
By: /s/ Daniel R. Milliard
Daniel R. Milliard,
President and Chief Operating
Officer
Pursuant to the requirements of the Securities Act of 1933, this
post-effective amendment to the registration statement has been signed below by
the following persons on behalf of the registrant and in the capacities
indicated, on June 11, 1998.
Signature Title
*
--------------------------------------
John J. Rigas Chairman and Director
*
--------------------------------------
Timothy J. Rigas Vice Chairman, Treasurer,
Chief Financial Officer
and Director
*
--------------------------------------
Michael J. Rigas Vice Chairman and Director
*
--------------------------------------
James P. Rigas Vice Chairman, Chief
Executive Officer and
Director
/s/ Daniel R. Milliard
--------------------------------------
Daniel R. Milliard President, Secretary,
Chief Operating Officer
and Director
*
--------------------------------------
Charles R. Drenning Senior Vice President and
Director
*
--------------------------------------
Paul D. Fajerski Senior Vice President and
Director
*
--------------------------------------
Randolph S. Fowler Senior Vice President and
Director
*
--------------------------------------
Pete J. Metros Director
*
--------------------------------------
James L. Gray Director
*
--------------------------------------
Edward E. Babcock Jr. Chief Accounting Officer
*By:/s/ Daniel R. Milliard
--------------------------------------
Daniel R. Milliard, Attorney-in-Fact
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
<S> <C>
4.1 Indenture, dated as of April 15, 1996, between the Registrant and Bank of Montreal Trust Company.
(Incorporated herein by reference is Exhibit 4.1 to Registration Statement No. 333-06957 on Form
S-4.)
4.2** First Supplemental Indenture, dated as of September 11, 1996, between the Registrant and Bank of
Montreal Trust Company.
4.3 Form of Class A Common Stock Certificate. (Incorporated herein by reference is Exhibit 4.1 to
Registrant's Registration Statement on Form 8-A, dated October 23, 1996.)
4.4 Second Supplemental Indenture, dated as August 27, 1997, between the Registrant and the Bank of
Montreal Trust Company, regarding the Registrant's 13% Senior Discount Notes due 2003.
(Incorporated herein by reference is Exhibit 4.06 to Form 8-K dated August 27, 1997 (File No.
0-21605).)
4.5 Certificate of Incorporation of Registrant, together with all amendments thereto. (Incorporated
herein by reference is Exhibit 3.01 to Registrant's Current Report on Form 8-K for the event dated
October 9, 1997.)
4.6 Bylaws of Registrant. (Incorporated herein by reference is Exhibit 3.2 to Registration Statement
No. 333-12619 on Form S-1.)
4.7 Warrant Agreement dated as of April 15, 1996, by and among Hyperion Telecommunications, Inc. and
Bank of Montreal Trust Company. (Incorporated herein by reference is Exhibit 10.13 to
Registration Statement No. 333-06957 on Form S-4.)
4.8 Warrant Registration Agreement dated as of April 15, 1996, by and among Hyperion
Telecommunications, Inc. and the Initial Purchasers. (Incorporated herein by reference is Exhibit
10.13 to Registration Statement No. 333-06957 on Form S-4.)
5.1** Opinion of Buchanan Ingersoll Professional Corporation
23.1** Consent of Buchanan Ingersoll Professional Corporation (contained in its opinion filed as Exhibit
5.1 hereto)
23.2* Consent of Deloitte & Touche LLP
24.1** Power of Attorney (appearing on signature page)
- ----------------------
<FN>
* Filed herewith.
** Previously filed.
</FN>
</TABLE>
<PAGE>
EXHIBIT NO. 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 2 to Registration Statement No.333-12619 of Hyperion Telecommunications,
Inc. on Form S-3 (formerly Form S-1) of our report dated June 13, 1997,
appearing in the Annual Report on Form 10-K of Hyperion Telecommunications,
Inc. for the year ended March 31, 1997, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of such Registration
Statement.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 12, 1998
