<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1997
REGISTRATION NO. 333-37087
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 4841 23-2417713
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
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MAIN AT WATER STREET
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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COLIN H. HIGGIN, ESQUIRE
ADELPHIA COMMUNICATIONS CORPORATION
MAIN AT WATER STREET
COUDERSPORT, PENNSYLVANIA 16915
(814) 274-9830
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
CARL E. ROTHENBERGER, JR., ESQUIRE
BUCHANAN INGERSOLL
PROFESSIONAL CORPORATION
21ST FLOOR, 301 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219
(412) 562-8826
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
ADELPHIA COMMUNICATIONS CORPORATION
CROSS REFERENCE SHEET PURSUANT TO RULE 404(a) AND ITEM 501 OF REGULATION S-K,
SHOWING THE LOCATION IN THE PROSPECTUS OF THE INFORMATION REQUIRED TO BE
INCLUDED THEREIN IN ACCORDANCE WITH PART I OF FORM S-4.
<TABLE>
<CAPTION>
FORM S-4
ITEM NUMBER AND CAPTION LOCATION OR HEADING IN THE PROSPECTUS
---------------------------------------- -------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.. Forepart of Registration Statement; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus..................... Inside Front and Outside Back Cover Pages
of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information........... Forepart of Prospectus; Prospectus Summary;
Risk Factors; Selected Consolidated
Financial Data
4. Terms of the Transaction................ Prospectus Summary; The Exchange Offer;
Description of Senior Notes; Certain
Federal Income Tax Considerations; Risk
Factors
5. Pro Forma Financial Information......... *
6. Material Contracts with Company Being
Acquired................................ *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters...................... Plan of Distribution
8. Interests of Named Experts and Counsel.. *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. *
10. Information with Respect to S-3 Incorporation by Reference; Risk Factors;
Registrants............................. Recent Developments; Selected Consolidated
Financial Data
11. Incorporation of Certain Information by
Reference............................... Incorporation by Reference
12. Information with Respect to S-2 or S-3
Registrants............................. *
13. Incorporation of Certain Information by
Reference............................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM S-4
ITEM NUMBER AND CAPTION LOCATION OR HEADING IN THE PROSPECTUS
---------------------------------------- -------------------------------------------
<S> <C> <C>
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants....... *
15. Information with Respect to S-3
Companies............................... *
16. Information with Respect to S-2 or S-3
Companies............................... *
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies......... *
18. Information if Proxies, Consents or
Authorizations are to be Solicited...... *
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................. Incorporation by Reference; The Exchange
Offer
</TABLE>
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* Item is omitted because the answer is negative or the item is inapplicable.
<PAGE>
OFFER TO EXCHANGE
10 1/2% SERIES B SENIOR NOTES DUE 2004
FOR ANY AND ALL OUTSTANDING 10 1/2% SENIOR NOTES DUE 2004
AND 13% SERIES B CUMULATIVE EXCHANGEABLE PREFERRED STOCK FOR ANY AND ALL
OUTSTANDING 13% SERIES A CUMULATIVE EXCHANGEABLE PREFERRED STOCK
OF
ADELPHIA COMMUNICATIONS CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON NOVEMBER 17, 1997, UNLESS EXTENDED
Adelphia Communications Corporation ("Adelphia", the "Company", the
"Registrant" or the "Issuer") hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange (i)
$1,000 principal amount of 10 1/2% Series B Senior Notes due 2004 of the
Registrant (the "New Notes") for each $1,000 principal amount of its issued
and outstanding 10 1/2% Senior Notes due 2004 (the "Old Notes," and
collectively with the New Notes, the "Notes") and (ii) one share of its 13%
Series B Cumulative Exchangeable Preferred Stock (the "New Preferred Stock")
for each outstanding share of its 13% Series A Cumulative Exchangeable
Preferred Stock (the "Old Preferred Stock," and collectively with the New
Preferred Stock, the "Exchangeable Preferred Stock"). The New Notes and New
Preferred Stock are sometimes referred to herein as the "New Securities," the
Old Notes and Old Preferred Stock are sometimes referred to herein as the "Old
Securities," and the New Securities and Old Securities are sometimes referred
to herein as the "Securities." As of the date of this Prospectus, $150,000,000
aggregate principal amount of the Old Notes and 1,500,000 shares of Old
Preferred Stock were outstanding. The terms of the New Notes and the New
Preferred Stock are substantially identical in all material respects to the
terms of the Old Notes and Old Preferred Stock, respectively, except for
certain transfer restrictions and registration rights; and except that holders
of Old Notes and Old Preferred Stock, respectively, are entitled to receive
Liquidated Damages (as defined) if (a) the Registrant fails to file any of the
registration statements required by the Registration Rights Agreements (as
defined) on or before the date specified for such filing, (b) any of such
registration statements is not declared effective by the Securities and
Exchange Commission (the "Commission") on or prior to the date specified for
such effectiveness (the "Effectiveness Target Date"), (c) the Registrant fails
to consummate the Exchange Offer within 30 business days of the Effectiveness
Target Date with respect to the applicable Exchange Offer registration
statement, or (d) a shelf registration statement or the registration statement
of which this Prospectus forms a part (the "Exchange Offer Registration
Statement") is declared effective but thereafter ceases to be effective or
usable in connection with resales of applicable Transfer Restricted Securities
(as defined) during the periods specified in the respective Registration
Rights Agreements (each such event referred to in clauses (a) through (d)
above is a "Registration Default"). In the event of a Registration Default,
the Registrant is required to pay Liquidated Damages (as defined) to each
holder of Transfer Restricted Securities for the period that the Registration
Default continues, until such Registration Defaults have been cured, at which
time the interest rate borne by the Old Notes or the dividend rate on the Old
Preferred Stock, as the case may be, will be reduced to the original rate. See
"Description of the Notes--Registration Rights; Liquidated Damages" and
"Description of Exchangeable Preferred Stock and Exchange Debentures--
Registration Rights and Liquidated Damages."
(Continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
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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 OCTOBER 17, 1997
<PAGE>
The Exchange Offer is being made to satisfy certain obligations of the
Registrant under the Registration Rights Agreements, dated as of July 7, 1997,
among the Registrant and the Initial Purchasers (as defined therein),
regarding the Notes (the "Notes Registration Rights Agreement") and regarding
the Exchangeable Preferred Stock (the "Preferred Stock Registration Rights
Agreement", and together with the Notes Registration Rights Agreement, the
"Registration Rights Agreements"). Upon consummation of the Exchange Offer,
holders of Old Securities that were not prohibited from participating in the
Exchange Offer and did not tender their Old Securities will not have any
registration rights under the Registration Rights Agreements with respect to
such nontendered Old Securities and, accordingly, such Old Securities will
continue to be subject to the restrictions on transfer contained in the
legends thereon.
Based on interpretations by the staff of the Commission with respect to
similar transactions, including no-action letters, the Registrant believes
that the New Securities issued pursuant to the Exchange Offer in exchange for
the Old Securities may be offered for resale, resold and otherwise transferred
by any holder of such New Securities (other than any such holder which is an
"affiliate" of the Registrant within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act")) without compliance
with the registration and prospectus delivery provisions of the Securities
Act, provided that such New Securities are acquired in the ordinary course of
such holder's business, such holder has no arrangement or understanding with
any person to participate in the distribution of such New Securities and
neither the holder nor any other person is engaging in or intends to engage in
a distribution of the New Securities. Each broker-dealer that receives New
Securities for its own account in exchange for Old Securities must acknowledge
that it will deliver a prospectus in connection with any resale of its New
Securities. A broker-dealer that acquired Old Securities directly from the
Registrant cannot exchange such Old Securities in the Exchange Offer. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of the New Securities received in exchange
for the Old Securities acquired by the broker-dealer as a result of market-
making activities or other trading activities. The Registrant has agreed that
it will make this Prospectus available to any broker-dealer for use in
connection with any such resale for a period of 365 days after the Exchange
Date (as defined) or, if earlier, until all participating broker-dealers have
so resold. See "Plan of Distribution."
The New Notes will evidence the same debt as the Old Notes and will be
entitled to the benefits of the Indenture (as defined). The New Preferred
Stock will evidence the same equity interests as the Old Preferred Stock and
will be entitled to the benefits of the Certificate of Designations (as
defined) which governs both the Old Preferred Stock and New Preferred Stock.
For a more complete description of the terms of the New Notes and New
Preferred Stock, see "Description of the Notes" and "Description of
Exchangeable Preferred Stock and Exchange Debentures." There will be no cash
proceeds to the Registrant from the Exchange Offer. The New Notes will be
senior unsecured indebtedness of Adelphia, will rank pari passu in right of
payment with other unsubordinated indebtedness of Adelphia and senior in right
of payment to all future subordinated indebtedness of Adelphia. The operations
of Adelphia are conducted through its 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 New Notes. Because the assets of its subsidiaries constitute
substantially all of the assets of Adelphia, and because the subsidiaries will
not guarantee the payment of principal of and interest on the New Notes, the
claims of holders of the New Notes effectively will be subordinated to the
claims of creditors of such entities. As of June 30, 1997, on a pro forma
basis, after giving effect to the July Offerings, the September Offering and
the Hyperion Offerings (all as hereinafter defined) and the application of net
proceeds therefrom, the New Notes would have been effectively subordinated to
$1.4 billion of indebtedness and redeemable preferred stock of Adelphia's
subsidiaries, and the Exchange Debentures (as defined) would have been
subordinated to $2.9 billion of indebtedness of the Company (including
redeemable preferred stock of its subsidiaries). As of June 30, 1997, the
total indebtedness of Adelphia's subsidiaries to banks and institutions, on a
consolidated basis, aggregated $1.5 billion.
The Old Securities were originally issued and sold on July 7, 1997 in an
offering of $150,000,000 aggregate principal amount of Old Notes (the "Notes
Offering," as defined) and 1,500,000 shares of Old Preferred Stock at $100.00
per share (the "Preferred Stock Offering" and, together with the Notes
Offering, the "Offerings").
2
<PAGE>
The Offerings were exempt from registration under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act.
Accordingly, the Old Securities may not be reoffered, resold or otherwise
pledged, hypothecated or transferred in the United States unless so registered
or unless an exemption from the registration requirements of the Securities
Act and applicable state securities laws is available.
The Registrant has not entered into any arrangement or understanding with
any person to distribute the New Securities to be received in the Exchange
Offer, and to the best of the Registrant's information and belief, each person
participating in the Exchange Offer is acquiring the New Securities in its
ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the New Securities to be received
in the Exchange Offer. Any person participating in the Exchange Offer who does
not acquire the New Securities in the ordinary course of business: (i) cannot
rely on the above referenced no action letters; (ii) cannot tender its Old
Securities in the Exchange Offer; and (iii) must comply with the registration
and prospectus delivery requirements of the Securities Act.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes or any minimum liquidation preference of Old Preferred
Stock being tendered for exchange. However, the Exchange Offer is subject to
certain customary conditions which may be waived by the Company. The Exchange
Offer will expire at 5:00 p.m., New York City time, on November 17, 1997,
unless extended (as it may be so extended, the "Expiration Date"), provided
that the Exchange Offer shall not be extended beyond 30 business days from the
date of this Prospectus. The date of acceptance for exchange of the Old
Securities for the New Securities (the "Exchange Date") will be the first
business day following the Expiration Date. Old Securities tendered pursuant
to the Exchange Offer may be withdrawn at any time prior to the Expiration
Date; otherwise such tenders are irrevocable.
Prior to this Exchange Offer, there has been no public market for the
Securities. The Old Securities have traded on the PORTAL Market. If a market
for the New Securities should develop, the New Securities could trade at a
discount from their initial offering prices. The Company does not intend to
apply for listing of the New Securities on any securities exchange or in any
automated quotation system. There can be no assurance that an active trading
market for the New Securities will develop.
----------------
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-4 under the Securities Act with respect to the Exchange
Offer. This Prospectus, which is part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Exchange Offer, reference is made to such Registration
Statement and the exhibits and schedules filed as part thereof. The
Registration Statement and the exhibits and schedules thereto filed with the
Commission may be inspected without charge at the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and will also be available for inspection and copying
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048, and the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any
portion of the Registration Statement may be obtained from the Public
Reference Section of the Commission upon payment of certain prescribed fees.
Electronic registration statements made through the Electronic Data Gathering,
Analysis, and Retrieval system are publicly available through the Commission's
Web site (http://www.sec.gov), which is maintained by the Commission and which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE REGISTRANT ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD SECURITIES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES LAWS OF SUCH JURISDICTION.
3
<PAGE>
INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act") are
incorporated herein by reference: (a) Annual Report on Form 10-K for the
fiscal year ended March 31, 1997 which incorporates, in Items 7 and 8 to such
Form 10-K, portions of Amendment No. 2 to Registration Statement No. 333-19327
of Olympus Communications, L.P. and Olympus Capital Corporation on Form S-4
(the "Form 10-K"); (b) Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (the "Form 10-Q"); (c) Adelphia's amendment to Form 10-K filed
July 29, 1997 (the "Form 10-K/A"); (d) Adelphia's Current Report on Form 8-K
for the event dated July 24, 1997; (e) Adelphia's Current Report on Form 8-K
for the event dated July 7, 1997; (f) Adelphia's Current Report on Form 8-K
for the event dated June 23, 1997; (g) Adelphia's definitive proxy statement
dated September 8, 1997, with respect to the Annual Meeting held September 29,
1997; (h) Adelphia's Current Reports on Form 8-K for the events dated May 1,
1997, June 12, 1997, August 27, 1997 and September 19, 1997; and (i) the
descriptions of the Company's Common Stock contained in the registration
statements filed under Section 12(g) of the Exchange Act, including any
amendments or reports for the purpose of updating such descriptions.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
offering shall be deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the respective date of filing of each such
document. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is, or is deemed
to be, incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
MICHAEL C. MULCAHEY, DIRECTOR OF ACCOUNTING AND ASSISTANT TREASURER, ADELPHIA
COMMUNICATIONS CORPORATION, MAIN AT WATER STREET, COUDERSPORT, PA 16915,
TELEPHONE NUMBER 814-274-9830. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE NO LATER THAN 5 BUSINESS DAYS PRIOR TO
THE EXPIRATION OF THE EXCHANGE OFFER.
4
<PAGE>
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed
information and financial statements appearing in this Prospectus or
incorporated by reference herein. The Private Securities Litigation Reform Act
of 1995 provides a "safe harbor" for forward-looking statements. Certain
information included or incorporated by reference in this Prospectus, including
Management's Discussion and Analysis of Financial Condition and Results of
Operations, is forward-looking, such as information relating to the effects of
future regulation, future capital commitments and the effects of competition.
Such forward-looking information involves important risks and uncertainties
that could significantly affect expected results in the future from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. These risks and uncertainties include, but are not limited to,
uncertainties relating to economic conditions, acquisitions and divestitures,
government and regulatory policies, the pricing and availability of equipment,
materials, inventories and programming, technological developments and changes
in the competitive environment in which the Company operates. Persons
participating in this Exchange Offer are cautioned that such statements are
only predictions and that actual events or results may differ materially. In
evaluating such statements, persons participating in this Exchange Offer should
specifically consider the various factors which could cause actual events or
results to differ materially from those indicated by such forward looking
statements. Persons participating in this Exchange Offer should carefully
consider the factors set forth herein under the caption "Risk Factors."
THE COMPANY
Adelphia Communications Corporation is the seventh-largest cable television
operator in the United States. As of June 30, 1997, cable television systems
owned or managed by the Company (the "Systems") in the aggregate passed
2,707,625 homes and served 1,907,715 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 owned cable systems (the "Company Systems") are located in ten
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 in suburban areas
of large and medium-sized cities within the 50 largest television markets. As
of June 30, 1997, the Company Systems passed 1,610,384 homes and served
1,176,846 basic subscribers.
The Company also provides, for a fee, management and consulting services to
certain partnerships and certain corporations engaged in the ownership and
operation of cable television systems (the "Managed Partnerships"). John J.
Rigas and certain members of his immediate family, including entities they own
or control (collectively the "Rigas Family") have substantial ownership
interests in the Managed Partnerships. As of June 30, 1997, cable systems (the
"Managed Systems") owned by the Managed Partnerships passed 426,529 homes and
served 303,428 basic subscribers.
In addition to its wholly owned cable operations, Adelphia has other
significant investments, including:
OLYMPUS COMMUNICATIONS, L.P.
The Company owns a 50% voting interest and nonvoting Preferred Limited
Partnership interests entitling the Company to a 16.5% preferred return in
Olympus Communications, L.P. ("Olympus"). Olympus is a joint venture limited
partnership between the Company and subsidiaries of FPL Group, Inc. (together
with its subsidiaries, "FPL Group"). FPL Group is one of the largest public
utility holding companies in the United States supplying, through its principal
subsidiary, electric service throughout most of the east and lower west
5
<PAGE>
coasts of Florida. Olympus operates the largest contiguous cable system in
Florida and is located in some of the fastest-growing markets in Florida. As of
June 30, 1997, the Olympus systems passed 670,712 homes and served 427,441
basic subscribers. Olympus is not a subsidiary of Adelphia or FPL Group. The
Company's investment in Olympus is accounted for under the equity method of
accounting. On November 12, 1996, Olympus realized proceeds of $195,500,000
upon the issuance of $200,000,000 in aggregate principal amount of 10 5/8%
Senior Notes due November 15, 2006. The net proceeds from such offering were
used to reduce outstanding bank borrowings of Olympus' subsidiaries.
HYPERION TELECOMMUNICATIONS, INC.
The Company owns an 88% interest in Hyperion Telecommunications, Inc.
("Hyperion"), a leading competitive local exchange carrier ("CLEC") that
designs, constructs, operates and manages state-of-the-art, fiber optic
networks and facilities. Hyperion operates one of the largest CLECs in the
United States based upon route miles and buildings connected. Hyperion
currently manages and operates 17 networks (excluding five under construction),
serving 35 cities. As of June 30, 1997, these networks had approximately 3,640
route miles, connecting approximately 1,603 buildings. Hyperion currently
offers switched services, including local dial tone, in 13 markets and expects
to begin offering local dial tone in the remainder of its operating networks by
the end of 1997. Hyperion is consolidated in Adelphia's financial results and
is currently an unrestricted subsidiary of Adelphia for purposes of Adelphia's
indentures. On April 15, 1996, Hyperion realized net proceeds of approximately
$168,600,000 upon the issuance of $329,000,000 in aggregate principal amount of
13% Senior Discount Notes (the "Hyperion Senior Notes") due April 15, 2003 and
329,000 warrants to purchase an aggregate of 613,427 shares of common stock of
Hyperion expiring April 1, 2001. Net proceeds from such offering were used to
repay a portion of outstanding indebtedness owed to Adelphia, fund capital
expenditures, working capital requirements, operating losses, pro rata
investments in operating companies and pro rata equity investments. Hyperion
also recently completed offerings of $250,000,000 in aggregate principal amount
of 12 1/4% Senior Secured Notes due 2004 and $200,000,000 aggregate liquidation
preference of 12 7/8% Senior Exchangeable Redeemable Preferred Stock due 2007.
See "--Recent Developments."
EMPIRE SPORTS NETWORK AND BUFFALO SABRES NHL FRANCHISE AND MARINE MIDLAND ARENA
Empire Sports Network ("Empire") is a majority-owned subsidiary of Adelphia
operating a regional sports television network serving western and central New
York. Empire's most popular programming is the Buffalo Sabres (the "Sabres")
NHL team games and related coverage. Adelphia has made $31,000,000 of preferred
equity investments and loans to Niagara Frontier Hockey, L.P. ("Niagara L.P.")
which holds the NHL Sabres franchise. The Company's investment in Niagara L.P.
is accounted for under the cost method. Niagara L.P. also holds a two-thirds
interest in the Marine Midland Arena complex, a recently opened $130,000,000
sports and entertainment facility capable of seating 18,500 people with 60
luxury suites. The complex holds a right of first refusal for hosting all arena
events in Buffalo.
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. The Company's executive
offices are located at Main at Water Street, Coudersport, Pennsylvania 16915,
and its telephone number is (814) 274-9830.
RECENT DEVELOPMENTS
Adelphia Offering of Senior Notes Due 2002. On September 25, 1997, Adelphia
announced the sale of $325,000,000 aggregate principal amount of 9 1/4% Senior
Notes due 2002 (the "9 1/4% Notes") in a private placement exempt from
registration (the "September Offering"). Of the net proceeds of approximately
$321,250,000 from the September Offering, at least $208,000,000 will be used by
Adelphia to purchase, redeem or otherwise retire a portion of the outstanding
12 1/2% Senior Notes due 2002 of Adelphia, approximately $12,000,000 will be
used for a redemption premium and the remainder will be contributed to Adelphia
6
<PAGE>
subsidiaries and used to repay revolving credit facilities of such
subsidiaries, all of which may be reborrowed and used for the general corporate
purposes of such subsidiaries.
Hyperion Offering of Senior Exchangeable Redeemable Preferred Stock. On
October 9, 1997, Hyperion issued $200,000,000 aggregate liquidation preference
of 12 7/8% Senior Exchangeable Redeemable Preferred Stock due 2007 (the "Senior
Preferred Stock") primarily to qualified institutional investors in a private
placement (the "Hyperion Preferred Stock Offering"). The net proceeds of
approximately $194,500,000 from this issuance will be used to fund the
acquisition of increased ownership interests in certain of Hyperion's networks,
for capital expenditures, including the construction and expansion of new and
existing networks, and for general corporate and working capital purposes of
Hyperion. Pending such uses, the net proceeds will be invested in cash, short-
term liquid investments and other cash equivalents. Through October 15, 2002,
dividends on the Senior Preferred Stock may be paid, at Hyperion's option, in
cash or additional shares of Senior Preferred Stock.
Hyperion Offering of Senior Secured Notes. On August 27, 1997, Hyperion and
the Company announced the sale of $250,000,000 aggregate principal amount of 12
1/4% Senior Secured Notes due 2004 of Hyperion (the "Hyperion Senior Secured
Notes") in a private placement exempt from registration (the "Hyperion Note
Offering" and, together with the Hyperion Preferred Stock Offering, the
"Hyperion Offerings"). Hyperion secured the Hyperion Senior Secured Notes
through the pledge of the common stock of certain of its wholly-owned
subsidiaries. Of the net proceeds of the Hyperion Note Offering of
approximately $243,300,000, $83,500,000 was placed in an escrow account to
provide for payment in full when due of the first six scheduled interest
payments on the Hyperion Senior Secured Notes, with the remainder of the net
proceeds to be used to fund the acquisition of increased ownership interests in
certain of its networks, the continued expansion of its networks, and working
capital.
$150 Million Offering of Notes and $150 Million Offering of Exchangeable
Preferred Stock. On July 7, 1997, Adelphia announced the sale of (i)
$150,000,000 aggregate principal amount of 10 1/2% Senior Notes due 2004 to
institutional investors in reliance on Rule 144A, and (ii) 13% Series A
Cumulative Exchangeable Preferred Stock (the "Exchangeable Preferred Stock")
with an aggregate liquidation preference of $150,000,000 to institutional
investors in reliance on Rule 144A and to an affiliate of the family of John
Rigas, Chairman of Adelphia (such offerings collectively, with the Convertible
Preferred Stock Offering (as defined), the "July Offerings"). The 10 1/2%
Senior Notes due 2004 and the Exchangeable Preferred Stock are the subject of
the within described Exchange Offer. The Rigas family affiliate subsequently
sold its Exchangeable Preferred Stock in a private transaction.
Adelphia also announced the sale of perpetual Series C Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock") with an aggregate
liquidation preference of $100,000,000 in a private placement to the Rigas
family affiliate and Telesat Cablevision, Inc. ("Telesat"), a wholly owned
subsidiary of FPL Group, Inc., a New York Stock Exchange company (the
"Convertible Preferred Stock Offering"). The Convertible Preferred Stock
accrues dividends at the rate of 8 1/8% of the liquidation preference per
annum, and is convertible at $8.48 per share into an aggregate of 11,792,450
shares of Class A Common Stock of Adelphia. The Convertible Preferred Stock is
redeemable at the option of Adelphia after three years from the date of
issuance at a premium declining to par. The net proceeds of $393,500,000 from
the July Offerings were used to repay Notes of Subsidiaries to institutions of
$284,000,000 plus a prepayment premium of approximately $11,000,000 and to
repay Notes of Subsidiaries to banks of approximately $98,500,000.
Acquisition of Cable Systems. On June 20, 1997, Adelphia acquired cable
systems from Booth Communications Company (the "Booth Acquisition") serving
25,800 subscribers in the Virginia cities of Blacksburg and Salem. These
systems were acquired for an aggregate purchase price of $54,500,000 comprised
of 3,571,428 shares of Adelphia's Class A Common Stock and $29,500,000 cash.
The acquisition was accounted for under the purchase method of accounting.
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Sale of Interest in Page Call. On June 11, 1997, the Company announced its
agreement to sell its 49.9% ownership in Page Call, Inc. for a total of
$16,500,000 payable in Series A Convertible Preferred Stock of Arch
Communications Group, Inc. and cash. The Company expects to complete this
transaction in 1997, subject to regulatory approvals.
TCI Partnership. On June 6, 1997, Adelphia signed a non-binding letter of
intent to establish a partnership into which Tele-Communications, Inc. ("TCI")
will contribute its cable systems in Buffalo, New York; Erie, Pennsylvania; and
Ashtabula and Lake County, Ohio, totaling 166,000 subscribers, and Adelphia
will contribute its Western New York and Lorain, Ohio systems, totaling 298,000
subscribers. Upon closing of the transaction, TCI will hold a minority interest
in the partnership. Adelphia will manage the partnership and expects to
consolidate the partnership's results for financial reporting purposes. The
venture will serve approximately 464,000 customers. The parties are negotiating
definitive documents for this transaction.
Exchange of Cable Systems with Time Warner Cable. On May 20, 1997, Adelphia
and its affiliates and Time Warner Cable companies entered into agreements
involving a trade of cable systems in seven states covering approximately
250,000 subscribers, an exchange of interests in four Competitive Local
Exchange Carrier ("CLEC") networks in New York state, and cash. Adelphia will
exchange its systems serving 67,600 subscribers primarily in the Mansfield,
Ohio, area for systems owned by Time Warner Cable companies serving 72,400
subscribers adjacent to systems owned or managed by Adelphia in Virginia, New
England and New York. On September 12, 1997, Hyperion consummated with a Time
Warner company the exchange of interests in four CLEC networks in New York. In
this transaction, Hyperion increased its interests in its Buffalo and Syracuse
CLEC networks to 60% and 100%, respectively, and eliminated its interests in
the Albany and Binghamton networks. Certain affiliates managed by Adelphia will
exchange systems serving 49,700 subscribers in Syracuse, New York, and
Henderson, North Carolina, for Time Warner cable systems serving 57,900
subscribers adjacent to systems owned or managed by Adelphia in western
Pennsylvania and Virginia. Consummation of the remainder of this transaction is
subject to certain closing conditions and regulatory approval.
THE EXCHANGE OFFER
Securities Offered.......... Up to $150,000,000 aggregate principal amount
of 10 1/2% Series B Senior Notes due 2004 of
the Company (the "New Notes," and
collectively with the Old Notes, the
"Notes").
Up to $150,000,000 aggregate liquidation
preference of 13% Series B Cumulative
Exchangeable Preferred Stock (the "New
Preferred Stock" and collectively with the
Old Preferred Stock, the "Exchangeable
Preferred Stock"). The terms of the New
Securities and the Old Securities are
substantially identical in all material
respects, except for certain transfer
restrictions, registration rights and
liquidated damages ("Liquidated Damages") for
Registration Defaults relating to the Old
Notes, which will not apply to the New
Securities. See "Description of the Notes"
and "Description of Exchangeable Preferred
Stock and Exchange Debentures."
The Exchange Offer.......... The Registrant is offering to exchange (i)
$1,000 principal amount of New Notes for each
$1,000 principal amount of Old Notes properly
tendered and accepted and (ii) one share of
New Preferred Stock for each share of Old
Preferred Stock properly tendered and
accepted. See "The Exchange Offer" for a
description of the procedures for tendering
Old Securities. The Exchange Offer
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satisfies the registration obligations of the
Registrant under the Registration Rights
Agreements. Upon consummation of the Exchange
Offer, holders of Old Securities that were
not prohibited from participating in the
Exchange Offer and did not tender their Old
Securities will not have any registration
rights under the Registration Rights
Agreements with respect to such nontendered
Old Securities and, accordingly, such Old
Securities will continue to be subject to the
restrictions on transfer contained in the
legends thereon.
Tenders, Expiration Date;
Withdrawal; Exchange Date..
The Exchange Offer will expire at 5:00 p.m.,
New York City time, on November 17, 1997, or
such later date and time to which it is
extended (as it may be so extended, the
"Expiration Date"), provided that the
Exchange Offer shall not be extended beyond
30 business days from the date of this
Prospectus. Tender of Old Securities pursuant
to the Exchange Offer may be withdrawn and
retendered at any time prior to the
Expiration Date. Any Old Securities not
accepted for exchange for any reason will be
returned without expense to the tendering
holder as promptly as practicable after the
expiration or termination of the Exchange
Offer. The date of acceptance for exchange of
all Old Securities properly tendered and not
withdrawn for New Securities (the "Exchange
Date") will be the first business day
following the Expiration Date.
Accrued Interest or
Accumulated Dividends on
the New Securities......... Each New Security will bear interest or be
entitled to dividends from the most recent
date to which interest or dividends have been
paid on the Old Securities or, if no such
payment has been made, from July 7, 1997.
Federal Income Tax The exchange pursuant to the Exchange Offer
Considerations.............. will not result in any income, gain or loss
to the holders of Old Securities or the
Company for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Use of Proceeds............. There will be no proceeds to the Company from
the exchange of New Securities for Old
Securities pursuant to the Exchange Offer.
Exchange Agent..............
Bank of Montreal Trust Company, the Trustee
under the Indenture, is serving as Exchange
Agent in connection with the Notes and
American Stock Transfer and Trust Company is
serving as Exchange Agent in connection with
the Exchangeable Preferred Stock, in the
Exchange Offer.
CONSEQUENCES OF EXCHANGING OR FAILURE TO EXCHANGE OLD SECURITIES PURSUANT TO
THE EXCHANGE OFFER
Generally, holders of Old Securities (other than any holder who is an
"affiliate" of the Registrant within the meaning of Rule 405 under the
Securities Act) who exchange their Old Securities for New Securities pursuant
to the Exchange Offer may offer their New Securities for resale, resell their
New Securities, and otherwise transfer their New Securities without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided such New Securities are acquired in the ordinary course of the
holder's business, such
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<PAGE>
holders have no arrangement with any person to participate in a distribution of
such New Securities and neither the holder nor any other person is engaging in
or intends to engage in a distribution of the New Securities. A broker-dealer
who acquired Old Securities directly from the Registrant cannot exchange such
Old Securities in the Exchange Offer. Each broker-dealer that receives New
Securities for its own account in exchange for Old Securities must acknowledge
that it will deliver a prospectus in connection with any resale of its New
Securities. See "Plan of Distribution." To comply with the securities laws of
certain jurisdictions, it may be necessary to qualify for sale or register the
New Securities prior to offering or selling such New Securities. The Company is
required, under the Registration Rights Agreements, to register the New
Securities in any jurisdiction requested by the holders, subject to certain
limitations. Upon consummation of the Exchange Offer, holders that were not
prohibited from participating in the Exchange Offer and did not tender their
Old Securities will not have any registration rights under the Registration
Rights Agreements with respect to such nontendered Old Securities, and
accordingly, such Old Securities will continue to be subject to the
restrictions on transfer contained in the legends thereon. See "The Exchange
Offer--Consequences of Failure to Exchange."
SUMMARY DESCRIPTION OF THE NOTES
Issuer................................ Adelphia Communications Corporation
Securities Offered.................... $150,000,000 principal amount of 10
1/2% Series B Senior Notes due
2004.
Maturity Date......................... The Notes will mature on July 15,
2004.
Interest Payment Dates................ January 15 and July 15 each year
commencing January 15, 1998.
Redemption............................ The Notes will not be redeemable
prior to maturity and will not be
subject to any mandatory redemption
or sinking fund payments.
Ranking...............................
The Notes are unsecured
indebtedness of Adelphia ranking
pari passu with other
unsubordinated indebtedness of
Adelphia and senior in right of
payment to any 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 its subsidiaries and
other investments constitute
substantially all of the assets of
Adelphia, and because those
subsidiaries and other investments
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 such entities. As of
June 30, 1997, on a pro forma
basis, after giving effect to the
July Offerings, the September
Offering and the Hyperion Offerings
and the application of the net
proceeds therefrom, the Notes would
have been
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effectively subordinated to $1.4
billion of indebtedness and
redeemable preferred stock of
Adelphia's subsidiaries. As of June
30, 1997, the total indebtedness of
Adelphia's subsidiaries to banks
and institutions, on a consolidated
basis, aggregated $1.5 billion and
total trade payables as of such
date were $53.6 million. The
Company's ability to access the
cash flow of its subsidiaries is
subject to significant contractual
restrictions. In addition, Olympus
has substantial leverage. See "Risk
Factors--Holding Company Structure;
Restrictive Covenants" and
"Description of the Notes."
Certain Covenants..................... The Indenture pursuant to which the
Notes were or will be issued (the
"Indenture") contains certain
restrictions on, among other
things, the incurrence of
indebtedness, mergers and sales of
assets, a change of control, the
payment of dividends on, or the
repurchase of, capital stock of
Adelphia and certain other
restricted payments by Adelphia and
its restricted subsidiaries and
certain transactions with and
investments in affiliates. The
Indenture will permit Adelphia's
subsidiaries to incur substantial
additional indebtedness.
Registration Rights................... Adelphia has entered into a
registration rights agreement with
the Initial Purchasers (the "Notes
Registration Rights Agreement")
pursuant to which Adelphia agreed
to file a registration statement
(the "Exchange Offer Registration
Statement") with respect to an
offer to exchange the Old Notes for
a new issue of debt securities of
Adelphia (the "Exchange Notes")
registered under the Securities
Act, with terms substantially
identical to those of the Old Notes
(the "Exchange Offer"). See
"Description of the Notes--
Registration Rights; Liquidated
Damages."
Change of Control..................... In the event of a Change of Control
(as defined herein), the Holders of
the Notes will have the right to
require the Company to purchase
their Notes at a price equal to
100% of the aggregate principal
amount thereof, plus accrued and
unpaid interest and Liquidated
Damages thereon, if any, to the
date of purchase. There can be no
assurance that the Company will
have adequate financial resources
to effect a required repurchase of
the Notes upon a Change in Control.
The Company's failure to make a
required repurchase of the Notes
upon a Change in Control would be
an Event of Default under the
Indenture.
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<PAGE>
RISK FACTORS
Prospective participants in the Exchange Offer should consider all of the
information contained in this Prospectus in connection with the Exchange Offer.
In particular, prospective participants should consider the factors set forth
herein under "Risk Factors."
SUMMARY DESCRIPTION OF
EXCHANGEABLE PREFERRED STOCK AND EXCHANGE DEBENTURES
The Exchangeable Preferred Stock
Issuer................................ Adelphia Communications Corporation
Securities Offered.................... 1,500,000 shares of 13% Series B
Cumulative Exchangeable Preferred
Stock, par value $.01 per share.
Dividends............................. At a rate equal to 13% per annum of
the liquidation preference per
share, payable semi-annually
beginning January 15, 1998, and
accumulating from July 7, 1997 (the
"Issue Date").
Dividend Payment Dates................ January 15 and July 15, commencing
January 15, 1998.
Ranking............................... The Exchangeable Preferred Stock
will, with respect to dividend
rights and rights on liquidation,
winding-up and dissolution of
Adelphia, rank pari passu with the
Convertible Preferred Stock and
senior to the common stock of
Adelphia.
Liquidation Rights.................... Upon any liquidation, dissolution
or winding-up of the affairs of
Adelphia, the Exchangeable
Preferred Stock will have a
liquidation preference of $100.00
per share plus accrued and unpaid
dividends and Liquidated Damages,
if any, to the date fixed for
liquidation, dissolution or
winding-up, before any distribution
is made on any Junior Securities
(as defined herein), including,
without limitation, the common
stock of Adelphia. See "Description
of Exchangeable Preferred Stock and
Exchange Debentures--Description of
Exchangeable Preferred Stock--
Liquidation Rights."
Mandatory Redemption.................. Adelphia is required, subject to
certain conditions, to redeem all
of the Exchangeable Preferred Stock
outstanding on July 15, 2009 at a
redemption price equal to 100% of
the liquidation preference thereof,
plus accumulated and unpaid
dividends and liquidated damages,
if any, to the date of redemption.
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<PAGE>
Optional Redemption................... The Exchangeable Preferred Stock is
redeemable, at the option of
Adelphia, in whole or in part, at
any time on or after July 15, 2002
at the redemption prices set forth
herein, plus, without duplication,
accumulated and unpaid dividends
and Liquidated Damages, if any, to
the date of redemption. In
addition, prior to July 15, 2000,
Adelphia may, at its option, redeem
up to 33% of the aggregate of (i)
the liquidation preference of the
Exchangeable Preferred Stock issued
less the liquidation preference of
Exchangeable Preferred Stock
exchanged for Exchange Debentures
and (ii) the principal amount of
Exchange Debentures issued, with
the net proceeds of one or more
common equity offerings received on
or after the date of original
issuance of the Exchangeable
Preferred Stock at a redemption
price of 113% of the liquidation
preference or principal amount, as
the case may be, plus accumulated
and unpaid dividends and liquidated
damages in the case of Exchangeable
Preferred Stock and accrued and
unpaid interest and liquidated
damages in the case of Exchange
Debentures; provided, that after
any such redemption, at least 67%
in liquidation preference or
principal amount, as applicable, of
such securities remain outstanding.
Exchange Rights....................... On any Dividend Payment Date,
Adelphia may, at its option,
exchange, in whole or in part, on a
pro rata basis, the outstanding
Exchangeable Preferred Stock for
the Exchange Debentures upon
payment of all issued and unpaid
dividends and Liquidated Damages;
provided that immediately after
giving effect to any such partial
exchange, if any Exchangeable
Preferred Stock remains outstanding
there shall be outstanding shares
of Exchangeable Preferred Stock
with an aggregate liquidation
preference of not less than $75
million and in any event not less
than $75 million in aggregate
principal amount of Exchange
Debentures. Adelphia's ability to
exercise the exchange option is
subject to compliance with its debt
agreements.
Voting................................ The Exchangeable Preferred Stock
will be non-voting, except as
otherwise required by law and as
specified in the Certificate of
Designations (as defined herein).
Upon Adelphia's failure to meet
certain obligations to holders of
Exchangeable Preferred Stock, the
holders of Exchangeable Preferred
Stock (including affiliates of
Adelphia) will be entitled to elect
two additional members to the
Company's Board of Directors.
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<PAGE>
Certain Restrictive Provisions........
The Certificate of Designations
contains certain restrictions on,
among other things, the incurrence
of indebtedness, mergers, a change
of control, the payment of
dividends on, or the repurchase of,
capital stock of Adelphia and
certain other restricted payments
by Adelphia and its restricted
subsidiaries and certain
transactions with and investments
in affiliates. The Certificate of
Designations permits Adelphia's
subsidiaries to incur substantial
additional indebtedness.
Registration Rights................... Adelphia entered into a
registration rights agreement with
the Initial Purchasers and Highland
Holdings, an affiliate of the
family of John Rigas, Chairman of
Adelphia (the "Preferred Stock
Registration Rights Agreement")
pursuant to which Adelphia agreed
to file a registration statement
(the "Exchange Offer Registration
Statement") with respect to an
offer to exchange the Exchangeable
Preferred Stock for a new issue of
preferred stock of Adelphia (the
"New Exchangeable Preferred Stock")
registered under the Securities
Act, with terms substantially
identical to those of the
Exchangeable Preferred Stock, and
an offer to exchange any Exchange
Debentures for a new issue of debt
securities of Adelphia (the "New
Exchange Debentures") registered
under the Securities Act, with
terms substantially identical to
those of the Exchange Debentures
(the "Exchange Offer"). See
"Description of Exchangeable
Preferred Stock and Exchange
Debentures--Registration Rights and
Liquidated Damages."
The Exchange Debentures
Issue................................. 13% Senior Subordinated Exchange
Debentures due 2009 issuable in
exchange for the Exchangeable
Preferred Stock in an aggregate
principal amount equal to the
liquidation preference of the
shares of Exchangeable Preferred
Stock so exchanged.
Maturity Date......................... The Exchange Debentures will mature
on July 15, 2009.
Interest Rate and Payment Dates....... The Exchange Debentures will bear
interest at a rate of 13% per
annum. Interest will accrue from
the date of issuance or from the
most recent interest payment date
to which interest has been paid or
provided for. Interest will be
payable semi-annually in cash in
arrears on each January 15 and July
15, commencing with the first such
date after the applicable date of
exchange (the "Exchange Date").
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<PAGE>
Ranking...............................
The Exchange Debentures will be
general unsecured obligations of
Adelphia and will be subordinated
in right of payment to all existing
and future Senior Debt of Adelphia.
In addition, the Exchange
Debentures will not be guaranteed
by any of Adelphia's subsidiaries
and will, therefore, be effectively
subordinated to all existing and
future Indebtedness (as defined) of
Adelphia's subsidiaries. As of June
30, 1997, the total amount of
Senior Debt of Adelphia, on a pro
forma basis after giving effect to
the July Offerings, the September
Offering and the Hyperion
Offerings, would have been $1.4
billion, and the total amount of
indebtedness and redeemable
preferred stock of Adelphia's
subsidiaries would have been $1.4
billion. The Exchange Debentures
will rank pari passu or senior to
any class or series of Indebtedness
that expressly provides that it
ranks pari passu or subordinate to
the Exchange Debentures, as the
case may be.
Optional Redemption................... See "The Exchangeable Preferred
Stock--Optional Redemption" for a
description of Adelphia's rights to
redeem the Exchange Debentures.
Certain Covenants..................... The indenture governing the
Exchange Debentures (the "Exchange
Indenture") will contain certain
restrictions on, among other
things, the incurrence of
indebtedness, mergers and sales of
assets, a change of control, the
payment of dividends on, or the
repurchase of, Capital Stock of
Adelphia and certain other
restricted payments by Adelphia and
its restricted subsidiaries,
certain transactions with and
investments in affiliates and the
incurrence of indebtedness that is
subordinated to Senior Debt and
senior to the Exchange Debentures.
The Exchange Indenture will permit
Adelphia's subsidiaries to incur
substantial additional
indebtedness.
Registration Rights................... See "The Exchangeable Preferred
Stock--Registration Rights" for a
description of the registration
rights of the Exchange Debentures.
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<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the
Company and its business in connection with the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Securities that were
not prohibited from participating in the Exchange Offer and did not tender
their Old Securities will not have any registration rights under the
Registration Rights Agreements with respect to such nontendered Old Securities
and, accordingly, such Old Securities will continue to be subject to the
restrictions on transfer contained in the legends thereon. In general, the Old
Securities may not be offered or sold, unless registered under the Securities
Act and applicable state securities laws, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not intend to register the Old
Securities under the Securities Act. Based on interpretations by the staff of
the Commission with respect to similar transactions, the Company believes that
the New Securities issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder of such New Securities
(other than any such holder which is an "affiliate" of the Registrants within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Securities are acquired in the ordinary course of such
holder's business, such holder has no arrangement or understanding with any
person to participate in the distribution of such New Securities and neither
the holder nor any other person is engaging in or intends to engage in a
distribution of the New Securities. A broker-dealer who acquired Old
Securities directly from the Registrant cannot exchange such Old Securities in
the Exchange Offer. Each broker-dealer that receives New Securities for its
own account in exchange for Old Securities must acknowledge that it will
deliver a prospectus in connection with any resale of its New Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of the New Securities received in exchange
for the Old Securities acquired by the broker-dealer as a result of market-
making activities or other trading activities. The Company has agreed that it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale for a period of 365 days after the Exchange Date or, if
earlier, until all participating broker-dealers have so resold. See "Plan of
Distribution." The New Securities may not be offered or sold unless they have
been registered or qualified for sale under applicable state securities laws
or an exemption from registration or qualification is available and is
complied with. The Registrant is required, under the Registration Rights
Agreements, to register the New Securities in any jurisdiction requested by
the holders, subject to certain limitations.
SUBSTANTIAL LEVERAGE
The Company is highly leveraged and has incurred substantial indebtedness to
finance acquisitions and expansion of its operations and, to a lesser extent,
for investments in and advances to affiliates. At June 30, 1997, the Company's
total indebtedness aggregated approximately $2,637,896,000, which included
approximately $1,286,697,000 of subsidiary bank and institutional debt,
$196,396,000 of Hyperion debt and approximately $1,154,803,000 of indebtedness
of the parent company. The Company's total debt has varying maturities to
2007, including an aggregate of approximately $900,645,000 maturing on or
prior to March 31, 2002. The Company has maintained its public long-term debt
at the holding company level and unrestricted subsidiaries 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 loan
periods and contain separately-negotiated covenants relating to, among other
things, cross-defaults and the incurrence of additional debt for each
borrowing group. In addition, Olympus has substantial leverage. The high level
of the Company's indebtedness will have important
16
<PAGE>
consequences to holders of the Securities, including: (i) a substantial
portion of the Company's cash flow from operations must be dedicated to debt
service and will not be available for general corporate purposes or for
capital improvements; (ii) the Company's ability to obtain additional debt
financing in the future for working capital, capital expenditures,
acquisitions or for capital improvements may be limited; and (iii) the
Company's level of indebtedness could limit its flexibility in reacting to
changes in the industry and economic conditions generally. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Form 10-K and the Form 10-Q.
NET LOSSES AND STOCKHOLDERS' DEFICIENCY
The total stockholders' deficiency at March 31, 1997 and June 30, 1997 was
$1,253,881,000 and $1,273,945,000, respectively. 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 $106,284,000,
$119,894,000 and $130,642,000, for the years ended March 31, 1995, 1996 and
1997, respectively and $26,818,000 and $42,361,000, for the quarters ended
June 30, 1996 and 1997, respectively. The Company expects to continue to incur
significant net losses for the next several years. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Form 10-K and the Form 10-Q.
For the years ended March 31, 1996 and 1997 and for the quarters ended June
30, 1996 and 1997, respectively, the Company's earnings were insufficient to
cover its combined fixed charges and preferred stock dividends by $78,189,000
and $61,848,000, respectively and $10,368,000 and $23,340,000, respectively.
However, such amounts reflect non-cash charges totalling $127,319,000 and
$165,426,000, respectively and $33,473,000 and $40,591,000, respectively,
consisting of depreciation, amortization, and non-cash interest expense on
certain indebtedness of the Company. On a pro forma basis, after giving effect
to the July Offerings, the September Offering and the Hyperion Offerings, the
Company's earnings were insufficient to cover its combined fixed charges and
preferred stock dividends by $120,233,000 and $37,586,000 for the year ended
March 31, 1997 and for the three months ended June 30, 1997, respectively.
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, and investments in and advances to
affiliates and the Company has depended on the availability of additional
borrowings to meet its liquidity requirements. 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 indentures and its subsidiary credit
agreements. Adelphia expects that it will be required to refinance the
Securities prior to their maturity. 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. There can be no assurance that any such options would yield
net proceeds sufficient to repay or retire the Securities in full. See
"Selected Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Form 10-K
and the Form 10-Q.
HOLDING COMPANY STRUCTURE; RESTRICTIVE COVENANTS
As a holding company, Adelphia holds no significant assets other than its
investments in and advances to its subsidiaries and other investments.
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 or other investments. Under the terms of various debt agreements
between the Adelphia subsidiaries and other investments 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
17
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tests are met, the Adelphia subsidiaries and other investments are restricted
from distributing funds to Adelphia. The Indenture governing the Notes and the
Certificate of Designations governing the Exchangeable Preferred Stock will
not restrict the Company's subsidiaries or other investments from
contractually restricting their ability to pay dividends to the Company in the
future. In addition, because Adelphia's subsidiaries and other investments 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 June 30, 1997, the total amount of
long-term debt of such subsidiaries was $1,483,093,000. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Form 10-K and the Form 10-Q, "Description of the Notes" and "Description
of the Exchangeable Preferred Stock and Exchange Debentures."
The agreements governing the bank debt of the Company's subsidiaries (the
"Subsidiary Bank Agreements") contain, among other covenants, requirements
that Adelphia's subsidiaries maintain specified financial ratios, including
maximum leverage and minimum interest coverage. The ability of a subsidiary to
comply with such provisions may be affected by events that are beyond
Adelphia's control. The breach of any of these covenants could result in a
default by a subsidiary under its Subsidiary Bank Agreement. In the event of
any such default, lenders party to that Subsidiary Bank Agreement could elect
to declare all amounts borrowed under that Subsidiary Bank Agreement, together
with accrued interest and other fees, to be due and payable. If the
indebtedness under a Subsidiary Bank Agreement were to be accelerated, all
indebtedness outstanding under such Subsidiary Bank Agreement would be
required to be paid in full before such subsidiary would be permitted to
distribute any assets or cash to Adelphia. There can be no assurance that the
assets of Adelphia and its subsidiaries would be sufficient to repay all
borrowings under the Subsidiary Bank Agreements and indebtedness owed to the
other creditors of such subsidiaries in full. In addition, as a result of
these covenants, the ability of Adelphia's subsidiaries to respond to changing
business and economic conditions and to secure additional financing, if
needed, may be significantly restricted, and Adelphia may be prevented from
engaging in transactions that might otherwise be considered beneficial to
Adelphia.
POTENTIAL CONFLICTS OF INTEREST
The Rigas Family holds substantially all of Adelphia's Class B Common Stock
and approximately 89% of the combined voting power of both classes of
Adelphia's Common Stock and has the power to elect seven of eight 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 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 and the
Certificate of Designations governing the Exchangeable Preferred Stock and the
indentures under which the 9 7/8% Debentures, 11 7/8% Debentures, 9 1/2%
Notes, 12 1/2% Notes, 10 1/4% Notes, 9 7/8% Notes and 9 1/4% Notes of Adelphia
were issued contain covenants that place certain restrictions on transactions
between the Company and its affiliates. See "Certain Relationships and Related
Transactions" in the Form 10-K and "Description of the Notes--Covenants--
Limitation on Transactions with Affiliates."
COMPETITION
The cable television systems owned by the Company compete with other
communications and entertainment media as well as other means of video
distribution including Direct Broadcast Satellite Systems ("DBS") and
Multichannel Multipoint Distribution Systems ("MMDS"). Several companies
recently have launched or have announced their intention to launch, DBS
services that compete with the Company for multichannel video entertainment
customers. In addition, some of the Regional Bell Operating Companies (the
"RBOCs") and other
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<PAGE>
local telephone companies are in the process of entering the video-to-home
business and several have expressed their intention to enter the video-to-home
business. In addition, some RBOCs and local telephone companies have in place
facilities which are capable of delivering cable television service.
In addition, the Telecommunications Act of 1996 (the "1996 Act") has
repealed the cable/telephone cross-ownership plan, and telephone companies
will now be permitted to provide cable television service within their service
areas. Certain of such potential service providers have greater financial
resources than the Company, and in the case of local exchange carriers seeking
to provide cable service within their service areas, have an installed plant
and switching capabilities, any of which could give them competitive
advantages with respect to cable television operators such as the Company. The
Company cannot predict either the extent to which competition will materialize
or, if such competition materializes, the extent of its effect on the Company.
See "Business--Competition" in the Form 10-K and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" in the Form 10-K
and the Form 10-Q.
The Company also faces competition from other communications and
entertainment media, including conventional off-air television broadcasting
services, newspapers, movie theaters, live sporting events and home video
products. The Company cannot predict the extent to which competition may
affect the Company. See "Business--Competition" and "--Legislation and
Regulation" in the Form 10-K and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Regulatory and Competitive
Matters" in the Form 10-K and the Form 10-Q.
NEED FOR ADDITIONAL FINANCING
The Company's business requires substantial investment on a continuing basis
to finance capital expenditures and related expenses for, among other things,
upgrade of the Company's cable plant (including the need to make cable system
upgrades mandated by franchise authorities), the offering of new services and
the servicing, repayment or refinancing of its indebtedness. The Company will
require significant additional financing, through debt and/or equity
issuances, to meet its capital expenditure plans and to pay its debt
obligations. There can be no assurance that Adelphia will be able to issue
additional debt or obtain additional equity capital on satisfactory terms, or
at all, to meet its future financing needs. See "Business--Technological
Developments" in the Form 10-K and "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" in the Form 10-K and the Form
10-Q.
REGULATION IN THE TELECOMMUNICATIONS INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, state and local levels, and many aspects of such regulation are
currently the subject of judicial proceedings and administrative or
legislative proposals. The Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") significantly expanded the
scope of cable television regulation. In particular, pursuant to the 1992
Cable Act, the Federal Communications Commission (the "FCC") adopted
regulations that limit the Company's ability to set and increase rates for the
Company's basic and cable programming service ("CPS") packages and for the
provision of cable television-related equipment. The 1992 Cable Act permits
certified local franchising authorities to order refunds of rates paid in the
previous twelve-month period determined to be in excess of the permitted
reasonable rates. It is possible that rate reductions or refunds of previously
collected fees may be required in the future.
The 1996 Act, which became law on February 8, 1996, materially alters
federal, state and local laws and regulations pertaining to cable television,
telecommunications and other related services and, in particular,
substantially amends the Communications Act of 1934 (the "Communications
Act"). Certain provisions of the 1996 Act could materially affect the growth
and operation of the cable television industry and the cable services provided
by the Company. Although the new legislation may substantially lessen certain
regulatory burdens, the cable television industry may be subject to additional
competition as a result. See "Business--Competition" in
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<PAGE>
the Form 10-K. There are numerous rulemakings that have been and continue to
be undertaken by the FCC which will interpret and implement the provisions of
the 1996 Act. In addition, certain provisions of the new legislation (such as
the deregulation of rates for CPS packages) will not immediately be effective.
Furthermore, certain provisions of the 1996 Act have been, and likely will be,
subject to judicial challenge. The Company is unable at this time to predict
the outcome of such rulemakings or litigation or the short and long-term
effect (financial or otherwise) of the 1996 Act and FCC rulemakings on the
Company.
The cable television industry is subject to state and local regulations and
the Company must comply with rules of the local franchising authorities to
retain and renew its cable franchises, among other matters. There can be no
assurances that the franchising authorities will not impose new and more
restrictive requirements as a condition to franchise renewal.
Although the 1996 Act eliminates many legal barriers to entry (i.e.,
telephone companies entering the cable industry and cable companies entering
the telephone industry), the Company cannot assure that rules adopted by the
FCC or state regulators or other legislative or judicial initiatives relating
to the telecommunications industry will not have a material adverse effect on
the Company. In addition, the 1996 Act removes entry barriers for all
companies and could increase substantially the number of competitors offering
comparable services in the Company's potential markets. See "Legislation and
Regulation" in the Form 10-K and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Regulatory and Competitive
Matters" in the Form 10-K and the Form 10-Q.
ABSENCE OF A PUBLIC MARKET; POSSIBLE VOLATILITY OF PRICE
The Securities are new securities for which there is currently no market.
The Company does not intend to apply for listing of the Securities on any
securities exchange or for inclusion of the Securities in any automated
quotation system, but the Initial Purchasers have applied to the National
Association of Securities Dealers, Inc. to have the Securities designated as
PORTAL securities. Although the Company has been advised by the Initial
Purchasers that they currently intend to make a market in the Securities, they
are not obligated to do so, and any such market-making activities may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the Securities.
If a market for the Securities were to develop, the Securities could trade at
prices that may be higher or lower than their initial offering price depending
upon many factors, including prevailing interest rates, the Company's
operating results and the markets for similar securities. Historically, the
market for non-investment-grade debt and preferred stock has been subject to
disruptions that have caused substantial volatility in the prices of
securities similar to the Securities. There can be no assurance that, if a
market for the Securities were to develop, such a market would not be subject
to similar disruptions.
LIMITATION ON ABILITY TO PAY DIVIDENDS
Adelphia has never declared or paid dividends on any of its Capital Stock.
The ability of Adelphia to pay cash dividends and to redeem the Exchangeable
Preferred Stock when required is substantially restricted under various
covenants contained in the indentures for Adelphia's various notes or
debentures. In addition to the limitations imposed on the payment of dividends
by the existing indentures, under Delaware law, Adelphia is permitted to pay
dividends on its Capital Stock, including the Exchangeable Preferred Stock,
only out of its surplus, or in the event that it has no surplus, out of its
net profits for the year in which a dividend is declared or for the
immediately preceding fiscal year. Delaware law imposes similar restrictions
on the repurchase of capital stock. Surplus is defined as the excess of a
company's total assets over the sum of its total liabilities plus the par
value of its outstanding Capital Stock. At June 30, 1997, the Company's
consolidated financial statements reflected a stockholders' deficiency of
$1,273,945,000. In order to pay dividends in cash, Adelphia must have surplus
or net profits equal to the full amount of the cash dividend at the time such
dividend is declared. Adelphia cannot predict what the value of its assets or
the amount of its liabilities will be in the future and, accordingly, there
can be no assurance that the Company will be able to pay cash dividends on or
redeem the Exchangeable Preferred Stock.
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<PAGE>
The Certificate of Designations will provide in certain circumstances,
including the accumulation of accrued and unpaid dividends on the outstanding
Exchangeable Preferred Stock in an amount equal to three semi-annual dividends
(whether or not consecutive) and the failure of the Company to satisfy any
mandatory redemption or repurchase obligation (including, without limitation,
pursuant to any required Change of Control Offer) with respect to the
Exchangeable Preferred Stock; the sole remedy to the holders (including
Affiliates of Adelphia) of the Exchangeable Preferred Stock will be to elect
two directors to Adelphia's board of directors. See "Description of
Exchangeable Preferred Stock and Exchange Debentures--Voting Rights."
RANKING OF THE EXCHANGEABLE PREFERRED STOCK; SUBORDINATION OF THE EXCHANGE
DEBENTURES
The Exchangeable Preferred Stock will rank junior in right of payment upon
liquidation to all existing and future indebtedness of the Company. The
Exchangeable Preferred Stock will rank pari passu in right of payment with the
Convertible Preferred Stock and senior in right of payment to the common stock
of Adelphia. The payment of principal, premium, if any, and interest on, and
any other amounts owing in respect of, the Exchange Debentures, if issued,
will be subordinated to the prior payment in full of all existing and future
Senior Debt of Adelphia. In the event of the bankruptcy, liquidation,
dissolution, reorganization or other winding-up of Adelphia, the assets of
Adelphia will be available to pay obligations on the Exchange Debentures only
after all Senior Debt has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Exchange Debentures.
See "Description of Exchangeable Preferred Stock and Exchange Debentures--
Description of the Exchange Debentures--Subordination."
LIMITATION ON ABILITY TO PURCHASE NOTES, EXCHANGEABLE PREFERRED STOCK OR
EXCHANGE DEBENTURES UPON A CHANGE OF CONTROL
The Certificate of Designations and the Exchange Indenture will require
Adelphia, upon a Change of Control, to commence an offer to redeem the shares
of Exchangeable Preferred Stock outstanding and the Exchange Debentures under
such instruments. The Indenture governing the Notes and certain of Adelphia's
other indentures contain provisions requiring Adelphia to make similar change
of control repurchase offers to holders of the Notes and certain of Adelphia's
other debt. Covenants in the indentures under which the various senior notes
of Adelphia have been issued and in the Indenture for the Notes substantially
restrict Adelphia's ability to redeem the Exchangeable Preferred Stock and the
Exchange Debentures. If a Change of Control occurs, there is no assurance that
(i) Adelphia will have the ability to make a Change of Control Offer to the
holders of the Exchangeable Preferred Stock or the Exchange Debentures as the
case may be, (ii) Adelphia will have sufficient funds to repurchase all
securities (including the Securities) entitled to be repurchased or (iii)
Adelphia could obtain any additional debt or equity financing in an amount
sufficient to repurchase such securities. Upon the failure of the Company to
make a Change of Control Offer on the terms and in accordance with the
conditions described under the caption "Description of Exchangeable Preferred
Stock and Exchange Debentures--Description of Preferred Stock--Change of
Control," the sole remedy to the holders of the outstanding Exchangeable
Preferred Stock will be the voting rights arising from a Voting Rights
Triggering Event. See "Description of Exchangeable Preferred Stock and
Exchange Debentures--Description of Preferred Stock--Voting Rights;
Amendment."
CERTAIN TAX CONSIDERATIONS
Distributions on the Exchangeable Preferred Stock will be taxable as
ordinary dividend income to the extent that the cash does not exceed
Adelphia's current and accumulated earnings and profits. In addition,
depending on the issue price of shares of Exchangeable Preferred Stock on the
date of their issuance, Holders may be required to include additional amounts
in income based on the difference between (x) the issue price of such shares
on the date of their issuance and (y) the amount payable in redemption of such
shares, unless the difference is de minimis under the applicable standard
(such difference being referred to as "Redemption Premium"). See "Certain
Federal Income Tax Considerations--The Exchangeable Preferred Stock Redemption
Premium." Shares of Exchangeable Preferred Stock that bear Redemption Premium
generally will have different
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<PAGE>
tax characteristics from other shares of Exchangeable Preferred Stock and
might trade separately, which might adversely affect the liquidity of such
shares.
Upon an exchange of shares of Exchangeable Preferred Stock for cash or
Exchange Debentures, the holder generally should have capital gain or loss
equal to the difference between the cash or issue price of the Exchange
Debentures received and the holder's adjusted basis in the shares of
Exchangeable Preferred Stock redeemed, unless the exchange has the effect of a
dividend. For a discussion of how to determine the issue price of the Exchange
Debentures, see "Certain Federal Income Tax Considerations--The Exchangeable
Preferred Stock Original Issue Discount." Holders should also note that if
shares of Exchangeable Preferred Stock are exchanged for Exchange Debentures
and the stated redemption price at maturity of such Exchange Debentures
exceeds their issue price by more than a de minimis amount, the Exchange
Debentures will be treated as having original issue discount ("OID") equal to
the entire amount of such excess.
Adelphia is allowed to exchange the Exchangeable Preferred Stock for
Exchange Debentures. Because the determination of the issue price of the
Exchange Debentures depends on several factors (such as, whether the Exchange
Debentures or the Exchangeable Preferred Stock are traded on an established
securities market at the time of the exchange, the trading price, and whether
the Exchange Debentures bear "adequate stated interest" at the time of the
exchange), it is possible that Exchange Debentures issued at different times
will have different issue prices. To the extent the Exchange Debentures have
different issue prices, they may have different tax characteristics from each
other (for example, the amount of OID on such Exchange Debentures may vary)
and may trade separately, which may adversely affect the liquidity of such
Exchange Debentures.
For a discussion of these and other relevant tax issues, see "Certain
Federal Income Tax Considerations."
USE OF PROCEEDS
The net proceeds of the Offerings, after deducting discounts and offering
expenses, together with the net proceeds from the concurrent sale of the
Convertible Preferred Stock, were approximately $393,500,000. The net proceeds
have been or will be contributed to Adelphia subsidiaries and used to reduce
subsidiary indebtedness as follows:
<TABLE>
<CAPTION>
AMOUNT
($000'S)
--------
<S> <C>
10.66% Senior Secured Notes due through 1999........................... $165,000
10.25% Senior Subordinated Notes due through 1998...................... 32,000
11.85% Senior Subordinated Notes due 1998 through 2000................. 60,000
10.80% Senior Secured Notes due through 2000........................... 27,000
Prepayment Premium..................................................... 11,000
Borrowings under Revolving Credit Facilities .......................... 98,500
--------
Total................................................................ $393,500
========
</TABLE>
As of June 30, 1997, the average effective interest rate charged on such
subsidiary revolving credit facilities (all of which may be reborrowed) was
approximately 7.1%. See "Capitalization."
Adelphia will not receive any proceeds from the Exchange Offer.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On July 7, 1997, the Registrant issued $150,000,000 aggregate principal
amount of Old Notes and 1,500,000 shares of Old Preferred Stock with an
aggregate liquidation preference of $150,000,000. The issuance was not
registered under the Securities Act in reliance upon the exemption under Rule
144A, Section 4(2) and Regulation S of the Securities Act. In connection with
the issuance and sale of the Old Securities, the Registrant entered into
Registration Rights Agreements with the Initial Purchasers dated as of July 7,
1997, which require the Registrant to cause the Old Securities to be
registered under the Securities Act or to file with the Commission
registration statements under the Securities Act with respect to an issue of
new securities of the Registrant identical in all material respects to the Old
Securities, and use its best efforts to cause such registration statements to
become effective under the Securities Act and, upon the effectiveness of such
registration statements, to offer to the holders of the Old Securities the
opportunity to exchange their Old Securities for a like principal amount or
liquidation preference of New Securities, which will be issued without a
restrictive legend and may be reoffered and resold by the holder without
restrictions or limitations under the Securities Act. Copies of the
Registration Rights Agreements have been filed as exhibits to the Registration
Statement of which this Prospectus is a part. The Exchange Offer is being made
pursuant to the Registration Rights Agreements to satisfy the Registrant's
obligations thereunder.
Based on no-action letters issued by the staff of the Commission to third
parties, the Registrant believes that the New Securities issued pursuant to
the Exchange Offer in exchange for Old Securities may be offered for resale,
resold and otherwise transferred by any holder of such New Securities (other
than any such holder which is an "affiliate" of the Registrant within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act,
provided that such New Securities are acquired in the ordinary course of such
holder's business, such holder has no arrangement or understanding with any
person to participate in the distribution of such New Securities and neither
the holder nor any other person is engaging in or intends to engage in a
distribution of the New Securities. A broker-dealer who acquired Old
Securities directly from the Registrant cannot exchange such Old Securities in
the Exchange Offer. Any holder who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Securities cannot rely
on such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Securities for its own account in exchange for Old Securities, where such Old
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such New Securities. See "Plan
of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Registrant will accept any and all Old Securities validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date (as defined herein). The Registrant will issue a principal
amount or liquidation preference of New Securities in exchange for an equal
principal amount or liquidation preference of outstanding Old Securities
tendered and accepted in the Exchange Offer. Holders may tender some or all of
their Old Securities pursuant to the Exchange Offer. The date of acceptance
for exchange of the Old Securities for the New Securities (the "Exchange
Date") will be the first business day following the Expiration Date or as soon
as practicable thereafter.
The terms of the New Securities and the Old Securities are substantially
identical in all material respects, except for certain transfer restrictions,
registration rights and Liquidated Damages for Registration Defaults relating
to the Old Securities which will not apply to the New Securities. See
"Description of the Notes" and "Description of Exchangeable Preferred Stock
and Exchange Debentures." The New Securities will evidence the same debt or
the same equity interests as the Old Securities. The New Notes will be issued
under, and will
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<PAGE>
be entitled to the benefits of, the Indenture pursuant to which the Old Notes
were issued, and the New Preferred Stock will be issued under, and will be
entitled to the benefits of, the Certificate of Designations which governs
both the Old Preferred Stock and the New Preferred Stock.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of the Old Notes and 1,500,000 shares of Old Preferred Stock are outstanding.
This Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders.
Holders of Old Securities do not have any appraisal or dissenters' rights
under state law or the Indenture in connection with the Exchange Offer. The
Registrant intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreements and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Securities which are not tendered and were not
prohibited from being tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest or dividends and to be subject to
transfer restrictions, but will not be entitled to any rights or benefits
under the Registration Rights Agreements.
Upon satisfaction or waiver of all the conditions to the Exchange Offer, on
the Exchange Date the Registrant will accept all Old Securities properly
tendered and not withdrawn and will issue New Securities in exchange therefor.
For purposes of the Exchange Offer, the Registrant shall be deemed to have
accepted properly tendered Old Securities for exchange when, as and if the
Registrant had given oral or written notice thereof to the applicable Exchange
Agent. The applicable Exchange Agent will act as agent for the tendering
holders for the purposes of receiving the New Securities from the Registrant.
In all cases, issuance of New Securities for Old Securities that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of such Old Securities, a properly
completed and duly executed Letter of Transmittal and all other required
documents; provided, however, that the Registrant reserves the absolute right
to waive any defects or irregularities in the tender or conditions of the
Exchange Offer. If any tendered Old Securities are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Old
Securities are submitted for a greater principal amount or liquidation
preference than the holder desires to exchange, such unaccepted or
nonexchanged Old Securities or substitute Old Securities evidencing the
unaccepted portion, as appropriate, will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Holders who tender Old Securities in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Securities pursuant to the Exchange Offer. The Registrant will pay all charges
and expenses, other than certain applicable taxes described below, in
connection with the Exchange Offer. See "Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
November 17, 1997, unless the Registrant, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended; provided that the
Exchange Offer shall not be extended beyond 30 business days after the date of
this Prospectus.
In order to extend the Expiration Date, the Registrant will notify the
applicable Exchange Agent of any extension by oral or written notice and will
mail to the registered holders an announcement thereof, prior to 9:00 a.m.,
New York City time, on the next business day after the then Expiration Date.
The Registrant reserves the right, in its sole discretion, (i) to delay
accepting any Old Securities, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the applicable Exchange Agent or (ii) to amend the
terms of the Exchange Offer. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or
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<PAGE>
written notice thereof. If the Exchange Offer is amended in a manner determined
by the Registrant to constitute a material change, the Registrant will promptly
disclose such amendment in a manner reasonably calculated to inform the holders
of Old Securities of such amendment.
Without limiting the manner in which the Registrant may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, the Registrant shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
INTEREST AND DIVIDENDS ON THE NEW SECURITIES
New Securities will bear interest or be entitled to dividends from the most
recent date to which interest or dividends have been paid on the Old Securities
or, if no such payment has been made, from July 7, 1997.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Registrant will not
be required to exchange any New Securities for any Old Securities, and may
terminate or amend the Exchange Offer before the acceptance of any Old
Securities for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer
which seeks to restrain or prohibit the Exchange Offer or, in the
Registrant's judgment, would materially impair the ability of the
Registrant to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule, order or regulation is interpreted,
by any government or governmental authority which, in the Registrant's
judgment, would materially impair the ability of the Registrant to
proceed with the Exchange Offer; or
(c) the Exchange Offer or the consummation thereof would otherwise violate
or be prohibited by applicable law.
If the Registrant determines in its sole discretion that any of these
conditions is not satisfied, the Registrant may (i) refuse to accept any Old
Securities and return all tendered Old Securities to the tendering holders,
(ii) extend the Exchange Offer and retain all Old Securities tendered prior to
the expiration of the Exchange Offer, subject, however, to the rights of
holders who tendered such Old Securities to withdraw their tendered Old
Securities, or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Old Securities which have not
been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Registrant will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered holders, and
the Registrant will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
The foregoing conditions are for the sole benefit of the Registrant and may
be asserted by the Registrant regardless of the circumstances giving rise to
any such condition or may be waived by the Registrant in whole or in part at
any time and from time to time in their sole discretion. The failure by the
Registrant at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time. Any
determination by the Registrant concerning the events described above shall be
final and binding on all parties.
PROCEDURES FOR TENDERING
The tender of Old Securities by a holder as set forth below (including the
tender of Old Securities by book-entry delivery pursuant to the procedures of
the Depository Trust Company ("DTC") and the acceptance thereof
25
<PAGE>
by the Registrant will constitute an agreement between such holder and the
Registrant in accordance with the terms and subject to the conditions set
forth in this Prospectus and in the Letter of Transmittal.
Only a holder of Old Securities may tender such Old Securities in the
Exchange Offer. To tender in the Exchange Offer, a holder must (i) complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Old Securities (unless such tender is being effected
pursuant to the procedure for book-entry transfer described below) and any
other required documents, to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date, or (ii) comply with the guaranteed delivery
procedures described below. Delivery of all documents must be made to the
applicable Exchange Agent at its address set forth herein.
THE METHOD OF DELIVERY OF OLD SECURITIES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE APPLICABLE EXCHANGE AGENT IS AT THE
ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS
RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE APPLICABLE
EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD
SECURITIES SHOULD BE SENT TO THE REGISTRANTS. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Securities are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering of
such owner's Old Securities, either make appropriate arrangements to register
ownership of the Old Securities in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by any Eligible Institution (as defined) unless the
Old Securities tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Payment Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Securities listed therein, such Old Securities must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old
Securities, with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Securities or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Registrant, evidence satisfactory to the Registrant of their authority to so
act must be submitted with the Letter of Transmittal.
Any financial institution that is a participant in the book-entry transfer
facility for the Old Securities, the DTC, may make book-entry delivery of Old
Securities by causing DTC to transfer such Old Securities into the applicable
Exchange Agent's account with respect to the Old Securities in accordance with
DTC's procedures
26
<PAGE>
for such transfer, including if applicable the procedures under the Automated
Tender Offer Program ("ATOP"). Although delivery of Old Securities may be
effected through book-entry transfer into the applicable Exchange Agent's
account at DTC, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be, or
be deemed to be, transmitted to and received and confirmed by the applicable
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Securities and withdrawal of tendered Old
Securities will be determined by the Registrant in its sole discretion, which
determination will be final and binding. The Registrant reserves the absolute
right to reject any and all Old Securities not properly tendered or any Old
Securities the Registrant's acceptance of which would, in the opinion of
counsel for the Registrant, be unlawful. The Registrant also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Old Securities. The Registrant's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Securities must be
cured within such time as the Registrant shall determine. Although the
Registrant intends to notify holders of defects or irregularities with respect
to tenders of Old Securities, neither the Registrant, the applicable Exchange
Agent nor any other person shall incur any liability for failure to give such
notification. Tenders of Old Securities will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Old
Securities received by the applicable Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the applicable Exchange Agent to the tendering
holders, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
In addition, the Registrant reserves the right in its sole discretion to
purchase or make offers for any Old Securities that remain outstanding
subsequent to the Expiration Date or, as set forth below under "Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Old Securities in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
By tendering, each holder will also represent to the Registrant (i) that the
New Securities acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the person receiving such New Securities,
whether or not such person is the holder, (ii) that neither the holder nor any
such person has an arrangement or understanding with any person to participate
in the distribution of such New Securities and (iii) that neither the holder
nor any such other person is an "affiliate," as defined in Rule 405 under the
Securities Act, of the Registrant, or that if it is an "affiliate," it will
comply with the registration and prospective delivery requirements of the
Securities Act to the extent applicable.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Securities and (i) whose Old Securities
are not immediately available, (ii) who cannot deliver their Old Securities,
the Letter of Transmittal or any other required documents to the applicable
Exchange Agent prior to the Expiration Date, or (iii) who cannot complete the
procedures for book-entry transfer of Old Securities to the applicable
Exchange Agent's account with DTC prior to the Expiration Date, may effect a
tender if:
(a) The tender is made through an Eligible Institution;
(b) On or prior to the Expiration Date, the applicable Exchange Agent
receives from such Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail
or hand delivery) setting forth the name and address of the holder, the
certificate number(s) of such Old Securities (if possible) and the
principal amount of Old Securities tendered, stating that the tender is
being made thereby and guaranteeing that, within five business trading
days after the Expiration Date, (i) the Letter of Transmittal (or
facsimile thereof) together with the
27
<PAGE>
certificate(s) representing the Old Securities and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the applicable Exchange Agent, or (ii) that book-entry
transfer of such Old Securities into the applicable Exchange Agent's
account at DTC will be effected and confirmation of such book-entry
transfer will be delivered to the applicable Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Securities in proper form for transfer and all other
documents required by the Letter of Transmittal, or confirmation of
book-entry transfer of the Old Securities into the applicable Exchange
Agent's account at DTC, are received by the applicable Exchange Agent
within five business trading days after the Expiration Date.
Upon request to the applicable Exchange Agent, a Notice of Guaranteed
Delivery will be sent to holders who wish to tender their Old Securities
according to the guaranteed delivery procedures set forth above.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer:
The holder tendering Old Securities exchanges, assigns and transfers the Old
Securities to the Registrant and irrevocably constitutes and appoints the
applicable Exchange Agent as the holder's agent and attorney-in-fact to cause
the Old Securities to be assigned, transferred and exchanged. The holder
represents and warrants to the Registrant and the applicable Exchange Agent
that (i) it has full power and authority to tender, exchange, assign and
transfer the Old Securities and to acquire the New Securities in exchange for
the Old Securities, (ii) when the Old Securities are accepted for exchange,
the Registrant will acquire good and unencumbered title to the Old Securities,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim, (iii) it will, upon request, execute and deliver
any additional documents deemed by the Registrant to be necessary or desirable
to complete the exchange, assignment and transfer of tendered Old Securities
and (iv) acceptance of any tendered Old Securities by the Registrant and the
issuance of New Securities in exchange therefor will constitute performance in
full by the Registrant of its obligations under the Registration Rights
Agreements and the Registrant will have no further obligations or liabilities
thereunder to such holders (except with respect to accrued and unpaid
Liquidated Damages, if any). All authority conferred by the holder will
survive the death or incapacity of the holder and every obligation of the
holder will be binding upon the heirs, legal representatives, successors,
assigns, executors and administrators of the holder.
Each holder will also certify that it (i) is not an "affiliate" of the
Registrant within the meaning of Rule 405 under the Securities Act or that, if
it is an "affiliate," it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (ii) is
acquiring the New Securities in the ordinary course of its business and (iii)
has no arrangement with any person or intent to participate in, and is not
participating in, the distribution of the New Securities.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Securities may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Old Securities in the Exchange Offer, a telegram,
telex, facsimile transmission or letter indicating notice of withdrawal must
be received by the applicable Exchange Agent at its address set forth herein
prior to 5:00 p.m., New York City time, on the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having tendered
the Old Securities to be withdrawn (the "Depositor"), (ii) identify the Old
Securities to be withdrawn (including the certificate number or numbers and
principal amount of such Old Securities), (iii) be signed by the holder in the
same manner as the original signature on the Letter
28
<PAGE>
of Transmittal by which such Old Securities were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee or Transfer Agent with respect to the Old
Securities, as applicable, register the transfer of such Old Securities into
the name of the person withdrawing the tender and (iv) specify the name in
which any such Old Securities are to be registered, if different from that of
the Depositor. If Old Securities have been tendered pursuant to the procedure
for book-entry transfer, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn Old Securities
or otherwise comply with DTC's procedures. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Registrant, whose determination shall be final and binding
on all parties. Any Old Securities so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Securities
will be issued with respect thereto unless the Old Securities so withdrawn are
validly retendered. Any Old Securities which have been tendered but which are
not accepted for payment will be returned to the holder thereof without cost
to such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Securities may be
retendered by following one of the procedures described above under
"Procedures for Tendering" at any time prior to the Expiration Date.
UNTENDERED OLD SECURITIES
Holders of Old Securities whose Old Securities are not tendered or are
tendered but not accepted in the Exchange Offer will continue to hold such Old
Securities and will be entitled to all the rights and preferences and subject
to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer, the holders of Old Securities will
continue to be subject to the existing restrictions upon transfer thereof and
the Registrant will have no further obligations to such holders, other than
the Initial Purchaser, to provide for the registration under the Securities
Act of the Old Securities held by them. To the extent that Old Securities are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Securities could be adversely affected.
EXCHANGE AGENT
Bank of Montreal Trust Company, the Trustee under the Indenture, has been
appointed as the Exchange Agent for the Notes and American Stock Transfer and
Trust Company has been appointed as the Exchange Agent for the Exchangeable
Preferred Stock for the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal and requests for Notices of Guaranteed Delivery, and all executed
Letters of Transmittal and Notices of Guaranteed Delivery, should be directed
to the proper Exchange Agent addressed as follows:
FOR NOTES:
By Registered or Certified Mail, By Facsimile:
by hand or by Overnight Courier Bank of Montreal Trust Company
Bank of Montreal Trust Company Attention: Corporate Trust Department
Wall Street Plaza
88 Pine Street, 19th Floor (212) 701-7664
Confirm by Telephone:
New York, NY 10005
Attention: Corporate Trust Department (212) 701-7652
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
29
<PAGE>
FOR EXCHANGEABLE PREFERRED STOCK:
By Registered or Certified Mail, By Facsimile:
by hand or by Overnight Courier American Stock Transfer and Trust Company
American Stock Transfer and Trust Attention: Reorganization Department
Company (718) 234-5001
6201 15th Avenue 3rd Floor Confirm by Telephone:
Brooklyn, NY 11219 (718) 921-8200
Attention: Reorganization Department
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Registrant. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers, regular
employees or agents of the Registrant and its affiliates.
The Registrant has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Registrant, however, will
pay the applicable Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith and will pay the reasonable fees and expenses of holders
in delivering their Old Securities to the applicable Exchange Agent.
The cash expenses of the Registrant to be incurred in connection with the
Registrant's performance and completion of the Exchange Offer will be paid by
the Registrant. Such expenses include fees and expenses of the applicable
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
The Registrant will pay all transfer taxes, if any, applicable to the
exchange of Old Securities pursuant to the Exchange Offer. If, however,
certificates representing New Securities or Old Securities for principal
amounts not tendered or accepted for exchange are to be delivered to, or are
to be issued in the name of, any person other than the registered holder of
the Old Securities tendered, or if tendered Old Securities are registered in
the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Securities pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Upon consummation of the Exchange Offer, holders of Old Securities that were
not prohibited from participating in the Exchange Offer and did not tender
their Old Securities will not have any registration rights under the
Registration Rights Agreement with respect to such nontendered Old Securities
and, accordingly, such Old Securities will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the Old
Securities may not be offered or sold, unless registered under the Securities
Act and applicable state securities laws, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Registrant does not intend to register the Old
Securities under the Securities Act. Based on interpretations by the staff of
the Commission with respect to similar transactions, the Registrant believes
that the New Securities issued pursuant to the Exchange Offer in exchange for
Old Securities may be offered for resale, resold and otherwise transferred by
any holder of such New Securities (other than any such holder which is an
"affiliate" of the Registrant within the meaning of Rule 405 under the
Securities Act)
30
<PAGE>
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Securities are acquired in the
ordinary course of such holder's business, such holder has no arrangement or
understanding with any person to participate in the distribution of such New
Securities and neither the holder nor any other person is engaging in or
intends to engage in a distribution of the New Securities. If any holder has
any arrangement or understanding with respect to the distribution of the New
Securities to be acquired pursuant to the Exchange Offer, the holder (i) could
not rely on the applicable interpretations of the staff of the Commission and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-
dealer that receives New Securities for its own account in exchange for Old
Securities must acknowledge that it will deliver a prospectus in connection
with any resale of its New Securities. See "Plan of Distribution." The New
Securities may not be offered or sold unless they have been registered or
qualified for sale under applicable state securities laws or an exemption from
registration or qualification is available and is complied with. The Registrant
is required, under the Registration Rights Agreements, to register the New
Securities in any jurisdiction requested by the holders, subject to certain
limitations.
OTHER
Participation in the Exchange Offer is voluntary and holders should carefully
consider whether to accept. Holders of the Old Securities are urged to consult
their financial and tax advisors in making their own decisions on what action
to take.
Upon consummation of the Exchange Offer, holders of the Old Securities that
were not prohibited from participating in the Exchange Offer and did not tender
their Old Securities will not have any registration rights under the
Registration Rights Agreements with respect to such nontendered Old Securities
and, accordingly, such Old Securities will continue to be subject to the
restrictions on transfer contained in the legend thereon. However, in the event
the Company fails to consummate the Exchange Offer or a holder of Old
Securities notifies the Company in accordance with the Registration Rights
Agreements that it will be unable to participate in the Exchange Offer due to
circumstances delineated in the Registration Rights Agreements, then the holder
of the Old Securities will have certain rights to have such Old Securities
registered under the Securities Act pursuant to the Registration Rights
Agreements and subject to conditions contained therein.
The Registrant has not entered into any arrangement or understanding with any
person to distribute the New Securities to be received in the Exchange Offer,
and to the best of the Registrant's information and belief, each person
participating in the Exchange Offer is acquiring the New Securities in its
ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the New Securities to be received
in the Exchange Offer. In this regard, the Registrant will make each person
participating in the Exchange Offer aware (through this Prospectus or
otherwise) that if the Exchange Offer is being registered for the purpose of
secondary resale, any holder using the Exchange Offer to participate in a
distribution of New Securities to be acquired in the registered Exchange Offer
(i) may not rely on the staff position enunciated in Morgan Stanley and Co.
Inc. (avail. June 5, 1991) and Exxon Capital Holding Corp. (avail. May 13,
1988) or similar letters and (ii) must comply with registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.
ACCOUNTING TREATMENT
The New Securities will be recorded at the same carrying value as the Old
Securities as reflected in the Registrant's accounting records on the Exchange
Date. Accordingly, no gain or loss for accounting purposes will be recognized
by the Registrant. The expenses of the Exchange Offer will be expensed over the
term of the New Securities.
31
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS EXCEPT PAR VALUE AMOUNTS)
The following table sets forth the cash and capitalization of the Company as
of June 30, 1997, on an actual and as adjusted basis to reflect the September
Offering, the July Offerings and the Hyperion Offerings. This table should be
read in conjunction with Adelphia's consolidated financial statements and
related notes thereto included in the Form 10-K and the Form 10-Q.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------
ACTUAL AS ADJUSTED (C)
----------- ---------------
<S> <C> <C>
Cash and cash equivalents, excluding restricted
cash............................................ $ 25,010 $ 379,310
Restricted cash (a).............................. -- 83,500
----------- -----------
Total cash and cash equivalents, including
restricted cash............................... $ 25,010 $ 462,810
=========== ===========
Long-term debt including current maturities (b):
Notes of Subsidiaries to banks.................. $ 927,600 $ 727,850
Notes of Subsidiaries to institutions........... 343,100 59,100
Other Debt...................................... 15,997 15,997
----------- -----------
Total Subsidiary Bank and Institutional Debt... 1,286,697 802,947
----------- -----------
12 1/4% Senior Secured Notes of Hyperion due
2004........................................... -- 250,000
13% Senior Discount Notes of Hyperion due 2003.. 193,900 193,900
Other Hyperion Debt............................. 2,496 2,496
----------- -----------
Total Hyperion Debt............................ 196,396 446,396
----------- -----------
Total Subsidiaries' Debt...................... 1,483,093 1,249,343
----------- -----------
9 1/4% Senior Notes due 2002.................... -- 325,000
10 1/2% Senior Notes due 2004................... -- 150,000
9 7/8% Senior Notes due 2007.................... 347,316 347,316
12 1/2% Senior Notes due 2002................... 277,385 69,838
10 1/4% Senior Notes due 2000................... 99,366 99,366
11 7/8% Senior Debentures due 2004.............. 124,548 124,548
9 7/8% Senior Debentures due 2005............... 128,291 128,291
9 1/2% Senior Pay-In-Kind Notes due 2004........ 177,897 177,897
----------- -----------
Total Parent Debt............................... 1,154,803 1,422,256
----------- -----------
Total long-term debt including current
maturities................................... 2,637,896 2,671,599
----------- -----------
Hyperion 12 7/8% Series A senior exchangeable
redeemable preferred stock due 2007, $.01 par
value, 380,000 shares authorized and 200,000
shares outstanding, as adjusted (aggregate
liquidation preference $200,000) ............... -- 194,500
Series A cumulative exchangeable preferred stock,
$.01 par value, 1,500,000 shares authorized
and none outstanding, as adjusted............... -- --
Series B cumulative exchangeable preferred stock,
$.01 par value, 1,500,000 shares authorized
and outstanding, as adjusted (aggregate
liquidation preference $150,000)................ -- 147,750
Stockholders' equity (deficiency):
Series C cumulative convertible preferred
stock, $.01 par value, 100,000 shares
authorized and outstanding, as adjusted; each
share of preferred stock convertible into
117.9245 shares of Class A Common Stock at the
option of the holder (aggregate liquidation
preference $100,000)........................... -- 97,000
Class A Common Stock, $.01 par value,
200,000,000 shares authorized and 19,702,308
shares outstanding............................. 197 197
Class B Common Stock, $.01 par value,
25,000,000 shares authorized and 10,944,476
shares outstanding............................. 109 109
Additional paid-in capital...................... 241,669 241,669
Accumulated deficit............................. (1,515,920) (1,539,373)
----------- -----------
Total stockholders' equity (deficiency)....... (1,273,945) (1,200,398)
----------- -----------
Total capitalization......................... $ 1,363,951 $ 1,813,451
=========== ===========
</TABLE>
- --------
(a) Approximately $83,500 of the proceeds from the Hyperion Note Offering was
placed in an escrow account for the purchase of pledged securities to
provide for payment in full when due of the first six scheduled interest
payments on the Hyperion Senior Secured Notes.
(b) Reference is made to Note 3 to Adelphia's consolidated financial
statements in the Form 10-K, for a description of Notes of Subsidiaries to
Banks and Institutions. See "The Company--Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" in the Form 10-K.
(c) Gives effect to the application of (i) the net proceeds of approximately
$321,250 from the September Offering to purchase, redeem or otherwise
retire at least $208,000 of the 12 1/2% Senior Notes due 2002,
approximately $12,000 for a redemption premium and the remainder to repay
revolving credit facilities of Adelphia's subsidiaries, (ii) the net
proceeds of $393,500 from the July Offerings to the repayment of Notes of
Subsidiaries to institutions of $284,000 plus a premium of approximately
$11,000 and the repayment of Notes of Subsidiaries to Banks of
approximately $98,500, (iii) the net proceeds of $243,300 from the
Hyperion Note Offering to cash and cash equivalents and restricted cash,
(iv) the net proceeds of $194,500 from the Hyperion Preferred Stock
Offering to cash and cash equivalents and (v) the effects of the Exchange
Offer.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
The selected consolidated financial data as of and for each of the five
years in the period ended March 31, 1997 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
thereto for each of the three years in the period ended March 31, 1997 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Form 10-K which is incorporated herein by
reference. The statement of operations data with respect to fiscal years ended
March 31, 1993 and 1994, and the balance sheet data at March 31, 1993, 1994
and 1995, have been derived from audited consolidated financial statements of
the Company not included in the Form 10-K. The statements of operations and
balance sheet data as of and for each of the four years ended March 31, 1997
of Hyperion have been derived from audited consolidated financial statements
of Hyperion not included in the Form 10-K. The unaudited information of
Hyperion for the fiscal year ended March 31, 1993 is derived from other
Hyperion information. The selected consolidated financial data as of and for
the three months ended June 30, 1996 and 1997 are unaudited; however, in the
opinion of management, such data reflect all adjustments (consisting of only
normal recurring adjustments) necessary to fairly present the data for such
interim periods. Operating results for the three months ended June 30, 1997
are not necessarily indicative of the results that may be expected for the
year ending March 31, 1998.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31, JUNE 30,
----------------------------------------------------- ------------------
1993 1994 1995 1996 1997 1996 1997
--------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues................ $ 305,222 $ 319,045 $ 361,505 $ 403,597 $ 472,778 $111,011 $122,644
Direct Operating and
Programming Expenses... 82,377 90,547 106,993 124,116 148,982 33,597 39,673
Selling, General and
Administrative
Expenses............... 49,468 52,801 63,487 68,357 81,763 18,638 22,259
Depreciation and
Amortization........... 90,406 89,402 97,602 111,031 124,066 28,477 33,733
Rate Regulation Charge.. -- -- -- 5,300 -- -- --
--------- --------- --------- --------- --------- -------- --------
Operating Income ....... 82,971 86,295 93,423 94,793 117,967 30,299 26,979
Interest Income from
Affiliates............. 5,216 9,188 11,112 10,623 8,367 2,049 2,151
Other Income (Expense).. 1,447 (299) 1,453 -- -- -- --
Priority Investment In-
come from Olympus...... 22,300 22,300 22,300 28,852 42,086 9,817 11,765
Cash Interest Expense... (164,695) (180,456) (180,942) (194,403) (199,332) (55,500) (57,030)
Noncash Interest
Expense................ (164) (1,680) (14,756) (16,288) (41,360) (4,996) (6,858)
Equity in Loss of Joint
Ventures............... (46,841) (30,054) (44,349) (46,257) (59,169) (14,647) (21,738)
Gain on Sale of
Investments............ -- -- -- -- 12,151 8,405 --
--------- --------- --------- --------- --------- -------- --------
Loss before Income
Taxes, Extraordinary
(Loss)/Gain and
Cumulative Effect of
Change in Accounting
Principle (a).......... (99,766) (94,706) (111,759) (122,680) (119,290) (24,573) (44,731)
Income Tax (Expense)
Benefit................ (3,143) (2,742) 5,475 2,786 358 (166) 70
--------- --------- --------- --------- --------- -------- --------
Loss before
Extraordinary
(Loss)/Gain and
Cumulative Effect of
Change in Accounting
Principle.............. (102,909) (97,448) (106,284) (119,894) (118,932) (24,739) (44,661)
Extraordinary
(Loss)/Gain on Early
Retirement of Debt..... (14,386) (752) -- -- (11,710) (2,079) 2,300
Cumulative Effect of
Change in
Accounting for Income
Taxes (a).............. (59,500) (89,660) -- -- -- -- --
--------- --------- --------- --------- --------- -------- --------
Net Loss................ $(176,795) $(187,860) $(106,284) $(119,894) $(130,642) $(26,818) $(42,361)
========= ========= ========= ========= ========= ======== ========
Loss per weighted
average share of common
stock before
extraordinary
(loss)/gain and
cumulative effect of
change in accounting
principle ............. $ (6.80) $ (5.66) $ (4.32) $ (4.56) $ (4.50) $ (0.94) $ (1.62)
Net loss per weighted
average share of common
stock ................. (11.68) (10.91) (4.32) (4.56) (4.94) (1.02) (1.54)
Cash dividends declared
per common share ...... -- -- -- -- -- -- --
Ratio of Earnings
Available to Cover
Combined Fixed Charges
and Preferred Stock
Dividends (g).......... -- -- -- -- -- -- --
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
MARCH 31,
--------------------------------------------------------------------------
AS ADJUSTED
1993 1994 1995 1996 1997 1997 (H)
---------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Adelphia
Total Assets.... $ 949,593 $ 1,073,846 $ 1,267,291 $ 1,367,579 $1,643,826 $2,093,326
Total Debt...... 1,731,099 1,793,711 2,021,610 2,175,473 2,544,039 2,577,741
Hyperion
Total Assets.... 4,316 14,765 23,212 35,269 174,601 619,101
Total Debt...... 4,814 19,968 35,541 50,855 215,675 465,675
Adelphia excluding Hyperion
Total Assets.... 945,277 1,059,081 1,244,079 1,332,310 1,469,225 1,474,225
Total Debt...... 1,726,285 1,773,743 1,986,069 2,124,618 2,328,364 2,112,066
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------------------------
AS ADJUSTED
1993 1994 1995 1996 1997 1997 (H)
---------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA AND
FINANCIAL
RATIOS:
Adelphia
Revenues......... $ 305,222 $ 319,045 $ 361,505 $ 403,597 $ 472,778 $ 472,778
Affiliate
interest and
priority
investment
income.......... 27,516 31,488 33,412 39,475 50,453 50,453
EBITDA (b)....... 202,340 207,936 225,890 247,999 292,486 292,486
Interest
expense......... (164,859) (182,136) (195,698) (210,691) (240,692) (244,453)
Preferred stock
dividends....... -- -- -- -- -- (54,624)
Capital
expenditures.... 70,975 75,894 92,082 100,089 129,609 129,609
Hyperion
Revenues......... $ 89 $ 417 $ 1,729 $ 3,322 $ 5,088 $ 5,088
Affiliate
interest and
priority
investment
income.......... -- -- -- -- -- --
EBITDA (b)....... (851) (1,958) (2,177) (2,452) (5,124) (5,124)
Interest
expense......... -- (2,164) (3,321) (6,088) (28,377) (59,001)
Preferred stock
dividends....... -- -- -- -- -- (27,000)
Capital
expenditures.... 1,950 3,097 2,850 6,084 36,127 36,127
Adelphia, excluding Hyperion
Revenues......... $ 305,133 $ 318,628 $ 359,776 $ 400,275 $ 467,690 $ 467,690
Affiliate
interest and
priority
investment
income.......... 27,516 31,488 33,412 39,475 50,453 50,453
EBITDA (b)....... 203,191 209,894 228,067 250,451 297,610 297,610
Interest
expense......... (164,859) (179,972) (192,377) (204,603) (212,315) (185,452)
Preferred stock
dividends....... -- -- -- -- -- (27,624)
Capital
expenditures.... 69,025 72,797 89,232 94,005 93,482 93,482
Total debt to
EBITDA (c)...... 8.34 8.46 8.51 8.29 7.64 6.93
EBITDA to total
interest
expense (d)..... 1.23 1.17 1.19 1.22 1.40 1.60
EBITDA to
combined
interest
expense and
preferred stock
dividends (e)... 1.23 1.17 1.19 1.22 1.40 1.40
<CAPTION>
JUNE 30, 1997
JUNE 30, --------------------------
1996 ACTUAL AS ADJUSTED(I)
----------- ----------- --------------
<S> <C> <C> <C>
BALANCE SHEET
DATA:
Adelphia
Total Assets.... $1,541,452 $1,708,795 $2,158,295
Total Debt...... 2,409,456 2,637,896 2,671,599
Hyperion
Total Assets.... 176,793 169,907 614,407
Total Debt...... 194,475 222,251 472,251
Adelphia excluding Hyperion
Total Assets.... 1,364,659 1,538,888 1,543,888
Total Debt...... 2,214,981 2,415,645 2,199,348
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------------------------
ACTUAL
----------------------- AS ADJUSTED
1996 1997 1997 (I)
----------- ----------- --------------
<S> <C> <C> <C>
OTHER DATA AND
FINANCIAL
RATIOS:
Adelphia
Revenues......... $ 111,011 $ 122,644 $ 125,269
Affiliate
interest and
priority
investment
income.......... 11,866 13,916 13,916
EBITDA (b)....... 70,642 74,628 76,203
Interest
expense......... (60,496) (63,888) (64,828)
Preferred stock
dividends....... -- -- (13,306)
Capital
expenditures.... 24,944 43,534 43,534
Hyperion
Revenues......... $ 1,102 $ 1,520 $ 1,520
Affiliate
interest and
priority
investment
income.......... -- -- --
EBITDA (b)....... (784) (2,040) (2,040)
Interest
expense......... (6,169) (8,077) (15,733)
Preferred stock
dividends....... -- -- (6,400)
Capital
expenditures.... 1,818 18,766 18,766
Adelphia, excluding Hyperion
Revenues......... $ 109,909 $ 121,124 $ 123,749
Affiliate
interest and
priority
investment
income.......... 11,866 13,916 13,916
EBITDA (b)....... 71,426 76,668 78,243
Interest
expense......... (54,327) (55,811) (49,095)
Preferred stock
dividends....... -- -- (6,906)
Capital
expenditures.... 23,126 24,768 24,768
Total debt to
EBITDA (c)...... 7.75 7.88 7.03
EBITDA to total
interest
expense (d)..... 1.31 1.37 1.59
EBITDA to
combined
interest
expense and
preferred stock
dividends (e)... 1.31 1.37 1.40
</TABLE>
34
<PAGE>
- --------
(a) "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 ("SFAS") No.
109, "Accounting for Income Taxes," which requires an asset and liability
approach for financial accounting and reporting for income taxes. The
adoption of SFAS No. 109 resulted in the cumulative recognition of an
additional liability by Olympus and the Company of $59,500 and $89,660,
respectively.
(b) Earnings before interest expense, income taxes, depreciation and
amortization, equity in net loss of joint ventures, other noncash charges,
extraordinary loss and cumulative effect of change in accounting principle
("EBITDA"). EBITDA includes affiliate interest and priority investment
income on the Company's investment in Olympus, although there can be no
assurance that such priority investment income will be available to the
Company in the future. 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. While EBITDA is not an alternative indicator of operating
performance to operating income or an alternative to cash flows from
operating activities as a measure of liquidity as defined by generally
accepted accounting principles, and, while EBITDA may not be comparable to
other similarly titled measures of other companies, the Company's
management believes EBITDA is a meaningful measure of performance as
substantially all of the Company's financing agreements contain financial
covenants based on EBITDA.
(c) Based on total debt outstanding at the end of the period, divided by
annualized EBITDA for the quarter ending the period presented. The Company
believes that this presentation is consistent with covenant tests which
limit the incurrence of indebtedness in certain of the Company's loan
agreements and that this ratio is commonly used for the cable television
industry as a measure of leverage.
(d) Based on EBITDA for the period presented divided by interest expense
recorded for the applicable period.
(e) Based on EBITDA for the period presented divided by combined interest
expense and preferred stock dividends recorded for the applicable period.
(f) Percentage represents EBITDA divided by revenues.
(g) For purposes of calculating the ratio of earnings available to cover
combined fixed charges and preferred stock dividends, (i) earnings consist
of loss before income taxes and extraordinary items plus fixed charges,
excluding capitalized interest and (ii) fixed charges consist of interest,
whether expensed or capitalized, plus (x) amortization of debt issuance
costs, (y) the assumed interest component of rent expense and (z)
preferred stock dividends. For the years ended March 31, 1993, 1994, 1995,
1996 and 1997 and the three-month periods ended June 30, 1996 and June 30,
1997, respectively, the Company's earnings were insufficient to cover its
combined fixed charges and preferred stock dividends by $53,934, $65,997,
$69,146, $78,189, $61,848, $10,368 and $23,340, respectively. On a pro
forma basis, the Company's earnings were insufficient to cover its fixed
charges by $120,233 and $37,586 for the year ended March 31, 1997 and for
the three months ended June 30, 1997, respectively.
(h) As adjusted data for the year ended March 31, 1997, give effect to the
application of (i) the net proceeds of approximately $321,250 from the
September Offering to purchase, redeem or otherwise retire at least
$208,000 of the 12 1/2% Senior Notes due 2002, approximately $12,000 for a
redemption premium and the remainder to repay revolving credit facilities
of Adelphia's subsidiaries, (ii) the net proceeds of $393,500 from the
July Offerings to the repayment of Notes of Subsidiaries to institutions
of $284,000 plus a premium of approximately $11,000 and the repayment of
Notes of Subsidiaries to Banks of approximately $98,500, and (iii) the net
proceeds of $437,800 from the Hyperion Offerings to cash and cash
equivalents and restricted cash. See "Use of Proceeds" and
"Capitalization."
(i) As adjusted data for the three month period ended June 30, 1997, give
effect to the Booth Acquisition and to the application of (i) the net
proceeds of approximately $321,250 from the September Offering to
purchase, redeem or otherwise retire at least $208,000 of the 12 1/2%
Senior Notes due 2002, approximately $12,000 for a redemption premium and
the remainder to repay revolving credit facilities of Adelphia's
subsidiaries, (ii) the net proceeds of $393,500 from the July Offerings to
the repayment of Notes of Subsidiaries to institutions of $284,000 plus a
premium of approximately $11,000 and the repayment of Notes of
Subsidiaries to Banks of approximately $98,500, and (iii) the net proceeds
of $437,800 from the Hyperion Offerings to cash and cash equivalents and
restricted cash. See "Use of Proceeds" and "Capitalization." Adelphia as
adjusted revenue and EBITDA for the three month period ended June 30, 1997
excluding the effect of the Booth Acquisition would be $122,644 and
$74,628, respectively. Adelphia excluding Hyperion as adjusted revenue,
EBITDA, total debt to EBITDA, EBITDA to total interest expense and EBITDA
to combined interest expense and preferred stock dividends for the three
month period ended June 30, 1997 excluding the effect of the Booth
Acquisition would be $121,124, $76,668, 7.17, 1.56 and 1.37, respectively.
35
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The New Notes, like the Old Notes, will be issued pursuant to the Indenture,
dated July 7, 1997 (the "Indenture"), among the Company and Bank of Montreal
Trust Company, as trustee (the "Trustee"). The terms of the Senior Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
terms of the New Notes are substantially identical to the Old Notes in all
material respects (including interest rate and maturity), except that (i) the
New Notes will not be subject to the restrictions on transfer (other than with
respect to holders that are broker-dealers, persons who participated in the
distribution of the Old Notes or affiliates) and (ii) the Notes Registration
Rights Agreement covenants regarding registration and the related Liquidated
Damages (other than those that have accrued and were not paid) with respect to
Registration Defaults will have been deemed satisfied. The Notes are subject
to all such terms, and holders of Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified
by reference to the Indenture, including the definitions therein of certain
terms used below. A copy of the Indenture and Notes Registration Rights
Agreement is available as set forth under "Available Information." The
definitions of certain terms used in the following summary are set forth below
under "--Certain Definitions." As used in this section, the term "Company"
refers only to Adelphia Communications Corporation and not to its
subsidiaries.
As of the date of this Prospectus, $150,000,000 principal amount of the Old
Notes was outstanding.
The Indenture authorizes the issuance of up to $250,000,000 in aggregate
principal amount of the Notes. The Notes are general senior 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 July 15, 2004. Adelphia will pay interest on the
Notes on January 15 and July 15 of each year, commencing January 15, 1998, to
the persons who are registered holders at the close of business on the January
1 and July 1 immediately preceding the interest payment date. The Notes will
not be redeemable prior to the maturity date.
The Notes will be issued only in fully registered form without coupons and
will be issued in denominations of $1,000 and integral multiples thereof.
The Indenture and the existing indentures under which the 9 7/8% Senior
Notes due 2007 (the "9 7/8% Notes"), the 12 1/2% Senior Notes due 2002 (the
"12 1/2% Notes"), the 10 1/4% Senior Notes due 2000 (the "10 1/4% Notes"), the
9 1/4% Senior Notes due 2002 (the "9 1/4% Notes") the 9 1/2% Senior Pay-In-
Kind Notes due 2004 (the "9 1/2% Notes"), the 11 7/8% Senior Debentures due
2004 (the "11 7/8% Debentures") and the 9 7/8% Senior Debentures due 2005 (the
"9 7/8% Debentures") of Adelphia were issued contain covenants which may
afford holders of Notes, the 9 7/8% Notes, the 12 1/2% Notes, the 10 1/4%
Notes, the 9 1/4% Notes, the 9 1/2% Notes, the 11 7/8% Debentures and the 9
7/8% Debentures 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, the 9 7/8%
Notes, the 12 1/2% Notes, the 10 1/4% Notes, the 9 1/4% Notes, the 9 1/2%
Notes, 11 7/8% Debentures and 9 7/8% Debentures 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.
On the date of the Indenture, the only Unrestricted Subsidiaries of Adelphia
are Hyperion, Global Cablevision, Inc. and Orchard Park Cablevision, Inc. and
their respective subsidiaries. See the Form 10-K and the Form 10-Q.
The Notes are not redeemable and there is no mandatory redemption or sinking
fund prior to maturity.
36
<PAGE>
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Adelphia and the Initial Purchasers entered into the Notes Registration
Rights Agreement on July 7, 1997 (the "Closing Date"). Pursuant to the Notes
Registration Rights Agreement, Adelphia has agreed to use its reasonable
efforts to file with the Commission on or prior to 90 days after the Closing
Date the Exchange Offer Registration Statement on the appropriate form under
the Securities Act with respect to the Exchange Notes. Upon the effectiveness
of the Exchange Offer Registration Statement, Adelphia will offer to the
holders of Transfer Restricted Securities pursuant to the Exchange Offer who
are able to make certain representations the opportunity to exchange their
Transfer Restricted Securities for Exchange Notes. If (i) Adelphia is not
required to file the Exchange Offer Registration Statement or permitted to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy, or (ii) any Holder of Transfer Restricted
Securities notifies Adelphia on or prior to the 20th Business Day following
consummation of the Exchange Offer that it (a) is prohibited by law or
Commission policy from participating in the Exchange Offer or (b) may not
resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales
or (iii) any holder of Transfer Restricted Securities is a broker-dealer and
holds Notes acquired directly from Adelphia or an affiliate of Adelphia, and
shall so notify Adelphia, Adelphia will file with the Commission a Shelf
Registration Statement to cover resales of the Notes by the Holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. Adelphia will use its best
efforts to cause the applicable registration statement to be declared
effective by the Commission within the applicable time period. For purposes of
the foregoing, "Transfer Restricted Securities" means each Note until (i) the
date on which such Note has been exchanged by a person other than a broker-
dealer for an Exchange Note in the Exchange Offer, (ii) following the exchange
by a broker-dealer in the Exchange Offer of a Note for an Exchange Note, the
date on which such Exchange Note is sold to a purchaser who receives from such
broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on
which such Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Note is distributed to the public pursuant to Rule 144
under the Securities Act. Notwithstanding the foregoing, at any time after
Consummation (as defined in the Notes Registration Rights Agreement) of the
Exchange Offer, Adelphia may allow the Shelf Registration Statement to cease
to be effective and usable if (i) the Board of Directors of Adelphia
determines in good faith that such action is in the best interests of
Adelphia, and Adelphia notifies the Holders within a certain period of time
after the Board of Directors of Adelphia makes such determination or (ii) the
prospectus contained in the Shelf Registration Statement contains an untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided that the period referred to in
the Notes Registration Rights Agreement during which the Shelf Registration
Statement is required to be effective and usable will be extended by the
number of days during which such registration statement was not effective or
usable pursuant to the foregoing provisions.
The Notes Registration Rights Agreement provides that (i) Adelphia will use
its reasonable efforts to file an Exchange Offer Registration Statement with
the Commission on or prior to 90 days after the Closing Date, (ii) Adelphia
will use its best efforts to have the Exchange Offer Registration Statement
declared effective by the Commission on or prior to 180 days after the Closing
Date (which 180-day period shall be extended for a number of days equal to the
number of Business Days, if any, that the Commission is officially closed
during such period), (iii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, Adelphia will commence the Exchange Offer
and use its best efforts to issue on or prior to 30 days after the date on
which the Exchange Offer Registration Statement was declared effective by the
Commission, Exchange Notes in exchange for all Notes tendered prior thereto in
the Exchange Offer and (iv) if obligated to file the Shelf Registration
Statement, Adelphia will use its best efforts to file the Shelf Registration
Statement with the Commission on or prior to 60 days after such filing
obligation arises and to cause the Shelf Registration Statement to be declared
effective by the Commission on or prior to 90 days after such filing
obligation arises. If (a) Adelphia fails to file either of the Registration
Statements required by the Notes Registration Rights
37
<PAGE>
Agreement on or before the date specified for such filing, (b) either of such
Registration Statements is not declared effective by the Commission on or
prior to the date specified for such effectiveness (the "Effectiveness Target
Date"), (c) Adelphia fails to consummate the Exchange Offer within 30 days of
the Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) subject to the last sentence of the preceding paragraph, the
Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective, but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Notes Registration Rights Agreement (each such event referred
to in clauses (a) through (d) above is a "Registration Default"), then,
subject to the last sentence of the preceding paragraph, Adelphia will pay
Liquidated Damages to each holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of
such Registration Default, in an amount equal to 0.25% per annum on the
principal amount of Notes constituting Transfer Restricted Securities held by
such Holder. The amount of the Liquidated Damages will increase by an
additional 0.25% per annum with respect to each subsequent 90-day period until
all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of 2.0% per annum on the principal amount of Notes
constituting Transfer Restricted Securities. All accrued Liquidated Damages
will be paid by Adelphia in cash on each Damages Payment Date to the Global
Note Holder (and any holder of Certificated Securities who has given wire-
transfer instructions to Adelphia at least 10 Business Days prior to the
Damages Payment Date) by wire transfer of immediately available funds and to
all other Holders of Certificated Securities by mailing checks to their
registered addresses. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
Holders of the Notes will be required to make certain representations to
Adelphia (as described in the Notes Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Notes Registration Rights Agreement in order to have their Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Notes Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
by reference to, all the provisions of the Notes Registration Rights
Agreement, a copy of which will be available upon request to Adelphia.
Except as described below under "--Modification of Indenture," the Old Notes
and the New Notes will be considered collectively to be a single class for all
purposes under the Indenture, including, without limitation, waivers,
amendments, redemptions and repurchase offers, and for purposes of this
"Description of the Notes" (except under this caption, "--Registration Rights;
Liquidated Damages"), all reference herein to "Notes" shall be deemed to refer
collectively to the Old Notes and any New Notes, unless the context otherwise
requires.
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.
38
<PAGE>
"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).
"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.
"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.
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"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 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 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,
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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 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 February 22, 1994, 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.
"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 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 February 22, 1994 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
$5,000,000 in the
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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 February 22, 1994, 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 January 1, 1993, minus the
aggregate amount of all Restricted Investments (excluding Restricted
Investments made with respect to Olympus) since January 1, 1993, (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
(ii), (iii), (iv) or (v) unless pro forma for 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): (a) in
the event the Notes are rated by either Moody's or Standard & Poor's 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 on the Rating Date, the
rating of the Notes by either Moody's or Standard and Poor's 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 Notes.
"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 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 July 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.
"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
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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.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary, (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 and (c) any subsidiary which as of the date of
the Indenture has been declared 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 June 30, 1997, the total indebtedness of
such subsidiaries to banks and institutions, on a consolidated basis,
aggregated approximately $1.5 billion. See "Risk Factors--Holding Company
Structure; Restrictive Covenants."
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 $150,000,000
of Notes originally issued under the Indenture) 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
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"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>
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
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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 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 debt and such debt 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 February 22, 1994) owned by Adelphia and its Restricted
Subsidiaries as of February 22, 1994, provided however, that Adelphia and its
Restricted Subsidiaries may sell additional assets of up to 10% of assets held
as of February 22, 1994 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 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:
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(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;
(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, provided that each Note purchased and each
such new Note issued shall be in an original principal amount in
denominations of $1,000 and integral multiples thereof; 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 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 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; provided that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
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
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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 9 7/8% Notes, the 12 1/2% Notes, the 10 1/4% Notes,
the 9 1/4% Notes, the 9 1/2% Notes, the 11 7/8% Debentures and the 9 7/8%
Debentures, which together represent outstanding indebtedness in the aggregate
principal amount of approximately $1.3 billion on a pro forma basis as of June
30, 1997, 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
default under such credit agreements. In the event that Adelphia is required
to purchase the 9 7/8% Notes, the 12 1/2% Notes, the 10 1/4% Notes, the 9 1/4%
Notes, the 9 1/2% Notes, 11 7/8% Debentures, 9 7/8% Debentures the 10 1/4%
Notes, the 9 1/2% 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 9 7/8% Notes,
the 12 1/2% Notes, the 10 1/4% Notes, the 9 1/4% Notes, the 9 1/2% Notes, the
11 7/8% Debentures 12 1/2% and the 9 7/8% Debentures 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 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
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notice to the holders of the Notes of any default (except in payment of
principal 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 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 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 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 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
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uncertificated Notes in addition to certificated Notes, issuing up to
$100,000,000 in aggregate principal amount of additional Notes pursuant to the
Indenture 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 or change the time for payment of interest on any Note, (iii)
reduce the principal of 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, (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 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 to be 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 9 7/8% Notes, the
12 1/2% Notes, the 10 1/4% Notes, the 9 1/4% Notes, the 9 1/2% Notes, the 11
7/8% Debentures and the 9 7/8% Debentures. 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.
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DESCRIPTION OF EXCHANGEABLE PREFERRED STOCK AND EXCHANGE DEBENTURES
The Exchangeable Preferred Stock was issued in a private transaction that
was not subject to the registration requirements of the Securities Act. Of the
1,500,000 shares originally issued, 550,000 were purchased by a Rigas family
affiliate and subsequently sold to a nonaffiliate in a private transaction. A
copy of the Certificate of Designations, the Exchange Indenture and the
Exchangeable Preferred Stock Registration Rights Agreement are available upon
request therefor made to Adelphia. Unless the context otherwise requires,
terms used in this section but not otherwise defined in this section shall
have meanings substantially similar to the meanings of those terms as defined
under "Description of the Notes."
DESCRIPTION OF EXCHANGEABLE PREFERRED STOCK
General
The following is a summary of certain terms of the Exchangeable Preferred
Stock. The terms of the Exchangeable Preferred Stock are set forth in the
Certificate of Designations, Preferences and Relative, Participating, Optional
and Other Special Rights of Preferred Stock and Qualifications, Limitations
and Restrictions Thereof (the "Certificate of Designations"). This summary is
not intended to be complete and is subject to, and qualified by reference to,
Adelphia's Certificate of Incorporation, which includes the Certificate of
Designations, including the definitions therein of certain terms used below.
The definitions of certain terms used in the following summary and not
otherwise defined in the following summary are substantially as set forth
above under "Description of the Notes--Certain Definitions."
Pursuant to the Certificate of Designations, 1.5 million shares of Series A
Exchangeable Preferred Stock and 1.5 million shares of Series B Exchangeable
Preferred Stock, both with a liquidation preference of $100.00 per share (the
"Liquidation Preference") are authorized for issuance in the Exchangeable
Preferred Stock Offering and the Exchange Offer. The Exchangeable Preferred
Stock will, when issued, be fully paid and nonassessable, and Holders thereof
will have no preemptive rights in connection therewith.
The Liquidation Preference of the Exchangeable Preferred Stock is not
necessarily indicative of the price at which the shares of Exchangeable
Preferred Stock will actually trade at or after the time of their issuance,
and the Exchangeable Preferred Stock may trade at prices below its Liquidation
Preference. The market price of the Exchangeable Preferred Stock can be
expected to fluctuate with changes in the financial markets and economic
conditions, the financial condition and prospects of Adelphia and other
factors that generally influence the market prices of securities. See "Risk
Factors."
The transfer agent for the Exchangeable Preferred Stock is American Stock
Transfer and Trust Company (the "Transfer Agent") unless and until a successor
is selected by Adelphia. The offices of the Transfer Agent are located at 40
Wall Street, New York, NY 10005.
Ranking
The Exchangeable Preferred Stock ranks pari passu in right of payment to the
Convertible Preferred Stock and senior to the common stock of Adelphia as to
dividends and upon liquidation, dissolution or winding- up of Adelphia. The
Certificate of Designations provides that Adelphia may not, without the
consent of the Holders of at least a majority of the then-outstanding shares
of Exchangeable Preferred Stock (including any shares of Exchangeable
Preferred Stock held by Affiliates of Adelphia), authorize, create (by way of
reclassification or otherwise) or issue any additional class or series of
Capital Stock of Adelphia ranking on a parity with the Exchangeable Preferred
Stock ("Parity Securities") or any obligation or security convertible or
exchangeable into or evidencing a right to purchase, shares of any class or
series of Parity Securities; provided that no such consent shall be required
unless such Parity Securities mature or have a mandatory redemption date prior
to July 15, 2009. The Certificate of Designations provides that Adelphia may
not, without the consent of the Holders of at least two-thirds of the then-
outstanding shares of Exchangeable Preferred Stock (including any shares of
Exchangeable Preferred Stock held by Affiliates of Adelphia), authorize,
create (by way of reclassification or
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otherwise) or issue any class or series of Capital Stock of Adelphia ranking
senior to the Exchangeable Preferred Stock ("Senior Securities") or any
obligation or security convertible or exchangeable into or evidencing a right
to purchase, shares of any class or series of Senior Securities.
Dividends
The Holders of the Exchangeable Preferred Stock will be entitled to receive,
when, as and if dividends are declared by the Board of Directors out of funds
of Adelphia legally available therefor, cumulative preferential dividends from
the issue date of the Exchangeable Preferred Stock accruing at the rate per
share of $13.00 per annum, payable semi-annually in arrears on January 15 and
July 15 in each year or, if any such date is not a business day, on the next
succeeding business day (each, a "Dividend Payment Date"), to the Holders of
record as of the next preceding January 1 and July 1 (each, a "Record Date").
Dividends will be payable in cash. The first dividend payment will be payable
on January 15, 1998. Dividends payable on the Exchangeable Preferred Stock
will be computed on the basis of a 360-day year of twelve 30-day months and
will be deemed to accrue on a daily basis. For a discussion of certain federal
income tax considerations relevant to the payment of dividends on the
Exchangeable Preferred Stock, see "Certain Federal Income Tax Considerations--
Dividends on Exchangeable Preferred Stock."
Dividends on the Exchangeable Preferred Stock will accrue whether or not
Adelphia has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends will accumulate to the extent they are not paid on the
Dividend Payment Date for the period to which they relate. Accumulated unpaid
dividends will bear interest at the rate of 13% per annum. The Certificate of
Designations provides that Adelphia will take all actions required or
permitted under Delaware law to permit the payment of dividends on the
Exchangeable Preferred Stock.
No dividend whatsoever shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any outstanding Exchangeable Preferred
Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid upon, or declared and a
sufficient sum set apart for the payment of such dividend upon, all
outstanding shares of Exchangeable Preferred Stock. If dividends on the
Exchangeable Preferred Stock with respect to any dividend period are not paid
in full, the Exchangeable Preferred Stock will share any partial dividends
paid on Parity Securities on a pro rata basis. Unless full cumulative
dividends on all outstanding shares of Exchangeable Preferred Stock due for
all past dividend periods shall have been declared and paid, or declared and a
sufficient sum for the payment thereof set apart, then: (i) no dividend (other
than a dividend payable solely in shares of any class of stock ranking junior
to the Exchangeable Preferred Stock as to the payment of dividends and as to
rights in liquidation, dissolution or winding-up of the affairs of Adelphia
("Junior Securities")) shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any shares of Junior Securities; (ii) no
other distribution shall be declared or made upon, or any sum set apart for
the payment of any distribution upon, any shares of Junior Securities; (iii)
no shares of Junior Securities shall be purchased, redeemed or otherwise
acquired or retired for value (excluding an exchange for shares of other
Junior Securities) by Adelphia or any of its Subsidiaries; and (iv) no monies
shall be paid into or set apart or made available for a sinking or other like
fund for the purchase, redemption or other acquisition or retirement for value
of any shares of Junior Securities by Adelphia or any of its Subsidiaries.
Holders of the Exchangeable Preferred Stock will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the full
cumulative dividends as herein described.
The Indenture, the Exchange Indenture, the Certificate of Designations with
respect to the Convertible Preferred Stock, and the existing Indentures
governing the 9 7/8% Notes, the 12 1/2% Notes, the 10 1/4% Notes, the 9 1/4%
Notes, the 9 1/2% Notes, the 11 7/8% Debentures and the 9 7/8% Debentures
contain restrictions on the ability of Adelphia to pay dividends on the
Exchangeable Preferred Stock. Any future credit agreements or other agreements
relating to Indebtedness or Preferred Stock to which Adelphia becomes a party
may contain similar restrictions and provisions. See "Risk Factors--
Limitations on Ability to Pay Dividends."
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Voting Rights
Holders of record of the Exchangeable Preferred Stock will have no voting
rights, except as required by law and as provided in the Certificate of
Designations. The Certificate of Designations provides that upon (a) the
accumulation of accrued and unpaid dividends on the outstanding Exchangeable
Preferred Stock in an amount equal to three semi-annual dividends (whether or
not consecutive); (b) the failure of Adelphia to satisfy any mandatory
redemption or repurchase obligation (including, without limitation, pursuant
to any required Change of Control Offer) with respect to the Exchangeable
Preferred Stock; (c) the failure of Adelphia to make a Change of Control Offer
on the terms and in accordance with the provisions contained in the
Certificate of Designations; (d) the failure of Adelphia to comply with any of
the other covenants or agreements set forth in the Certificate of Designations
and the continuance of such failure for 60 consecutive days or more after
notice as provided in the Certificate of Designations; or (e) the 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 in
the principal amount of $100,000,000 or more 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 Certificate of Designations (each of the events described in
clauses (a), (b), (c), (d) and (e) being referred to herein as a "Voting
Rights Triggering Event"), then the number of members of Adelphia's Board of
Directors will be immediately and automatically increased by two, and the
Holders of a majority of the outstanding shares of Exchangeable Preferred
Stock (including any shares of Exchangeable Preferred Stock held by Affiliates
of Adelphia), voting as a separate class, will be entitled to elect two
members to the Board of Directors of Adelphia. Voting rights arising as a
result of a Voting Rights Triggering Event will continue until such time as
all dividends in arrears on the Exchangeable Preferred Stock are paid in full,
and all other Voting Rights Triggering Events have been cured or waived.
In addition, as provided above under "--Ranking," Adelphia may not, without
the consent of the Holders of at least a majority of the then-outstanding
shares of Exchangeable Preferred Stock (including any shares of Exchangeable
Preferred Stock held by Affiliates of Adelphia), authorize, create (by way of
reclassification or otherwise) or issue any class or series of Parity
Securities (other than Convertible Preferred Stock) or any obligation or
security convertible or exchangeable into or evidencing a right to purchase,
shares of any class or series of Parity Securities (provided that no such
consent with respect to the issuance of Parity Securities shall be required
unless such Parity Securities mature or have a mandatory redemption date prior
to July 15, 2009) and Adelphia may not, without the consent of the Holders of
at least two-thirds of the then- outstanding shares of Exchangeable Preferred
Stock (including any shares of Exchangeable Preferred Stock held by Affiliates
of Adelphia), authorize, create (by way of reclassification or otherwise) or
issue any class or series of Senior Securities or any obligation or security
convertible or exchangeable into or evidencing a right to purchase, shares of
any class or series of Senior Securities.
Exchange
Adelphia may, at its option on any Dividend Payment Date, exchange, in whole
or in part, on a pro rata basis, the then-outstanding shares of Exchangeable
Preferred Stock for Exchange Debentures; provided that immediately after
giving effect to any partial exchange, if any Exchangeable Preferred Stock
remains outstanding there shall be outstanding Exchangeable Preferred Stock
with an aggregate liquidation preference of not less than $75 million and in
any event not less than $75 million in aggregate principal amount of Exchange
Debentures; and provided, further, that (i) on the date of such exchange,
there are no accumulated and unpaid dividends or Liquidated Damages on the
Exchangeable Preferred Stock (including the dividend payable on such date) or
other contractual impediments to such exchange; (ii) immediately after giving
effect to such exchange, no Default or Event of Default (each as defined in
the Exchange Indenture) would exist under the Exchange Indenture, or any other
material instrument governing Indebtedness outstanding at the time of such
exchange; (iii) the Exchange Indenture has been qualified under the Trust
Indenture Act, if such qualification is required at the time of exchange; and
(iv) Adelphia shall have delivered a written opinion to the Exchange Trustee
(as defined herein) to the effect that all conditions to be satisfied prior to
such exchange have been satisfied. The Indenture, the
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<PAGE>
Exchange Indenture and the Certificate of Designations with respect to the
Convertible Preferred Stock, and the existing indentures governing the 9 7/8%
Notes, the 12 1/2% Notes, the 10 1/4% Notes, the 9 1/4% Notes, the 9 1/2%
Notes, the 11 7/8% Debentures and the 9 7/8% Debentures currently restrict,
the exchange of the Exchangeable Preferred Stock and may restrict Adelphia's
ability to exchange the Exchangeable Preferred Stock in the future.
The Exchange Debentures will be issuable in denominations of $1,000 and
integrals thereof. Notice of the intention to exchange will be sent by or on
behalf of Adelphia not more than 60 days nor less than 30 days prior to the
Exchange Date, by first class mail, postage prepaid, to each Holder of record
of Exchangeable Preferred Stock at its registered address. In addition to any
information required by law or by the applicable rules of any exchange upon
which Exchangeable Preferred Stock may be listed or admitted to trading, such
notice will state: (i) the Exchange Date; (ii) the place or places where
certificates for such shares are to be surrendered for exchange, including any
procedures applicable to exchanges to be accomplished through book-entry
transfers; and (iii) that dividends and Liquidated Damages on the Exchangeable
Preferred Stock to be exchanged will cease to accrue on the Exchange Date. If
notice of any exchange has been properly given, and if on or before the
Exchange Date the Exchange Debentures have been duly executed and
authenticated and an amount in cash equal to all accrued and unpaid dividends
and Liquidated Damages, if any, thereon to the Exchange Date has been
deposited with the Transfer Agent, then on and after the close of business on
the Exchange Date, the Exchangeable Preferred Stock to be exchanged will no
longer be deemed to be outstanding and may thereafter be issued in the same
manner as the other authorized but unissued preferred stock, but not as
Exchangeable Preferred Stock, and all rights of the holders thereof as
stockholders of Adelphia will cease, except the right of the Holders to
receive upon surrender of their certificates the Exchange Debentures and all
accrued and unpaid dividends, and Liquidated Damages, if any, to the Exchange
Date.
Redemption
Mandatory Redemption
On July 15, 2009 (the "Mandatory Redemption Date"), Adelphia will be
required to redeem (subject to the legal availability of funds therefor) all
outstanding shares of Exchangeable Preferred Stock at a price in cash equal to
the Liquidation Preference thereof, plus accrued and unpaid dividends and
Liquidated Damages, if any, to the date of redemption. The Indenture, the
Exchange Indenture, the Certificate of Designations with respect to the
Convertible Preferred Stock, and the existing indentures governing the 9 7/8%
Notes, the 12 1/2% Notes, the 10 1/4% Notes, the 9 1/4% Notes, the 9 1/2%
Notes, the 11 7/8% Debentures and the 9 7/8% Debentures currently restrict the
redemption of the Exchangeable Preferred Stock and may restrict Adelphia's
ability to redeem the Exchangeable Preferred Stock in the future. Adelphia
will not be required to make sinking fund payments with respect to the
Exchangeable Preferred Stock. The Certificate of Designations provides that
Adelphia will take all actions required or permitted under Delaware law to
permit such redemption.
Optional Redemption
The Exchangeable Preferred Stock may be redeemed, in whole or in part, at
the option of Adelphia on or after July 15, 2002 at the redemption prices
specified below (expressed as percentages of the Liquidation Preference
thereof), in each case, together with accrued and unpaid dividends and
Liquidated Damages, if any, to the date of redemption, upon not less than 30
nor more than 60 days' prior written notice, if redeemed during the 12-month
period commencing on July 15 of each of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR RATE
---- ----------
<S> <C>
2002.............................................................. 106.500%
2003.............................................................. 105.417%
2004.............................................................. 104.333%
2005.............................................................. 103.250%
2006.............................................................. 102.167%
2007.............................................................. 101.083%
2008 and thereafter............................................... 100.000%
</TABLE>
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<PAGE>
In addition, prior to July 15, 2000, Adelphia may, at its option, redeem up
to 33% of the aggregate of (i) the Liquidation Preference of the Exchangeable
Preferred Stock issued less the Liquidation Preference of Exchangeable
Preferred Stock exchanged for Exchange Debentures and (ii) the principal
amount of Exchange Debentures issued, with the net proceeds of one or more
common equity offerings received on or after the date of original issuance of
the Exchangeable Preferred Stock, at a redemption price of 113% of the
Liquidation Preference or principal amount, as the case may be, plus
accumulated and unpaid dividends and Liquidated Damages, in the case of
Exchangeable Preferred Stock, and accrued and unpaid interest and Liquidated
Damages, in the case of Exchange Debentures; provided, that after any such
redemption, at least 67% of the aggregate of (i) the Liquidation Preference of
the Exchangeable Preferred Stock issued less the Liquidation Preference of
Exchangeable Preferred Stock exchanged for Exchange Debentures and (ii) the
principal amount of Exchange Debentures issued remain outstanding; and
provided, further, that any such redemption shall occur within 75 days of the
date of closing of such offering of common equity of Adelphia.
The Indenture, the Exchange Indenture, the Certificate of Designations with
respect to the Convertible Preferred Stock, and the existing indentures
governing the 9 7/8% Notes, the 12 1/2% Notes, the 10 1/4% Notes, the 9 1/4%
Notes, the 9 1/2% Notes, the 11 7/8% Debentures and the 9 7/8% Debentures
currently restrict the redemption of the Exchangeable Preferred Stock and may
restrict Adelphia's ability to redeem the Exchangeable Preferred Stock in the
future.
Liquidation Rights
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the affairs of Adelphia, each holder of the Exchangeable Preferred Stock will
be entitled to payment out of the assets of Adelphia available for
distribution of an amount equal to the Liquidation Preference per share of
Exchangeable Preferred Stock held by such Holder, plus accrued and unpaid
dividends and Liquidated Damages, if any, to the date fixed for liquidation,
dissolution or winding-up, before any distribution is made on any Junior
Securities, including, without limitation, any common stock of Adelphia. If,
upon any voluntary or involuntary liquidation, dissolution or winding-up of
Adelphia, the amounts payable with respect to the Exchangeable Preferred Stock
and all other Parity Securities are not paid in full, the holders of the
Exchangeable Preferred Stock and all Parity Securities will share equally and
ratably in any distribution of assets of Adelphia. After payment in full of
the Liquidation Preference and all accrued dividends and Liquidated Damages,
if any, to which holders of Exchangeable Preferred Stock are entitled, such
holders will not be entitled to any further participation in any distribution
of assets of Adelphia. However, neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of
Adelphia nor the consolidation or merger of Adelphia with or into one or more
corporations will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of Adelphia, unless such sale, conveyance, exchange
or transfer shall be in connection with a liquidation, dissolution or winding-
up of the business of Adelphia.
The Certificate of Designations does not contain any provision requiring
funds to be set aside to protect the Liquidation Preference of the
Exchangeable Preferred Stock, although such Liquidation Preference will be
substantially in excess of the par value of the Exchangeable Preferred Stock.
Certain Covenants
Limitation on Indebtedness
The Certificate of Designations contains a Limitation on Indebtedness
covenant that will be substantially the same as the like-titled covenant that
will be contained in the Indenture governing the Notes. See "Description of
the Notes--Covenants--Limitation on Indebtedness."
Limitation on Restricted Payments
The Certificate of Designations provides that, so long as any of the shares
of Exchangeable Preferred Stock remain outstanding, Adelphia shall not make,
and shall not permit any Restricted Subsidiary to make, any
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<PAGE>
Restricted Payment (as defined below) if (a) at the time of such proposed
Restricted Payment, a Voting Rights Triggering Event 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 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 used in or by reference to the Limitation on Restricted Payments covenant
contained in the Certificate of Designations, the following terms shall have
the following meanings:
"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 but excluding the Exchangeable Preferred Stock).
"Restricted Payment" means (i) any dividend or distribution (whether made in
cash, property or securities) on or with respect to any Junior Securities of
Adelphia, except for dividends or distributions payable solely in shares of
Junior Securities of Adelphia, or (ii) any redemption, repurchase, retirement
or other direct or indirect acquisition of (a) Junior Securities or (b) any
warrants, rights or options to directly or indirectly purchase or acquire any
Junior Securities or any securities exchangeable for or convertible into any
such Junior Securities 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 its Junior
Securities by exchange for, or out of the proceeds of the substantially
concurrent sale of, other shares of its Junior Securities, other than any
Junior Securities which, by their terms (or by the terms of any security into
which they are convertible or for which they are exchangeable), or upon the
happening of any event, mature or are 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 July 15, 2009.
Other defined terms used in the Restricted Payments covenant have
substantially the same meaning assigned to the like terms in "Description of
the Notes."
Merger and Consolidations
The Certificate of Designations provides 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 the Exchangeable Preferred Stock shall be converted
into or exchanged for and shall become shares of such successor, transferee or
resulting Person, having in respect of such successor, transferee or resulting
Person the same powers, preferences and relative participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereon, that the Exchangeable Preferred Stock had immediately prior to such
transaction; (ii) immediately before and immediately after giving effect to
such transaction, no Voting Rights Triggering Event 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
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<PAGE>
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>
<CAPTION>
A B C
-------------------- --- ------
<S> <C> <C>
1.1111:1 to 1.4999:1 90% 1.00:1
1.5 and higher 80% 1.35:1
</TABLE>
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
Transfer Agent, in form and substance reasonably satisfactory to the Transfer
Agent, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer comply with this provision and that all
conditions precedent herein provided for relating to such transaction or
transactions have been complied with.
Limitations on Transactions with Affiliates
The Certificate of Designations contains a Limitations on Transactions with
Affiliates covenant that will be substantially the same as the like-titled
covenant that will be contained in the Indenture governing the Notes. See
"Description of the Notes--Covenants--Limitations on Transactions with
Affiliates."
Limitation on Investment in Affiliates and Unrestricted Subsidiaries
The Certificate of Designations contains a Limitation on Investment in
Affiliates and Unrestricted Subsidiaries covenant that will be substantially
the same as the like-titled covenant that will be contained in the Indenture
governing the Notes. See "Description of the Notes--Limitation on Investments
in Affiliates and Unrestricted Subsidiaries."
Change of Control Offer
The Certificate of Designations contains a Change of Control Offer covenant
that will be substantially the same as the like-titled covenant that will be
contained in the Indenture governing the Notes. See "Description of the
Notes--Covenants--Change of Control Offer."
Amendment, Supplement and Waiver
In general, changes to the Certificate of Designations will require the
consent of a majority of holders of the Exchangeable Preferred Stock
(including shares of Exchangeable Preferred Stock held by Affiliates of
Adelphia, including without limitation shares held by Highland Holdings).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Exchangeable Preferred Stock held by a non-consenting
holder): (i) alter the voting rights with respect to the Exchangeable
Preferred Stock or reduce the number of shares of Exchangeable Preferred Stock
whose holders must consent to an amendment, supplement or waiver, (ii) reduce
the Liquidation Preference of or change the Mandatory Redemption Date of any
Exchangeable Preferred Stock or alter the provisions with respect to the
redemption of the Exchangeable Preferred Stock, (iii) reduce the rate of or
change the time for payment of dividends on any Exchangeable Preferred Stock,
(iv) waive a default in the payment of dividends or Liquidated Damages on the
Exchangeable Preferred Stock, (v) make any Exchangeable Preferred Stock
payable in any form other than that stated in the Certificate of Designations,
(vi) make any change in the provisions of the Certificate of Designations
relating to waivers of the rights of holders of Exchangeable Preferred Stock
to receive the Liquidation Preference, dividends or Liquidated Damages on the
Exchangeable Preferred Stock, (vii) waive a redemption payment with respect to
any Exchangeable Preferred Stock or (viii) make any change in the foregoing
amendment and waiver provisions.
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Notwithstanding the foregoing, without the consent of any Holder of
Exchangeable Preferred Stock, Adelphia may (to the extent permitted by
Delaware law) amend or supplement the Certificate of Designations to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Exchangeable
Preferred Stock in addition to or in place of certificated Exchangeable
Preferred Stock or to make any change that would provide any additional rights
or benefits to the holders of Exchangeable Preferred Stock or that does not
materially and adversely affect the legal rights under the Certificate of
Designations of any such holder.
Reissuance
Exchangeable Preferred Stock redeemed or otherwise acquired by Adelphia will
assume the status of authorized but unissued preferred stock and may
thereafter be reissued in the same manner as the other authorized but unissued
preferred stock, but not as Exchangeable Preferred Stock.
DESCRIPTION OF THE EXCHANGE DEBENTURES
General
The Exchange Debentures will, if and when issued, be issued pursuant to an
indenture (the "Exchange Indenture") between Adelphia and the trustee
thereunder (the "Exchange Trustee"). The terms of the Exchange Debentures
include those stated in the Exchange Indenture and those made part of the
Exchange Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The Exchange Debentures will be subject to all
such terms, and holders of Exchange Debentures are referred to the Exchange
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Exchange Indenture does not purport to be
complete and is qualified by reference to the Exchange Indenture, including
the definitions therein of certain terms used below. The definitions of
certain terms used in the following summary and not otherwise defined in the
following summary are substantially as set forth above under "Description of
the Notes--Certain Definitions."
The Exchange Debentures will rank subordinate in right of payment to all
Senior Debt, including the Notes, the 9 7/8% Notes, the 12 1/2% Notes, the 10
1/4% Notes, the 9 1/4% Notes, the 9 1/2% Notes, the 11 7/8% Debentures and the
9 7/8% Debentures. The Exchange Debentures will also effectively rank
subordinate in right of payment to Indebtedness of Adelphia's Subsidiaries,
which Indebtedness as of June 30, 1997 was approximately $1.5 billion.
Principal, Maturity and Interest
The Exchange Debentures will be limited in aggregate principal amount to the
Liquidation Preference of the Exchangeable Preferred Stock exchanged therefor
and will mature on July 15, 2009. Interest on the Exchange Debentures will
accrue at the rate of 13% per annum and will be payable semi-annually in
arrears on each January 15 and July 15 (each, an "Interest Payment Date") to
holders of record on the immediately preceding January 1 and July 1 (each, an
"Exchange Debenture Record Date"). Interest will be payable in cash. Interest
on the Exchange Debentures will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Exchange Debentures will be issued in
denominations of $1,000 or integrals thereof.
Subordination
The payment of principal of, premium on, if any, and interest and Liquidated
Damages, if any, on the Exchange Debentures will be subordinated in right of
payment, as set forth in the Exchange Indenture, to the prior payment in full
of all Senior Debt, whether outstanding on the date of the Exchange Indenture
or thereafter issued.
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Upon any distribution to creditors of Adelphia in a liquidation or
dissolution of Adelphia or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to Adelphia or its property, or in
an assignment for the benefit of creditors or any marshaling of Adelphia's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt, whether or not an allowable claim)
before the Holders will be entitled to receive any payment with respect to the
Exchange Debentures; and until all Obligations with respect to Senior Debt are
paid in full, any distribution to which the Holders would be entitled will be
made to the holders of Senior Debt (except that, in either case, Holders may
receive (i) securities that are subordinated at least to the same extent as
the Exchange Debentures are to Senior Debt and any securities issued in
exchange for Senior Debt and (ii) payments made from the trust described in
the discharge and defeasance provisions of the Exchange Indenture).
Adelphia also may not make any payment upon or in respect of the Exchange
Debentures (except as described above) if (i) a default in the payment of the
principal of, premium, if any, or interest on Designated Senior Debt occurs
and is continuing or (ii) any other default occurs and is continuing with
respect to Designated Senior Debt that permits holders of Designated Senior
Debt as to which such default relates to accelerate its maturity, and the
Exchange Trustee receives a notice of such default (a "Payment Blockage
Notice") from Adelphia or the holders of any Designated Senior Debt. Payments
on the Exchange Debentures may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and
(b) in the case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until (1) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice, and (2) all
scheduled payments of principal, premium, if any, interest and Liquidated
Damages on the Exchange Debentures that have come due have been paid in full.
No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Exchange Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice.
The Exchange Indenture will further require that Adelphia promptly notify
the holders of Senior Debt if payment of the Exchange Debentures is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, holders of Exchange Debentures may recover less
ratably than creditors of Adelphia who are holders of Senior Debt or other
creditors of Adelphia who are not subordinated to holders of Senior Debt. As
of June 30, 1997, after giving pro forma effect to the July Offerings, the
Hyperion Offerings and the September Offering, Adelphia would have had
approximately $2.9 billion of Senior Debt and redeemable preferred stock of
subsidiaries outstanding.
"Designated Senior Debt" means any Senior Debt permitted under the Exchange
Indenture that has been designated by Adelphia as "Designated Senior Debt."
"Senior Debt" means (a) all Indebtedness that is permitted under the
Exchange Indenture that is not by its terms pari passu with or subordinated to
the Exchange Debentures, (b) all Obligations of the Company with respect to
the foregoing clause (a), including post-petition interest, and (c) all
(including all subsequent) renewals, extensions, amendments, refinancings,
repurchases or redemptions, modifications, replacements or refundings thereto
or thereof (whether or not coincident therewith) that are permitted by the
Exchange Indenture. Notwithstanding anything to the contrary in the foregoing,
Senior Debt shall not include (i) any Indebtedness of the Company to any of
its Subsidiaries, (ii) any Indebtedness incurred for the purchase of goods or
materials or for services obtained in the ordinary course of business (other
than with the proceeds of borrowings from banks or other financial
institutions) or (iii) any Indebtedness incurred in violation of the Exchange
Indenture.
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<PAGE>
Optional Redemption
The Exchange Debentures will be subject to redemption after July 15, 2002 at
the option of Adelphia, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount thereof) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on July 15 of the years
indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR RATE
---- ----------
<S> <C>
2002.............................................................. 106.500%
2003.............................................................. 105.417%
2004.............................................................. 104.333%
2005.............................................................. 103.250%
2006.............................................................. 102.167%
2007.............................................................. 101.083%
2008 and thereafter............................................... 100.000%
</TABLE>
In addition, prior to July 15, 2000, Adelphia may, at its option, redeem up
to 33% of the aggregate of (i) the Liquidation Preference of the Exchangeable
Preferred Stock issued less the Liquidation Preference of Exchangeable
Preferred Stock exchanged for Exchange Debentures and (ii) the principal
amount of Exchange Debentures issued, with the net proceeds of one or more
common equity offerings received on or after the date of original issuance of
the Exchangeable Preferred Stock at a redemption price of 113% of the
Liquidation Preference or principal amount, as the case may be, plus
accumulated and unpaid dividends and Liquidated Damages, in the case of
Exchangeable Preferred Stock and accrued and unpaid interest and Liquidated
Damages, in the case of Exchange Debentures; provided, that after any such
redemption, at least 67% of the aggregate of (i) the Liquidation Preference of
the Exchangeable Preferred Stock issued less the Liquidation Preference of
Exchangeable Preferred Stock exchanged for Exchange Debentures and (ii) the
principal amount of Exchange Debentures issued remain outstanding; and
provided, further, that any such redemption shall occur within 75 days of the
date of closing of such offering of common equity of Adelphia.
The Indenture and the existing indentures governing the 9 7/8% Notes, the 12
1/2% Notes, the 10 1/4% Notes, the 9 1/4% Notes, the 9 1/2% Notes, the 11 7/8%
Debentures and the 9 7/8% Debentures currently restrict the redemption of the
Exchange Debentures and may restrict Adelphia's ability to redeem the Exchange
Debentures in the future.
Certain Covenants
The Exchange Indenture will have the following covenants which will be
substantially the same (with the appropriate changes to reflect the
subordination of the Exchange Debentures) as the like-titled covenants that
are contained in the Indenture governing the Notes: Limitation on
Indebtedness, Limitation on Restricted Payments, Mergers and Consolidations,
Limitations on Investment in Affiliates and Unrestricted Subsidiaries,
Covenant to Secure Notes Equally, Limitation on Transactions with Affiliates,
Limitation on Sale of Assets, and Change of Control Offer. See "Description of
the Notes--Covenants." The Exchange Indenture will contain the following
additional covenants:
No Senior Subordinated Debt
The Exchange Indenture will provide that Adelphia will not incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that
is subordinate or junior in right of payment to any Senior Debt and senior in
any respect in right of payment to the Exchange Debentures.
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Additional Provisions
The Exchange Indenture will also contain Events of Default provisions,
Defeasance and Covenant Defeasance provisions, Modification of Indenture
provisions, Reports to Holders provisions and Compliance Certificate
provisions, all or which will be substantially the same as the like-titled
provisions that will be contained in the Indenture governing the Notes. See
"Description of the Notes."
The Trustee
Bank of Montreal is to be the Exchange Trustee under the Exchange Indenture
and has been appointed by Adelphia as Registrar, Paying Agent with regard to
the Exchange Debentures. Bank of Montreal also serves as Registrar and Paying
Agent and Trustee under the Indenture and the indentures with respect to the 9
7/8% Notes, the 12 1/2% Senior Notes, the 10 1/4% Notes, the 9 1/4% Notes, the
9 1/2% Notes, the 11 7/8% Debentures and the 9 7/8% Debentures. The Exchange
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
Exchange Indenture. During the existence of an Event of Default, the Trustee
will exercise such rights and powers vested in it under the Exchange 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.
REGISTRATION RIGHTS AND LIQUIDATED DAMAGES
Adelphia, the Initial Purchasers and Highland Holdings entered into the
Exchangeable Preferred Stock Registration Rights Agreement on the Closing
Date. Pursuant to the Exchangeable Preferred Stock Registration Rights
Agreement, Adelphia has agreed to use its reasonable efforts to file with the
Commission on or prior to 90 days after the Closing Date the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the New Preferred Stock and New Exchange Debentures. Upon the
effectiveness of the Exchange Offer Registration Statement, Adelphia will
offer pursuant to the Exchange Offer to the holders of Transfer Restricted
Securities who are able to make certain representations the opportunity to
exchange their Transfer Restricted Securities for New Preferred Stock or New
Exchange Debentures, as the case may be. If (i) Adelphia is not required to
file the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law
or Commission policy, or (ii) any holder of Transfer Restricted Securities
notifies Adelphia on or prior to the 20th Business Day following consummation
of the Exchange Offer that it (a) is prohibited by law or Commission policy
from participating in the Exchange Offer, or (b) may not resell the New
Preferred Stock or New Exchange Debentures, as the case may be, acquired in
the Exchange Offer to the public without delivering a prospectus, and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales, or (iii) any holder of Transfer
Restricted Securities is a broker-dealer and holds Old Preferred Stock or
Exchange Debentures acquired directly from Adelphia or an affiliate of
Adelphia, and shall so notify Adelphia, Adelphia will file with the Commission
a Shelf Registration Statement to cover resales of the Exchangeable Preferred
Stock or Exchange Debentures by the holders thereof who satisfy certain
conditions relating to the provision of information in connection with the
Shelf Registration Statement. Adelphia will use its best efforts to cause the
applicable registration statement to be declared effective by the Commission
within the applicable time period. For purposes of the foregoing, "Transfer
Restricted Securities" means each share of Old Preferred Stock and each
Exchange Debenture until (i) the date on which such security has been
exchanged by a person other than a broker-dealer for New Preferred Stock or
New Exchange Debentures, as the case may be, in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of such
security for New Preferred Stock or New Exchange Debentures, as the case may
be, the date on which such New Preferred Stock or New Exchange Debentures are
sold to a purchaser who receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such security has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement or (iv) the date on which such security
is distributed to the public pursuant to Rule 144 under the Securities Act.
Notwithstanding the foregoing, at any time after Consummation (as defined in
the
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Exchangeable Preferred Stock Registration Rights Agreement) of the Exchange
Offer, Adelphia may allow the Shelf Registration Statement to cease to be
effective and usable if (i) the Board of Directors of Adelphia determines in
good faith that such action is in the best interests of Adelphia, and Adelphia
notifies the Holders within a certain period of time after the Board of
Directors of Adelphia makes such determination, or (ii) the prospectus
contained in the Shelf Registration Statement contains an untrue statement of
a material fact or omits to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided that the period referred to in the Exchangeable
Preferred Stock Registration Rights Agreement during which the Shelf
Registration Statement is required to be effective and usable will be extended
by the number of days during which such registration statement was not
effective or usable pursuant to the foregoing provisions.
The Exchangeable Preferred Stock Registration Rights Agreement provides that
(i) Adelphia will use its reasonable efforts to file an Exchange Offer
Registration Statement with the Commission on or prior to 90 days after the
Closing Date; (ii) Adelphia will use its best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or prior
to 180 days after the Closing Date (which 180-day period shall be extended for
a number of days equal to the number of Business Days, if any, that the
Commission is officially closed during such period), (iii) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, Adelphia
will commence the Exchange Offer and use its best efforts to issue, on or
prior to 30 days after the date on which the Exchange Offer Registration
Statement was declared effective by the Commission, New Preferred Stock or New
Exchange Debentures in exchange for all Old Preferred Stock or Exchange
Debentures, as the case may be, tendered prior thereto in the Exchange Offer,
and (iv) if obligated to file the Shelf Registration Statement, Adelphia will
use its best efforts to file the Shelf Registration Statement with the
Commission on or prior to 60 days after such filing obligation arises and to
cause the Shelf Registration Statement to be declared effective by the
Commission on or prior to 90 days after such filing obligation arises. If (a)
Adelphia fails to file either of the Registration Statements required by the
Exchangeable Preferred Stock Registration Rights Agreement on or before the
date specified for such filing, (b) either of such Registration Statements is
not declared effective by the Commission on or prior to the date specified for
such effectiveness (the "Effectiveness Target Date"), (c) Adelphia fails to
consummate the Exchange Offer within 30 days of the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement, or (d) subject to
the last sentence in the preceding paragraph, the Shelf Registration Statement
or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the
Exchangeable Preferred Stock Registration Rights Agreement (each such event
referred to in clauses (a) through (d) above a "Registration Default"), then,
subject to the last sentence of the preceding paragraph, Adelphia will pay
Liquidated Damages to each holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence or
such Registration Default, in an amount equal to 0.25% per annum on the
Liquidation Preference of the Old Preferred Stock or the principal amount of
Exchange Debentures constituting Transfer Restricted Securities held by such
holder. The amount of the Liquidated Damages will increase by an additional
0.25% per annum with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of 2.0% per annum on the Liquidation Preference of Old Preferred Stock
or the principal amount of Exchange Debentures constituting Transfer
Restricted Securities. All accrued Liquidated Damages will be paid by Adelphia
in cash on each Damages Payment Date to the Global Exchangeable Preferred
Stock Holder or Global Exchange Debenture Holder (and any holder of
Certificated Securities who has given wire transfer instructions to Adelphia
at least 10 Business Days prior to the Damages Payment Date) by wire transfer
of immediately available funds and to all other holders of Certificated
Securities by mailing checks to their registered addresses. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Preferred Stock or Exchange Debentures, as the case may be,
will be required to make certain representations to Adelphia (as described in
the Exchangeable Preferred Stock Registration Rights Agreement) in order to
participate in the Exchange Offer, and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement
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within the time periods set forth in the Exchangeable Preferred Stock
Registration Rights Agreement, in order to have their Old Preferred Stock or
Exchange Debentures included in the Shelf Registration Statement and benefit
from the provisions regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Exchangeable Preferred Stock
Registration Rights Agreement does not purport to be complete and is subject
to, and is qualified by reference to, all the provisions of the Exchangeable
Preferred Stock Registration Rights Agreement, a copy of which will be
available upon request to Adelphia.
Except as described in the Certificate of Designations or the Exchange
Indenture, the Old Preferred Stock and the New Preferred Stock, as well as the
Exchange Debentures and the New Exchange Debentures, will each be considered
collectively to be a single class for all purposes under the Certificate of
Designations and the Exchange Indenture, respectively, including, without
limitation, waivers, amendments, redemptions, and repurchase offers, and for
purposes of this "Description of Exchangeable Preferred Stock and Exchange
Debentures" (except under this caption, "--Registration Rights and Liquidated
Damages"), all references herein to "Exchangeable Preferred Stock," shall be
deemed to refer collectively to the Old Preferred Stock and any New Preferred
Stock and all references herein to "Exchange Debentures" shall be deemed to
refer collectively to the Exchange Debentures and any New Exchange Debentures,
unless the context otherwise requires.
TERMS APPLICABLE TO ALL SECURITIES
BOOK-ENTRY, DELIVERY AND FORM
The Securities are being offered and sold to qualified institutional buyers
in reliance on Rule 144A. Except as set forth below, Notes and Exchange
Debentures will be issued in registered, global form in minimum denominations
of $1,000 and integral multiples thereof, and certificates for Exchangeable
Preferred Stock will be issued in minimum denominations of 10 shares and
integral multiples thereof. Securities will be issued at the closing of the
Offerings (the "Closing") only against payment in immediately available funds.
The Notes, Exchangeable Preferred Stock and any Exchange Debentures
initially will be represented by one or more Notes, Exchangeable Preferred
Stock certificates or Exchange Debentures, respectively, in registered, global
form without interest coupons (the "Global Note," "Global Exchangeable
Preferred Stock Certificate" and "Global Exchange Debenture," respectively,
and collectively, the "Global Securities"). The Global Securities will be
deposited with, or on behalf of, The Depository Trust Company ("DTC"), in New
York, New York, and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant in DTC as
described below.
Except as set forth below, the Global Securities may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Securities may not be
exchanged for Securities in certificated form except in the limited
circumstances described below. See "--Exchange of Book-Entry Securities for
Certificated Securities."
The Securities (including beneficial interests in the Global Securities)
will be subject to certain restrictions on transfer and will bear a
restrictive legend, as described under "Notice to Investors." In addition,
transfer of beneficial interests in the Global Securities will be subject to
the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar for the Notes,
and the Transfer Agent will act as Registrar for the Exchangeable Preferred
Stock. The Securities may be presented for registration of transfer and
exchange at the offices of the Registrar.
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Depository Procedures
DTC has advised Adelphia that DTC is a limited-purpose trust company created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers
and dealers (including the Initial Purchasers), banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own
securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests and transfer of ownership
interests of each actual purchaser of each security held by or on behalf of
DTC are recorded on the records of the Participants and Indirect Participants.
DTC has also advised Adelphia that, pursuant to procedures established by
it, (i) upon deposit of the Global Securities, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the
principal amount of the Global Securities, and (ii) ownership of such
interests in the Global Securities will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC
(with respect to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interests in the
Global Securities).
Investors in the Global Securities may hold their interests therein directly
through DTC, if they are participants in such system, or indirectly through
organizations which are participants in such system. All interests in a Global
Security may be subject to the procedures and requirements of DTC. The laws of
some states require that certain persons take physical delivery in definitive
form of securities that they own. Consequently, the ability to transfer
beneficial interests in a Global Security to such persons will be limited to
that extent. Because DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in a Global Security to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the
lack of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Securities, see "--Exchange of
Book-Entry Securities for Certificated Securities" and "--Exchange of
Certificated Securities for Book-Entry Securities."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL SECURITIES WILL
NOT HAVE SECURITIES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF SECURITIES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE, THE CERTIFICATE OF
DESIGNATIONS OR THE EXCHANGE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of and premium and Liquidated Damages,
if any, and interest on a Global Note or Global Exchange Debenture registered
in the name of DTC or its nominee will be payable by the Trustee to DTC in its
capacity as the registered Holder under the Indenture or the Exchange
Indenture. Payments in respect of dividends, redemption prices and Liquidated
Damages, if any, on the Exchangeable Preferred Stock or a Global Exchangeable
Preferred Stock Certificate registered in the name of DTC or its nominee will
be payable by Adelphia to DTC in its capacity as the registered holder under
the Certificate of Designations. Under the terms of the Indenture, the
Exchange Indenture and the Certificate of Designations, Adelphia, the Trustee
and the Transfer Agent will treat the persons in whose names the Securities,
including the Global Securities, are registered as the owners thereof for the
purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither Adelphia, the Trustee, the Transfer Agent
nor any agent of Adelphia or the Trustee or Transfer Agent has or will have
any responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to, or payments made
on account of, beneficial ownership interests in the Global Securities, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Securities, or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
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Indirect Participants. DTC has advised Adelphia that its current practice,
upon receipt of any payment in respect of securities such as the Securities,
is to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in the
beneficial interests in the relevant security as shown on the records of DTC,
unless DTC has reason to believe it will not receive payment on such payment
date. Payments by the Participants and the Indirect Participants to the
beneficial owners of Securities will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Trustee,
the Transfer Agent or Adelphia. Neither Adelphia, the Transfer Agent nor the
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the Securities, and Adelphia, the
Transfer Agent and the Trustee may conclusively rely on and will be protected
in relying on instructions from DTC or its nominee for all purposes.
Interests in the Global Securities are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System, and secondary market trading activity
in such interests will therefore settle in immediately available funds,
subject in all cases to the rules and procedures of DTC and its Participants.
See "--Same-Day Settlement and Payment."
Subject to the transfer restrictions set forth under "Notice to Investors,"
transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
DTC has advised Adelphia that it will take any action permitted to be taken
by a holder of Securities only at the direction of one or more Participants to
whose account or accounts with DTC interests in the Global Securities are
credited and only in respect of such portion of the aggregate principal amount
of the Securities as to which such Participant or Participants has or have
given such direction. However, if there is an Event of Default or Voting
Rights Triggering Event under the Securities, DTC reserves the right to
exchange the Global Securities for legended Securities in certificated form,
and to distribute such Securities to its Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources that Adelphia believes to be reliable, but Adelphia
takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Securities among Participants in DTC, it is under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither Adelphia, the Transfer
Agent nor the Trustee will have any responsibility for the performance by DTC
or its Participants or indirect Participants of their respective obligations
under the rules and procedures governing their operations.
Exchange of Book-Entry Securities for Certificated Securities
A Global Security is exchangeable for definitive Securities in registered
certificated form if (i) DTC (a) notifies Adelphia that it is unwilling or
unable to continue as depositary for that Global Security, and Adelphia
thereupon fails to appoint a successor depositary, or (b) has ceased to be a
clearing agency registered under the Exchange Act, (ii) Adelphia, at its
option, notifies the Trustee or the Transfer Agent, as the case may be, in
writing that it elects to cause the issuance of the Securities in certificated
form, or (iii) there shall have occurred and be continuing an Event of Default
or Voting Rights Triggering Event or any event which after notice or lapse of
time or both would be an Event of Default or Voting Rights Triggering Event
with respect to the Securities. In addition, beneficial interests in a Global
Security may be exchanged for certificated Securities upon request, but only
upon at least 20 days' prior written notice given to the Trustee, in the case
of the Notes or the Exchange Debentures, or to the Transfer Agent in the case
of the Exchangeable Preferred Stock, by or on behalf of DTC in accordance with
its customary procedures. In all cases, certificated Securities delivered in
exchange for any Global Security or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its customary
procedures) and will bear any applicable restrictive legend, unless Adelphia
determines otherwise in compliance with applicable law.
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Exchange of Certificated Securities for Book-Entry Securities
Securities issued in certificated form may not be exchanged for beneficial
interests in any Global Security unless the transferor first delivers to the
Trustee, in the case of the Notes or Exchange Debentures, or to Adelphia, in
the case of the Exchangeable Preferred Stock, a written certificate (in the
form provided in the Certificate of Designations, the Exchange Indenture or
the Indenture) to the effect that such transfer will comply with any
appropriate transfer restrictions applicable to such Securities.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture, Exchange Indenture and Certificate of Designations will
require that payments in respect of the Securities represented by the Global
Securities (including principal, premium, if any, interest and Liquidated
Damages, if any with respect to the Notes and Exchange Debentures, and
dividends, redemption payments and Liquidated Damages, if any, with respect to
the Exchangeable Preferred Stock) be made by wire transfer of immediately
available funds to the accounts specified by the Global Securities custodian.
With respect to Securities issued in definitive form, Adelphia will make all
payments by mailing a check to each such Holder's registered address, provided
that all payments with respect to Notes or Exchange Debentures having an
aggregate principal amount of $1,000 or more or with respect to 10 shares or
more of Exchangeable Preferred Stock, the holders of which have given wire-
transfer instructions to Adelphia at least ten Business Days prior to the
applicable payment date, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
See "General." The Securities represented by the Global Securities are
expected to be eligible to trade in DTC's Same-Day Funds Settlement System,
and any permitted secondary market trading activity in such notes will,
therefore, be required by DTC to be settled in immediately available funds.
Adelphia expects that secondary trading in the Certificated Securities also
will be settled in immediately available funds.
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DESCRIPTION OF CONVERTIBLE PREFERRED STOCK
Simultaneously with the Closing of the issuance and sale of the Notes and
the Exchangeable Preferred Stock, the Company issued 100,000 shares of its
Series C Cumulative Convertible Preferred Stock, $.01 par value (the
"Convertible Preferred Stock"), to the Rigas Family and a subsidiary of FPL
Group, Inc. at a purchase price of $970 per share and a conversion price of
$8.48 per share of Adelphia Class A Common Stock.
Each share of Convertible Preferred Stock is convertible at any time at the
election of the holder thereof into 117.9245 shares of the Class A Common
Stock of the Company. The Convertible Preferred Stock will not be entitled to
vote in the election of directors of the Company or upon any other matter
(except as provided by law), unless a Voting Rights Triggering Event with
respect to the Convertible Preferred Stock occurs, in which case the Board of
Directors will be expanded by two seats, which shall then be elected by the
holders of the Convertible Preferred Stock. The Convertible Preferred Stock is
not subject to mandatory redemption (perpetual).
The Convertible Preferred Stock ranks pari passu with the Exchangeable
Preferred Stock and ranks senior to the Common Stock of the Company with
respect to dividends and liquidation. The Convertible Preferred Stock will
accrue cumulative dividends at the rate of 8 1/8% per annum, or $81 1/4 per
share of the Convertible Preferred Stock per annum. The liquidation preference
for the Convertible Preferred Stock shall be $1,000 per share. The holders of
the Convertible Preferred Stock are entitled to receive the liquidation
preference for the Convertible Preferred Stock, plus any accrued but unpaid
dividends thereon, and no more. Neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of
Adelphia nor the consolidation or merger of Adelphia with or into one or more
corporations will be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of Adelphia, unless such sale, conveyance, exchange
or transfer shall be in connection with a liquidation, dissolution or winding-
up of the business of Adelphia.
The Convertible Preferred Stock may be redeemed at the option of Adelphia,
in whole or in part, at any time on or after August 1, 2000 at the following
percentages of the liquidation preference of the Convertible Preferred Stock
plus accrued dividends:
<TABLE>
<S> <C>
2000................................................................. 104.00%
2001................................................................. 102.00%
2002 and thereafter.................................................. 100.00%
</TABLE>
The Certificate of Designations for the Convertible Preferred Stock contains
covenants requiring Adelphia to furnish copies of certain filings with the SEC
and other financial reports to the holders thereof, and prohibiting Adelphia
from paying any consideration to a holder in exchange for obtaining a consent
to the amendment or waiver of the terms of the Convertible Preferred Stock
unless such consideration is offered and paid to all holders of Convertible
Preferred Stock. The holders of Convertible Preferred Stock have certain
registration rights.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain Federal income tax
considerations relevant to the receipt, ownership and disposition of the New
Notes, New Preferred Stock and the Exchange Debentures to the initial Holders
of the New Notes and New Preferred Stock and any Exchange Debentures resulting
from the exchange thereof, but does not purport to be a complete analysis of
all the potential tax effects thereof. This summary only addresses the tax
consequences to a person that acquires New Notes or New Preferred Stock in the
Exchange Offer and that is not excluded by this summary. This summary is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), administrative pronouncements, judicial decisions and existing and
proposed Treasury Regulations, changes to any of which subsequent to the date
of this Registration Statement may affect the tax consequences described
herein. Such changes may be applied retroactively in a manner that could cause
the tax consequences to vary substantially from the consequences described
below. The authorities on which this summary is based are subject to various
interpretations, and it is therefore possible that the federal
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income tax treatment of the purchase, ownership and disposition of the New
Notes, New Preferred Stock or Exchange Debentures may differ from the
treatment described below. In this connection, it should be noted that as used
in the discussion below, the term "earnings and profits" refers to Adelphia's
current and accumulated earnings and profits as determined under the Code.
There is no assurance that Adelphia will have earnings and profits for any
particular taxable year. This summary addresses only holders of the Notes,
Exchangeable Preferred Stock and the Exchange Debentures who hold the same as
capital assets within the meaning of Section 1221 of the Code. It does not
discuss all of the tax consequences that may be relevant to a Holder in light
of its particular circumstances or to Holders subject to special rules, such
as certain financial institutions, insurance companies, dealers in securities,
holders that are, for Federal income tax purposes, non-resident alien
individuals or foreign corporations, and persons holding the Notes,
Exchangeable Preferred Stock or the Exchange Debentures as part of a
"straddle," "hedge" or "conversion transaction." Holders should consult their
tax advisors with regard to the application of the Federal income tax laws to
their particular situations as well as any tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction.
EXCHANGEABLE PREFERRED STOCK
EXCHANGE OFFER
The exchange of Old Preferred Stock for New Preferred Stock pursuant to the
Exchange Offer should not be a taxable exchange for Federal income tax
purposes. As a result, there should be no Federal income tax consequences to
Holders exchanging Old Preferred Stock for New Preferred Stock pursuant to the
Exchange Offer. A Holder should have the same adjusted basis and holding
period in the New Preferred Stock as it had in the Old Preferred Stock
immediately before the Exchange Offer.
DIVIDENDS ON EXCHANGEABLE PREFERRED STOCK
Cash dividends paid on the Exchangeable Preferred Stock will be taxable as
ordinary income to the extent of Adelphia's earnings and profits. To the
extent that the amount of cash distributions paid on the Exchangeable
Preferred Stock exceeds Adelphia's earnings and profits, such distributions
will be treated first as a return of capital and will be applied against and
reduce the adjusted tax basis of the Exchangeable Preferred Stock in the hands
of the shareholder. Any remaining amount after the Holder's basis has been
reduced to zero will be taxable as capital gain and will be long-term capital
gain if the Holder's holding period for the Exchangeable Preferred Stock
exceeds one year.
For purposes of the remainder of this discussion, the term "dividend" refers
to a distribution taxable as ordinary income as described above unless the
context indicates otherwise. Dividends received by corporate shareholders will
be eligible for a dividends-received deduction under section 243 of the Code,
subject to the limitations contained in sections 246 and 246A of the Code.
Section 1059 of the Code requires a corporate shareholder to reduce its
basis (but not below zero) in the Exchangeable Preferred Stock by the
"nontaxed portion" or any "extraordinary dividend" if the holder has not held
its Exchangeable Preferred Stock for more than two years as of the date the
amount or payment of such dividend is agreed to, announced or declared.
Generally, the nontaxed portion of an extraordinary dividend is the amount
excluded from income under section 243 of the Code (relating to the dividends-
received deduction). An "extraordinary dividend" on the Exchangeable Preferred
Stock would include a dividend that (i) equals or exceeds 5% of the holder's
adjusted tax basis in the Exchangeable Preferred Stock, treating all dividends
having ex-dividend dates within an 85-day period as one dividend, or (ii)
exceeds 20% of the holder's adjusted tax basis in the Exchangeable Preferred
Stock, treating all dividends having ex-dividend dates within a 365-day period
as one dividend. In determining whether a dividend paid is an extraordinary
dividend, a Holder may elect to use the fair market value of the Exchangeable
Preferred Stock rather than its basis for purposes of applying the 5% (or 20%)
limitation, if the shareholder is able to establish to the satisfaction of the
Secretary of the Treasury such fair market value as of the day before the ex-
dividend date. An "extraordinary dividend" would also include any amount
treated as a dividend in the case of a redemption of the Exchangeable
Preferred Stock that is
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non-pro rata as to all shareholders, without regard to the period the Holder
held the stock. If any part of the nontaxed portion of an extraordinary
dividend has not been applied to reduce basis as a result of the limitation on
reducing basis below zero, the amount thereof will be treated as gain from the
sale or exchange of stock in the year in which the extraordinary dividend is
received.
The extraordinary dividend rules do not apply with respect to "qualified
preferred dividends." A "qualified preferred dividend" is any fixed dividend
payable with respect to preferred stock which (i) provides for fixed preferred
dividends payable no less often than annually and (ii) is not in arrears as to
dividends when acquired, provided the actual rate of return, as determined
under section 1059(e)(3) of the Code, on such stock does not exceed 15%. Where
a qualified preferred dividend exceeds the 5% (or 20%) threshold for
extraordinary dividend status described above, (i) the extraordinary dividend
rules will not apply if the taxpayer holds the stock for more than five years,
and (ii) if the taxpayer disposes of the stock before it has been held for
more than five years, the aggregate reduction in basis cannot exceed the
excess of the qualified preferred dividends paid on such stock during the
period held by the taxpayer over the qualified preferred dividends which would
have been paid during such period on the basis of the stated rate of return,
as determined under section 1059(e)(3) of the Code. The length of time that a
taxpayer is deemed to have held stock for purposes for section 1059 of the
Code is determined under principles similar to those contained in section
246(c) of the Code discussed above.
CORPORATE STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 TO THE OWNERSHIP AND
DISPOSITION OF THEIR EXCHANGEABLE PREFERRED STOCK.
REDEMPTION PREMIUM
If the redemption price of the Exchangeable Preferred Stock to be paid by
Adelphia on the Mandatory Redemption or Optional Redemption of the
Exchangeable Preferred Stock exceeds, by more than a de minimis amount, its
issue price, all or a portion of such excess may, pursuant to section 305(c)
of the Code, be viewed as constructive distributions (and thus as dividends
depending upon the presence of earnings and profits) over the term during
which the Exchangeable Preferred Stock cannot be called for redemption under
an economic accrual method similar to the method described under the fourth
paragraph under "Original Issue Discount." In such event, Holders of
Exchangeable Preferred Stock could be required to treat such excess as
constructive distributions of property includable in income on a periodic
basis in advance of receiving cash attributable to such income. The issue
price of the Exchangeable Preferred Stock issued for money is the price at
which a substantial amount of such stock is sold. A redemption premium will
generally be considered de minimis as long as it is less than the redemption
price of the Exchangeable Preferred Stock multiplied by 1/4 of 1% multiplied
by the number of years until the issuer must redeem the preferred stock.
For purposes of determining whether such constructive distribution treatment
applies, the Mandatory Redemption and the Optional Redemption are tested
separately. Constructive distribution treatment is required if either (or
both) of these tests is satisfied. Because the issue price of the Old
Preferred Stock at original issuance was equal to the Mandatory Redemption
Price, no redemption premium will arise as a result of the Mandatory
Redemption feature with respect to such stock.
Pursuant to recently issued regulations (the "Section 305(c) Regulations"),
such economic accrual will arise due to the Optional Redemption only if, based
on all of the facts and circumstances as of the date the Exchangeable
Preferred Stock is issued, redemption pursuant to the Optional Redemption were
more likely than not to occur. Even if redemption were more likely than not to
occur, however, constructive distribution treatment would not result if the
redemption premium were solely in the nature of a penalty for premature
redemption. For this purpose, a penalty for premature redemption is a premium
paid as a result of changes in economic or market conditions over which
neither the issuer nor the Holder has control, such as changes in prevailing
dividend rates. The Section 305(c) Regulations provide a safe harbor pursuant
to which constructive distribution treatment will not result from an issuer
call right if the issuer and the Holder are unrelated, there are no
arrangements that effectively require the issuer to redeem the stock and
exercise of the option to redeem would not reduce the yield of the stock.
Although Adelphia believes that the Optional Redemption would not be treated
as more likely
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than not to be exercised under these rules, that the redemption premium is in
the nature of a penalty for premature redemption or that the safe harbor would
apply, this determination cannot be made with certainty at this time. Thus, no
assurance can be given as to the treatment of the redemption premium with
respect to the Exchangeable Preferred Stock under the Section 305(c)
Regulations.
Shares of Exchangeable Preferred Stock that are subject to the Section
305(c) Regulations concerning redemption premiums generally will have
different tax characteristics than shares of Exchangeable Preferred Stock that
are not subject to the Section 305(c) Regulations and might trade separately,
which might adversely affect the liquidity of such shares.
REDEMPTION, SALE AND EXCHANGE OF EXCHANGEABLE PREFERRED STOCK
A redemption of Exchangeable Preferred Stock for cash (whether pursuant to
the Mandatory Redemption or the Optional Redemption), a sale of Exchangeable
Preferred Stock or an exchange of shares of Exchangeable Preferred Stock for
Exchange Debentures will be a taxable event.
A redemption of Exchangeable Preferred Stock for cash will be treated as a
dividend to the extent of Adelphia's currently or accumulated earnings and
profits, unless the redemption (i) results in a "complete termination" of the
shareholder's stock interest in Adelphia under section 302(b)(3) of the Code,
(ii) is "substantially disproportionate" with respect to the shareholder under
section 302(b)(2) of the Code or (iii) is "not essentially equivalent to a
dividend" with respect to the shareholder under section 302(b)(1) of the Code.
In determining whether any of these tests has been met, the shareholder must
take into account not only stock he actually owns, but also stock he
constructively owns within the meaning of section 318 of the Code. A
distribution to a shareholder is "not essentially equivalent to a dividend" if
it results in a "meaningful reduction" in the shareholder's stock interest in
Adelphia. If, as a result of a redemption for cash of the Exchangeable
Preferred Stock, a shareholder of Adelphia whose relative stock interest in
Adelphia is minimal and who exercises no control over corporate affairs
suffers a reduction in his proportionate interest in Adelphia (including any
ownership of common stock and any shares constructively owned), that
shareholder should generally be regarded as having suffered a meaningful
reduction in his interest in Adelphia. Satisfaction of the "complete
termination" and "substantially disproportionate" exceptions is dependent upon
compliance with the respective objective tests set forth in section 302(b)(3)
and 302(b)(2) of the Code.
If the redemption is not treated as a distribution taxable as a dividend, or
if Exchangeable Preferred Stock is sold, the redemption or sale of the
Exchangeable Preferred Stock for cash would result in taxable gain or loss
equal to the difference between the amount of cash received and the
shareholder's adjusted tax basis in the Exchangeable Preferred Stock redeemed
or sold. Such gain or loss would be capital gain or loss and would be long-
term capital gain or loss if the holding period for the Exchangeable Preferred
Stock exceeded one year.
An exchange of Exchangeable Preferred Stock for Exchange Debentures at the
option of Adelphia will be subject to the same general rules as a redemption
for cash, including the rules for treating the redemption as a dividend or as
a sale or exchange. If the exchange of Exchangeable Preferred Stock for
Exchange Debentures is treated as a dividend, the amount of the dividend would
be the "issue price" of the Exchange Debentures (to the extent of Adelphia's
current or accumulated earnings and profits) determined in the manner
described below for purposes of computing original issue discount (if any) on
the Exchange Debentures. If the exchange of Exchangeable Preferred Stock is
not treated as a dividend, the exchanging shareholder would recognize gain or
loss equal to the difference between the issue price of Exchange Debentures
and the shareholder's adjusted tax basis in the Exchangeable Preferred Stock.
If neither the Exchangeable Preferred Stock nor the Exchange Debentures are
regularly traded on an established securities market, gain realized on the
exchange of Exchangeable Preferred Stock for Exchange Debentures may qualify
for installment-sale treatment.
If the amount received in a redemption of Exchangeable Preferred Stock is
treated as a distribution which may be taxable as a dividend as opposed to
consideration received in a sale or exchange, the amount of the distribution
will be measured by the amount of cash or the issue price (or, alternatively,
fair market value) of the
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Exchange Debentures, as the case may be, received by the Holder. The Holder's
adjusted tax basis in the redeemed Exchangeable Preferred Stock will be
transferred to any remaining stockholdings in Adelphia. If the shareholder
does not retain any stock ownership in Adelphia, it is unclear whether the
shareholder will be permitted to transfer such basis to any Exchange
Debentures received in the redemption or will lose such basis entirely. Under
section 1059 of the Code, the term "extraordinary dividend" includes any
redemption of stock that is treated as a dividend and that is non-pro rata as
to all stockholders, including shares of common stock, irrespective of the
holding period. Consequently, to the extent an exchange of Exchangeable
Preferred Stock for debentures or cash constitutes a distribution taxable as a
dividend, it may constitute an "extraordinary dividend" to a corporate
shareholder and be subject to the rules described above. See "--Dividends on
Exchangeable Preferred Stock."
ORIGINAL ISSUE DISCOUNT
If the shares of Exchangeable Preferred Stock are exchanged for Exchange
Debentures at a time when the stated redemption price at maturity of such
Exchange Debentures exceeds their issue price by an amount equal to or greater
than 0.25% of the stated redemption price at maturity multiplied by the number
of complete years to maturity, the Exchange Debentures will be treated as
having original issue discount ("OID") equal to the entire amount of such
excess. If the Exchange Debentures are traded on an established securities
market within the meaning of section 1273(b)(3) of the Code, the issue price
of the Exchange Debentures will be their fair market value as of the issue
date. Similarly, if the Exchangeable Preferred Stock, but not the Exchange
Debentures issued and exchanged therefor, is traded on an established
securities market within the meaning of section 1273(b)(3) of the Code at the
time of the exchange, then the issue price of each Exchange Debenture should
be the fair market value of the Exchangeable Preferred Stock at the time of
the exchange. If neither the Exchangeable Preferred Stock nor the Exchange
Debentures are traded on an established securities market, and absent any
"potentially abusive situation," the issue price of the Exchange Debentures
will be their stated principal amount or, in the event the Exchange Debentures
do not bear "adequate stated interest" within the meaning of section 1274 of
the Code, their "imputed principal amount" as determined under section 1274 of
the Code using the applicable federal rate (the "AFR") in effect as of the
date of the exchange.
Adelphia is allowed to exchange the Exchangeable Preferred Stock for
Exchange Debentures. Because the determination of the issue price of the
Exchange Debentures depends on several factors as described above, it is
possible that Exchange Debentures issued at different times will have
different issue prices. To the extent the Exchange Debentures have different
issue prices, they may have different tax characteristics from each other (for
example, the amount of OID on such Exchange Debentures may vary), and may
trade separately, which may adversely affect the liquidity of such Exchange
Debentures.
The "stated redemption price at maturity" of the Exchange Debentures would
equal the total of all payments under the Exchange Debentures, other than
payments of "qualified stated interest." "Qualified stated interest" generally
is stated interest that is unconditionally payable in cash or other property
(other than debt instruments of the issuer such as the Exchange Debentures) at
least annually at a single fixed rate. Since Adelphia will pay interest in
cash, the stated interest would qualify as qualified stated interest and none
of such stated interest would be included in the stated redemption price at
maturity of the Exchange Debentures.
A holder of an Exchange Debenture would generally be required under section
1272 of the Code to include in gross income (irrespective of its method of
accounting) a portion of such OID for each year during which it holds such an
Exchange Debenture, even if the cash to which such income is attributable
would not be received until maturity or redemption of the Exchange Debenture.
The amount of any OID included in income for each year would be calculated
under a constant-yield-to-maturity formula that would result in the allocation
of less OID to the early years of the term of the Exchange Debenture and more
OID for later years.
Since Adelphia will pay interest in cash, the stated interest would be
included in income by a Holder in accordance with such Holder's usual method
of accounting.
If the Exchange Debentures are issued with OID and Adelphia were found to
have had an intention to call the Exchange Debentures before maturity, any
gain realized on a sale, exchange or redemption of Exchange
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Debentures prior to maturity would be considered ordinary income to the extent
of any unamortized OID for the period remaining to the stated maturity of the
Exchange Debentures. Adelphia cannot predict whether it would have an
intention to call the Exchange Debentures before their maturity at the time,
if ever, it issues the Exchange Debentures.
BOND PREMIUM ON EXCHANGE DEBENTURES
If the shares of Exchangeable Preferred Stock are exchanged for Exchange
Debentures at a time when the issue price of such Exchange Debentures exceeds
the amount payable at the maturity date (or earlier redemption date, if
appropriate) of the Exchange Debentures, such excess will be deductible,
subject to certain limitations with respect to individuals, by the Holder of
such Exchange Debentures as amortizable bond premium over the term of the
Exchange Debentures (taking into account earlier call dates, as appropriate),
under a yield-to-maturity formula, but only if an election by the taxpayer
under the section 171 of the Code is in effect or is made. To the extent the
excess is deducted as amortizable bond premium, the Holder's adjusted tax
basis in the Exchange Debentures will be reduced. An election under section
171 of the Code is available only if the Exchange Debentures are held as
capital assets. Such election is binding once made and applies to all debt
obligations owned or subsequently acquired by the taxpayer. Under the Code,
the amortizable bond premium will be treated as an offset to interest income
on the Exchange Debentures rather than as a separate deduction item unless
otherwise provided in future regulations.
REDEMPTION OR SALE OF EXCHANGE DEBENTURES
Generally, any redemption or sale of Exchange Debentures by a Holder would
result in taxable gain or loss equal to the difference between the amount of
cash received (except to the extent that cash received is attributable to
accrued interest) and the Holder's tax basis in the Exchange Debentures. The
tax basis of a Holder who received an Exchange Debenture in exchange for
Exchangeable Preferred Stock will generally be equal to the issue price of the
Exchange Debenture on the date the Exchange Debenture is issued (or, in the
case of an Exchange Debenture received as to which the holder thereof was
entitled to installment-sale-treatment, the adjusted tax basis of the
Exchangeable Preferred Stock exchanged) plus any OID on the Exchange Debenture
included in the Holder's income prior to sale or redemption of the Exchange
Debenture, reduced by any amortizable bond premium applied against the
Holder's income prior to sale or redemption of the Exchange Debenture and by
payments other than payments of qualified stated interest. Such gain or loss
would be capital gain or loss and would be long-term capital gain or loss if
the holding period exceeded one year. However, if Adelphia were found to have
an intention at the time the Exchange Debentures were issued to call them
before maturity, the gain would be ordinary income to the extent of any
unamortized OID.
HIGH YIELD DISCOUNT OBLIGATIONS
Sections 163(e) and 163(i) of the Code provide rules that affect the tax
treatment of certain high-yield discount obligations ("HYDOs"). The Exchange
Debentures may constitute HYDOs if their yield-to-maturity exceeds by more
than five percentage points the applicable federal rate (the "AFR") for
instruments with a similar maturity in effect for the calendar month in which
the Exchange Debentures are issued. If the Exchange Debentures are HYDOs, the
Company may not deduct any OID that accrues with respect to the Exchange
Debentures until it pays such amount in cash.
In addition, to the extent that the Exchange Debentures' yield-to-maturity
exceeds the relevant AFR by more than six percentage points, then (i) a
portion of such interest corresponding to the yield in excess of six
percentage points above the AFR will not be deductible by Adelphia at any time
and (ii) a corporate holder may be entitled to treat the portion of the
interest that is not deductible by Adelphia as a dividend, which may then
qualify for the dividends-received deduction provided by Section 243 of the
Code (subject to applicable limitations). In such event, corporate holders of
Exchange Debentures should consult with their tax advisors as to the
applicability of the dividends-received deduction. It is not possible to
determine at the present time whether an Exchange Debenture will be treated as
a HYDO.
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BACKUP WITHHOLDING
Under section 3406 of the Code and applicable Treasury regulations, a Holder
of Exchangeable Preferred Stock or Exchange Debentures may be subject to
backup withholding at the rate of 31% with respect to "reportable payments,"
which include dividends or interest paid on, or the proceeds of a sale,
exchange or redemption of, Exchangeable Preferred Stock or Exchange
Debentures, as the case may be. The payor will be required to deduct and
withhold the prescribed amounts if (i) the payee fails to furnish a taxpayer
identification number ("TIN") to the payor in the manner required by the Code
and applicable Treasury regulations, (ii) the Internal Revenue Service
notifies the payor that the TIN furnished by the payee is incorrect, (iii)
there has been a "notified payee underreporting" described in section 3406(c)
of the Code, or (iv) there has been a failure of the payee to certify under
penalty of perjury that the payee is not subject to withholding under section
3406(a)(1)(C) of the Code. If any one of the events listed above occurs,
Adelphia will be required to withhold an amount equal to 31% from any dividend
payment made with respect to Exchangeable Preferred Stock, any payment of
interest or principal pursuant to the terms of the Exchange Debentures or any
payment of proceeds of a redemption of Exchangeable Preferred Stock or
Exchange Debentures, as the case may be, to a Holder. Amounts paid as backup
withholding do not constitute an additional tax and will be credited against
the holder's federal income tax liabilities, so long as the required
information is provided to the Internal Revenue Service. Adelphia will report
to the Holders of Exchangeable Preferred Stock or Exchange Debentures and to
the Internal Revenue Service the amount of any "reportable payments" for each
calendar year and the amount of tax withheld, if any, with respect to payment
on the securities.
SUBSEQUENT PURCHASERS
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquire the Exchangeable Preferred Stock or the Exchange
Debentures other than through purchasing the Exchangeable Preferred Stock at
the time of original issuance at the issue price, including those provisions
of the Code relating to the treatment of "market discount." For example, the
market discount provisions of the Code may require a subsequent purchaser of
an Exchange Debenture at a market discount to treat all or a portion of any
gain recognized upon sale or other disposition of the Exchange Debenture as
ordinary income and to defer a portion of any interest expense that would
otherwise be deductible on any indebtedness incurred or maintained to purchase
or carry such Exchange Debenture until the holder disposes of the Exchange
Debenture in a taxable transaction.
As a further example, a holder of an Exchange Debenture issued with OID who
purchases such Exchange Debenture for an amount that is greater than its
adjusted issue price but equal to or less than the sum of all payments payable
on the Exchange Debenture after the purchase date (other than payments, if
any, of qualified stated interest) will be considered to have purchased such
Exchange Debenture at an "acquisition premium." Under the acquisition premium
rules, the amount of OID which such holder must include in income with respect
to such Exchange Debenture for any taxable year will be reduced by the portion
of such acquisition premium properly allocable to such year.
EACH PROSPECTIVE HOLDER OF EXCHANGEABLE PREFERRED STOCK OR EXCHANGE
DEBENTURES SHOULD CONSULT HIS OWN TAX ADVISOR TO DETERMINE THE FEDERAL, STATE,
LOCAL AND ANY OTHER TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF EXCHANGEABLE PREFERRED STOCK OR EXCHANGE DEBENTURES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN INCOME
TAX LAWS AND ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.
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NEW NOTES
EXCHANGE OFFER
The exchange of the New Notes for Old Notes pursuant to the Exchange Offer
will not constitute a recognition event for federal income tax purposes.
Consequently, no gain or loss will be recognized by holders upon receipt of
the New Notes. For purposes of determining gain or loss upon the subsequent
exchange of New Notes, a holder's basis in the New Notes will be the same as a
holder's basis in the Old Notes exchanged therefor. Holders will be considered
to have held the New Notes from the time of their original acquisition of the
Old Notes. As used herein, the term "Senior Note" refers to both an Old Note
and a New Note received in exchange therefor.
INTEREST ON THE NEW NOTES
A holder of a New Note will be required to report as income for federal
income tax purposes interest earned on a New Note in accordance with the
holder's method of tax accounting. A holder of a New Note using the accrual
method of accounting for tax purposes is, as a general rule, required to
include interest in ordinary income as such interest accrues. A cash basis
holder must include interest in income when cash payments are received by (or
made available to) such holder.
MARKET DISCOUNT
If a holder acquired an Old Note at a market discount (i.e., at a price less
than the stated redemption price at maturity of the Old Note), the Old 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 Old Note multiplied by the number
of complete years to maturity after the holder acquired the Old Note. If the
holder exchanges an Old Note that has more than de minimis market discount for
a New Note, the New Note also will be subject to the market discount rules of
the Code. New Notes purchased by a subsequent purchaser also will be subject
to the market discount rules if the New Notes are purchased with more than a
de minimis amount of market discount. Notes that have more than de minimis
market discount are herein referred to as "Market Discount Notes."
Any gain recognized on the maturity, sale or other 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. The
amount of market discount treated as having accrued will be determined either
(i) on a ratable basis by multiplying the market discount times a fraction,
the numerator of which is the number of days the New Note was held by the
Holder and the denominator of which is the total number of days after the date
such Holder acquired the New Note up to and including the date of its
maturity, or (ii) if the Holder so elects, on a constant interest rate method.
A Holder may elect to include market discount in income currently over the
life of the Market Discount Note. Such an election shall apply to all debt
instruments with market discount acquired by the holder on or after the first
day of the first taxable year to which the election applies and all subsequent
taxable years. This election may not be revoked without the consent of the
IRS. Market discount will accrue on a ratable inclusion basis unless the
holder elects to accrue market discount on a constant yield to maturity basis.
Such an election shall apply only to the Market Discount Note with respect to
which it is made and may not be revoked without the consent of the IRS. If an
election is made to include market discount in income currently, the basis of
the New Note in the hands of the holder will be increased by the market
discount thereon as it is included in income. A holder who does not elect to
include market discount in income currently generally will be required to
defer deductions for interest on borrowings allocable to a Market Discount
Note in an amount not exceeding the accrued market discount on the Market
Discount Note until the maturity or disposition of the Market Discount Note.
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DISPOSITION OF THE NOTES
Subject to the market discount rules discussed above, a holder of Senior
Notes will recognize gain or loss upon the sale, redemption, retirement or
other disposition of such securities equal to the difference between (i) the
amount of cash and the fair market value of the property received (except to
the extent attributable to the payment of accrued interest) and (ii) the
holder's adjusted tax basis in the securities. Gain or loss recognized will be
capital gain or loss provided the Notes are held as capital assets by the
holder, and will be long-term capital gain or loss if the holder has held such
securities (or is treated as having held such securities) for more than one
year.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Holders of the Senior Notes may be subject to backup withholding at a rate
of 31% with respect to interest paid on the Senior Notes 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 the requirements of the backup
withholding rules.
The Company will report to the holders of the Senior Notes and the IRS the
amount of any "reportable payment" for each calendar year and amount of tax
withheld, if any, with respect to payments on the Senior Notes.
EACH HOLDER 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).
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of the New Securities. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Securities received in exchange for Old
Securities acquired as a result of market-making activities or other trading
activities. The Company has agreed that it will make this Prospectus available
to any broker-dealer for use in connection with any such resale for a period
of 365 days after the Expiration Date or until all participating broker-
dealers have so resold.
The Company will not receive any proceeds from any sale of New Securities by
broker-dealers. New Securities received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Securities or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concession from any
such broker-dealer and/or the purchasers of any New Securities. Any broker-
dealer that resells New Securities that were received by it for its own
account pursuant to the Exchange Offer and any broker-dealer that participates
in a distribution of New Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act, and any profit on any resale of New
Securities and any commissions or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities Act. The Letter
of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Securities to be received in the Exchange Offer,
and to the best of the Company's information and belief, each
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person participating in the Exchange Offer is acquiring the New Securities in
its ordinary course of business and has no arrangement or understanding with
any person to participate in the distribution of the New Securities to be
received in the Exchange Offer.
LEGAL MATTERS
The validity of the New Securities will be passed upon on behalf of the
Company by Buchanan Ingersoll Professional Corporation, Pittsburgh,
Pennsylvania.
EXPERTS
The consolidated financial statements and the related financial statement
schedules of Adelphia and its subsidiaries as of March 31, 1996 and 1997, and
for each of the three years in the period ended March 31, 1997, and the
consolidated financial statements of Olympus Communications, L.P. and its
subsidiaries as of December 31, 1995 and 1996, and for each of the three years
in the period ended December 31, 1996, all incorporated in this Prospectus by
reference from Adelphia's Annual Report on Form 10-K for the year ended March
31, 1997, have been audited by Deloitte & Touche LLP, 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.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING
LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTA-
TION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE REGISTRANT. NEI-
THER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLI-
CATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE REGISTRANT SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF. NEITHER THIS PROSPECTUS NOR THE ACCOMPANY-
ING LETTER OF TRANSMITTAL CONSTITUTES 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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information...................................................... 3
Incorporation by Reference................................................. 4
Prospectus Summary......................................................... 5
The Exchange Offer......................................................... 8
Summary Description of the Notes .......................................... 10
Risk Factors............................................................... 16
Use of Proceeds............................................................ 22
The Exchange Offer......................................................... 23
Capitalization............................................................. 32
Selected Consolidated Financial Data....................................... 33
Description of the Notes................................................... 36
Description of Exchangeable Preferred Stock and Exchange Debentures........ 51
Terms Applicable to All Securities......................................... 63
Description of Convertible Preferred Stock................................. 67
Certain Federal Income Tax Considerations.................................. 67
Plan of Distribution....................................................... 75
Legal Matters.............................................................. 76
Experts.................................................................... 76
</TABLE>
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ADELPHIA
COMMUNICATIONS
CORPORATION
10 1/2% SERIES B SENIOR NOTES
DUE 2004
13% SERIES B CUMULATIVE
EXCHANGEABLE PREFERRED STOCK
---------------
PROSPECTUS
---------------
OCTOBER 17, 1997
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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, respectively, or its stockholders
for monetary damages for breach of fiduciary duty as a director for acts or
omissions, 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 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<C> <S>
3.01 Certificate of Incorporation of Adelphia Communications
Corporation (Incorporated herein by reference is Exhibit 3.01 to
the Registrant's Current Report on Form 8-K dated July 24, 1997.)
(File Number 0-16014)
3.02 Bylaws of Adelphia Communications Corporation (Incorporated herein
by reference is Exhibit 3.02 to Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1994.) (File Number 0-
16014)
4.01 Indenture, dated as of February 26, 1997, between the Registrant
and Bank of Montreal Trust Company with respect to the
Registrant's 9 7/8% Senior Notes Due 2007 (Incorporated herein by
reference is Exhibit 4.01 to Registrant's Current Report on Form
8-K dated May 1, 1997.) (File Number 0-16014)
4.02 Form of Note with respect to the Registrant's 9 7/8% Senior Notes
Due 2007 (contained in Indenture filed as Exhibit 4.01.)
4.03 Registration Rights Agreement, dated as of February 26, 1997,
between the Registrant and the Initial Purchaser with respect to
the Registrant's 9 7/8% Senior Notes Due 2007 (Incorporated herein
by reference is Exhibit 10.01 to Registrant's Current Report on
Form 8-K dated May 1, 1997.) (File Number 0-16014)
4.04 First Supplemental Indenture, dated as of May 4, 1994, with
respect to Registrant's 9 1/2% Senior Pay-In-Kind Notes Due 2004
(Incorporated herein by reference is Exhibit 4.01 to Registrant's
Current Report on Form 8-K dated May 5, 1994.) (File Number 0-
16014)
4.05 Indenture, dated as of February 22, 1994, with respect to
Registrant's 9 1/2% Senior Pay-In-Kind Notes Due 2004
(Incorporated herein by reference is Exhibit 4.05 to Registration
Statement No. 33-52513 on Form S-4.)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.06 Indenture, dated as of July 28, 1993, with respect to Registrant's
10 1/4% Senior Notes Due 2000 (Incorporated herein by reference is
Exhibit 4.01 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993.) (File Number 0-16014)
4.07 Amended and Restated Indenture, dated as of May 11, 1993, with
respect to Registrant's 9 7/8% Senior Debentures Due 2005
(Incorporated herein by reference is Exhibit 4.01 to Registrant's
Annual Report on Form 10-K for the fiscal year ended March 31,
1993.) (File Number 0-16014)
4.08 Indenture, dated as of September 2, 1992, with respect to the
Registrant's 11 7/8% Senior Debentures Due 2004 (Incorporated
herein by reference is Exhibit 4.03 to Registration Statement No.
33-52630 on Form S-1.)
4.09 Indenture, dated as of May 7, 1992, with respect to the
Registrant's 12 1/2% Senior Notes Due 2002 (Incorporated herein by
reference is Exhibit 4.03 to Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1992.) (File Number 0-
16014)
4.10 Indenture, dated as of April 15, 1996, between Hyperion
Telecommunications, Inc. and Bank of Montreal Trust Company
(Incorporated by reference is Exhibit 4.1 to Registration
Statement No. 333-06957 on Form S-4 filed for Hyperion
Telecommunications, Inc.)
4.11 Form of 13% Hyperion Telecommunications, Inc. Senior Discount
Notes (Incorporated herein by reference is Exhibit 4.3 to Hyperion
Telecommunications, Inc.'s Registration Statement No. 333- 12619
on Form S-1.)
4.12 First Supplemental Indenture, dated as of September 11, 1996,
between Hyperion Telecommunications, Inc. and Bank of Montreal
Trust Company (Incorporated herein by reference is Exhibit 4.2 of
Hyperion Telecommunications, Inc.'s Registration Statement No.
333-12619 on Form S-1.)
4.13 Indenture, dated as of November 12, 1996, between Olympus
Communications, L.P., Olympus Capital Corporation and Bank of
Montreal Trust Company (Incorporated herein by reference is
Exhibit 10.02 to Registrant's Current Report on Form 8-K dated
December 16, 1996.) (File Number 0-16014)
4.14 Certificate of Designations for 13% Series A and Series B
Cumulative Exchangeable Preferred Stock (Contained in Exhibit 3.01
to Registrant's Current Report on Form 8-K dated July 24, 1997,
which is incorporated herein by reference.) (File Number 0-16014)
4.15 Certificate of Designations for Series C Convertible Preferred
Stock (Contained in Exhibit 3.01 to Registrant's Current Report on
Form 8-K dated July 24, 1997, which is incorporated herein by
reference.) (File Number 0-16014)
4.16 Indenture, dated as of July 7, 1997, with respect to the
Registrant's 10 1/2% Senior Notes due 2004, between the Registrant
and the Bank of Montreal Trust Company (Incorporated herein by
reference is Exhibit 4.03 from the Registrant's Current Report on
Form 8-K dated July 24, 1997.) (File Number 0-16014)
4.17 Form of 10 1/2% Senior Note due 2004 (Contained in Exhibit 4.03 to
Registrant's Current Report on Form 8-K dated July 24, 1997 which
is incorporated herein by reference.) (File Number 0-16014)
4.18 Form of Indenture, with respect to the Registrant's 13% Senior
Subordinated Exchange Debentures due 2009, between the Registrant
and the Bank of Montreal Trust Company (Contained in Exhibit 3.01
as Annex A to Registrant's Current Report on Form 8-K dated July
24, 1997, which is incorporated herein by reference.) (File Number
0-16014)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.19 Form of Certificate for 13% Cumulative Exchangeable Preferred
Stock (Incorporated herein by reference is Exhibit 4.06 from the
Registrant's Current Report on Form 8-K dated July 24, 1997.)
(File Number 0-16014)
4.20 Form of Certificate for Series C Convertible Preferred Stock
(Incorporated herein by reference is Exhibit 4.06 from the
Registrant's Current Report on Form 8-K dated July 24, 1997.)
(File Number 0-16014)
4.21 Indenture, dated as of August 27, 1997, with respect to Hyperion
Telecommunications, Inc. ("Hyperion") 12 1/4% Senior Secured Notes
due 2004, between Hyperion and the Bank of Montreal Trust Company
(Incorporated herein by reference to Exhibit 4.01 to Hyperion's
Current Report on Form 8-K dated August 27, 1997.) (File No. 0-
21605).
4.22 Form of 12 1/4% Senior Secured Note due 2004 (contained in Exhibit
4.21).
4.23 Second Supplemental Indenture, dated as of August 27, 1997,
between Hyperion and the Bank of Montreal Trust Company, regarding
Hyperion's 13% Senior Discount Notes due 2003 (Incorporated by
reference herein to Exhibit 4-06 to Hyperion's Current Report on
Form 8-K dated August 27, 1997.) (File No. 0-21605).
5.01** Opinion of Buchanan Ingersoll Professional Corporation
10.01 Class B Common Stockholders Agreement (Incorporated herein by
reference is Exhibit 10.01 to Registration Statement No. 33-6974
on Form S-1.)
10.02 Joinder to Class B Common Stockholders Agreement (Incorporated
herein by reference is Exhibit 10.02 to Registrant's Annual Report
on Form 10-K for the fiscal year ended March 31, 1994.) (File
Number 0-16014)
10.03 Registration Rights Agreement and Amendment to Registration Rights
Agreement (Incorporated herein by reference are Exhibit 10.02 to
Registration Statement No. 33-6974 on Form S-1 and Exhibit 10.35
to Registration Statement No. 33-25121 on Form S-1.)
10.04 Form of Management Agreement for Managed Companies (Incorporated
herein by reference is Exhibit 10.04 to the Registrant's Annual
Report on Form 10-K for fiscal year ended March 31, 1996.) (File
Number 0-16014)
10.05 Management Agreement--Montgomery Cablevision Associates, L.P.
(Incorporated herein by reference is Exhibit 10.08 to Registration
Statement No. 33-6974 on Form S-1.)
10.06 Management Agreement--Adelphia Cablevision Associates of Radnor,
L.P. (Incorporated herein by reference is Exhibit 10.09 to
Registration Statement No. 33-6974 on Form S-1.)
10.07 Stock Option Plan of 1986, as amended (Incorporated herein by
reference is Exhibit 10.07 to Registration Statement No. 33-46551
on Form S-1.)
10.08 Restricted Stock Bonus Plan, as amended (Incorporated herein by
reference is Exhibit 10.08 to Registration Statement No. 33-46551
on Form S-1.)
10.09 Business Opportunity Agreement (Incorporated herein by reference
is Exhibit 10.13 to Registration Statement No. 33-3674 on Form S-
1.)
10.10 Employment Agreement between the Company and John J. Rigas
(Incorporated herein by reference is Exhibit 10.14 to Registration
Statement No. 33-6974 on Form S-1.)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.11 Employment Agreement between the Company and Daniel R. Milliard
(Incorporated herein by reference is Exhibit 10.15 to Registration
Statement No. 33-6974 on Form S-1.)
10.12 Employment Agreement between the Company and Timothy J. Rigas
(Incorporated herein by reference is Exhibit 10.16 to Registration
Statement No. 33-6974 on Form S-1.)
10.13 Employment Agreement between the Company and Michael J. Rigas
(Incorporated herein by reference is Exhibit 10.17 to Registration
Statement No. 33-6974 on Form S-1.)
10.14 Employment Agreement between the Company and James P. Rigas
(Incorporated herein by reference is Exhibit 10.18 to Registration
Statement No. 33-6974 on Form S-1.)
10.15 Agreement Regarding Management Fees relating to the subsidiaries
of Chauncey Communications Corporation (Incorporated herein by
reference is Exhibit 10.16 of Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1991.) (File Number 0-
16014)
10.16 Form of Note Agreement, dated as of August 1, 1990, relating to
the 10.66% Senior Secured Notes due August 1, 1998, of Chauncey
Communications Corporation (Incorporated herein by reference is
Exhibit 10.01 of Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990.) (File Number 0-16014)
10.17 Amendatory Agreement regarding Chauncey Communications Corporation
10.66% Senior Secured Note Agreement, dated as of August 6, 1991
(Incorporated herein by reference is Exhibit 10.02 of Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1991.) (File Number 0-16014)
10.18 $50,000 Term Note and Pledge Agreement between Adelphia
Communications Corporation as lender and Daniel R. Milliard, dated
October 1, 1988 (Incorporated herein by reference is Exhibit 10.03
of Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991.) (File Number 0-16014)
10.19 $205,000 Revolving Term Note and Pledge Agreement among Adelphia
Communications Corporation as lender, Daniel R. Milliard and David
Acker (Incorporated herein by reference is Exhibit 10.04 of
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991.) (File Number 0-16014)
10.20 Olympus Communications, L.P. Second Amended and Restated Limited
Partnership Agreement, dated as of February 28, 1995 (Incorporated
herein by reference is Exhibit 10.32 of the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995.)
(File Number 0-16014)
10.21 Credit, Security and Guaranty Agreement among UCA Corp. and
certain of its Affiliates and First Union National Bank of North
Carolina as Administrative Agent, dated as of March 15, 1995
(Incorporated herein by reference is Exhibit 10.32 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995.) (File Number 0-16014)
10.22 Revolving Credit Facility among Adelphia Cable partners, L.P.,
Southwest Florida Cable, Inc., West Boca Acquisition Limited
Partnership and Toronto-Dominion (Texas), Inc., as Administrative
Agent, dated May 12, 1995 (Incorporated herein by reference is
Exhibit 10.03 to Registrant's Current Report on Form 8-K dated
June 30, 1995.) (File Number 0-16014)
10.23 Credit Agreement, dated as of October 27, 1995, among Plato
Communications, Inc. Northeast Cable, Inc., Robinson/Plum
Cablevision L.P., the several other banks and other financial
institutions from time to time parties to this agreement and
Chemical Bank, as Administrative Agent (Incorporated herein by
reference is Exhibit 10.35 to Registrant's Current Report on Form
8-K dated December 7, 1995.) (File Number 0-16014)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<C> <S>
10.24 Credit Agreement, dated as of April 12, 1996, among Chelsea
Communications, Inc., Kittanning Cablevision Inc., Robinson/Plum
Cablevision L.P., the several banks and financial institutions
parties thereto, and Toronto Dominion (Texas), Inc. as
Administrative Agent (Incorporated herein by reference is Exhibit
10.36 to Registrant's Current Report on Form 8-K dated June 3,
1996.) (File Number 0-16014)
10.25 Amended Credit Agreement, dated as of March 29, 1996, among
Highland Video Associates L.P., Telesat Acquisition Limited
Partnership, Global Acquisition Partners, L.P., the various
financial institutions as parties thereto, Bank of Montreal as
syndication agent, Chemical Bank as documentation agent, and the
Bank of Nova Scotia as administrative agent (Incorporated herein
by reference is Exhibit 10.37 to Registrant's Current Report on
Form 8-K dated June 19, 1996.) (File Number 0-16014)
10.26 Purchase Agreement dated as of April 10, 1996, between Hyperion
Telecommunications, Inc. and Bear Stearns & Co. Inc., Chase
Securities Inc. and NationsBanc Capital Markets, Inc.
(Incorporated by reference is Exhibit 1.1 to Registration
Statement No. 333-06957 on Form S-4 filed for Hyperion
Telecommunications, Inc.)
10.27 Purchase Agreement dated as of February 21, 1997 between the
Registrant and Smith Barney Inc. (Incorporated herein by reference
is Exhibit 10.02 to Adelphia Communications Corporation's Current
Report on Form 8-K dated May 1, 1997). (File Number 0-16014)
10.28 Registration Rights Agreement dated as of April 15, 1996, between
Hyperion Telecommunications, Inc. and the Initial Purchasers
(Incorporated by reference is Exhibit 4.3 to Registration
Statement No. 333-06957 on Form S-4 filed for Hyperion
Telecommunications, Inc.)
10.29 Warrant Agreement dated as of April 15, 1996, by and among
Hyperion Telecommunications, Inc. and Bank of Montreal Trust
Company (Incorporated by reference is Exhibit 10.13 to
Registration Statement No. 333-06957 on Form S-4 filed for
Hyperion Telecommunications, Inc.)
10.30 Warrant Registration Rights Agreement dated as of April 15, 1996,
by and among Hyperion Telecommunications, Inc. and the Initial
Purchasers (Incorporated by reference is Exhibit 10.14 to
Registration Statement No. 333-06957 on Form S-4 filed for
Hyperion Telecommunications, Inc.)
10.31 Hyperion Telecommunications, Inc. Long-Term Incentive Compensation
Plan (Incorporated herein by reference is Exhibit 10.17 to
Hyperion Telecommunications, Inc.'s Registration Statement No.
333-13663 on Form S-1.)
10.32 Purchase Agreement, dated as of November 6, 1996, between Olympus
Communications, L.P., Olympus Capital Corporation and Goldman,
Sachs & Co. (Incorporated herein by reference is Exhibit 10.01 to
Registrant's Current Report on Form 8-K dated December 16, 1996.)
(File Number 0-16014)
10.33 Registration Rights Agreement among Charles R. Drenning, Paul D.
Fajerski, Randolph S. Fowler, Adelphia Communications Corporation
and Hyperion (Incorporated herein by reference is Exhibit 10.18 to
Hyperion Telecommunications, Inc.'s Registration Statement No.
333-13663 on Form S-1.)
10.34 Registration Rights Agreement between Adelphia Communications
Corporation and Hyperion (Incorporated herein by reference is
Exhibit 10.19 to Hyperion Telecommunications, Inc.'s Registration
Statement No. 333-13663 on Form S-1.)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.35 First Amendment to the Olympus Communications, L.P. Second Amended
and Restated Limited Partnership Agreement, dated September 1,
1995 (Incorporated herein by reference is Exhibit 10.33 to the
Registrant's Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1996.) (File Number 0-16014)
10.36 First Amendment to the Olympus Communications, L.P. Second Amended
and Restated Limited Partnership Agreement, dated March 29, 1996
(Incorporated herein by reference is Exhibit 10.34 to the
Registrant's Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1996.) (File Number 0-16014)
10.37 Second Amendment to the Olympus Communications, L.P. Second
Amended and Restated Limited Partnership Agreement, dated June 27,
1996 (Incorporated herein by reference is Exhibit 10.35 to the
Registrant's Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1996.) (File Number 0-16014)
10.38 Employment Agreement between Hyperion Telecommunications, Inc. and
Daniel R. Milliard dated as of March 4, 1997. (Incorporated herein
by reference is Exhibit 10.03 to Adelphia Communications
Corporation's Current Report on Form 8-K dated May 1, 1997) (File
Number
0-16014)
10.39 Extension Agreement dated as of January 8, 1997, among Hyperion
Telecommunications, Inc., Adelphia Communications Corporation,
Charles R. Drenning, Paul D. Fajerski, Randolph S. Fowler, and six
Trusts named therein (Incorporated herein by reference is Exhibit
10.04 to Adelphia Communications Corporation's Current Report on
Form 8-K dated May 1, 1997.) (File Number 0-16014)
10.40 Purchase Agreement among Adelphia Communications Corporation,
Smith Barney Inc., Bear Stearns & Co. Inc., NationsBanc Capital
Markets, Inc. and TD Securities (USA) Inc. (the "Initial
Purchasers") dated July 1, 1997. (Incorporated herein by reference
is Exhibit 10.01 from the Registrant's Current Report on Form 8-K
dated July 24, 1997) (File Number 0-16014)
10.41 Registration Rights Agreement among Adelphia Communications
Corporation, the Initial Purchasers and Highland Holdings, dated
July 7, 1997, regarding the 13% Cumulative Exchangeable Preferred
Stock. (Incorporated herein by reference is Exhibit 10.02 from the
Registrant's Current Report on Form 8-K dated July 24, 1997) (File
Number 0-16014)
10.42 Registration Rights Agreement among Adelphia Communications
Corporation and the Initial Purchasers, dated July 7, 1997,
regarding the 10 1/2% Senior Notes due 2004. (Incorporated herein
by reference is Exhibit 10.03 from the Registrant's Current Report
on Form 8-K dated July 24, 1997) (File Number 0-16014)
10.43 Registration Rights Agreement among Adelphia Communications
Corporation, Highland Holdings and Telesat Cablevision, Inc.,
dated July 7, 1997. (Incorporated herein by reference is Exhibit
10.04 from the Registrant's Current Report on Form 8-K dated July
24, 1997) (File Number 0-16014)
10.44 Purchase Agreement between Adelphia Communications Corporation and
Highland Holdings, dated July 1, 1997. (Incorporated herein by
reference is Exhibit 10.05 from the Registrant's Current Report on
Form 8-K dated July 24, 1997) (File Number 0-16014)
10.45 Series C Preferred Stock Purchase Agreement among Adelphia
Communications Corporation, Highland Holdings and Telesat
Cablevision, Inc., dated June 22, 1997 (Incorporated herein by
reference is Exhibit 10.06 from the Registrant's Current Report on
Form 8-K dated July 24, 1997) (File Number 0-16014)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.46 Pledge Agreement between Hyperion and the Bank of Montreal Trust
Company as Collateral Agent, dated as of August 27, 1997.
(Incorporated by reference herein is Exhibit 4.03 to Hyperion's
Current Report on Form 8-K dated August 27, 1997) (File No. 0-
21065).
10.47 Registration Rights Agreement between Hyperion and the Initial
Purchasers, dated August 27, 1997, regarding the 12 1/4% Senior
Secured Notes due 2004 (Incorporated herein by reference to
Exhibit 4.04 to Hyperion's Current Report on Form 8-K dated August
27, 1997) (File No. 0-21605).
10.48 Pledge, Escrow and Disbursement Agreement, between Hyperion and
the Bank of Montreal Trust Company dated as of August 27, 1997.
(Incorporated by reference herein to Exhibit 4.05 to Hyperion's
Current Report on Form 8-K dated August 27, 1997) (File No. 0-
21605).
10.49 Purchase Agreement among Hyperion, Bear Stearns & Co. Inc., Chase
Securities Inc., TD Securities (USA) Inc., CIBC Wood Gundy
Securities Corp., and Scotia Capital Markets (the "Initial
Purchasers") dated August 21, 1997. (Incorporated herein by
reference to Exhibit 10.01 to Hyperion's Current Report on Form 8-
K dated August 27, 1997) (File No. 0-21605).
12.01* Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
21.01 Subsidiaries of the Registrant (Incorporated herein by reference
is Exhibit 21.01 to Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1997.) (File Number 0-16014)
23.01** Consent of Buchanan Ingersoll Professional Corporation (contained
in its opinion filed as Exhibit 5.01 hereto)
23.02* Consent of Deloitte & Touche LLP
24.01** Power of Attorney (appearing on signature page)
25.01** Form T-1 Statement of Eligibility of Trustee
99.01** Form of Letter of Transmittal and Notice of Guaranteed Delivery
for Notes
99.02** Form of Letter of Transmittal and Notice of Guaranteed Delivery
for Preferred Stock
</TABLE>
- --------
*Filed herewith.
**Previously filed.
(b) Financial Statement Schedules
The following schedules are included in the Registrant's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997 contained herein by
reference.
Schedule I--Condensed Financial Information of the Registrant
Schedule II--Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants 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 of 1933 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 of 1933 and will be governed by the final
adjudication of such issue.
II-7
<PAGE>
The Registrant hereby undertakes to respond to requests for information that
is incorporated by reference into the Prospectus pursuant to Item 4, 10(b),
11, or 13 of the Form S-4, within one business day of receipt of such request,
and to send the incorporated documents by first-class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date of responding to the request.
The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
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.
(3) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) ((S)230.424(b) of this chapter), if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the
effective registration statement.
II-8
<PAGE>
(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 (3)(i) and (3)(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 with or furnished to the Commission 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.
(4) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) 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.
(6) 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-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Coudersport, Commonwealth of Pennsylvania, on the 16th day of October, 1997.
ADELPHIA COMMUNICATIONS CORPORATION
By:/s/ Timothy J. Rigas
----------------------------------
Timothy J. Rigas
Executive Vice President, Chief
Accounting
Officer, Chief Financial Officer
and Treasurer
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.
SIGNATURE TITLE DATE
Chairman, President and
/s/ * Chief Executive Officer October 16,
- ----------------------------- 1997
John Rigas
Executive Vice President and
/s/ * Director October 16,
- ----------------------------- 1997
Michael J. Rigas
/s/ Timothy J. Rigas Executive Vice President,
- ----------------------------- Chief Accounting Officer, October 16,
Timothy J. Rigas Treasurer, Chief Financial 1997
Officer and Director
Executive Vice President and
/s/ * Director October 16,
- ----------------------------- 1997
James P. Rigas
Senior Vice President,
/s/ * Secretary and Director October 16,
- ----------------------------- 1997
Daniel R. Milliard
II-10
<PAGE>
SIGNATURE TITLE DATE
Director
/s/ * October 16,
- ----------------------------- 1997
Dennis P. Coyle
Director
/s/ * October 16,
- ----------------------------- 1997
Pete J. Metros
Director
- -----------------------------
Perry S. Patterson
*/s/ Timothy J. Rigas October 16,
- ----------------------------- 1997
Timothy J. Rigas, as
Attorney-in-Fact
II-11
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.01 Certificate of Incorporation of Adelphia Communications
Corporation (Incorporated herein by reference is Exhibit 3.01 to
the Registrant's Current Report on Form 8-K dated July 24, 1997.)
(File Number 0-16014)
3.02 Bylaws of Adelphia Communications Corporation (Incorporated herein
by reference is Exhibit 3.02 to Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1994.) (File Number 0-
16014)
4.01 Indenture, dated as of February 26, 1997, between the Registrant
and Bank of Montreal Trust Company with respect to the
Registrant's 9 7/8% Senior Notes Due 2007 (Incorporated herein by
reference is Exhibit 4.01 to Registrant's Current Report on Form
8-K dated May 1, 1997.) (File Number 0-16014)
4.02 Form of Note with respect to the Registrant's 9 7/8% Senior Notes
Due 2007 (contained in Indenture filed as Exhibit 4.01.)
4.03 Registration Rights Agreement, dated as of February 26, 1997,
between the Registrant and the Initial Purchaser with respect to
the Registrant's 9 7/8% Senior Notes Due 2007 (Incorporated herein
by reference is Exhibit 10.01 to Registrant's Current Report on
Form 8-K dated May 1, 1997.) (File Number 0-16014)
4.04 First Supplemental Indenture, dated as of May 4, 1994, with
respect to Registrant's 9 1/2% Senior Pay-In-Kind Notes Due 2004
(Incorporated herein by reference is Exhibit 4.01 to Registrant's
Current Report on Form 8-K dated May 5, 1994.) (File Number 0-
16014)
4.05 Indenture, dated as of February 22, 1994, with respect to
Registrant's 9 1/2% Senior Pay-In-Kind Notes Due 2004
(Incorporated herein by reference is Exhibit 4.05 to Registration
Statement No. 33-52513 on Form S-4.)
4.06 Indenture, dated as of July 28, 1993, with respect to Registrant's
10 1/4% Senior Notes Due 2000 (Incorporated herein by reference is
Exhibit 4.01 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993.) (File Number 0-16014)
4.07 Amended and Restated Indenture, dated as of May 11, 1993, with
respect to Registrant's 9 7/8% Senior Debentures Due 2005
(Incorporated herein by reference is Exhibit 4.01 to Registrant's
Annual Report on Form 10-K for the fiscal year ended March 31,
1993.) (File Number 0-16014)
4.08 Indenture, dated as of September 2, 1992, with respect to the
Registrant's 11 7/8% Senior Debentures Due 2004 (Incorporated
herein by reference is Exhibit 4.03 to Registration Statement No.
33-52630 on Form S-1.)
4.09 Indenture, dated as of May 7, 1992, with respect to the
Registrant's 12 1/2% Senior Notes Due 2002 (Incorporated herein by
reference is Exhibit 4.03 to Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1992.) (File Number 0-
16014)
4.10 Indenture, dated as of April 15, 1996, between Hyperion
Telecommunications, Inc. and Bank of Montreal Trust Company
(Incorporated by reference is Exhibit 4.1 to Registration
Statement No. 333-06957 on Form S-4 filed for Hyperion
Telecommunications, Inc.)
4.11 Form of 13% Hyperion Telecommunications, Inc. Senior Discount
Notes (Incorporated herein by reference is Exhibit 4.3 to Hyperion
Telecommunications, Inc.'s Registration Statement No. 333- 12619
on Form S-1.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.12 First Supplemental Indenture, dated as of September 11, 1996,
between Hyperion Telecommunications, Inc. and Bank of Montreal
Trust Company (Incorporated herein by reference is Exhibit 4.2 of
Hyperion Telecommunications, Inc.'s Registration Statement No.
333-12619 on Form S-1.)
4.13 Indenture, dated as of November 12, 1996, between Olympus
Communications, L.P., Olympus Capital Corporation and Bank of
Montreal Trust Company (Incorporated herein by reference is
Exhibit 10.02 to Registrant's Current Report on Form 8-K dated
December 16, 1996.) (File Number 0-16014)
4.14 Certificate of Designations for 13% Series A and Series B
Cumulative Exchangeable Preferred Stock (Contained in Exhibit 3.01
to Registrant's Current Report on Form 8-K dated July 24, 1997,
which is incorporated herein by reference.) (File Number 0-16014)
4.15 Certificate of Designations for Series C Convertible Preferred
Stock (Contained in Exhibit 3.01 to Registrant's Current Report on
Form 8-K dated July 24, 1997, which is incorporated herein by
reference.) (File Number 0-16014)
4.16 Indenture, dated as of July 7, 1997, with respect to the
Registrant's 10 1/2% Senior Notes due 2004, between the Registrant
and the Bank of Montreal Trust Company (Incorporated herein by
reference is Exhibit 4.03 from the Registrant's Current Report on
Form 8-K dated July 24, 1997.) (File Number 0-16014)
4.17 Form of 10 1/2% Senior Note due 2004 (Contained in Exhibit 4.03 to
Registrant's Current Report on Form 8-K dated July 24, 1997 which
is incorporated herein by reference.) (File Number 0-16014)
4.18 Form of Indenture, with respect to the Registrant's 13% Senior
Subordinated Exchange Debentures due 2009, between the Registrant
and the Bank of Montreal Trust Company (Contained in Exhibit 3.01
as Annex A to Registrant's Current Report on Form 8-K dated July
24, 1997, which is incorporated herein by reference.) (File Number
0-16014)
4.19 Form of Certificate for 13% Cumulative Exchangeable Preferred
Stock (Incorporated herein by reference is Exhibit 4.06 from the
Registrant's Current Report on Form 8-K dated July 24, 1997.)
(File Number 0-16014)
4.20 Form of Certificate for Series C Convertible Preferred Stock
(Incorporated herein by reference is Exhibit 4.06 from the
Registrant's Current Report on Form 8-K dated July 24, 1997.)
(File Number 0-16014)
4.21 Indenture, dated as of August 27, 1997, with respect to Hyperion
Telecommunications, Inc. ("Hyperion") 12 1/4% Senior Secured Notes
due 2004, between Hyperion and the Bank of Montreal Trust Company
(Incorporated herein by reference to Exhibit 4.01 to Hyperion's
Current Report on Form 8-K dated August 27, 1997.) (File No. 0-
21605).
4.22 Form of 12 1/4% Senior Secured Note due 2004 (contained in Exhibit
4.21).
4.23 Second Supplemental Indenture, dated as of August 27, 1997,
between Hyperion and the Bank of Montreal Trust Company, regarding
Hyperion's 13% Senior Discount Notes due 2003 (Incorporated by
reference herein to Exhibit 4-06 to Hyperion's Current Report on
Form 8-K dated August 27, 1997.) (File No. 0-21605).
5.01** Opinion of Buchanan Ingersoll Professional Corporation
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.01 Class B Common Stockholders Agreement (Incorporated herein by
reference is Exhibit 10.01 to Registration Statement No. 33-6974
on Form S-1.)
10.02 Joinder to Class B Common Stockholders Agreement (Incorporated
herein by reference is Exhibit 10.02 to Registrant's Annual Report
on Form 10-K for the fiscal year ended March 31, 1994.) (File
Number 0-16014)
10.03 Registration Rights Agreement and Amendment to Registration Rights
Agreement (Incorporated herein by reference are Exhibit 10.02 to
Registration Statement No. 33-6974 on Form S-1 and Exhibit 10.35
to Registration Statement No. 33-25121 on Form S-1.)
10.04 Form of Management Agreement for Managed Companies (Incorporated
herein by reference is Exhibit 10.04 to the Registrant's Annual
Report on Form 10-K for fiscal year ended March 31, 1996.) (File
Number 0-16014)
10.05 Management Agreement--Montgomery Cablevision Associates, L.P.
(Incorporated herein by reference is Exhibit 10.08 to Registration
Statement No. 33-6974 on Form S-1.)
10.06 Management Agreement--Adelphia Cablevision Associates of Radnor,
L.P. (Incorporated herein by reference is Exhibit 10.09 to
Registration Statement No. 33-6974 on Form S-1.)
10.07 Stock Option Plan of 1986, as amended (Incorporated herein by
reference is Exhibit 10.07 to Registration Statement No. 33-46551
on Form S-1.)
10.08 Restricted Stock Bonus Plan, as amended (Incorporated herein by
reference is Exhibit 10.08 to Registration Statement No. 33-46551
on Form S-1.)
10.09 Business Opportunity Agreement (Incorporated herein by reference
is Exhibit 10.13 to Registration Statement No. 33-3674 on Form S-
1.)
10.10 Employment Agreement between the Company and John J. Rigas
(Incorporated herein by reference is Exhibit 10.14 to Registration
Statement No. 33-6974 on Form S-1.)
10.11 Employment Agreement between the Company and Daniel R. Milliard
(Incorporated herein by reference is Exhibit 10.15 to Registration
Statement No. 33-6974 on Form S-1.)
10.12 Employment Agreement between the Company and Timothy J. Rigas
(Incorporated herein by reference is Exhibit 10.16 to Registration
Statement No. 33-6974 on Form S-1.)
10.13 Employment Agreement between the Company and Michael J. Rigas
(Incorporated herein by reference is Exhibit 10.17 to Registration
Statement No. 33-6974 on Form S-1.)
10.14 Employment Agreement between the Company and James P. Rigas
(Incorporated herein by reference is Exhibit 10.18 to Registration
Statement No. 33-6974 on Form S-1.)
10.15 Agreement Regarding Management Fees relating to the subsidiaries
of Chauncey Communications Corporation (Incorporated herein by
reference is Exhibit 10.16 of Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1991.) (File Number 0-
16014)
10.16 Form of Note Agreement, dated as of August 1, 1990, relating to
the 10.66% Senior Secured Notes due August 1, 1998, of Chauncey
Communications Corporation (Incorporated herein by reference is
Exhibit 10.01 of Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990.) (File Number 0-16014)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.17 Amendatory Agreement regarding Chauncey Communications Corporation
10.66% Senior Secured Note Agreement, dated as of August 6, 1991
(Incorporated herein by reference is Exhibit 10.02 of Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1991.) (File Number 0-16014)
10.18 $50,000 Term Note and Pledge Agreement between Adelphia
Communications Corporation as lender and Daniel R. Milliard, dated
October 1, 1988 (Incorporated herein by reference is Exhibit 10.03
of Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991.) (File Number 0-16014)
10.19 $205,000 Revolving Term Note and Pledge Agreement among Adelphia
Communications Corporation as lender, Daniel R. Milliard and David
Acker (Incorporated herein by reference is Exhibit 10.04 of
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991.) (File Number 0-16014)
10.20 Olympus Communications, L.P. Second Amended and Restated Limited
Partnership Agreement, dated as of February 28, 1995 (Incorporated
herein by reference is Exhibit 10.32 of the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995.)
(File Number 0-16014)
10.21 Credit, Security and Guaranty Agreement among UCA Corp. and
certain of its Affiliates and First Union National Bank of North
Carolina as Administrative Agent, dated as of March 15, 1995
(Incorporated herein by reference is Exhibit 10.32 of the
Registrant's Annual Report on Form 10-K for the fiscal year ended
March 31, 1995.) (File Number 0-16014)
10.22 Revolving Credit Facility among Adelphia Cable partners, L.P.,
Southwest Florida Cable, Inc., West Boca Acquisition Limited
Partnership and Toronto-Dominion (Texas), Inc., as Administrative
Agent, dated May 12, 1995 (Incorporated herein by reference is
Exhibit 10.03 to Registrant's Current Report on Form 8-K dated
June 30, 1995.) (File Number 0-16014)
10.23 Credit Agreement, dated as of October 27, 1995, among Plato
Communications, Inc. Northeast Cable, Inc., Robinson/Plum
Cablevision L.P., the several other banks and other financial
institutions from time to time parties to this agreement and
Chemical Bank, as Administrative Agent (Incorporated herein by
reference is Exhibit 10.35 to Registrant's Current Report on Form
8-K dated December 7, 1995.) (File Number 0-16014)
10.24 Credit Agreement, dated as of April 12, 1996, among Chelsea
Communications, Inc., Kittanning Cablevision Inc., Robinson/Plum
Cablevision L.P., the several banks and financial institutions
parties thereto, and Toronto Dominion (Texas), Inc. as
Administrative Agent (Incorporated herein by reference is Exhibit
10.36 to Registrant's Current Report on Form 8-K dated June 3,
1996.) (File Number 0-16014)
10.25 Amended Credit Agreement, dated as of March 29, 1996, among
Highland Video Associates L.P., Telesat Acquisition Limited
Partnership, Global Acquisition Partners, L.P., the various
financial institutions as parties thereto, Bank of Montreal as
syndication agent, Chemical Bank as documentation agent, and the
Bank of Nova Scotia as administrative agent (Incorporated herein
by reference is Exhibit 10.37 to Registrant's Current Report on
Form 8-K dated June 19, 1996.) (File Number 0-16014)
10.26 Purchase Agreement dated as of April 10, 1996, between Hyperion
Telecommunications, Inc. and Bear Stearns & Co. Inc., Chase
Securities Inc. and NationsBanc Capital Markets, Inc.
(Incorporated by reference is Exhibit 1.1 to Registration
Statement No. 333-06957 on Form S-4 filed for Hyperion
Telecommunications, Inc.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.27 Purchase Agreement dated as of February 21, 1997 between the
Registrant and Smith Barney Inc. (Incorporated herein by reference
is Exhibit 10.02 to Adelphia Communications Corporation's Current
Report on Form 8-K dated May 1, 1997). (File Number 0-16014)
10.28 Registration Rights Agreement dated as of April 15, 1996, between
Hyperion Telecommunications, Inc. and the Initial Purchasers
(Incorporated by reference is Exhibit 4.3 to Registration
Statement No. 333-06957 on Form S-4 filed for Hyperion
Telecommunications, Inc.)
10.29 Warrant Agreement dated as of April 15, 1996, by and among
Hyperion Telecommunications, Inc. and Bank of Montreal Trust
Company (Incorporated by reference is Exhibit 10.13 to
Registration Statement No. 333-06957 on Form S-4 filed for
Hyperion Telecommunications, Inc.)
10.30 Warrant Registration Rights Agreement dated as of April 15, 1996,
by and among Hyperion Telecommunications, Inc. and the Initial
Purchasers (Incorporated by reference is Exhibit 10.14 to
Registration Statement No. 333-06957 on Form S-4 filed for
Hyperion Telecommunications, Inc.)
10.31 Hyperion Telecommunications, Inc. Long-Term Incentive Compensation
Plan (Incorporated herein by reference is Exhibit 10.17 to
Hyperion Telecommunications, Inc.'s Registration Statement No.
333-13663 on Form S-1.)
10.32 Purchase Agreement, dated as of November 6, 1996, between Olympus
Communications, L.P., Olympus Capital Corporation and Goldman,
Sachs & Co. (Incorporated herein by reference is Exhibit 10.01 to
Registrant's Current Report on Form 8-K dated December 16, 1996.)
(File Number 0-16014)
10.33 Registration Rights Agreement among Charles R. Drenning, Paul D.
Fajerski, Randolph S. Fowler, Adelphia Communications Corporation
and Hyperion (Incorporated herein by reference is Exhibit 10.18 to
Hyperion Telecommunications, Inc.'s Registration Statement No.
333-13663 on Form S-1.)
10.34 Registration Rights Agreement between Adelphia Communications
Corporation and Hyperion (Incorporated herein by reference is
Exhibit 10.19 to Hyperion Telecommunications, Inc.'s Registration
Statement No. 333-13663 on Form S-1.)
10.35 First Amendment to the Olympus Communications, L.P. Second Amended
and Restated Limited Partnership Agreement, dated September 1,
1995 (Incorporated herein by reference is Exhibit 10.33 to the
Registrant's Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1996.) (File Number 0-16014)
10.36 First Amendment to the Olympus Communications, L.P. Second Amended
and Restated Limited Partnership Agreement, dated March 29, 1996
(Incorporated herein by reference is Exhibit 10.34 to the
Registrant's Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1996.) (File Number 0-16014)
10.37 Second Amendment to the Olympus Communications, L.P. Second
Amended and Restated Limited Partnership Agreement, dated June 27,
1996 (Incorporated herein by reference is Exhibit 10.35 to the
Registrant's Annual Report on Form 10-K/A for the fiscal year
ended March 31, 1996.) (File Number 0-16014)
10.38 Employment Agreement between Hyperion Telecommunications, Inc. and
Daniel R. Milliard dated as of March 4, 1997. (Incorporated herein
by reference is Exhibit 10.03 to Adelphia Communications
Corporation's Current Report on Form 8-K dated May 1, 1997) (File
Number 0-16014)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.39 Extension Agreement dated as of January 8, 1997, among Hyperion
Telecommunications, Inc., Adelphia Communications Corporation,
Charles R. Drenning, Paul D. Fajerski, Randolph S. Fowler, and six
Trusts named therein (Incorporated herein by reference is Exhibit
10.04 to Adelphia Communications Corporation's Current Report on
Form 8-K dated May 1, 1997.) (File Number 0-16014)
10.40 Purchase Agreement among Adelphia Communications Corporation,
Smith Barney Inc., Bear Stearns & Co. Inc., NationsBanc Capital
Markets, Inc. and TD Securities (USA) Inc. (the "Initial
Purchasers") dated July 1, 1997. (Incorporated herein by reference
is Exhibit 10.01 from the Registrant's Current Report on Form 8-K
dated July 24, 1997) (File Number 0-16014)
10.41 Registration Rights Agreement among Adelphia Communications
Corporation, the Initial Purchasers and Highland Holdings, dated
July 7, 1997, regarding the 13% Cumulative Exchangeable Preferred
Stock. (Incorporated herein by reference is Exhibit 10.02 from the
Registrant's Current Report on Form 8-K dated July 24, 1997) (File
Number 0-16014)
10.42 Registration Rights Agreement among Adelphia Communications
Corporation and the Initial Purchasers, dated July 7, 1997,
regarding the 10 1/2% Senior Notes due 2004. (Incorporated herein
by reference is Exhibit 10.03 from the Registrant's Current Report
on Form 8-K dated July 24, 1997) (File Number 0-16014)
10.43 Registration Rights Agreement among Adelphia Communications
Corporation, Highland Holdings and Telesat Cablevision, Inc.,
dated July 7, 1997. (Incorporated herein by reference is Exhibit
10.04 from the Registrant's Current Report on Form 8-K dated July
24, 1997) (File Number 0-16014)
10.44 Purchase Agreement between Adelphia Communications Corporation and
Highland Holdings, dated July 1, 1997. (Incorporated herein by
reference is Exhibit 10.05 from the Registrant's Current Report on
Form 8-K dated July 24, 1997) (File Number 0-16014)
10.45 Series C Preferred Stock Purchase Agreement among Adelphia
Communications Corporation, Highland Holdings and Telesat
Cablevision, Inc., dated June 22, 1997 (Incorporated herein by
reference is Exhibit 10.06 from the Registrant's Current Report on
Form 8-K dated July 24, 1997) (File Number 0-16014)
10.46 Pledge Agreement between Hyperion and the Bank of Montreal Trust
Company as Collateral Agent, dated as of August 27, 1997.
(Incorporated by reference herein is Exhibit 4.03 to Hyperion's
Current Report on Form 8-K dated August 27, 1997) (File No. 0-
21065).
10.47 Registration Rights Agreement between Hyperion and the Initial
Purchasers, dated August 27, 1997, regarding the 12 1/4% Senior
Secured Notes due 2004 (Incorporated herein by reference to
Exhibit 4.04 to Hyperion's Current Report on Form 8-K dated August
27, 1997) (File No. 0-21605).
10.48 Pledge, Escrow and Disbursement Agreement, between Hyperion and
the Bank of Montreal Trust Company dated as of August 27, 1997.
(Incorporated by reference herein to Exhibit 4.05 to Hyperion's
Current Report on Form 8-K dated August 27, 1997) (File No. 0-
21605).
10.49 Purchase Agreement among Hyperion, Bear Stearns & Co. Inc., Chase
Securities Inc., TD Securities (USA) Inc., CIBC Wood Gundy
Securities Corp., and Scotia Capital Markets (the "Initial
Purchasers") dated August 21, 1997. (Incorporated herein by
reference to Exhibit 10.01 to Hyperion's Current Report on Form 8-
K dated August 27, 1997) (File No. 0-21605).
12.01* Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
21.01 Subsidiaries of the Registrant (Incorporated herein by reference
is Exhibit 21.01 to Registrant's Annual Report on Form 10-K for
the fiscal year ended March 31, 1997.) (File Number 0-16014)
23.01** Consent of Buchanan Ingersoll Professional Corporation (contained
in its opinion filed as Exhibit 5.01 hereto)
23.02* Consent of Deloitte & Touche LLP
24.01** Power of Attorney (appearing on signature page)
25.01** Form T-1 Statement of Eligibility of Trustee
99.01** Form of Letter of Transmittal and Notice of Guaranteed Delivery
for Notes
99.02** Form of Letter of Transmittal and Notice of Guaranteed Delivery
for Preferred Stock
</TABLE>
- --------
*Filed herewith.
**Previously filed.
<PAGE>
EXHIBIT 12.01
ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED MARCH 31, PRO FORMA THREE THREE
--------------------------------------------------- YEAR MONTHS MONTHS
ENDED ENDED ENDED
MARCH 31, JUNE 30, JUNE 30,
1993 1994 1995 1996 1997 1997 1997 1997
-------- -------- --------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loss before Income
Taxes,
Extraordinary Loss and
Cumulative Effect of
Change in Accounting
Principle............ $(99,766) $(94,706) $(111,759) $(122,680) $(119,290) $(150,675) $(44,731) $(52,577)
Add: Combined Fixed
Charges and Preferred
Stock Dividends,
Excluding Capitalized
Interest............. 170,376 187,439 200,927 217,170 249,113 280,498 66,936 74,782
Equity in loss of
joint ventures....... 46,841 30,054 44,349 46,257 59,169 59,169 21,738 21,738
-------- -------- --------- --------- --------- --------- -------- --------
Net Earnings Available
for
Combined Fixed Charges
and
Preferred Stock Divi-
dends.................. 117,451 122,787 133,517 140,747 188,992 188,992 43,943 43,943
-------- -------- --------- --------- --------- --------- -------- --------
Combined Fixed Charges
and Preferred Stock
Dividends:
Interest and Preferred
Stock Dividends...... 164,859 182,136 195,698 210,691 240,692 299,077 63,888 78,134
Capitalized interest.. 1,009 1,345 1,736 1,766 1,727 1,727 347 347
Amortization of debt
issuance costs....... 4,155 3,987 3,792 4,917 6,344 6,344 2,470 2,470
Interest portion of
rent expense......... 1,362 1,316 1,437 1,562 2,077 2,077 578 578
-------- -------- --------- --------- --------- --------- -------- --------
Total Combined Fixed
Charges and Preferred
Stock Dividends........ 171,385 188,784 202,663 218,936 250,840 309,225 67,283 81,529
-------- -------- --------- --------- --------- --------- -------- --------
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends.............. -- -- -- -- -- -- -- --
Deficiency in Earnings
Required to Cover
Combined Fixed Charges
and Preferred Stock
Dividends.............. $ 53,934 $ 65,997 $ 69,146 $ 78,189 $ 61,848 $ 120,233 $ 23,340 $ 37,586
======== ======== ========= ========= ========= ========= ======== ========
</TABLE>
<PAGE>
EXHIBIT 23.02
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-37087 of Adelphia Communications Corporation on
Form S-4 of our report dated June 11, 1997 and our report dated March 26, 1997
on our audits of the financial statements of Adelphia Communications
Corporation and subsidiaries and of Olympus Communications, L.P. and
subsidiaries, respectively, appearing in and incorporated by reference in the
Annual Report on Form 10-K of Adelphia Communications Corporation for the year
ended March 31, 1997, and to the reference to us under the heading "Experts"
in the Prospectus, which is part of such Registration Statement.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
October 17, 1997
