SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
X Annual Report under Section 13 or 15(d) of the Securities Exchange Act
- -------
of 1934
For the fiscal year ended March 31, 1997
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period
from ______________ to _____________
Commission File Number: 0-16014
ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2417713
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Main at Water Street
Coudersport, PA 16915
(Address of principal executive offices) (Zip code)
814-274-9830
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the form 10-K or any amendment to the
Form 10-K. X
Aggregate market value of outstanding Class A Common stock $.01 par value, held
by non-affiliates of the registrant at July 23, 1997 was $92.9 million based on
the closing sale price as computed by the NASDAQ National Market system as of
that date. For purposes of this calculation only, affiliates are deemed to be
directors and executive officers of the registrant.
At July 23, 1997, 19,702,308 shares of Class A Common Stock, par value $0.01,
and 10,944,476 shares of Class B Common Stock, par value $0.01 per share, of the
registrant were outstanding.
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
fiscal year ended March 31, 1997 as set forth in the pages attached hereto:
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADELPHIA COMMUNICATIONS CORPORATION
July 29, 1997 By: /s/ Timothy J. Rigas
---------------------
Timothy J. Rigas
Executive Vice President, Chief
Financial Officer, Chief
Accounting Officer and
Treasurer
<PAGE>
Item 10. Directors and Executive Officers of the Registrant
The information set forth in Part I under the caption "Executive
Officers of the Registrant" is incorporated herein by reference. All of the
following nominees for director are currently directors who were first elected
or appointed as directors in 1986 except for Mr. Dennis Coyle. Mr. Coyle was
first elected as a director of the Company in 1995.
Perry S. Patterson
Age 80
Perry S. Patterson became a director of Adelphia on September 9, 1986.
Since 1977, Mr. Patterson has practiced law in Coudersport, Pennsylvania. From
1975 to 1977, Mr. Patterson served as President Judge of the Court of Common
Pleas of the 55th Judicial District in Potter County, Pennsylvania. He was a
partner of the law firm of Kirkland & Ellis, in Chicago, Illinois and
Washington, D.C. from 1950 to 1973. Mr. Patterson attended Georgetown University
and graduated from Northwestern University Law School in 1941.
John J. Rigas
Age 72
John J. Rigas is the founder, Chairman, President and Chief Executive
Officer of Adelphia and is President of its subsidiaries. Mr. Rigas has served
as President or general partner of most of the constituent entities which became
wholly-owned subsidiaries of Adelphia upon its formation in 1986, as well as the
cable television operating companies acquired by the Company which were wholly
or partially owned by members of the Rigas Family. Mr. Rigas has owned and
operated cable television systems since 1952. Among his business and community
service activities, Mr. Rigas is Chairman of the Board of Directors of Citizens
Bancorp., Inc., Coudersport, Pennsylvania, and a member of the Board of
Directors of Charles Cole Memorial Hospital. He is a director of the National
Cable Television Association and a past President of the Pennsylvania Cable
Television Association. He is also a member of the Board of Directors of C-SPAN
and the Cable Advertising Bureau, and is a Trustee of St. Bonaventure
University. He graduated from Rensselaer Polytechnic Institute with a B.S. in
Management Engineering in 1950.
John J. Rigas is the father of Michael J. Rigas, Timothy J. Rigas and
James P. Rigas, each of whom currently serves as a director and executive
officer of the Company.
Michael J. Rigas
Age 43
Michael J. Rigas is Executive Vice President, Operations of Adelphia
and is a Vice President of its subsidiaries. Since 1981, Mr. Rigas has served as
a Senior Vice President, Vice President, general partner or other officer of the
constituent entities which became wholly-owned subsidiaries of Adelphia upon its
formation in 1986, as well as the cable television operating companies acquired
by the Company which were wholly or partially owned by members of the Rigas
Family. From 1979 to 1981, he worked for Webster, Chamberlain & Bean, a
Washington, D.C. law firm. Mr. Rigas graduated from Harvard University (magna
cum laude) in 1976 and received his Juris Doctor degree from Harvard Law School
in 1979.
Timothy J. Rigas
Age 41
Timothy J. Rigas is Executive Vice President, Chief Financial Officer,
Chief Accounting Officer and Treasurer of Adelphia and its subsidiaries. Since
1979, Mr. Rigas has served as Senior Vice President, Vice President, general
partner or other officer of the constituent entities which became wholly-owned
subsidiaries of Adelphia upon its formation in 1986, as well as the cable
television operating companies acquired by the Company which were wholly or
partially owned by members of the Rigas Family. Mr. Rigas graduated from the
University of Pennsylvania, Wharton School, with a B.S. degree in Economics (cum
laude) in 1978.
James P. Rigas
Age 39
James P. Rigas is Executive Vice President, Strategic Planning of
Adelphia and is a Vice President of its subsidiaries, and also serves as Chief
Executive Officer of Hyperion. Since February 1986, Mr. Rigas has served as a
Senior Vice President, Vice President or other officer of the constituent
entities which became wholly-owned subsidiaries of Adelphia upon its formation
in 1986, as well as the cable television operating companies acquired by the
Company which were wholly or partially owned by members of the Rigas Family.
Among his business activities, Mr. Rigas is a member of the Board of Directors
of Cable Labs. Mr. Rigas graduated from Harvard University (magna cum laude) in
1980 and received a Juris Doctor degree and an M.A. degree in Economics from
Stanford University in 1984. From June 1984 to February 1986, he was a
consultant with Bain & Co., a management consulting firm.
Daniel R. Milliard
Age 50
Daniel R. Milliard is Senior Vice President and Secretary of Adelphia
and its subsidiaries, and also serves as President of Hyperion. Since 1982, Mr.
Milliard served as Vice President, Secretary and/or General Counsel of Adelphia
and the constituent entities which became wholly-owned subsidiaries of Adelphia,
as well as the cable television operating companies acquired by the Company
which were wholly or partially owned by members of the Rigas Family. He served
as outside general counsel to the Company's predecessors from 1979 to 1982. Mr.
Milliard graduated from American University in 1970 with a Bachelor of Science
degree in Business Administration. He received an M.A. degree in Business from
Central Missouri State University in 1971, where he was an Instructor in the
Department of Finance, School of Business and Economics, from 1971-1973, and
received a Juris Doctor degree from the University of Tulsa School of Law in
1976. He is a Director of Citizens Bancorp., Inc. in Coudersport, Pennsylvania
and President of the Board of Directors of Charles Cole Memorial Hospital.
Pete J. Metros
Age 57
Pete J. Metros became a director of Adelphia on November 4, 1986. Mr.
Metros has been President and a member of the Board of Directors of Rapistan
Demag Corporation, a subsidiary of Mannesmann AG, since December 1991. From
August 1987 to December 1991, he was President of Rapistan Corp., the
predecessor of Rapistan Demag Corporation, and of Truck Products Corp., both of
which were major subsidiaries of Lear Siegler Holdings Corp. From 1980 to August
1987, Mr. Metros was President of the Steam Turbine, Motor & Generator Division
of Dresser-Rand Company. From 1964 to 1980, he held various positions at the
General Electric Company, the last of which was Manager--Manufacturing for the
Large Gas Turbine Division. Mr. Metros is also on the Board of Directors of
Borroughs Corporation of Kalamazoo, Michigan. Mr. Metros received a BS degree
from the Georgia Institute of Technology in 1962.
Dennis P. Coyle
Age 59
Dennis P. Coyle is General Counsel and Secretary of FPL Group, Inc. and
Florida Power & Light Company. Mr. Coyle was named General Counsel of FPL Group,
Inc. and Florida Power & Light Company in 1989, and assumed the additional title
and responsibilities of Secretary of such companies in 1991. He graduated from
Dartmouth College in 1960 and received his law degree from Columbia University
in 1965. In an investment agreement with respect to Olympus Communications, L.P.
("Olympus," a joint venture of the Company), John, Michael, Timothy and James
Rigas have agreed to vote a sufficient number of shares of the Company's Class A
Common Stock to elect to the Board a nominee of Telesat Cablevision, Inc., which
is the Company's joint venture partner in Olympus. Mr. Coyle is the nominee of
Telesat Cablevision, Inc., which is an indirect, wholly-owned subsidiary of FPL
Group, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company's
directors, executive officers and persons who beneficially own more than ten
percent of a class of the Company's registered equity securities to file with
the Securities and Exchange Commission and deliver to the Company initial
reports of ownership and reports of changes in ownership of such registered
equity securities.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company or written representations that no other
reports were required, the Company's directors, executive officers and more than
ten percent stockholders filed on a timely basis all reports due under Section
16(a) for the period from April 1, 1996 through March 31, 1997.
<PAGE>
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid by the Company for services rendered during the Company's last
three fiscal years in the period ended March 31, 1997 to the Company's Chief
Executive Officer and the four most highly compensated executive officers whose
compensation exceeded $100,000 in salary and bonus during fiscal 1997:
<TABLE>
Annual Compensation
<CAPTION>
All Other
Compensation (a) (b)
Name and Principal Position Fiscal Year Salary ($) ($)
- --------------------------- ----------- ----------- ---
<S> <C> <C> <C>
John J. Rigas 1997 1,235,194 474,707
Chairman, President and 1996 641,963 474,495
Chief Executive Officer 1995 595,933 293,750
Michael J. Rigas 1997 206,857 10,950
Executive Vice President, 1996 205,948 10,750
Operations 1995 124,658 10,950
Timothy J. Rigas 1997 206,857 10,950
Executive Vice President, Chief 1996 205,948 10,750
Financial Officer Chief Accounting 1995 124,658 10,950
Officer and Treasurer
James P. Rigas 1997 206,857 11,410
Executive Vice President, 1996 205,948 11,201
Strategic Planning 1995 124,658 11,250
Daniel R. Milliard 1997 313,863 5,340
Senior Vice President and 1996 207,474 5,250
Secretary 1995 187,412 5,350
<FN>
(a) Fiscal 1997, 1996 and 1995 amounts include: (i) life insurance
premiums paid during each respective fiscal year by the Company under
employment agreements with John J. Rigas, Michael J. Rigas, Timothy J.
Rigas, James P. Rigas and Daniel R. Milliard, in premium payment
amounts of $200,000, $10,200, $10,200, $10,660 and $4,590, during
fiscal 1997, $200,000, $10,000, $10,000, $10,451, and $4,500,
respectively, during fiscal 1996, and $293,000, $10,200, $10,200,
$10,500 and $4,600, respectively, during fiscal 1995, on policies owned
by the respective named executive officers; (ii) $251,825 and $250,829
for John J. Rigas which represents the dollar value of the benefit of
the whole-life portion of the premiums paid by the Company during
fiscal 1997 and 1996, respectively, pursuant to a split-dollar life
insurance arrangement projected on an actuarial basis; (iii) $22,132
and $22,916 for John J. Rigas which represents payments by the Company
during fiscal 1997 and 1996, respectively, pursuant to a split-dollar
life insurance arrangement that is attributable to term life insurance
coverage; and (iv) $750 in Company matching contributions for each
executive officer under the Company's 401(k) savings plan for each of
fiscal 1997, 1996 and 1995. Fiscal 1997 amounts shown for Daniel R.
Milliard include amounts paid by the Company under Mr. Milliard's
employment agreement with the Company, which terminated March 4, 1997
and amounts paid since March 4, 1997 under Mr. Milliard's new
employment agreement with Hyperion Telecommunications, Inc. as
described below. The amounts shown above do not include transactions
between the Company and certain executive officers or certain entities
which are privately owned in whole or in part by the executive officers
named in the table. See Item 13 "Certain Relationships and Related
Transactions."
In accordance with an agreement related to the split-dollar insurance
life arrangement referred to above, the Company will be reimbursed for
all premiums paid related to such arrangement upon the earlier of death
of both the insured and his spouse or termination of the insurance
policies related to such arrangement.
(b) Does not include the value of certain non-cash compensation to the
named individuals which did not exceed the lesser of $50,000 or 10% of
such individuals' total annual salary shown in the table.
</FN>
</TABLE>
All of the executive officers are eligible to receive bonuses of Class
A Common Stock under the Company's Restricted Stock Bonus Plan, as amended, and
options to purchase Class A Common Stock under the Stock Option Plan of 1986, as
amended, to be awarded or granted at the discretion of the Bonus Committee (as
defined therein) and Option Committee (as defined therein), respectively,
subject to certain limitations on the number of shares that may be awarded to
each executive officer under each of the Plans. No awards were made under either
the Restricted Stock Bonus Plan or the Stock Option Plan of 1986 during fiscal
1997.
Employment Contracts and Termination of Employment
During fiscal 1997, each of the named executive officers had an
employment agreement with the Company which is automatically renewable each year
unless one party gives the other prior notice and which provides among other
things for compensation review by the Compensation Committee, the insurance
premium payments listed in note (a)(i) to the Summary Compensation Table above,
and benefits. In addition, under such employment agreements, upon termination of
such employment for any reason other than "for cause," each of the executive
officers will be entitled to receive severance pay equal to three months of
their salary plus the amount of insurance premiums payable under such officer's
employment agreement which, as of April 1, 1996, in the aggregate in the case of
John J. Rigas would be approximately $315,876.
As of March 4, 1997, Mr. Milliard entered into an employment agreement
with Hyperion Telecommunications, Inc., an 88% owned subsidiary of the Company,
and terminated his employment agreement with Adelphia. Mr. Milliard serves as
President and Chief Operating Officer of Hyperion. Mr. Milliard's employment
agreement with Hyperion provides for base salary, annual cash bonuses based on
achievement, stock options and stock bonuses, certain employee benefits and
certain change-in-control and other provisions, and expires on March 31, 2001
unless terminated earlier pursuant to its terms. Mr. Milliard will continue to
serve as a director, senior vice president and secretary of Adelphia, although
he will receive no additional compensation for serving in such capacities.
During fiscal 1996 the Company paid the annual premiums related to a
split-dollar life insurance arrangement for joint and survivor life insurance
coverage for John J. Rigas and his spouse. Upon the earlier of the death of Mr.
Rigas and the death of his spouse or the termination of the arrangement, the
Company will recover all of the premiums previously paid by the Company. The
compensation related to such arrangement is derived as described in notes
(a)(ii) and (iii) to the Summary Compensation Table above.
Board of Directors Compensation
Directors who are not also employees of the Company each receive
compensation from the Company for services as a director at a rate of $750 plus
reimbursement of expenses for each Board and committee meeting attended.
Directors who are employees of the Company do not receive any compensation for
services as a director or as a member of Board committees.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, based on information available to the
Company as of July 23, 1997, certain information with respect to the beneficial
ownership of Class A Common Stock and Class B Common Stock by each director or
nominee for director, all executive officers and directors of Adelphia as a
group, and each person known to Adelphia to own beneficially more than 5% of
such Common Stock, based on 19,702,308 shares of Class A Common Stock and
10,944,476 shares of Class B Common Stock outstanding, respectively, as of such
date. Unless otherwise noted, the individuals have sole voting and investment
power. The business address of each such 5% beneficial owner named below, unless
otherwise noted, is Main at Water Street, Coudersport, Pennsylvania 16915.
<TABLE>
<CAPTION>
Shares of Percent of Shares of Percent of
Class A Class A Class B Class B
Common Common Common Common
Name and Addresses Stock Stock Stock Stock
<S> <C> <C> <C> <C>
John J. Rigas (a) (b) 5,883,004(c) 53.8%
Michael J. Rigas (a) (b) 1,915,970(c) 17.5%
Timothy J. Rigas (a) (b) 1,915,970(c) 17.5%
James P. Rigas (a) (b) 1,151,634(c) 10.5%
Daniel R. Milliard 1,000(d) (e) -- --
Perry S. Patterson 3,250 (e) -- --
Pete J. Metros 100 (e) -- --
Dennis P. Coyle 1,000 (e) -- --
All executive officers and directors
as a group (eight persons) 26,898,245(a)(c) (b) 10,572,731(c) 96.6%
Syracuse Hilton Head Holdings, L.P. 2,398,151(f) 12.2% -- --
Main at Water Street
Coudersport, Pennsylvania 16915
Highland Holdings 13,849,913(g) 47.5% -- --
Main at Water Street
Coudersport, Pennsylvania 16915
Ellen K. Rigas (h) (i) 371,762(c) 3.4%
Main at Water Street
Coudersport, Pennsylvania 16915
The Capital Group Companies, Inc. 1,177,500(j) 6.0% -- --
333 South Hope Street
Los Angeles, California 90071
Telesat Cablevision, Inc. 3,450,014(k) 15.6% -- --
700 Universe Blvd.
Juno Beach, Florida 33408
Booth American Company 3,571,428 18.1% -- --
333 W. Fort Street, 12th Floor
Detroit, MI 48226
Myron M. Kaplan 979,500 5.0% -- --
P.O. Box 385
Leonia, NJ 07605
<FN>
(a) The holders of Class B Common Stock are deemed to be beneficial
owners of an equal number of shares of Class A Common Stock because
Class B Common Stock is convertible into Class A Common Stock on a
one-to-one basis. In addition, the following persons own or have the
power to direct the voting of shares of Class A Common Stock in the
following amounts: John J. Rigas, 431,800 shares--71,700 shares
directly and 360,100 shares through Syracuse Hilton Head Holdings, L.P.
( "SHHH "); Michael J. Rigas, 193,500 shares--200 shares directly and
193,300 shares through SHHH; Timothy J. Rigas, 193,500 shares--200
shares directly and 193,300 shares through SHHH; James P. Rigas,
193,300 shares indirectly through SHHH. John J. Rigas shares voting
power with his spouse with respect to 106,300 of such shares held
through SHHH. Each of John J. Rigas, Michael J. Rigas, Timothy J. Rigas
and James P. Rigas also share voting and dispositive power with respect
to 13,849,913 shares of Class A Common Stock deemed to be beneficially
owned by Highland Holdings, and 1,458,151 shares of Class A Common
Stock held by SHHH. See notes (f) and (g) below.
(b) After giving effect to the conversion solely by each individual
holder of all of his Class B Common Stock into Class A Common Stock and
including all shares of Class A Common Stock, and the conversion into
Class A Common Stock of Series C Cumulative Convertible Preferred
Stock, currently held by such individual holder or over which such
individual holder has or shares voting or investment power as disclosed
in note (a) above or notes (f) and (g) below, the percentage of Class A
Common Stock owned by John J. Rigas, Michael J. Rigas, Timothy J. Rigas
and James P. Rigas, and by all executive officers and directors as a
group (eight persons), would be 63.4%, 58.5%, 58.5%, 57.4% and 67.7%,
respectively. Further, after giving effect to an additional 4,966,540
shares of Class A Common Stock of which John J. Rigas has the right to
direct the voting in the election of directors pursuant to the Class B
Stockholders Agreement discussed in the paragraph following this table
(and assuming the parties to such agreement converted their Class B
Common Stock into Class A Common Stock), as to all of which additional
shares John J. Rigas disclaims beneficial ownership, the percentage of
Class A Common Stock owned by John J. Rigas would be 68.0%.
(c) The amounts shown include 97,949 of the same shares which are owned of
record by Dorellenic, and such shares are only included once for "All
executive officers and directors as a group." The named Rigas
individuals have shared voting and investment power with respect to
these shares.
(d) Daniel R. Milliard shares voting and investment power with his spouse
with respect to these shares.
(e) Less than 1%.
(f) SHHH, Doris Holdings, L.P. ("Doris"), the general partner of SHHH, and
Eleni Acquisition, Inc., the general partner of Doris, are affiliates
of John J. Rigas, Michael J. Rigas, Timothy J. Rigas and James P.
Rigas, each of whom has shared voting and investment power with respect
to the shares held by SHHH. In addition, through irrevocable proxies,
each of the above-named individuals shares with SHHH the power to vote
or direct the vote of such number of shares of Class A Common Stock
held by as is specified in note (a) above.
(g) Highland Holdings ("Highland"), as beneficially owned, is a general
partnership, the general partners of which include John J. Rigas,
Michael J. Rigas, Timothy J. Rigas, James P. Rigas and Ellen K. Rigas,
each of whom is deemed to share voting and investment power with
respect to the shares held by Highland. The amount shown includes,
and the percentage shown reflects, 9,433,960 shares of Class A Common
Stock into which 80,000 shares of the Company's Series C Cumulative
Convertible Preferred Stock held by Highland Holdings is convertible as
of July 23, 1997.
(h) As a holder of Class B Common Stock, Ellen K. Rigas is deemed to be the
beneficial owner of an equal number of shares of Class A Common Stock
because Class B Common Stock is convertible into Class A Common Stock
on a one-to-one basis. In addition, Ellen K. Rigas owns 1,600 shares of
Class A Common Stock directly and shares voting and investment power
with respect to 13,849,913 shares of Class A Common Stock held by
Highland. See note (g) above. Ellen K. Rigas is the daughter of John J.
Rigas.
(i) After giving effect to the conversion of all of Ellen K. Rigas' Class B
Common Stock into shares of Class A Common Stock and including all
shares of Class A Common Stock, and the conversion into Class A Common
Stock of Series C Cumulative Convertible Preferred Stock, held by Ellen
K. Rigas or over which Ellen K. Rigas has or shares voting or
investment power as discussed in note (h) above, the percentage of
Class A Common Stock owned by Ellen K. Rigas would be 48.2%.
(j) According to a Schedule 13G and other information provided to the
Company, certain operating subsidiaries of the named entity have sole
dispositive power with respect to all of such shares, and sole voting
power with respect to 97,500 of such shares. An operating subsidiary of
the named entity, Capital Research and Management Company, exercises
sole dispositive power with respect to 1,080,000 of such shares.
(k) According to a Schedule 13D, the named entity shares voting and
dispositive power over the shares with FPL Group Capital, Inc., the
parent of Telesat Cablevision, Inc., FPL Group, Inc., the parent of FPL
Group Capital, Inc., and Cable L.P. I, Inc. and Telesat Cablevision of
South Florida, Inc., subsidiaries of Telesat Cablevision, Inc. Telesat
Cablevision, Inc. is the Company's joint venture partner in Olympus and
is also a holder of in excess of five percent of the Company's Class A
Common Stock. The consent of both the Company and Telesat Cablevision,
Inc. is required under the Olympus partnership agreement for certain
material transactions. Mr. Dennis P. Coyle, is the nominee of Telesat
for election to the Board of Directors of the Company. The amount shown
includes, and the percentage shown reflects, as beneficially owned,
2,358,490 shares of Class A Common Stock into which 20,000 shares of
the Company's Series C Cumulative Convertible Preferred Stock held by
Telesat Cablevision, Inc. is convertible as of July 23, 1997.
</FN>
</TABLE>
John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas,
Ellen K. Rigas, Daniel R. Milliard, Dorellenic and the Company have entered into
a Class B Stockholders Agreement providing that such stockholders shall vote
their shares of Common Stock for the election of directors designated by a
majority of voting power (as defined in the Agreement) of the shares of Common
Stock held by them. The Class B Stockholders Agreement also provides that, in
the absence of the consent of the holders of a majority of the voting power of
the shares of Common Stock owned by the parties to the Agreement, (i) none of
the stockholder parties may sell, assign or transfer all or any part of their
shares of Common Stock in a public sale (as defined in the Agreement) without
first offering the shares to the other parties to the Agreement and (ii) no
stockholder party may accept a bona fide offer from a third party to purchase
shares of such stockholder without first offering the shares to the Company and
then to the other parties to the Class B Stockholders Agreement. In addition,
each party has certain rights to acquire the shares of Common Stock of the
others under certain conditions. John J. Rigas has also entered into a Stock
Purchase Agreement with the other holder of Class B Common Stock who is not a
party to the Class B Stockholders Agreement which gives John J. Rigas certain
rights to acquire the shares of Common Stock of such stockholder under certain
conditions.
<PAGE>
Item 13. Certain Relationships and Related Transactions
Management Services
During the fiscal year ended March 31, 1997, the Company provided
management services for certain cable television systems not owned by the
Company, including managed partnerships ("Managed Partnerships") in which John
J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, Daniel R. Milliard
and Ellen K. Rigas had varied ownership interests. These services included
supervision of technical and business operations, accounting, marketing,
programming, purchasing, field engineering and other technical and
administrative nonfield services. During this period, the Managed Partnerships
paid the Company five to six percent of system revenues for such services. Other
fees were charged by the Company to the Managed Partnerships during this period
for goods and services including mark-ups on the Company's volume purchases of
equipment, pay programming and other goods and services. In addition, the
Managed Partnerships charged the Company for system and corporate costs during
this period. The net fees and expenses charged by the Company to Managed
Partnerships amounted to $2,475,000 for fiscal 1997. In addition, the Company
paid $2,563,000 to other entities owned by members of the Rigas family,
primarily for property, plant and equipment. The Company believes that these
fees were no less favorable than the fees which the Company believes it could
obtain in similar transactions with unrelated third parties.
Real Estate
During fiscal 1997, the Company leased from Dorellenic (a partnership
owned principally by the Company's executive officers) certain real estate used
in connection with the operations of the Company. The partners of Dorellenic are
John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas and Ellen K.
Rigas. The leases were for varying terms, generally provided for monthly rental
payments equal to fair market value rentals, and were no less favorable than the
terms of leases which the Company believes it could obtain from unrelated third
parties. The Company pays all operating expenses in connection with the leased
property. Real estate rental payments to Dorellenic totaled $133,000 for fiscal
1997.
Equipment Leases
The Company leased certain operating and support equipment from
Dorellenic and a corporation which is wholly owned by members of the Rigas
Family, for which it made aggregate lease payments of $482,000 in fiscal 1997.
Such lease payments equaled the lessor's borrowing costs or lease payments to
unrelated third parties for such equipment. The Company also paid all operating
costs incurred with respect to such equipment. The Company believes that the
terms of such leases were no less favorable than those which the Company
believes it could obtain from unrelated third parties.
Loans to and from Affiliates
Certain loans to and from the Company by or to affiliates (which do not
include Olympus) as of March 31, 1997 are summarized below. Interest is charged
on such loans to affiliates at rates which ranged from 10.8% to 15.0% for the
year ended March 31, 1997.
Total interest income on loans to affiliates, excluding Olympus,
aggregated $1,767,000 for fiscal 1997. In addition, net settlement amounts under
interest rate swap agreements with the Managed Partnerships, recorded as
adjustments to interest expense during the period incurred, increased the
Company's interest expense by $50,000 for fiscal 1997
Net receivables due from the Managed Partnerships for advances made by
the Company for the construction and acquisition of cable television systems and
for working capital purposes, including accrued interest thereon, were
$4,518,000 at March 31, 1997.
During fiscal 1997 the Company made net advances of $1,653,000 to
Dorellenic. At March 31, 1997, net receivables from Dorellenic (including
accrued interest) were $26,128,000. Amounts advanced to Dorellenic were
primarily used for working capital purposes.
During fiscal 1990 and 1991, the Company loaned an aggregate $255,000
to Daniel R. Milliard and an unaffiliated third party, pursuant to several
revolving term and term notes, for capital expenditures and working capital
purposes. As of March 31, 1997, the outstanding amount of these loans was
$152,000.
On an end-of-quarter basis, the largest aggregate amount of net
outstanding loans and advances receivable from affiliates (directors, executive
officers and five-percent shareholders) or entities they control, including John
J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, Ellen K. Rigas,
Daniel R. Milliard, Dorellenic and/or the Managed Partnerships during fiscal
1997 was $36,430,000 at June 30, 1996. At March 31, 1997, such aggregate net
amount was $30,798,000.
Co-Borrowing Agreement
On March 29, 1996, a subsidiary of the Company entered into a
$200,000,000 loan agreement with a Managed Partnership and an Olympus
subsidiary, as co-borrowers.
Business Opportunities
The Company's executive officers have entered into a Business
Opportunity Agreement, dated July 1, 1986 (the "Business Opportunity
Agreement"), under which they have agreed not to acquire an interest (except
that such persons may, individually for their own account, engage in regular
portfolio trading of publicly traded securities of companies in the cable
television industry) in any cable television system except: cable television
systems which they or their affiliates (excluding the Company) owned, in whole
or in part, operated or had agreed to acquire as of July 1, 1986; any expansions
of such systems within the same county or an adjacent county (except for systems
which are also contiguous to Company-owned systems); and systems which the
Company elects not to acquire under its right of first refusal described below
and any expansions of such systems within the same county or an adjacent county
(except for systems which are also contiguous to Company-owned systems).
Otherwise, the executive officers will first offer to the Company the
opportunity to acquire or invest in any cable television system or franchise
therefor or interest therein that is offered or available to them. If a majority
of the Company's Board of Directors, including a majority of the independent
directors, rejects such offer, the executive officers may acquire or invest in
all of such cable television systems or franchises therefor or interest therein
or with others on terms no more favorable to them than those offered to the
Company.
The Company's executive officers may from time to time evaluate and,
subject to the Company's rights and covenants in the Company's loan agreements
and indentures, may acquire cable television systems or interests therein for
their own accounts separately or along with the Company and/or other joint
venture parties.
Except for the limitations on the ownership of cable television systems
as described herein, the executive officers of Adelphia and their affiliates are
not subject to limitations with respect to their other business activities and
may engage in other businesses related to cable television or other
telecommunications media. The executive officers will devote as much of their
time to the business of the Company as is reasonably required to fulfill the
duties of their offices.
In the event that any executive officer (or his affiliate) decides to
offer for sale (other than to another executive officer or his or another
executive officer's family member, trust or family controlled entity) for his
account, his ownership interest in any cable television system or franchise, he
or it will (subject to the rights of third parties existing at such time) first
offer such interests to the Company. Such selling person or entity has a
unilateral option to elect to require that, if the Company accepts such offer,
up to one half of the consideration for his or its interest would consist of
shares of Class B Common Stock, which shares will be valued at the prevailing
market price of the Class A Common Stock, and the remainder would consist of
shares of Class A Common Stock and/or cash. If a majority of the Company's
independent directors rejects such offer, the executive officer (or his
affiliate) may sell such interest to third parties on terms no more favorable to
such third parties than those offered to the Company.
Registration Rights and Stock Purchase Matters
Pursuant to a Registration Rights Agreement, as amended, between the
Company and the holders of Class B Common Stock, John J. Rigas has the right,
subject to certain limitations, to require the Company to register shares of the
Company's Common Stock owned by him for sale to the public and pay the expenses
(except for Mr. Rigas' counsel fees) of such registration on five occasions
selected by him (subject to certain limitations intended to prevent undue
interference with the Company's ability to distribute its securities) during a
fourteen-year period which began in December 1986. The other holders of Class B
Common Stock have the right to participate, at the option of John J. Rigas, as
selling stockholders in any such registration initiated by John J. Rigas. The
holders of Class B Common Stock also have unlimited rights to participate as
selling stockholders in any registered public offering initiated by the Company
and require the Company to pay their expenses (except counsel fees). Such rights
of participation are subject to limitation at the discretion of the managing
underwriter of such offering.
On June 22, 1997, Adelphia entered into an agreement with Highland
Holdings and Telesat Cablevision, Inc. pursuant to which Highland Holdings and
Telesat Cablevision, Inc., respectively, purchased from Adelphia on July 7,
1997, 80,000 and 20,000 shares of Series C Cumulative Convertible Preferred
Stock, with a liquidation preference of $1,000 per share, at a purchase price of
$970 per share. Each share of Series C Cumulative Convertible Preferred Stock is
convertible into 117.9245 shares of Class A Common Stock of Adelphia at $8.48
per share, bears dividends of 8-1/8% of the liquidation preference per share,
and is redeemable at the option of Adelphia after three years from the date of
issuance at a premium declining to par. On July 7, 1997, Adelphia also sold
550,000 shares of 13% Cumulative Exchangeable Preferred Stock to Highland
Holdings for $98.8421 per share, a price per share equal to the price paid by
the initial purchasers of 950,000 shares of the same preferred stock after
discounts and commissions. The closing of the offerings on July 7, 1997 of
$150,000,000 aggregate principal amount of 10-1/2% Senior Notes due 2004 to
institutional investors and the 950,000 shares of 13% Cumulative Exchangeable
Preferred Stock were conditioned upon the completion of the sale of the Series C
Cumulative Convertible Preferred Stock. In connection with such transactions,
Adelphia entered into Registration Rights Agreements with Highland Holdings and
Telesat Cablevision, Inc. with respect to the registration of the Series C
Cumulative Convertible Preferred Stock and with Highland Holdings and the
initial purchasers with respect to the 13% Cumulative Exchangeable Preferred
Stock.
Olympus Matters
On February 28, 1995, the Company and certain of its subsidiaries and
Telesat Cablevision, Inc. and certain of its subsidiaries ("Telesat") entered
into an Investment Agreement and an amended and restated partnership agreement
for Olympus Communications. L.P. See Item 7 of this Form 10-K entitled
"Management's Discussion and Analysis of Results of Operation and Financial
Condition" for information on the investment and related partnership
transactions. The consent of both the Company and Telesat is required under the
Olympus partnership agreement for certain material transactions. As noted
earlier, Mr. Dennis Coyle is the nominee of Telesat for election to the Board of
Directors of the Company.
