<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 9, 1998
REGISTRATION NO. 333-64603
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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) 562-8800
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>
OFFER TO EXCHANGE
8 1/8% SERIES B SENIOR NOTES DUE 2003
FOR ANY AND ALL OUTSTANDING 8 1/8% SENIOR NOTES DUE 2003
OF
ADELPHIA COMMUNICATIONS CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON NOVEMBER 12, 1998, 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
$1,000 principal amount of 8 1/8% Series B Senior Notes due 2003 of the
Registrant (the "New Notes") for each $1,000 principal amount of the issued
and outstanding 8 1/8% Senior Notes due 2003 (the "Old Notes," and
collectively with the New Notes, the "Notes"). Interest on the Senior Notes is
payable semi-annually commencing January 15, 1999 with a final maturity date
of July 15, 2003. As of the date of this Prospectus, $150,000,000 aggregate
principal amount of the Old Notes is outstanding. The terms of the New Notes
and the Old Notes are substantially identical in all material respects, except
for certain transfer restrictions and registration rights; and except that
holders of Old Notes 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 Agreement (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 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 Transfer Restricted Securities (as defined) during the periods
specified in the Registration Rights Agreement (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 to
each holder of Transfer Restricted Securities for the period that the
Registration Default continues, with respect to the first 90-day period
immediately following the occurrence of such Registration Default, at a rate
of 0.25% per annum on the principal amount of Transfer Restricted Securities
held by such holder. Such interest rate will increase by an additional 0.25%
per annum at the beginning of each subsequent 90-day period up to a maximum
aggregate increase of 2.0% per annum until such Registration Defaults have
been cured, at which time the interest rate borne by the Old Notes will be
reduced to the original interest rate. See "Description of the Notes-
Registration Rights; Liquidated Damages."
(Continued on following page)
SEE "RISK FACTORS" BEGINNING ON PAGE 11 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 , 1998
<PAGE>
The Exchange Offer is being made to satisfy certain obligations of the
Registrant under the Registration Rights Agreement, dated as of July 2, 1998,
between the Registrant and the Initial Purchaser (the "Registration Rights
Agreement"). Upon consummation of the Exchange Offer, holders of Old Notes
that were not prohibited from participating in the Exchange Offer and did not
tender their Old Notes will not have any registration rights under the
Registration Rights Agreement with respect to such nontendered Old Notes and,
accordingly, such Old Notes will continue to be subject to the restrictions on
transfer contained in the legend 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 Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by any
holder of such New Notes (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 Notes 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 Notes and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must acknowledge that it will
deliver a prospectus in connection with any resale of its New Notes. A broker-
dealer who acquired Old Notes directly from the Registrant can not exchange
such Old Notes 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 Notes received in exchange for the Old Notes 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). For a more complete
description of the terms of the New Notes, see "Description of the Notes."
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, 1998, on an as adjusted basis, after giving effect to the Offering (as
defined below) and the Equity Offering (as defined), the New Notes would have
been effectively subordinated to $1.3 billion of indebtedness and redeemable
preferred stock of Adelphia's subsidiaries. As of June 30, 1998, the New Notes
were effectively subordinated to $1.7 billion of indebtedness and redeemable
preferred stock of Adelphia's subsidiaries. As of March 31, 1998 and June 30,
1998, the total indebtedness of Adelphia and its subsidiaries, on a
consolidated basis, aggregated $2.9 and $3.0 billion, respectively.
The Old Notes were originally issued and sold on July 2, 1998 in an offering
of $150,000,000 aggregate principal amount (the "Offering"). The Offering was
exempt from registration under the Securities Act in reliance upon the
exemptions provided by Rule 144A and Section 4(2) of the Securities Act.
Accordingly, the Old Notes 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 Notes to be received in the Exchange Offer,
and to the best of the Registrant's information and belief, each
2
<PAGE>
person participating in the Exchange Offer is acquiring the New Notes in its
ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the New Notes to be received in
the Exchange Offer. Any person participating in the Exchange Offer who does
not acquire the Exchange Notes in the ordinary course of business: (i) cannot
rely on the above referenced no action letters; (ii) cannot tender its Old
Notes 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 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
12, 1998, 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 Notes for the New Notes (the "Exchange Date") will be the first business
day following the Expiration Date or as soon as practicable thereafter. Old
Notes 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 Notes.
The Old Notes have traded on the PORTAL Market. If a market for the New Notes
should develop, the New Notes could trade at a discount from their initial
offering price. The Company does not intend to apply for listing of the New
Notes on any securities exchange or in any automated quotation system. There
can be no assurance that an active trading market for the New Notes will
develop.
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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 NOTES 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, 1998 which incorporates, in Items 7 and 8 to such
Form 10-K, portions of the Form 10-K for the fiscal year ended December 31,
1997 of Olympus Communications, L.P. and Olympus Capital Corporation, as
amended by Form 10-K/A for the fiscal year ended March 31, 1998 (the "Form-10-
K"); (b) Form 10-Q for the quarter ended June 30, 1998 (the "Form 10-Q"); (c)
Forms 8-K for events dated June 29, 1998, July 2, 1998, August 3, 1998, August
18, 1998 and September 10, 1998, (the "Forms 8-K"); and (d) Adelphia's
definitive proxy statement dated September 11, 1998, with respect to the
Annual Meeting of Stockholders held October 6, 1998 (the "Proxy Statement").
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 the
Exchange Offer 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
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
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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 contained in the Form 10-K, 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 reading this Prospectus are cautioned that such statements
are only predictions and that actual events or results may differ materially.
In evaluating such statements, readers should specifically consider the various
factors which could cause actual events or results to differ materially from
those indicated by such forward-looking statements. Prospective investors
should carefully consider the factors set forth herein under the caption "Risk
Factors."
THE COMPANY
Adelphia Communications Corporation ("Adelphia" and, collectively with its
subsidiaries, the "Company") is a leader in the telecommunications industry
with cable television operations and competitive local exchange telephony
operations. The Company is the seventh largest cable television operator in the
United States. As of June 30, 1998, cable television systems owned or managed
by the Company (the "Systems") in the aggregate passed 2,796,747 homes and
served 1,998,411 basic subscribers. The Company, through its subsidiary
Hyperion Telecommunications, Inc. ("Hyperion"), owns and operates one of the
largest facilities based Competitive Local Exchange Carriers ("CLEC") in the
United States based on route miles and buildings connected. John J. Rigas, the
Chairman, President, Chief Executive Officer and founder of Adelphia, has owned
and operated cable television systems since 1952.
Cable systems owned by the Company (the "Company Systems") are located in
twelve 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, 1998 the Company Systems passed 1,696,294 homes and served
1,244,310 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, 1998, cable systems (the
"Managed Systems") owned by the Managed Partnerships passed 348,441 homes and
served 260,843 basic subscribers.
Hyperion designs, constructs, operates and manages state-of-the-art, fiber
optic networks and facilities. At June 30, 1998, Hyperion managed and operated
22 networks (including two under construction), serving 46 cities. As of June
30, 1998, these networks had 5,455 route miles, connecting 2,034 buildings.
Hyperion currently offers switched services, including local dial tone, in 19
of its markets. Hyperion is consolidated in Adelphia's financial results and is
currently an unrestricted subsidiary of Adelphia for purposes of Adelphia's
indentures.
5
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On May 8, 1998, Hyperion completed an initial public offering (the "Hyperion
IPO") of 12,850,000 shares, including 350,000 shares subsequently issued
pursuant to an over-allotment option, of its Class A Common Stock ("Hyperion
Stock"). As part of the IPO, Adelphia purchased an incremental 3,324,001 shares
of Hyperion Stock for $49,900,000 and converted indebtedness owed to the
Company by Hyperion into 3,642,666 shares of Hyperion Stock. Adelphia currently
owns approximately 66% of the Hyperion Common Stock on a fully diluted basis
and 85% of the total voting power. Additional net proceeds of approximately
$192,000,000 to Hyperion were received as a result of the sale of Hyperion
Stock to the public.
John J. Rigas, the Chairman, President, Chief Executive Officer and majority
stockholder of Adelphia, is a pioneer in the cable television industry, having
built his first system in 1952 in Coudersport, Pennsylvania. 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 its
Class A Common Stock, $.01 par value. The Company's operations consist of
providing telecommunications services primarily over its broadband networks.
The Company did not have any material foreign operations or foreign sales in
the year ended March 31, 1998. The Company's executive offices are located at
Main at Water Street, Coudersport, Pennsylvania 16915, and its telephone number
is (814) 274-9830.
OLYMPUS COMMUNICATIONS, L.P.
The Company owns a 50% voting interest and nonvoting Preferred Limited
Partnership ("PLP") 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
subsidiaries, electric service throughout most of the east and lower west
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, 1998, the Olympus systems passed 752,012 homes and served 493,258
basic subscribers. The Company's investment in Olympus is accounted for under
the equity method of accounting.
RECENT DEVELOPMENTS
On March 2, 1998, Adelphia entered into a definitive agreement to acquire
cable television systems serving approximately 62,000 subscribers in
Connecticut and Virginia from Marcus Cable, Inc. for approximately $150,000,000
in cash. This acquisition closed on September 1, 1998.
On August 18, 1998, Adelphia issued 8,190,315 shares of its Class A Common
Stock, $.01 par value (the "August Offering"). Of this total, 4,100,000 shares
were sold to the public at a price of $32.00 per share, pursuant to agreements
with several underwriters with an underwriting discount of $1.44 per share. The
remaining 4,090,315 shares were sold to entities controlled by the Rigas Family
at the public offering price less the underwriting discount. Net proceeds to
Adelphia after offering expenses from the August Offering were approximately
$250,000,000. On September 14, 1998, Adelphia issued an additional 615,000
shares in connection with the several underwriters exercising the August
Offering's over-allotment option (the "Option Offering") (the August Offering
and the Option Offering, collectively being, the "Equity Offering"). Net
proceeds to Adelphia after offering expenses from the Option Offering were
approximately $18,800,000.
On September 30, 1998, the Company consummated an agreement to merge a
subsidiary of the Company with the subsidiary of Tele-Communications Inc.
("TCI") that held an interest in Syracuse Hilton Head Holdings, L.P. ("SHHH,
L.P."), an Adelphia managed partnership controlled by the Rigas Family.
Pursuant to the agreement, TCI received, 2,250,000 newly issued shares of the
Company's Class A
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Common Stock, $.01 par value, as a result of the merger. Simultaneously, SHHH,
L.P. distributed certain SHHH, L.P. cable systems in Virginia and North
Carolina (the "Virginia and North Carolina Systems") to Adelphia, in exchange
for the interest acquired by Adelphia from TCI as described above, the
remainder of Adelphia's minority equity interests in SHHH, L.P., and certain
affiliate receivables owed to Adelphia. The Virginia and North Carolina Systems
were distributed to Adelphia without indebtedness.
For other recent developments regarding the Company, reference is made to the
Form 10-Q and future filings by the Company under the Exchange Act.
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.
THE EXCHANGE OFFER
Securities Offered.......... Up to $150,000,000 aggregate principal amount
of 8 1/8% Series B Senior Notes due 2003 of
the Company (the "New Notes," and
collectively with the Old Notes, the
"Notes"). The terms of the New Notes and the
Old Notes 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 Notes.
See "Description of the Notes."
The Exchange Offer.......... The Registrant is offering to exchange $1,000
principal amount of New Notes for each $1,000
principal amount of Old Notes. See "The
Exchange Offer" for a description of the
procedures for tendering Old Notes. The
Exchange Offer satisfies the registration
obligations of the Registrant under the
Registration Rights Agreement. Upon
consummation of the Exchange Offer, holders
of Old Notes that were not prohibited from
participating in the Exchange Offer and did
not tender their Old Notes will not have any
registration rights under the Registration
Rights Agreement with respect to such
nontendered Old Notes and, accordingly, such
Old Notes will continue to be subject to the
restrictions on transfer contained in the
legend thereon.
Tenders, Expiration Date;
Withdrawal; Exchange Date..
The Exchange Offer will expire at 5:00 p.m.,
New York City time, on November 12, 1998, 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 Notes pursuant to
the Exchange Offer may be withdrawn and
retendered at any time prior to the
Expiration Date. Any Old Notes not accepted
for exchange for any reason will be returned
without expense to the tendering holder as
promptly as practicable after the expiration
or
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<PAGE>
termination of the Exchange Offer. The date
of acceptance for exchange of all Old Notes
properly tendered and not withdrawn for New
Notes (the "Exchange Date") will be the first
business day following the Expiration Date or
as soon as practicable thereafter.
Accrued Interest on the New Each New Note will bear interest from the
Notes....................... most recent date to which interest has been
paid on the Old Note or, if no such payment
has been made, from July 2, 1998.
Federal Income Tax The Exchange Offer will not result in any
Considerations.............. income, gain or loss to the holders of Notes
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 Notes for the Old Notes
pursuant to the Exchange Offer.
Exchange Agent.............. Bank of Montreal Trust Company, the Trustee
under the Indenture, is serving as exchange
agent (the "Exchange Agent") in connection
with the Exchange Offer.
CONSEQUENCES OF EXCHANGING OR FAILURE TO EXCHANGE OLD NOTES PURSUANT TO THE
EXCHANGE OFFER
Generally, holders of Old Notes (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 Notes for New Notes pursuant to the Exchange Offer may offer
their New Notes for resale, resell their New Notes, and otherwise transfer
their New Notes without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided such New Notes are acquired
in the ordinary course of the holder's business, such holders have no
arrangement with any person to participate in a distribution of such New Notes
and neither the holder nor any other person is engaging in or intends to engage
in a distribution of the New Notes. A broker-dealer who acquired Old Notes
directly from the Registrant can not exchange such Old Notes in the Exchange
Offer. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that it will deliver a prospectus in
connection with any resale of its New Notes. 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 Notes prior to offering or selling such
New Notes. The Company is required, under the Registration Rights Agreement, to
register the New Notes 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 Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes, and accordingly,
such Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, Old Notes may not be offered or
sold, unless registered under the Securities Act and applicable state
securities laws. See "The Exchange Offer--Consequences of Failure to Exchange."
8
<PAGE>
SUMMARY DESCRIPTION OF THE NOTES
Issuer...................... Adelphia Communications Corporation
Securities Offered.......... $150,000,000 principal amount of 8 1/8%
Series B Senior Notes due 2003. The terms of
the New Notes and the Old Notes are
substantially identical in all material
respects, except for certain transfer
restrictions, registration rights and
Liquidated Damages for Registration Defaults
relating to the Old Notes which will not
apply to the New Notes. See "Description of
the Notes."
Maturity Date............... The Notes will mature on July 15, 2003.
Interest Payment Dates...... July 15 and January 15 each year commencing
January 15, 1999.
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,
1998, on an as adjusted basis, after giving
effect to the Offering and the Equity
Offering and the application of the net
proceeds therefrom, the Notes would have been
effectively subordinated to $1.3 billion of
indebtedness and redeemable preferred stock
of Adelphia's subsidiaries. As of June 30,
1998 the total indebtedness of Adelphia and
its subsidiaries, on a consolidated basis,
aggregated $3.0 billion and total trade
payables as of such date were $79.7 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 permits Adelphia's
subsidiaries to incur substantial additional
indebtedness.
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Registration Rights......... Adelphia has entered into a registration
rights agreement with the Initial Purchaser
(the "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. 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.
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."
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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 Notes that were not
prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes and, accordingly, such
Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes 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 Notes under the Securities Act.
Based on interpretations by the staff of the Commission with respect to
similar transactions, the Company believes that the New Notes issued pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by any holder of such New Notes (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 Notes 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 Notes and neither the holder nor any other person is
engaging in or intends to engage in a distribution of the New Notes. A broker-
dealer who acquired Old Notes directly from the Registrant can not exchange
such Old Notes in the Exchange Offer. Each broker-dealer that receives New
Notes for its own account in exchange for Old Notes must acknowledge that it
will deliver a prospectus in connection with any resale of its New Notes. 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 Notes received in exchange for
the Old Notes 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 Notes 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 Agreement, to
register the New Notes 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, 1998, the Company's
total indebtedness aggregated approximately $2,996,821,000, which included
approximately $1,013,276,000 of subsidiary bank, institutional and other debt,
approximately $472,949,000 of Hyperion public debt and approximately
$1,510,596,000 of indebtedness of the parent company. The Company's total debt
has varying maturities to 2008, including an aggregate of approximately
$1,158,487,000 maturing on or prior to March 31, 2003. The Company has
maintained its public long-term debt at the holding company level and Hyperion
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
consequences to investors, including: (i) a substantial portion of the
Company's
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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. In addition, at June 30, 1998 Hyperion also had
$214,085,000 of redeemable exchangeable preferred stock. 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 CONVERTIBLE PREFERRED STOCK, COMMON STOCK AND OTHER
STOCKHOLDERS' EQUITY (DEFICIENCY)
The Total Convertible Preferred Stock, Common Stock and Other Stockholders'
Equity (Deficiency) at June 30, 1998 was approximately ($1,217,429,000). 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 applicable
to common stockholders of approximately $119,894,000, $130,642,000 and
$192,729,000 for the years ended March 31, 1996, 1997 and 1998, and
approximately $48,285,000 for the three months ended June 30, 1998,
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, 1997 and 1998 and the three months ended June
30, 1998, the Company's earnings were insufficient to cover its combined fixed
charges and preferred stock dividends by approximately $61,848,000,
$113,941,000 and $38,757,000, respectively. However, such amounts reflect non-
cash charges totalling approximately $165,426,000, $182,471,000 and
$46,454,000, respectively, consisting of depreciation, amortization, and non-
cash interest expense on certain indebtedness of the Company. On a pro forma
basis, the Company's earnings were insufficient to cover its combined fixed
charges and preferred stock dividends by approximately $126,006,000 and
$34,964,000 for the year ended March 31, 1998 and the three months ended June
30, 1998, 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. 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 its indebtedness 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 tests are met, the
Adelphia subsidiaries and other investments are restricted from distributing
funds to Adelphia. The Indentures governing the Notes, the 8 3/8% Senior Notes
due 2008 (the "8 3/8% Notes"), the 9 1/4% Senior
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Notes due 2002 (the "9 1/4% Notes"), the 9 7/8% Senior Notes due 2007 (the "9
7/8% Notes"), the 10 1/2% Senior Notes due 2004 (the "10 1/2% Notes"), the 10
1/4% Senior Notes due 2000 (the "10 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") (collectively, "Adelphia's Public Debt") 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, 1998, the total amount of long-term
debt of such subsidiaries was approximately $1,486,225,000. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Form 10-K and the Form 10-Q.
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. There are similar restrictions under other institutional debt of the
Company's subsidiaries.
POTENTIAL CONFLICTS OF INTEREST
As of October 1, 1998, the Rigas Family held substantially all of Adelphia's
Class B Common Stock and 84.8% of the combined voting power of both classes of
Adelphia's outstanding Common Stock (85.8% assuming the conversion of the
Convertible Preferred Stock owned by the Rigas Family) 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 a 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 indentures under which Adelphia's Public Debt was issued
and the Indenture under which the Notes will be 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 Proxy Statement 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"). In addition, some of
the Regional Bell Operating Companies (the "RBOCs") and other local telephone
companies are in the process of entering the
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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" and "Management's Discussion and Analysis of
Financial Condition 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.
In each of the markets served by Hyperion's networks, the services offered
by Hyperion compete principally with the services offered by the incumbent
local exchange carrier ("LEC") serving that area. Incumbent LECs have long-
standing relationships with their customers, have the potential to subsidize
competitive services from monopoly service revenues, and benefit from
favorable state and federal regulations. In light of the passage of the 1996
Act, federal and state regulatory initiatives will provide increased business
opportunities to CLECs such as Hyperion, but regulators are likely to provide
incumbent LECs with increased pricing flexibility for their services as
competition increases. If incumbent LECs are allowed by regulators to lower
their rates substantially or selectively engage in excessive volume and term
discount pricing practices for their customers or charge CLECs excessive fees
for interconnection to the incumbent LECs' networks, the net income and cash
flow of CLECs, including Hyperion, could be materially and adversely affected.
The 1996 Act also establishes procedures under which the RBOCs can obtain
authority to provide long distance services if they comply with certain
interconnection requirements. To date, the FCC authority to provide in-region
interLATA service has been sought by Ameritech in Michigan, Southwestern Bell
in Oklahoma, and BellSouth in Louisiana and South Carolina. The Department of
Justice has opposed each request, and each request has been denied by the FCC.
An approval could result in decreased market share for the major Inter-
Exchange Carriers ("IXCs"), which are among Hyperion's significant customers.
Such a result could have an adverse effect on Hyperion.
There has been significant merger activity among the RBOCs in anticipation
of entry into the long distance market, including the merger of Bell Atlantic
and NYNEX, whose combined territory covers a substantial portion of Hyperion's
markets. If RBOCs are permitted to provide such services, they will ultimately
be in a position to offer single source service for local and long distance
communications and subsidize the price of their long distance prices with
charges on local service. Other combinations are occurring in the industry,
which may have a material adverse effect on Hyperion. Hyperion also faces, and
will continue to face, competition from other current and potential market
entrants, including other CLECs, incumbent LECs which are not subject to RBOC
restrictions on long distance, AT&T, MCI, Sprint and other IXCs, cable
television companies, electric utilities, microwave carriers, wireless
telecommunications providers and private networks built by large end users. In
addition, all of the major IXCs are expected to enter the market for local
telecommunications services. Both AT&T and MCI have announced that they have
begun to offer local telephone services in some areas of the country, and AT&T
recently announced a new wireless technology for providing local telephone
service. AT&T and TCI also recently announced that they will merge. Although
Hyperion has good relationships with the IXCs, there are no assurances that
any of these IXCs will not build their own facilities, purchase other carriers
or their facilities, or resell the services of other carriers rather than use
Hyperion's services when entering the market for local exchange services.
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Many of Hyperion's current and potential competitors, particularly incumbent
LECs, have financial, personnel and other resources substantially greater than
those of Hyperion, as well as other competitive advantages over Hyperion.
See "Business--Competition" and "--Legislation and Regulation" 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 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" and "Management's Discussion and Analysis of Financial Condition
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 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
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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" 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.
IMPACT OF THE YEAR 2000 ISSUES
The year 2000 issue refers to the inability of computerized systems and
technologies to recognize and process dates beyond December 31, 1999. The
Company is evaluating the impact of the year 2000 issue on its business
applications and its products and services. The evaluation includes a review
of the Company's information technology systems, cable network equipment and
other embedded technologies. A significant portion of the Company's
computerized systems and technologies have been developed, installed or
upgraded in recent years and are generally more likely to be year 2000 ready.
The Company is also evaluating the potential impact as a result of its
reliance on third-party systems that may have year 2000 issues.
Computerized business applications that could be affected by the year 2000
issue could include:
. information processing and financial reporting systems
. customer billing systems
. customer service systems
. telecommunication transmission and reception systems
. facility systems.
System failure or miscalculation could result in a temporary inability to
process transactions, send invoices, accept customer orders or provide
customers with products and services. Customers could also experience a
temporary inability to receive or use the Company's products and services.
The Company has developed a program to assess and address the year 2000
issue. This program consists of the following phases:
. inventorying and assessing the impact on affected technology
. developing solutions for affected technology
. modifying or replacing affected technology
. testing and verifying solutions
. implementing solutions
. developing contingency plans.
The Company has substantially completed inventorying and assessing the
affected computerized systems and technologies. The Company is in various
stages of its year 2000 compliance program with respect to the remaining
phases as it relates to the affected systems and technologies.
The Company has engaged a consulting firm familiar with its financial
reporting systems. This firm has developed and tested year 2000 solutions that
the Company is in the process of implementing. The Company expects its
financial reporting systems to be year 2000 compliant by June 1999.
A third-party billing vendor currently facilitates customer billing. The
Company is currently in the process of testing an in-house service ordering,
provisioning, maintenance and billing system that would replace the third-
party billing vendor. The Company expects to have this new system implemented
by June 1999. On a contingency basis, the third-party vendor has provided a
written assertion that it will certify it is fully year 2000 compliant by June
1999.
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Telecommunication plant rebuilds and upgrades in recent years have minimized
the potential impact of the year 2000 issue on the Company's facilities,
customer service, telecommunication transmission and reception systems. The
Company is engaged in a comprehensive internal inventory and assessment of all
hardware components and component controlling software throughout its
telecommunication networks. The Company expects to implement any hardware and
software modifications, upgrades or replacements resulting from the internal
review by June 1999.
Costs incurred to date directly related to addressing the year 2000 issue
have not been material. The Company has also redeployed internal resources to
meet the goals of its year 2000 program. The Company currently estimates the
total cost of its year 2000 remediation program to be approximately
$2,500,000. Although the Company will continue to incur substantial capital
expenditures in the ordinary course of meeting its telecommunication system
upgrade goals through the year 2000, it will not specifically accelerate its
expenditures to facilitate year 2000 readiness, and accordingly such
expenditures are not included in the above estimate.
The Company has begun communicating with others with whom it does
significant business to determine their year 2000 readiness and to determine
the extent to which the Company is vulnerable to year 2000 issues related to
those third parties. The Company purchases much of its technology from third
parties. There can be no assurance that the systems of other companies on
which the Company's systems rely will be year 2000 ready or timely converted
into systems compatible with the Company systems. The Company's failure or a
third-party's failure to become year 2000 ready or the Company's inability to
become compatible with third parties with which the Company has a material
relationship, may have a material adverse effect on the Company, including
significant service interruption or outages.
The Company is in the process of identifying secondary sources to supply its
systems or services in the event it becomes probable that any of its systems
will not be year 2000 ready prior to the end of 1999. The Company is also in
the process of identifying secondary vendors and service providers to replace
those vendors and service providers whose failure to be year 2000 ready could
lead to a significant delay in the Company's ability to provide its services
to its customers.
FORWARD LOOKING STATEMENTS
The statements contained in this Prospectus that are not historical facts
are "forward looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995), which statements can be identified
by the use of forward-looking terminology such as "believes," "expects,"
"may," "will," "should," "intends" or "anticipates" or the negative thereof or
other variations thereon or comparable terminology, or by discussions of
strategy that involve risks and uncertainties. Certain information included or
incorporated by reference in this Prospectus, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the Form 10-K and the Form 10-Q, 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 reading this Prospectus are cautioned that such
statements are only predictions and that actual events or results may differ
materially. In evaluating such statements, readers should specifically
consider the various factors which could cause actual events or results to
differ materially from those indicated by such forward-looking statements.
LIMITATION ON ABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
The Indenture governing the Notes and most of Adelphia's other indentures
contain provisions requiring Adelphia upon a Change of Control, to commence an
offer to redeem the Notes to holders of the Notes and
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certain of Adelphia's other debt. 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 Notes, (ii) Adelphia will have sufficient funds to
repurchase all securities (including the Notes) entitled to be repurchased or
(iii) Adelphia could obtain any additional debt or equity financing in an
amount sufficient to repurchase such securities. See "Description of the
Notes--Covenants--Change of Control Offer."
ABSENCE OF A PUBLIC MARKET; POSSIBLE VOLATILITY OF PRICE
The Notes are securities for which there is currently no market. The Company
does not intend to apply for listing of the Notes on any securities exchange
or for inclusion of the Notes in any automated quotation system, but the
Initial Purchaser (as defined) has applied to the National Association of
Securities Dealers, Inc. to have the Notes designated as PORTAL securities.
Although the Company has been advised by the Initial Purchaser that it intends
to make a market in the Notes, it is 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 Notes. If a market for the Notes were to develop, the Notes
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 has been subject to
disruptions that have caused substantial volatility in the prices of
securities similar to the Notes. There can be no assurance that, if a market
for the Notes were to develop, such a market would not be subject to similar
disruptions.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
On July 2, 1998, the Registrant issued $150,000,000 aggregate principal
amount of Old Notes to Barclays Capital Inc., the Initial Purchaser. The
issuance was not registered under the Securities Act in reliance upon the
exemptions under Rule 144A and Section 4(2) of the Securities Act. In
connection with the issuance and sale of the Old Notes, the Registrant entered
into a Registration Rights Agreement with the Initial Purchaser dated as of
July 2, 1998 (the "Registration Rights Agreement"), which requires the
Registrant to cause the Old Notes to be registered under the Securities Act or
to file with the Commission a registration statement under the Securities Act
with respect to an issue of new notes of the Registrant identical in all
material respects to the Old Notes, and use its best efforts to cause such
registration statement to become effective under the Securities Act and, upon
the effectiveness of that registration statement, to offer to the holders of
the Old Notes the opportunity to exchange their Old Notes for a like principal
amount of New Notes, 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. A copy of the Registration Rights Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus is
a part. The Exchange Offer is being made pursuant to the Registration Rights
Agreement 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 Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any holder of such New Notes (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
Notes 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 Notes and neither the holder nor any other person
is engaging in or intends to engage in a distribution of the New Notes. A
broker-dealer who acquired Old Notes directly from the Registrant can not
exchange such Old Notes in the Exchange Offer. Any holder who tenders in the
Exchange Offer for the purpose of participating in a distribution of the New
Notes 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 Notes for its own account in exchange for Old Notes, where
such Old Notes 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 Notes. 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 Registrants will accept any and all Old Notes 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 of New Notes in exchange for an equal principal amount of outstanding
Old Notes tendered and accepted in the Exchange Offer. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer. The date of
acceptance for exchange of the Old Notes for the New Notes (the "Exchange
Date") will be the first business day following the Expiration Date or as soon
as practicable thereafter.
The terms of the New Notes and the Old Notes are substantially identical in
all material respects, except for certain transfer restrictions, registration
rights and Liquidated Damages for Registration Defaults relating to the Old
Notes which will not apply to the New Notes. See "Description of the Notes."
The New Notes will evidence the same debt as the Old Notes. The New Notes will
be issued under and entitled to the benefits of the Indenture pursuant to
which the Old Notes were issued.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders.
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Holders of Old Notes 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 Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes 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 and to be subject to transfer
restrictions, but will not be entitled to any rights or benefits under the
Registration Rights Agreement.
Upon satisfaction or waiver of all the conditions to the Exchange Offer, on
the Exchange Date the Registrant will accept all Old Notes properly tendered
and not withdrawn and will issue New Notes in exchange therefor. For purposes
of the Exchange Offer, the Registrant shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Registrant had
given oral or written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering holders for the purposes of receiving the
New Notes from the Registrant.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such Old Notes, 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 Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if Old Notes are submitted for a greater
principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Notes or substitute Old Notes 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 Notes 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
Notes 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 12, 1998, 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
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 Notes, 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 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 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 Notes 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.
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INTEREST ON THE NEW NOTES
New Notes will bear interest at the rate of 8 1/8% per annum, payable semi-
annually, in cash, on July 15 and January 15 of each year, from the most
recent date to which interest has been paid on the Old Notes or, if no such
payment has been made, from July 2, 1998.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Registrant will
not be required to exchange any New Notes for any Old Notes, and may terminate
or amend the Exchange Offer before the acceptance of any Old Notes 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
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration
of the Exchange Offer, subject, however, to the rights of holders who tendered
such Old Notes to withdraw their tendered Old Notes, or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Notes 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 Notes by a holder as set forth below (including the tender
of Old Notes by book-entry delivery pursuant to the procedures of the
Depository Trust Company ("DTC")) and the acceptance thereof 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 Notes may tender such Old Notes 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
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of Transmittal or such facsimile, together with the Old Notes (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 Exchange Agent at its address set forth herein.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE 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 EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD NOTES 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 Notes 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 Notes, either make appropriate arrangements to register
ownership of the Old Notes 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 Notes 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 Notes listed therein, such Old Notes 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 Notes, with the
signature thereon guaranteed by an Eligible Institution. If the Letter of
Transmittal or any Old Notes 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 Notes, DTC, may make book-entry delivery of Old Notes by
causing DTC to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with DTC's procedures for such
transfer, including if applicable the procedures under the Automated Tender
Offer Program ("ATOP"). Although delivery of Old Notes may be effected through
book-entry transfer into the 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 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.
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All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes 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 Notes not properly tendered or any Old Notes
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 Notes.
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 Notes 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 Notes, neither the
Registrant, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Old Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived. Any Old Notes received by the 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 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 Notes 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 Notes 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 Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, 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 Notes 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 Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or (iii) who cannot complete the procedures for book-entry
transfer of Old Notes to the 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 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 Notes (if possible) and the principal
amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three business trading days after
the Expiration Date, (i) the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes
and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, or (ii)
that book-entry transfer of such Old Notes into the Exchange Agent's
account at DTC will be effected and confirmation of such book-entry
transfer will be delivered to the 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 Notes in proper form for transfer and all other documents
required by the Letter of Transmittal, or confirmation of book-entry
transfer of the Old Notes into the Exchange Agent's account at DTC, are
received by the Exchange Agent within three business trading days after
the Expiration Date.
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Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes 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 Notes exchanges, assigns and transfers the Old
Notes to the Registrant and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
assigned, transferred and exchanged. The holder represents and warrants to the
Registrant and the Exchange Agent that (i) it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire the New
Notes in exchange for the Old Notes, (ii) when the Old Notes are accepted for
exchange, the Registrant will acquire good and unencumbered title to the Old
Notes, 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
Notes and (iv) acceptance of any tendered Old Notes by the Registrant and the
issuance of New Notes in exchange therefor will constitute performance in full
by the Registrant of its obligations under the Registration Rights Agreement
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 Notes 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 Notes.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes 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 Notes in the Exchange Offer, a telegram, telex,
facsimile transmission or letter indicating notice of withdrawal must be
received by the 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
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. If Old Notes
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 Notes 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 Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes 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
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<PAGE>
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes 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 NOTES
Holders of Old Notes whose Old Notes are not tendered or are tendered but
not accepted in the Exchange Offer will continue to hold such Old Notes 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 Notes 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 Notes held by
them. To the extent that Old Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted Old Notes
could be adversely affected.
EXCHANGE AGENT
Bank of Montreal Trust Company, the Trustee under the Indenture, has been
appointed as Exchange Agent of 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 should be
directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail, By Facsimile:
by hand or by Overnight Courier Bank of Montreal Trust Company
Bank of Montreal Trust Company
Wall Street Plaza Attention: Reorganization Department
88 Pine Street, 19th Floor
(212) 701-7636
New York, NY 10005 Confirm by Telephone:
Attention: Reorganization Department (212) 701-7624
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 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 Notes to the 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 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 Notes pursuant to the Exchange Offer. If, however,
certificates representing New Notes or Old Notes 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
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than the registered holder of the Old Notes tendered, or if tendered Old Notes
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 Notes 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 Notes that were not
prohibited from participating in the Exchange Offer and did not tender their
Old Notes will not have any registration rights under the Registration Rights
Agreement with respect to such nontendered Old Notes and, accordingly, such
Old Notes will continue to be subject to the restrictions on transfer
contained in the legend thereon. In general, the Old Notes 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 Notes under the Securities Act.
Based on interpretations by the staff of the Commission with respect to
similar transactions, the Registrant believes that the New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any holder of such New Notes
(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 Notes 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 Notes and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the New Notes. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes 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 Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
its New Notes. See "Plan of Distribution." The New Notes 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 Agreement, to register the New Notes 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 Notes 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 Notes that were
not prohibited from participating in the Exchange Offer and did not tender
their Old Notes will not have any registration rights under the Registration
Rights Agreement with respect to such nontendered Old Notes and, accordingly,
such Old Notes 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 Notes notifies the Company in
accordance with the Registration Rights Agreement that it will be unable to
participate in the Exchange Offer due to circumstances delineated in the
Registration Rights Agreement, then the holder of the Old Notes will have
certain rights to have such Old Notes registered under the Securities Act
pursuant to the Registration Rights Agreement and subject to conditions
contained therein.
The Registrant has not entered into any arrangement or understanding with
any person to distribute the New Notes 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 Notes in its ordinary
course of business and has
26
<PAGE>
no arrangement or understanding with any person to participate in the
distribution of the New Notes 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 Notes 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 Notes will be recorded at the same carrying value as the Old Notes
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 Notes.
USE OF PROCEEDS
The net proceeds of the Offering, after deducting offering expenses, were
approximately $147,300,000 which were contributed to Adelphia subsidiaries and
used to repay revolving credit facilities of such subsidiaries, all of which
may be reborrowed and used for general corporate purposes of such
subsidiaries. As of June 30, 1998, the average effective interest rate charged
on such subsidiary credit facilities was approximately 6.65%.
Adelphia will not receive any proceeds from the Exchange Offer.
27
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS EXCEPT PAR VALUE AMOUNTS)
The following table sets forth the cash and cash equivalents and
capitalization of the Company as of June 30, 1998, on an actual and as
adjusted basis to reflect the Offering and the Equity Offering and the
application of the net proceeds therefrom. 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, 1998
---------------------------
ACTUAL AS ADJUSTED (B)
---------- ---------------
<S> <C> <C>
Cash and cash equivalents.......................... $ 454,676 $ 454,676
U.S. government securities--pledged................ 71,535 71,535
---------- ----------
Total cash, cash equivalents and U.S. government
securities--pledged............................ $ 526,211 $ 526,211
========== ==========
Long-term debt including current maturities (a):
Subsidiary debt.................................. $1,486,225 $1,070,131
Parent debt...................................... 1,510,596 1,659,828
---------- ----------
Total long-term debt including current
maturities.................................... 2,996,821 2,729,959
---------- ----------
Hyperion redeemable exchangeable preferred stock... 214,085 214,085
---------- ----------
Redeemable exchangeable preferred stock............ 148,105 148,105
---------- ----------
Convertible preferred stock, common stock and other
stockholders' equity (deficiency):
8 1/8% Series C convertible preferred stock
($100,000 liquidation
preference)..................................... 1 1
Class A common stock, $.01 par value, 200,000,000
shares authorized
and 20,043,528 shares outstanding on an Actual
basis and 28,848,843 shares outstanding on an As
Adjusted basis.................................. 200 288
Class B common stock, $.01 par value, 25,000,000
shares authorized
and 10,944,476 shares outstanding............... 109 109
Additional paid-in capital....................... 471,078 739,784
Accumulated deficit.............................. (1,688,817) (1,688,817)
---------- ----------
Total convertible preferred stock, common stock
and other stockholders' equity (deficiency)... (1,217,429) (948,635)
---------- ----------
Total capitalization.......................... $2,141,582 $2,143,514
========== ==========
</TABLE>
- --------
(a) See Note 3 to Adelphia's consolidated financial statements in the Form 10-
K for a description of long-term debt of the Company and its subsidiaries.
See "The Company--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" in
the Form 10-K and the Form 10-Q.
(b) Gives effect to the application of the net proceeds of approximately
$147,300 from the Offering, as described in "Use of Proceeds," and
approximately $269,000 from the Equity Offering.
28
<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, 1998 have been derived from the audited
consolidated financial statements of the Company. This data should be read in
conjunction with the consolidated financial statements and related notes
thereto as of March 31, 1997 and 1998 and for each of the three years in the
period ended March 31, 1998 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, 1994 and 1995, and the balance sheet
data at March 31, 1994, 1995 and 1996, have been derived from audited
consolidated financial statements of the Company not included in the Form 10-
K. The selected consolidated financial data as of and for the three months
ended June 30, 1997 and 1998 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, 1998 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 1999.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31, JUNE 30,
----------------------------------------------------- ------------------
1994 1995 1996 1997 1998 1997 1998
--------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues................ $ 319,045 $ 361,505 $ 403,597 $ 472,778 $ 528,442 $122,644 $144,756
Direct operating and
programming expense.... 90,547 106,993 124,116 148,982 167,288 39,673 48,738
Selling, general and
administrative expense. 52,801 63,487 68,357 81,763 95,731 22,259 29,111
Depreciation and
amortization expenses.. 89,402 97,602 111,031 124,066 145,041 33,733 38,559
Rate regulation charge.. -- -- 5,300 -- -- -- --
--------- --------- --------- --------- --------- -------- --------
Operating income ....... 86,295 93,423 94,793 117,967 120,382 26,979 28,348
Other income (expense).. (299) 1,453 -- -- -- -- 1,000
Priority investment in-
come from Olympus...... 22,300 22,300 28,852 42,086 47,765 11,765 12,000
Cash interest expense--
net.................... (171,268) (169,830) (183,780) (190,965) (209,677) (54,879) (54,850)
Noncash interest
expense................ (1,680) (14,756) (16,288) (41,360) (37,430) (6,858) (7,895)
Equity in loss of joint
ventures............... (30,054) (44,349) (46,257) (59,169) (79,056) (21,738) (21,506)
Hyperion preferred stock
dividends.............. -- -- -- -- (12,682) -- (6,946)
Minority interest in
losses of subsidiaries. -- -- -- -- -- -- 5,460
Gain on sale of
investments............ -- -- -- 12,151 2,538 -- --
--------- --------- --------- --------- --------- -------- --------
Loss before income
taxes, extraordinary
(loss) gain
and cumulative effect
of change in accounting
principle (a).......... (94,706) (111,759) (122,680) (119,290) (168,160) (44,731) (44,389)
Income tax (expense)
benefit................ (2,742) 5,475 2,786 358 5,606 70 5,614
--------- --------- --------- --------- --------- -------- --------
Loss before
extraordinary (loss)
gain and cumulative
effect of change
in accounting principle
(a).................... (97,448) (106,284) (119,894) (118,932) (162,554) (44,661) (38,775)
Extraordinary (loss)
gain on early
retirement of debt..... (752) -- -- (11,710) (11,325) 2,300 (2,604)
Cumulative effect of
change in accounting
for income taxes (a)... (89,660) -- -- -- -- -- --
--------- --------- --------- --------- --------- -------- --------
Net loss................ (187,860) (106,284) (119,894) (130,642) (173,879) (42,361) (41,379)
Dividend requirements
applicable to preferred
stock.................. -- -- -- -- (18,850) -- (6,906)
--------- --------- --------- --------- --------- -------- --------
Net loss applicable to
common stockholders.... $(187,860) $(106,284) $(119,894) $(130,642) $(192,729) $(42,361) $(48,285)
========= ========= ========= ========= ========= ======== ========
Basic and diluted loss
per weighted average
share of common stock
before extraordinary
(loss) gain
and cumulative effect
of change in accounting
principle (a).......... $ (5.66) $ (4.32) $ (4.56) $ (4.50) $ (6.07) $ (1.62) $ (1.48)
Basic and diluted net
loss per weighted
average share of common
stock.................. (10.91) (4.32) (4.56) (4.94) (6.45) (1.54) (1.56)
Cash dividends declared
per common share....... -- -- -- -- -- -- --
Weighted average shares
of common stock
outstanding (in
thousands)............. 17,221 24,628 26,305 26,411 29,875 27,468 30,988
Ratio of earnings to
combined fixed charges
and preferred stock
dividends (b).......... -- -- -- -- -- -- --
</TABLE>
- --------
(footnotes included on next page)
29
<PAGE>
As more fully described in the Form 10-K which is incorporated herein by
reference, Adelphia operates primarily in two lines of business within the
telecommunications industry: cable television (Adelphia, excluding Hyperion)
and competitive local exchange carrier telephony (Hyperion). The balance sheet
data and other data as of and for each of the five years ended March 31, 1998
of Hyperion have been derived from audited consolidated financial statements
of Hyperion not included herein.
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
------------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1997 1998
----------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Adelphia Consolidated
Total assets........... $ 1,073,846 $ 1,267,291 $ 1,367,579 $1,643,826 $2,304,671 $1,708,795 $2,562,963
Total debt............. 1,793,711 2,021,610 2,175,473 2,544,039 2,909,745 2,637,896 2,996,821
Total debt and
redeemable preferred
stock................. 1,793,711 2,021,610 2,175,473 2,544,039 3,265,011 2,637,896 3,359,011
Investments (c)........ 24,416 50,426 74,961 130,005 150,787 156,161 160,313
Convertible preferred
stock, common stock
and other
stockholders' equity
(deficiency).......... (918,064) (1,011,575) (1,128,239) (1,253,881) (1,315,865) (1,273,945) (1,217,429)
Hyperion
Total assets........... $ 14,765 $ 23,212 $ 35,269 $ 174,601 $ 634,893 $ 169,907 $ 897,385
Total debt............. 19,968 35,541 50,855 215,675 528,776 222,251 500,177
Total debt and
redeemable preferred
stock................. 19,968 35,541 50,855 215,675 735,980 222,251 714,262
Investments (c)........ 9,068 15,085 27,900 56,695 66,648 74,726 69,554
Common stock and other
stockholders'
equity (deficiency)... (6,011) (13,703) (27,323) (50,254) (118,991) (63,493) 141,390
Adelphia, Excluding Hyperion
Total assets........... $ 1,059,081 $ 1,244,079 $ 1,332,310 $1,469,225 $1,669,778 $1,538,888 $1,665,578
Total debt............. 1,773,743 1,986,069 2,124,618 2,328,364 2,380,969 2,415,645 2,496,644
Total debt and
redeemable preferred
stock................. 1,773,743 1,986,069 2,124,618 2,328,364 2,529,031 2,415,645 2,644,749
Investments (c)........ 15,348 35,341 47,061 73,310 84,139 81,435 90,759
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
------------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1997 1998
----------- ----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Adelphia Consolidated
EBITDA (d).............. $ 175,697 $ 191,025 $ 211,124 $ 242,033 $ 265,423 $ 60,712 $ 66,907
Capital expenditures.... 75,894 92,082 100,089 129,609 183,586 43,534 74,255
Cash paid for
acquisitions........... 21,681 70,256 60,804 143,412 146,546 29,509 22,769
Hyperion
Revenues................ $ 417 $ 1,729 $ 3,322 $ 5,088 $ 13,510 $ 1,520 $ 7,635
Operating expenses (e).. 2,375 3,906 5,774 10,212 22,118 3,560 13,421
Depreciation and
amortization expense... 189 463 1,184 3,945 11,477 1,372 6,120
EBITDA (d).............. (1,958) (2,177) (2,452) (5,124) (8,608) (2,040) (5,786)
Interest expense--net... (2,147) (3,282) (5,889) (22,401) (36,030) (7,314) (7,645)
Preferred stock
dividends.............. -- -- -- -- (12,682) -- (6,946)
Capital expenditures.... 3,097 2,850 6,084 36,127 68,629 18,766 43,464
Cash paid for
acquisitions........... -- -- -- 5,040 65,968 -- --
Adelphia, Excluding Hyperion
Revenues................ $ 318,628 $ 359,776 $ 400,275 $ 467,690 $ 514,932 $ 121,124 $ 137,121
Operating expenses (e).. 140,973 166,574 186,699 220,533 240,901 58,372 64,428
Depreciation and
amortization expense... 89,213 97,139 109,847 120,121 133,564 32,361 32,439
EBITDA (d).............. 177,655 193,202 213,576 247,157 274,031 62,752 72,693
Interest expense--net... (170,801) (181,304) (194,179) (209,924) (211,077) (54,423) (55,100)
Capital expenditures.... 72,797 89,232 94,005 93,482 114,957 24,768 30,791
Cash paid for
acquisitions........... 21,681 70,256 60,804 138,372 80,578 29,509 22,769
</TABLE>
- --------
(a) "Cumulative Effect of Change in Accounting Principle" refers to a change
in accounting principle for the Company. Effective April 1, 1993, 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 the Company of $89,660.
(b) For purposes of calculating the ratio of earnings to 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 amortization of debt issuance costs plus the
assumed interest component of rent expense. For the years ended March 31,
1994, 1995, 1996, 1997 and 1998, and the three-month periods ended June
30, 1997 and 1998, the Company's earnings were insufficient to cover its
combined fixed charges and preferred stock dividends by $65,997, $69,146,
$78,189, $61,848, $113,941, $23,340 and $38,757, respectively. On a pro
forma basis, the Company's earnings were insufficient to cover its
combined fixed charges and preferred stock dividends by $126,006 and
$34,964 for the year ended March 31, 1998 and the three months ended June
30, 1998, respectively.
(c) Represents total investments before cumulative equity in net losses.
(d) EBITDA presented above is defined as operating income plus depreciation
and amortization and rate regulation charge. EBITDA and other similar
measurements of cash flow are commonly used in the telecommunications
industry to analyze and compare telecommunications companies on the basis
of operating performance, leverage and liquidity. While EBITDA is not an
alternative to operating income as an indicator of operating performance
or an alternative to cash flows from operating activities as a measure of
liquidity, all 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.
(e) Amount excludes depreciation and amortization expenses.
30
<PAGE>
DESCRIPTION OF THE NOTES
GENERAL
The New Notes, like the Old Notes, will be issued pursuant to the Indenture,
dated July 2, 1998 (the "Indenture"), among the Company and Bank of Montreal
Trust Company, as trustee (the "Trustee"). The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (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 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 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 $300,000,000 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, 2003. Adelphia will pay interest on the
Notes on July 15 and January 15 of each year, commencing January 15, 1999, to
the persons who are registered holders at the close of business on the July 1
and January 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 Notes and
Adelphia's Public Debt were issued contain covenants which may afford holders
of Adelphia's Public Debt 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 and
Adelphia's Public Debt 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.
The Unrestricted Subsidiaries of Adelphia include Hyperion, Global
Cablevision, Inc. and Orchard Park Cablevision, Inc., their respective
subsidiaries, and certain other subsidiaries.
The Notes are not redeemable and there is no mandatory redemption or sinking
fund prior to maturity.
RANKING
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
31
<PAGE>
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, 1998 on an as adjusted basis, after giving effect to the Offering and the
Equity Offering, and to the application of the net proceeds therefrom, the New
Notes would have been effectively subordinated to $1.3 billion of indebtedness
and redeemable preferred stock of Adelphia's subsidiaries. As of June 30,
1998, the total indebtedness of Adelphia's subsidiaries to banks and
institutions, on a consolidated basis, aggregated $3.0 billion. See "Risk
Factors--Holding Company Structure; Restrictive Covenants."
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Adelphia and the Initial Purchaser entered into the Registration Rights
Agreement on July 2, 1998 (the "Closing Date"). Pursuant to the 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 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 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 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)
32
<PAGE>
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 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 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 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 Old Notes will be required to make certain representations to
Adelphia (as described in the 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 Registration Rights Agreement in order to have their Old 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 Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
by reference to, all the provisions of the 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.
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"Affiliate" means a Person (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, Adelphia, (ii) which beneficially owns or holds 10% or more of any class
of the voting Capital Stock of Adelphia, or (iii) of which 10% or more of the
voting Capital Stock is beneficially owned or held by Adelphia, a Restricted
Subsidiary or an Unrestricted Subsidiary of Adelphia. Without limitation, an
Affiliate also includes any director or executive officer of Adelphia. As used
herein, "Affiliate" shall not include a Restricted Subsidiary.
"Aggregate Excess Restricted Investments" means for any fiscal quarter the
aggregate of Excess Restricted Investments with respect to the Restricted
Investments in all of the Unrestricted Subsidiaries and Affiliates of
Adelphia.
"Allowable Securities" means (i) cash equivalents, (ii) common or preferred
Capital Stock in a Person which (x) has Investment Grade Senior Debt or (y)
whose ratio of Indebtedness plus Preferred Stock to Annualized Pro Forma
EBITDA is less than 7.75:1, or (iii) debt securities issued by a Person which
(x) has Investment Grade Senior Debt or (y) whose Leverage Ratio is less than
7.75:1, provided that the securities in (ii)(y) and (iii)(y) above shall only
be deemed to be Allowable Securities if the principal business of the Person
is owning and operating cable television systems.
"Annualized Pro Forma EBITDA" means, with respect to any Person, (i) such
Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four,
minus (ii) in the case of Adelphia only, Adelphia's Aggregate Excess
Restricted Investments for such fiscal quarter.
"Asset Sale" means the sale, transfer or other disposition (other than to
Adelphia or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary, (b) all or substantially all of the
assets of Adelphia or of any Restricted Subsidiary, or (c) all or
substantially all of the assets of a Company System or part thereof serving at
least 5,000 basic subscribers, a division, line of business or comparable
business segment of Adelphia or any Restricted Subsidiary.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capital Stock Sale Proceeds" means the aggregate net sale proceeds
(including the fair market value of property, other than cash, as determined
by an independent appraisal firm) received by Adelphia from the issue or sale
(other than to a Subsidiary) by Adelphia of any class of its Capital Stock on
or after January 1, 1993 (including Capital Stock of Adelphia issued after
January 1, 1993 upon conversion of or in exchange for other securities of
Adelphia).
"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
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<PAGE>
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.
"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;
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<PAGE>
(ii) cash income received during such quarter by Adelphia with respect to
its Restricted Investments in such Unrestricted Subsidiary or
Affiliate multiplied by four;
and provided that cash income from a particular Restricted Investment shall be
included only (x) if cash income has been received by Adelphia with respect to
such Restricted Investment during each of the previous two fiscal quarters, or
(y) if the cash income derived from such Restricted Investment is attributable
to Allowable Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Indebtedness" is defined to mean (without duplication), with respect to any
Person, any indebtedness, secured or unsecured, contingent or otherwise, which
is for borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), or evidenced
by bonds, notes, debentures or similar instruments or representing the balance
deferred and unpaid of the purchase price of any property (excluding, without
limitation, any balances that constitute subscriber advance payments and
deposits, accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of 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
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<PAGE>
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 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.
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"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).
"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, 2003.
"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
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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 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, 1998, 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 contains, among others, the following covenants. Except as
otherwise specified, all of the covenants described below appear in the
Indenture.
Limitation on Indebtedness. The Indenture provides 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 does 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."
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Limitation on Restricted Payments. The Indenture provides that, so long as
any of the Notes remain outstanding, Adelphia shall not make, and shall not
permit any Restricted Subsidiary to make, any Restricted Payment (as defined
above) if (a) at the time of such proposed Restricted Payment, a Default or
Event of Default shall have occurred and be continuing or shall occur as a
consequence of such Restricted Payment, or (b) immediately after giving effect
to any such Restricted Payment, the aggregate of all Restricted Payments which
shall have been made on or after January 1, 1993 (the amount of any Restricted
Payment, if other than cash, to be based upon fair market value as determined
in good faith by Adelphia's Board of Directors whose determination shall be
conclusive) would exceed an amount equal to the greater of (i) the sum of
$5,000,000 or (ii) the difference between (a) the Cumulative Credit (as
defined above) and (b) the sum of the aggregate amount of all Restricted
Payments, and all Permitted Investments made pursuant to clause (v) of the
definition of "Permitted Investments," made on or after January 1, 1993 plus
1.2 times Cumulative Interest Expense (as defined above).
Mergers and Consolidations. The Indenture 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 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 provides 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
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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 provides that
Adelphia will not, and will not permit any Restricted Subsidiary to, engage in
any transaction with any Affiliate upon terms which would be any less
favorable than those obtainable by Adelphia or a Restricted Subsidiary in a
comparable arm's-length transaction with a person which is not an Affiliate.
The Indenture will provide that Adelphia will not, and will not permit any
Restricted Subsidiary to, engage in any transaction (or series of related
transactions) involving in the aggregate $1,000,000 or more with any Affiliate
except for (i) the making of any Restricted Payment, (ii) any transaction or
series of transactions between Adelphia and one or more of its Restricted
Subsidiaries or between two or more of its Restricted Subsidiaries (provided
that no more than 5% of the equity interest in any of its Restricted
Subsidiaries is owned by an Affiliate), and (iii) the payment of compensation
(including, without limitation, amounts paid pursuant to employee benefit
plans) for the personal services of officers, directors and employees of
Adelphia or any of its Restricted Subsidiaries, so long as the Board of
Directors of Adelphia in good faith shall have approved the terms thereof and
deemed the services theretofore or thereafter to be performed for such
compensation or fees to be fair consideration therefor; and provided further
that for any Asset Sale, or a sale, transfer or other disposition (other than
to Adelphia or any of its Restricted Subsidiaries) of an interest in a
Restricted Investment, involving an amount greater than $25,000,000, such
Asset Sale or transfer of interest in a Restricted Investment is for fair
value as determined by an opinion of a nationally recognized investment
banking firm filed with the Trustee. Notwithstanding the foregoing, the
Indenture provides that such provision will not prohibit any such transaction
which is determined by the independent members of the Board of Directors of
Adelphia, in their reasonable, good faith judgment (as evidenced by a Board
Resolution filed with the Trustee) to be (a) in the best interests of Adelphia
or such Restricted Subsidiary, and (b) upon terms which would be obtainable by
Adelphia or a Restricted Subsidiary in a comparable arm's-length transaction
with a Person which is not an Affiliate.
Limitation on Sale of Assets. The Indenture provides that neither Adelphia
nor a Restricted Subsidiary shall sell an asset (including Capital Stock of
Restricted Subsidiaries) or reclassify a Restricted Subsidiary existing on the
date of the Indenture as an Unrestricted Subsidiary (a "Reclassification")
unless (a) in the 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
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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:
(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.
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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 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 8 3/8% Notes, 9 1/4% Notes, the 9 7/8% Notes, the
10 1/2% Notes, the 10 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 $1,510,596,000 as of June 30,
1998, 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 8 3/8% Notes, 9 1/4% Notes, the 9 7/8% Notes, the 10 1/2%
Notes, the 10 1/4% Notes, the 9 1/2% Notes, 11 7/8% Debentures, 9 7/8%
Debentures and the 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 8 3/8% Notes,
9 1/4% Notes, the 9 7/8% Notes, the 10 1/2% Notes, the 10 1/4% Notes, the
9 1/2% Notes, the 11 7/8% Debentures 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
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in the observance or performance of any other covenant in the Notes or the
Indenture for 60 days after written notice from the Trustee or the holders of
not less than 25% in aggregate principal amount of the Notes then outstanding;
(iv) failure to pay when due principal, interest or premium aggregating
$10,000,000 or more with respect to any Indebtedness of Adelphia or any
Restricted Subsidiary or the acceleration of any such Indebtedness which
default shall not be cured or waived, or such acceleration shall not be
rescinded or annulled, within ten days after written notice as provided in the
Indenture; (v) any final judgment or judgments for the payment of money in
excess of $10,000,000 shall be rendered against Adelphia or any Restricted
Subsidiary and shall not be discharged for any period of 60 consecutive days
during which a stay of enforcement shall not be in effect; or (vi) certain
events involving bankruptcy, insolvency or reorganization of Adelphia or any
Restricted Subsidiary with liabilities of greater than $10,000,000 under
generally accepted accounting principles as of the date of such bankruptcy,
insolvency or reorganization. The Indenture provides that the Trustee may
withhold notice to the holders of the Notes of any default (except in payment
of principal or 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 provides 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
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(as specified in the Indenture) to the effect that the holders of the Notes or
persons in their positions will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred. Such opinion, in the case of defeasance
under clause (a) above, must refer to and be based upon a private ruling of
the Internal Revenue Service concerning the Notes or a ruling of general
effect published by the Internal Revenue Service.
MODIFICATION OF INDENTURE
From time to time, Adelphia and the Trustee may, without the consent of
holders of the Notes, amend the Indenture or the Notes or supplement the
Indenture for certain specified purposes, including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any holder. The Indenture
contains provisions permitting Adelphia and the Trustee, with the consent of
holders of at least one-half in principal amount of the outstanding Notes, to
modify or supplement the Indenture or the Notes, except that no such
modification shall, without the consent of each holder affected thereby, (i)
reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes, (ii) reduce the rate of
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 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 8 3/8% Notes,
9 1/4% Notes, the 9 7/8% Notes, the 10 1/2% Notes, the 10 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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BOOK-ENTRY, DELIVERY AND FORM
The Notes were initially offered and sold to qualified institutional buyers
in reliance on Rule 144A. Except as set forth below, the Notes will be issued
in registered, global form in minimum denominations of $1,000 and integral
multiples thereof.
The New Notes initially will be represented by one or more Notes, in
registered, global form without interest coupons (the "Global Note"). The
Global Note will be deposited with, or on behalf of, 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 Note 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 Note may not be exchanged for
Notes in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Notes for Certificated Notes."
The Old Notes (including beneficial interests in the Global Note) are
subject to certain restrictions on transfer and will bear a restrictive
legend. In addition, transfer of beneficial interests in the Global Note 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.
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
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 Purchaser), 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 Notes, DTC will credit the accounts of
Participants designated by the Initial Purchaser with portions of the
principal amount of the Global Notes and (ii) ownership of such interests in
the Global Notes 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 Notes).
Investors in the Global Notes 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
Note 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 Note 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 Note 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
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of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Notes, see "--Exchange of Book-
Entry Notes for Certificated Notes", "--Exchange of Certificated Notes for
Book-Entry Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of and premium and Liquidated Damages,
if any, and interest on a Global Note 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. Under the terms of the Indenture,
Adelphia and the Trustee will treat the persons in whose names the Notes,
including the Global Notes, 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 nor any agent of
Adelphia or the Trustee 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 Notes, 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 Notes or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised Adelphia that its
current practice, upon receipt of any payment in respect of securities such as
the Notes (including principal and interest), 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 principal amount of
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 Notes 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
or Adelphia. Neither Adelphia nor the Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the
Notes, and Adelphia 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 Notes 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 on the Old Notes, 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 Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the
right to exchange the Global Notes for legended Notes in certificated form,
and to distribute such Notes to its Participants.
The information in this section concerning DTC and its book-entry systems
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 Notes 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 nor the Trustee
will have any responsibility for the performance by DTC or its respective
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
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EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (a) notifies Adelphia that it is unwilling or
unable to continue as depositary for the Global Note 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 in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be
continuing an Event of Default or any event which after notice or lapse of
time or both would be an Event of Default with respect to the Notes. In
addition, beneficial interests in a Global Note may be exchanged for
certificated Notes upon request but only upon at least 20 days prior written
notice given to the Trustee by or on behalf of DTC in accordance with its
customary procedures. In all cases, certificated Notes delivered in exchange
for any Global Note 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.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Note custodian. With respect to
Notes issued in definitive form, Adelphia will make all payments of principal,
premium, interest and Liquidated Damages, if any, by mailing a check to each
such Holder's registered address, provided that all payments with respect to
Notes have an aggregate principal amount of $1,000 or more, 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 Notes represented by the Global Notes 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 Notes also will be
settled in immediately available funds.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of the Old Notes for the New Notes,
but does not purport to be a complete analysis of all potential tax effects.
The discussion is based upon the United States Internal Revenue Code of 1986,
as amended, (the "Code"), Treasury Regulations, Internal Revenue Service
("IRS") rulings and pronouncements and judicial decisions now in effect, all
of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a
manner that could adversely affect a holder of the New Notes. The following
discussion assumes that holders hold the Old Notes and the New Notes as
capital assets within the meaning of Section 1221 of the Code.
The Company has not sought and will not seek any rulings from the IRS with
respect to the positions of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the exchange of the Old Notes for the New Notes or that any
such position would not be sustained.
The tax treatment of a holder may vary depending on his or its particular
situation or status. This summary does not address the tax consequences to
taxpayers who are subject to special rules such as insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign entities
and individuals, persons holding Old Notes or New Notes as a part of a hedging
or conversion transaction or a straddle and holders whose "functional
currency" is not the U.S. dollar, or aspects of federal income taxation that
may be relevant to a prospective investor based upon such investor's
particular tax situation. In addition, the description does not consider the
effect of any applicable foreign, state, local or other tax laws.
EACH HOLDER SHOULD CONSULT HIS OR ITS OWN TAX ADVISER AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING
THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE
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,
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<PAGE>
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.
AMORTIZABLE BOND PREMIUM
A holder that purchased an Old Note for an amount in excess of its principal
amount may elect to treat such excess as "amortizable bond premium," in which
case the amount required to be included in the holder's income each year with
respect to interest on the Old Note will be reduced by the amount of
amortizable bond premium allocable (based on the yield to maturity of the Old
Note) to such year. If a holder made an election to amortize bond premium with
respect to an Old Note and exchanges the Old Note for a New Note pursuant to
the Exchange Offer, the election will apply to the New Note. A holder who
exchanges an Old Note for which an election has not been made for a New Note,
and a subsequent purchaser of a New Note, may also elect to amortize bond
premium if the holder acquired the Note for an amount in excess of its
principal amount. Any election to amortize bond premium shall apply to all
bonds (other than bonds the interest on which is excludable from gross income)
held by the holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the holder, and is irrevocable
without the consent of the IRS.
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
50
<PAGE>
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
SENIOR NOTES (INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN,
AND OTHER TAX LAWS).
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes 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 Notes. 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 Notes received in exchange for Old Notes
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 Notes by
broker-dealers. New Notes 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 Notes 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 Notes. Any broker-dealer
that resells New Notes 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 Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any resale of New Notes 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 Notes to be received in the Exchange Offer, and
to the best of the Company's information and belief, each person participating
in the Exchange Offer is acquiring the New Notes in its ordinary course of
business and has no arrangement or understanding with any person to
participate in the distribution of the New Notes to be received in the
Exchange Offer.
LEGAL MATTERS
The validity of the New Notes will be passed upon on behalf of the Company
by Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania.
Attorneys of that firm who are representing Adelphia in the Exchange Offer own
an aggregate of 2,300 shares of Adelphia's Class A Common Stock and 10,400
shares of Hyperion's Class A Common Stock.
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<PAGE>
EXPERTS
The consolidated financial statements and the related financial statement
schedules of Adelphia and its subsidiaries as of March 31, 1997 and 1998, and
for each of the three years in the period ended March 31, 1998, and the
consolidated financial statements of Olympus Communications, L.P. and its
subsidiaries as of December 31, 1996 and 1997, and for each of the three years
in the period ended December 31, 1997, all incorporated in this Prospectus by
reference from Adelphia's Annual Report on Form 10-K for the year ended March
31, 1998, 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.
52
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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.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 3
Incorporation by Reference................................................. 4
Prospectus Summary......................................................... 5
The Exchange Offer......................................................... 7
Summary Description of the Notes .......................................... 9
Risk Factors............................................................... 11
The Exchange Offer......................................................... 19
Use of Proceeds............................................................ 27
Capitalization............................................................. 28
Summary Consolidated Financial Data........................................ 29
Description of the Notes................................................... 31
Certain Federal Income Tax Considerations.................................. 49
Plan of Distribution....................................................... 51
Legal Matters.............................................................. 51
Experts.................................................................... 52
</TABLE>
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ADELPHIA
COMMUNICATIONS
CORPORATION
8 1/8% SERIES B SENIOR NOTES
DUE 2003
----------------
PROSPECTUS
----------------
OCTOBER , 1998
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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
----------- -----------
<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>
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<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)
4.25 Indenture, dated as of September 25, 1997, with respect to the
Registrant's 9 1/4% Senior Notes due 2002, between the Registrant
and the Bank of Montreal Trust Company (Incorporated herein by
reference is Exhibit 4.01 from the Registrant's Current Report on
Form 8-K, dated September 25, 1997.) (File Number 0-16014)
4.26 Registration Rights Agreement between Adelphia Communications
Corporation and the Initial Purchaser, dated September 25, 1997,
regarding the Registrant's 9 1/4% Senior Notes due 2002
(Incorporated herein by reference is Exhibit 4.02 from the
Registrant's Current Report on Form 8-K, dated September 25,
1997.) (File Number 0-16014)
4.27 Form of 9 1/4% Senior Note due 2002 (contained in Exhibit 4.25)
4.28 Indenture, dated as of January 21, 1998, with respect to the
Registrant's 8 3/8% Senior Notes due 2008, between the Registrant
and the Bank of Montreal Trust Company (Incorporated by reference
herein is Exhibit 4.01 from the Registrant's Current Report on
Form 8-K dated January 21, 1998.) (File No. 0-16014)
4.29 Registration Rights Agreement between Adelphia Communications
Corporation and the Initial Purchaser, dated January 21, 1998,
regarding the Registrant's 8 3/8% Senior Notes due 2008
(Incorporated by reference herein is Exhibit 4.02 from the
Registrant's Current Report on Form 8-K dated January 21, 1998.)
(File No. 0-16014)
4.30 Form of 8 3/8% Senior Note due 2008 (contained in Exhibit 4.28)
4.31 Indenture, dated as of July 2, 1998, with respect to the
Registrant's 8 1/8% Senior Notes due 2003, between the Registrant
and the Bank of Montreal Trust Company (Incorporated by reference
herein is Exhibit 4.01 from the Registrant's Current Report on
Form 8-K, dated July 2, 1998.) (File No. 0-16014)
4.32 Registration Rights Agreement between Adelphia Communications
Corporation and the Initial Purchaser, dated July 2, 1998,
regarding the Registrant's 8 1/8% Senior Notes due 2003
(Incorporated by reference herein is Exhibit 4.02 from the
Registrant's Current Report on Form 8-K, dated July 2, 1998.)
(File No. 0-16014)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.33 Form of 8 1/8% Senior Note due 2003 (Incorporated by reference
herein is Exhibit 4.03 from the Registrant's Current Report on
Form 8-K, dated July 2, 1998.) (File No. 0-16014)
5.01* Opinion of Buchanan Ingersoll Professional Corporation
12.01* Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
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
</TABLE>
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*Previously filed.
**Filed herewith.
The Registrant will furnish to the Commission upon request copies of
instruments not filed herewith which authorize the issuance of long-term
obligations of Registrant not in excess of 10% of the Registrant's total
assets on a consolidated basis.
(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, 1998 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.
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
II-4
<PAGE>
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 Securities Act of 1933 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.
(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.
II-5
<PAGE>
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-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Coudersport, Commonwealth of Pennsylvania, on the 9th day of October, 1998.
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 Amendment No. 1 to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
<TABLE>
<S> <C>
/s/ * Chairman, President and October 9, 1998
- ---------------------------- Chief Executive Officer
John Rigas
/s/ * Executive Vice President October 9, 1998
- ---------------------------- and Director
Michael J. Rigas
/s/ Timothy J. Rigas Executive Vice President, October 9, 1998
- ---------------------------- Chief Accounting Officer,
Timothy J. Rigas Treasurer, Chief Financial
Officer and Director
/s/ * Executive Vice President October 9, 1998
- ---------------------------- and Director
James P. Rigas
/s/ * Senior Vice President, October 9, 1998
- ---------------------------- Secretary and Director
Daniel R. Milliard
Director , 1998
- ----------------------------
Dennis P. Coyle
Director , 1998
- ----------------------------
Pete J. Metros
Director , 1998
- ----------------------------
Perry S. Patterson
*/s/ Timothy J. Rigas October 9, 1998
- ----------------------------
Timothy J. Rigas, as
Attorney-in-fact
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
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.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
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)
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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
4.25 Indenture, dated as of September 25, 1997, with respect to
the Registrant's 9 1/4% Senior Notes due 2002, between the
Registrant and the Bank of Montreal Trust Company
(Incorporated herein by reference is Exhibit 4.01 from the
Registrant's Current Report on Form 8-K, dated September
25, 1997.) (File Number 0-16014)
4.26 Registration Rights Agreement between Adelphia
Communications Corporation and the Initial Purchaser, dated
September 25, 1997, regarding the Registrant's 9 1/4%
Senior Notes due 2002 (Incorporated herein by reference is
Exhibit 4.02 from the Registrant's Current Report on Form
8-K, dated September 25, 1997.) (File Number 0-16014)
4.27 Form of 9 1/4% Senior Note due 2002 (contained in Exhibit
4.25)
4.28 Indenture, dated as of January 21, 1998, with respect to
the Registrant's 8 3/8% Senior Notes due 2008, between the
Registrant and the Bank of Montreal Trust Company
(Incorporated by reference herein is Exhibit 4.01 from the
Registrant's Current Report on Form 8-K dated January 21,
1998.) (File No. 0-16014)
4.29 Registration Rights Agreement between Adelphia
Communications Corporation and the Initial Purchaser, dated
January 21, 1998, regarding the Registrant's 8 3/8% Senior
Notes due 2008 (Incorporated by reference herein is Exhibit
4.02 from the Registrant's Current Report on Form 8-K dated
January 21, 1998.) (File No. 0-16014)
4.30 Form of 8 3/8% Senior Note due 2008 (contained in Exhibit
4.28)
4.31 Indenture, dated as of July 2, 1998, with respect to the
Registrant's 8 1/8% Senior Notes due 2003, between the
Registrant and the Bank of Montreal Trust Company
(Incorporated by reference herein is Exhibit 4.01 from the
Registrant's Current Report on Form 8-K, dated July 2,
1998.) (File No. 0-16014)
4.32 Registrant Rights Agreement between Adelphia Communications
Corporation and the Initial Purchaser, dated July 2, 1998,
regarding the Registrant's 8 1/8% Senior Notes due 2003
(Incorporated by reference herein is Exhibit 4.02 from the
Registrant's Current Report on Form 8-K, dated July 2,
1998.) (File No. 0-16014)
4.33 Form of 8 1/8% Senior Note due 2003 (Incorporated by
reference herein is Exhibit 4.03 from the Registrant's
Current Report on Form 8-K, dated July 2, 1998) (File No.
0-16014)
5.01* Opinion of Buchanan Ingersoll Professional Corporation
12.01* Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
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
</TABLE>
- --------
*Previously filed.
**Filed herewith.
<PAGE>
EXHIBIT 23.02
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-64603 of Adelphia Communications Corporation on
Form S-4 of our report dated June 10, 1998 and our report dated March 6, 1998
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, 1998, 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 9, 1998
