SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
X Annual Report under Section 13 or 15(d) of the Securities Exchange Act
- ------- of 1934
Transition report pursuant to Section 13 or 15(d) of the Securities
- ------- Exchange Act of 1934 for the transition period
Commission File Number: 000-21605
ADELPHIA BUSINESS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1669404
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One North Main Street
Coudersport, PA 16915
(Address of principal executive offices) (Zip code)
814-274-9830
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $0.01 par value.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
Aggregate market value of outstanding Class A Common Stock, par value $0.01,
held by non-affiliates of the registrant at March 24, 2000 was $1,603.8 million
based on the closing sale price as computed by the NASDAQ National Market system
as of that date. For purposes of this calculation only, affiliates are deemed to
be Adelphia Communications Corporation and directors and executive officers of
the registrant.
At March 24, 2000, 34,266,591 shares of Class A Common Stock, par value $0.01,
and 35,172,364 shares of Class B Common Stock, par value $0.01, of the
registrant were outstanding.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to the
Form 10-K.
-----
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Form 10-K for the year ended
December 31, 1999 as set forth in the pages attached hereto:
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADELPHIA BUSINESS SOLUTIONS, INC.
May 1, 2000 By: /s/ Timothy J. Rigas
---------------------
Timothy J. Rigas
Vice Chairman, Treasurer, Chief
Financial Officer and Director
<PAGE>
Item 10. Directors and Executive Officers of the Registrant
The information set forth in Part I under the caption "Executive
Officers of the Registrant" is incorporated herein by reference. All of the
following are currently directors.
Directors and Executive Officers
The directors and executive officers of the Company are:
Name Age Position
Executive Officers and Directors
John J. Rigas.......................... 75 Chairman and Director
James P. Rigas......................... 42 Vice Chairman, Chief Executive
Officer, President and Director
Michael J. Rigas....................... 46 Vice Chairman, Secretary and
Director
Timothy J. Rigas....................... 44 Vice Chairman, Chief Financial
Officer, Treasurer and Director
Non-Officer Directors
Pete J. Metros......................... 59 Director
James L. Gray.......................... 65 Director
Peter L. Venetis....................... 42 Director
Edward S. Mancini...................... 40 Director
Executive Officers
John J. Rigas is the Chairman of the Board of the Company. He also is
the founder, Chairman, Chief Executive Officer and President of Adelphia
Communications Corporation ("Adelphia"). Mr. Rigas has owned and operated cable
television systems since 1952. Among his business and community service
activities, Mr. Rigas is Chairman of the Board of Directors of Citizens Bank
Corp., Inc., Coudersport, Pennsylvania and a member of the Board of Directors
of the Charles Cole Memorial Hospital. He is a director of the National Cable
Television Association and a member of its Pioneer Association and a past
President of the Pennsylvania Cable Television Association. He is also a member
of the Board of Directors of C-SPAN and the Cable Advertising Bureau, and is a
Trustee of St. Bonaventure University. He graduated from Rensselaer Polytechnic
Institute with a B.S. in Management Engineering in 1950.
John J. Rigas is the father of Michael J. Rigas, Timothy J. Rigas and
James P. Rigas, each of whom currently serves as a director and executive
officer of the Company, and is the father-in-law of Peter L. Venetis.
James P. Rigas is Vice Chairman, Chief Executive Officer, President
and a Director of the Company, Executive Vice President, Strategic Planning and
a Director of Adelphia and a Vice President and Director of Adelphia's other
subsidiaries. Mr. Rigas currently spends substantially all of his time on
concerns of the Company. He has been with Adelphia since 1986. Mr. Rigas
graduated from Harvard University (magna cum laude) in 1980 and received a
Juris Doctor degree and an M.A. degree in Economics from Stanford University in
1984. From June 1984 to February 1986, he was a consultant with Bain & Co., a
management consulting firm.
<PAGE>
Michael J. Rigas is Vice Chairman, Secretary and a Director of the
Company, Executive Vice President, Operations and a Director of Adelphia and a
Vice President and Director of Adelphia's other subsidiaries. He has been with
Adelphia since 1981. From 1979 to 1981, he worked for Webster, Chamberlain &
Bean, a Washington, D.C. law firm. Mr. Rigas graduated from Harvard University
(magna cum laude) in 1976 and received his Juris Doctor degree from Harvard Law
School in 1979.
Timothy J. Rigas is Vice Chairman, Chief Financial Officer, Treasurer
and a Director of the Company, Executive Vice President, Chief Accounting
Officer, Treasurer and a Director of Adelphia, and a Vice President and Director
of Adelphia's other subsidiaries. He has been with Adelphia since 1979. Mr.
Rigas graduated from the University of Pennsylvania, Wharton School, with a B.S.
degree in Economics (cum laude) in 1978.
Non-Officer Directors
Pete J. Metros became a director of the Company on April 1, 1997. Mr.
Metros has been President and a member of the Board of Directors of Rapistan
Demag Corporation, a subsidiary of Mannesmann AG, since December 1991. From
August 1987 to December 1991, he was President of Rapistan Corp., the
predecessor of Rapistan Demag Corporation, and of Truck Products Corp., both of
which were major subsidiaries of Lear Siegler Holdings Corp. From 1980 to
August 1987, Mr. Metros was President of the Steam Turbine, Motor & Generator
Division of Dresser-Rand Company. From 1964 to 1980, he held various positions
at the General Electric Company, the last of which was Manager--Manufacturing
for the Large Gas Turbine Division. Mr. Metros is also on the Board of
Directors of Borroughs Corporation of Kalamazoo, Michigan. Mr. Metros has
served as a director of Adelphia Communications Corporation since 1986 and
received a BS degree from the Georgia Institute of Technology in 1962.
James L. Gray became a director of the Company on April 1, 1997. Mr.
Gray is the retired chairman & CEO of PRIMESTAR Partners. Mr. Gray served as
chairman and CEO of PRIMESTAR from 1995 to 1998. Mr. Gray has more than 20
years of experience in the telecommunications, cable and satellite industries.
He joined Warner Cable in 1974, and advanced through several division operating
posts prior to being named president of Warner Cable in 1986. In 1992, after
the merger of Time Inc. and Warner Communications, Mr. Gray was appointed vice
chairman of Time Warner Cable where he served until his retirement in 1993. Mr.
Gray has served on the boards of several telecommunications companies and
associations, including the National Cable Television Association, where he
served as a director from 1986 to 1992, and Turner Broadcasting System, where
he served as a director from 1987 to 1991. He also served as chairman of the
executive committee and director of C-SPAN and as a director of E!
Entertainment Television, Cable in the Classroom and the Walter Kaitz
Foundation. Beginning in 1992, Mr. Gray began serving on PRIMESTAR's board of
directors. Since 1995, Mr. Gray has served as a director of Sea Pines
Associates, Inc. Mr. Gray received a bachelor's degree from Kent State
University in Kent, Ohio and a master's degree in business administration (MBA)
from the State University of New York at Buffalo.
Peter L. Venetis became a director of Adelphia Business Solutions on
October 25, 1999. Mr. Venetis is President and Chief Executive Officer of the
Atlantic Bank of New York. Mr. Venetis also serves as a member of Atlantic
Bank's Boards of Directors and as Chairman of the Executive Committee of the
Board. Mr. Venetis joined Atlantic Bank as its Chief Executive Officer in 1992.
From 1986 to 1992, Mr. Venetis was a Director in the Leveraged Finance Group at
Salomon Brothers, Inc. In New York. Mr. Venetis is also a board member of the
NY Metro Chapter of the Young President's Organization and is a Trustee of the
Churchill School and Center in Manhattan. Mr. Venetis graduated from Columbia
University (cum laude) in 1979 and received his MBA in Finance and
International Business from the Columbia University Graduate School of Business
in 1981.
<PAGE>
Edward S. Mancini became a director of Adelphia Business Solutions on
October 25, 1999. Mr. Mancini is President/Owner of Artistic Stitches, Inc. From
1989 to 1993, Mr. Mancini was Vice President-Media Lending at Canadian Imperial
Bank of Commerce. From 1986 to 1989, Mr. Mancini was in the corporate training
program at Chase Manhattan Bank. Mr. Mancini received his Maters of Science,
Finance and Accounting from Texas A&M University in 1986.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company's
directors, officers and persons who beneficially own more than ten percent of a
class of the Company's registered equity securities to file with the Securities
and Exchange Commission and deliver to the Company initial reports of ownership
and reports of changes in ownership of such registered equity securities.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company or written representations that no other
reports were required, the Company's directors, officers and more than ten
percent stockholders filed on a timely basis all reports due under Section 16(a)
for the period from January 1, 1999 through December 31, 1999, except that an
initial report of ownership was filed late by Mr. Mancini and Mr. Venetis.
<PAGE>
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid by the Company for services rendered during the year ended
March 31, 1998, the nine and twelve months ended December 31, 1998 and the year
ended December 31, 1999 to the Company's Chief Executive Officer and the three
executive officers whose compensation exceeded $100,000 in salary and bonus
during the year ended December 31, 1999:
<TABLE>
Compensation
Long Term
Compensation
Restricted Securities
Stock Underlying All Other
Name and Principal Position(a) Period (b) Salary Bonus Awards (f) Options (f) Compensation(c)(d)
- ------------------------------ ---------- ------ ----- ---------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
John J. Rigas....................... 12 months ended 12/99 1,354,953 --- 1,575,000 100,000 461,940
Chairman and Director 12 months ended 12/98 1,367,399 --- --- --- 461,061
9 months ended 12/98 1,018,789 --- --- --- 200,750
12 months ended 3/98 1,271,939 --- --- --- 461,378
James P. Rigas(e)................... 12 months ended 12/99 223,856 --- 1,575,000 100,000 11,669
Vice Chairman, Chief 12 months ended 12/98 229,385 --- --- --- 11,431
Executive Officer, President 9 months ended 12/98 171,003 --- --- --- 11,431
and Director 12 months ended 3/98 213,011 --- --- --- 11,410
Michael J. Rigas.................... 12 months ended 12/99 223,856 --- 1,575,000 100,000 10,950
Vice Chairman, Secretary and 12 months ended 12/98 229,866 --- --- --- 10,950
And Director 9 months ended 12/98 171,484 --- --- --- 10,950
12 months ended 3/98 213,011 --- --- --- 10,950
Timothy J. Rigas.................... 12 months ended 12/99 223,856 --- 1,575,000 100,000 10,950
Vice Chairman, Chief 12 months ended 12/98 229,866 --- --- --- 10,950
Financial Officer , Treasurer 9 months ended 12/98 171,484 --- --- --- 10,950
and Director 12 months ended 3/98 213,089 --- --- --- 10,950
Daniel R. Milliard (g).............. 12 months ended 12/99 230,774 --- --- 81,250 5,340
President, Vice Chairman 12 months ended 12/98 238,191 --- 760,500 --- 5,340
Secretary and Director 9 months ended 12/98 176,438 --- 760,500 --- 5,340
12 months ended 3/98 229,810 --- 27,000 --- 5,340
- ------------
<FN>
(a) John J. Rigas, Michael J. Rigas and Timothy J. Rigas are not employed by
the Company but are compensated by Adelphia for services to the Company
pursuant to employment agreements with Adelphia. The Company does not
reimburse Adelphia directly for the services they provide to the Company,
although the Company does make payments for shared corporate overhead
services to Adelphia pursuant to a Management Services Agreement.
(b) The twelve months ended December 31, 1998 includes three months
compensation from the fiscal year ended March 31, 1998.
(c) Twelve months ended December 31, 1998 and 1999, nine months ended December
31, 1998 and fiscal year ended March 31, 1998 amounts include:(i) life
insurance premiums paid during each respective period by Adelphia under
employment agreements with John J. Rigas, James P. Rigas, Michael J. Rigas,
Timothy J. Rigas and Daniel R. Milliard, in premium payment amounts of
$200,000, $10,919, $10,200, $10,200 and $4,590, respectively, during the
twelve months ended December 31, 1999 $200,000, $10,681, $10,200, $10,200
and $4,590, respectively, during the nine and twelve months ended December
31, 1998, $200,000, $10,660, $10,200, $10,200 and $4,590, respectively,
<PAGE>
during the fiscal year ended March 31, 1998 on policies owned by the
respective named executive officers; (ii) $216,270, $227,805, $0 and
$230,746 for John J. Rigas which represents the dollar value of the benefit
of the whole-life portion of the premiums paid by Adelphia during the
twelve months ended December 31, 1999 and 1998, respectively, and the nine
months ended December 31, 19999 and the fiscal year ended March 31, 1998,
respectively, pursuant to a split-dollar life insurance arrangement
projected on an actuarial basis; (iii) $44,920, $32,506, $0 and $29,882 for
John J. Rigas which represents payments by Adelphia during the twelve
months ended December 31, 1999 and 1998, respectively, and the nine months
ended December 31, 1998 and the fiscal year ended March 31, 1998,
respectively, pursuant to a split-dollar life insurance arrangement that is
attributable to term life insurance coverage; and (iv) $750 in Adelphia
matching contributions for each executive officer under the Company's
401(k) savings plan for the twelve months ended December 31, 1999 and 1998
and the nine months ended December 31, 1998 and the fiscal year ended March
31, 1998, respectively. The amounts shown above do not include transactions
between the Company and certain executive officers or certain entities
which are privately owned in whole or in part by the executive officers
named in the table. See "Item 13, Certain Relationships and Transactions."
In accordance with an agreement related to the split-dollar life insurance
arrangement referred to above, the Company will be reimbursed for all
premiums paid related to such arrangement upon the earlier of death of both
the insured and his spouse or termination of the insurance policies related
to such arrangement.
(d) Does not include the value of certain non-cash compensation to each
respective named individual which did not exceed the lesser of $50,000 or
10% of such individual's total salary shown in the table.
(e) During the periods presented throught December 31, 1998, James P. Rigas was
not employed by the Company, but was compensated by Adelphia for his
services to the Company pursuant to an employment agreement with Adelphia.
During such periods, the Company did not directly reimburse Adelphia for
Mr. Rigas' base salary, insurance premium payments and other benefits paid
by Adelphia. Effective January 1, 1999, the Company employed Mr. Rigas
directly.
(f) The respective amounts set forth represent restrictive stock awards of the
Company's Class A common stock and stock options to purchase the Company's
Class A common stock, which were granted to the named executive officers by
the Company under its 1996 Long-Term Incentive Compensation Plan ("1996
Plan").
(g) Mr. Milliard served in the indicated positions for the Company, and as
Senior Vice President and Secretary of Adelphia pursuant to an employment
agreement with the Company, until September 1999 when he resigned his
positions with both companies. Amounts shown for Mr. Milliard represent
amounts paid under his employment agreement, including (i) restricted stock
bonus awards under the 1996 Plan of 58,500 and 58,500 shares of the
Company's Class A common stock which had a value of approximately $27,000
and $760,500 as of April 1, 1997 and April 1, 1998 (the dates of grant),
respectively, and an option to purchase 81,250 shares of the Company's
Class A common stock granted April 1, 1999. The 117,000 restricted stock
award shares are not subject to vesting and will fully participate in
dividends and distributions.
</FN>
</TABLE>
Long-Term Incentive Compensation Plan
The Company's 1996 Plan provides for the grant of options which qualify
as "incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), options which do not so qualify,
share awards (with or without restrictions on vesting), stock appreciation
rights and stock equivalent or phantom units. The number of shares of Class A
common stock available for the issuance of such options, awards, rights and
phantom stock units under the 1996 Plan was initially 5,687,500. Such number is
to increase each year by a number of shares equal to one percent (1%) of
outstanding shares of all classes of common stock, up to a maximum of 8,125,000
shares. Options, awards and units may be granted under the 1996 Plan to
directors, officers, employees and consultants. The purposes of the 1996 Plan
are to encourage ownership of Class A common stock by directors, executive
officers, employees and consultants; to induce them to remain employed or
involved with the Company; and to provide additional incentive for such persons
to promote the success of the Company. In 1999, the Company granted certain
stock awards and stock options to certain executive officers of the Company.
<PAGE>
<TABLE>
Option Grants in Last Fiscal Year
Individual Grants
-------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options Exercise or Grant Date
Options Granted in Base Price Expiration Present
Name Granted (#) (a) Fiscal Year ($/share) Date Value ($) (b)
- ---- --------------- ----------- -------- ---- -------------
<S> <C> <C> <C> <C> <C>
John J. Rigas 100,000 16.7 16.00 8/9/2009 809,000
James P. Rigas 100,000 16.7 16.00 8/9/2009 809,000
Michael J. Rigas 100,000 16.7 16.00 8/9/2009 809,000
Timothy J. Rigas 100,000 16.7 16.00 8/9/2009 809,000
Daniel R. Milliard 81,250 13.6 12.125 9/20/2000 891,313
- -------------------------
<FN>
(a) All options granted were with respect to the Class A common stock of the
Company, with an exercise price equal to the fair market value of such
stock on the date of grant. These options, other than those for Mr.
Milliard, all vest in three equal, annual amounts on the third, forth and
fifth anniversaries of the date of grant.
(b) The grant date present value of each option was calculated using the
Black-Scholes option pricing model using the following assumptions:
expected dividend yield - 0%; risk free interest rate - 6.93%; and expected
volatility - 50%. The expected life used in the calculation of the Black
Scholes option pricing model for the options relating to John J. Rigas,
James P. Rigas, Michael J. Rigas, Timothy J. Rigas and Daniel R. Milliard
were as follows: 10 years, 10 years, 10 years, 10 years and 1.47
years, respectively.
</FN>
</TABLE>
<TABLE>
Aggregate Option Exercises In Last Fiscal Year
And December 31, 1999 Option Values
Number of Securities Value of Unexercised
Underlying In-The-Money
Unexercised Options Options at
December 31, 1999 December 31, 1999
Shares Acquired Value (#) (1) Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable ($) (a)
- ---- --------------- ------------ ------------- ---------------------
<S> <C> <C> <C> <C>
John J. Rigas 0 0 0/100,000 0/3,200,000
James P. Rigas 0 0 0/100,000 0/3,200,000
Michael J. Rigas 0 0 0/100,000 0/3,200,000
Timothy J. Rigas 0 0 0/100,000 0/3,200,000
Daniel R. Milliard 0 0 81,250/0 2,914,844/0
- -------------------------
(a) All options granted were with respect to the Class A common stock of the
Comapny, with an exercise price equal to the fair market value of such
stock on the date of grant. These options, other than those for Mr.
Milliard, all vest in three equal, annual amounts on the third, forth and
fifth anniversaries of the date of grant.
</TABLE>
<PAGE>
Employment Contracts
Mr. Milliard served as President and Vice Chairman of the Company. Mr.
Milliard's employment agreement with the Company provided for base salary,
annual cash bonuses based on achievement, stock options and stock bonuses,
certain employee benefits and certain change-in-control and other provisions,
and was set to expire on March 31, 2001. Mr. Milliard resigned as President and
Secretary of the Company and as senior vice president and secretary of Adelphia
effective as of September 20, 1999 although he continued to serve as a director
of both companies until the 1999 annual meeting on October 25, 1999. Mr.
Milliard will continue to receive payments under his employment agreement
through March 31, 2001 at the rate of his base salary at the time of his
resignation, which will total approximately $282,000 for the period covering
January 1, 2000 through March 31, 2001, and will receive an option to purchase
81,250 shares of the Company's Class A common stock at fair market value on
April 1, 2000. Certain other matters under Mr. Milliard's employment agreement
remain under discussion and negotiation by Mr. Milliard and the Company.
Compensation Committee Interlocks and Insider Participation
James Gray, and Pete Metros serve as members of the Compensation
Committee of the Board of Directors. Neither Mr. Gray nor Mr. Metros is or has
been an officer or employee of the Company.
Board of Directors Compensation
Directors who are not also employees of the Company each receive
compensation from the Company for services as a director at a rate of $750 plus
reimbursement of expenses for each Board and committee meeting attended.
Directors who are employees of the Company do not receive any compensation for
services as a director or as a member of Board committees.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Class A common stock and Class B common stock as of March 24, 2000 by
(i) each person known by the Company to be a beneficial owner of more than 5% of
either the Class A common stock or Class B common stock, (ii) the directors and
executive officers and (iii) all directors and executive officers as a group. As
of March 24, 2000, there were 34,266,591 shares of Class A common stock
outstanding and 35,172,364 shares of Class B common stock outstanding. Unless
otherwise indicated, each of the shareholders in the table has sole voting and
investment power with respect to the shares beneficially owned.
<TABLE>
Total
Class A Class B Common Stock
Common Stock Common Stock (%)
------------ ------------ ------------
<S> <C> <C> <C>
Adelphia Communications Corporation (a).............. 6,966,667(b)(c) 34,306,416 59.4%
John J. Rigas (a).................................... 617,500 -- 0.9%
James P. Rigas (a)................................... 642,500 -- 0.9%
Michael J. Rigas (a)................................. 602,500 -- 0.9%
Timothy J. Rigas (a)................................. 592,500 -- 0.9%
Pete J. Metros....................................... 3,300 -- --
James L. Gray........................................ 5,000 -- --
Peter L. Venetis (d)................................. 517,500 -- 0.7%
All executive officers and directors as a group
(eight persons) (a).................................. 7,977,467(e) 34,306,416(e) 60.9%
Alliance Capital Management L.P.
1290 Avenue of the Americas
New York, NY 10104 3,117,500(f) -- 4.5%
MFS Investment Management
500 Boylston Street, 15th floor
Boston, MA 02116 1,787,820(g) -- 2.6%
<FN>
(a) The business address of Adelphia Communications Corporation is One
North Main Street, Coudersport, PA 16915. In their capacity as executive
officers of Adelphia, the following persons share or may be deemed to share
voting and dispositive power over the shares of common stock owned by
Adelphia, subject to the discretion of the Board of Directors of Adelphia:
John J. Rigas, James P. Rigas, Michael J. Rigas and Timothy J. Rigas. Share
amounts shown for John J. Rigas, James P. Rigas, Michael J. Rigas and
Timothy J. Rigas each include 492,500 of the same Class A common stock
shares held by a Rigas family partnership in which each of them is a
general partner.
(b) Each share of Class B common stock is convertible at any time at the option
of the holder into an equal number of shares of Class A common stock.
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.
(c) The information presented reflects only shares of Class A common stock held
directly by Adelphia and does not include (i) shares of Class A common
stock into which Class B common stock may be converted or (ii) 1,621,501
shares of Class A common stock issuable under warrants held by Adelphia.
Assuming the conversion of all Class B common stock held by Adelphia into
Class A common stock and the exercise of all such warrants, Adelphia would
beneficially own 61.1% of the Class A common stock as of such date.
(d) The information presented includes 25,000 shares owned directly by Mr.
Venetis and 492,500 shares deemed to be benefically owned through a Rigas
family partnership by Ellen K. Rigas, the wife of Mr. Venetis and the
daughter of John J. Rigas.
(e) The information presented includes 6,966,667 shares of Class A common
stock and 34,306,416 shares of Class B common stock held by Adelphia, for
which the following executive officers and directors of the Company share
or may be deemed to share voting and dispositive power over the shares,
<PAGE>
subject to the discretion of the Board of Directors of Adelphia: John J.
Rigas, James P. Rigas, Michael J. Rigas, Timothy J. Rigas and Daniel R.
Milliard. The information presented excludes 1,621,501 shares of Class A
common stock issuable under warrants held by Adelphia.
(f) According to a Schedule 13G, the named entity and Alvin H. Fenichel, its
senior vice president, share or may be deemed to share voting and
investment power over the shares shown, which represent 9.1% of the
outstanding Class A common stock and all of which are held by discretionary
accounts managed by them.
(g) According to a Schedule 13G, the named entity and Arnold D. Scott, its
senior vice president, share or may be deemed to share voting and
investment power over the shares shown, which represent 5.2% of the
outstanding Class A common stock and all of which are held by discretionary
accounts managed by them.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1999, the Company made demand
advances to Adelphia periodically, for which the Company earned interest at
5.15%, totaling approximately $8.5 million. During the period January 1, 1999 to
December 31, 1999, the largest amount due from Adelphia at the end of any
quarter was approximately $392.6 million at December 31, 1999.
The Company and Adelphia have entered into a registration rights
agreement, as amended whereby the Company has agreed to provide to Adelphia and
certain permitted transferees, with respect to common stock owned by them, two
demand registration rights per year under certain conditions, including that any
such demand be with respect to shares with a minimum of $10 million in market
value, and with certain piggyback registration rights in future public offerings
of the common stock. Adelphia's demand registration rights terminate at such
time as Adelphia ceases to hold at least $10 million in market value of common
stock.
During the year ended December 31, 1999, the Company incurred charges
from Adelphia of approximately $8.6 million for the provision to the Company of
shared corporate overhead services in areas such as personnel, payroll,
management information services, computer services, shared use of office,
aircraft and network facilities and support equipment. The Company expects that
charges for the provision of similar services by Adelphia to the Company, or by
the Company to Adelphia, will continue to be incurred or charged by the Company
in the future. The transactions related to the provision of these services have
been based on allocation of Adelphia's incremental costs incurred for these
services, and do not necessarily represent the actual costs that would be
incurred if the Company was to secure such services on its own or the costs
which would be charged on a pro-rata allocation of such costs under the
Management Services Agreement between the Company and Adelphia dated April 10,
1998, with respect to shared corporate overhead service. During the year ended
December 31, 1999, the Company (i) paid Adelphia or certain of Adelphia's
affiliates, fiber lease payments of approximately $0.2 million, (ii) received
from Adelphia $1.8 million in revenue for providing switched services, and (iii)
paid to entities owned by members of the Rigas family who are executive officers
of the Company approximately $7.6 million for property, plant and equipment and
services.
On March 2, 1999, Highland Holdings, a partnership owned by the Rigas
family, purchased directly from the Company $100 million aggregate principal
amount of the Company's 12% Senior Subordinated Notes due 2007 at a purchase
price equal to the principal amount less the discount to the initial purchasers
of the other $200 million of such notes sold on that date.
On November 30, 1999, the Company issued and sold 8,750,000 shares of
Class A common stock at a price to the public of $30.00 per share.
Simultaneously with the closing of this transaction, the Company issued and sold
5,181,350 shares of Class B common stock to Adelphia at a purchase price of
$28.95 per share, which was equal to the offering price less the underwriting
discount for the Class A common stock sold to the public.
