<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 4841 23-2417713
(State or other jurisdic- (Primary Standard Industrial (I.R.S. Employer
tion of incorporation or Classification Code Number) Identification No.)
organization)
5 WEST THIRD STREET--P.O. BOX 472
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
COLIN HIGGIN, ESQUIRE
DEPUTY GENERAL COUNSEL
ADELPHIA COMMUNICATIONS CORPORATION
5 WEST THIRD STREET--P.O. BOX 472
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------
PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
CARL E. ROTHENBERGER, JR., ESQUIRE ALLAN G. SPERLING, ESQUIRE
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION CLEARY, GOTTLIEB, STEEN & HAMILTON
58TH FLOOR, 600 GRANT STREET ONE LIBERTY PLAZA
PITTSBURGH, PENNSYLVANIA 15219 NEW YORK, NEW YORK 10006
(412) 562-8826 (212) 225-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
FROM TIME TO TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS TO BE OFFERING PRICE PER AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED SHARE OR UNIT (1) OFFERING PRICE (1) FEE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/2% Senior Pay-In-Kind Notes
Due 2004........................ $22,615,000 100.00% $22,615,000 $7,799
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating registration fee.
------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion May 2, 1994
PROSPECTUS
$
ADELPHIA COMMUNICATIONS CORPORATION
9 1/2% SENIOR PAY-IN-KIND NOTES DUE 2004, SERIES B
This Prospectus relates to $ in principal amount of 9 1/2% Senior Pay-
In-Kind Notes due 2004, Series B ("Notes") of Adelphia Communications
Corporation ("Adelphia") and any Notes issued as payment of interest thereon
pursuant to the terms of the Notes, which may be sold by or for the account of
the Selling Securityholder named herein. The Notes were acquired by the Selling
Securityholder from Adelphia on May , 1994 in a private exchange for an equal
principal amount of Adelphia's 9 1/2% Senior Pay-In-Kind Notes due 2004, Series
A ("Series A Notes"). The Series A Notes so exchanged by the Selling
Securityholder had terms substantially identical to the Notes and were obtained
by the Selling Securityholder pursuant to a private placement by Adelphia. See
"Selling Securityholder."
The Notes offered hereby may be sold by the Selling Securityholder from time to
time in open market transactions, in private or negotiated transactions or in a
combination of such methods of sale, at fixed prices, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. See "Plan of Distribution." Adelphia will not
receive any proceeds from the sale of the Notes by the Selling Securityholder.
The Notes will mature on February 15, 2004. Interest on the Notes is payable
semi-annually on February 15 and August 15 of each year, commencing August 15,
1994. On or prior to February 15, 1999, interest on the Notes may, at
Adelphia's option, be paid in cash, through the issuance of additional Notes
valued at 100% of their principal amount, or in any combination thereof. See
"Certain United States Income Tax Considerations" for a discussion of the
federal income tax treatment of the original issue discount on the Notes. The
Notes are general unsecured obligations of Adelphia and rank pari passu with
all unsubordinated indebtedness of Adelphia and senior in right of payment to
all existing and future subordinated indebtedness of Adelphia. All liabilities
of Adelphia's subsidiaries are effectively senior in right of payment to the
Notes. As of the date hereof, $150,000,000 aggregate principal amount of Notes
are outstanding, including the Notes offered hereby.
The Notes are redeemable at the option of Adelphia, in whole or in part, at any
time on or after February 15, 1999, initially at a redemption price of 103.56%
of the principal amount, plus accrued interest, and declining to 100.00% of the
principal amount, plus accrued interest, on or after February 15, 2002. In
addition, in the event of a sale by the Company prior to February 15, 1996 of
at least $100 million of its capital stock to a Strategic Equity Investor (as
defined herein), up to a maximum of 33 1/3% of the aggregate principal amount
of the Notes then outstanding may be redeemed, at the Company's option, from
the net cash proceeds of such sale at 109.50% of such principal amount, plus
accrued interest, upon not less than 30 nor more than 60 days' prior written
notice to holders given within 30 days after such sale. See "Description of the
Notes--Optional Redemption."
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER THE
CAPTION "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1994.
<PAGE>
AVAILABLE INFORMATION
Adelphia is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2511, and Seven World Trade Center,
13th Floor, New York, New York 10048. Copies of such reports, proxy statements
and other information can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
Adelphia has filed with the Commission a Registration Statement under the
Securities Act with respect to the securities offered by this Prospectus. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information set forth in the Registration Statement. For
further information about Adelphia and the securities offered hereby, reference
is made to the Registration Statement and to the financial statements, exhibits
and schedules filed therewith. The statements contained in this Prospectus
about the contents of any contract or other document are not necessarily
complete, and in each instance reference is made to the copy of each such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. Copies
of the Registration Statement and the exhibits and schedules thereto may be
inspected without charge and copied at prescribed rates at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C., 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Adelphia hereby incorporates by reference into this Prospectus the following
documents or information filed with the Commission: (a) Adelphia's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993 (the "Form 10-K");
(b) Adelphia's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1993; (c) Adelphia's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1993; (d) Adelphia's Quarterly Report on Form 10-Q for the
fiscal quarter ended December 31, 1993 (the "December Form 10-Q"); (e)
Adelphia's Current Reports on Form 8-K filed September 3, 1993, January 18,
1994, April 27, 1994 and May 2, 1994; and (f) Adelphia's Proxy Statement dated
August 23, 1993.
All documents filed by Adelphia pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act on or after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
Any statement contained herein or in any documents incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for the purpose of this Prospectus to the extent that a subsequent
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN EXHIBITS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM MICHAEL C. MULCAHEY,
DIRECTOR OF INVESTOR RELATIONS OF ADELPHIA AT ADELPHIA'S PRINCIPAL EXECUTIVE
OFFICE LOCATED AT 5 WEST THIRD STREET, COUDERSPORT, PENNSYLVANIA 16915,
TELEPHONE NUMBER (814) 274-9830.
3
<PAGE>
As used herein, the term "Consolidated Financial Statements" refers to
consolidated financial statements and the notes thereto incorporated by
reference from the Form 10-K, and the term "Management's Discussion and
Analysis" refers to Management's Discussion and Analysis of Financial Condition
and Results of Operations incorporated by reference from the Form 10-K and the
Forms 10-Q for the quarters ended December 31, 1993, September 30, 1993 and
June 30, 1993, as applicable, except to the extent updated by any filing made
subsequent to the date thereof.
4
<PAGE>
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus or
incorporated by reference herein. Prospective investors should carefully
consider the factors set forth herein under the caption "Risk Factors."
THE COMPANY
Adelphia Communications Corporation ("Adelphia" and, collectively with its
subsidiaries, the "Company") is one of the largest cable television operators
in the United States. As of December 31, 1993, cable television systems owned
or managed by the Company (the "Systems") served 1,294,230 basic subscribers.
John J. Rigas, the Chairman, President, Chief Executive Officer and founder of
Adelphia, has owned and operated cable television systems since 1952.
The Company's wholly-owned cable systems (the "Company Systems") are located
in eight states and are organized into seven regional clusters: Western New
York, Virginia, Western Pennsylvania, New England, Eastern Pennsylvania, Ohio
and Coastal New Jersey. The Company Systems are located primarily within the 50
largest television markets. As of December 31, 1993, the Company Systems passed
1,131,979 homes and served 831,880 basic subscribers.
The Company owns a 50% voting interest and nonvoting preferred limited
partnership interests entitling the Company to a 16.5% priority return in
Olympus Communications, L.P. ("Olympus"). Olympus is a joint venture which owns
cable systems (the "Olympus Systems") primarily located in some of the fastest
growing areas of Florida. The Olympus Systems in Florida form a substantial
part of an eighth regional cluster, Southeastern Florida. The Company is the
managing general partner of Olympus and receives a fee for providing management
services. As of December 31, 1993, the Olympus Systems passed 453,901 homes and
served 269,726 basic subscribers.
The Company also provides, for a fee, management and consulting services to
certain partnerships (the "Managed Partnerships"). John J. Rigas and certain
members of his immediate family, including entities they own or control
(collectively, the "Rigas Family"), control or have substantial ownership
interests in the Managed Partnerships. As of December 31, 1993, cable systems
owned by the Managed Partnerships (the "Managed Systems") passed 265,618 homes
and served 192,624 basic subscribers.
The Company's strategy has been to provide superior customer service while
maximizing operating cash flow. By clustering its systems in geographic
proximity, the Company has been able to realize significant operating
efficiencies through the consolidation of many managerial, administrative and
technical functions while maintaining a strong community presence in its
service areas. At December 31, 1993, approximately 642,000, or 50%, of the
Systems' basic subscribers were served from only ten headends and approximately
1,027,000, or 80%, of such subscribers were served from only 27 headends. In
addition, approximately 65% of the Systems' basic subscribers were served by
systems serving more than 50,000 subscribers while, nationwide, only 39% were
served by systems as large. Over 99% of the subscribers to the Company Systems
are served by systems with "addressable capable" technology.
Since April 1, 1988, the Company has invested more than $375,000,000 to
modernize and expand the Company Systems. In particular, the Company has
replaced approximately 18% of the total installed trunk cable for the Systems
with fiber optic cable. In addition, the Company has installed over 400 miles
of fiber optic plant for point-to-point applications such as connecting or
eliminating headends or microwave link sites. Through the use of fiber optic
cable and other technological improvements, the Company has increased system
reliability, channel capacity and its ability to deliver advanced cable
television services. These improvements have enhanced customer service, reduced
operating expenses and allowed the Company to introduce additional services,
such as impulse-ordered pay-per-view programming, which expand customer
5
<PAGE>
choices and increase Company revenues. The Company believes that the
installation of fiber optic cable plant will better position the Company to
deliver new or enhanced services in the future.
Management believes that the telecommunications industry, including the
cable television and telephone industries, is in a period of consolidation
characterized by mergers, joint ventures, acquisitions, sales of all or part
of cable companies or their assets, and other partnering and investment
transactions of various structures and sizes involving cable or other
telecommunications companies. The Company continues to evaluate new
opportunities that allow for expansion of its business through the acquisition
of additional cable television systems in geographic proximity to its existing
regional markets or in locations that can serve as a basis for new market
areas. Management also believes that the Company is well positioned to
participate in this consolidation trend due to its well-clustered cable
systems, the quality of its cable plant, its management strengths and its
relationships within the cable industry. The Company, like other cable
television companies, has participated from time to time and is participating
in preliminary discussions with third parties regarding a variety of potential
transactions, and the Company has considered and expects to continue to
consider and explore potential transactions of various types with other cable
and telecommunications companies. However, the Company has not reached any
agreements, in principal or otherwise, with respect to any material
transaction and no assurances can be given as to whether any such transaction
may be consummated or, if so, when.
Adelphia was incorporated in Delaware on July 1, 1986 for the purpose of
reorganizing five cable television companies, then principally owned by the
Rigas Family, into a holding company structure in connection with the initial
public offering of Adelphia's Class A Common Stock and its 13% Senior
Subordinated Notes due 1996 ("Senior Subordinated Notes"). The Company's
executive offices are located at 5 West Third Street, Coudersport, Pennsylvania
16915, and its telephone number is (814) 274-9830.
TERMS OF THE NOTES
<TABLE>
<C> <S>
Maturity Date............. The Notes will mature on February 15, 2004.
Interest Payment Dates.... February 15 and August 15, commencing August 15,
1994.
Interest Payments......... On or prior to February 15, 1999, all interest on
the Notes may, at the option of Adelphia, be paid
in cash, through the issuance of additional Notes
valued at 100% of their principal amount, or in
any combination thereof. The Notes will bear cash
interest from February 16, 1999 until maturity.
Interest.................. The Notes offered hereby will bear interest at a
rate of 9 1/2% per annum from , 1994, the
date such Notes were issued to the Selling
Securityholder by Adelphia in exchange for Series
A Notes then held by the Selling Securityholder.
The interest accrued from February 22, 1994, the
issuance date of the Series A Notes so exchanged
by the Selling Securityholder, until , 1994,
the date of issuance of the Notes offered hereby,
will be paid on the first interest payment date on
the Notes (August 15, 1994) to the holders of such
Notes. The interest rate on the Series A Notes
exchanged by the Selling Securityholder was 10%
per annum prior to March 25, 1994. On March 25,
1994 and thereafter the interest rate on such
Series A Notes was 9 1/2% per annum. See
"Description of the Notes--Exchange Offer and
Private Exchange."
</TABLE>
6
<PAGE>
Optional Redemption.......
The Notes will be redeemable at the option of
Adelphia, in whole or in part, at any time on
or after February 15, 1999, initially at
103.56% of their principal amount, plus accrued
interest, and declining to 100.00% of such
principal amount, plus accrued interest, on or
after February 15, 2002. In addition, in the
event of a sale by the Company prior to
February 15, 1996 of at least $100 million of
its capital stock (an "Equity Event") to a
Strategic Equity Investor (as defined herein),
up to 33 1/3% of the aggregate principal amount
of Notes then outstanding may be redeemed, at
the Company's option, from the net cash
proceeds of the Equity Event at 109.50% of such
principal amount, plus accrued interest, upon
not less than 30 nor more than 60 days' prior
written notice to holders given within 30 days
after the Equity Event. See "Description of the
Notes--Optional Redemption."
Ranking................... The Notes are unsecured indebtedness of
Adelphia ranking pari passu with other
unsubordinated indebtedness of Adelphia,
including Adelphia's $400,000,000 of 12 1/2%
Senior Notes due 2002 (the "12 1/2% Notes"),
Adelphia's $125,000,000 of 11 7/8% Senior
Debentures due 2004 (the "11 7/8% Debentures"),
Adelphia's $130,000,000 of 9 7/8% Senior
Debentures due 2005 (the "9 7/8% Debentures")
and Adelphia's $110,000,000 of 10 1/4% Senior
Notes due 2000 (the "10 1/4% Notes"), and
senior in right of payment to all existing and
future subordinated indebtedness of Adelphia.
The operations of Adelphia are conducted
through Adelphia's subsidiaries and, therefore,
Adelphia is dependent on the earnings and cash
flow of and distributions from its subsidiaries
to meet its debt obligations, including its
obligations with respect to the Notes. Because
the assets of Adelphia's subsidiaries
constitute substantially all of the assets of
Adelphia, and because those subsidiaries will
not guarantee the payment of principal of and
interest on the Notes, the claims of holders of
the Notes effectively will be subordinated to
the claims of creditors of the Company's
subsidiaries. At December 31, 1993, the total
amount of long-term debt of Adelphia's
subsidiaries was $937,809,000. See "Risk
Factors--Holding Company Structure" and
"Description of the Notes."
Certain Covenants......... The Notes were issued under an Indenture (the
"Indenture") between Adelphia and Bank of
Montreal Trust Company, Trustee, dated as of
February 22, 1994, as amended by the First
Supplemental Indenture thereto dated as of May
, 1994, which imposes certain restrictions
on, among other things, the incurrence of
indebtedness, mergers and sales of assets,
change of control, the payment of dividends on
capital stock, and the repurchase of
subordinated debt of Adelphia. In addition, the
Indenture restricts certain other payments by
Adelphia and its subsidiaries and certain
transactions with, and investments in,
affiliates.
Original Issue Discount... For federal income tax purposes, each Note will
be treated as having been issued with original
issue discount. See "Certain United States
Income Tax Considerations."
7
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS EXCEPT PER SHARE AND
PER SUBSCRIBER DATA)
The selected consolidated financial data as of and for each of the five years
in the period ended March 31, 1993 have been derived from the audited
consolidated financial statements of the Company. These data should be read in
conjunction with the Consolidated Financial Statements and related notes for
each of the three years in the period ended March 31, 1993, the Financial
Statements and related notes for the nine month period ended December 31, 1993
and "Management's Discussion and Analysis." The statement of operations data
with respect to fiscal years ending March 31, 1989 and 1990, and the balance
sheet data at March 31, 1989, 1990 and 1991, have been derived from audited
consolidated financial statements of the Company not included herein. Results
of operations for the South Dade Systems are reflected on a consolidated basis
up to the date of transfer (December 19, 1989) of such systems to Olympus. The
selected consolidated financial data with respect to the nine months ended
December 31, 1992 and 1993 are unaudited; however, in the opinion of
management, such data reflect all adjustments (consisting only of normal
recurring adjustments) necessary to fairly present the data for such interim
periods. Operating results for interim periods are not necessarily indicative
of the results that may be expected for a full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------------------------------------- --------------------
1989 1990 1991 1992 1993 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 186,379 $ 228,643 $ 248,586 $ 273,630 $ 305,222 $ 225,921 $ 239,865
Direct Operating and
Programming............ 52,966 63,381 66,007 74,787 82,377 61,110 67,370
Selling, General and
Administrative......... 33,236 35,326 41,421 44,427 49,468 35,628 38,152
--------- --------- --------- ---------- --------- --------- ---------
Operating Income before
Depreciation
and Amortization....... 100,177 129,936 141,158 154,416 173,377 129,183 134,343
Depreciation and
Amortization........... 114,009 122,107(a) 79,427 84,817 90,406 66,145 67,516
--------- --------- --------- ---------- --------- --------- ---------
Operating Income (Loss). (13,832) 7,829 61,731 69,599 82,971 63,038 66,827
Interest Income from
Affiliates............. 1,257 933 1,596 3,085 5,216 3,960 3,755
Other Income............ 261 122 1,750 968 1,447 1,002 570
Priority Investment In-
come (b)............... -- 9,797 19,175 22,300 22,300 16,725 16,725
Interest Expense........ (111,331) (150,263) (163,637) (164,839) (164,859) (120,318) (136,757)
Equity in Net Loss of
Olympus................ -- (25,357) (61,975) (52,718) (46,841) (36,309) (23,408)
--------- --------- --------- ---------- --------- --------- ---------
Loss before Income
Taxes, Extraordinary
Loss and Cumulative
Effect of Change in
Accounting Principle
(c).................... (123,645) (156,939) (141,360) (121,605) (99,766) (71,902) (72,288)
Income Tax Expense...... -- -- -- -- (3,143) -- (2,601)
Extraordinary Loss (c).. -- -- -- -- (14,386) (14,386) --
Cumulative Effect of
Change in
Accounting Principle
(c).................... -- -- -- -- (59,500) -- (89,660)
--------- --------- --------- ---------- --------- --------- ---------
Net Loss................ $(123,645) $(156,939) $(141,360) $(121,605) $(176,795) $ (86,288) $(164,549)
========= ========= ========= ========== ========= ========= =========
Loss per Share of Common
Stock before
Extraordinary Loss and
Cumulative
Effect of Change in
Accounting Principle.. $ (8.94) $ (11.36) $ (10.23) $ (8.80) $ (6.80) $ (4.77) $ (4.89)
Net Loss per Share of
Common Stock........... $ (8.94) $ (11.36) $ (10.23) $ (8.80) $ (11.68) $ (5.72) $ (10.74)
Cash Dividends Declared
per Common Share....... -- -- -- -- -- -- --
EBITDA (d).............. $ 101,695 $ 140,788 $ 163,679 $ 180,769 $ 202,340 $ 150,870 $ 155,393
Deficiency of Earnings
Available to
Cover Fixed Charges
(e).................... $ 127,079 $ 134,612 $ 82,377 $ 70,385 $ 53,934 $ 36,515 $ 49,888
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------------------------------------------------------- ---------------------
1989 1990 1991 1992 1993 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash
Equivalents............ $ 43,662 $ 15,287 $ 18,592 $ 11,173 $ 38,671 $ 113,992 $ 3,821
Investment in and
Amounts Due from
Olympus (f)............ -- 87,337 79,030 64,972 7,692 67,572 (7,129)
Total Assets............ 897,555 971,792 981,960 925,791 949,593 1,104,247 957,709
Total Debt.............. 1,121,796 1,355,330 1,495,025 1,554,270 1,731,099 1,790,551 1,798,284
Debt Net of Cash (g).... 1,078,134 1,340,043 1,476,433 1,543,097 1,692,428 1,676,559 1,794,463
Stockholders' Equity
(Deficiency)........... (293,640) (450,579) (591,939) (713,544) (868,614) (778,107) (1,033,163)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------------------------- ----------------
1989 1990 1991 1992 1993 1992 1993
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL RATIOS AND
OTHER DATA:
Total Debt to EBITDA
(h).................... 9.87x 8.69x 8.85x 8.09x 8.41x 8.72x 8.66x
Debt Net of Cash to
EBITDA................. 9.48x 8.59x 8.74x 8.03x 8.22x 8.17x 8.64x
EBITDA to Total Interest
Expense................ 0.91 0.94 1.00 1.10 1.23 1.25 1.14
Operating Margin (i).... 53.7% 56.8% 56.8% 56.4% 56.8% 57.2% 56.0%
Capital Expenditures.... $58,501 $75,619 $77,851 $52,808 $70,975 $57,302 $48,248
Average Monthly Revenue
per Basic Subscriber
(j).................... $ 25.07 $ 26.61 $ 28.63 $ 29.82 $ 32.40 $ 31.73 $ 32.22
</TABLE>
- --------
(a) Reflects an increase in the estimated useful lives of certain intangible
assets effective January 1990. See Note 1 to the Adelphia Communications
Corporation Consolidated Financial Statements.
(b) The Company's return on its priority investment in Olympus is based on a
16.5% return on its nonvoting preferred limited partnership interests ("PLP
Interests"), although the Company recognizes priority investment income
only to the extent received. At March 31, 1993 and December 31, 1993,
$68,702,000 and $95,930,000, respectively, of accumulated priority return
remained unpaid.
(c) "Extraordinary loss" relates to loss on the early retirement of the Senior
Discount Notes. "Cumulative Effect of Change in Accounting Principle"
refers to a change in accounting principle for Olympus and the Company.
Effective January 1, 1993 and April 1, 1993, respectively, Olympus and the
Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which requires
an asset and liability approach for financial accounting and reporting for
income taxes. SFAS 109 resulted in the cumulative recognition of an
additional liability by Olympus and the Company of approximately
$59,500,000 and $89,660,000, respectively.
(d) Earnings before interest, income taxes, depreciation and amortization,
equity in net loss of Olympus, extraordinary loss and cumulative effect of
change in accounting principle. The use of the term "EBITDA" is consistent
with the use of the same term in the Indenture under which the Notes were
issued and the indentures for the 10 1/4% Notes, the 9 7/8% Debentures, the
11 7/8% Debentures and the 12 1/2% Notes. EBITDA and similar measurements
of cash flow are commonly used in the cable television industry to analyze
and compare cable television companies on the basis of operating
performance, leverage and liquidity.
(e) Earnings consist of operating income before income taxes and fixed charges
(excluding capitalized interest). Fixed charges consist of (i) interest,
whether expensed or capitalized; (ii) amortization of debt issuance costs
and discount relating to any indebtedness, whether expensed or capitalized;
and (iii) the assumed interest component of rent expense.
(f) Investment in and amounts due from Olympus at December 31, 1993 is
comprised of the following:
<TABLE>
<S> <C>
Gross Investment in PLP Interests and General Partner's
Equity................................................... $ 283,002,000
Excess of Ascribed Value of Contributed Property over
Historical Cost......................................... (98,303,000)
Cumulative Equity in Net Loss of Olympus................. (269,799,000)
-------------
Investments in Olympus.................................. (85,100,000)
Amounts due from Olympus................................. 77,971,000
-------------
Total.................................................. $ (7,129,000)
=============
</TABLE>
(g) Total debt less cash and cash equivalents.
(h) Based on annualized EBITDA for the quarter ending the period presented. The
Company believes that this presentation is consistent with the covenant
test which limits the incurrence of indebtedness in the Indenture under
which the Notes were issued and the indentures for the 10 1/4% Notes, the 9
7/8% Debentures, the 11 7/8% Debentures and the 12 1/2% Notes and that this
ratio is commonly used in the cable television industry as a measure of
leverage.
(i) Percentage representing operating income before depreciation and
amortization divided by revenues.
(j) Average for the last quarter of each period presented, including revenues
and subscribers for the South Dade Systems up to the date of transfer to
Olympus. The Company believes that this presentation provides meaningful
trend information over the periods presented and is commonly used in the
cable television industry to present such data on a comparative basis.
9
<PAGE>
RISK FACTORS
Prior to making an investment decision, prospective investors should
carefully consider, along with other matters referred to herein or incorporated
by reference herein, the following:
REGULATION AND COMPETITION IN THE CABLE TELEVISION INDUSTRY
The cable television operations of the Company may be adversely affected by
changes and developments in governmental regulation, competitive forces and
technology. The cable television industry and the Company are subject to
extensive regulation at the federal, state and local levels. Many aspects of
such regulation are currently the subject of judicial proceedings and
administrative or legislative proceedings or proposals. On October 5, 1992,
Congress passed the Cable Television Consumer Protection and Competition Act of
1992 (the "1992 Cable Act") which significantly expands the scope of regulation
of certain subscriber rates and a number of other matters in the cable
industry, such as mandatory carriage of local broadcast stations and
retransmission consent, and which will increase the administrative costs of
complying with such regulations. The Federal Communications Commission (the
"FCC") has adopted rate regulations that establish, on a system-by-system
basis, maximum allowable rates for (i) basic and cable programming services
(other than programming offered on a per-channel or per-program basis), based
upon a benchmark methodology, and (ii) associated equipment and installation
services, based upon cost plus a reasonable profit. Under the FCC rules,
franchising authorities are authorized to regulate rates for basic services and
associated equipment and installation services, and the FCC will regulate rates
for regulated cable programming services in response to complaints filed with
the agency. The original rate regulations became effective on September 1,
1993. Amendments to the rate regulations will become effective May 15, 1994.
The FCC ordered an interim rate freeze effective April 5, 1993 which has been
extended through May 15, 1994.
The original rate regulations required a reduction of existing rates charged
for basic services and regulated cable programming services to the greater of
(i) the applicable benchmark level or (ii) the rates in force as of September
30, 1992 reduced by 10%, adjusted forward for inflation. The amended
regulations will generally require a reduction of up to 17 percent from the
rates for regulated services in force as of September 30, 1992, adjusted
forward for inflation and certain other factors. Rate reductions are not
required to the extent that a cable operator at its option elects to use an
alternative cost-of-service methodology and shows that rates for basic and
cable programming services are reasonable. The FCC has adopted interim rules to
govern cost-of-service showings by cable operators. Refunds with interest will
be required to be paid by cable operators who are required to reduce regulated
rates after September 1, 1993, calculated retroactively from the date of a
local franchising authority's decision with regard to basic rates, and from the
date a complaint is filed with the FCC with regard to the rates charged for
regulated programming services. The FCC has reserved the right to reduce or
increase the benchmarks it has established. The rate regulations will also
limit future increases in regulated rates to an inflation indexed amount plus
increases above the inflation index in certain costs such as taxes, franchise
fees, costs associated with specific franchise requirements and increased
programming costs. Cost-based adjustments to these capped rates can also be
made in the event a cable operator adds or deletes channels. Because of the
limitation on rate increases for regulated services, future revenue growth from
cable services will rely to a much greater extent than has been true in the
past on increased revenues from unregulated services and new subscribers than
from increases in previously unregulated rates.
The FCC has adopted regulations implementing most of the requirements of the
1992 Cable Act and is in the process of completing certain additional
rulemaking proceedings before the 1992 Cable Act can be fully implemented. As
noted above, amendments to the rate regulations were recently announced and the
FCC is also likely to continue to modify, clarify or refine the rate
regulations and benchmark methodology. In addition, litigation has been
instituted challenging various portions of the 1992 Cable Act and the
rulemaking proceedings including the rate regulations. The Company cannot
predict the effect or outcome of the future rulemaking proceedings, changes to
the rate regulations, or litigation. Further, because the FCC
10
<PAGE>
has only recently issued its interim rules and has not adopted final cost-of-
service rules, the Company has not determined to what extent it will be able to
utilize cost-of-service showings to justify rates.
Effective as of September 1, 1993, in accordance with the 1992 Cable Act, the
Company repackaged certain existing cable services by adjusting rates for basic
service and introducing a new method of offering certain cable services. The
Company adjusted the basic service rates and related equipment and installation
rates in all of its systems in order for such rates to be in compliance with
the applicable benchmark or equipment and installation cost levels. The amended
rules may require further adjustments to the Company's rates. The Company also
implemented a program in all of its systems called "CableSelect" under which
most of the Company's satellite-delivered programming services are now offered
individually on a per channel basis, or as a group at a price of approximately
15% to 20% below the sum of the per channel prices of all such services. For
subscribers who elect to customize their channel lineup, the Company will
provide, for a monthly rental fee, an electronic device located on the cable
line outside the home, enabling a subscriber's television to receive only those
channels selected by the subscriber. These basic service rate adjustments and
the CableSelect program have also been implemented in all systems managed by
the Company. The Company believes CableSelect provides increased programming
choices to the Company's subscribers while providing flexibility to the Company
to respond to future changes in areas such as customer demand and programming.
Certain programmers have taken the position that the Company's new method of
offering services is inconsistent with their programming agreements. The
Company disagrees and is in discussions with these programmers. Revenues from
regulated programming services and equipment, and revenues from CableSelect
services per subscriber for the quarter ended December 31, 1993 (the first full
quarter reflecting the impact of the implementation of rate regulations on
September 1, 1993) declined 3.0% compared to the quarter ended June 30, 1993
(the last quarter not impacted by the implementation of rate regulations on
September 1, 1993). The decline in revenue was partially offset by increases in
prices for HBO, Cinemax, TMC, Disney, Showtime, and Prism; and by increases in
the average number of basic subscribers. A letter of inquiry, one of at least
63 sent by the FCC to numerous cable operators, was received by an Olympus
System regarding the implementation of this new method of offering services.
The Company has responded in writing to the FCC's inquiry.
As part of its reconsideration of the original rate regulations, the FCC has
established guidelines for evaluating such "a la carte" packages on a case-by-
case basis based on a number of factors. The FCC has indicated that "a la
carte" packages which are determined to be evasions of rate regulations rather
than true enhancements of subscriber choice will be treated as regulated tiers,
and cable operators engaging in such practices may be subject to fines and/or
further rate adjustments. The Company is examining its a la carte packages and
may modify certain packages in light of these guidelines.
The Company is currently unable to predict the effect that the amended
regulations, future FCC treatment of "a la carte" packages or other future FCC
rulemaking proceedings will have on its business and results of operations in
future periods. No assurance can be given at this time that such matters will
not have a material adverse effect on the Company's business and results of
operations in the future. Also, no assurance can be given as to what other
future actions Congress, the FCC or other regulatory authorities may take or
the effects thereof on the Company.
Cable television companies operate under franchises granted by local
authorities which are subject to renewal and renegotiation from time to time.
Because such franchises are generally non-exclusive, there is a potential for
competition with the Systems from other operators of cable television systems,
including public systems operated by municipal franchising authorities
themselves, and from other distribution systems capable of delivering
television programming to homes. The 1992 Cable Act contains provisions which
encourage competition from such other sources. Additionally, recent court and
administrative decisions have removed certain of the restrictions that have
limited entry into the cable television business by potential competitors such
as telephone companies, and proposals now under consideration by the FCC, and
which are being and from time to time have been considered by Congress, could
result in the elimination of other such restrictions. The Company cannot
predict the extent to which competition will materialize from other
11
<PAGE>
cable television operators, other distribution systems for delivering
television programming to the home, or other potential competitors, or, if such
competition materializes, the extent of its effect on the Company.
FCC rules permit local telephone companies to offer "video dialtone" service
for video programmers, including channel capacity for the carriage of video
programming and certain non-common carrier activities such as video processing,
billing and collection and joint marketing agreements. On December 15, 1992,
New Jersey Bell Telephone Company filed an application with the FCC to operate
a "video dialtone" service in portions of Dover County, New Jersey, in which
the Company serves approximately 20,000 subscribers. The Company opposed the
application. On July 28, 1993, the FCC sent a letter to New Jersey Bell stating
that the application appeared to be inconsistent with the FCC's video dialtone
requirements in that insufficient capacity to serve multiple programmers was to
be made available. New Jersey Bell was given the opportunity to amend its
application which, it subsequently did. The Company then filed a further
opposition to the application. The matter has not yet been decided by the FCC.
On December 17, 1992, the Chesapeake and Potomac Telephone Company of
Virginia and Bell Atlantic Video Service Company ("Bell Atlantic Video") filed
suit in U.S. District Court in Alexandria, Virginia seeking to declare
unconstitutional the provisions in the Cable Communications Policy Act of 1984
(the "1984 Cable Act") that prohibit telephone companies from owning a cable
television system in their telephone service areas. On August 24, 1993, the
court held that the 1984 Cable Act cross-ownership provision is
unconstitutional, and it issued an order enjoining the FCC from enforcing the
cross-ownership ban. The U.S. Justice Department has appealed this decision to
the U.S. Court of Appeals for the Fourth Circuit. Similar suits have been filed
in other federal district courts. In addition, legislation which would alter or
eliminate the cross-ownership ban is under active consideration in Congress.
The Company cannot predict the outcome of the New Jersey Bell video dialtone
proceeding or the Bell Atlantic Video litigation. However, the Company believes
that the provision of video programming by telephone companies with
considerable financial resources in competition with the Company's existing
operations could have an adverse effect on the Company's financial condition
and results of operations. At this time, the magnitude of any such effect is
not known or estimable.
SUBSTANTIAL LEVERAGE/DEFICIENCY OF EARNINGS AVAILABLE TO COVER FIXED CHARGES
The Company is highly leveraged and has incurred substantial indebtedness,
primarily to finance acquisitions and expansion of its operations and, to a
lesser extent, for investments in and advances to affiliates. At December 31,
1993, the Company's total debt aggregated approximately $1,798,284,000 which
included approximately $937,809,000 of subsidiary debt and approximately
$860,475,000 of parent debt. The Company's total debt has varying maturities to
2005, including as of December 31, 1993 an aggregate of approximately
$584,724,000 maturing on or prior to March 31, 1998. The Company's financing
strategy has been to maintain its public long-term debt at the holding company
level while borrowing in the private debt markets (e.g., bank and insurance
company debt) through the Company's wholly-owned subsidiaries. The Company's
subsidiary financings are effected through separate borrowing groups, and
substantially all of the indebtedness in these borrowing groups is non-recourse
to Adelphia. The subsidiary credit arrangements have varied revolving credit
and term periods and contain separately-negotiated covenants relating to cross-
defaults and the incurrence of additional debt for each borrowing group. See
"Management's Discussion and Analysis."
The total stockholders' deficiency at March 31, 1993 and at December 31, 1993
was $868,614,000 and $1,033,163,000, respectively. However, the total
stockholders' deficiency has been reduced as a result of the Stock Offering
completed on January 14, 1994. See "Recent Developments" and "Capitalization."
The stockholders' deficiency generally has resulted from the Company's reported
net losses which have been caused primarily by high levels of depreciation and
amortization and interest expense. The Company reported net losses of
approximately $141,400,000, $121,600,000 and $176,800,000, respectively, for
the years ended
12
<PAGE>
March 31, 1991, 1992 and 1993 and $86,288,000 and $164,549,000, respectively,
for the nine months ended December 31, 1992 and 1993. The increase in net loss
for the year ended March 31, 1993 and the nine months ended December 31, 1993
compared to the respective prior year periods was primarily due to the
cumulative effect of the change in accounting principle for Olympus and the
Company. Effective January 1, 1993 and April 1, 1993, Olympus and the Company,
respectively, adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." The cumulative effect
of adopting SFAS No. 109 was to increase the net loss by $59,500,000 and
$89,660,000 for the year ended March 31, 1993 and the nine months ended
December 31, 1993, respectively. The Company expects to incur significant
losses for the next several years. See "Management's Discussion and Analysis."
For the year ended March 31, 1993 and for the nine months ended December 31,
1993, the Company's earnings were insufficient to cover its fixed charges by
$53,934,000 and $49,888,000, respectively, and, in addition, after giving pro
forma effect to the issuance of the Notes and the 10 1/4% Notes and to the
Stock Offering (as defined herein) and to the application of net proceeds
therefrom as if all such events had occurred on April 1, 1992 and April 1,
1993, the Company's earnings would have been insufficient to cover its fixed
charges by $51,966,000 and $43,770,000 for the year ended March 31, 1993 and
the nine months ended December 31, 1993, respectively. However, such amounts
reflect non-cash charges totalling $90,570,000 and $67,570,000, respectively,
consisting of depreciation and amortization, and accretion of original issue
discount. Historically, the Company's cash generated from operating activities
and borrowings has been sufficient to meet its requirements for debt service,
working capital, capital expenditures, acquisitions, and investments in and
advances to affiliates. The Company believes that it will continue to generate
cash and obtain financing sufficient to meet such requirements. However, the
Company's ability to incur additional indebtedness is limited by covenants in
its parent company indentures and its subsidiary credit agreements. If the
Company were unable to meet its debt service obligations, the Company would
have to consider refinancing its indebtedness or obtaining new financing.
Although in the past the Company has been able both to refinance its
indebtedness and to obtain new financing, there can be no assurance that the
Company would be able to do so in the future or that, if the Company were able
to do so, the terms available would be favorable to the Company. In the event
that the Company were unable to refinance its indebtedness or obtain new
financing under these circumstances, the Company would likely have to consider
various options such as the sale of certain assets to meet its required debt
service, negotiation with its lenders to restructure applicable indebtedness or
other options available to it under applicable law. See "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis."
HOLDING COMPANY STRUCTURE
As a holding company, Adelphia holds no significant assets other than its
investments in and advances to its subsidiaries. Adelphia's ability to make
interest and principal payments when due to holders of debt of Adelphia is
dependent upon the receipt of sufficient funds from its subsidiaries. Under the
terms of various debt agreements between the Adelphia subsidiaries and their
respective lending institutions, upon the occurrence of an event of default
(including certain cross-defaults resulting from defaults under Adelphia's debt
agreements) or unless certain financial performance tests are met, the Adelphia
subsidiaries are restricted from distributing funds to Adelphia. In addition,
because Adelphia's subsidiaries do not guarantee the payment of principal of
and interest on debt of Adelphia, the claims of holders of such debt
effectively will be subordinated to the claim of creditors of such entities. At
December 31, 1993, the total amount of long-term debt of such subsidiaries was
$937,809,000. See "Management's Discussion and Analysis" and "Description of
the Notes."
POTENTIAL CONFLICTS OF INTEREST
The Rigas Family holds substantially all of Adelphia's Class B Common Stock
and 94% of the combined voting power of both classes of Adelphia's Common Stock
and currently has the power to elect all seven members of Adelphia's Board of
Directors. John J. Rigas and the other executive officers of Adelphia
(including other members of the Rigas Family) hold direct and indirect
ownership interests in the Managed Partnerships, which are managed by the
Company for a fee. Subject to the restrictions contained in the
13
<PAGE>
Business Opportunity Agreement regarding future acquisitions, Rigas Family
members and the executive officers are free to continue to own these interests
and acquire additional interests in cable television systems. Such activities
could present a conflict of interest with the Company in the allocation of
management time and resources of the executive officers. In addition, there
have been and will continue to be transactions between the Company and the
executive officers or other entities in which the executive officers have
ownership interests or with which they are affiliated. The Indenture under
which the Notes were issued and indentures under which the 10 1/4% Notes, 9
7/8% Debentures, 11 7/8% Debentures and 12 1/2% Notes of Adelphia were issued
contain covenants that place certain restrictions on transactions between the
Company and its affiliates. See "Description of New Notes--Covenants:
Limitation on Transactions with Affiliates."
TAXABLE INCOME WITHOUT CASH PAYMENTS
Holders of the Notes will be required to report taxable income, for federal
income tax purposes, as original issue discount accrues thereon (regardless of
whether stated interest thereon is paid in cash or through the issuance of
additional Notes). As a result, such holders may be required to report interest
income before receiving the cash to which such interest is attributable. See
"Certain United States Income Tax Considerations."
ABSENCE OF ACTIVE TRADING MARKET
The Notes are a new issue of securities for which there is currently no
active trading market, and there can be no assurance that an active trading
market for the Notes will exist. If the Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities and
other factors, including general economic conditions and the financial
condition of the Company. The Company does not intend to apply for listing of
the Notes on any securities exchange or authorization for quotation on the
National Association of Securities Dealers Automated Quotations System. No
assurance can be given as to the liquidity of the trading market for the Notes
or that an active public market will develop for the Notes.
RECENT DEVELOPMENTS
On February 22, 1994, the Company issued, in a private placement,
$150,000,000 aggregate principal amount of Series A Notes. The net proceeds
from the Series A Notes of approximately $147,000,000 were used to repay
outstanding bank debt of subsidiaries in order to extend the scheduled
maturities of the Company's long-term debt. On May , 1994, pursuant to an
exchange offer the Company completed the exchange of $ aggregate principal
amount of Notes registered under the Securities Act of 1933, as amended (the
"Securities Act"), for an equal principal amount of Series A Notes tendered by
the holders thereof. Also, on May , 1994, the Company completed the private
exchange of $ aggregate principal amount of Notes, which are offered
hereby, for Series A Notes held by the Selling Securityholder. See "Selling
Securityholder."
On January 14, 1994, the Company completed a public offering of 9,132,604
shares of Class A Common Stock (the "Stock Offering"), which included 300,000
shares of Class A Common Stock sold to the underwriter in the Stock Offering
pursuant to an over-allotment option. Upon completion of the Stock Offering,
there were 13,507,604 shares of Class A Common Stock outstanding and a total of
24,452,080 shares of Class A Common Stock and Class B Common Stock outstanding.
Certain provisions of this Prospectus present information that gives effect to
the completion of the Stock Offering with net proceeds, before offering
expenses, of $156,579,000 or $17.145 per share to the Company. The net proceeds
from the Stock Offering were used to redeem all the Company's outstanding
Senior Subordinated Notes and to reduce bank debt of Adelphia's subsidiaries.
Of the 9,132,604 shares of Class A Common Stock sold in the Stock Offering,
3,300,000 shares were sold to the public at $18.00 per share and 5,832,604
shares were sold directly by Adelphia to partnerships controlled by members of
the Rigas Family, at the public offering price less the underwriting discount.
Highland Holdings and Syracuse Hilton Head Holdings, L.P., which purchased
4,374,453 and 1,458,151 of such 5,832,604 shares, respectively, hold and
control the Managed Systems. See "Management's Discussion and Analysis" in the
December Form 10-Q.
14
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
December 31, 1993 and as adjusted to give effect to the Stock Offering and to
the Offering of Notes, and to the application of the net proceeds therefrom.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
------------------------
ACTUAL AS ADJUSTED
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total Debt (a):
Notes of subsidiaries to banks................... $ 402,775 $ 199,541(b)
Notes of subsidiaries to institutions ........... 516,500 516,500
----------- -----------
Total subsidiaries' debt....................... 919,275 716,041
9 1/2% Senior Pay-In-Kind Notes Due 2004........ -- 150,000(b)
10 1/4% Senior Notes Due 2000.................... 108,731 108,731
12 1/2% Senior Notes Due 2002.................... 400,000 400,000
11 7/8% Senior Debentures Due 2004............... 124,435 124,435
9 7/8% Senior Debentures Due 2005............... 127,856 127,856
13 % Senior Subordinated Notes Due 1996....... 99,453 -- (b)
Other debt....................................... 18,534 18,534
----------- -----------
Total Debt..................................... 1,798,284 1,645,597
Stockholders' Equity (Deficiency):
Preferred Stock, $.01 par value, 5,000,000 shares
authorized, none issued......................... -- --
Class A Common Stock, $.01 par value, 50,000,000
shares authorized, 4,375,000 and 13,507,604
shares issued and outstanding, liquidation
preference, $1.00 per share (c)................. 44 135(d)
Class B Common Stock, $.01 par value, 25,000,000
shares authorized, 10,944,476 shares issued and
outstanding..................................... 109 109
Paid-in capital.................................. 60,112 216,254(d)
Accumulated deficit.............................. (1,093,428) (1,094,242)(e)
----------- -----------
Stockholders' Equity (Deficiency).............. (1,033,163) (877,744)
----------- -----------
Total Capitalization........................... $ 765,121 $ 767,853
=========== ===========
</TABLE>
- --------
(a) Reference is made to Note 3 to the Adelphia Communications Corporation
Consolidated Financial Statements for a description of Notes of
subsidiaries to banks and institutions. See "Management's Discussion and
Analysis--Liquidity and Capital Resources."
(b) Gives effect to the application of $100,000,000 of the net proceeds from
the Stock Offering for the redemption of the Senior Subordinated Notes, and
to the application of the remainder of the proceeds from the Stock Offering
($56,234,000) and to the estimated net proceeds from the Offering of Notes
($147,000,000) to reduce bank debt of subsidiaries.
(c) Does not include an aggregate of 700,000 shares of Class A Common Stock
reserved for issuance to officers and other key employees pursuant to
Adelphia's Stock Option Plan of 1986 and Restricted Stock Bonus Plan.
(d) Gives effect to the issuance of 9,132,604 shares of Class A Common Stock
pursuant to the Stock Offering.
(e) Gives effect to the redemption at par of the Senior Subordinated Notes,
with accretion requirements of $547,000, and the treatment as an expense of
deferred debt cost of $267,000.
15
<PAGE>
DESCRIPTION OF THE NOTES
The Notes were issued pursuant to the Indenture between Adelphia and Bank of
Montreal Trust Company, as trustee (the "Trustee"). The following is a summary
of the material provisions of the Indenture. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), as in effect on the date of the Indenture. The Notes are subject to all
such terms, and holders of the Notes are referred to the Indenture and the
Trust Indenture Act for a statement of those terms. The statements under this
caption relating to the Notes and the Indenture are summaries and do not
purport to be complete. Such summaries may make use of certain terms defined
in the Indenture and are qualified in their entirety by express reference to
the Indenture. A copy of the form of Indenture will be provided upon request
without charge to any prospective investor.
GENERAL
The Indenture authorizes the issuance of $150,000,000 in aggregate principal
amount of Series A Notes and Notes plus Series A Notes and Notes in the
aggregate principal amount necessary to pay interest on the Series A Notes and
Notes, at the option of the Company. The Notes are general unsecured
obligations of Adelphia and are effectively subordinate in right of payment to
the liabilities of Adelphia's subsidiaries. See "Subordination to Subsidiary
Debt" and "Certain Definitions" below.
The Notes will mature on February 15, 2004. Adelphia will pay interest on
February 15 and August 15 of each year, commencing August 15, 1994, to the
persons who are registered holders at the close of business on the February 1
and August 1 immediately preceding the interest payment date. On or prior to
February 15, 1999, interest on the Notes may be paid in cash, through the
issuance of additional Notes (valued at 100% of their principal amount) or in
any combination thereof at the option of the Company, in accordance with the
terms of the Indenture.
The principal of, premium, if any, and interest on the Notes will be payable
at the office or agency to be maintained by Adelphia, which, unless otherwise
provided by Adelphia, will be the offices of the Trustee. The principal of and
interest payments on the Notes may be paid by check. Except as described
below, the Notes may be presented for registration of transfer and exchange at
such offices.
The Notes will be issued in fully registered form only.
The Indenture and the existing indentures under which the 12 1/2% Notes, the
11 7/8% Debentures, the 9 7/8% Debentures and the 10 1/4% Notes of Adelphia
were issued contain covenants which may afford holders of Notes, the 12 1/2%
Notes, the 11 7/8% Debentures, the 9 7/8% Debentures and the 10 1/4% Notes
certain protections regarding leverage and the incurrence of indebtedness.
These include covenants which limit the amount of additional indebtedness that
may be incurred by Adelphia and its subsidiaries, which restrict mergers and
consolidations by Adelphia unless after giving effect to the transaction the
consolidated fixed charge ratio of the surviving entity satisfies certain
compliance tests, and which require such Notes, 12 1/2% Notes, 11 7/8%
Debentures, 9 7/8% Debentures and 10 1/4% Notes to be secured equally and
ratably with other indebtedness in certain circumstances where Adelphia
creates or assumes liens on its property or assets in connection therewith.
See "Covenants" below.
REDEMPTION
Optional Redemption. The Notes will be redeemable at the option of Adelphia,
in whole or in part, at any time on or after February 15, 1999 at the
following redemption prices (expressed as a percentage of principal amount) if
redeemed during the twelve-month period beginning on the dates indicated
below:
<TABLE>
<S> <C>
February 15, 1999................................................. 103.56%
February 15, 2000................................................. 102.38%
February 15, 2001................................................. 101.19%
</TABLE>
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and from February 15, 2002 and thereafter at 100% of the principal amount,
together, in each case, with accrued interest to the redemption date. In the
event of redemption of fewer than all of the Notes, the Trustee shall select by
lot or in such other manner as it shall deem fair and equitable the Notes to be
redeemed. The Notes will be redeemable in whole or in part upon not less than
30 nor more than 60 days' prior written notice, mailed by first class mail to a
holder's last address as it shall appear on the register of Notes maintained by
the Registrar. On and after any redemption date, interest will cease to accrue
on the Notes or portions thereof called for redemption unless Adelphia shall
fail to redeem any such Note.
In addition, in the event of a sale by the Company prior to February 15, 1996
of at least $100 million of its Capital Stock to a Strategic Equity Investor
(an "Equity Event"), up to 33 1/3% of the aggregate principal amount of Notes
then outstanding may be redeemed, at the Company's option, upon not less than
30 nor more than 60 days' prior written notice given to holders within 30 days
after the Equity Event, from the net cash proceeds of the Equity Event at
109.50% of such principal amount, together with accrued interest to the
redemption date.
BOOK-ENTRY; DELIVERY AND FORM
Notes offered hereby are held as Certificated Notes (as defined below) by the
Selling Securityholder. The following discussion will apply to the Notes upon
the sale thereof by the Selling Securityholder pursuant to this Prospectus.
The certificates representing the Notes will be issued in fully registered
form without coupons. The Notes, except as discussed below, will be represented
by one or more global notes in fully registered form without interest coupons
(each a "Global Note") and will be deposited with the Trustee as custodian for
The Depository Trust Company, New York, New York ("DTC") and registered in the
name of a nominee of DTC.
Notes purchased by or transferred to persons who elect to take physical
delivery of certificates instead of holding their interest through a Global
Note (and which are thus ineligible to trade through DTC) will be issued in
registered form without interest coupons (the "Certificated Notes"). Interests
in a Global Note will, upon request, be exchangeable for Certificated Notes in
accordance with DTC's customary procedures.
Upon the issuance of a Global Note, DTC or its custodian will credit, on its
internal system, the respective principal amount of the individual beneficial
interests represented by such Global Note to the accounts of institutions that
have accounts with such depositary ("participants"). Ownership of beneficial
interests in the Global Note will be limited to participants or persons who
hold interests through participants. Ownership of beneficial interests in the
Global Note will be shown on, and the transfer of that ownership will be
affected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC or its nominee is the registered owner or holder of a Global
Note, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Note for all purposes
under the Indenture and the Notes. No beneficial owner of an interest in a
Global Note will be able to transfer the interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
Indenture or described elsewhere herein.
Payments of the principal of, and interest on, a Global Note will be made to
DTC or its nominee, as the case may be, as the registered owner and holder
thereof. Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
Transfers between participants in DTC will be effected in accordance with
provisions of the Indenture and DTC rules. If a holder requires physical
delivery of a Certificated Note for any reason such holder must transfer its
interest in a Global Note in accordance with the normal procedures of DTC and
the procedures set forth in the Indenture.
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DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more participants to
whose account the DTC interests in a Global Note is credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such participant or participants has or have given such direction.
However, if there is an Event of Default (as defined below) under the Notes,
DTC will exchange the Global Note for Certificated Notes, which it will
distribute to its participants. If DTC is at any time unwilling or unable to
continue as a depositary for a Global Note and a successor depositary is not
appointed by the Company within 90 days, the Company will issue Certificated
Notes in exchange for such Global Note.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for
the full definition of all such terms as well as any other capitalized terms
used herein for which no definition is provided.
"Affiliate" means a Person (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, Adelphia, (ii) which beneficially owns or holds 10% or more of any class
of the voting Capital Stock of Adelphia, or (iii) of which 10% or more of the
voting Capital Stock is beneficially owned or held by Adelphia, a Restricted
Subsidiary or an Unrestricted Subsidiary of Adelphia. Without limitation, an
Affiliate also includes any director or executive officer of Adelphia. As used
herein, "Affiliate" shall not include a Restricted Subsidiary.
"Aggregate Excess Restricted Investments" means for any fiscal quarter the
aggregate of Excess Restricted Investments with respect to the Restricted
Investments in all of the Unrestricted Subsidiaries and Affiliates of Adelphia.
"Allowable Securities" means (i) cash equivalents, (ii) common or preferred
Capital Stock in a Person which (x) has Investment Grade Senior Debt or (y)
whose ratio of Indebtedness plus Preferred Stock to Annualized Pro Forma EBITDA
is less than 7.75:1, or (iii) debt securities issued by a Person which (x) has
Investment Grade Senior Debt or (y) whose Leverage Ratio is less than 7.75:1,
provided that the securities in (ii)(y) and (iii)(y) above shall only be deemed
to be Allowable Securities if the principal business of the Person is owning
and operating cable television systems.
"Annualized Pro Forma EBITDA" means, with respect to any Person, (i) such
Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four,
minus (ii) in the case of Adelphia only, Adelphia's Aggregate Excess Restricted
Investments for such fiscal quarter.
"Asset Sale" means the sale, transfer or other disposition (other than to
Adelphia or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary, (b) all or substantially all of the
assets of Adelphia or of any Restricted Subsidiary, or (c) all or substantially
all of the assets of a Company system or part thereof serving at least 5,000
basic subscribers, a division, line of business or comparable business segment
of Adelphia or any Restricted Subsidiary.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capital Stock Sale Proceeds" means the aggregate net sale proceeds
(including the fair market value of property, other than cash, as determined by
an independent appraisal firm) received by Adelphia from the issue or sale
(other than to a Subsidiary) by Adelphia of any class of its Capital Stock on
or after January 1, 1993 (including Capital Stock of Adelphia issued after
January 1, 1993 upon conversion of or in exchange for other securities of
Adelphia).
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"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles
and the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with generally accepted accounting
principles.
"Change of Control" means such time as (i) (a) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than
the Rigas Family and its affiliates, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total
voting power required to elect or designate for election a majority of
Adelphia's Board of Directors and attaching to the then outstanding voting
Capital Stock of Adelphia and (b) the Rigas Family, together with its
affiliates, is not at such time the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 35% of the total voting power
required to elect or designate for election a majority of Adelphia's Board of
Directors and attaching to the then outstanding voting Capital Stock of
Adelphia, or (ii) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted Adelphia's Board
of Directors (together with any new directors whose election by Adelphia's
Board of Directors or whose nomination for election by Adelphia's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved or approved by
the Rigas Family and its affiliates at a time when they had the right or
ability by voting right, contract or otherwise to elect or designate for
election a majority of Adelphia's Board of Directors) cease for any reason to
constitute a majority of the directors then in office.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Decline.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the
National Association of Securities Dealers Automated Quotations National
Market System or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on such automated quotations system but
the issuer is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange
Act) and the principal securities exchange on which such shares are listed or
admitted to trading is a Designated Offshore Securities Market (as defined in
Rule 902(a) under the Securities Act), the average of the reported closing bid
and asked prices regular way on such principal exchange, or, if such shares
are not listed or admitted to trading on any national securities exchange or
quoted on such automated quotation system and the issuer and principal
securities exchange do not meet such requirements, the average of the closing
bid and asked prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm that is selected from time to time by the
Company for that purpose and is reasonably acceptable to the Trustee.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, with respect to dividends, distributions or liquidation
proceeds of such Person, to shares of Capital Stock of any other class of such
Person.
"Consolidated Fixed Charge Ratio" means, for any Person, for any period, the
ratio of (i) Annualized Pro Forma EBITDA to (ii) Consolidated Interest Expense
for such period multiplied by four.
"Consolidated Interest Expense" means, for any Person, for any period, the
amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends and the interest
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component of rentals in respect of any Capitalized Lease Obligation paid,
accrued or scheduled to be paid or accrued by such Person during such period,
determined on a consolidated basis in accordance with generally accepted
accounting principles. For purposes of this definition, interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by such Person to be the rate of interest implicit in
such Capitalized Lease Obligation in accordance with generally accepted
accounting principles consistently applied.
"Cumulative Credit" means the sum of (i) Capital Stock Sale Proceeds plus
(ii) cumulative EBITDA of Adelphia from and after January 1, 1993 to the end
of the fiscal quarter immediately preceding the date of a proposed Restricted
Payment, or, if such cumulative EBITDA for such period is negative, minus the
amount by which such cumulative EBITDA is less than zero.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense paid, accrued or scheduled to be paid or accrued by Adelphia
from January 1, 1993 to the end of the fiscal quarter immediately preceding a
proposed Restricted Payment, determined on a consolidated basis in accordance
with generally accepted accounting principles.
"EBITDA" means, for any Person, for any period, an amount equal to (A) the
sum of (i) consolidated net income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing consolidated net income and any provision
for taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
consolidated net income for such period, minus (B) all non-cash items
increasing consolidated net income for such period, all for such Person and
its Subsidiaries determined in accordance with generally accepted accounting
principles consistently applied, except that with respect to Adelphia each of
the foregoing items shall be determined on a consolidated basis with respect
to Adelphia and its Restricted Subsidiaries only.
"Excess Restricted Investment" means, with respect to any particular
Unrestricted Subsidiary or Affiliate of Adelphia for a fiscal quarter, the
lesser of the amounts described in the following clauses (i) and (ii), or, if
such amounts are equal, such amount:
(i) the aggregate amount of any Restricted Investments (other than the
Initial Investment) made by Adelphia or any Restricted Subsidiary with
respect to such Unrestricted Subsidiary or Affiliate after the date of
the Indenture and during the twelve-month period ending on the last
day of such fiscal quarter;
(ii) cash income received during such quarter by Adelphia with respect to
its Restricted Investments in such Unrestricted Subsidiary or
Affiliate multiplied by four;
and provided that cash income from a particular Restricted Investment shall be
included only (x) if cash income has been received by Adelphia with respect to
such Restricted Investment during each of the previous two fiscal quarters, or
(y) if the cash income derived from such Restricted Investment is attributable
to Allowable Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Indebtedness" is defined to mean (without duplication), with respect to any
Person, any indebtedness, secured or unsecured, contingent or otherwise, which
is for borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), or evidenced
by bonds, notes, debentures or similar instruments or representing the balance
deferred and unpaid of the purchase price of any property (excluding, without
limitation, any balances that constitute subscriber advance payments and
deposits, accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of
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business) if and to the extent any of the foregoing indebtedness would appear
as a liability upon a balance sheet of such Person prepared in accordance with
generally accepted accounting principles, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed, (iii) guaranties of items of other Persons which would be
included within this definition for such other Persons (whether or not such
items would appear upon the balance sheet of the guarantor), (iv) in the case
of Adelphia, Preferred Stock of its Restricted Subsidiaries and (v) obligations
of any such Person under any Interest Rate Agreement applicable to any of the
foregoing. Notwithstanding the foregoing, Indebtedness shall not include any
interest or accrued interest until due and payable.
"Initial Investment" means the Restricted Investment in a Person made by
Adelphia or a Restricted Subsidiary that first results in such Person becoming
an Unrestricted Subsidiary or Affiliate of Adelphia, except that in the case of
Olympus, "Initial Investment" shall mean any Restricted Investment made in
Olympus since the date of the Indenture, but only to the extent that such
Restricted Investment when aggregated with the other Restricted Investments
made in Olympus since such date does not exceed $25,000,000.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investment Grade Senior Debt" means, with respect to any Person,
Indebtedness of such Person which has been rated with an investment grade
rating by Moody's or Standard & Poor's Corporation.
"Leverage Ratio" is defined as the ratio of (i) the outstanding Indebtedness
of a Person and its Subsidiaries (or in the case of Adelphia, its Restricted
Subsidiaries) divided by (ii) the Annualized Pro Forma EBITDA of such Person.
"Lien" means with respect to any property or assets of Adelphia (it being
understood that for purposes of this definition property or assets of Adelphia
do not include property or assets of any Subsidiary of Adelphia) any mortgage
or deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien, charge, easement (other than any easement not
materially impairing usefulness or marketability), encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind
or nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sale, or
other title retention agreement having substantially the same economic effect
as any of the foregoing) except for (i) liens for taxes, assessments or
governmental charges or levies on property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are being contested in
good faith and by appropriate proceedings; (ii) liens imposed by law, such as
carriers', warehousemen's and mechanics' liens and other similar liens arising
in the ordinary course of business which secure payment of obligations not more
than sixty (60) days past due or obligations that are being contested in good
faith and by appropriate proceedings; (iii) other liens incidental to the
conduct of its business or the ownership of its property and assets which were
not incurred in connection with the borrowing of money or the obtaining of
advances or credit and which do not in the aggregate materially detract from
the value of its property or assets or materially impair the use thereof in the
operation of its business; (iv) utility easements, building restrictions and
such other encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character; or (v)
liens arising upon entry of a confession of judgment in Pennsylvania courts in
connection with borrowings not in excess of $1,000,000 in aggregate.
"Permitted Investments" means, for any Person, Restricted Investments made on
or after the date of the Indenture, consisting of (i) advances for less than
one year issued in the ordinary course of business for working capital purposes
or for the purchase of property, plant and equipment in an amount not to exceed
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$5,000,000 in the aggregate outstanding, (ii) with respect to a Restricted
Investment in Olympus, $25,000,000 plus the aggregate amount of cash income
received by Adelphia from Olympus, minus the aggregate amount of all Restricted
Investments made since the date of the Indenture, with respect to Olympus,
(iii) $20,000,000 plus the cash proceeds from the sale or redemption of, or
income from, any Restricted Investments made on or after the date of the
Indenture, minus the aggregate amount of all Restricted Investments (excluding
Restricted Investments made with respect to Olympus) since the date of the
Indenture, (iv) non-cash Restricted Investments made with the non-cash proceeds
from the sale or redemption of, or income from, any Restricted Investments, or
(v) an amount which, at the time of such Restricted Investment, does not exceed
the amount of Restricted Payments that could then be made by Adelphia and its
Restricted Subsidiaries under the covenant set forth under "Limitations on
Restricted Payments"; provided further that no Restricted Investments may be
made under subsections (ii), (iii), (iv) or (v) of this paragraph unless after
giving pro forma effect to such Restricted Investment Adelphia could incur $1
of debt under the first paragraph of the covenant set forth under "Limitation
on Indebtedness."
"Permitted Refinancing Indebtedness" means any renewals, extensions,
substitutions, refinancings or replacements of any Indebtedness, including any
successive extensions, renewals, substitutions, refinancings or replacements so
long as (i) the aggregate amount of Indebtedness represented thereby is not
increased by such renewal, extension, substitution, refinancing or replacement,
(ii) in the case of Indebtedness of Adelphia, the average life and the date
such Indebtedness is scheduled to mature is not shortened and (iii) in the case
of Indebtedness of Adelphia, the new Indebtedness shall not be senior in right
of payment to the Indebtedness that is being extended, renewed, substituted,
refinanced or replaced.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such
Person as determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied after giving effect to the
following: (i) if, during or after such period, such Person or any of its
Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of such Person
and its Subsidiaries for such period shall be reduced by an amount equal to the
Pro Forma EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Sale for the period or increased by an amount equal
to the Pro Forma EBITDA (if negative) directly attributable thereto for such
period and (ii) if, during or after such period, such Person or any of its
Subsidiaries completes an acquisition of any Person or business which
immediately after such acquisition is a Subsidiary of such Person or whose
assets are held directly by such Person or a Subsidiary of such Person, Pro
Forma EBITDA shall be computed so as to give pro forma effect to the
acquisition of such Person or business; and provided further that, with respect
to Adelphia, all of the foregoing references to "Subsidiary" or "Subsidiaries"
shall be deemed to refer only to a "Restricted Subsidiary" or "Restricted
Subsidiaries" of Adelphia.
"Rating Date" means the date which is 90 days prior to the earlier of (i) a
Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of Adelphia to effect a Change of Control.
"Rating Decline" means the occurrence of the following on, or within 90 days
after, the date of public notice of the occurrence of a Change of Control or of
the intention by Adelphia to effect a Change of Control (which period shall be
extended so long as the rating of the Notes is under publicly announced
consideration for possible downgrade by Moody's or Standard & Poor's
Corporation): (a) in the event the Notes are rated by either Moody's or
Standard & Poor's Corporation on the Rating Date as Investment Grade Senior
Debt, the rating of the Notes by both Moody's and Standard & Poor's Corporation
shall be below Investment Grade Senior Debt; or (b) in the event the Notes are
rated below Investment Grade Senior Debt by both Moody's and Standard & Poor's
Corporation on the Rating Date, the rating of the Notes by either Moody's or
Standard and Poor's Corporation shall be decreased by one or more gradations
(including gradations within rating categories as well as between rating
categories).
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"Redeemable Dividend" means, for any dividend with regard to Redeemable
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any Capital Stock that
by its terms or otherwise is required to be redeemed or is redeemable at the
option of the holder at any time prior to the maturity of the Debentures.
"Restricted Investment" means any advance, loan, account receivable (other
than an account receivable arising in the ordinary course of business), or
other extension of credit (excluding, however, accrued and unpaid interest in
respect of any advance, loan or other extension of credit) or any capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others, or otherwise), any
purchase or ownership of any stocks, bonds, notes, debentures or other
securities (including, without limitation, any interests in any partnership or
joint venture) of, or any bank accounts with or guarantee of any Indebtedness
or other obligations of, any Unrestricted Subsidiary or Affiliate of Adelphia.
"Restricted Payment" means (i) any dividend or distribution (whether made in
cash, property or securities), on or with respect to any shares of Capital
Stock of Adelphia or Capital Stock of any Subsidiary which is consolidated with
Adelphia in accordance with generally accepted accounting principles
consistently applied, except for any dividend or distribution which is made
solely to Adelphia or another Subsidiary or dividends or distributions payable
solely in shares of Common Stock of Adelphia, or (ii) any redemption,
repurchase, retirement or other direct or indirect acquisition of (a)
Indebtedness of Adelphia which is subordinate in right of payment to the Notes,
except, within one year of or on the original maturity date (August 15, 1996)
of Adelphia's 13% Senior Subordinated Notes Due 1996, without regard to any
subsequent extension of such maturity date, or prior to such original maturity
date (August 15, 1996) by exchange for or out of the proceeds of the
substantially concurrent issuance of Permitted Refinancing Indebtedness or from
the proceeds of a sale of Capital Stock by Adelphia, or (b) shares of Capital
Stock of Adelphia or any warrants, rights or options to directly or indirectly
purchase or acquire any such Capital Stock of Adelphia or any securities
exchangeable for or convertible into any such shares, other than options issued
or shares purchased or granted under Adelphia's Stock Option Plan of 1986 or
Adelphia's Restricted Stock Bonus Plan, from any employee of Adelphia or any of
its Subsidiaries who, together with any Person that, directly or indirectly,
controls (other than by virtue of being directly or indirectly the employer of
such employee), is controlled by or is under common control with such employee,
owns less than 1% of the outstanding Capital Stock of Adelphia, except for the
purchase, redemption, retirement or other acquisition of any shares of
Adelphia's Capital Stock by exchange for, or out of the proceeds of the
substantially concurrent sale of, other shares of its Capital Stock other than
any capital stock which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to February 15, 2004.
"Restricted Subsidiary" means (a) any Subsidiary of Adelphia, whether
existing on or after the date of the Indenture, unless such Subsidiary is an
Unrestricted Subsidiary or shall have been classified as an Unrestricted
Subsidiary by a resolution adopted by the Board of Directors of Adelphia and
(b) an Unrestricted Subsidiary which is reclassified as a Restricted Subsidiary
by a resolution adopted by the Board of Directors of Adelphia, provided that on
and after the date of such reclassification such Unrestricted Subsidiary shall
not incur Indebtedness other than that permitted to be incurred by a Restricted
Subsidiary under the provisions of the Indenture.
"Rigas Family" means collectively John J. Rigas and members of his immediate
family, any of their respective spouses, estates, lineal descendants, heirs,
executors, personal representatives, administrators, trusts for any of their
benefit and charitable foundations to which shares of Adelphia's Capital Stock
beneficially owned by any of the foregoing have been transferred.
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"Strategic Equity Investor" means, with respect to any sale of the Company's
Capital Stock, any Person engaged in the telecommunications business which,
both as of the Trading Day, with respect to any class of such Person's Capital
Stock, immediately before the day of such sale and the Trading Day, with
respect to any class of such Person's Capital Stock, immediately after the day
of such sale, has a Total Market Capitalization of at least $2 billion and the
long-term senior debt of which is rated BBB- or above by Standard & Poor's
Corporation and Baa3 or above by Moody's, after giving effect to such Person's
purchase of the Company's Capital Stock on a pro forma basis. In calculating
Total Market Capitalization for the purpose of this definition, the
consolidated Indebtedness of such Person, solely when calculated as of the
Trading Day, with respect to any class of such Person's Capital Stock,
immediately after the day of such sale, will be calculated after giving effect
to such sale (including any Indebtedness incurred in connection with such sale)
and the average Closing Price of the Common Stock of such Person, solely when
calculated as of the Trading Day, with respect to any class of such Person's
Capital Stock, immediately after the day of such sale, will be deemed to be the
Closing Price of such Common Stock on such Trading Day, subject to the last
sentence of the definition of "Total Market Capitalization."
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which
more than 50% of the total voting power of the Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the
direction of the management and policies of such entity by contract or
otherwise, if in accordance with generally accepted accounting principles such
entity is consolidated with the first-named Person for financial statement
purposes.
"Total Market Capitalization" of any Person means, as of any day of
determination (and as modified for purposes of the definition of "Strategic
Equity Investor"), the sum of (1) the consolidated Indebtedness of such Person
and its Subsidiaries on such day, plus (2) the product of (i) the aggregate
number of outstanding primary shares of Common Stock of such Person on such day
(which shall not include any options or warrants on, or securities convertible
or exchangeable into, shares of Common Stock of such Person) and (ii) the
average Closing Price of such Common Stock over the 20 consecutive Trading Days
immediately preceding such day, plus (3) the liquidation value of any
outstanding shares of Preferred Stock of such Person on such day. If no such
Closing Price exists with respect to shares of any such class, the value of
such shares for purposes of clause (2) of the preceding sentence shall be
determined by the Company's Board of Directors in good faith and evidenced by a
resolution of the Board of Directors filed with the Trustee.
"Trading Day" means, with respect to a security listed or admitted to trading
on a securities exchange or automated quotation system, a day on which such
exchange or system is open for a full day of trading, and with respect to a
security not so listed or admitted to trading, a day on which such security has
traded at least once.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of Adelphia which is classified after the
date of the Indenture as an Unrestricted Subsidiary by a resolution adopted by
the Board of Directors of Adelphia; provided that a Subsidiary organized or
acquired after the date of the Indenture may be so classified as an
Unrestricted Subsidiary only if immediately after the date of such
classification, any investment by Adelphia and its Restricted Subsidiaries in
such Subsidiary made at the time of the organization or acquisition of such
Subsidiary would be a Restricted Investment permissible under the Indenture.
The Trustee shall be given prompt notice by Adelphia of each resolution adopted
by its Board of Directors under this provision, together with a copy of each
such resolution adopted.
SUBORDINATION TO SUBSIDIARY DEBT
All liabilities of Adelphia's subsidiaries will be effectively senior in
right of payment to the Notes. As of December 31, 1993, the total indebtedness
of such subsidiaries to banks and institutions, on a consolidated basis,
aggregated $919,275,000.
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COVENANTS
The Indenture will contain, among others, the following covenants. Except as
otherwise specified, all of the covenants described below will appear in the
Indenture.
Limitation on Indebtedness. The Indenture will provide that Adelphia will
not, and will not permit any Restricted Subsidiary to, directly or indirectly,
create, incur, issue, assume or become liable for, contingently or otherwise
(collectively an "incurrence"), any Indebtedness (other than the Notes)
unless, after giving effect to such incurrence on a pro forma basis,
Indebtedness of Adelphia and its Restricted Subsidiaries, on a consolidated
basis, shall not be more than the product of the Annualized Pro Forma EBITDA
for the latest fiscal quarter preceding such incurrence for which financial
statements are available, multiplied by 8.75.
Notwithstanding the above, the Indenture will not limit the incurrence of
Indebtedness which is incurred by Adelphia or its Restricted Subsidiaries for
working capital purposes or capital expenditures with respect to plant,
property and equipment of Adelphia and its Restricted Subsidiaries in an
aggregate amount not to exceed $50,000,000. Further, the Indenture will not
limit Permitted Refinancing Indebtedness, subject to the provisions of the
covenant set forth under "Limitation on Restricted Payments."
Limitation on Restricted Payments. The Indenture will provide that, so long
as any of the Notes remain outstanding, Adelphia shall not make, and shall not
permit any Restricted Subsidiary to make, any Restricted Payment (as defined
above) if (a) at the time of such proposed Restricted Payment, a Default or
Event of Default shall have occurred and be continuing or shall occur as a
consequence of such Restricted Payment, or (b) immediately after giving effect
to any such Restricted Payment, the aggregate of all Restricted Payments which
shall have been made on or after January 1, 1993 (the amount of any Restricted
Payment, if other than cash, to be based upon fair market value as determined
in good faith by Adelphia's Board of Directors whose determination shall be
conclusive) would exceed an amount equal to the greater of (i) the sum of
$5,000,000 or (ii) the difference between (a) the Cumulative Credit (as defined
above) and (b) the sum of the aggregate amount of all Restricted Payments, and
all Permitted Investments made pursuant to clause (v) of the definition of
"Permitted Investments," made on or after January 1, 1993 plus 1.2 times
Cumulative Interest Expense (as defined above).
Mergers and Consolidations. The Indenture will provide that Adelphia may not
consolidate with, merge with or into, or transfer all or substantially all of
its assets (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless: (i) Adelphia shall
be the continuing Person, or the Person (if other than Adelphia) formed by such
consolidation or into which Adelphia is merged or to which the properties and
assets of Adelphia are transferred shall be a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
of the obligations of Adelphia under the Notes and the Indenture, and the
obligations under the Indenture shall remain in full force and effect; (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and (iii)
immediately after giving effect to such transaction on a pro forma basis for
the most recent quarter, the pro forma Consolidated Fixed Charge Ratio of the
surviving entity shall be at least 1:1 provided that, if the Consolidated Fixed
Charge Ratio of Adelphia for the most recent quarter preceding such transaction
is within the range set forth in Column A below, then the pro forma
Consolidated Fixed Charge Ratio of the surviving entity after giving effect to
such transaction shall be at least equal to the greater of the percentage of
the Consolidated Fixed Charge Ratio of Adelphia for the most recent quarter
preceding such transaction set forth in Column B or the ratio set forth in
Column C below:
<TABLE>
<S> <C> <C>
A B C
----- ----- ------
1.1111:1 to 1.4999:1 90% 1.00:1
1.5 and higher 80% 1.35:1
</TABLE>
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and provided, further, that if the pro forma Consolidated Fixed Charge Ratio of
the surviving entity is 2:1 or more, the calculation in the preceding proviso
shall be inapplicable and such transaction shall be deemed to have complied
with the requirements of such proviso.
In connection with any consolidation, merger or transfer contemplated by this
provision, Adelphia shall deliver, or cause to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and the supplemental indenture in respect thereto comply
with this provision and that all conditions precedent herein provided for
relating to such transaction or transactions have been complied with.
Limitations on Investment in Affiliates and Unrestricted Subsidiaries. After
the date of the Indenture, Adelphia may not, nor will Adelphia allow any
Restricted Subsidiary to, make a Restricted Investment other than by way of
Permitted Investments unless pro forma for such Restricted Investment the
Leverage Ratio of Adelphia does not exceed 7.75:1.
Covenant to Secure Notes Equally. The Indenture will provide that except for
Liens created or assumed by Adelphia in connection with the acquisition of real
property or equipment to be used by Adelphia in the operation of its business
which do not secure Indebtedness in excess of the purchase price of such real
property or equipment, Adelphia covenants that, if it shall create or assume
any Lien upon any of its property or assets, whether now owned or hereafter
acquired, it will make or cause to be made effective provisions whereby the
Notes will be secured by such Lien equally and ratably with all other
Indebtedness of Adelphia secured by such Lien, as long as any such other
Indebtedness of Adelphia shall be so secured. The restriction imposed by this
covenant shall not apply with respect to a Lien, including a pledge of Capital
Stock of a Subsidiary or an Affiliate, to secure Indebtedness which is an
obligation of such Subsidiary or Affiliate and not an obligation of Adelphia.
Limitation on Transactions with Affiliates. The Indenture will provide that
Adelphia will not, and will not permit any Restricted Subsidiary to, engage in
any transaction with any Affiliate upon terms which would be any less favorable
than those obtainable by Adelphia or a Restricted Subsidiary in a comparable
arm's-length transaction with a person which is not an Affiliate. The Indenture
will provide that Adelphia will not, and will not permit any Restricted
Subsidiary to, engage in any transaction (or series of related transactions)
involving in the aggregate $1,000,000 or more with any Affiliate except for (i)
the making of any Restricted Payment, (ii) any transaction or series of
transactions between Adelphia and one or more of its Restricted Subsidiaries or
between two or more of its Restricted Subsidiaries (provided that no more than
5% of the equity interest in any of its Restricted Subsidiaries is owned by an
Affiliate), and (iii) the payment of compensation (including, without
limitation, amounts paid pursuant to employee benefit plans) for the personal
services of officers, directors and employees of Adelphia or any of its
Restricted Subsidiaries, so long as the Board of Directors of Adelphia in good
faith shall have approved the terms thereof and deemed the services theretofore
or thereafter to be performed for such compensation or fees to be fair
consideration therefor; and provided further that for any Asset Sale, or a
sale, transfer or other disposition (other than to Adelphia or any of its
Restricted Subsidiaries) of an interest in a Restricted Investment, involving
an amount greater than $25,000,000, such Asset Sale or transfer of interest in
a Restricted Investment is for fair value as determined by an opinion of a
nationally recognized investment banking firm filed with the Trustee.
Notwithstanding the foregoing, the Indenture provides that such provision will
not prohibit any such transaction which is determined by the independent
members of the Board of Directors of Adelphia, in their reasonable, good faith
judgment (as evidenced by a Board Resolution filed with the Trustee) to be (a)
in the best interests of Adelphia or such Restricted Subsidiary, and (b) upon
terms which would be obtainable by Adelphia or a Restricted Subsidiary in a
comparable arm's-length transaction with a Person which is not an Affiliate.
Limitation on Sale of Assets. The Indenture provides that neither Adelphia
nor a Restricted Subsidiary shall sell an asset (including Capital Stock of
Restricted Subsidiaries) or reclassify a Restricted Subsidiary existing on the
date of the Indenture as an Unrestricted Subsidiary (a "Reclassification")
unless (a) in the
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<PAGE>
case of an asset sale, (i) at least 75% of the net proceeds received by
Adelphia or such Restricted Subsidiary is in cash, cash equivalents or common
or preferred Capital Stock or debt securities issued by a Person which has
Investment Grade Senior Debt, and (ii) cash proceeds from the asset sale are
used to reduce Indebtedness and such Indebtedness reduction results in
Adelphia's Leverage Ratio being lower pro forma after such asset sale than
prior to such asset sale, or (b) in the case of an asset sale or
Reclassification, pro forma for such asset sale or Reclassification the
Indebtedness of Adelphia and its Restricted Subsidiaries, on a consolidated
basis, shall not be more than 7.75 multiplied by Annualized Pro Forma EBITDA,
provided that in no case under either clause (a) or (b) shall Adelphia
undertake an asset sale or Reclassification, if pro forma for such an asset
sale or Reclassification Adelphia and its Restricted Subsidiaries would be the
owners of fewer than 75% of the cable systems (measured on the basis of basic
subscribers as of the date of the Indenture) owned by Adelphia and its
Restricted Subsidiaries as of the date of the Indenture, provided however, that
Adelphia and its Restricted Subsidiaries may sell additional assets of up to
10% of assets held as of the date of the Indenture if the consideration
received from such sale is (i) cash which is used within 12 months to purchase
additional systems of equivalent value or (ii) other cable systems of
equivalent value.
Change of Control Offer. Within 50 days of (i) the proposed occurrence of a
Change of Control or (ii) the occurrence of a Change of Control Triggering
Event, Adelphia shall notify the Trustee in writing of such proposed occurrence
or occurrence, as the case may be, and shall make an offer to purchase (the
"Change of Control Offer") the Notes at a purchase price equal to 100% of the
principal amount thereof plus any accrued and unpaid interest thereon (which
interest must be paid in cash) to the Change of Control Payment Date (as
hereinafter defined) (the "Change of Control Purchase Price") in accordance
with the procedures set forth in this covenant.
Within 50 days of (i) the proposed occurrence of a Change of Control or (ii)
the occurrence of a Change of Control Triggering Event, Adelphia also shall (a)
cause a notice of the Change of Control Offer to be sent at least once to the
Dow Jones News Service or similar business news service in the United States
and (b) send by first-class mail, postage prepaid, to the Trustee and to each
holder of the Notes, at his address appearing in the register of the Notes
maintained by the Registrar, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment,
provided that a Change of Control Triggering Event has occurred and
otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 50 days from the date such
notice is mailed and no later than 15 days after the date of the
corresponding Change of Control Triggering Event) (the "Change of
Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless Adelphia defaults in the payment of the Change of Control
Purchase Price, any Notes accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender
the Notes to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Notes delivered for
purchase, and a statement that such holder is withdrawing his election
to have such Notes purchased;
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<PAGE>
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered; and
(8) any other procedures that a holder must follow to accept a Change of
Control Offer or effect withdrawal of such acceptance.
Notwithstanding any other provision of this covenant, in the case of a notice
of a Change of Control Offer that is being furnished by Adelphia with respect
to a proposed Change of Control that has not yet actually occurred, the Company
may specify in such notice that holders of the Notes shall be required to
notify Adelphia, by a date not later than the date (the "Proposed Change of
Control Response Date") which is 30 days from the date of such notice, as to
whether such holders will tender their Notes for payment pursuant to the Change
of Control Offer and to notify Adelphia of the principal amount of such Notes
to be so tendered (with the failure of any holder to so notify Adelphia within
such 30-day period to be deemed an election of such holder not to accept such
Change of Control Offer). In such event, Adelphia shall have the option, to be
exercised by a subsequent written notice to be sent, no later than 15 days
after the Proposed Change of Control Response Date, to the same Persons to whom
the original notice of the Change of Control Offer was sent, to cancel or
otherwise effect the termination of the proposed Change of Control and to
rescind the related Change of Control Offer, in which case the then outstanding
Change of Control Offer shall be deemed to be null and void and of no further
effect.
On the Change of Control Payment Date, Adelphia shall (a) accept for payment
Notes or portions thereof tendered pursuant to the Change of Control Offer, (b)
deposit with the Paying Agent money sufficient to pay the Change of Control
Purchase Price of all Notes or portions thereof so tendered and (c) deliver or
cause to be delivered to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof tendered to
Adelphia. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the Change of Control Purchase Price for
such Notes, and the Trustee shall promptly authenticate and mail to such holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered.
There shall be no purchase of any Notes pursuant to this covenant if there
has occurred (prior to, on or after, as the case may be, the tender of such
Notes pursuant to the Change of Control Offer, by the holders of such Notes)
and is continuing an Event of Default. The Paying Agent will promptly return to
the respective holders thereof any Notes (a) the tender of which has been
withdrawn in compliance with the Indenture or (b) held by it during the
continuance of an Event of Default (other than a default in the payment of the
Change of Control Purchase Price with respect to such Notes).
Because a "Change of Control" for purposes of this covenant is defined in
terms of "beneficial ownership" (as defined in Rule 13d-3 under the Exchange
Act) of voting power, there may be circumstances in which the Rigas Family
could beneficially own (for purposes of Rule 13d-3) more than 35% of the
outstanding voting Capital Stock of Adelphia through options, warrants or other
purchase rights while directly holding 35% or less of the total voting power
required to elect or designate for election a majority of Adelphia's Board of
Directors, without a Change of Control Triggering Event occurring. Further, a
change in the composition of the Board of Directors of Adelphia could occur
without the occurrence of a Change of Control Triggering Event if either the
election or the nomination of the new directors was approved by two-thirds of
the continuing directors or by the Rigas Family and its Affiliates. See
"Certain Definitions--Change of Control."
The indentures for the 12 1/2% Notes, the 11 7/8% Debentures, the 9 7/8%
Debentures and the 10 1/4% Notes, which together represent outstanding
indebtedness in the aggregate principal amount of $765,000,000, provide that
Adelphia must make an offer to purchase such Notes and Debentures,
respectively, at a purchase price equal to 100% of the principal amount
thereof, plus any accrued but unpaid interest thereon, in the event of
circumstances identical to those which trigger a Change of Control Offer under
this covenant. In addition, the credit agreements of Adelphia's subsidiaries
generally contain provisions under which circumstances that would trigger a
Change of Control Offer under this covenant would constitute an event of
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<PAGE>
default under such credit agreements. In the event that Adelphia is required
to purchase 12 1/2% Notes, 11 7/8% Debentures, 9 7/8% Debentures, the 10 1/4%
Notes and Notes in accordance with such provisions, and the indebtedness under
such subsidiary credit agreements were to be accelerated, the source of funds
for such purchases or payments will be Adelphia's available cash, cash
generated from Adelphia's operating activities, and other sources including
borrowings, asset sales or equity sales. There can be no assurance that
sufficient funds would be available to make any required repurchases under the
Indenture and under the indentures for the 12 1/2% Notes, the 11 7/8%
Debentures, the 9 7/8% Debentures and the 10 1/4% Notes or any such required
payments under such credit agreements. Although in the past Adelphia has been
able to both refinance its indebtedness or obtain new financing, there can be
no assurance that Adelphia would be able to do so under such circumstances or
that, if Adelphia were able to do so, the terms would be favorable to
Adelphia. In the event that Adelphia is required to make a Change of Control
Offer, Adelphia will comply with all applicable tender offer rules including
Rule 14e-1 under the Exchange Act, to the extent applicable.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the Notes;
(ii) default for 30 days in payment of any interest on the Notes; (iii)
default by Adelphia in the observance or performance of any other covenant in
the Notes or the Indenture for 60 days after written notice from the Trustee
or the holders of not less than 25% in aggregate principal amount of the Notes
then outstanding; (iv) failure to pay when due principal, interest or premium
aggregating $10,000,000 or more with respect to any Indebtedness of Adelphia
or any Restricted Subsidiary or the acceleration of any such Indebtedness
which default shall not be cured or waived, or such acceleration shall not be
rescinded or annulled, within ten days after written notice as provided in the
Indenture; (v) any final judgment or judgments for the payment of money in
excess of $10,000,000 shall be rendered against Adelphia or any Restricted
Subsidiary and shall not be discharged for any period of 60 consecutive days
during which a stay of enforcement shall not be in effect; or (vi) certain
events involving bankruptcy, insolvency or reorganization of Adelphia or any
Restricted Subsidiary with liabilities of greater than $10,000,000 under
generally accepted accounting principles as of the date of such bankruptcy,
insolvency or reorganization. The Indenture provides that the Trustee may
withhold notice to the holders of the Notes of any default (except in payment
of principal or premium, if any, or interest on the Notes) if the Trustee
considers it to be in the best interest of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the principal amount
of all the Notes then outstanding plus accrued but unpaid interest to the date
of acceleration; provided, however, that after such acceleration but before a
judgment or decree based on acceleration is obtained by the Trustee, the
holders of a majority in aggregate principal amount of outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the nonpayment of accelerated principal, premium or
interest, have been cured or waived as provided in the Indenture. In case an
Event of Default resulting from certain events of bankruptcy, insolvency or
reorganization shall occur, such amount with respect to all of the Notes shall
be due and payable immediately without any declaration or other act on the
part of the Trustee or the holders of Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
subject to certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder
shall have previously given to the Trustee written notice of a
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continuing Event of Default and unless also the holders of at least 25% in
aggregate principal amount of the outstanding Notes shall have made written
request and offered reasonable indemnity to the Trustee to institute such
proceeding as a trustee, and unless the Trustee shall not have received from
the holders of a majority in aggregate principal amount of the outstanding
Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not
apply to a suit instituted by a holder of a Note for enforcement of payment of
the principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides Adelphia may elect either (a) to defease and be
discharged from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of such Notes, to replace
temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office
or agency in respect of the Notes and to hold monies for payment in trust)
("defeasance") or (b) to be released from its obligations with respect to the
Notes under certain covenants contained in the Indenture and described above
under "Covenants" ("covenant defeasance"), upon the deposit with the Trustee
(or other qualifying trustee), in trust for such purpose, of money and/or U.S.
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide money, in an amount sufficient to pay
the principal of, premium, if any, and interest on the Notes, on the scheduled
due dates therefor in accordance with the terms of the Indenture. Such a trust
may only be established if, among other things, Adelphia has delivered to the
Trustee an Opinion of Counsel (as specified in the Indenture) to the effect
that the holders of the Notes or persons in their positions will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance or covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such defeasance or covenant defeasance had not occurred. Such
opinion, in the case of defeasance under clause (a) above, must refer to and
be based upon a private ruling of the Internal Revenue Service concerning the
Notes or a ruling of general effect published by the Internal Revenue Service.
MODIFICATION OF INDENTURE
From time to time, Adelphia and the Trustee may, without the consent of
holders of the Notes, amend the Indenture or the Notes or supplement the
Indenture for certain specified purposes, including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any holder. The Indenture
contains provisions permitting Adelphia and the Trustee, with the consent of
holders of at least one-half in principal amount of the outstanding Notes, to
modify or supplement the Indenture or the Notes, except that no such
modification shall, without the consent of each holder affected thereby, (i)
reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes, (ii) reduce the rate of
interest, or change the time for or permissible method of any payment of
interest on any Note, (iii) reduce the principal of or premium on or change
the stated maturity of any Note, (iv) make any Note payable in money other
than that stated in the Note or change the place of payment from New York, New
York, (v) change the amount or time of any payment required by the Notes or
provide for the redemption of the Notes prior to maturity other than as stated
in the Indenture, (vi) waive a default on the payment of the principal of,
interest on, or redemption payment with respect to any Note, or (vii) take any
other action otherwise prohibited by the Indenture to be taken without the
consent of each holder affected thereby.
REPORTS TO HOLDERS
So long as Adelphia is subject to the periodic reporting requirements of the
Exchange Act it will continue to furnish the information required thereby to
the Commission and to the holders of the Notes. The Indenture provides that
even if Adelphia is entitled under the Exchange Act not to furnish such
information to the
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Commission or to the holders of the Notes, it will nonetheless continue to
furnish such information to the Commission (at such time as it would be
required to file such reports under the Exchange Act) and to the Trustee and
the holders of the Notes (within 15 days thereafter as required by the
Indenture) as if it were subject to such periodic reporting requirements.
COMPLIANCE CERTIFICATE
Adelphia will deliver to the Trustee on or before 105 days after the end of
its fiscal year and on or before 50 days after the end of its second fiscal
quarter in each year an Officer's Certificate stating whether or not the
signers know of any Default or Event of Default that has occurred. If they do,
the certificate will describe the Default or Event of Default and its status.
THE TRUSTEE
Bank of Montreal Trust Company is the Trustee under the Indenture and has
been appointed by Adelphia as Registrar and Paying Agent with regard to the
Notes. Bank of Montreal Trust Company also serves as Registrar and Paying Agent
and Trustee under the indentures with respect to the 12 1/2% Notes, the 11 7/8%
Debentures, the 9 7/8% Debentures and the 10 1/4% Notes. The Indenture provides
that, except during the continuance of an Event of Default, the Trustee will
perform only such duties as are specifically set forth in the Indenture. During
the existence of an Event of Default, the Trustee will exercise such rights and
powers vested in it under the Indenture and use the same degree of care and
skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
TRANSFER AND EXCHANGE
Holders may transfer or exchange Notes in accordance with the Indenture. The
Registrar under such Indenture may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and to pay any taxes
and fees required by law or permitted by the Indentures.
The registered holder of a Note may be treated as the owner of it for all
purposes.
EXCHANGE OFFER AND PRIVATE EXCHANGE
The Series A Notes were issued in a private placement on February 22, 1994.
On May , 1994, the Company, pursuant to an exchange offer registered under
the Securities Act, completed an exchange of $ aggregate principal
amount of the Notes for an equal principal amount of Series A Notes tendered by
the holders thereof. Also on May , 1994, the Company completed the private
exchange of $ aggregate principal amount of Notes for an equal principal
amount of Series A Notes held by the Selling Securityholder. The Series A Notes
also were issued under the Indenture and the terms of the Notes are
substantially identical to the terms of the Series A Notes.
Pursuant to the terms of the Indenture, on March 25, 1994, the date the
registration statement with respect to the public exchange offer was declared
effective, the interest rate on all Series A Notes decreased from 10% per annum
to 9 1/2% per annum. The interest rate on the Notes is 9 1/2% per annum.
The Notes offered hereby will bear interest from May , 1994, the date such
Notes were issued to the Selling Securityholder by Adelphia in exchange for the
Series A Notes then held by the Selling Securityholder. The interest accrued
from February 22, 1994, the issuance date of the Series A Notes so exchanged by
the Selling Securityholder, until , 1994, the date of issuance of the
Notes offered hereby, will be paid on the first interest payment date on the
Notes (August 15, 1994) to the holders of such Notes.
31
<PAGE>
CERTAIN UNITED STATES INCOME TAX CONSIDERATIONS
The discussion set forth in this summary is based on the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
promulgated thereunder ("Treasury Regulations"), and administrative and
judicial interpretations thereof, all as in effect on the date hereof and all
of which are subject to change (possibly on a retroactive basis). Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could affect the tax consequences to holders of the Notes.
This summary is for general information only and does not purport to address
all of the United States federal income tax consequences that may be applicable
to the acquisition, ownership and disposition of the Notes. This discussion
assumes that the Notes will be held as capital assets. The tax treatment of a
holder may vary depending on the holder's particular situation. For example,
certain holders, including individual retirement and other tax-deferred
accounts, insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations, and non-U.S. persons, may
be subject to special rules not discussed below. A ruling from the Internal
Revenue Service ("IRS") on the matters discussed below has not been requested.
Thus, no assurance can be provided that the statements set forth herein would
be sustained by a court if contested by the IRS. The costs of any contest with
the IRS will be borne directly or indirectly by each holder or prospective
holder.
The IRS has recently issued final regulations dealing with the inclusion of
original issue discount in income by holders of debt instruments (the
"Regulations"). The Regulations apply to debt instruments issued on or after
April 4, 1994 and to sales and exchanges that occur on or after such date. The
following discussion reflects the Regulations. Holders should consult their own
tax advisors regarding the application of the Regulations to them.
EACH PROSPECTIVE PURCHASER OF NOTES SHOULD CONSULT ITS OWN TAX ADVISOR WITH
RESPECT TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW
AND ANY OTHER FEDERAL, STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES TO IT OF
ACQUIRING, HOLDING AND DISPOSING OF THE NOTES.
ORIGINAL ISSUE DISCOUNT
Because the Company may issue additional Notes (the "Additional Notes") in
lieu of paying cash interest on the Notes on or prior to February 15, 1999, the
Notes are issued with original issue discount within the meaning of Section
1273 of the Code, and no payment of interest on the Notes is treated as
"qualified stated interest". Accordingly, each holder of a Note will recognize,
as ordinary income, through the accrual of original issue discount, the full
amount of interest with respect to the Note and such holder will not recognize
ordinary income upon receipt of an Additional Note or upon a cash payment of
stated interest. As discussed below, each holder of a Note will be required to
include such original issue discount in income on a constant yield to maturity
basis, regardless of the holder's method of tax accounting.
The total amount of original issue discount with respect to a Note will be
the excess of its stated redemption price at maturity over its issue price. The
issue price of a Note is the first price at which a substantial amount of the
Notes are sold to investors. The stated redemption price at maturity of a Note
is the sum of all amounts payable over the life of the Note (determined as if
all interest will be paid in cash and not in Additional Notes).
Under the Regulations, the portion of original issue discount includible in
the income of a holder of a Note for any accrual period is equal to the product
of (x) the "adjusted issue price" of the Note at the
32
<PAGE>
beginning of the accrual period and (y) the yield of the Note. The "adjusted
issue price" of a Note is equal to the original issue price, plus any
previously accrued original issue discount, minus any cash payments previously
made on the Note or an Additional Note issued with respect to such Note. An
accrual period may be of any length and may vary in length, provided that each
accrual period is no longer than one year and February 15 and August 15 in each
year occur at the beginning or end of an accrual period.
Original issue discount as determined above will be allocated ratably to each
day in the accrual period, and the amount includable in a holder's income
(whether such holder is on the cash or accrual method of accounting) with
respect to the Note will be the sum of the resulting daily portions of original
issue discount for each day of the taxable year on which the holder holds the
Note. The amount of original issue discount required to be accrued annually
with respect to a Note will increase each year, reflecting the compounding of
original issue discount on the Note. In addition, the amount of original issue
discount for any accrual period may be greater than the amount of cash payments
denominated as interest that are made during the accrual period. Generally, the
tax basis of a Note in the hands of the holder will be increased by the amount
of any original issue discount on the Note that is included in the holder's
income pursuant to these rules and will be decreased by the amount of any cash
payments received with respect to the Note whether such payments are
denominated as principal or interest.
MARKET DISCOUNT
If a holder acquires a Note at a market discount (i.e., at a price less than
the stated redemption price at maturity of the Note), the Note is subject to
the market discount rules of the Code unless the market discount is de minimis.
Market discount is de minimis if it is less than one quarter of one percent of
the principal amount of the Note multiplied by the number of complete years to
maturity after the holder acquires the Note. Notes that have more than de
minimis market discount are herein referred to as "Market Discount Notes."
Any gain recognized on the maturity or disposition of a Market Discount Note
will be treated as ordinary income to the extent that such gain does not exceed
the accrued market discount on the Market Discount Note. In addition, the
holder could be required to defer the deduction of a portion of the interest
paid on any indebtedness incurred or continued to purchase a Market Discount
Note.
A holder of a debt instrument acquired at a market discount may elect to
include the market discount in income as the discount thereon accrues, either
on a straight line basis or, if elected, on a constant interest rate basis. The
current inclusion election, once made, applies to all market discount
obligations acquired by such holder on or after the first day of the first
taxable year to which the election applies, and may not be revoked without the
consent of the IRS. If a holder of a Market Discount Note elects to include
market discount in income in accordance with the preceeding sentence, the
foregoing rules with respect to the recognition of ordinary income on a sale or
certain other dispositions of such Market Discount Note and the deferral of
interest deductions on indebtedness related to such Market Discount Note would
not apply.
AMORTIZABLE BOND PREMIUM
A holder that purchases a Note for an amount in excess of its principal
amount may elect to treat such excess as "amortizable bond premium," in which
case the amount required to be included in the holder's income each year with
respect to interest on the Note will be reduced by the amount of amortizable
bond premium allocable (based on the yield to maturity of the Note) to such
year. Any election to amortize bond premium shall apply to all debt instruments
(other than debt instruments the interest on which is excludable from gross
income) held by the holder at the beginning of the first taxable year to which
the election applies or thereafter acquired by the holder, and is irrevocable
without the consent of the IRS.
33
<PAGE>
DISPOSITION OF A NOTE OR AN ADDITIONAL NOTE
In general, a holder of a Note will recognize gain or loss upon the sale,
exchange, redemption or other taxable disposition of the Note measured by the
difference between (i) the amount of cash and the fair market value of property
received and (ii) the holder's tax basis in the Note (i.e., such holder's
original purchase price as increased by any original issue discount and market
discount previously included in income by the holder and decreased by any cash
payments received with respect to the Note). If a holder has received
Additional Notes in lieu of cash payments of interest on the Note and
separately disposes of such Note or Additional Notes, the tax basis in the Note
generally will be allocated among the Note and such Additional Notes in
proportion to their respective principal amounts. Subject to the original issue
discount and market discount rules discussed above, any such gain or loss will
generally be long-term capital gain or loss, provided the Note had been held
for more than one year.
BACKUP WITHHOLDING
A holder of a Note may be subject to backup withholding at the rate of 31%
with respect to interest paid on, original issue discount accrued on, and gross
proceeds of a sale of, the Note, unless such holder (a) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact or (b) provides a correct taxpayer identification number, certifies
as to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A holder of a Note who
does not provide the Company with its correct taxpayer identification number
may be subject to penalties imposed by the IRS. Any amount withheld under these
rules will be creditable against the holder's federal income tax liability.
The Company will report to the holders of the Notes and the IRS the amount of
any "reportable payments" (including any interest paid and any original issue
discount accrued on the Notes) and any amount withheld with respect to the
holders during the calendar year.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH PROSPECTIVE
PURCHASER OF NOTES SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES TO IT OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
SELLING SECURITYHOLDER
The Selling Securityholder, Salomon Brothers Inc, initially acquired
$150,000,000 aggregate principal amount of Series A Notes pursuant to a private
placement of the Series A Notes by Adelphia, of which $ aggregate
principal amount were resold by the Selling Securityholder pursuant to Rule
144A under the Securities Act. Pursuant to a private exchange with Adelphia,
the Selling Securityholder exchanged $ aggregate principal amount of
Series A Notes for $ aggregate principal amount of Notes offered hereby.
In addition to the $ aggregate principal amount of Notes acquired by the
Selling Securityholder pursuant to such private exchange, this Prospectus also
relates to any additional Notes paid to the Selling Securityholder as interest
pursuant to the terms of the Notes. In addition to the Notes offered hereby,
the Selling Securityholder may from time to time hold Notes that it acquires as
a market-maker and may acquire additional Notes as interest pursuant to the
terms of the Notes. Accordingly, the aggregate principal amount of Notes that
the Selling Securityholder may hold when it sells Notes to be offered hereby
and the aggregate principal amount of Notes that it may hold thereafter, is
uncertain. The Selling Securityholder has, from time to time, provided
investment banking services to the Company.
Adelphia will not receive any proceeds from the sale of the Notes by the
Selling Securityholder.
34
<PAGE>
PLAN OF DISTRIBUTION
The Notes offered hereby may be sold by the Selling Securityholder from time
to time in reliance on this Prospectus. Sales may be made in one or more
transactions that may take place in the open market, in private or negotiated
transactions or in a combination of such methods of sale, at fixed prices, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
The Selling Securityholder may be deemed to be an "underwriter" within the
meaning of the Securities Act with respect to the Notes offered hereby, and any
profits realized or commissions received may be deemed underwriter
compensation.
PROSPECTUS SUPPLEMENTS
A supplement to this Prospectus ("Prospectus Supplement") will set forth,
with respect to the Selling Securityholder, any necessary further information
regarding the distribution of the Notes to be offered hereby. Such Prospectus
Supplement may be appropriately modified or supplemented.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries as of March 31, 1992 and 1993,
and for each of the three years in the period ended March 31, 1993, and the
consolidated financial statements of Olympus Communications, L.P. and its
subsidiaries as of December 31, 1991 and 1992, and for each of the three years
in the period ended December 31, 1992 that are incorporated in this Prospectus
by reference from the Company's Annual Report on Form 10-K for the year ended
March 31, 1993 have been audited by Deloitte & Touche, independent auditors, as
stated in their reports, which are incorporated herein by reference and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
35
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF ADELPHIA SINCE THE DATE HEREOF. THIS PROSPEC-
TUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information...................................................... 3
Incorporation of Certain Documents
by Reference.............................................................. 3
Prospectus Summary......................................................... 5
Risk Factors............................................................... 10
Recent Developments........................................................ 14
Capitalization............................................................. 15
Description of the Notes................................................... 16
Certain United States Income Tax
Considerations............................................................ 32
Selling Securityholder..................................................... 34
Plan of Distribution....................................................... 35
Experts.................................................................... 35
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$
[LOGO OF ADELPHIA CABLE COMMUNICATIONS APPEARS HERE]
ADELPHIA COMMUNICATIONS
CORPORATION
9 1/2% SENIOR PAY-IN-KIND NOTES
DUE 2004, SERIES B
-------------------
P R O S P E C T U S
-------------------
, 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an estimate of the expenses which will be incurred in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts and commissions.
<TABLE>
<CAPTION>
PAYABLE BY
THE COMPANY
-----------
<S> <C>
SEC filing fee................................................. $ 9,351
Legal fees and expenses........................................ 20,000
Printing and engraving fees.................................... 10,000
Accounting fees and expenses................................... 5,000
Blue Sky legal fees, filing fees and expenses.................. 2,000
Trustee fees................................................... 2,000
Miscellaneous expense.......................................... 1,649
-------
Total........................................................ $50,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides in general that
a corporation may indemnify its directors, officers, employees or agents
against expenditures (including judgments, fines, amounts paid in settlement
and attorneys' fees) made by them in connection with certain lawsuits to which
they may be made parties by reason of their being directors, officers,
employees or agents and shall so indemnify such persons against expenses
(including attorneys' fees) if they have been successful on the merits or
otherwise. The bylaws of Adelphia provide for indemnification of the officers
and directors of Adelphia to the full extent permissible under Delaware law.
Adelphia's Certificate of Incorporation also provides, pursuant to Section
102(b)(7) of the Delaware General Corporation Law, that directors of Adelphia
shall not be personally liable to Adelphia or its stockholders for monetary
damages for breach of fiduciary duty as a director for acts or omissions after
July 1, 1986, provided that directors shall nonetheless be liable for breaches
of the duty of loyalty, bad faith, intentional misconduct, knowing violations
of law, unlawful distributions to stockholders, or transactions from which a
director derived an improper personal benefit.
ITEM 16. EXHIBITS
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
EXHIBIT NO. REFERENCE
----------- ---------
<C> <S> <C>
4.01 Indenture, dated as of February 22, Incorporated herein by reference is
1994, with respect to the Registrant's Exhibit 4.05 to Registration Statement
9 1/2% Senior Pay-In-Kind Notes Due No. 33-52513 on Form S-4.
2004
4.02 Indenture, dated as of May 7, 1992, Incorporated herein by reference is
with respect to the Registrant's 12 Exhibit 4.03 to Registrant's Annual
1/2% Senior Notes Due 2002 Report on Form 10-K for the fiscal year
ended March 31, 1992.
4.03 Indenture, dated as of September 2, Incorporated herein by reference is
1992, Exhibit 4.03 to Registration Statement
with respect to the Registrant's 11 No. 33-52630 on Form S-1.
7/8% Senior Debentures Due 2004
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. REFERENCE
----------- ---------
<C> <S> <C>
4.04 Amended and Restated Indenture, dated Incorporated herein by reference is
as of May 11, 1993, with respect to Exhibit 4.01 to Registrant's Annual
Registrant's 9 7/8% Senior Debentures Report on Form 10-K for the fiscal year
Due 2005 ended March 31, 1993.
4.05 Indenture, dated as of July 28, 1993, Incorporated herein by reference is
with respect to the Registrant's 10 Exhibit 4.01 to Registrant's Quarterly
1/4% Senior Notes Due 2000 Report on Form 10-Q for the Quarter
ended June 30, 1993.
4.06 Form of First Supplemental Indenture, Filed herewith.
relating to the Indenture dated as of
February 22, 1994 with respect to the
Registrant's 9 1/2% Senior Pay-In-Kind
Notes Due 2004
5.01 Opinion of Buchanan Ingersoll Filed herewith.
Professional Corporation with regard to
the securities being registered
12.01 Computation of Ratio of Earnings to Incorporated herein by reference is
Fixed Charges Exhibit 12.01 to Registration Statement
No. 33-52513 on Form S-4.
23.01 Consent of Deloitte & Touche Filed herewith.
24.01 Power of Attorney (appearing on the Filed herewith.
Signature Page)
25.01 Form T-1 Statement of Eligibility of Incorporated herein by reference is
Trustee Exhibit 25.01 to Registration Statement
No. 33-52513 on Form S-4.
</TABLE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed part of the Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at such time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
The undersigned Registrant hereby undertakes to the extent applicable
hereunder:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registrant statement:
(i) To include any prospectus required by section 10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the Registration Statement.
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Coudersport,
Commonwealth of Pennsylvania, on the 2nd day of May 1994.
ADELPHIA COMMUNICATIONS CORPORATION
By: /s/ John J. Rigas
----------------------------------
John J. Rigas, Chairman, President
and Chief Executive Officer
Know All Men By These Presents that each person whose signature appears below
constitutes and appoints John J. Rigas, Timothy J. Rigas and Michael J. Rigas,
and each of them, such person's true and lawful attorneys-in-fact and agents,
with full power of substitution and revocation, for such person and in such
person's name, place and stead, in any and all capacities to sign any and all
amendments (including post-effective amendments to this Registration Statement)
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as such person might
or could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents or any of them, or their or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ John J. Rigas Chairman, President and May 2, 1994
- ------------------------------- Chief Executive Officer
JOHN J. RIGAS
/s/ Michael J. Rigas Senior Vice President and May 2, 1994
- ------------------------------- Director
MICHAEL J. RIGAS
/s/ Timothy J. Rigas Senior Vice President, May 2, 1994
- ------------------------------- Chief Financial Officer,
TIMOTHY J. RIGAS Chief Accounting Officer,
Treasurer and Director
/s/ James P. Rigas Vice President and May 2, 1994
- ------------------------------- Director
JAMES P. RIGAS
/s/ Daniel R. Milliard Vice President, Secretary May 2, 1994
- ------------------------------- and Director
DANIEL R. MILLIARD
Director
- -------------------------------
PERRY S. PATTERSON
Director
- -------------------------------
PETE J. METROS
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. REFERENCE
----------- ---------
<C> <S> <C>
4.01 Indenture, dated as of February 22, Incorporated herein by reference is
1994, with respect to the Registrant's Exhibit 4.05 to Registration Statement
9 1/2% Senior Pay-In-Kind Notes Due No. 33-52513 on Form S-4.
2004
4.02 Indenture, dated as of May 7, 1992, Incorporated herein by reference is
with respect to the Registrant's 12 Exhibit 4.03 to Registrant's Annual
1/2% Senior Notes Due 2002 Report on Form 10-K for the fiscal year
ended March 31, 1992.
4.03 Indenture, dated as of September 2, Incorporated herein by reference is
1992, Exhibit 4.03 to Registration Statement
with respect to the Registrant's 11 No. 33-52630 on Form S-1.
7/8% Senior Debentures Due 2004
4.04 Amended and Restated Indenture, dated Incorporated herein by reference is
as of May 11, 1993, with respect to Exhibit 4.01 to Registrant's Annual
Registrant's 9 7/8% Senior Debentures Report on Form 10-K for the fiscal year
Due 2005 ended March 31, 1993.
4.05 Indenture, dated as of July 28, 1993, Incorporated herein by reference is
with respect to the Registrant's 10 Exhibit 4.01 to Registrant's Quarterly
1/4% Senior Notes Due 2000 Report on Form 10-Q for the Quarter
ended June 30, 1993.
4.06 Form of First Supplemental Indenture, Filed herewith.
relating to the Indenture dated as of
February 22, 1994 with respect to the
Registrant's 9 1/2% Senior Pay-In-Kind
Notes Due 2004
5.01 Opinion of Buchanan Ingersoll Filed herewith.
Professional Corporation with regard to
the securities being registered
12.01 Computation of Ratio of Earnings to Incorporated herein by reference is
Fixed Charges Exhibit 12.01 to Registration Statement
No. 33-52513 on Form S-4.
23.01 Consent of Deloitte & Touche Filed herewith.
24.01 Power of Attorney (appearing on the Filed herewith.
Signature Page)
25.01 Form T-1 Statement of Eligibility of Incorporated herein by reference is
Trustee Exhibit 25.01 to Registration Statement
No. 33-52513 on Form S-4.
</TABLE>
<PAGE>
EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this
Registration Statement of Adelphia Communications Corporation on
Form S-3 of our reports dated June 25, 1993 and March 17, 1993 for Adelphia
Communications Corporation and subsidiaries and Olympus Communications, L.P.
and subsidiaries, respectively, appearing in the Annual Report on Form 10-K of
Adelphia Communications Corporation for the year ended March 31, 1993, and to
the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement.
DELOITTE & TOUCHE
May 2, 1994
Pittsburgh, Pennsylvania
<PAGE>
EXHIBIT 4.06
FIRST SUPPLEMENTAL INDENTURE, dated as of __________, 1994 (the "First
Supplemental Indenture"), to the Indenture, dated as of February 22, 1994 (the
"Indenture") between ADELPHIA COMMUNICATIONS CORPORATION, a Delaware corporation
(the "Company"), and BANK OF MONTREAL TRUST COMPANY, a trust company organized
under the laws of the State of New York (the "Trustee").
WHEREAS, the Company has duly authorized the execution and delivery of the
Indenture to provide for the issuance of 9-1/2% Senior Pay-In-Kind Notes due
2004, Series A ("Series A Notes") and 9-1/2% Senior Pay-In-Kind Notes due 2004,
Series B ("Series B Notes") ("Series A Notes" and "Series B Notes" sometimes
collectively referred to herein as the "Notes"); and
WHEREAS, the Company desires and has requested the Trustee to join it in
the execution and delivery of this First Supplemental Indenture in order to
establish and provide for the issuance by the Company of Series B Notes pursuant
to the Indenture in the aggregate principal amount of $__________ in exchange
for a like principal amount of Series A Notes in a Private Exchange Offer (as
defined herein) subject to the limitations of Section 2.02 of the Indenture; and
WHEREAS, Section 8.01 of the Indenture provides that a supplemental
indenture may be entered into by the Company and the Trustee without the consent
of any holder of any Note for such purpose provided certain conditions are met;
and
WHEREAS, the conditions set forth in the Indenture for the execution and
delivery of this First Supplemental Indenture have been complied with; and
WHEREAS, all things necessary to make this First Supplemental Indenture a
valid agreement of the Company and the Trustee, in accordance with its terms,
and a valid amendment of, and supplement to, the Indenture have been done;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein, the Company agrees with the Trustee that the Indenture is supplemented
and amended, to the extent and for the purposes expressed herein, as follows:
Section 1. Private Exchange Offer; Scope. In the event that the Company
-----------------------------
delivers to the Trustee a copy of an Officer's Certificate certifying that the
Company has privately offered Series B Notes to holders of Series A Notes
("Private Holders") in accordance with an exchange offer by the Company (the
"Private Exchange Offer"), the Trustee shall authenticate and deliver Series B
Notes in exchange for such Private Holders' Series A Notes for Series B Notes
upon the terms set forth in the Private Exchange Offer. The changes,
modifications and supplements to the Indenture effected by this First
Supplemental Indenture in Sections 2 and 3 of this First Supplemental
Indenture shall only be applicable with respect to, and govern the terms of,
Series B Notes issued by the Company in accordance with the Private Exchange
<PAGE>
Offer and Series B Notes issued by the Company in lieu of cash payments of
interest on such Series B Notes as provided in Section 2.15 of the Indenture
("Private Series B Notes"). Terms and provisions of the Indenture not otherwise
changed, modified or supplemented herein shall continue to apply to Private
Series B Notes.
Section 2. Transfer and Exchange.
---------------------
(a) The Company shall promptly notify the Trustee upon the occurrence
of the following: (i) the effective date of any registration statement, and any
post-effective amendments and supplements thereto, registering the sale of
Private Series B Notes by Private Holders under the Securities Act (a "Series B
Registration Statement"); (ii) the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Series B
Registration Statement or the initiation of any proceedings for that purpose;
(iii) the happening of any event during the period that a Series B Registration
Statement is effective which makes any statement in such Series B Registration
Statement (or the prospectus included therein) untrue in any material respect or
which requires the making of any changes in such Series B Registration Statement
(or such prospectus) so that, as of such date, the statements therein are not
misleading and do not omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and (iv)
that all Private Series B Notes have been sold pursuant to a Series B
Registration Statement.
(b) The provisions set forth in Section 3 of this Supplemental
Indenture shall terminate, with respect to any Private Series B Note,
simultaneously with any sale of such Private Series B Note pursuant to a
Series B Registration Statement. Any Private Series B Note as to which such
restrictions shall have terminated or expired or any Private Series B Note
freely tradeable by the Holder thereof pursuant to Rule 144(k) under the
Securities Act may, upon surrender of such Private Series B Note for exchange
to the Trustee, be exchanged for a new Series B Note of like tenor and
aggregate principal amount which shall not bear the Series B Private Placement
Legend; provided, however, that no transfer of a Series B Note pursuant to a
Series B Registration Statement shall be permitted if such transfer pursuant
to a Series B Registration Statement is attempted to be made at any time after
the Company has notified the Trustee of the occurrence of an event described
in Section 2(a)(ii) or (iii), unless the Company has subsequently notified the
Trustee otherwise. In the event that a Holder surrenders a Private Series B
Note for exchange pursuant to the immediately preceding sentence, the Trustee
shall authenticate and deliver a Series B Note of like tenor and aggregate
principal amount as the Private Series B Note exchanged therefor, which Series
B Note shall not be a Private Series B Note, and Series B Notes issued by the
Company in lieu of cash payments of interest thereon shall not be Private
Series B Notes.
Section 3. Certificated Note and Special Transfer Provisions.
--------------------------------------------------
(a) Every Private Series B Note shall (i) be a Certificated Note, and
(ii) bear the following legend (the "Series B Private Placement Legend"):
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<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT
THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X)
PRIOR TO THE THIRD ANNIVERSARY OF THE LATER OF THE ISSUANCE HEREOF (OR
ANY PREDECESSOR SECURITY HERETO) OR THE SALE HEREOF (OR ANY PREDECESSOR
SECURITY HERETO) BY THE COMPANY OR AN AFFILIATE OF THE COMPANY
(COMPUTED IN ACCORDANCE WITH PARAGRAPH (D) OF RULE 144 UNDER THE
SECURITIES ACT) OR (Y) BY AN AFFILIATE OF THE COMPANY OR BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE
MONTHS PRECEDING THE DATE OF SUCH TRANSFER IN EITHER CASE, OTHER THAN
(1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A, PURCHASING FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE TRANSFEROR IN WRITTEN
INSTRUCTIONS TO THE REGISTRAR), (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY
THE TRANSFEROR IN WRITTEN INSTRUCTIONS TO THE REGISTRAR), (4) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT (AS INDICATED BY THE
TRANSFEROR IN WRITTEN INSTRUCTIONS TO THE REGISTRAR), OR (5) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF OF ANY
STATE OF THE UNITED STATES. THE HOLDER HEREOF BY PURCHASING THIS
SECURITY, TO THE EXTENT THE TRANSFEROR HEREOF INDICATES IN ITS WRITTEN
NOTICE TO THE REGISTRAR THAT IT IS TRANSFERRING THIS SECURITY PURSUANT
TO ITEMS (2) OR (3) ABOVE, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
COMPANY THAT IT IS (I) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A AND THAT IT IS HOLDING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (II) A NON-U.S. PERSON
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (O)(2) OF RULE 902 UNDER)
REGULATION S OF THE SECURITIES ACT.
(b) The following provisions shall apply with respect to the
registration of any proposed transfer of a Private Series B Note:
(i) The Registrar shall register the transfer of Private
Series B Notes if such transfer is being made by a proposed transferor
who has advised the Company and the Registrar in writing, that (A) the
transfer has been made in compliance with the provisions of Rule 144A
under the Securities Act ("Rule 144A") to a transferee who, in either
-3-
<PAGE>
case, by purchasing or otherwise acquiring the Note shall have and
shall be deemed to have represented and agreed that it is purchasing
the Private Series B Note for its own account or an account with
respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and that
it is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A, (B) the transfer has
been made in an offshore transaction in accordance with all
requirements and provisions of Regulation S under the Securities Act
("Regulation S") to a transferee who, in either case, by purchasing or
otherwise acquiring the Note shall have and shall be deemed to have
represented and agreed that it is purchasing the Private Series B Note
for its own account or for an account with respect o which it exercises
sole investment discretion and that it and any such account have
complied, and the purchase or other acquisition is in compliance with,
all requirements and provisions of Regulation S, (C) the transfer has
been made in accordance with Rule 144 under the Securities Act, or (D)
the transfer has been made pursuant to a Series B Registration
Statement; in each case such transfer shall be accompanied by such
additional documentation or certifications as shall be requested by the
Company or the Registrar.
(ii) If the proposed transferee is an Agent Member, and the
proposed transfer will result in the termination or expiration of the
restrictions on transfer of the Private Series B Note pursuant to
Section 2(b), upon receipt by the Registrar of (x) the documents or
certifications, if any, required by paragraph (i) and (y) instructions
given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the
date and an increase in the principal amount of the Series B Global
Note in an amount equal to the principal amount of the Certificated
Notes to be transferred, and the Trustee shall cancel the Certificated
Note so transferred.
(c) By its acceptance of any Private Series B Note bearing the Series
B Private Placement Legend, each Private Holder acknowledges the restrictions on
transfer of such Private Series B Note set forth in this First Supplemental
Indenture and in the Series B Private Placement Legend and agrees that it will
transfer such Private Series B Note only as provided in this First Supplemental
Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 3. The Company shall have
the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time.
Section 4. Definitions. Any capitalized term used herein and not otherwise
-----------
defined herein shall have the meaning given in the Indenture.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and attested, all as of the date and year first
above written.
ATTEST: ADELPHIA COMMUNICATIONS CORPORATION
By:
- ------------------------------- -------------------------------
ATTEST: BANK OF MONTREAL TRUST COMPANY, as
Trustee
By:
- ------------------------------- -------------------------------
-5-
<PAGE>
EXHIBIT 5.01
Buchanan Ingersoll Professional Corporation
Attorneys
58th Floor, 600 Grant Street
Pittsburgh, PA 15219-2887
May 2, 1994
Adelphia Communications Corporation
5 West Third Street
Coudersport, PA 16915
Dear Sirs:
We have acted as counsel to Adelphia Communications Corporation, a Delaware
corporation (the "Company"), in connection with the proposed private exchange
(the "Private Exchange") by the Company of 9-1/2% Senior Pay-In-Kind Notes Due
2004, Series B ("New Notes") for an equal principal amount of its outstanding
9-1/2% Senior Pay-In-Kind Notes Due 2004, Series A ("Old Notes") held by Salomon
Brothers Inc ("Salomon") as the initial purchaser of the Old Notes on February
22, 1994.
In connection with the proposed Private Exchange and the proposed public
offering of the New Notes received therein by Salomon, we have examined the
Certificate of Incorporation of the Company, the Bylaws of the Company, as
amended, the relevant corporate proceedings of the Company, the draft
Registration Statement on Form S-3 covering the proposed offering of the New
Notes by Salomon, which is proposed to be filed by the Company with the
Securities and Exchange Commission (the "Registration Statement"), including the
Prospectus filed as a part of the Registration Statement, the Indenture dated
February 22, 1994 with respect to the Old Notes and New Notes (the "Indenture"),
the proposed form of First Supplemental Indenture ("First Supplemental
Indenture") relating to the Indenture and the New Notes proposed to be issued to
Salomon in the Private Exchange, and such other documents, records, certificates
of public officials, statutes and decisions as we considered necessary to
express the opinions contained herein. In the examination of such documents, we
have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals and the conformity to the original
documents of all documents submitted to us as certified or photostatic copies.
We understand that the New Notes are to be issued to Salomon in the Private
Exchange and are to be available for resale by Salomon, all in the manner
described in the Prospectus which is a part of the Registration Statement and in
the Indenture and First Supplemental Indenture.
Based on the foregoing, we are of the opinion that:
1. The issuance of the New Notes to Salomon pursuant to the terms of the
Private Exchange, the Indenture and the First Supplemental Indenture have
been duly authorized by proper corporate action of the Company.
<PAGE>
Adelphia Communications Corporation
May 2, 1994
Page 2
2. When the First Supplemental Indenture has been duly executed and
delivered and the New Notes have been duly issued to and exchanged with
Salomon in accordance with the terms of the Private Exchange, the Indenture
and the First Supplemental Indenture, such New Notes will be validly issued
and will constitute binding obligations of the Company, subject, as to
enforcement, (i) to any applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors' rights and
remedies generally and (ii) to general principles of judicial discretion
and equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to any reference to us in the Prospectus which is a
part thereof.
Sincerely,
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
By: /s/ Carl E. Rothenberger, Jr.
-----------------------------
Carl E. Rothenberger, Jr.
