<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Adelphia Communications Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
<PAGE>
ADELPHIA COMMUNICATIONS CORPORATION
MAIN AT WATER STREET
COUDERSPORT, PENNSYLVANIA 16915
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 6, 1998
----------------
To the Stockholders of
Adelphia Communications Corporation:
The Annual Meeting of Stockholders of Adelphia Communications Corporation
will be held at the Coudersport Theater, Main Street, Coudersport,
Pennsylvania on Tuesday, October 6, 1998 at 10:00 a.m., for the following
purposes:
1. To elect one (1) Director by vote of the holders of Class A Common Stock
voting as a separate class.
2. To elect seven (7) Directors by vote of the holders of Class A Common
Stock and Class B Common Stock, voting together.
3. To approve the Company's 1998 Long-Term Incentive Compensation Plan.
4. To consider and act upon such other matters as may properly come before
the meeting.
The Board of Directors has fixed the close of business on August 19, 1998 as
the record date for determination of stockholders entitled to notice of and to
vote at the Annual Meeting.
IF YOU ARE UNABLE TO ATTEND THE MEETING AND YOU WISH TO VOTE YOUR STOCK, IT
IS REQUESTED THAT YOU COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
Daniel R. Milliard
Senior Vice President and Secretary
September 11, 1998
<PAGE>
ADELPHIA COMMUNICATIONS CORPORATION
MAIN AT WATER STREET
COUDERSPORT, PENNSYLVANIA 16915
----------------
PROXY STATEMENT FOR ANNUAL MEETING
OF STOCKHOLDERS
OCTOBER 6, 1998
----------------
This proxy statement is being furnished to the stockholders of Adelphia
Communications Corporation, a Delaware corporation (the "Company"), in
connection with the solicitation by the Board of Directors of the Company of
proxies to be voted at the annual meeting of stockholders (the "Annual
Meeting") scheduled to be held on Tuesday, October 6, 1998, at the Coudersport
Theater, Main Street, Coudersport, Pennsylvania. The address of the principal
executive offices of the Company is Main at Water Street, Coudersport,
Pennsylvania 16915, and the date this proxy statement was first mailed to
stockholders was on or about September 11, 1998. A copy of the Annual Report
to Stockholders for the fiscal year ended March 31, 1998 is being furnished
with this proxy statement.
Only stockholders of record as of the close of business on August 19, 1998
are entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof. The outstanding common stock of the Company on that date
consisted of 28,283,843 shares of Class A Common Stock, $.01 par value ("Class
A Common Stock"), and 10,944,476 shares of Class B Common Stock, $.01 par
value ("Class B Common Stock"). With respect to the matters described in this
proxy statement, other than the election of the Class A director as described
below, the holders of Class A Common Stock and of Class B Common Stock vote
together as a single class, and each holder of Class A Common Stock is
entitled to cast one (1) vote for each share of Class A Common Stock standing
in their name on the books of the Company and each holder of Class B Common
Stock is entitled to cast ten (10) votes for each share of Class B Common
Stock standing in their name on the books of the Company. A majority of the
votes cast at the Annual Meeting are required for the adoption of the
proposals described below.
All shares represented by valid proxies received by the Company prior to the
Annual Meeting will be voted at the Annual Meeting as specified in the proxy,
unless such proxies previously have been revoked. If no specification is made,
the shares will be voted FOR the election of each of the Board's nominees to
the Board of Directors, and FOR the approval of the Company's 1998 Long-Term
Incentive Compensation Plan. Unless otherwise indicated by the stockholder,
the proxy card also confers discretionary authority on the Board-appointed
proxies to vote the shares represented by the proxy on any matter that is
properly presented for action at the Annual Meeting. A stockholder giving a
proxy has the power to revoke it any time prior to its exercise by delivering
to the Secretary of the Company a written revocation or a duly executed proxy
bearing a later date, or by attendance at the meeting and voting his shares in
person.
Abstentions and broker non-votes on any matter submitted to the stockholders
for approval have no effect on the vote on such matter since the affirmative
vote of at least a majority of the votes cast by shareholders at the meeting,
in person or by proxy, is necessary for adoption of the proposals described
below. Broker non-votes as to any matter are shares held by nominees of
beneficial owners which are present and voted at the meeting on matters as to
which the nominee has discretionary authority but which are not voted on the
matter in question because the nominee does not have discretionary voting
authority as to such matter.
<PAGE>
PROPOSALS 1 AND 2
ELECTION OF DIRECTORS
DESCRIPTION OF BOARD OF DIRECTORS
The Certificate of Incorporation of the Company provides for the Board of
Directors to be elected as follows: a majority of the votes cast by holders of
Class A Common Stock, voting as a separate class, are entitled to elect one
(1) director; and a majority of the votes cast by holders of Class A Common
Stock and holders of Class B Common Stock, voting together as a single class,
are entitled to elect the remaining directors, with each share of Class A
Common Stock entitled to one (1) vote and each share of Class B Common Stock
entitled to ten (10) votes. Stockholders of the Company are not entitled to
cumulate their votes in the election of directors.
The Bylaws of the Company provide that the Board of Directors shall
establish the number of directors which shall not be less than five (5) nor
more than nine (9). The Board currently consists of eight (8) directors, all
of whom are also nominees for director.
Each director is to hold office until the next annual meeting of
stockholders and until his successor is duly elected and qualified, subject to
the right of the stockholders to remove any director as provided in the
Bylaws. Any vacancy in the office of a director elected by the holders of
Class A Common Stock voting as a separate class may be filled by such holders
voting as a separate class, and any vacancy in the office of a director
elected by the holders of Class A Common Stock and the holders of Class B
Common Stock voting as a single class may be filled by such holders voting as
a single class. In the absence of a stockholder vote, a vacancy in the office
of a director elected by the holders of Class A Common Stock voting as a
separate class or by the holders of Class A Common Stock and the holders of
Class B Common Stock voting as a single class, as the case may be, may be
filled by the remaining directors then in office, even if less than a quorum,
or by the sole remaining director. Any director elected by the Board of
Directors to fill a vacancy shall serve until the next annual meeting of
stockholders and until his successor has been elected and has qualified. If
the Board of Directors increases the number of directors, any vacancy so
created may be filled by the Board of Directors.
The persons named as proxies in the enclosed form of proxy were selected by
the Board of Directors and have advised the Board of Directors that, unless
authority is withheld, they intend to vote the shares represented by them at
the Annual Meeting for the election of Perry S. Patterson, on behalf of the
Class A Common Stockholders, and for the election of John J. Rigas, Michael J.
Rigas, Timothy J. Rigas, James P. Rigas, Daniel R. Milliard, Pete J. Metros
and Dennis P. Coyle on behalf of all of the common stockholders of the
Company. All nominees except Mr. Coyle were first elected or appointed as
directors of the Company in 1986. Mr. Coyle was first elected as a director of
the Company in 1995.
The Board of Directors knows of no reason why any nominee for director would
be unable to serve as director. If at the time of the Annual Meeting any of
the named nominees are unable or unwilling to serve as directors of the
Company, the persons named in the proxy intend to vote for such substitutes as
may be nominated by the Board of Directors.
The following sets forth certain information concerning each nominee for
election as a director of the Company. Each of the current directors of the
Company is a nominee for reelection as a director.
PROPOSAL 1--NOMINEE FOR ELECTION BY HOLDERS OF CLASS A COMMON STOCK
Perry S. Patterson
Age 81
Perry S. Patterson became a director of Adelphia on September 9, 1986. Since
1977, Mr. Patterson has practiced law in Coudersport, Pennsylvania. From 1975
to 1977, Mr. Patterson served as President Judge of the Court of Common Pleas
of the 55th Judicial District in Potter County, Pennsylvania. He was a partner
of the law
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firm of Kirkland & Ellis in Chicago, Illinois and Washington, D.C. from 1950
to 1973. Mr. Patterson attended Georgetown University and graduated from
Northwestern University Law School in 1941.
PROPOSAL 2--NOMINEES FOR ELECTION BY HOLDERS OF CLASS A COMMON STOCK AND CLASS
B COMMON STOCK
John J. Rigas
Age 73
John J. Rigas is the founder, Chairman, President and Chief Executive
Officer of Adelphia and is President of most of its subsidiaries. Mr. Rigas
has served as President or general partner of most of the constituent entities
which became wholly-owned subsidiaries of Adelphia upon its formation in 1986,
as well as the cable television operating companies acquired by the Company
which were wholly or partially owned by members of the Rigas family. Mr. Rigas
has owned and operated cable television systems since 1952. Among his business
and community service activities, Mr. Rigas is Chairman of the Board of
Directors of Citizens Bancorp., Inc., Coudersport, Pennsylvania and a member
of the Board of Directors of the Charles Cole Memorial Hospital. He is a
director of the National Cable Television Association and a past President of
the Pennsylvania Cable Television Association. He is also a member of the
board of directors of C-SPAN and the Cable Advertising Bureau, and is a
Trustee of St. Bonaventure University. He graduated from Rensselaer
Polytechnic Institute with a B.S. in Management Engineering in 1950.
John J. Rigas is the father of Michael J. Rigas, Timothy J. Rigas and James
P. Rigas, each of whom currently serves as a director and executive officer of
the Company.
Michael J. Rigas
Age 44
Michael J. Rigas is Executive Vice President, Operations of Adelphia and is
a Vice President of its subsidiaries. Since 1981, Mr. Rigas has served as a
Senior Vice President, Vice President, general partner or other officer of the
constituent entities which became wholly-owned subsidiaries of Adelphia upon
its formation in 1986, as well as the cable television operating companies
acquired by the Company which were wholly or partially owned by members of the
Rigas family. From 1979 to 1981, he worked for Webster, Chamberlain & Bean, a
Washington, D.C. law firm. Mr. Rigas graduated from Harvard University (magna
cum laude) in 1976 and received his Juris Doctor degree from Harvard Law
School in 1979.
Timothy J. Rigas
Age 42
Timothy J. Rigas is Executive Vice President, Chief Financial Officer, Chief
Accounting Officer and Treasurer of Adelphia and its subsidiaries. Since 1979,
Mr. Rigas has served as Senior Vice President, Vice President, general partner
or other officer of the constituent entities which became wholly-owned
subsidiaries of Adelphia upon its formation in 1986, as well as the cable
television operating companies acquired by the Company which were wholly or
partially owned by members of the Rigas family. Mr. Rigas graduated from the
University of Pennsylvania, Wharton School, with a B.S. degree in Economics
(cum laude) in 1978.
James P. Rigas
Age 40
James P. Rigas is Executive Vice President, Strategic Planning of Adelphia
and is a Vice President of its subsidiaries. Mr. Rigas also serves as Chief
Executive Officer of a subsidiary, Hyperion Telecommunications, Inc. Since
February 1986, Mr. Rigas has served as a Senior Vice President, Vice President
or other officer of the constituent entities which became wholly-owned
subsidiaries of Adelphia upon its formation in 1986, as well as the cable
television operating companies acquired by the Company which were wholly or
partially owned by members of the Rigas family. Among his business activities,
Mr. Rigas is a member of the Board of Directors of
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Cable Labs. Mr. Rigas graduated from Harvard University (magna cum laude) in
1980 and received a Juris Doctor degree and an M.A. degree in Economics from
Stanford University in 1984. From June 1984 to February 1986, he was a
consultant with Bain & Co., a management consulting firm.
Daniel R. Milliard
Age 51
Daniel R. Milliard is Senior Vice President and Secretary of Adelphia and
its subsidiaries, and also serves as President of a subsidiary, Hyperion
Telecommunications, Inc. Since 1982, Mr. Milliard served as Vice President,
Secretary and/or General Counsel of Adelphia and the constituent entities
which became wholly-owned subsidiaries of Adelphia, as well as the cable
television operating companies acquired by the Company which were wholly or
partially owned by members of the Rigas family. He served as outside general
counsel to the Company's predecessors from 1979 to 1982. Mr. Milliard
graduated from American University in 1970 with a Bachelor of Science degree
in Business Administration. He received an M.A. degree in Business from
Central Missouri State University in 1971, where he was an Instructor in the
Department of Finance, School of Business and Economics, from 1971-1973, and
received a Juris Doctor degree from the University of Tulsa School of Law in
1976. He is a director of Citizens Bancorp., Inc. in Coudersport, Pennsylvania
and is a member of the Board of Directors of the Charles Cole Memorial
Hospital.
Pete J. Metros
Age 58
Pete J. Metros became a director of Adelphia on November 4, 1986. Mr. Metros
has been President and a member of the Board of Directors of Rapistan Demag
Corporation, a subsidiary of Mannesmann AG, since December 1991. From August
1987 to December 1991, he was President of Rapistan Corp., the predecessor of
Rapistan Demag Corporation, and of Truck Products Corp., both of which were
major subsidiaries of Lear Siegler Holdings Corp. From 1980 to August 1987,
Mr. Metros was President of the Steam Turbine, Motor & Generator Division of
Dresser-Rand Company. From 1964 to 1980, he held various positions at the
General Electric Company, the last of which was Manager--Manufacturing for the
Large Gas Turbine Division. Mr. Metros is also on the Board of Directors of
Hyperion Telecommunications, Inc. and Borroughs Corporation of Kalamazoo,
Michigan. Mr. Metros received a BS degree from the Georgia Institute of
Technology in 1962.
Dennis P. Coyle
Age 60
Dennis P. Coyle is General Counsel and Secretary of FPL Group, Inc. and
Florida Power & Light Company. Mr. Coyle was named General Counsel of FPL
Group, Inc. and Florida Power & Light Company in 1989, and assumed the
additional title and responsibilities of Secretary of such companies in 1991.
He graduated from Dartmouth College in 1960 and received his law degree from
Columbia University in 1965. In an investment agreement with respect to
Olympus Communications, L.P. ("Olympus," a joint venture of the Company),
John, Michael, Timothy and James Rigas have agreed to vote a sufficient number
of shares of the Company's Class A Common Stock to elect to the Board a
nominee of Telesat Cablevision, Inc., which is the Company's joint venture
partner in Olympus. Mr. Coyle is the nominee of Telesat Cablevision, Inc.,
which is an indirect, wholly-owned subsidiary of FPL Group, Inc.
AUDIT AND COMPENSATION COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee, consisting of Perry S.
Patterson and Pete J. Metros, which reviews and has authority to approve the
compensation of the key officers and employees of the Company. The
Compensation Committee met during fiscal 1998. The Board also has an Audit
Committee, comprised of Perry S. Patterson, Pete J. Metros and Timothy J.
Rigas, which is responsible for monitoring the financial reporting of the
Company on behalf of the Board and the investing public. The Audit Committee
met once to review the Company's fiscal 1998 financial condition and results
of operations. The Company does not have a
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<PAGE>
nominating committee. The Board of Directors met or acted by written consent
in lieu of meeting 12 times in fiscal 1998. Each director attended at least
75% of the meetings of the Board and the respective committees of which each
is a member.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR each of the
nominees named above for election as directors.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid by the Company for services rendered during the Company's last three
fiscal years in the period ended March 31, 1998 to the Company's Chief
Executive Officer and the four most highly compensated executive officers
whose compensation exceeded $100,000 in salary and bonus during fiscal 1998:
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION($) COMPENSATION
---------------- RESTRICTED ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS STOCK AWARDS($) COMPENSATION($)(A)(B)
- ---------------------------- ----------- --------- ------ --------------- ---------------------
<S> <C> <C> <C> <C> <C>
John J. Rigas........... 1998 1,271,939 -- -- 461,378
Chairman, President and 1997 1,235,194 -- -- 473,852
Chief Executive Officer 1996 641,963 -- -- 474,495
Michael J. Rigas........ 1998 213,011 -- -- 10,950
Executive Vice
President, 1997 206,857 -- -- 10,950
Operations 1996 205,948 -- -- 10,750
Timothy J. Rigas........ 1998 213,089 -- -- 10,950
Executive Vice
President, Chief 1997 207,618 -- -- 10,950
Financial Officer and
Treasurer 1996 205,948 -- -- 10,750
James P. Rigas.......... 1998 213,011 -- -- 11,410
Executive Vice
President, 1997 206,857 -- -- 11,410
Strategic Planning 1996 205,948 -- -- 11,201
Daniel R. Milliard (c).. 1998 216,399 13,412 27,000 5,340
Senior Vice President
and 1997 238,863 75,000 156,000 5,340
Secretary 1996 207,474 -- -- 5,250
</TABLE>
- --------
(a) Fiscal 1998, 1997 and 1996 amounts include: (i) life insurance premiums
paid during each respective fiscal year by the Company under employment
agreements with John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James
P. Rigas and Daniel R. Milliard, in premium payment amounts of $200,000,
$10,200, $10,200, $10,660 and $4,590, respectively, during fiscal 1998,
$200,000, $10,200, $10,200, $10,660 and $4,590, during fiscal 1997, and
$200,000, $10,000, $10,000, $10,451, and $4,500, respectively, during
fiscal 1996, on policies owned by the respective named executive officers;
(ii) $230,746, $250,970 and $250,829 for John J. Rigas which represents
the dollar value of the benefit of the whole-life portion of the premiums
paid by the Company during fiscal 1998, 1997 and 1996, respectively,
pursuant to a split-dollar life insurance arrangement projected on an
actuarial basis; (iii) $29,882, $22,132 and $22,916 for John J. Rigas
which represents payments by the Company during fiscal 1998, 1997 and
1996, respectively, pursuant to a split-dollar life insurance arrangement
that is attributable to term life insurance coverage; and (iv) $750 in
Company matching contributions for each executive officer under the
Company's 401(k) savings plan for each of fiscal 1998, 1997 and 1996. The
amounts shown above do not include transactions between the Company and
certain executive officers or certain entities which are privately owned
in whole or in part by the executive officers named in the table. See
"Certain Transactions."
In accordance with an agreement related to the split-dollar insurance life
arrangement referred to above, the Company will be reimbursed for all
premiums paid related to such arrangement upon the earlier of death of both
the insured and his spouse or termination of the insurance policies related
to such arrangement.
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(b) Does not include the value of certain non-cash compensation to the named
individuals which did not exceed the lesser of $50,000 or 10% of such
individuals' total annual salary shown in the table.
(c) Amounts shown for Daniel R. Milliard include amounts paid by the Company
under Mr. Milliard's employment agreement with the Company, which was
terminated March 4, 1997 and amounts paid since March 4, 1997 under Mr.
Milliard's new employment agreement with Hyperion Telecommunications, Inc.
("Hyperion"), a majority owned subsidiary of the Company of which Mr.
Milliard is President and Chief Operating Officer, as described below. Mr.
Milliard was granted, pursuant to his employment agreement, restricted
stock bonus awards under Hyperion's Plan of 338,000 and 58,500 shares of
Hyperion Class A Common Stock which had a value of approximately $156,000
and $27,000 as of March 4, 1997 and April 1, 1997, the dates of grant,
respectively. The 396,500 shares are not subject to vesting and will fully
participate in dividends and distributions.
All of the executive officers are eligible to receive bonuses of Class A
Common Stock under the Company's Restricted Stock Bonus Plan, as amended, to
be awarded or granted at the discretion of the Bonus Committee (as defined
therein), subject to certain limitations on the number of shares that may be
awarded to each executive officer under the Bonus Plan. No awards were made
under either the Restricted Stock Bonus Plan or the Stock Option Plan of 1986
during fiscal 1998.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
During fiscal 1998, each of the named executive officers had an employment
agreement with the Company which is automatically renewable each year unless
one party gives the other prior notice and which provides among other things
for compensation review by the Compensation Committee, the insurance premium
payments listed in note (a)(i) to the Summary Compensation Table above, and
benefits. In addition, under such employment agreements, upon termination of
such employment for any reason other than "for cause," each of the executive
officers will be entitled to receive severance pay equal to three months of
their salary plus the amount of insurance premiums payable under such
officer's employment agreement which, as of April 1, 1998, in the aggregate in
the case of John J. Rigas would be approximately $374,721.
As of March 4, 1997, Mr. Milliard entered into an employment agreement with
Hyperion, currently a 66% owned subsidiary of the Company, and terminated his
employment agreement with Adelphia. Mr. Milliard serves as President and Chief
Operating Officer of Hyperion. Mr. Milliard's employment agreement with
Hyperion provides for base salary, annual cash bonuses based on achievement,
stock options and stock bonuses, certain employee benefits and certain change-
in-control and other provisions, and expires on March 31, 2001 unless
terminated earlier pursuant to its terms. Mr. Milliard will continue to serve
as a director, senior vice president and secretary of Adelphia, although he
will receive no additional compensation for serving in such capacities.
During fiscal 1996 the Company began paying the annual premiums related to a
split-dollar life insurance arrangement for joint and survivor life insurance
coverage for John J. Rigas and his spouse. Upon the earlier of the death of
Mr. Rigas and the death of his spouse or the termination of the arrangement,
the Company will recover all of the premiums previously paid by the Company.
The compensation related to such arrangement is derived as described in notes
(a)(ii) and (iii) to the Summary Compensation Table above.
BOARD OF DIRECTORS COMPENSATION
Directors who are not also employees of the Company each receive
compensation from the Company for services as a director at a rate of $750
plus reimbursement of expenses for each Board and committee meeting attended.
Directors who are employees of the Company do not receive any compensation for
services as a director or as a member of Board committees.
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Issues relating to the compensation of executive officers are addressed by
the Compensation Committee of the Board of Directors (the "Compensation
Committee"), which is composed of two independent, non-employee directors,
Pete J. Metros and Perry S. Patterson.
The Compensation Committee recognizes that the compensation of executive
officers should be established at levels which are consistent with the
Company's objectives and achievements. However, no part of executive
compensation is strictly tied to statistical operating performance criteria.
Each of the executive officers of the Company, including the Chief Executive
Officer, entered into an employment agreement with the Company in July of
1986, which fixed the initial annual base salary of each executive and
provided the Compensation Committee with the ability to increase the base
salary as the Compensation Committee deems appropriate to adequately reflect
the scope and success of the Company's operations, as well as to reflect
increases in the Consumer Price Index. The agreements also provide for bonus
compensation in amounts to be determined by the Compensation Committee from
time to time, and for certain de minimis fringe benefits. The agreements are
renewable and have been renewed at the end of each year, except in the case of
Mr. Milliard, whose agreement with the Company was terminated when he entered
into a new employment agreement with Hyperion, a majority owned subsidiary of
the Company of which Mr. Milliard is President and Chief Operating Officer, in
March 1997.
With respect to compensation of executive officers other than the Chief
Executive Officer (the "Principal Executives"), the Compensation Committee
receives and accords significant weight to the input of the Chief Executive
Officer. Based on a review of public filings by other publicly-held cable
system operators and other independent compensation survey data, the
Compensation Committee believes that the annual base salaries and bonuses of
the Company's Principal Executives historically have been materially lower
than the annual base salaries and bonuses paid to corresponding Principal
Executives of most other publicly-held cable system operators and other
telecommunications firms, and remain relatively constant compared to increases
made in the annual base salaries of Principal Executives of such other
corporations over the past five years prior to fiscal 1996. Increases, if any,
in annual base salary from fiscal 1997 to fiscal 1998 were immaterial with
respect to the Principal Executives. The Compensation Committee believes that
the annual base salaries and overall compensation packages of the Principal
Executives continue to be set materially lower than those paid to
corresponding Principal Executives of other publicly-held cable system
operators and telecommunications firms.
The Compensation Committee has recognized the success of the Principal
Executives in accomplishing the Company's various strategic objectives. The
Company has continued to refinance its shorter-term debt at the level of the
operating subsidiaries with longer-term fixed rate debt and new equity
infusions at the parent Company level, and with new revolving credit
facilities and public fixed rate debt at the subsidiary and Olympus levels.
These actions extend the maturities of the Company's long-term debt and
increase the Company's overall longer-term liquidity and flexibility to obtain
financing, which in turn will assist the Company to meet the challenges of
achieving growth while facing increased competition and regulation within the
telecommunications industry. In addition, the Company has made strategic
acquisitions of existing cable systems and other telecommunications
facilities, contributing to increases in cash flow, and has continued to
develop and expand its other telecommunications product and service offerings,
such as competitive local exchange services, residential telephone services,
internet and cable data services and home security. The Company has also
continued to focus its efforts on other methods of increasing cash flow and on
providing superior customer service while realizing operating efficiencies and
cost-savings. Based upon its evaluation of these and other relevant factors,
the Compensation Committee is satisfied that the Principal Executives have
contributed positively to the Company's long-term financial performance, and
the Compensation Committee, in consultation with the Chief Executive Officer
of the Company, has set compensation under the employment agreements
accordingly.
The annual base salary of John J. Rigas, the Chief Executive Officer, is
determined by the Compensation Committee in accordance with Mr. Rigas's
employment agreement. Over the past several years, the
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Compensation Committee has recognized Mr. Rigas's success in achieving the
strategic objectives mentioned above with respect to the Principal Executives,
and has also recognized Mr. Rigas's leadership and vision in formulating
strategies for responding to the challenges of increased regulation and
increasing competition, and for positioning the Company for growth in a
regulated environment. Based on its survey of compensation data for other
companies, the Compensation Committee believes that Mr. Rigas's annual base
salary and overall compensation package is lower than the compensation
packages (including salary, bonus, options and deferred compensation) paid to
chief executive officers of many other publicly-held cable system operators
and other telecommunications firms.
To date, the Company has not granted bonuses to its Chief Executive Officer
or its Principal Executives (with the exclusion of the bonuses paid to Mr.
Milliard by Hyperion), but may in its discretion grant bonuses from time to
time as it deems appropriate. In light of the historically significant equity
interests of the Chief Executive Officer and the Principal Executives, the
Compensation Committee has generally judged it unnecessary to offer its
executive officers equity participation plans or other equity-based incentives
in order to align the interests of its executive officers with those of its
stockholders, although the Compensation Committee may consider such incentives
in the future.
COMPENSATION COMMITTEE
Pete J. Metros, Chairman
Perry S. Patterson
10
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total shareholder return on the weighted average of the Company's Class A
Common Stock ("Adelphia Class A Common Stock") during the five years ended
March 31, 1998 with the cumulative total return on the Standard & Poor's 500
Stock Index and with a selected peer group of five companies engaged in the
cable communications industry: Cablevision Systems Corporation (Class A);
Comcast Corporation (Class A); Tele-Communications, Inc. (Class A); TCA Cable
TV, Inc.; and Century Communications Corporation (Class A). The returns of
each component issuer in the foregoing peer group have been weighted according
to the respective issuer's market capitalization. The comparison assumes $100
was invested on March 31, 1993 in the Company's Class A Common Stock and in
each of the foregoing indices, and also assumes reinvestment of dividends. The
yearly points marked on the horizontal axis correspond to March 31 of each
year.
Comparison of 5 Year Cumulative Total Return*
Among Adelphia Communications Corporation,
the S&P 500 Index and a Peer Group
[GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Adelphia Communications Corporation $100 $ 72.22 $ 55.56 $ 38.89 $ 29.86 $164.58
Peer Group 100 98.59 99.41 114.86 77.71 201.81
S&P 500 Index 100 101.47 117.27 154.92 186.64 274.74
</TABLE>
11
<PAGE>
CERTAIN TRANSACTIONS
MANAGEMENT SERVICES
During the fiscal year ended March 31, 1998, the Company provided management
services for certain cable television systems not owned by the Company,
including managed partnerships ("Managed Partnerships") in which John J.
Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, Daniel R. Milliard
and Ellen K. Rigas had varied ownership interests. These services included
supervision of technical and business operations, accounting, marketing,
programming, purchasing, field engineering and other technical and
administrative nonfield services. During this period, the Managed Partnerships
paid the Company up to five percent of system revenues for such services.
Other fees were charged by the Company to the Managed Partnerships during this
period for goods and services including mark-ups on the Company's volume
purchases of equipment, pay programming and other goods and services. In
addition, the Managed Partnerships charged the Company for system and
corporate costs during this period. The net fees and expenses charged by the
Company to Managed Partnerships amounted to $2,373,000 for fiscal 1998. In
addition, the Company paid $2,485,000 to other entities owned by members of
the Rigas family, primarily for property, plant and equipment. The Company
believes that these fees were no less favorable than the fees which the
Company believes it could obtain in similar transactions with unrelated third
parties.
REAL ESTATE
During fiscal 1998, the Company leased from Dorellenic certain real estate
used in connection with the operations of the Company. The partners of
Dorellenic are John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P.
Rigas and Ellen K. Rigas. The leases were for varying terms, generally
provided for monthly rental payments equal to fair market value rentals, and
were no less favorable than the terms of leases which the Company believes it
could obtain from unrelated third parties. The Company pays all operating
expenses in connection with the leased property. Real estate and other rental
payments to Dorellenic totaled $104,000 for fiscal 1998.
LOANS TO AND FROM AFFILIATES
Certain loans to and from the Company by or to affiliates (which do not
include Olympus) as of March 31, 1998 are summarized below. Interest is
charged on such loans to affiliates at rates which ranged from 6.9% to 15.0%
for the year ended March 31, 1998.
Total interest income on loans to affiliates, excluding Olympus, aggregated
$9,869,000 for fiscal 1998. In addition, net settlement amounts under interest
rate swap agreements with the Managed Partnerships, recorded as adjustments to
interest expense during the period incurred, increased the Company's interest
expense by $128,000 for fiscal 1998.
The Company earned a $3,750,000 preferred return on its Preferred Class B
Limited Partner Interest in SHHH for fiscal 1998.
Net receivables due from the Managed Partnerships for advances made by the
Company for the construction and acquisition of cable television systems and
for working capital purposes, including accrued interest thereon, were
$26,341,000 at March 31, 1998.
During fiscal 1998 the Company made net advances of $1,075,000 to
Dorellenic. At March 31, 1998, net receivables from Dorellenic (including
accrued interest) were $25,917,000. Amounts advanced to Dorellenic were
primarily used for working capital purposes.
During fiscal 1990 and 1991, the Company loaned an aggregate $255,000 to
Daniel R. Milliard and an unaffiliated third party, pursuant to several
revolving term and term notes, for capital expenditures and working capital
purposes. As of March 31, 1998, the outstanding amount of these loans was
$152,500.
12
<PAGE>
On an end-of-quarter basis, the largest aggregate amount of net outstanding
loans and advances receivable from affiliates (directors, executive officers
and five-percent shareholders) or entities they control, including John J.
Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, Ellen K. Rigas,
Daniel R. Milliard, Dorellenic and/or the Managed Partnerships during fiscal
1998 was $52,258,000 at March 31, 1998.
CO-BORROWING AGREEMENT
On March 29, 1996, a subsidiary of the Company entered into a $200,000,000
loan agreement with a Managed Partnership and an Olympus subsidiary, as co-
borrowers, which agreement remained in effect during fiscal 1998.
BUSINESS OPPORTUNITIES
The Company's executive officers have entered into a Business Opportunity
Agreement, dated July 1, 1986 (the "Business Opportunity Agreement"), under
which they have agreed not to acquire an interest (except that such persons
may, individually for their own account, engage in regular portfolio trading
of publicly traded securities of companies in the cable television industry)
in any cable television system except: cable television systems which they or
their affiliates (excluding the Company) owned, in whole or in part, operated
or had agreed to acquire as of July 1, 1986; any expansions of such systems
within the same county or an adjacent county (except for systems which are
also contiguous to Company-owned systems); and systems which the Company
elects not to acquire under its right of first refusal described below and any
expansions of such systems within the same county or an adjacent county
(except for systems which are also contiguous to Company-owned systems).
Otherwise, the executive officers will first offer to the Company the
opportunity to acquire or invest in any cable television system or franchise
therefor or interest therein that is offered or available to them. If a
majority of the Company's Board of Directors, including a majority of the
independent directors, rejects such offer, the executive officers may acquire
or invest in all of such cable television systems or franchises therefor or
interest therein or with others on terms no more favorable to them than those
offered to the Company.
On December 3, 1997, the Company, SHHH and Highland completed a trade of
certain cable systems serving approximately 49,700 subscribers with Time
Warner Cable companies serving approximately 57,900 subscribers.
The Company's executive officers may from time to time evaluate and, subject
to the Company's rights and covenants in the Company's loan agreements and
indentures, may acquire cable television systems or interests therein for
their own accounts separately or along with the Company and/or other joint
venture parties.
Except for the limitations on the ownership of cable television systems as
described herein, the executive officers of Adelphia and their affiliates are
not subject to limitations with respect to their other business activities and
may engage in other businesses related to cable television or other
telecommunications media. The executive officers will devote as much of their
time to the business of the Company as is reasonably required to fulfill the
duties of their offices.
In the event that any executive officer (or his affiliate) decides to offer
for sale (other than to another executive officer or his or another executive
officer's family member, trust or family controlled entity) for his account,
his ownership interest in any cable television system or franchise, he or it
will (subject to the rights of third parties existing at such time) first
offer such interests to the Company. Such selling person or entity has a
unilateral option to elect to require that, if the Company accepts such offer,
up to one half of the consideration for his or its interest would consist of
shares of Class B Common Stock, which shares will be valued at the prevailing
market price of the Class A Common Stock, and the remainder would consist of
shares of Class A Common Stock and/or cash. If a majority of the Company's
independent directors rejects such offer, the executive officer (or his
affiliate) may sell such interest to third parties on terms no more favorable
to such third parties than those offered to the Company.
13
<PAGE>
REGISTRATION RIGHTS, STOCK PURCHASE AND OTHER MATTERS
Pursuant to a Registration Rights Agreement, as amended, between the Company
and the holders of Class B Common Stock, John J. Rigas has the right, subject
to certain limitations, to require the Company to register shares of the
Company's Common Stock owned by him for sale to the public and pay the
expenses (except for Mr. Rigas' counsel fees) of such registration on five
occasions selected by him (subject to certain limitations intended to prevent
undue interference with the Company's ability to distribute its securities)
during a fourteen-year period which began in December 1986. The other holders
of Class B Common Stock have the right to participate, at the option of John
J. Rigas, as selling stockholders in any such registration initiated by John
J. Rigas. The holders of Class B Common Stock also have unlimited rights to
participate as selling stockholders in any registered public offering
initiated by the Company and require the Company to pay their expenses (except
counsel fees). Such rights of participation are subject to limitation at the
discretion of the managing underwriter of such offering.
On June 22, 1997, Adelphia entered into an agreement with Highland Holdings
and Telesat Cablevision, Inc. pursuant to which Highland Holdings and Telesat
Cablevision, Inc., respectively, purchased from Adelphia on July 7, 1997,
80,000 and 20,000 shares of Series C Cumulative Convertible Preferred Stock,
with a liquidation preference of $1,000 per share, at a purchase price of $970
per share. Each share of Series C Cumulative Convertible Preferred Stock is
convertible into 117.9245 shares of Class A Common Stock of Adelphia at $8.48
per share, bears dividends of 8 1/8% of the liquidation preference per share,
and is redeemable at the option of Adelphia after three years from the date of
issuance at a premium declining to par. On July 7, 1997, Adelphia also sold
550,000 shares of Series A 13% Cumulative Exchangeable Preferred Stock to
Highland Holdings for $98.8421 per share, a price per share equal to the price
paid by the initial purchasers of 950,000 shares of the same preferred stock
after discounts and commissions. The closing of the offerings on July 7, 1997
of $150,000,000 aggregate principal amount of 10 1/2% Senior Notes due 2004 to
institutional investors and the 950,000 shares of 13% Cumulative Exchangeable
Preferred Stock were conditioned upon the completion of the sale of the Series
C Cumulative Convertible Preferred Stock. On August 8, 1997, Highland Holdings
sold the 550,000 shares of Series A 13% Cumulative Exchangeable Preferred
Stock to an unaffiliated third party. In connection with such transactions,
Adelphia entered into Registration Rights Agreements with Highland Holdings
and Telesat Cablevision, Inc. with respect to the registration of the Series C
Cumulative Convertible Preferred Stock and with Highland Holdings and the
initial purchasers with respect to the 13% Cumulative Exchangeable Preferred
Stock. The consent of both the Company and Telesat is required under the
Olympus partnership agreement for certain material transactions. As noted
earlier, Mr. Dennis Coyle is the nominee of Telesat for election to the Board
of Directors of the Company.
From time to time, the Company makes announcements regarding proposed
transactions that may involve affiliates of the Company. No assurance can be
given that these transactions will be consummated.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
directors, executive officers and persons who beneficially own more than ten
percent of a class of the Company's registered equity securities to file with
the Securities and Exchange Commission and deliver to the Company initial
reports of ownership and reports of changes in ownership of such registered
equity securities.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company or written representations that no other
reports were required, the Company's directors, executive officers and more
than ten percent stockholders filed on a timely basis all reports due under
Section 16(a) for the period from April 1, 1997 through March 31, 1998.
14
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, based on information available to the
Company as of August 19, 1998, certain information with respect to the
beneficial ownership of Class A Common Stock and Class B Common Stock by each
director or nominee for director, all executive officers and directors of
Adelphia as a group, and each person known to Adelphia to own beneficially
more than 5% of such Common Stock, based on 28,283,843 shares of Class A
Common Stock and 10,944,476 shares of Class B Common Stock outstanding,
respectively, as of such date. Unless otherwise noted, the individuals have
sole voting and investment power. The business address of each such 5%
beneficial owner named below, unless otherwise noted, is Main at Water Street,
Coudersport, Pennsylvania 16915.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF SHARES OF PERCENT OF
CLASS A CLASS A CLASS B CLASS B
COMMON COMMON COMMON COMMON
NAME AND ADDRESSES STOCK STOCK STOCK STOCK
- ------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
John J. Rigas............. (a) (b) 5,883,004(c) 53.8%
Michael J. Rigas.......... (a) (b) 1,915,970(c) 17.5%
Timothy J. Rigas.......... (a) (b) 1,915,970(c) 17.5%
James P. Rigas............ (a) (b) 1,151,634(c) 10.5%
Daniel R. Milliard........ 1,000(d) (e) -- --
Perry S. Patterson........ 2,250 (e) -- --
Pete J. Metros............ 100 (e) -- --
Dennis P. Coyle........... 1,000 (e) -- --
All executive officers and
directors
as a group (eight
persons)................. 31,037,562(a)(c) (b) 10,572,713(c) 96.6%
Syracuse Hilton Head
Holdings, L.P............ 2,398,151(f) 8.5% -- --
Main at Water Street
Coudersport, Pennsylvania
16915
Highland Holdings......... 17,990,230(g) 47.7% -- --
Main at Water Street
Coudersport, Pennsylvania
16915
Ellen K. Rigas............ (h) (i) 371,762(c) 3.4%
Main at Water Street
Coudersport, Pennsylvania
16915
Capital Research and
Management Company....... 1,784,200(j) 6.3% -- --
333 South Hope Street
Los Angeles, California
90071
Telesat Cablevision, Inc.. 3,449,889(k) 11.3% -- --
700 Universe Blvd.
Juno Beach, Florida 33408
Booth American Company.... 3,571,428 12.6% -- --
333 W. Fort Street, 12th
Floor
Detroit, MI 48226
</TABLE>
- --------
(a) The holders of Class B Common Stock are deemed to be beneficial owners of
an equal number of shares of Class A Common Stock because Class B Common
Stock is convertible into Class A Common Stock on a one-to-one basis. In
addition, the following persons own or have the power to direct the voting
of shares of Class A Common Stock in the following amounts: John J. Rigas,
431,800 shares--71,700 shares directly and 360,100 shares through Syracuse
Hilton Head Holdings, L.P. ("SHHH"); Michael J. Rigas, 193,500 shares--200
shares directly and 193,300 shares through SHHH; Timothy J. Rigas, 193,500
shares--200 shares directly and 193,300 shares through SHHH; James P.
Rigas, 193,300 shares indirectly through
15
<PAGE>
SHHH. John J. Rigas shares voting power with his spouse with respect to
106,300 of such shares held through SHHH. Each of John J. Rigas, Michael J.
Rigas, Timothy J. Rigas and James P. Rigas also share voting and
dispositive power with respect to 8,506,268 shares of Class A Common Stock
beneficially owned by Highland Communications, L.L.C., 9,433,962 shares of
Class A Common Stock deemed to be beneficially owned by Highland Preferred
Communications, L.L.C., 50,000 shares of Class A Common Stock beneficially
owned by Bucktail Broadcasting Corporation, and 1,458,151 shares of Class A
Common Stock held by SHHH. See notes (f) and (g) below.
(b) After giving effect to the conversion solely by each individual holder of
all of his Class B Common Stock into Class A Common Stock and including
all shares of Class A Common Stock, and the conversion into Class A Common
Stock of Series C Cumulative Convertible Preferred Stock ("Convertible
Preferred Stock"), currently held by such individual holder or over which
such individual holder has or shares voting or investment power as
disclosed in note (a) above or notes (f) and (g) below, the percentage of
Class A Common Stock owned by John J. Rigas, Michael J. Rigas, Timothy J.
Rigas and James P. Rigas, and by all executive officers and directors as a
group (eight persons), would be 60.4%, 56.3%, 56.3%, 55.4% and 64.3%,
respectively. Further, after giving effect to an additional 4,966,540
shares of Class A Common Stock of which John J. Rigas has the right to
direct the voting in the election of directors pursuant to the Class B
Stockholders Agreement discussed in the paragraph following this table
(and assuming the parties to such agreement converted their Class B Common
Stock into Class A Common Stock), as to all of which additional shares
John J. Rigas disclaims beneficial ownership, the percentage of Class A
Common Stock owned by John J. Rigas would be 64.5%.
(c) The amounts shown include 97,949 of the same shares which are owned of
record by Dorellenic (a partnership owned principally by the Company's
executive officers), and such shares are only included once for "All
executive officers and directors as a group." The named Rigas individuals
have shared voting and investment power with respect to these shares.
(d) Daniel R. Milliard shares voting and investment power with his spouse with
respect to these shares.
(e) Less than 1%.
(f) SHHH, Doris Holdings, L.P. ("Doris"), the general partner of SHHH, and
Eleni Acquisition, Inc., the general partner of Doris, are affiliates of
John J. Rigas, Michael J. Rigas, Timothy J. Rigas and James P. Rigas, each
of whom has shared voting and investment power with respect to the shares
held by SHHH. In addition, through irrevocable proxies, each of the above-
named individuals shares with SHHH the power to vote or direct the vote of
such number of shares of Class A Common Stock held by as is specified in
note (a) above.
(g) Highland Communications, L.L.C., Highland Preferred Communications, L.L.C.
and Bucktail Broadcasting Corporation beneficially own shares of Class A
Common Stock and are subsidiaries of Highland Holdings, L.P. ("Highland"),
which may be deemed to share voting and investment power with respect to
the shares held by its subsidiaries. See note (a) above. Highland, as
beneficially owned, is a general partnership, the general partners of
which include John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P.
Rigas and Ellen K. Rigas, each of whom is deemed to share voting and
investment power with respect to the shares held by Highland and its
subsidiaries. The amount shown includes 9,433,962 shares of Class A Common
Stock into which 80,000 shares of the Company's Convertible Preferred
Stock held by Highland Preferred Communications, L.L.C. is convertible.
(h) As a holder of Class B Common Stock, Ellen K. Rigas is deemed to be the
beneficial owner of an equal number of shares of Class A Common Stock
because Class B Common Stock is convertible into Class A Common Stock on a
one-to-one basis. In addition, Ellen K. Rigas owns 1,600 shares of Class A
Common Stock directly and shares voting and investment power with respect
to 17,990,230 shares of Class A Common Stock held by Highland. See note
(g) above. Ellen K. Rigas is the daughter of John J. Rigas.
(i) After giving effect to the conversion of all of Ellen K. Rigas' Class B
Common Stock into shares of Class A Common Stock and including all shares
of Class A Common Stock, and the conversion into Class A Common Stock of
Convertible Preferred Stock, held by Ellen K. Rigas or over which Ellen K.
Rigas has or
16
<PAGE>
shares voting or investment power as discussed in note (h) above, the
percentage of Class A Common Stock owned by Ellen K. Rigas would be 48.2%.
(j) According to a Schedule 13G and other information provided to the Company,
Capital Research and Management Company, an investment adviser, exercises
sole dispositive power with respect to 1,784,200 of such shares, and World
Fund, Inc., an investment company which is advised by Capital Research and
Management Company, has sole voting power over 1,185,800 of such shares.
(k) According to a Schedule 13D, the named entity shares voting and
dispositive power over the shares with FPL Group Capital, Inc., the parent
of Telesat Cablevision, Inc., FPL Group, Inc., the parent of FPL Group
Capital, Inc., and Cable L.P. I, Inc. and Telesat Cablevision of South
Florida, Inc., subsidiaries of Telesat Cablevision, Inc. ("Telesat").
Telesat is the Company's joint venture partner in Olympus and is also a
holder of in excess of five percent of the Company's Class A Common Stock.
The consent of both the Company and Telesat is required under the Olympus
partnership agreement for certain material transactions. Mr. Dennis P.
Coyle is the nominee of Telesat for election to the Board of Directors of
the Company. The amount shown above includes, as beneficially owned,
2,358,490 shares of Class A Common Stock into which 20,000 shares of the
Company's Convertible Preferred Stock held by Telesat. John J. Rigas,
Michael J. Rigas, Timothy J. Rigas, James P.
Rigas, Ellen K. Rigas, Daniel R. Milliard, Dorellenic and the Company are
parties to a Class B Stockholders Agreement providing that such stockholders
shall vote their shares of Common Stock for the election of directors
designated by a majority of voting power (as defined in the Agreement) of the
shares of Common Stock held by them. The Class B Stockholders Agreement also
provides that, in the absence of the consent of the holders of a majority of
the voting power of the shares of Common Stock owned by the parties to the
Agreement, (i) none of the stockholder parties may sell, assign or transfer
all or any part of their shares of Common Stock in a public sale (as defined
in the Agreement) without first offering the shares to the other parties to
the Agreement and (ii) no stockholder party may accept a bona fide offer from
a third party to purchase shares of such stockholder without first offering
the shares to the Company and then to the other parties to the Class B
Stockholders Agreement. In addition, each party has certain rights to acquire
the shares of Common Stock of the others under certain conditions. John J.
Rigas has also entered into a Stock Purchase Agreement with the other holder
of Class B Common Stock who is not a party to the Class B Stockholders
Agreement which gives John J. Rigas certain rights to acquire the shares of
Common Stock of such stockholder under certain conditions.
17
<PAGE>
PROPOSAL 3
APPROVAL OF 1998 LONG-TERM INCENTIVE COMPENSATION PLAN
On August 31, 1998, the Board of Directors adopted (and recommended for
submission to the stockholders for their approval) the Company's 1998 Long-
Term Incentive Compensation Plan (the "Plan").
PROPOSED ADELPHIA COMMUNICATIONS CORPORATION 1998 LONG-TERM INCENTIVE
COMPENSATION PLAN
In the judgment of the Board of Directors, it is important that the Company
be in a position to grant stock-based incentives to directors, officers,
employees and consultants who are responsible for the Company's continued
growth, development and future financial success, in order to secure to the
Company the advantages of incentive and the sense of proprietorship inherent
in stock ownership by such persons, to reward prior performance, to assist in
the Company's efforts to recruit, retain and motivate high quality directors
and employees, and to further align the interests of such persons with those
of stockholders.
GENERAL
The following description is intended to summarize certain provisions of the
Plan if adopted as proposed. The full text of the Plan is set forth in Exhibit
A hereto and the following description is qualified in its entirety by
reference to Exhibit A.
Administration. The Plan is to be administered by the full Board of
Directors or by a committee of the Board (the "Plan Administrator"). Subject
to the terms of the Plan, the Plan Administrator will select from eligible
employees those persons to whom awards will be made. The Plan Administrator
will determine the terms of each award including the type and number of shares
to be included in any award, the price and the period in which any option
award may be exercised, the terms and conditions which must be met in order
for any such award to vest, the type of consideration to be paid with respect
to any such award, and the other terms of the award.
Eligibility. Awards may be granted under the Plan to directors, officers and
employees of and consultants to the Company and its subsidiaries who, in the
opinion of the Plan Administrator, are mainly responsible for the continued
growth and development and future financial success of the business of the
Company. No determination has been made as to the individuals to whom awards
may be made, or the amount of awards that may be granted, to any such
individual under the Plan.
Shares Available for Issuance. The Plan provides for the issuance of
3,500,000 shares of Class A Common Stock The number of shares available under
the Plan for awards is subject to adjustment to prevent dilution or
enlargement of rights. The shares may be either authorized and unissued shares
or shares held in the treasury of the Company. Shares covered by awards
granted under the Plan that terminate or expire without being exercised,
shares returned to the Plan in payment of an exercise price of an option or
for any tax obligation and, in certain cases, shares that are awarded pursuant
to the Plan but that are forfeited, will remain available for the future
granting of awards under the Plan. No Incentive Stock Options (as defined
below) can be granted under the Plan after July 27, 2008.
Stock Options. The Plan provides for the Plan Administrator, in its
discretion, to grant options either in the form of incentive stock options
("Incentive Stock Options") qualified as such under the Internal Revenue Code
of 1986, as amended, or other options ("Nonstatutory Stock Options"). See
"Federal Income Tax Consequences" below for a summary of the differing tax
consequences of Incentive Stock Options and Nonstatutory Stock Options. The
aggregate fair market value of the shares with respect to which Incentive
Stock Options are first exercisable by the optionee in any calendar year may
not exceed $100,000 determined at the time of the grant. Options designated as
Incentive Stock Options in excess of such limitation automatically are
reclassified as Nonstatutory Stock Options, as described in the Plan.
18
<PAGE>
The price at which each share covered by an option granted under the Plan
may be purchased will be determined in each case by the Plan Administrator but
may not be less than the fair market value at the time the option is granted.
Fair market value is defined to mean (i) the closing sale price of the Class A
Common Stock on the day before the date in question (or if no sales were
reported on such day, on the next preceding day on which sales were reported)
if the Class A Common Stock is listed for trading on a national securities
exchange, the Nasdaq National Market or other last reported sale system; (ii)
if last reported sales information is not available for the Class A Common
Stock, the closing bid price on the day before the date in question; or (iii)
if the Common Stock is not listed for trading or quoted in a quotations
system, a price determined by the Plan Administrator. On September 3, 1998,
such fair market value for the Class A Common Stock was $36.50 per share.
The option price of each share purchased pursuant to an option shall be paid
in full at the time of each exercise of the option (i) in cash, (ii) through a
cashless exercise procedure in which a broker sells sufficient shares to
deliver the exercise price to the Company or (iii) in the discretion of the
Plan Administrator, (a) by delivering shares of Capital Stock (held by the
participant for at least six (6) months) having an aggregate fair market value
equal to the option price of the shares being purchased; (b) through an
election to withhold shares of Capital Stock otherwise issuable having an
aggregate fair market value equal to the option price of the shares being
purchased; or (c) through any combination of the foregoing.
Stock Appreciation Rights. The Plan Administrator may, from time to time,
subject to the provisions of the Plan, grant stock appreciation rights
("SARs") to eligible participants. Such SARs may be granted (i) alone, (ii)
simultaneously with the grant of an option (either an Incentive Stock Option
or Nonstatutory Stock Option) and in conjunction therewith or in the
alternative thereto or (iii) subsequent to the grant of a Nonstatutory Stock
Option and in conjunction therewith or in the alternative thereto.
An SAR shall entitle the holder upon exercise thereof to receive from the
Company, upon request, (i) a number of shares of Common Stock, (ii) cash, or
(iii) any combination of shares of Common Stock and cash, as specified in the
request (but subject to the approval of the Plan Administrator in its sole
discretion as to the making of any cash payment), having an aggregate fair
market value equal to the product of (i) the excess of the fair market value,
on the day of such request, of one share of Common Stock over the exercise
price per share specified in such SAR or its related option, multiplied by
(ii) the number of shares of Common Stock for which such SAR was exercised.
The exercise price of an SAR granted alone shall be determined by the Plan
Administrator. An SAR granted simultaneously with or subsequent to the grant
of an option and in conjunction therewith or in the alternative thereto will
have the same exercise price as the related option, will be transferable only
upon the same terms and conditions as the related option, and will be
exercisable only to the same extent as the related Option; provided, however,
that an SAR, by its terms, will be exercisable only when the fair market value
of the Common Stock subject to the SAR and related option exceeds the exercise
price thereof.
Upon exercise of an SAR granted simultaneously with or subsequent to an
option and in the alternative thereto, the number of shares of Common Stock
for which the related option will be exercisable shall be reduced by the
number of shares of Common Stock for which the SAR shall have been exercised.
The number of shares of Common Stock for which an SAR shall be exercisable
will be reduced upon any exercise of a related option by the number of shares
of Common Stock for which such option will have been exercised.
Any SAR shall be exercisable upon such additional terms and conditions as
may be prescribed by the Plan Administrator.
An option or SAR may be exercised in whole at any time or in part from time
to time within such period as may be determined by the Plan Administrator
provided that the period for an Incentive Stock Option may not exceed ten
years from the granting of the option. If the grantee ceases to be employed by
the Company or any of its subsidiaries, the option or SAR may be exercised
only within three months after the termination of
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employment and within the period, or, if such termination was due to
disability or retirement, within one year after termination of employment and
within the period, unless such termination of employment shall be for cause or
the person becomes affiliated with a competing business, in which case the
option shall terminate. In the discretion of the Plan Administrator, the
period may be extended for up to three years from the date of termination
regardless of the original period. Further, the option or SAR may be exercised
only within one year after the grantee's death and within the period and only
by the optionee's personal representatives or persons entitled thereto under
the grantee's will or the laws of the descent and distribution.
Share Awards; Phantom Stock. The Plan Administrator may from time to time
award shares or stock equivalent units with a value equal to the Common Stock
("Phantom Stock") to participants pursuant to share award agreements which may
contain such terms and conditions as the Plan Administrator shall determine.
The Plan Administrator may establish such vesting period, schedule and
criteria as it deems appropriate for each such award, such as vesting in
installments upon the achievement by the Company or grantee of specified
periods of continued employment, specific performance criteria or other goals.
If the grantee or the Company, as the case may be, fails to achieve the
designated goals or the grantee ceases to be employed by the Company for any
reason prior to the expiration of the vesting period, the grantee will forfeit
all non-vested shares in the award.
Allotment of Shares. Not more than 25% of the aggregate number of shares
subject to the Plan may be awarded in the aggregate to any one individual
excluding shares covered by an option previously granted to the individual to
the extent it has expired or terminated without being exercised and excluding
shares to the extent the award has terminated without such shares having
vested.
Change in Control. The Plan provides that in the event of a change in
control of the Company (as defined in the Plan to exclude transactions
involving the Rigas Family or any affiliate of the Rigas Family), (a) all
options and SARs that become exercisable in installments shall become
immediately exercisable in full, (b) an optionee who ceases to be employed by
the Company or a subsidiary within one year following the change in control
may in all events exercise his or her options and SARs for a period of three
months after the termination of employment and within the option period, and
(c) all awards of shares and Phantom Stock which have not previously vested
shall become vested.
Tax Withholding. When shares are issued under the Plan, or if an optionee
makes a disqualifying disposition of shares acquired upon exercise of an
Incentive Stock Option, the Company has the right to require the optionee to
remit to the Company an amount sufficient to satisfy required income tax
withholding. In the discretion of the Plan Administrator, the grantee may
elect to satisfy this withholding obligation by requesting that the Company
withhold shares of stock otherwise issuable to him or her or by delivering to
the Company previously owned shares. All such elections will be subject to the
approval of the Plan Administrator.
Amendment or Discontinuance. The Board of Directors may alter, amend,
suspend or discontinue the Plan, provided that no such action may deprive any
person without such person's consent of any rights granted under the plan.
Federal Income Tax Consequences. In general, under the Code as presently in
effect, a participant will not be deemed to receive any income for federal
income tax purposes at the time an option or SAR is granted or a stock award,
subject to restrictions, or Phantom Stock award is made, nor will the Company
be entitled to a tax deduction at that time. When any part of an option or SAR
is exercised, when restrictions on restricted stock or Phantom Stock lapse or
when an unrestricted stock award is made, the federal income tax consequences
may be summarized as follows:
1. In the case of an exercise of a non-qualified stock option or a SAR, the
participant will recognize ordinary income in an amount equal to the
difference between the option price and the fair market value of the
Common Stock on the exercise date.
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2. In the case of performance share awards or restricted stock awards, the
immediate federal income tax effect for the recipient will depend on the
nature of the restrictions. Generally, the value of the Common Stock
will not be taxable to the recipient as ordinary income until the year
in which his or her interest in the stock is freely transferable or is
no longer subject to a substantial risk of forfeiture. However, the
recipient may elect to recognize income when the stock is received,
rather than when his or her interest in the stock is freely transferable
or is no longer subject to a substantial risk of forfeiture. If the
recipient makes this election, the amount taxed to the recipient as
ordinary income is determined as of the date of receipt of the
restricted stock. Unrestricted stock awards will generally be taxable as
ordinary income to the recipient upon receipt.
3. In the case of an ISO, there is no tax liability at the time of
exercise. However, the excess of the Fair Market Value of the Common
Stock on the exercise date over the option price is included in the
participant's income for purposes of the alternative minimum tax. If no
disposition of the ISO stock is made before the later of one year from
the date of exercise or two years from the date the ISO is granted, the
participant will realize a long-term capital gain or loss upon a sale of
the stock; if the stock is not held for the required period, ordinary
income tax treatment will generally apply to the amount of any gain at
sale or exercise, whichever is less, and the balance of any gain or loss
will be treated as capital gain or loss (long-term or short-term,
depending on whether the shares have been held for more than one year).
4. Upon the exercise of a non-qualified stock option or SAR, the award of
unrestricted stock, or the recognition of income on restricted stock,
the Company will generally be allowed an income tax deduction equal to
the ordinary income recognized by the employee. The Company does not
receive an income tax deduction as a result of the exercise of an ISO,
provided that the ISO stock is held for the required period as described
above. If the ISO is not held for such required period and ordinary
income tax treatment is applied to the amount of any gain at sale or
exercise by the recipient, the Company will generally receive an income
tax deduction for a corresponding amount. When a cash payment is made
pursuant to the award, the recipient will recognize the amount of the
cash payment as ordinary income, and the Company will generally be
entitled to a deduction in the same amount.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON AWARD RECIPIENTS AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE
OF AWARDS UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE MAY RESIDE.
Because executive officers (who may also be members of the Board) are
eligible to receive awards under the Plan, each of them has a personal
interest in the approval of these amendments.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company recommends a vote FOR the approval of
the Plan.
FORM 10-K ANNUAL REPORT TO THE SECURITIES
AND EXCHANGE COMMISSION
A COPY OF THE ANNUAL REPORT ON FORM 10-K (EXCLUDING EXHIBITS) OF THE COMPANY
FOR THE FISCAL YEAR ENDED MARCH 31, 1998, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WILL BE FURNISHED FREE OF CHARGE, UPON WRITTEN REQUEST,
TO STOCKHOLDERS WHO HAVE NOT PREVIOUSLY RECEIVED A COPY FROM THE COMPANY.
WRITTEN REQUESTS MAY BE DIRECTED TO THE SECRETARY, ADELPHIA COMMUNICATIONS
CORPORATION, MAIN AT WATER STREET, COUDERSPORT, PENNSYLVANIA 16915.
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OTHER MATTERS
The Company knows of no other matters to be presented for action at the
meeting. If any other matters should properly come before the meeting,
however, it is intended that votes will be cast pursuant to the proxy in
respect thereto in accordance with the best judgment of the persons acting as
proxies.
The Company will pay the expense in connection with the printing, assembling
and mailing to the holders of capital stock of the Company the notice of
meeting, this proxy statement and the accompanying form of proxy. In addition
to the use of the mails, proxies may be solicited by directors, officers or
regular employees of the Company personally or by telephone or telegraph. The
Company may request the persons holding stock in their names, or in the names
of their nominees, to send proxy material to and obtain proxies from their
principals, and will reimburse such persons for their expense in so doing.
The Company's certified public accountants during fiscal 1998 were, and for
fiscal 1999 will be, Deloitte & Touche LLP. Such accountants are not expected
to attend the Annual Meeting.
STOCKHOLDER PROPOSALS
Stockholders who intend to submit a proposal at the Annual Meeting of the
stockholders of the Company expected to be held in October 1999 must submit
such proposal to the attention of the Secretary of the Company at the address
of its executive offices no later than May 1, 1999.
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EXHIBIT A
ADELPHIA COMMUNICATIONS CORPORATION
1998 LONG-TERM INCENTIVE COMPENSATION PLAN
SECTION 1. ESTABLISHMENT. There is hereby established the Adelphia
Communications Corporation 1998 Long-Term Incentive Compensation Plan
(hereinafter called the "Plan") pursuant to which directors, officers,
employees and consultants of Adelphia Communications Corporation ("Adelphia"),
or any parent or subsidiary of Adelphia (hereinafter collectively called the
"Company") who are mainly responsible for its continued growth and development
and future financial success may be granted options to purchase shares of
Common Stock of Adelphia (as defined in Section 5 below), stock appreciation
rights ("SARs") and/or may receive awards of shares of Common Stock or stock
equivalent units in order to secure to the Company the advantage of the
incentive and sense of proprietorship inherent in stock ownership by such
persons, to reward such persons for services previously performed and/or as an
added inducement to continue to provide service to the Company.
SECTION 2. DURATION. Incentive Stock Options (as hereinafter defined) under
this Plan may be granted only within the ten-year period beginning on the
Effective Date (as defined in Section 20 hereof). Any Incentive Stock Options
outstanding after the expiration of such ten-year period may be exercised
within the periods prescribed by Section 8.
SECTION 3. ADMINISTRATION. The Plan shall be administered by the full Board
of Directors of Adelphia or one or more committees of such Board of Directors
(the "Plan Administrator"). Subject to the provisions of the Plan, the Plan
Administrator is authorized to construe the Plan and any award under the Plan,
to amend awards and to adopt such rules and regulations and to take such
action in the administration of the Plan as it shall deem proper. The
determination of the Plan Administrator or any and all such matters shall be
conclusive.
SECTION 4. ELIGIBILITY. Directors, officers, employees and consultants of
the Company who, in the opinion of the Plan Administrator, are mainly
responsible for the continued growth and development and future financial
success of the business shall be eligible to participate in the Plan. The Plan
Administrator shall, in its sole discretion, from time to time, select from
such eligible persons those to whom options or SARs shall be granted or shares
or stock equivalent units awarded and determine the number of shares to be
included in such option, SAR or award. No participant shall have any right to
receive an option, SAR, share award or stock equivalent unit except as the
Plan Administrator in its discretion shall determine. The terms "subsidiary"
and "parent" where used in the Plan or in any stock option agreement entered
into under the Plan means a "subsidiary corporation" and a "parent
corporation," respectively, as such terms are defined in Section 424 of the
Internal Revenue Code of 1986, as it may be amended from time to time (the
"Code").
SECTION 5. SHARES SUBJECT TO THE PLAN. The initial number of shares of stock
which may be issued pursuant to the Plan shall be 3,500,000 shares of the
Class A Common Stock, par value $.01 per share, of Adelphia (the "Common
Stock"); provided, however, that: (a) the number of shares of Common Stock to
be issued pursuant to the Plan is subject to adjustment as provided in Section
13; and (b) to the extent that (i) options or SARs granted under the Plan
shall expire or terminate without being exercised, (ii) shares are returned to
the Plan in payment of the exercise price of an option or for any tax
obligation as permitted by this Plan and any relevant option agreement, or
(iii) shares or stock equivalent units awarded under the Plan shall be
forfeited, such shares shall remain available or again become eligible for
purposes of the Plan. To the extent that an SAR is granted in conjunction with
an option, the shares covered by such SAR and option shall be counted only
once. Common Stock to be issued under the Plan may be either authorized and
unissued shares or shares held in treasury by Adelphia.
SECTION 6. TYPES OF OPTIONS. Options granted pursuant to the Plan may be
either options which are incentive stock options under Section 422 of the Code
(hereinafter called "Incentive Stock Options") or other options (hereinafter
called "Nonstatutory Stock Options"). Incentive Stock Options and Nonstatutory
Stock
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Options shall be granted separately hereunder. The Plan Administrator, in its
discretion, shall determine whether and to what extent options shall be
granted under the Plan and whether such options granted shall be Incentive
Stock Options or Nonstatutory Stock Options. The provisions of the Plan and
any stock option agreement pursuant to which Incentive Stock Options shall be
issued shall be construed in a manner consistent with Section 422 of the Code
(or any successor provision) and rules and regulations promulgated or proposed
thereunder.
SECTION 7. STOCK APPRECIATION RIGHTS. The Plan Administrator may, from time
to time, subject to the provisions of the Plan, grant SARs to eligible
participants. Such SARs may be granted (i) alone, (ii) simultaneously with the
grant of an option (either an Incentive Stock Option or Nonstatutory Stock
Option) and in conjunction therewith or in the alternative thereto or (iii)
subsequent to the grant of a Nonstatutory Stock Option and in conjunction
therewith or in the alternative thereto.
(a) An SAR shall entitle the holder upon exercise thereof to receive from
Adelphia, upon a written request filed with the Secretary of Adelphia at
its principal offices (the "Request"), (i) a number of shares of Common
Stock (with or without restrictions as to substantial risk of forfeiture
and transferability, as determined by the Plan Administrator in its sole
discretion), (ii) an amount of cash, or (iii) any combination of shares of
Common Stock and cash, as specified in the Request (but subject to the
approval of the Plan Administrator in its sole discretion, at any time up
to and including the time of payment, as to the making of any cash
payment), having an aggregate fair market value equal to the product of (i)
the excess of the fair market value, on the day of such Request, of one
share of Common Stock over the exercise price per share specified in such
SAR or its related option, multiplied by (ii) the number of shares of
Common Stock for which such SAR shall be exercised.
(b) The exercise price of an SAR granted alone shall be determined by the
Plan Administrator. An SAR granted simultaneously with or subsequent to the
grant of an option and in conjunction therewith or in the alternative
thereto shall have the same exercise price as the related option, shall be
transferable only upon the same terms and conditions as the related option,
and shall be exercisable only to the same extent as the related Option;
provided, however, that an SAR, by its terms, shall be exercisable only
when the fair market value of the Common Stock subject to the SAR and
related option exceeds the exercise price thereof.
(c) Upon exercise of an SAR granted simultaneously with or subsequent to
an option and in the alternative thereto, the number of shares of Common
Stock for which the related option shall be exercisable shall be reduced by
the number of shares of Common Stock for which the SAR shall have been
exercised. The number of shares of Common Stock for which an SAR shall be
exercisable shall be reduced upon any exercise of a related option by the
number of shares of Common Stock for which such option shall have been
exercised.
(d) Any SAR shall be exercisable upon such additional terms and
conditions as may be prescribed by the Plan Administrator.
(e) Any election by a holder of an SAR to receive cash in full or partial
settlement of such SAR, and any exercise of such SAR for cash, may be made
only by a Request filed with the Secretary. Within thirty (30) days of the
receipt by the Secretary of a Request to receive cash in full or partial
settlement of an SAR or to exercise such SAR for cash, the Plan
Administrator shall, in its sole discretion, either consent to or
disapprove, in whole or in part, such Request. A Request to receive cash in
full or partial settlement of an SAR may provide that, in the event the
Plan Administrator shall disapprove such Request, such Request shall be
deemed to be an exercise of such SAR for shares of Common Stock.
(f) If the Committee disapproves in whole or in part any election by a
holder to receive cash in full or partial settlement of an SAR or to
exercise such SAR for cash, such disapproval shall not affect such holder's
right to exercise such SAR at a later date, to the extent that such SAR
shall be otherwise exercisable, or to elect the form of payment at a later
date, provided that an election to receive cash
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upon such later exercise shall be subject to the approval of the Plan
Administrator. Additionally, such disapproval shall not affect such
holder's right to exercise any related option or options granted to such
holder under the Plan.
SECTION 8. TERMS OF OPTIONS AND SARS. Each option or SAR granted under the
Plan shall be evidenced by an agreement between Adelphia and the person to
whom such option or SAR is granted and shall be subject to the following terms
and conditions:
(a) Subject to adjustment as provided in Section 13 of this Plan, the
price at which each share covered by an option may be purchased shall be
determined in each case by the Plan Administrator; provided, however, that
such price shall not, in the case of an Incentive Stock Option, be less
than the fair market value thereof at the time the option is granted. If an
optionee owns (or is deemed to own under applicable provisions of the Code
and rules and regulations promulgated thereunder) more than ten percent
(10%) of the combined voting power of all classes of the stock of the
Company and an option granted to such optionee is intended to qualify as an
Incentive Stock Option, the option price shall be no less than 110% of the
fair market value of the Common Stock covered by the option on the date the
option is granted.
(b) The aggregate fair market value of shares of Common Stock with
respect to which Incentive Stock Options are first exercisable by the
optionee in any calendar year (under all plans of the Company) shall not
exceed the limitations, if any, imposed by Section 422(d) of the Code (or
any successor provision). If any option designated as an Incentive Stock
Option, either alone or in conjunction with any other option or options,
exceeds the foregoing limitation, the portion of such option in excess of
such limitation shall automatically be reclassified (in whole share
increments and without fractional share portions) as a Nonstatutory Stock
Option, with later granted options being so reclassified first.
(c) Neither an option nor an SAR shall be transferable by the participant
otherwise than by will or by the laws of descent and distribution or
pursuant to a domestic relations order. After the death of the participant,
the option or SAR may be transferred to Adelphia upon such terms and
conditions, if any, as the Plan Administrator and the personal
representative or other person entitled to the option or SAR may agree
within the period specified in subsection 8(d)(iii) hereof.
(d) An option or SAR may be exercised in whole at any time, or in part
from time to time, within such period or periods (not to exceed ten years
from the granting of the option in the case of an Incentive Stock Option)
as may be determined by the Plan Administrator and set forth in the
agreement (such period or periods being hereinafter referred to as the
"option period"), provided that, unless the agreement provides otherwise:
(i) If a participant who is an employee of the Company shall cease to
be employed by the Company, all options and SARs may be exercised only
within three months after the termination of employment and within the
option period or, if such termination was due to disability or
retirement (as hereinafter defined), within one year after termination
of employment and within the option period, unless such termination of
employment shall be for Cause (as defined herein) or the participant
becomes an officer or director of, a consultant to or employed by a
Competing Business (as defined herein), in which case all options and
SARs shall forthwith terminate; provided, however, that the Plan
Administrator may in its sole discretion extend the option period of any
option or SAR for up to three years from the date of termination of
employment regardless of the original option period. For purposes of the
Plan, retirement shall mean the termination of employment with the
Company, other than for Cause, at any time after the age 65.
For purposes of this Plan, the term "Cause" shall mean (a) with
respect to an individual who is party to a written agreement with the
Company which contains a definition of "cause" or "for cause" or words
of similar import for purposes of termination of employment thereunder
by the Company,
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"cause" or "for cause" as in defined in such agreement; (b) in all
other cases (I) the willful commission by an employee of a criminal or
other act that causes substantial economic damage to the Company or
substantial injury to the business reputation of the Company; (II) the
commission of an act of fraud in the performance of such person's
duties to or on behalf of the Company; (III) the continuing willful
failure of a person to perform the duties of such person to the Company
(other than a failure to perform duties resulting from such person's
incapacity due to illness) after written notice thereof (specifying the
particulars thereof in reasonable detail) and a reasonable opportunity
to be heard and cure such failure are given to the person by the Board
of Directors of Adelphia or the Plan Administrator. For purposes of the
Plan, no act, or failure to act, on the part of any person shall be
considered "willful" unless done or omitted to be done by the person in
good faith and without reasonable belief that the person's action or
omission was in the best interest of the Company.
For purposes of this Plan, the term "Competing Business" shall mean:
any person, corporation or other entity engaged in the business of (a)
providing telecommunications alternate access network systems or (b)
selling or attempting to sell any product or service which is the same
as or similar to products or services sold by the Company within the
last three (3) years prior to termination of person's employment,
consultant relationship or directorship, as the case may be, hereunder.
(ii) If a participant who is a director of the Company shall cease to
serve as a director of the Company, the option or SAR may be exercised
only within three months after the cessation of service and within the
option period or, if such cessation was due to disability, within one
year after cessation of service and within the option period; unless
such cessation of service as a director was the result of removal for
Cause or the participant becomes an officer or director of, a
consultant to or employed by a Competing Business, in which case any
options and SARs shall forthwith terminate; provided, however, that the
Plan Administrator may in its sole discretion extend the option period
of any option or SAR for up to three years from the date of cessation
of service regardless of the original option period;
(iii) If the optionee shall die, the option or SAR may be exercised
only within one year after the participant's death and within the
option period and only by the participant's personal representative or
persons entitled thereto under the participant's will or the laws of
descent and distribution;
(iv) The option or SAR may not be exercised for more shares (subject
to adjustment as provided in Section 13) after the termination of the
participant's employment, cessation of service as a director or the
participant's death, as the case may be, than the participant was
entitled to purchase thereunder at the time of the termination of the
participant's employment or the participant's death; and
(v) If a participant owns (or is deemed to own under applicable
provisions of the Code and rules and regulations promulgated
thereunder) more than 10% of the combined voting power of all classes
of stock of the Company (or any parent or subsidiary corporation of the
Company) and an option granted to such participant is intended to
qualify as an Incentive Stock Option, the option by its terms may not
be exercisable after the expiration of five years from the date such
option is granted.
(e) The option exercise price of each share purchased pursuant to an
option shall be paid in full at the time of each exercise (the "Payment
Date") of the option (i) in cash; (ii) by delivering to Adelphia a notice
of exercise with an irrevocable direction to a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, to sell a sufficient
portion of the shares and deliver the sale proceeds directly to Adelphia to
pay the exercise price; (iii) in the discretion of the Plan Administrator,
through the delivery to Adelphia of previously-owned shares of Common Stock
having an aggregate fair market value equal to the option price of the
shares being purchased pursuant to the exercise of the option; provided,
however, that shares of Common Stock delivered in payment of the option
price must have been held by the participant for at least six (6) months in
order to be utilized to pay the option price; (iv) through an election
pursuant to Section 9 hereof to have shares of Common Stock otherwise
issuable to the optionee withheld to pay the exercise
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price of such option; or (v) in the discretion of the Plan Administrator,
through any combination of the payment procedures set forth in subsections
(i)-(iv) of this Section 8(e).
(f) The Plan Administrator, in its discretion, may authorize "stock
retention options" which provide, upon the exercise of an option previously
granted under this Plan (a "prior option"), using previously owned shares,
for the automatic issuance of a new option under this Plan with an exercise
price equal to the current fair market value and for up to the number of
shares equal to the number of previously-owned shares delivered in payment
of the exercise price of the prior option. Such stock retention option
shall have the same option period as the prior option.
(g) Nothing contained in the Plan nor in any stock option, SAR, share
award or stock equivalent agreement shall confer upon any participant any
right with respect to the continuance of employment by the Company nor
interfere in any way with the right of the Company to terminate his
employment or change his compensation at any time.
(h) The Plan Administrator may include such other terms and conditions
not inconsistent with the foregoing as the Plan Administrator shall
approve. Without limiting the generality of the foregoing sentence, the
Plan Administrator shall be authorized to determine that options or SARs
shall be exercisable in one or more installments during the term of the
option and the right to exercise may be cumulative as determined by the
Plan Administrator.
SECTION 9. SHARE WITHHOLDING.
(a) An optionee may, in the sole discretion of the Plan Administrator,
pay the exercise price of an option, in whole or in part, by requesting
that Adelphia withhold shares of stock otherwise issuable to the optionee
having a fair market value equal to the portion of the exercise price of
the option being paid pursuant to such election (a "Share Withholding
Election").
(b) A Share Withholding Election must be in writing and must be delivered
to Adelphia no later than with the delivery of the notice of exercise of
the option.
SECTION 10. SHARE AWARDS; PHANTOM STOCK.
(a) The Plan Administrator may, from time to time, subject to the
provisions of the Plan, award shares of Common Stock or stock equivalent
units with a value equal to the Common Stock ("Phantom Stock") to
participants.
(b) The award of shares or Phantom Stock shall be evidenced by an
agreement executed by Adelphia and the grantee setting forth the number of
shares of Common Stock or Phantom Stock awarded, the vesting period, the
vesting schedule or criteria and such other terms and conditions as the
Plan Administrator may determine.
(c) The grantee of a share award shall receive shares of Common Stock
without payment to Adelphia immediately upon grant; provided, however, that
the grantee's ownership of such shares shall be subject to the following
terms and conditions:
(i) Any award of shares to a participant shall vest in installments
upon achievement by the Company or grantee of specified performance
goals as determined by the Plan Administrator and as provided in the
share award agreement;
(ii) If the grantee or the Company, as the case may be, fails to
achieve the designated goals or the grantee ceases to be employed by
the Company for any reason (including death, permanent disability or
retirement) prior to the expiration of the vesting period, the grantee
shall forfeit all shares so awarded which have not then vested;
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(iii) A grantee who has received a share award pursuant to the Plan
shall have all rights of a stockholder in such Common Stock, including
but not limited to the right to vote and receive dividends with respect
thereto; provided, however, that shares awarded pursuant to the Plan
which have not vested may not be sold or otherwise transferred by the
grantee and stock certificates representing such shares shall bear a
restrictive legend to that effect; and
(iv) Adelphia may, in the discretion of the Plan Administrator,
retain possession of the stock certificate for the shares awarded under
any share award until all restrictions on such ownership have vested or
lapsed.
(d) A vested Phantom Stock award shall entitle the holder thereof to
receive from Adelphia the consideration provided for in the agreement with
respect to the Phantom Stock award, including (i) cash in an amount equal
to the number of units of Phantom Stock covered by the award multiplied by
the fair market value of the Common Stock on the date of exercise of the
Phantom Stock or (ii) shares of Common Stock. A holder of Phantom Stock
shall have no rights of a stockholder.
SECTION 11. LIMITATION ON OPTIONS AND AWARDS. The aggregate number of
shares covered by any options, SARs, share awards or Phantom Stock awards
granted to one person shall not exceed twenty-five percent (25%) of the
aggregate number of shares subject to the Plan as provided in Section 5
hereof.
SECTION 12. TAX WITHHOLDING.
(a) Whenever shares are to be issued or cash is to be paid under the
Plan, Adelphia shall have the right to require the participant to remit to
Adelphia an amount sufficient to satisfy federal, state and local tax
withholding requirements prior to the delivery of any certificate for
shares or any proceeds; provided, however, that in the case of a
participant who receives an award of shares under the Plan which is not
fully vested, the participant shall remit such amount on the first business
day following the Tax Date. The "Tax Date" for purposes of this Section 12
shall be the date on which the amount of tax to be withheld is determined.
If a participant makes a disposition of shares acquired upon the exercise
of an Incentive Stock Option within either two years after the option was
granted or one year after the receipt of stock by the participant, the
participant shall promptly notify Adelphia and Adelphia shall have the
right to require the participant to pay to Adelphia an amount sufficient to
satisfy federal, state and local tax withholding requirements.
(b) A participant who is obligated to pay Adelphia an amount required to
be withheld under applicable tax withholding requirements may pay such
amount (i) in cash; (ii) in the discretion of the Plan Administrator,
through the delivery to Adelphia of previously-owned shares of Common Stock
having an aggregate fair market value on the Tax Date equal to the tax
obligation provided that the previously owned shares delivered in
satisfaction of the withholding obligations must have been held by the
participant for at least six (6) months; or (iii) in the discretion of the
Plan Administrator, through a combination of the procedures set forth in
subsections (i) an (ii) of this Section 12(b).
(c) A participant who is obligated to pay to Adelphia an amount required
to be withheld under applicable tax withholding requirements in connection
with either the exercise of a Nonstatutory Stock Option or a share award
under the Plan may, in the discretion of the Plan Administrator, elect to
satisfy this withholding obligation, in whole or in part, by requesting
that Adelphia withhold shares of stock otherwise issuable to the
participant having a fair market value on the Tax Date equal to the amount
of the tax required to be withheld; provided, however, that shares may be
withheld by Adelphia only if such withheld shares have vested. Any
fractional amount shall be paid to Adelphia by the optionee in cash or
shall be withheld from the participant's next regular paycheck.
(d) An election by a participant to have shares of stock withheld to
satisfy federal, state and local tax withholding requirements pursuant to
Section 12(c) (a "Tax Withholding Election") must be in writing and
delivered to Adelphia prior to the Tax Date.
A-6
<PAGE>
SECTION 13. ADJUSTMENT OF NUMBER AND PRICE OF SHARES.
The following shall be subject to the provisions of Section 5(a) of this
Plan.
(a) In the event that a dividend shall be declared upon the Common Stock
of Adelphia payable in shares of said stock, the number of shares of Common
Stock covered by each outstanding option and the number of shares which may
be issued pursuant to the Plan but are not yet covered by outstanding
options shall be adjusted by adding thereto the number of shares of Common
Stock which would have been distributable thereon if such shares had been
outstanding on the date fixed for determining the stockholders entitled to
receive such stock dividend.
(b) In the event that the outstanding shares of Common Stock of Adelphia
shall be changed into or exchanged for a different number or kind of shares
of stock or other securities of Adelphia or of another corporation, whether
through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, then there shall be substituted for the
shares of Common Stock covered by each outstanding option, and the shares
which may be issued pursuant to the Plan but are not yet covered by
outstanding options, the number and kind of shares of stock or other
securities which would have been substituted therefor if such shares had
been outstanding on the date fixed for determining the stockholders
entitled to receive such changed or substituted stock or other securities.
(c) In the event there shall be any change, other than specified in this
Section 13, in the number or kind of outstanding shares of Common Stock of
Adelphia or of any stock or other securities into which such Common Stock
shall be changed or for which it shall have been exchanged, then, if the
Board of Directors shall determine, in its discretion, that such change
equitably requires an adjustment in the number or kind of shares covered by
outstanding options and the shares which may be issued pursuant to the Plan
but are not yet covered by outstanding options, such adjustment shall be
made by the Board of Directors and shall be effective and binding for all
purposes of the Plan and on each outstanding stock option agreement.
(d) In the event that, by reason of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation, the Board of Directors shall authorize the issuance or
assumption of a stock option or stock options in a transaction to which
Section 424(a) of the Code applies, then, notwithstanding any other
provision of the Plan, the Plan Administrator may grant an option or
options upon such terms and conditions as it may deem appropriate for the
purpose of assumption of the old option, or substitution of a new option
for the old option, in conformity with the provisions of Code Section
424(a) and the rules and regulations thereunder, as they may be amended
from time to time.
(e) No adjustment or substitution provided for in this Section 13 shall
require Adelphia to issue or to sell a fractional share under any stock
option agreement or share award agreement and the total adjustment or
substitution with respect to each stock option and share award agreement
shall be limited accordingly.
(f) In the case of any adjustment or substitution provided for in this
Section 13, the option price per share in each stock option agreement shall
be equitably adjusted by the Board of Directors to reflect the greater or
lesser number of shares of stock or other securities into which the stock
covered by the option may have been changed or which may have been
substituted therefor.
SECTION 14. FAIR MARKET VALUE. In any determination of fair market value of
the Common Stock hereunder, fair market value, as to any date, shall mean (i)
the closing sale price of the Common Stock on the day before the date in
question (or if no sales were reported on such day, on the next preceding day
on which sales were reported) if the Common Stock is listed for trading on a
national securities exchange, the Nasdaq National Market or other last
reported sale system; (ii) if last reported sales information is not available
for the Common Stock, the closing bid price on the day before the date in
question; or (iii) if the Common Stock is not listed for trading or quoted in
a quotations system, a price determined by the Plan Administrator. In all
cases, the determination by the Plan Administrator of fair market value shall
be conclusive.
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<PAGE>
SECTION 15. CHANGE IN CONTROL.
(a) In the event of a Change in Control of Adelphia, as hereinafter
defined, the following provisions shall apply to options, SARs, share
awards and Phantom Stock previously awarded under the Plan, notwithstanding
any provision herein or in any agreement to the contrary:
(i) All options or SARs which provide for exercise in one or more
installments shall become immediately exercisable in full;
(ii) If any optionee shall cease to be employed by the Company within
one (1) year following a Change in Control, then the option or SAR, as
the case may be, may in all events be exercised for a period of three
months after such termination of employment if otherwise within the
option period;
(iii) All awards of shares and Phantom Stock under the Plan which
have not previously vested shall become vested.
(b) The term "Change in Control" shall mean a change in control of
Adelphia of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A promulgated under the Exchange Act as in effect
on the date thereof or, if Item 6(e) is no longer in effect, any
regulations issued by the Securities and Exchange Commission pursuant to
the Exchange Act which serve similar purposes, other than any event or
series of events the result of which is that John J. Rigas and/or members
of his family (the "Rigas Family") or any affiliate of the Rigas Family
obtains or maintains control; provided that, without limitation, such a
Change in Control shall be deemed to have occurred if: (i) Adelphia shall
be merged or consolidated with another corporation or entity, other than
the Rigas Family or a corporation or entity which is an "affiliate" of the
Rigas Family (as such term is defined in Rule 144(a) promulgated under the
Securities Act of 1933), or (ii) Adelphia shall sell all or substantially
all of its operating properties and assets to another person, group of
associated persons or corporation, excluding the Rigas Family or any
affiliate of the Rigas Family, if any, or (iii) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) other than the
Rigas Family or any affiliate of the Rigas Family, is or becomes a
beneficial owner, directly or indirectly, of securities of Adelphia
representing 25% or more of the combined voting power of Adelphia's then
outstanding securities coupled with or followed by the election as
directors of Adelphia of persons who were not directors at the time of such
acquisition if such person shall elect a majority of the Board of Directors
of Adelphia.
SECTION 16. AMENDMENT AND DISCONTINUANCE. The Board of Directors may alter,
amend, suspend or discontinue the Plan, provided that no such action shall
deprive any person without such person's consent of any rights theretofore
granted pursuant hereto.
SECTION 17. COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Notwithstanding any
provision of the Plan or the terms of any agreement entered into pursuant to
the Plan, Adelphia shall not be required to issue any shares hereunder prior
to registration of the shares subject to the Plan under the Securities Act of
1933 or the Exchange Act, if such registration shall be necessary, or before
compliance by Adelphia or any participant with any other provisions of either
of those acts or of regulations or rulings of the Securities and Exchange
Commission thereunder, or before compliance with other federal and state laws
and regulations and rulings thereunder, including the rules any applicable
exchange or of the Nasdaq Stock Market. Adelphia shall use its best efforts to
effect such registrations and to comply with such laws, regulations and
rulings forthwith upon advice by its counsel that any such registration or
compliance is necessary.
SECTION 18. COMPLIANCE WITH SECTION 16. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 (or its successor rule).
To the extent that any grant of an option, SAR, share award or Phantom Stock
award fails to so comply, it shall be deemed null and void to the extent
permitted by law and to the extent deemed advisable by the Plan Administrator.
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<PAGE>
SECTION 19. PARTICIPATION BY FOREIGN NATIONALS. The Plan Administrator may,
in order to fulfill the purposes of the Plan and without amending the Plan,
modify grants to foreign nationals or United States citizens employed abroad
in order to recognize differences in local law, tax policy or custom.
SECTION 20. EFFECTIVE DATE OF PLAN. The Effective Date of the Plan is July
28, 1998, subject to approval of the Plan by the holders of a majority of the
outstanding shares of all classes of common stock of Adelphia at its 1998
Annual Meeting of Stockholders.
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<PAGE>
PROXY
ADELPHIA COMMUNICATIONS CORPORATION
This Proxy is Solicited On Behalf Of The Board of Directors Of The Company
The undersigned hereby appoints John J. Rigas, Timothy J. Rigas and Daniel R.
Milliard, or any one or more of them, with power of substitution to each, as
proxies to represent and to vote as designated on the reverse all the shares of
Class A Common Stock held of record at the close of business on August 19, 1998
by the undersigned at the annual meeting of the stockholders of Adelphia
Communications Corporation to be held at the Coudersport Theater, Main Street,
Coudersport, Pennsylvania on October 6, 1998 at 10:00 a.m. and at any
adjournment thereof.
(Please sign on reverse side and return promptly)
<PAGE>
A [X] Please mark your
votes as in this
example
WITHHOLD
FOR AUTHORITY
all nominees to vote for all
listed at right nominees listed at right
1. Election of [ ] [ ]
Director --
Class A
2. Election of Directors -- Class A and B
(Instruction: To withhold authority to vote for any individual nominee, strike
a line through that nominee's name.)
The Board of Directors recommends a vote "FOR" proposals numbered 1, 2, 3 and 4.
Nominees:
Perry S. Patterson as director be elected by the Class A Common Stockholders
Class A and B
Dennis P. Coyle, Pete J. Metros, Daniel R. Milliard, John J. Rigas, James P.
Rigas, Michael J. Rigas and Timothy J. Rigas
FOR AGAINST ABSTAIN
3. Approval of 1998 Long-Term incentive
Compensation Plan (the "1998 Plan"). [ ] [ ] [ ]
4. In their discretion vote upon such
other matters as may properly come
before the meeting or any adjournment
thereof. [ ] [ ] [ ]
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. Unless otherwise specified in the squares
provided, the proxies shall vote in the election of directors for the nominees
listed at left, and shall have discretionary power to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
A majority of such proxies who shall be present and shall act at the meeting (or
if only one shall be present and act, then that one) may exercise all powers
thereunder.
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NOTE: Stockholder sign here exactly as name appears hereon.
Dated , 1998
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