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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
Commission file number 0-16899
ARAHOVA COMMUNICATIONS, INC.
(Successor by Merger to Century Communications Corp.)
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 25-1844576
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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One North Main Street
Coudersport, Pennsylvania 16915-1141
(Address of principal executive offices, including zip code)
(814) 274-9830
(Registrant's telephone number, including area code)
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock -1,000 outstanding shares as of October 11, 1999
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EXPLANATORY NOTE
On October 1, 1999 Century Communications Corp. ("Century") was merged with
and into Adelphia Acquisition Subsidiary, Inc. ("Merger Sub"), a wholly owned
subsidiary of Adelphia Communications Corporation. ("Adelphia"). Upon filing of
the Certificate of Merger with the Delaware Secretary of State on October 1,
1999, the Merger Sub's corporate name was changed to Arahova Communications,
Inc. ("Arahova"). This quarterly report on Form 10-Q filed by Arahova thus
represents financial information for Century for the quarter ended August 31,
1999. For historical information regarding Century/Arahova, please see the
filings made by Century prior to the date of this filing.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
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<CAPTION>
August 31,
1999 May 31,
(Unaudited) 1999
------------ -------
ASSETS
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Current assets:
Cash and short-term investments $ 1,481,862 $ 626,155
Accounts receivable less allowance for doubtful
accounts of $2,165 and $3,311, respectively 27,466 16,775
Prepaid expenses and other current assets 4,980 3,705
Investment in marketable equity securities 56,531 49,143
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Total current assets 1,570,839 695,778
Property, plant and equipment - net 593,640 585,693
Investment in marketable equity securities 28,441 25,756
Debt issuance costs, less accumulated amortization of $23,969
and $22,464, respectively 25,552 27,057
Cable television franchises, less accumulated amortization of
$374,040 and $361,498, respectively 283,816 296,280
Excess of purchase price over value of net assets acquired, less
accumulated amortization of $44,249 and $43,001, respectively 157,621 158,869
Other assets 11,083 10,866
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$ 2,670,992 $ 1,800,299
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</TABLE>
See notes to consolidated financial statements
1
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CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
Amounts in Thousands (Except Share Data)
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<CAPTION>
August 31,
1999 May 31,
(Unaudited) 1999
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LIABILITIES AND COMMON STOCKHOLDERS'
DEFICIENCY
Current liabilities:
Current maturities of long-term debt $ 290,030 $ 20,050
Accounts payable 36,984 35,053
Accrued expenses and other current liabilities 254,087 102,260
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Total current liabilities 581,101 157,363
Long-term debt 2,640,008 2,022,640
Deferred income taxes 5,492 5,290
Minority interest in subsidiaries 78,073 74,915
Other deferred income 5,350 5,410
Commitments and contingencies (See Notes)
Common stockholders' deficiency:
Common stock, par value $.01 per share:
Class A, authorized 400,000,000 shares,
issued, 67,554,551 and 67,232,335 shares,
respectively, and outstanding 33,701,226 and
33,423,167 shares, respectively 675 672
Class B, authorized 300,000,000 shares, issued and
outstanding 42,322,059 shares 423 423
Additional paid-in capital 193,209 191,234
Other, including 33,853,325 and 33,809,168 treasury
shares, respectively (129,374) (143,818)
Accumulated deficit (703,965) (513,830)
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Total common stockholders' deficiency (639,032) (465,319)
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$2,670,992 $1,800,299
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</TABLE>
See notes to consolidated financial statements
2
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CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Amounts in Thousands (Except Share Data)
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<CAPTION>
Three Months Ended August 31,
1999 1998
---- ----
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Revenue $ 139,804 $ 126,716
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Costs and expenses:
Cost of services 28,325 27,153
Selling, general and administrative 32,164 29,128
Depreciation and amortization 39,828 39,609
Merger costs 173,411 -
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273,728 95,890
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Operating loss (133,924) 30,826
Interest expense 48,357 47,929
Gain (loss) on sale of assets - 5,542
Other income 240 -
---------- ----------
Loss before income tax expense
and minority interest (182,041) (11,561)
Income tax expense 4,010 4,785
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Loss before minority interest (186,051) (16,346)
Minority interest in income of subsidiaries (4,084) (4,492)
---------- ----------
Net loss $ (190,135) $ (20,838)
---------- ----------
---------- ----------
Net loss per common share - basic and diluted $ (2.51) $ (.28)
---------- ----------
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Weighted average number of common shares
outstanding during the period - basic and diluted 75,832,000 74,775,000
---------- ----------
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</TABLE>
See notes to consolidated financial statements
3
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CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Amounts in Thousands
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<CAPTION>
Three Months Ended August 31,
--------------------------------
1999 1998
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OPERATING ACTIVITIES:
Cash received from subscribers and others $ 165,659 $ 150,159
Cash paid to suppliers, employees and
governmental agencies (115,347) (87,534)
Interest paid (34,381) (35,573)
---------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,931 27,052
---------- ------------
INVESTING ACTIVITIES:
Capital expenditures (33,940) (23,412)
Cable television franchise expenditures (80) (77)
Acquisition of other assets (217) (1,792)
Sale of radio stations - 11,538
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NET CASH USED IN INVESTING ACTIVITIES (34,237) (13,743)
---------- ------------
FINANCING ACTIVITIES:
Proceeds from long-term borrowings 875,000 -
Principal payments on long-term debt (1,000) (7,000)
Purchase of treasury stock (1,965) (1,041)
Issuance of common stock 1,978 2,305
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 874,013 (5,736)
---------- ------------
NET INCREASE IN CASH AND SHORT-TERM
INVESTMENTS - CONTINUING OPERATIONS 855,707 7,573
CASH FLOWS OF DISCONTINUED OPERATIONS - NET - 1,776
CASH AND SHORT-TERM INVESTMENTS - BEGINNING
OF PERIOD 626,155 285,498
---------- ------------
CASH AND SHORT-TERM INVESTMENTS - END OF PERIOD $1,481,862 $ 294,847
---------- ------------
---------- ------------
</TABLE>
See notes to consolidated financial statements
4
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CENTURY COMMUNICATIONS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
Amounts in Thousands
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<CAPTION>
Three Months Ended August 31,
-------------------------------
1999 1998
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RECONCILIATION OF NET LOSS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
NET LOSS $ (190,135) $ (20,838)
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Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 39,828 39,609
Minority interest in income of subsidiaries -
continuing operations 4,084 4,492
Deferred income taxes 202 -
Amortization of restricted stock 6,504 -
Non cash interest charges 14,810 13,923
Gain on sale of assets and other (473) (5,890)
Change in assets and liabilities net of effects of acquired
cable television systems:
Accounts receivable - (increase) (10,691) (10,062)
Prepaid expenses and other current assets - (increase) (1,275) (1,019)
Accounts payable and accrued expenses - increase 153,077 6,837
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Total adjustments 206,066 47,890
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 15,931 $ 27,052
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</TABLE>
See notes to consolidated financial statements
5
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CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except subscriber and share data)
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying interim unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the consolidated financial
position of Century Communications Corp. and subsidiaries ("Century") or ("the
Predecessor Corporation") as of August 31, 1999 and the results of its
consolidated operations and cash flows for the periods ended August 31, 1999 and
1998. The August 31, 1999 and 1998 financial statements do not include all
disclosures required by generally accepted accounting principles. The statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in Century's May 31, 1999 Annual Report on Form 10-K,
which includes a summary of significant accounting policies and other
disclosures. Certain reclassifications have been made to prior period balances
to conform with the current period's presentation. The consolidated balance
sheet at May 31, 1999 is audited.
NOTE 2. MERGER TRANSACTION
On October 1, 1999, Adelphia Communications Corporation ("Adelphia"), a Delaware
corporation, and Century, a New Jersey corporation, consummated a merger ("the
Merger") whereby Century was merged with and into Adelphia Acquisition
Subsidiary, Inc. ("Merger Sub"), a Delaware corporation and a wholly owned
subsidiary of Adelphia, pursuant to an Agreement and Plan of Merger ("the Merger
Agreement"), dated as of March 5, 1999, as amended as of July 12, 1999 and July
29, 1999 by and among Adelphia, Century and Merger Sub. As a result of the
Merger, Century has become a wholly owned subsidiary of Adelphia. The Merger Sub
is sometimes referred to herein as the "Successor Corporation". The name of the
Successor Corporation was changed to Arahova Communications, Inc. ("Arahova") on
October 1, 1999. As used herein,"the Company" refers to the Predecessor
Corporation as well as the Merger Sub, as the Successor to the Predecessor
Corporation.
Pursuant to the terms of the Merger Agreement, and subject to the limitations
set forth below, each issued and outstanding share of Class A common stock, par
value $.01 per share, of Century ("Century Class A Common Stock") was converted,
at the option of the holder, into the right to receive either (1) $44.14 in
cash, or (2) 0.77269147 shares of Class A common stock, par value $.01 per share
of Adelphia ("Adelphia Class A Common Stock"). Subject to the limitations set
forth below, each issued and outstanding share of Class B common stock, par
value $.01 per share, of Century ("Century Class B Common Stock") was converted,
at the option of the holder, into the right to receive either (1) $48.14 in
cash, or (2) 0.84271335 shares of Adelphia Class A Common Stock.
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The aggregate number of shares of Century's Class A Common Stock converted into
the right to receive cash in the Merger was limited to 20.76% of the number of
shares of Century's Class A Common Stock outstanding immediately prior to the
effective time of the Merger. The aggregate number of shares of the Century's
Class A Common Stock converted into shares of Adelphia Class A Common Stock in
the Merger was limited to 79.24% of the number of such shares of Century's Class
A Common Stock outstanding immediately prior to the effective time of the
Merger. The aggregate number of shares of Century's Class B Common Stock
converted into the right to receive cash in the Merger was limited to 24.54% of
the number of shares of Century's Class B Common Stock outstanding immediately
prior to the effective time of the Merger. The aggregate number of shares of
Century's Class B Common Stock converted into the right to receive shares of
Adelphia Class A Common Stock in the Merger was limited to 75.46% of the number
of shares of Century's Class B Common Stock outstanding immediately prior to the
effective time of the Merger.
Century Class A Common stockholders made stock elections for an amount of
Adelphia Class A Common Stock exceeding the amount available to such holders. As
a result, holders of Century Class A Common Stock who elected to receive
Adelphia Class A Common Stock will receive 86.42% of their consideration in
Adelphia Class A Common Stock, or approximately 0.6678 of a share of Adelphia
Class A Common Stock, and 13.58% of their consideration in cash, or
approximately $5.99, for each share of Century Class A Common Stock, without
interest. Holders of Century Class A Common Stock who elected to receive cash
will receive $44.14 per share, without interest. Adelphia's transfer agent,
American Stock Transfer & Trust Company, began to mail checks and stock
certificates on October 12, 1999.
Century Class B common stockholders made stock elections for amounts of cash and
Adelphia Class A common stock equal to the amounts available to such holders. As
a result, holders of Century Class B common stock who elected to receive
Adelphia Class A common stock will receive 0.84271335 of a share of Adelphia
Class A common stock for each share of Century Class B common stock, and holders
of Century Class B common stock who elected to receive cash will receive $48.14
per share, without interest.
Also pursuant to the terms of the Merger Agreement, each outstanding option to
purchase shares of Century Class A Common Stock granted under Century's 1993
Non-Employee Directors' Stock Option Plan, the 1994 Stock Option Plan, and all
other similar plans or arrangements (collectively "Option Plans"), whether or
not previously exercisable or vested, became fully exercisable and vested.
Option holders were given the option to exercise immediately prior to the Merger
or to rollover their options. Furthermore, all restricted shares of Century
Class A Common Stock issued pursuant to the 1992 Management Equity Incentive
Plan became fully vested and ceased to be restricted.
On or about March 10, 1999, a lawsuit was commenced by the filing of a class
action complaint (the "Complaint") by one of Century's Class A Common
stockholders on behalf of himself and all others similarly situated naming
Century's Class B Common stockholders and all of Century's Directors as
defendants for alleged breaches of fiduciary duty in connection with approval of
the Merger consideration. Century and Adelphia were also named as defendants for
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allegedly aiding and abetting in the foregoing breaches of fiduciary duty. The
Complaint seeks damages in an unspecified amount and such other relief as may be
appropriate. On July 21, 1999, the court granted Century's and the other
defendants' motion for extension of time to answer or otherwise respond to the
complaint to the earlier of November 15, 1999 or twenty days after the effective
date of the Merger.
At the effective time of the Merger, Adelphia purchased Citizens Utilities
Company's ("Citizens") 50% interest in the Century/Citizens Joint Venture, one
of Century's 50% owned joint ventures, for a purchase price of approximately
$157,500, comprised of approximately $27,700 in cash, approximately 1.85 million
shares of Adelphia Class A Common Stock and the assumption of indebtedness. This
joint venture served approximately 92,300 basic subscribers in California and
was jointly owned by Century and Citizens Cable Company, a subsidiary of
Citizens.
In addition, Century sold its shares of Class A Common Stock of Citizens to Dr.
Leonard Tow, Chairman and Chief Executive Officer of the Company, at the
effective time of the Merger at fair market value, based on the closing market
price of such shares on the date the Merger Agreement was signed. Based on that
closing price, the aggregate purchase price was approximately $39,800. At August
31, 1999, this investment is recorded on the Company's books at $56,531. Upon
completion of the Merger, the Company will record a loss equal to the difference
between the fair market value of the shares and the sales price of the shares as
determined by the Merger Agreement. As of August 31, 1999, these shares
constituted approximately 2% of the outstanding stock of Citizens.
NOTE 3. MARKETABLE EQUITY SECURITIES
In fiscal 1999, the Company sold to UIH Asia/Pacific Communications Inc.
("UAP"), a unit of United International Holdings, Inc. ("UIH"), the Company's
25% ownership interest in XYZ Entertainment Pty. Limited ("XYZ") for
approximately $24,600. Approximately 95% of the sales price was paid in the form
of UIH Series B Convertible Preferred Stock ("UIH Convertible Stock") which is
convertible at any time into approximately ten shares of UIH Class A Common
Stock for each share of UIH Convertible Stock, at a conversion price of $21.25
per share. The Company could not sell, assign, pledge, transfer or otherwise
convey any of these UIH securities prior to September 11, 1999.
Also in fiscal 1999, East Coast Pay Television Pty. Limited ("ECT") sold
substantially all of its operating assets to Austar Entertainment Pty Ltd.
("Austar"), a wholly owned subsidiary of UAP, for approximately $6,100 in the
form of UIH Convertible Stock. ECT has finalized the shutdown of its operations,
including the liquidation of its current liabilities. On December 16, 1998, the
creditors of ECT (including the Company) entered into an Intercreditor Agreement
pursuant to which substantially all of the remaining assets of ECT have been
distributed among them and the Company has received 5,652 units of UIH
Convertible Stock, of which 1,156 units were transferred to the ECT minority
interest shareholders during the three months ended August 31, 1999. The Company
could not sell, assign, pledge, transfer or otherwise convey any of the
remaining 4,496 units of UIH Convertible Stock until July 9, 1999. During the
three months
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ended August 31, 1999, the Company recorded an increase in unrealized
appreciation of approximately $2,500 related to a mark-to-market adjustment for
these units of UIH Convertible Stock , all of which were held as of August 31,
1999.
At August 31, 1999, the Company held a total of 121,413 units of UIH Convertible
Stock, including accrued stock dividends. The closing price of the UIH Class A
Common Stock on the Nasdaq National Market was $73.25.
NOTE 4. REVENUE RECOGNITION
Revenue includes earned subscriber service revenue and charges for installation
and connections, net of programmers' share of pay television revenue. Such
programmers' share netted against service income amounted to $39,236 and $35,586
for the three months ended August 31, 1999 and 1998, respectively. Also included
within revenue was investment income of $8,270 and $3,899 for the three months
ended August 31, 1999 and 1998, respectively.
NOTE 5. DISPOSITION
In June 1998, Century-ML Cable Venture, a 50% owned joint venture partnership
between the Company and ML Media Partners, L.P., sold substantially all of the
assets of its two radio stations for approximately $11,500. The Company recorded
a pre-tax gain of $5,506 in relation to the sale of these two radio stations
during the three months ended August 31, 1998.
NOTE 6. PENDING ACQUISITION
In August 1998, the Company entered into an agreement to acquire a cable
television system which serves approximately 19,000 primary basic subscribers in
Moreno Valley and Riverside County, California. The purchase price for this
system is approximately $33,000. The Company currently expects to fund the
acquisition using available credit facilities. The purchase of this system by
the Company is subject to regulatory approvals. There is no assurance that the
Company will obtain such approvals or that such acquisition will be consummated.
NOTE 7. LONG-TERM DEBT
At August 31, 1999, the Company's public debt securities of approximately
$1,887,000 in the aggregate have interest rates ranging from 8 3/8% to 9 3/4%,
with remaining maturities ranging from 1 to 18 1/4 years. The Company's public
debt securities rank pari passu with all existing and future Senior Indebtedness
(as that term is defined in the respective Indentures under which the public
debt securities were issued) of the Company, are senior in right of payment to
all existing and future subordinated indebtedness of the Company, and may not be
redeemed prior to maturity. On October 1, 1999, Arahova executed supplemental
indentures in relation to the public debt wherein it expressly assumed payment
obligations on Century's public debt securities.
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Certain subsidiaries of the Company had four credit facilities (the CCC-I,
CCC-II, Century Venture Corp. and CCCTV credit facilities) with $1,155,000 of
total potential credit availability of which $963,000 was outstanding at August
31, 1999, including an aggregate of $875,000 borrowed under the CCC-I and CCC-II
credit facilities on August 26, 1999. The $875,000 of proceeds were invested by
CCC-I and CCC-II in short-term time deposits.
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. They are used to manage well-defined
interest rate risks. The Company entered into a five-year interest rate hedge
agreement during October 1997 in relation to certain of its fixed-rate bank
debt. The hedge agreement is structured such that the Company pays a variable
rate of interest based on the higher of the U.S. dollar six-month LIBOR or the
U.S. dollar six-month LIBOR set in arrears and receives a fixed rate of interest
of 6.695% based on a notional amount of $35,000. Subject to the terms of the
hedge agreement, if the six-month LIBOR is set at or below 4.75% at the
beginning of any period, the hedge agreement would terminate for that period
alone and the Company would receive a 50 basis points subsidy for that period
alone.
The subsidiaries' credit facilities and the Company's public debt securities,
among other things, require the maintenance of certain financial and operating
covenants, restrict the use of proceeds from such borrowing, limit the
incurrence of additional indebtedness, restrict the purchase or redemption of
its capital stock and limit the ability to pay dividends and management fees and
make capital expenditures.
At August 31, 1999 and as of October 15, 1999, the Company and its subsidiaries
were in compliance with all covenants of their respective debt agreements.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Cable Modem Services
The Company is presently in the initial deployment stage of high-speed cable
modem services. On May 1, 1998, the Company entered into an agreement with @Home
Network ("@Home"), a provider of high-speed internet services via cable
infrastructure, to deliver high-speed internet services in certain of the
Company's markets covering approximately 1,315,000 homes passed. The agreement
has a term of six years and contains mutual exclusivity provisions relating to
the provision of high-speed internet services in certain of the Company's
systems covering the same approximately 1,315,000 homes passed. In connection
with the agreement, the Company has received a warrant to purchase 5,260,000
shares of @Home's Series A Common Stock at an exercise price equal to $5.25 per
share, subject to adjustment. The warrant becomes exercisable on a schedule
based upon and subject to the commercial deployment (as defined) of the @Home
services by the Company, which must be certified by the Company and @Home on or
after March 31 of each year during the term of the warrant for the 12 month
period ending March 31. As of both March 31, 1999 and August 31, 1999 no portion
of the warrant had become exercisable, therefore no asset has been recorded.
From March 31, 1999 through August 31, 1999, the Company has passed
approximately 151,000 homes or 11.5% of the commercial
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deployment specified in the Agreement. As of August 31, 1999, the closing price
of the @Home Series A Common Stock on the Nasdaq National Market (adjusted for
stock splits) was $40.125 per share.
Merger Related Costs
The Company has employment agreements primarily with four executive officers
including Dr. Leonard Tow, Chairman and Chief Executive Officer of the Company.
The terms of these employment agreements expire on June 30, 2003, except that
Dr. Tow's agreement continues for an additional five-year advisory period. Each
of these employment agreements is terminable by the executive officer upon a
"change of control" or a "threatened change of control" of the Company. One of
the events that is considered to be a threatened change of control under each
employment agreement is the acquisition by any person of securities of the
Company such that the person files or is required to make a filing pursuant to
Regulation 13D under the Securities Exchange Act of 1934, as amended. Such an
event has occurred and, therefore, for purposes of these employment agreements,
a "threatened change of control" has occurred. During the quarter ended August
31, 1999, each of these executive officers exercised his right to terminate his
employment agreement but continued working for the Company through the closing
of the Merger.
Pursuant to the employment agreement, upon such termination, each executive
officer is entitled to receive his base salary through the end of the term of
his employment agreement, an annual cash bonus for the remainder of the term
equal to his most recently awarded cash bonus, continuation of medical, dental,
life and disability insurance for the remainder of the term on the same basis as
provided while the agreement was in effect and the use of office space for one
year. In addition, upon termination, all of his Company stock options vest and
become exercisable and the restrictions on all of his shares of restricted stock
of the Company lapse. The total cost to the Company of the termination of the
executive employment agreements was approximately $252,000. Approximately
$172,000 of these costs were recorded by the Company during the three months
ended August 31, 1999 and the remaining $80,000 of these costs, which resulted
from the completion of the Merger, will be recorded subsequent to August 31,
1999 and through the completion of the Merger.
The Company incurred certain other Merger related costs subsequent to August 31,
1999. Approximately $77,000 of these costs relate primarily to investment
banking, legal and accounting services incurred in relation to the completion of
the Merger. The Company also incurred employee severance related costs related
to the Merger and the continuance of the employment of key personnel through the
completion of the Merger. The total cost to the Company of these employee
severance related costs was approximately $9,000. These additional Merger
related costs will be recorded by the Company during the three months ended
November 30, 1999.
The Company incurred total incremental compensation, legal and consulting costs
of $173,411 during the three months ended August 31, 1999 in connection with the
Merger. These costs
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include the $172,000 of costs noted above which were incurred during the three
months ended August 31, 1999 in relation to the termination of the executive
employment agreements.
NOTE 9. STRATEGIC PARTNERSHIP
On November 18, 1998, the Company and TCI Communications, Inc. ("TCI") entered
into a definitive agreement to establish a strategic partnership (the
"Partnership"). TCI will contribute to the Partnership all the assets related to
the businesses of certain cable television systems owned and operated by TCI
serving approximately 249,200 primary basic subscribers in the area of southern
California. The Company will contribute to the Partnership all the assets
related to the businesses of certain cable television systems owned and operated
by the Company serving approximately 545,100 primary basic subscribers in the
area of southern California, including approximately 103,500 primary basic
subscribers to be acquired in an exchange of cable systems described below as
well as approximately 20,200 primary basic subscribers related to the Company's
pending acquisition of the cable television system serving Moreno Valley and
certain portions of Riverside County, California (See Note 6). The Company will
manage the newly combined cable systems and own approximately 69.5 percent of
the Partnership. The cable systems contributed by each party will be valued
based upon annualized cash flow of such contributed systems as of the closing
date of the transaction, subject to certain fees and expenses. These values will
be used in the process of determining the ownership percentages of the
respective parties at the closing date of the transaction.
The Company is expected to manage the Partnership in return for a management fee
payable by the Partnership calculated based on a percentage of the annual total
gross revenues of the Partnership, in addition to payment of certain fees and
expenses. However, under the Agreement of Limited Partnership, the Partnership
may not, among other things, without the approval of the TCI partner or the
unanimous vote of all the members of the Partnership committee, enter into
certain transactions with affiliates, issue any Partnership or other equity
interest, permit any subsidiary to issue any equity interest, effectuate certain
mergers or other business combinations or incur in excess of certain levels of
indebtedness.
As part of the Partnership Transaction, the Company and TCI have agreed to
exchange cable systems owned by the Company in certain communities in northern
California for certain cable systems owned by TCI in southern California,
allowing each of them to unify operations in existing service areas. TCI will
exchange its East San Fernando Valley cable system serving approximately 103,500
primary basic subscribers for the Company's northern California cable systems
(San Pablo, Benecia, Fairfield and Rohnert Park, California), serving
approximately 96,500 primary basic subscribers.
It is anticipated that the Partnership will be funded by approximately $900,000
of indebtedness. There is no assurance that such financing will be available to
the Partnership or that the Partnership will be able to obtain such financing on
terms favorable to the Partnership.
The closing of the foregoing transactions is subject to, among other things,
each party obtaining the required consents and all appropriate regulatory and
other approvals, including from the
12
<PAGE>
Federal Communications Commission and local franchising authorities and under
the HSR Act. On February 18, 1999, the waiting period under the HSR Act for the
Partnership Transaction terminated. In connection with the Partnership
Transaction, the Company has completed filing the material applications seeking
transfer of the Company's applicable franchise licenses with the FCC and local
franchising authorities. There is no assurance that the Company will obtain such
approvals or that such transactions will be consummated.
13
<PAGE>
NOTE 10. CHANGES IN STOCKHOLDERS' DEFICIENCY
<TABLE>
<CAPTION>
Common Stock
--------------------------------------
Class A Class B Additional
----------------- ------------------ Paid-in Accumulated
Shares Dollars Shares Dollars Capital Deficit
---------- ------- ---------- ------- ------- -------
Balance at June 1, 1998 65,684,888 $657 42,726,115 $427 $178,893 $(770,014)
Shares issued in connection
with employee incentive plans 1,118,391 11 25,000 12,341
Class A Shares purchased by the
Company from employees
Class B shares converted to Class A
shares 429,056 4 (429,056) (4)
Change in unrealized appreciation of
marketable securities
Net income 256,184
---------- ---- ---------- ---- -------- ---------
Balance at May 31, 1999 67,232,335 $672 42,322,059 $423 $191,234 $(513,830)
Shares issued in connection
with employee incentive plans 322,216 3 1,975
Class A Shares purchased by the
Company from employees
Change in unrealized appreciation of
marketable securities
Net loss (190,135)
---------- ---- ---------- ---- -------- ---------
Balance at August 31, 1999 67,554,551 $675 42,322,059 $423 $193,209 $(703,965)
---------- ---- ---------- ---- -------- ---------
---------- ---- ---------- ---- -------- ---------
<CAPTION>
Total Comprehensive
Stockholders' Income
Other Deficiency (Loss)
----- ---------- -------
<S> <C> <C> <C>
Balance at June 1, 1998 $(135,215) $(725,252)
Shares issued in connection
with employee incentive plans (3,790) 8,562
Class A Shares purchased by the
Company from employees (1,505) (1,505)
Class B shares converted to Class A
shares -
Change in unrealized appreciation of
marketable securities (3,308) (3,308) $ (3,308)
Net income 256,184 256,184
--------- --------- ---------
Balance at May 31, 1999 $(143,818) $(465,319) $ 252,876
---------
Shares issued in connection ---------
with employee incentive plans 6,504 8,482
Class A Shares purchased by the
Company from employees (1,965) (1,965)
Change in unrealized appreciation of
marketable securities 9,905 9,905 $ 9,905
Net loss (190,135) (190,135)
--------- --------- ---------
Balance at August 31, 1999 $(129,374) $(639,032) $(180,230)
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
August 31, May 31,
1999 1999
------------ -------
<S> <S> <S>
Other stockholders' deficiency items:
Treasury stock $ (156,167) $ (154,202)
Unrealized appreciation of marketable
securities 26,793 16,888
Foreign currency translation adjustment -
Unearned compensation on restricted stock - (6,504)
------------ ----------
$ (129,374) $ (143,818)
------------ ----------
------------ ----------
Accumulated other comprehensive income:
Accumulated other comprehensive income - beginning
of period $ 16,888 $ 20,196
Change in unrealized appreciation of
marketable securities 9,905 (3,308)
------------ ----------
Accumulated other comprehensive income - end of period $ 26,793 $ 16,888
------------ ----------
------------ ----------
</TABLE>
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information contained in this Part I, Item 2 updates, and should be read in
conjunction with, information set forth in Part II, Items 7 and 8, in the Annual
Report on Form 10-K for the fiscal year ended May 31, 1999, filed by Century
Communications Corp. (the "Predecessor Corporation") in addition to the interim
consolidated financial statements and accompanying notes presented in Part I,
Item 1 of this Form 10-Q.
RESULTS OF OPERATIONS (dollar amounts in thousands except subscriber, homes
passed and share data)
On October 1, 1999, Adelphia Communications Corporation ("Adelphia"), a Delaware
corporation, and Century Communications Corp. ("Century"), a New Jersey
corporation, consummated a merger ("the Merger") whereby Century was merged with
and into Adelphia Acquisition Subsidiary, Inc. ("Merger Sub"), a Delaware
corporation and a wholly owned subsidiary of Adelphia, pursuant to an Agreement
and Plan of Merger ("the Merger Agreement"), dated as of March 5, 1999, as
amended as of July 12, 1999 and July 29, 1999 by and among Adelphia, Century and
Merger Sub. As a result of the Merger, Century has become a wholly owned
subsidiary of Adelphia. Merger Sub is sometimes referred to herein as the
"Successor Corporation". The name of the Successor Corporation was changed to
Arahova Communications, Inc. ("Arahova") on October 1, 1999. As used herein,
"the Company" refers to the Predecessor Corporation as well as the Merger Sub,
as the successor to the Predecessor Corporation.
The Company is primarily engaged in the ownership and operation of cable
television systems in the United States and earns its revenues primarily from
subscriber fees. At August 31, 1999, the Company owned and operated 72 cable
television systems in 25 states and Puerto Rico. At that date, the Company's
cable systems passed approximately 2,373,000 homes and served a total of
approximately 1,330,000 primary basic subscribers. Certain of the Company's
cable systems are owned 50% by the Company and 50% by unaffiliated entities. At
August 31, 1999, these 50%-owned systems passed approximately 631,000 homes and
served approximately 335,000 primary basic subscribers in the aggregate.
Pursuant to the terms of the Merger Agreement, and subject to the limitations
set forth below, each issued and outstanding share of Class A common stock, par
value $.01 per share, of Century ("Century Class A Common Stock") was converted,
at the option of the holder, into the right to receive either (1) $44.14 in
cash, or (2) 0.77269147 shares of Class A common stock, par value $.01 per share
of Adelphia ("Adelphia Class A Common Stock"). Subject to the limitations set
forth below, each issued and outstanding share of Class B common stock, par
value $.01 per share, of Century ("Century Class B Common Stock") was converted,
at the option of the holder, into the right to receive either (1) $48.14 in
cash, or (2) 0.84271335 shares of Adelphia Class A Common Stock.
15
<PAGE>
The aggregate number of shares of Century's Class A Common Stock converted into
the right to receive cash in the Merger was limited to 20.76% of the number of
shares of Century's Class A Common Stock outstanding immediately prior to the
effective time of the Merger. The aggregate number of shares of the Century's
Class A Common Stock converted into shares of Adelphia Class A Common Stock in
the Merger was limited to 79.24% of the number of such shares of Century's Class
A Common Stock outstanding immediately prior to the effective time of the
Merger. The aggregate number of shares of Century's Class B Common Stock
converted into the right to receive cash in the Merger was limited to 24.54% of
the number of shares of Century's Class B Common Stock outstanding immediately
prior to the effective time of the Merger. The aggregate number of shares of
Century's Class B Common Stock converted into the right to receive shares of
Adelphia Class A Common Stock in the Merger was limited to 75.46% of the number
of shares of Century's Class B Common Stock outstanding immediately prior to the
effective time of the Merger.
Century Class A Common stockholders made stock elections for an amount of
Adelphia Class A Common Stock exceeding the amount available to such holders. As
a result, holders of Century Class A Common Stock who elected to receive
Adelphia Class A Common Stock will receive 86.42% of their consideration in
Adelphia Class A Common Stock, or approximately 0.6678 of a share of Adelphia
Class A Common Stock, and 13.58% of their consideration in cash, or
approximately $5.99, for each share of Century Class A Common Stock, without
interest. Holders of Century Class A Common Stock who elected to receive cash
will receive $44.14 per share, without interest. Adelphia's transfer agent,
American Stock Transfer & Trust Company, began to mail checks and stock
certificates on October 12, 1999.
Century Class B common stockholders made stock elections for amounts of cash and
Adelphia Class A common stock equal to the amounts available to such holders. As
a result, holders of Century Class B common stock who elected to receive
Adelphia Class A common stock will receive 0.84271335 of a share of Adelphia
Class A common stock for each share of Century Class B common stock, and holders
of Century Class B common stock who elected to receive cash will receive $48.14
per share, without interest.
Also pursuant to the terms of the Merger Agreement, each outstanding option to
purchase shares of Century Class A Common Stock granted under Century's 1993
Non-Employee Directors' Stock Option Plan, the 1994 Stock Option Plan, and all
other similar plans or arrangements (collectively "Option Plans"), whether or
not previously exercisable or vested, became fully exercisable and vested.
Option holders were given the option to exercise immediately prior to the Merger
or to rollover their options. Furthermore, all restricted shares of Century
Class A Common Stock issued pursuant to the 1992 Management Equity Incentive
Plan became fully vested and ceased to be restricted.
On or about March 10, 1999, a lawsuit was commenced by the filing of a class
action complaint (the "Complaint") by one of Century's Class A Common
stockholders on behalf of himself and all others similarly situated naming
Century's Class B Common stockholders and all of Century's Directors as
defendants for alleged breaches of fiduciary duty in connection with approval of
the Merger consideration. Century and Adelphia were also named as defendants for
16
<PAGE>
allegedly aiding and abetting in the foregoing breaches of fiduciary duty. The
Complaint seeks damages in an unspecified amount and such other relief as may be
appropriate. On July 21, 1999, the court granted Century's and the other
defendants' motion for extension of time to answer or otherwise respond to the
complaint to the earlier of November 15, 1999 or twenty days after the effective
date of the Merger. See Part II Item 1. Legal Proceedings.
At the effective time of the Merger, Adelphia purchased Citizens Utilities
Company's ("Citizens") 50% interest in the Century/Citizens Joint Venture, one
of Century's 50% owned joint ventures, for a purchase price of approximately
$157,500, comprised of approximately $27,700 in cash, approximately 1.85 million
shares of Adelphia Class A Common Stock and the assumption of indebtedness. This
joint venture served approximately 92,300 basic subscribers in California and
was jointly owned by Century and Citizens Cable Company, a subsidiary of
Citizens.
In addition, Century sold its shares of Class A Common Stock of Citizens
Utilities Company to Dr. Leonard Tow, Chairman and Chief Executive Officer of
Century, at the effective time of the Merger at fair market value, based on the
closing market price of such shares on the date the Merger Agreement was signed.
Based on that closing price, the aggregate purchase price was approximately
$39,800. At August 31, 1999, this investment is recorded on the Company's books
at $56,531. Upon completion of the Merger, the Company will record a loss equal
to the difference between the fair market value of the shares and the sales
price of the shares as determined by the Merger Agreement. As of August 31,
1999, these shares constituted approximately 2% of the outstanding stock of
Citizens.
The following discussion of results of operations and financial condition is
presented for continuing operations only and does not reflect the impact of the
Merger or changes in capital structure or business plans associated with the
Merger.
The Telecommunications Act of 1996 (the "Act") which was enacted in February
1996, alters federal, state and local laws and regulations regarding
telecommunications providers and services, including the cable television
industry. The Act deregulated (except for basic service) cable service rates on
March 31, 1999.
THREE MONTHS ENDED AUGUST 31, 1999 AND AUGUST 31, 1998
Revenue increased by $13,088 or 10.3%, over the corresponding three months ended
August 31, 1998. This increase in revenue was a result of subscription price
increases and increases in the number of cable television subscriptions as well
as acquisitions and investment income. Average primary basic cable television
subscribers ("Basic Subscribers") for the twelve months ended August 31, 1999
were approximately 1,331,000, as compared to approximately 1,304,000 Basic
Subscribers for the twelve-month period ended August 31, 1998, an increase of
2.1%, of which acquisitions accounted for approximately 48.9%. Average monthly
revenue per Basic Subscriber, including programmers' share of such revenue, was
approximately $41.53 during the twelve months ended August 31, 1999, as compared
to approximately $39.36 during the comparable prior twelve month period, an
increase of 5.5%.
17
<PAGE>
Cost of services increased by $1,172, or 4.3%, while selling, general and
administrative expenses increased by $3,036, or 10.4%. The principal reason for
the increase in cost of services was the increase in the variable component of
the Company's cost structure which increases in relation to increased revenue.
The increase in selling, general and administrative expenses was primarily the
result of an increase in sales, marketing and subscriber acquisition activities
as well as increased staffing levels to accommodate the growth of the Company's
core business. The Company anticipates increases in the cost of services and
selling, general and administrative expenses as the growth of its businesses
continues.
Depreciation and amortization of the Company's cable television operations for
the three months ended August 31, 1999 increased by $219, or .6% over the three
months ended August 31, 1998. The Company also incurred incremental
compensation, legal and consulting costs in connection with the Merger during
the three months ended August 31, 1999, including costs incurred in relation to
the termination of certain executive employment agreements. These Merger costs
for the three months ended August 31, 1999 totaled $173,411.
As a result of the factors noted above, operating loss for the three months
ended August 31, 1999 was $133,924 or $164,750 below the operating income of
$30,826 for the three months ended August 31, 1998.
Interest expense for the three months ended August 31, 1999 increased by $428,
or .9% as compared with the three months ended August 31, 1998, as a result of
increased borrowings. For the three months ended August 31, 1999, the average
debt outstanding was approximately $2,094,000 or $64,500 above the average
outstanding debt balance of $2,029,500 during the three months ended August 31,
1998. The Company's weighted average interest rate excluding borrowings of the
Company's 50% owned joint ventures was approximately 9.3% in the three months
ended August 31, 1999, as compared to approximately 9.6% in the three months
ended August 31, 1998.
After income attributable to minority interests in subsidiaries for the three
months ended August 31, 1999, a consolidated pre-tax loss of $186,125 was
incurred, as compared to a pre-tax loss of $16,053 for the three months ended
August 31, 1998. The loss for the three months ended August 31, 1999 of $190,135
represents an increase of $169,297 from the loss of $20,838 for the three months
ended August 31, 1998. The Company expects losses to continue until such time as
the cable television systems and investments in plant associated with rebuilds
and extensions of its cable television systems generate sufficient earnings to
offset the associated costs of acquisitions and operations.
LIQUIDITY AND CAPITAL RESOURCES (dollar amounts in thousands except share data)
The Company has grown through acquisitions as well as upgrading, extending and
rebuilding its existing cable television systems. In addition to an aggregate of
$1,887,000 in public debt instruments of the Company, certain subsidiaries of
the Company have entered into credit agreements with various bank groups and
private lending institutions providing for an aggregate of approximately
$1,235,000 of potential borrowing capacity for cable operations. At August 31,
18
<PAGE>
1999, approximately $1,043,000 of that aggregate availability has been drawn,
including an aggregate of $875,000 borrowed under the CCC-I and CCC-II credit
facilities on August 26, 1999. These $875,000 of proceeds have been invested by
CCC-I and CCC-II in short-term time deposits.
The Company's internally-generated cash, along with third party financing,
primarily the issuance of debt securities to the public, have enabled it to fund
its working capital requirements, capital expenditures for property, plant and
equipment, acquisitions, investments and debt service. The Company has funded
the principal obligations on its long-term borrowings by refinancing the
principal with the issuance of debt securities in the public market and through
private institutions as well as internally generated cash flow and the sale of
certain business segments. The debt instruments to which the Company and its
subsidiaries are a party impose restrictions on the incurrence of additional
indebtedness.
During the three months ended August 31, 1999, the Company made capital
expenditures of $33,940. The Company's future commitments for property, plant
and equipment in its cable television business consist of usual upgrades,
extensions, betterments and replacements of cable plant and equipment. As the
Company completes capital projects started in prior fiscal years, it anticipates
an annualized rate of approximately $120,000 for cable television capital
expenditures in fiscal 2000. Various construction projects have been undertaken
to expand the operations of certain cable television systems into adjacent and
previously unbuilt areas and to rebuild and upgrade its existing cable system
plant. The Company is currently considering the further upgrade of its cable
television distribution systems in certain of its cable television markets to
expand its capability for the delivery of video, voice and data transmission.
Should the Company undertake such an upgrade plan, it would result in an
acceleration of capital expenditures which would otherwise be incurred in future
years. The Company has not yet determined the feasibility, timing or cost of
such projects. Funds for cable television capital projects and related equipment
are currently available from internally generated cash and other financing
resources.
For the three months ended August 31, 1999, earnings were less than fixed
charges by $182,041. However, such amount reflects non-cash charges totaling
$39,828, consisting of depreciation and amortization. Historically, cash
generated from operating activities has exceeded fixed charges. Based upon
current market conditions, the Company expects that cash flows from operations,
the proceeds received from the sale of Centennial and funds from currently
available credit facilities will be sufficient to enable the Company to meet
required cash commitments through the next twelve month period.
Cash on hand was sufficient to fund the Company's expenditures for property,
plant and equipment and financing and investing activities. The Company will
continue to rely on internally generated cash, cash on hand, as well as various
financing activities to fund these requirements.
19
<PAGE>
FINANCING AND CAPITAL FORMATION
At August 31, 1999, the Company's public debt securities of approximately
$1,887,000 in the aggregate, have interest rates ranging from 8 3/8% to 9 3/4%,
with remaining maturities ranging from 1 to 18 1/4 years. These public debt
securities were all issued pursuant to shelf registrations of the Company's debt
securities which were filed with the SEC. The Company's public debt securities
rank pari passu with all existing and future Senior Indebtedness (as that term
is defined in the respective Indentures under which the public debt securities
were issued) of the Company, are senior in right of payment to all existing and
future subordinated indebtedness of the Company, and may not be redeemed prior
to maturity. On October 1, 1999, Arahova executed supplemental indentures
wherein it expressly assumed payment obligations on Century's public debt
securities.
Certain subsidiaries of the Company have four credit facilities with $1,155,000
of total potential credit availability at August 31, 1999, of which $963,000 was
outstanding, including an aggregate of $875,000 borrowed under the CCC-I and
CCC-II credit facilities on August 26, 1999. These $875,000 of proceeds were
invested by CCC-I and CCC-II in short-term time deposits. The interest rates
payable on borrowings under the respective credit facilities are as follows:
At the election of CCC-I, (a) the Base Rate of interest announced by Citibank,
N.A. plus 0% to 0.625% per annum based upon certain conditions, or (b) the
London Interbank Offering Rate plus 0.75% to 1.625% per annum based upon certain
conditions.
At the election of CCC-II, (a) the Base Rate of interest announced by Citibank,
N.A. plus 0% to 0.5% per annum based upon certain conditions, or (b) the London
Interbank Offering Rate plus 0.75% to 1.375% per annum based upon certain
conditions.
At the election of Citizens Century Cable Television Venture ("CCCTV"), either
the Base Rate, or the Eurodollar Rate, plus the applicable margin (as defined in
the facility).
At the election of Century Venture Corp. ("CVC"), (a) the C/D Base Rate plus an
applicable margin, as defined or (b) the Eurodollar Base Rate plus an applicable
margin, as defined or (c) the ABR Rate, as defined.
The Company has only limited involvement with derivative financial instruments
and does not use them for trading purposes. They are used to manage well-defined
interest rate risks. The Company entered into a five-year interest rate hedge
agreement during October 1997 in relation to certain of its fixed rate bank
debt. The hedge agreement is structured such that the Company pays a variable
rate of interest based on the higher of the U.S. dollar six month LIBOR or the
U.S. dollar six month LIBOR Set in Arrears and receives a fixed rate of interest
of 6.695% based on a notional amount of $35,000. Subject to the terms of the
hedge agreement, if the six month LIBOR is set at or below 4.75% at the
beginning of any period, the hedge agreement would terminate for that period
alone and the Company would receive a 50 basis points subsidy for that period
alone.
20
<PAGE>
The subsidiaries' credit facilities and the Company's public debt instruments,
among other things, require the maintenance of certain financial and operating
covenants, restrict the use of proceeds from such borrowing, limit the
incurrence of additional indebtedness, restrict the purchase or redemption of
its capital stock and limit the ability to pay dividends and management fees and
make capital expenditures.
At August 31, 1999 and as of October 15, 1999, the Company and its subsidiaries
were in compliance with all covenants of their respective debt agreements.
DISPOSITION
In June 1998, Century-ML Cable Venture, a 50% owned joint venture partnership
between the Company and ML Media Partners, L.P., sold substantially all of the
assets of its two radio stations for approximately $11,500. The Company recorded
a pre-tax gain of $5,506 in relation to the sale of these two radio stations
during the three months ended August 31, 1998.
PENDING ACQUISITION
In August 1998, the Company entered into an agreement to acquire a cable
television system which serves approximately 19,000 primary basic subscribers in
Moreno Valley and Riverside County, California. The purchase price for this
system is approximately $33,000. The Company currently expects to fund the
acquisition using available credit facilities. The purchase of this system by
the Company is subject to regulatory approvals. There is no assurance that the
Company will obtain such approvals or that such acquisition will be consummated.
STRATEGIC PARTNERSHIP
On November 18, 1998, the Company and TCI Communications, Inc. ("TCI") entered
into a definitive agreement to establish a strategic partnership (the
"Partnership"). TCI will contribute to the Partnership all the assets related to
the businesses of certain cable television systems owned and operated by TCI
serving approximately 249,200 primary basic subscribers in the area of Southern
California. The Company will contribute to the Partnership all the assets
related to the businesses of certain cable television systems owned and operated
by the Company serving approximately 545,100 primary basic subscribers in the
area of southern California, including approximately 103,500 primary basic
subscribers to be acquired in an exchange of cable systems described below as
well as approximately 20,200 primary basic subscribers related to the Company's
pending acquisition of the cable television system serving Moreno Valley and
certain portions of Riverside County, California. The Company will manage the
newly combined cable systems and own approximately 69.5 percent of the
Partnership. The cable systems contributed by each party will be valued based
upon annualized cash flow of such contributed systems as of the closing date of
the transaction, subject to certain fees and expenses. These values will be used
in the process of determining the ownership percentages of the respective
parties at the closing date of the transaction.
21
<PAGE>
The Company is expected to manage the Partnership in return for a management fee
payable by the Partnership calculated based on a percentage of the annual total
gross revenues of the Partnership, in addition to payment of certain fees and
expenses. However, under the Agreement of Limited Partnership, the Partnership
may not, among other things, without the approval of the TCI partner or the
unanimous vote of all the members of the Partnership committee, enter into
certain transactions with affiliates, issue any Partnership or other equity
interest, permit any subsidiary to issue any equity interest, effectuate certain
mergers or other business combinations or incur in excess of certain levels of
indebtedness.
As part of the Partnership Transaction, the Company and TCI have agreed to
exchange cable systems owned by the Company in certain communities in northern
California for certain cable systems owned by TCI in southern California,
allowing each of them to unify operations in existing services areas. TCI will
exchange its East San Fernando Valley cable system serving approximately 103,500
primary basic subscribers for the Company's northern California cable systems
(San Pablo, Benicia, Fairfield, and Rohnert Park, California), serving
approximately 96,500 primary basic subscribers.
It is anticipated that the Partnership will be funded by approximately $900,000
of indebtedness. There is no assurance that such financing will be available to
the Partnership or that the Partnership will be able to obtain such financing on
terms favorable to the Partnership.
The closing of the foregoing transactions is subject to, among other things,
each party obtaining the required consents and all appropriate regulatory and
other approvals, including from the Federal Communications Commission and local
franchising authorities. On February 18, 1999, the waiting period under the HSR
Act for the Partnership Transaction terminated. In connection with the
Partnership Transaction, the Company has completed filing the material
applications seeking transfer of the Company's applicable franchise licenses
with the FCC and local franchising authorities. There is no assurance that the
Company will obtain such approvals or that such transactions will be
consummated.
CABLE MODEM SERVICES
The Company is presently in the initial deployment stage of high-speed cable
modem services. On May 1, 1998, the Company entered into an agreement with @Home
Network ("@Home"), a provider of high-speed internet services via cable
infrastructure, to deliver high-speed internet services in certain of the
Company's markets covering approximately 1,315,000 homes passed. The agreement
has a term of six years and contains mutual exclusivity provisions relating to
the provision of high-speed internet services in certain of the Company's
systems covering the same approximately 1,315,000 homes passed. In connection
with the agreement, the Company has received a warrant to purchase 5,260,000
shares of @Home's Series A Common Stock at an exercise price equal to $5.25 per
share, subject to adjustment. The warrant becomes exercisable on a schedule
based upon and subject to the commercial deployment (as defined) of the @Home
services by the Company, which must be certified by the Company and @Home on or
after March 31 of each year during the term of the warrant for the 12 month
period ending March 31. As of both March 31, 1999 and August 31, 1999 no portion
of the warrant had become
22
<PAGE>
exercisable, therefore no asset has been recorded. From March 31, 1999 through
August 31, 1999, the Company has passed approximately 151,000 homes or 11.5% of
the commercial deployment specified in the Agreement. As of August 31, 1999, the
closing price of the @Home Series A Common Stock on the Nasdaq National Market
(adjusted for stock splits) was $40.125 per share.
MERGER RELATED COSTS
The Company has employment agreements primarily with four executive officers
including Dr. Leonard Tow, Chairman and Chief Executive Officer of the Company.
The terms of these employment agreements expire on June 30, 2003, except that
Dr. Tow's agreement continues for an additional five-year advisory period. Each
of these employment agreements is terminable by the executive officer upon a
"change of control" or a "threatened change of control" of the Company. One of
the events that is considered to be a threatened change of control under each
employment agreement is the acquisition by any person of securities of the
Company such that the person files or is required to make a filing pursuant to
Regulation 13D under the Securities Exchange Act of 1934, as amended. Such an
event has occurred and, therefore, for purposes of these employment agreements,
a "threatened change of control" has occurred. During the quarter ended August
31, 1999, each of these executive officers exercised his right to terminate his
employment agreement but continued working for the Company through the closing
of the Merger.
Pursuant to the employment agreement, upon such termination, each executive
officer is entitled to receive his base salary through the end of the term of
his employment agreement, an annual cash bonus for the remainder of the term
equal to his most recently awarded cash bonus, continuation of medical, dental,
life and disability insurance for the remainder of the term on the same basis as
provided while the agreement was in effect and the use of office space for one
year. In addition, upon termination, all of his Company stock options vest and
become exercisable and the restrictions on all of his shares of restricted stock
of the Company lapse. The total cost to the Company of the termination of the
executive employment agreements was approximately $252,000. Approximately
$172,000 of these costs were recorded by the Company during the three months
ended August 31, 1999 and the remaining $80,000 of these costs, which resulted
from the completion of the Merger, will be recorded subsequent to August 31,
1999 and through the completion of the Merger.
The Company incurred certain other Merger related costs subsequent to August 31,
1999. Approximately $77,000 of these costs relate primarily to investment
banking, legal and accounting services incurred in relation to the completion of
the Merger. The Company also incurred employee severance related costs related
to the Merger and the continuance of the employment of key personnel through the
completion of the Merger. The total cost to the Company of these employee
severance related costs was approximately $9,000. These additional Merger
related costs will be recorded by the Company during the three months ended
November 30, 1999.
23
<PAGE>
The Company incurred total incremental compensation, legal and consulting costs
of $173,411 during the three months ended August 31, 1999 in connection with the
Merger. These costs include the $172,000 of costs noted above which were
recorded during the three months ended August 31, 1999 in relation to the
termination of the executive employment agreements.
YEAR 2000
The Company has undertaken a comprehensive program to address the issue of
computer software and embedded microchips which are unable to distinguish
between the year 1900 and the year 2000 within the Company and in the products
and services purchased from its material suppliers (the "Year 2000 Project").
The Company has established a Year 2000 team.
The Company is using a multi-step approach in conducting its Year 2000 Project.
These steps are: inventory, assessment, remediation and testing, and contingency
planning. The first step, an inventory of all systems and devices with potential
Year 2000 problems, was completed in December 1998. The next step, completed in
December 1998, was to conduct an initial assessment of the inventory to
determine the state of its Year 2000 readiness. As part of the assessment phase,
remediation strategies were identified and remediation cost estimates were
developed. The Company will utilize primarily internal resources to remediate
and test for Year 2000 readiness. The Company is in the process of replacing and
testing its most critical business systems; signal delivery, accounting, and
telephone answering systems. The Company has initiated formal communications
with the suppliers with which it has active contracts ("Trading Partners") to
determine the extent to which the Company is vulnerable to those third parties'
failure to remediate their own Year 2000 issue. The Company cannot predict the
outcome of other companies' remediation efforts. The Company is reliant on
outside suppliers for signal delivery, customer billing, payroll and utility
service. The Company is also consulting with other cable television multiple
system operators which utilize similar technology to assess the nature of any
risks and possible remediation.
Since August 1998, periodic reports have been submitted to and discussed with
senior executives of the Company, including the Chief Operating Officer and
Chief Financial Officer. In October 1998, a progress report was discussed with
the Company's Board of Directors' Audit Committee. The Company has been and
plans to continue such periodic reporting to its senior officers and its Board
of Directors.
Year 2000 Costs
The Company currently plans to complete the Year 2000 Project by October 1999.
Through August 31, 1999, the Company has spent approximately $2,200 in
connection with the Year 2000 Project. The total remaining cost of the Year 2000
Project is estimated at $800 which is for new software and hardware purchases.
The majority of these remaining costs will be capitalized. The costs of the
project and the date on which the Company plans to complete the Year 2000
modifications are based on management's best estimates, which were derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, third parties' Year 2000 readiness and other
factors.
24
<PAGE>
Risks
The failure to address a material Year 2000 issue could result in an
interruption in, or a failure of, certain normal business activities or
operations. Due to the decentralized nature of the Company's operations, there
are few systems the failure of which would have a material adverse effect on the
Company as a whole. Nonetheless, the Company relies upon an external billing
service, utility companies, satellite program service providers, satellite
delivery systems, an external payroll service, the United States postal service,
the financial service industry and other suppliers outside of its control and
there can be no assurance that such suppliers or other third parties will not
suffer a Year 2000 business disruption. The most reasonably likely worst case
scenario would involve a failure of the nation's satellite delivery systems
and/or widespread prolonged utility outages. If such a scenario occurred and it
affected a large portion of the United States for a period exceeding 30 days,
the Company's operating results would be negatively impacted. Failures in other
systems would not be expected to have an adverse effect on the Company's
consolidated financial position. In addition, the Company is in the process of
upgrading or replacing certain of its software to comply with Year 2000
readiness. Although the implementation of software may be accompanied with risks
of incompatibilities, the Company believes that the risks associated with these
incompatibilities will not have a material effect on the Company's operations.
Due to the general uncertainty inherent in the Year 2000 issue, resulting in
part from the uncertainty of the Year 2000 readiness of its Trading Partners and
its Trading Partners' customers, the Company is unable to determine at this time
whether the consequences of Year 2000 failures will have a material impact on
the Company's consolidated financial condition or results of operations. The
Year 2000 Project is expected to significantly reduce the Company's level of
uncertainty about the Year 2000 issue and, in particular, about the Year 2000
compliance and readiness of its material Trading Partners. The Company believes
that, with the implementation of new business systems and completion of the Year
2000 Project as scheduled, the possibility of significant interruptions of
normal operations should be greatly reduced.
* * * * *
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains or incorporates by reference forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Where any such forward-looking statement includes a statement of the assumptions
or bases underlying such forward-looking statement, the Company cautions that
assumed facts or bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results can be material,
depending upon the circumstances. Where, in any forward-looking statement, the
Company or its management expresses an expectation or belief as to future
results, there can be no assurance that the statement of expectation or belief
will result or be achieved or accomplished. The words "believe", "expect",
"estimate", "anticipate", "project" and similar expressions may identify
forward-looking statements.
25
<PAGE>
Taking into account the foregoing, the following are identified as important
factors that could cause actual results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, the
Company: the consummation of the Merger; the consummation of the Partnership
Transaction; the Company's net losses and stockholders' deficiency; the
Company's debt structure; the competitive nature of the cable television and
wireless telephone industries; regulation; restrictive covenants and
consequences of default contained in the Company's financing arrangements;
control by certain of the Company's stockholders; operating hazards and
uninsured risks; refinancing and interest rate exposure risks; and potential for
changes in accounting standards. A more detailed discussion of a majority of the
foregoing factors can be found in the Company's Annual Report on Form 10-K for
the Fiscal Year ended May 31, 1999 under the heading "CAUTIONARY STATEMENT FOR
PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995" in Item 7 of such Form 10-K. Other factors may be detailed
from time to time in the Company's filings with the SEC. The Company assumes no
obligation to update its forward looking statements or to advise of changes in
the assumptions and factors on which they are based.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about March 10, 1999, Robert Lowinger, on behalf of himself and all others
similarly situated (the "Plaintiff") commenced an action by filing a Class
Action Complaint (the "Complaint") in the Superior Court of Connecticut,
Judicial District of Stamford/Norwalk against Century, all of its directors, and
Adelphia Communications Corporation ("Adelphia"). The Plaintiff, claiming that
he owns shares of Class A Common Stock of Century alleges that in connection
with the proposed merger of Century with Adelphia, holders of Class B Common
Stock of Century (which has superior voting rights to the Class A Common Stock
of Century) will receive consideration for their shares that exceeds by $4.00
per share the consideration to be paid to Century's Class A shareholders
resulting in the Century's Class B shareholders receiving approximately $170,000
more than if they held the equivalent number of the Century's Class A shares.
The Plaintiff claims that the individual defendants breached their fiduciary
duties of loyalty, good faith, and due care to Century's Class A shareholders by
approving the higher payment to Century's Class B shareholders and that Century
and Adelphia aided and abetted these alleged breaches of fiduciary duty. The
Plaintiff seeks certification of a class of Century's Class A shareholders and
seeks recovery on behalf of himself and the class of unspecified damages,
profits, and special benefits alleged to have been wrongfully obtained by the
defendants, as well as all costs, expenses and attorney's fees. No defendant has
yet responded to the Complaint.
26
<PAGE>
The Company is also subject to various legal proceedings and claims that arise
in the ordinary course of business. Management currently believes that resolving
these matters will not have a material adverse impact on the Company's financial
position or its results of operations.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the stockholders of Century Communications Corp. was held
on Friday, October 1, 1999. At the meeting the stockholders considered and voted
upon a proposal to approve the Agreement and Plan of Merger, dated as of March
5, 1999, as amended, among Century, Adelphia Communications Corporation and a
wholly owned subsidiary of Adelphia that provides for, among other things, a
merger that resulted in Century becoming a wholly owned subsidiary of Adelphia
and Century's stockholders receiving, at their election, but subject to
proration, cash, Adelphia Class A common stock or a combination of cash and
Adelphia Class A common stock in exchange for their Century common stock.
The results of the vote were:
<TABLE>
<S> <C> <C>
Class A Stock:
For: 24,364,881 Against 19,498 Abstain: 3,891
Class B Stock:
For: 423,220,590 Against: 0 Abstain: 0
</TABLE>
ITEM 5. OTHER INFORMATION -
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Each exhibit identified below is filed as part of this report.
a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
Exhibit 2 Joint Proxy Statement/Prospectus, dated as of
August 12, 1999, between the Company and
Adelphia Communications Corporation (filed as
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
Exhibit 1 to the Company's Form 8-K report
filed With the Commission on September 1, 1999
and incorporated herein by reference).
Exhibit 3(i) Certificate of Incorporation of Arahova
Communications, Inc., as amended.
Exhibit 3(ii) By-laws of Arahova Communications, Inc., as
amended.
Exhibit 4.01 Ninth Supplemental Indenture, dated as of
October 1, 1999 between Arahova Communications,
Inc. ("Arahova") and U.S. Bank Trust National
Association (the "Trustee"), successor trustee
to Bank of America National Trust and Savings
Association, to the Indenture, dated as of
February 15, 1992 between Century
Communications Corp. and the Trustee.
Exhibit 4.02 First Supplemental Indenture, dated as of
October 1, 1999 between Arahova Communications,
Inc. and U.S. Bank Trust National Association
(the "Trustee"), to the Indenture, dated as of
January 15, 1998 between Century Communications
Corp. and the Trustee.
Exhibit 11 Statement re: computation of per share earnings
Exhibit 27 Financial Data Schedule (EDGAR filing only)
</TABLE>
b) Reports on Form 8-K
None
28
<PAGE>
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.
ARAHOVA COMMUNICATIONS, INC.
Date: October 15, 1999
By: /s/ Timothy J. Rigas
______________________________________
Timothy J. Rigas
Executive Vice President (authorized
officer), Chief Financial Officer, Chief
Accounting Officer and Treasurer
29
<PAGE>
EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION
OF
ARAHOVA COMMUNICATIONS, INC.
(AS AMENDED ON OCTOBER 1, 1999)
1. The name of the corporation is:
Arahova Communications, Inc.
2. The address of its registered office in the State of Delaware is 1013
Centre Road, Wilmington, Delaware 19805, County of New Castle. The name of
its registered agent at such address is The Prentice-Hall Corporation
System, Inc.
3. The nature of the business or purpose to be conducted or promoted is:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State
of Delaware.
4. The total number of shares of stock which the corporation shall have
authority to issue is 1,000 shares of Common Stock, and the par value of
each of such shares is $0.01, amounting in the aggregate to Ten Dollars
($10.00).
5. The name and mailing address of the Sole Incorporator is as follows:
Ann Martin Criss
Buchanan Ingersoll Professional Corporation
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, PA 15219
6. The corporation is to have perpetual existence.
7. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director for any act or omission; provided, however,
that the foregoing shall not eliminate or limit the liability of a director
(a) for any breach of the director's duty or loyalty to the corporation or
its stockholders, (b) for any act or omission not in good faith or which
involves intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation law of the State of Delaware, or (d)
for any transaction from which the director derived an improper personal
benefit. Any repeal or modification of this article by the stockholders of
the corporation shall be prospective only, and shall not adversely affect
any limitation on the personal liability of a director of the corporation
existing at the time of such repeal or modification.
<PAGE>
8. In furtherance and not in limitation of the powers conferred by the General
Corporation Law of the State of Delaware, the Board of Directors of the
corporation is expressly authorized to make, alter, or repeal the By-laws
of the corporation.
9. Elections of directors need not be by written ballot except and to the
extent provided in the By-laws of the corporation.
-2-
<PAGE>
EXHIBIT 3(ii)
BY-LAWS
OF
ARAHOVA COMMUNICATIONS, INC.
(AS AMENDED ON OCTOBER 1, 1999)
1. OFFICES
Arahova Communications, Inc. (hereinafter the "Corporation")
may have offices and places of business at such places, within or without the
State of Delaware, as the Board of Directors may from time to time determine or
the business of the Corporation may require.
2. MEETING OF STOCKHOLDERS
2.1 Place of Meetings.
All meetings of the stockholders for the election of directors
shall be held at such place as may be fixed from time to time by the Board of
Directors, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver thereof.
2.2 Annual Meeting.
Annual meetings of stockholders commencing with the year 2000
shall be held on the date and time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting or in a duly
executed waiver thereof.
2.3 Special Meetings.
Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the President or Board of Directors and shall be
called by the President or Secretary at the request in writing of stockholders
owning not less than one-fifth of the entire capital stock of the Corporation
issued and outstanding and entitled to vote. Such request shall state the
purpose or purposes of the proposed meeting.
2.4 Notice.
Written notice of each meeting of stockholders shall be given
in the manner prescribed in Article IV of these By-laws which shall state the
place, date and hour of the meeting and, in the case of a special meeting, shall
state the purpose or purposes for which the meeting is called. In the case of a
meeting to vote on a proposed merger or consolidation, such notice shall
<PAGE>
state the purpose of the meeting and shall contain a copy of the agreement or
brief summary thereof and, in the case of a meeting to vote on a proposed sale,
lease or exchange of all of the Corporation's assets, such notice shall specify
that such a resolution shall be considered. Such notice shall be given to each
stockholder of record entitled to vote at the meeting not less than ten (10) nor
more than sixty (60) days prior to the meeting, except that where the matter to
be acted on is a merger or consolidation of the Corporation or a sale, lease or
exchange of all or substantially all of its assets, such notice shall be given
not less than twenty (20) nor more than sixty (60) days prior to such meeting.
If mailed, notice is given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it appears on the records
of the corporation.
2.5 Business.
Business transacted at any special meeting of stockholders
shall be limited to the purpose or purposes stated in the notice.
2.6 Quorum and Adjournment.
Except as otherwise provided by statute or the Certificate of
Incorporation, the holders of a majority of the shares of the Corporation issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall be necessary to and shall constitute a quorum for the
transaction of business at each meeting of stockholders but in no event shall a
quorum consist of less than one-third of the shares entitled to vote at the
meeting. If a quorum shall not be present at the time fixed for any meeting, the
stockholders present, in person or by proxy, and entitled to vote thereat shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. At such adjourned
meeting at which a quorum shall be present, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.7 Voting.
Unless otherwise provided in the Certificate of Incorporation
and subject to the provisions of Article VI, Section 4 of these By-laws, each
stockholder shall be entitled to one vote, in person or by proxy, for each share
of capital stock held by such stockholder. If the Certificate of Incorporation
provides for more or less than one vote for any share, on any matter, every
reference in these By-laws to a majority or other proportion of stock shall
refer to such majority or other proportion of the votes of such stock.
2.8 Vote Required.
When a quorum is present at any meeting, in all matters other
than the election of directors, the vote of the holders of a majority of the
shares present in person or represented by
-2-
<PAGE>
proxy and entitled to vote on the subject matter shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of the statutes or of the Certificate of Incorporation, a different
vote is required in which case such express provision shall govern and control
the decision of such question. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors.
2.9 Voting Lists.
The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
2.10 Proxy.
Each stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy, but no
such proxy shall be voted or acted upon after three (3) years from its date,
unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that
it is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
2.11 Consents.
Any action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting, without
prior notice and a vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. Where corporate action is taken in such manner by less than
unanimous written
-3-
<PAGE>
consent, prompt written notice of the taking of such action shall be given to
all stockholders who have not consented in writing thereto.
Every written consent shall bear the date of signature of each
stockholder who signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by statute to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
3. DIRECTORS
3.1 Board of Directors.
The business and affairs of the Corporation shall be managed
by or under the direction of its Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things, except as
provided in the Certificate of Incorporation.
3.2 Number; Election and Tenure.
The number of directors which shall constitute the whole Board
shall be not less than three (3) nor more than nine (9). The first Board shall
consist of five (5) directors. Thereafter, within the limits above specified,
the number of directors shall be determined by resolution of the Board of
Directors or by the stockholders at the annual meeting. The directors shall be
elected at the annual meeting of the stockholders, except as provided in Section
3 of this Article, and each director elected shall hold office until his
successor is elected and qualified or until his earlier resignation or removal.
Any director may resign at any time upon written notice to the Corporation.
Directors need not be stockholders.
3.3 Vacancies.
Vacancies in the Board of Directors and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, although less than
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify, or until his earlier resignation or removal. If at
any time, by reason of death or resignation or other cause, the Corporation
should have no directors in office, then any officer or any stockholder or an
executor, administrator, trustee or guardian of a stockholder, or other
fiduciary entrusted with like responsibility for the person or estate of a
stockholder, may call a special meeting of stockholders in accordance with the
provisions of the Certificate of Incorporation or
-4-
<PAGE>
the By-laws or may apply to the Court of Chancery for a decree summarily
ordering an election as provided by statute.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
3.4 Meetings.
The Board of Directors of the Corporation may hold its
meetings, and have an office or offices, within or without the State of
Delaware.
3.5 First Meeting.
The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
3.6 Notice.
Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board. A special meeting of the Board may be called by the President or
any Vice President and a special meeting shall be called by the President on the
written request of two directors. Notice of each special meeting of the Board of
Directors, specifying the place, day and hour of the meeting, shall be given in
the manner prescribed in Article IV of these By-Laws and in this Section 6,
either personally or by mail, by courier, telex or telegram to each director, at
the address or the telex number supplied by the director to the Corporation for
the purpose of notice, at least 48 hours before the time set for the meeting.
Neither the business to be transacted at, nor the purpose of any meeting of the
Board, need be specified in the notice of the meeting.
3.7 Quorum and Voting.
Except as may be otherwise specifically provided by statute or
by the Certificate of Incorporation, a majority of the total number of directors
shall constitute a quorum for the
-5-
<PAGE>
transaction of business. The vote of the majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors.
Members of the Board or members of any committee designated by
the Board may participate in meetings of the Board or of such committee by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in such meeting shall constitute presence in person at such meeting.
3.8 Consents.
Unless otherwise restricted by the Certificate of
Incorporation, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
3.9 Committees.
The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to the
extent provided in the resolution, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-laws of the Corporation; and, unless the resolution, By-laws or Certificate
of Incorporation provides, no such committee shall have the power or authority
to declare a dividend or to authorize the issuance of stock. In the absence or
disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Such committee or committees shall have such name or names
as may be determined from time to time by resolution adopted by the Board of
Directors.
3.10 Committee Minutes.
Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
-6-
<PAGE>
3.11 Compensation of Directors.
The directors as such, and as members of any standing or
special committee, may receive such compensation for their services as may be
fixed from time to time by resolution of the Board. Nothing herein contained
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
The directors may be paid their expenses, if any, for
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
3.12 Removal of Directors.
Any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors.
4. NOTICES
4.1 Form of Notice.
Whenever, under the provisions of the Delaware General
Corporation Law or of the Certificate of Incorporation or of these By-laws,
notice is required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
first class or express mail, addressed to such director or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail, except that, in the case of
directors, notice sent by first class mail shall be deemed to have been given
forty-eight hours after being deposited in the United States mail. Whenever,
under these By-laws, notice may be given by telegraph, courier or telex, notice
shall be deemed to have been given when deposited with a telegraph office or
courier service for delivery or, in the case of telex, when dispatched.
4.2 Waiver of Notice.
Whenever notice is required to be given under any provisions
of the Delaware General Corporation Law or the Certificate of Incorporation or
these By-laws, a written waiver, signed by the person or persons entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
-7-
<PAGE>
committee of directors need be specified in any written waiver of notice unless
so required by the Certificate of Incorporation or the By-laws.
5. OFFICERS
5.1 Selection of Officers.
The officers of the Corporation shall be chosen by the
directors and shall consist of a president and secretary. The Board of Directors
may also choose a treasurer, one or more vice presidents, and one or more
assistant secretaries. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these By-laws otherwise provide. A
failure to elect officers shall not dissolve or otherwise affect the
Corporation.
5.2 Term of Office, Removal and Vacancies.
Each officer of the Corporation shall hold his office until
his successor is elected and qualifies or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring by death, resignation, removal or otherwise, in
any office of the Corporation, shall be filled by the Board of Directors.
5.3 Compensation.
The salaries of the officers of the Corporation may be fixed
by the Board of Directors.
5.4 Bond.
The Corporation may secure the fidelity of any or all of its
officers or agents by bond or otherwise.
5.5 The President.
The President shall be the chief executive officer of the
Corporation, shall preside at all meetings of the stockholders and the Board of
Directors, shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He shall have the power to appoint and remove
such subordinate officers and agents other than those actually appointed or
elected by the Board of Directors as the business of the Corporation may
require.
-8-
<PAGE>
5.6 Vice President.
Each Vice President, if any, shall perform such duties as
shall be assigned to him by the Board of Directors or President, and, in the
absence or disability of the President, the most senior in rank of the Vice
Presidents shall perform the duties of the President.
5.7 Secretary.
The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Board of Directors and the stockholders in a book to be kept
for that purpose and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or President.
He shall be the custodian of the seal of the Corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring
it, and when so affixed, it may be attested by his signature or by the signature
of such assistant secretary. The Board of Directors may give general authority
to any other officer to affix the seal of the Corporation and to attest the
affixing by his signature.
5.8 Assistant Secretary.
The Assistant Secretary, if any, or assistant secretaries, if
more than one, shall perform the duties of the secretary in his or her absence
and shall perform such other duties as the Board of Directors, the President or
the Secretary may from time to time designate.
5.9 Treasurer.
The Treasurer shall have custody of the corporate funds and
securities and shall keep, or cause to be kept, full and accurate amounts of
receipts and disbursements in books kept for that purpose. He shall deposit all
monies, and other valuable effects, in the name and to the credit of the
Corporation, in such depository as the Board of Directors shall designate. As
directed by the Board of Directors or the President, he shall disburse monies of
the Corporation, taking proper vouchers for such disbursements and shall render
to the President and directors an account of all his transactions as Treasurer
and of the financial condition of the Corporation. In addition, he shall perform
all the usual duties incident to the office of Treasurer.
6. CERTIFICATES OF STOCK AND TRANSFERS
6.1 Certificates of Stock; Uncertificated Shares.
The shares of the Corporation shall be represented by
certificates, provided that the Board of Directors may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation.
-9-
<PAGE>
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate signed by, or
in the name of the Corporation by, the President or any Vice President, and
countersigned by the Secretary or any Assistant Secretary or the Treasurer,
representing the number of shares registered in certificate form. Any or all the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificate or Uncertificated Shares.
The Board of Directors may issue a new certificate of stock or
uncertificated shares in place of any certificate therefore issued by it,
alleged to have been lost, stolen or destroyed, and the Corporation may require
the owner of the lost, stolen or destroyed certificate, or his legal
representative to give the Corporation a bond sufficient to indemnify it against
any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate or
uncertificated shares.
6.3 Record Date.
In order that the Corporation may determine the stockholders
entitled to notice of, or to vote at, any meeting of stockholders or at any
adjournment thereof in respect of which a new record date is not fixed, or to
consent to corporate action without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors and which
date shall not be more than sixty (60) nor less than ten (10) days before the
date of any such meeting, nor more than ten (10) days after the date on which
the date fixing the record date for the consent of stockholders without a
meeting is adopted by the Board of Directors, nor more than sixty (60) days
prior to any other such action. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
6.4 Registered Stockholders.
The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as of any record date fixed or
determined pursuant to Section 3 of this Article as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part
-10-
<PAGE>
of any other person, regardless of whether it shall have express or other notice
thereof, except as otherwise provided by the laws of the State of Delaware.
7. GENERAL PROVISIONS
7.1 Dividends.
Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the Corporation's
capital stock, subject to the provisions of the Certificate of Incorporation.
7.2 Liability of Directors as to Dividends or Stock Redemption.
A member of the board of directors, or a member of any
committee designated by the board of directors, shall be fully protected in
relying in good faith upon the records of the Corporation and upon such
information, opinions, reports or statements presented to the Corporation by any
of its officers or employees, or committees of the Board of Directors, or by any
other person as to matters the director reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from which
dividends might properly be declared and paid, or with which the Corporation's
stock might properly be purchased or redeemed.
7.3 Reserve for Dividends.
Before declaring any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
7.4 Annual Statement.
The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
7.5 Signing Checks, Notes, etc.
All checks or other orders for the payment of money and all
notes or other instruments evidencing indebtedness of the Corporation shall be
signed on its behalf by such
-11-
<PAGE>
officer or officers or such other person or persons as the Board of Directors
may from time to time designate, or, if not so designated, by the President or
any Vice President of the Company.
7.6 Fiscal Year.
The fiscal year of the Corporation shall end on March 31 of
each year or as otherwise determined by resolution of the Board of Directors.
7.7 Seal.
The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
7.8 Voting of Securities of Other Corporations.
In the event that the Corporation shall, at any time or from
time to time, own and have power to vote any securities (including but not
limited to shares of stock or partnership interests) of any other issuer, they
shall be voted by such person or persons, to such extent and in such manner, as
may be determined by the Board of Directors or, if not so determined, by any
duly elected officer of the Corporation.
8. INDEMNIFICATION
8.1 Indemnification.
Except as otherwise provided below, each person who was or is
made a party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding") and
whether or not by or in the right of the Corporation or otherwise, by reason of
the fact that he or she, or a person of whom he or she is the heir, executor or
administrator, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as director or officer or trustee of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director or officer or trustee, or in any other capacity while serving as a
director or officer or trustee, shall be indemnified and held harmless by the
Corporation to the fullest extent permitted by law, as the same exist or may
hereinafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than are permitted the corporation to provide prior to
such amendment), against all reasonable expenses, including attorneys' fees, and
any liability and loss, including judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement, incurred or paid by such
person in connection therewith, and such indemnification shall continue as to a
person who has ceased to be a director or officer or trustee; provided, however,
that except as provided in paragraph (b)
-12-
<PAGE>
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this section shall be
a contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of the final
disposition thereof; provided, however, that to the extent required by the law,
the payment of such expenses incurred by an officer or director in advance of
the final disposition of a proceeding shall be made only upon receipt of an
undertaking, by or on behalf of such person, to repay all amounts so advanced if
it shall ultimately be determined that he or she is not entitled to be
indemnified under this section or otherwise. The right to indemnification and
advancement of expenses provided herein shall continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person.
8.2 Right to Claimant to Bring Suit.
If a claim under Section 1 of this Article is not paid in full
by the Corporation within thirty (30) days after a written claim has been
received by the Corporation, the claimant may, at any time thereafter, bring
suit against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim.
8.3 Non-Exclusivity of Rights.
The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of a final disposition conferred
in this Article VIII shall not be exclusive of any other rights to which those
seeking indemnification or advancement of expenses hereunder may be entitled
under any bylaw, agreement, vote of stockholders or directors or otherwise, both
as to action in his official capacity and as to action in any other capacity
while holding that office.
8.4 Funding.
The Corporation may create a fund of any nature, which may,
but need not be, under the control of a trustee, or otherwise secure or insure
in any manner its indemnification obligations, whether arising under or pursuant
to this bylaw or otherwise.
9. AMENDMENTS
These By-laws may be altered, amended or repealed, and new
By-laws may be adopted, by the stockholders, or by the Board of Directors when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation.
Dated: March 5, 1999, as amended on October 1, 1999
-13-
<PAGE>
EXHIBIT 4.01
ARAHOVA COMMUNICATIONS, INC.
(Survivor of Merger with Century Communications Corp.)
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
successor trustee to
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Trustee
------------------------------
Ninth Supplemental Indenture
Dated as of October 1, 1999
------------------------------
<PAGE>
NINTH SUPPLEMENTAL INDENTURE, dated as of October 1, 1999 (the
"Ninth Supplemental Indenture") between ARAHOVA COMMUNICATIONS, INC., a
corporation organized and existing under the laws of the State of Delaware,
formerly known as Adelphia Acquisition Subsidiary, Inc. and having its principal
offices at One North Main Street, Coudersport, Pennsylvania 16915 ("Arahova")
and U.S. BANK TRUST NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States (the "Trustee"), and
successor trustee to BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, to
the Indenture, dated as of February 15, 1992 (the "Indenture"), between CENTURY
COMMUNICATIONS CORP., a corporation duly organized and existing under the laws
of the State of New Jersey (the "Company"), having its principal offices at 50
Locust Avenue, New Canaan, Connecticut 06840, and the Trustee.
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and
delivery of the Indenture to provide for the issuance from time to time of one
or more series of its senior debt securities (the "Securities") to be issued in
one or more series as outlined by the eight supplemental indentures entered into
by the parties and as listed on Schedule A (the "Supplemental Indentures" and
each individually, a "Supplemental Indenture"); and
WHEREAS, the Company has, to date, duly executed and delivered
eight Supplemental Indentures, each providing for the issuance of a series of
Securities as permitted and provided by the Indenture and as outlined on
Schedule A herein; and
WHEREAS, pursuant to the Agreement and Plan of Merger by and
among Adelphia Communications Corporation, a Delaware corporation ("Adelphia"),
the Company and Arahova, the Company has merged with and into Arahova, a wholly
owned subsidiary of Adelphia (the "Merger Agreement"); and
WHEREAS, Arahova, the surviving corporation of the merger
between the Company and Arahova, desires and has requested the Trustee to join
it in the execution and delivery of this Ninth Supplemental Indenture in order
to expressly assume the due and punctual payment of the principal of (and
premium, if any) and interest on all of the Securities and the performance of
every covenant of the Indenture, and the preceding Supplements to the Indenture,
on the part of the Company to be performed or observed; and
WHEREAS, Section 10.01(1) of the Indenture provides that a
supplemental indenture may be entered into by Arahova and the Trustee without
the consent of any holder of any Securities for such purpose provided compliance
with Article Nine of the Indenture; and
WHEREAS, the conditions set forth in Article Nine of the
Indenture have been complied with; and
-2-
<PAGE>
WHEREAS, all things necessary to make this Ninth Supplemental
Indenture a valid agreement of Arahova and the Trustee, in accordance with it
terms, and a valid amendment of, and supplement to, the Indenture have been
done;
NOW THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
In consideration of the premises as stated above, Arahova, as
successor in interest to the Company mutually covenants and agrees with the
Trustee, for the equal and proportionate benefit of all holders of Notes issued
under the Supplemental Indentures as outlined on Schedule A, that the Indenture
is supplemented and amended, to the extent and for the purposes expressed
herein, as follows:
PARAGRAPH A. ARTICLE NINE
Arahova expressly assumes the due and punctual payment of the
principal of (and premium, if any) and interest on the Securities and the
performance of every covenant of the Indenture and the Supplemental Indentures
on the part of the Company to be performed and observed.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Ninth
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
ARAHOVA COMMUNICATION, INC.
By: /s/ Michael J. Rigas
______________________________________
Name: Michael J. Rigas
_____________________________
Title: Executive Vice President
_____________________________
U.S. BANK TRUST NATIONAL ASSOCIATION,
successor trustee to BANK OF AMERICA
NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Trustee
By: /s/ Robert Schneider
______________________________________
Name: Robert Schneider
_____________________________
Title: Assistant Vice President
_____________________________
-4-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF POTTER )
On the 28th day of September, 1999, before me personally came Michael
J. Rigas, to me known, who, being by me duly sworn, did depose and say that he
is Executive Vice President of ARAHOVA COMMUNICATIONS, INC., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
[NOTARIAL SEAL] /s/ Migorette Houghtaling
________________________________________
Notary Public
<PAGE>
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On the 27th day of September, 1999, before me personally came Robert
Schneider, to me known, who, being by me duly sworn, did depose and say that he
is the Assistant Vice President of U.S. BANK TRUST NATIONAL ASSOCIATION,
successor trustee to BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
Trustee, one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation; and that he signed his name thereto
by like authority.
[NOTARIAL SEAL] /s/ Grace Yang
________________________________________
Notary Public
<PAGE>
SCHEDULE A
1. First Supplemental Indenture dated as of February 15, 1992 for
$200,000,000 of 9 3/4% Senior Notes due 2002;
2. Second Supplemental Indenture dated as of August 15, 1992 for $150,000,000
of 9 1/2% Senior Notes due 2000;
3. Third Supplemental Indenture dated as of April 1, 1993 for $444,000,000 of
Senior Discount Notes due 2003;
4. Fourth Supplemental Indenture dated as of March 6, 1995 for $250,000,000
of 9 1/2% Senior Notes due 2005;
5. Fifth Supplemental Indenture dated as of January 23, 1997 for $250,000,000
of 8 7/8% Senior Notes due 2007;
6. Sixth Supplemental Indenture dated as of September 29, 1997 for
$225,000,000 of 8 3/4% Senior Notes due 2007;
7. Seventh Supplemental Indenture dated as of November 13, 1997 for
$100,000,000 of 8 3/8% Senior Notes due 2017; and
8. Eighth Supplemental Indenture dated as of December 10, 1997 for
$100,000,000 of 8 3/8% Senior Notes due 2007.
<PAGE>
ARAHOVA COMMUNICATIONS, INC.
(Survivor of Merger with Century Communications Corp.)
and
U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
------------------------------
First Supplemental Indenture
Dated as of October 1, 1999
------------------------------
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of October 1, 1999 between
ARAHOVA COMMUNICATIONS, INC., a corporation duly organized and existing under
the laws of the State of Delaware, formerly known as Adelphia Acquisition
Subsidiary, Inc. and having its principal offices at One North Main Street,
Coudersport, Pennsylvania 16915 ("Arahova"), and U.S. BANK TRUST NATIONAL
ASSOCIATION, formerly known as FIRST TRUST OF CALIFORNIA, NATIONAL ASSOCIATION,
a national banking association duly organized and existing under the laws of the
United States, as trustee (the "Trustee") (the "First Supplemental Indenture"),
to the Indenture, dated as of January 15, 1998 (the "Indenture"), between
CENTURY COMMUNICATIONS CORP., a corporation duly organized and existing under
the laws of the State of New Jersey (the "Company"), having its principal
offices at 50 Locust Avenue, New Canaan, Connecticut 06840, and the Trustee.
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and delivery of
the Indenture to provide for the issuance of $605,000,000 Senior Discount Notes
due January 15, 2008 (the "Senior Discount Notes"), as provided in the
Indenture; and
WHEREAS, pursuant to the Agreement and Plan of Merger by and among
Adelphia Communications Corporation, a Delaware corporation ("Adelphia"), the
Company and Arahova , the Company has merged with and into Arahova; and
WHEREAS, Arahova, the surviving corporation of the merger between the
Company and Arahova, desires and has requested the Trustee to join it in the
execution and delivery of this First Supplemental Indenture in order to
expressly assume the due and punctual payment of the principal of (and premium,
if any) and interest on all of the Senior Discount Notes and the performance of
every covenant of the Indenture on the part of the Company to be performed or
observed; and
WHEREAS, Section 10.01(1) of the Indenture provides that a
supplemental indenture may be entered into by Arahova and the Trustee without
the consent of any holder of any Senior Discount Notes for such purpose provided
compliance with Article Nine of the Indenture; and
WHEREAS, the conditions set forth in Article Nine of the Indenture
have been complied with; and
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of Arahova and the Trustee, in accordance with it
terms, and a valid amendment of, and supplement to, the Indenture have been
done;
NOW THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
In consideration of the premises, Arahova as successor in interest to
the Company mutually covenants and agrees with the Trustee, for the equal and
proportionate benefit of all
<PAGE>
holders of the Senior Discount Notes, that the Indenture is supplemented and
amended, to the extent and for the purposes expressed herein, as follows:
PARAGRAPH A. ARTICLE NINE
Arahova expressly assumes the due and punctual payment of the
principal of (and premium, if any) and interest on the Senior Discount Notes and
the performance of every covenant of the Indenture on the part of the Company to
be performed and observed.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
ARAHOVA COMMUNICATION, INC.
By: /s/ Michael J. Rigas
-----------------------------------
Name: Michael J. Rigas
----------------------------
Title: Executive Vice President
----------------------------
U.S. BANK TRUST
NATIONAL ASSOCIATION,
as Trustee
By: /s/ Robert Schneider
-----------------------------------
Name: Robert Schneider
----------------------------
Title: Assistant Vice President
----------------------------
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss:
COUNTY OF POTTER )
On the 28th day of September, 1999, before me personally came Michael
J. Rigas, to me known, who, being by me duly sworn, did depose and say that he
is Executive Vice President of ARAHOVA COMMUNICATIONS, INC., one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
[NOTARIAL SEAL] /s/ Migorette Houghtaling
-----------------------------------
Notary Public
<PAGE>
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On the 27th day of September, 1999, before me personally came Robert
Schneider, to me known, who, being by me duly sworn, did depose and say that he
is the Assistant Vice President of U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee, one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation; and that he signed his name thereto
by like authority.
[NOTARIAL SEAL] /s/ Grace Yang
----------------------------------
Notary Public
<PAGE>
Exhibit 11
CENTURY COMMUNICATIONS CORP. AND SUBSIDIARIES
EXHIBIT TO FORM 10-Q
For the Three Months Ended
August 31, 1999 and 1998
COMPUTATION OF LOSS PER COMMON SHARE
(Amounts in thousands, except share data)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------
August 31, August 31,
1999 1998
---- ----
(Unaudited)
<S> <C> <C>
Net loss $ (190,135) $ (20,838)
---------- ----------
---------- ----------
Average number of common shares and
common share equivalents outstanding
Average number of common shares
outstanding during this period 75,832,000 74,775,000
Add common share equivalents -
options to purchase common shares - net 1,141,000 1,862,000
---------- -----------
Average number of common shares and
common share equivalents 76,973,000(A) 76,637,000 (A)
---------- -----------
---------- -----------
Loss per common share $ (2.47)(A) $ (.27)(A)
---------- -----------
---------- -----------
</TABLE>
(A) In accordance with SFAS 128, the inclusion of common share equivalents in
the computation of earnings per share need not be considered if the
reduction of earnings per share is anti-dilutive. Therefore, loss per
common share and common share equivalents as shown on the Consolidated
Statements of Operations for the periods presented do not include certain
common share equivalents as their effect is anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> AUG-31-1999
<CASH> 1,481,862
<SECURITIES> 0
<RECEIVABLES> 27,466
<ALLOWANCES> 2,165
<INVENTORY> 0
<CURRENT-ASSETS> 1,570,839
<PP&E> 593,640
<DEPRECIATION> 536,008
<TOTAL-ASSETS> 2,670,992
<CURRENT-LIABILITIES> 581,101
<BONDS> 2,640,008
<COMMON> 1,098
0
0
<OTHER-SE> (640,130)
<TOTAL-LIABILITY-AND-EQUITY> 2,670,992
<SALES> 139,804
<TOTAL-REVENUES> 139,804
<CGS> 28,325
<TOTAL-COSTS> 273,728
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,357
<INCOME-PRETAX> (182,041)
<INCOME-TAX> 4,010
<INCOME-CONTINUING> (190,135)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (190,135)
<EPS-BASIC> (2.51)
<EPS-DILUTED> (2.51)
</TABLE>
