<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 14, 1999
$500,000,000
Filed Pursuant to Rule 424(b)5
Registration No. 333-78027
[LOGO OF ADELPHIA APPEARS HERE]
Adelphia Communications Corporation
9 3/8% Senior Notes due November 15, 2009
------------
We will pay interest on the Notes each May 15 and November 15. The first
interest payment will be made on May 15, 2000.
We may not redeem the Notes prior to their maturity on November 15, 2009,
and the Notes will not be subject to any mandatory redemption or sinking fund
payments.
The underwriters propose to offer the Notes from time to time for sale in
negotiated transactions or otherwise, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices, plus accrued interest, if any, from November 16, 1999.
Investing in the Notes involves risks. See "Risk Factors" on page S-10 and
page 4.
Delivery of the Notes in book-entry delivery form only will be made on or
about November 16, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
the prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
Joint Book-Running Managers
Credit Suisse First Boston Salomon Smith Barney
------------
BNY Capital Markets, Inc.
Chase Securities Inc.
Nesbitt Burns Securities Inc.
PNC Capital Markets, Inc.
Scotia Capital Markets
TD Securities
The date of this prospectus supplement is November 10, 1999.
<PAGE>
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
------------
TABLE OF CONTENTS
Prospectus Supplement Prospectus
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement Summary...... S-2
Risk Factors....................... S-10
Use of Proceeds.................... S-22
Capitalization..................... S-23
Description of the Notes........... S-24
Certain United States Federal Tax
Considerations for Non-United
States Holders.................... S-42
Underwriting....................... S-44
Notice to Canadian Residents....... S-45
Where You Can Find More
Information....................... S-46
Legal Matters...................... S-47
Experts............................ S-47
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Adelphia............................ 2
Risk Factors........................ 4
Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends...... 16
Dilution............................ 17
Use of Proceeds..................... 17
Description of Debt Securities...... 18
Description of Capital Stock........ 31
Book Entry Issuance................. 36
Plan of Distribution................ 38
Where You Can Find More
Information........................ 40
Legal Matters....................... 41
Experts............................. 42
</TABLE>
------------
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
This summary may not contain all the information that may be important to
you. You should read this entire prospectus supplement and the entire attached
prospectus and those documents incorporated by reference into this document,
including the risk factors, financial data and related notes, before making an
investment decision. When we use the term Adelphia Parent Company in this
prospectus supplement, we are referring only to the parent holding company
entity, Adelphia Communications Corporation, and not to its subsidiaries.
Adelphia
Adelphia is a leader in the telecommunications industry with cable
television and local telephone operations. We are the sixth largest cable
television operator in the United States, after giving effect to the recent
cable system acquisitions and the pending swaps described in "Recent
Developments." Through our subsidiary Adelphia Business Solutions, Inc., we own
and operate a leading national provider of facilities-based integrated
communications services. John J. Rigas, the Chairman, President, Chief
Executive Officer and founder of Adelphia, has owned and operated cable
television systems since 1952.
Our operations consist of providing telecommunications services primarily
over our networks, which are commonly referred to as broadband networks because
they can transmit large quantities of voice, video and data by way of digital
or analog signals. We owned cable television systems with broadband networks
that passed in front of approximately 7.9 million homes and served
approximately 5.0 million basic subscribers as of June 30, 1999, after giving
effect to the recent cable system acquisitions and the pending swaps described
in "Recent Developments." After giving effect to these acquisitions and the
pending swaps, our cable systems are organized into ten regional clusters: Los
Angeles, Florida, New England, Midwest, Western New York, Virginia, Western
Pennsylvania, Puerto Rico, Colorado Springs and Eastern Pennsylvania.
Approximately 40% of our basic subscribers are located in our Los Angeles and
Florida clusters and approximately 75% of our basic subscribers are located in
our five largest clusters.
Adelphia Business Solutions provides its customers with alternatives to the
incumbent local telephone company for local and long distance voice services,
high-speed data and Internet services. Adelphia Business Solutions' telephone
operations are referred to as being facilities based, which means it generally
owns the local telecommunications networks and facilities it uses to deliver
these services, rather than leasing or renting the use of another party's
networks to do so. As of June 30, 1999, Adelphia Business Solutions was serving
40 metropolitan statistical areas and had sold 212,191 access lines of which
191,285 were installed, approximately 65% of which Adelphia Business Solutions
provisioned on its own switches. Adelphia Business Solutions' Class A common
stock is quoted on the Nasdaq National Market under the symbol "ABIZ."
Recent Developments
Hyperion Name Change
On July 1, 1999, Adelphia and Hyperion announced their decision to further
combine the efforts of both companies and that Hyperion was changing the name
under which it will be doing business
S-2
<PAGE>
to Adelphia Business Solutions. On October 25, 1999, after its stockholders
approved the changing of its legal name, Hyperion filed an amendment to its
certificate of incorporation formalizing the change from Hyperion
Telecommunications, Inc. to Adelphia Business Solutions, Inc.
Adelphia Business Solutions Shelf Registration
On October 13, 1999, Adelphia Business Solutions filed a shelf registration
statement with the SEC registering $1.5 billion of securities. The shelf became
effective on October 22, 1999.
October 1999 Common Stock Offering
On October 6, 1999, Adelphia completed a public offering of 6.0 million
shares of its Class A common stock at $57 per share. Net proceeds to Adelphia
from this offering, after deducting offering expenses, were approximately
$330.0 million. Adelphia initially invested the net proceeds in cash
equivalents and advanced or contributed a portion of the remaining net proceeds
to certain subsidiaries to repay borrowings under subsidiary credit agreements.
October Rigas Direct Placement
On October 1, 1999, we entered into a stock purchase agreement with Highland
Holdings, a general partnership controlled by members of the family of John
Rigas, under which Adelphia agreed to sell to Highland Holdings and Highland
Holdings agreed to purchase 2.5 million shares of Adelphia Class B common
stock. In this prospectus supplement, we will refer to this stock purchase as
the October Rigas Direct Placement. The October Rigas Direct Placement will be
at a per share price equal to $55.00, which is the public offering price less
the underwriting discount in the October 6, 1999 public offering of Class A
common stock described above, plus an interest factor. Closing on the October
Rigas Direct Placement is to occur on or prior to July 2, 2000 as determined by
Highland Holdings at its discretion. The agreement for the October Rigas Direct
Placement is subject to customary closing conditions.
Century Acquisition
On October 1, 1999, Adelphia acquired Century Communications Corp., through
a merger whereby Century was merged with and into a wholly owned subsidiary of
Adelphia, Arahova Communications, Inc., pursuant to an agreement and plan of
merger, dated as of March 5, 1999, and as amended on July 12, 1999 and as
further amended on July 29, 1999. For ease of reference in this document, we
will refer to the acquisition of Century as the Century acquisition, and the
surviving corporation will be referred to as Arahova.
In connection with the closing of the Century acquisition, Adelphia issued
approximately 47.8 million new shares of Adelphia Class A common stock and paid
approximately $811.9 million to the stockholders of Century, and assumed
approximately $1.7 billion of debt. This transaction was approved by Century
and Adelphia stockholders at their respective stockholders' meetings on
October 1, 1999. As of August 31, 1999, Century had approximately 1,610,000
basic subscribers after giving effect to Century's pending joint venture with
AT&T.
At the effective time of the merger, Adelphia also purchased Citizens Cable
Company's 50% interest in the Citizens/Century Cable Television Joint Venture,
one of Century's 50% owned joint ventures, for a purchase price of
approximately $157.5 million, comprised of approximately $27.7
S-3
<PAGE>
million in cash, approximately 1.85 million shares of Adelphia Class A common
stock and the assumption of indebtedness. This joint venture serves
approximately 92,300 basic subscribers in California and was jointly owned by
Century and Citizens Cable Company, a subsidiary of Citizens Utilities Company.
FrontierVision Acquisition
On October 1, 1999, Adelphia completed the acquisition of FrontierVision
Partners, L.P. through ACC Operations, Inc. and Adelphia GP Holdings, LLC,
wholly owned subsidiaries of Adelphia, that acquired all of the partnership
interests of FrontierVision from its partners in exchange for approximately
$543.3 million in cash, 7.0 million shares of Adelphia Class A common stock and
assumed debt of approximately $1.1 billion. As of June 30, 1999, FrontierVision
owned and operated cable television systems serving approximately 710,000 basic
subscribers.
Harron and Other Acquisitions
On October 1, 1999, Adelphia completed the acquisition of Harron
Communications Corp. by acquiring all of the outstanding common stock of Harron
from the stockholders of Harron for approximately $852.7 million in cash and
approximately $303.0 million in assumed debt. As of June 30, 1999, Harron had
approximately 299,000 basic subscribers after giving effect to recent
acquisitions by Harron involving systems with approximately 6,000 basic
subscribers.
In addition to the Century, FrontierVision and Harron acquisitions, the May
1999 cable system swap agreements described below, and the acquisition of
Telesat's interests in Olympus described below, Adelphia also has consummated
acquisitions covering an aggregate of approximately 102,000 additional basic
subscribers for an aggregate price of approximately $484.5 million, on or prior
to October 29, 1999.
Telesat Stock Repurchase and Acquisition of Olympus Interests
On January 29, 1999, Adelphia purchased from subsidiaries of Telesat
Cablevision, Inc., a subsidiary of FPL Group, Inc., shares of Adelphia's stock
owned by those Telesat subsidiaries. Adelphia purchased 1,091,524 shares of
Adelphia Class A common stock and 20,000 shares of its Series C cumulative
convertible preferred stock which were convertible into an additional 2,358,490
shares of Adelphia Class A common stock. These shares represented 3,450,014
shares of Adelphia Class A common stock on a fully converted basis. At that
time Adelphia also agreed to acquire Telesat's equity interests in Olympus
Communications, L.P., a non-consolidated joint venture between Adelphia and
Telesat. This acquisition closed on October 1, 1999. Olympus owns and operates
cable television systems which as of June 30, 1999 served approximately 641,000
basic subscribers. The aggregate purchase price for this transaction was
approximately $108.0 million.
May 1999 Cable System Swap Agreements
On May 26, 1999, Adelphia announced that it had agreed to exchange certain
cable systems with Comcast Corporation and Jones Intercable, Inc. in a
geographic rationalization of the companies' respective markets. As a result of
this transaction, Adelphia would add approximately 440,000 basic subscribers in
Los Angeles, California and West Palm/Fort Pierce, Florida. In exchange,
Comcast
S-4
<PAGE>
and Jones would receive systems currently owned, managed or under contract to
be acquired by Adelphia serving approximately 464,000 basic subscribers in
suburban Philadelphia, Pennsylvania, Ocean County, New Jersey, Ft. Myers,
Florida, Michigan, New Mexico and Indiana. All systems involved in the
transactions will be valued by agreement between the parties or, following a
failure to reach agreement, by independent appraisals, and any difference in
relative value will be funded with cash or additional cable systems. The system
exchanges are subject to customary closing conditions and regulatory approvals
and are expected to close by mid-2000.
April 1999 Series D Convertible Preferred Stock Offering
On April 30, 1999, and in a related transaction on May 14, 1999, Adelphia
consummated an offering of 2.5 million shares, plus an additional 375,000
shares pursuant to an underwriters' overallotment option, of 5 1/2% Series D
Convertible Preferred Stock, liquidation preference $200 per share. Net
proceeds to Adelphia from this offering, after deducting offering expenses,
were approximately $557.0 million. Adelphia invested a portion of the net
proceeds in cash equivalents and advanced or contributed the remaining net
proceeds to certain subsidiaries to repay borrowings under subsidiary credit
agreements, a portion of which was reborrowed to fund the acquisitions which
closed on October 1, 1999.
April 1999 Common Stock Offering
On April 28, 1999, Adelphia consummated an offering of 8.0 million shares of
Class A common stock. Net proceeds to Adelphia from this offering, after
deducting offering expenses, were approximately $485.5 million. Adelphia
advanced or contributed the net proceeds to certain subsidiaries to repay
borrowings under subsidiary credit agreements, a portion of which was
reborrowed to fund the acquisitions which closed on October 1, 1999.
April 1999 Senior Notes Offering
On April 28, 1999, Adelphia consummated an offering of $350 million of 7
7/8% Senior Notes due 2009. Net proceeds from this offering, after deducting
offering expenses, were approximately $345.0 million. The net proceeds were
used to repay borrowings under subsidiary credit agreements, a portion of which
was reborrowed to fund the acquisitions which closed on October 1, 1999.
April Rigas Direct Placement
On April 9, 1999, Adelphia entered into a stock purchase agreement with
Highland Holdings, a general partnership controlled by members of the family of
John J. Rigas, pursuant to which Adelphia agreed to sell to Highland Holdings
and Highland Holdings agreed to purchase $375.0 million of Adelphia Class B
common stock. We will refer to this purchase as the April Rigas Direct
Placement. The purchase price for the Class B common stock will be $60.76 per
share, which is equal to the public offering price in Adelphia's April 28, 1999
public offering of Class A common stock described above less the underwriting
discount, plus an interest factor. Closing under this stock purchase agreement
is to occur on or prior to January 23, 2000 as determined by Highland Holdings
at its discretion.
S-5
<PAGE>
March 1999 Adelphia Business Solutions Notes Offering
On March 2, 1999, Adelphia Business Solutions issued $300.0 million of 12%
Senior Subordinated Notes due 2007. An entity controlled by members of the
Rigas family purchased $100.0 million of the $300.0 million of Senior
Subordinated Notes directly from Adelphia Business Solutions at a price equal
to the aggregate principal amount less the discount to the initial purchasers.
The net proceeds of approximately $292.0 million have been or will be used to
fund Adelphia Business Solutions' acquisition of interests held by local
partners in certain of its networks, for capital expenditures and investments
in its networks, for working capital purposes and for general corporate
purposes.
For other recent developments regarding Adelphia, we refer you to our most
recent and future filings under the Exchange Act.
------------
Our executive offices are located at One North Main Street, Coudersport,
Pennsylvania 16915, and our telephone number is (814) 274-9830.
S-6
<PAGE>
The Offering
Issuer................................ Adelphia Communications Corporation
Securities Offered.................... $500.0 million in aggregate
principal amount of 9 3/8% Senior
Notes due 2009. For ease of
reference, we will refer to the 9
3/8% Senior Notes due 2009 as the
Notes.
Maturity Date......................... The Notes will mature on November
15, 2009.
Interest Payment Dates................ May 15 and November 15 each year
commencing on May 15, 2000.
Redemption............................ The Notes will not be redeemable
prior to maturity and will not be
subject to any mandatory redemption
or sinking fund payments.
Ranking............................... . The Notes are unsecured
indebtedness of the Adelphia
Parent Company ranking pari passu
with other unsubordinated
indebtedness of the Adelphia
Parent Company and senior in
right of payment to any future
subordinated indebtedness of the
Adelphia Parent Company.
. The operations of the Adelphia
Parent Company are conducted
through its subsidiaries.
Therefore, the Adelphia Parent
Company is dependent on the
earnings, if any, and cash flow
of and distributions from its
subsidiaries to meet its debt
obligations, including its
obligations with respect to the
Notes. Because the assets of its
subsidiaries and other
investments constitute
substantially all of the assets
of Adelphia Parent Company, and
because those subsidiaries and
other investments will not
guarantee the payment of
principal of and interest on the
Notes, the claims of holders of
the Notes effectively will be
subordinated to the claims of
creditors of those entities.
. As of June 30, 1999, on an as
adjusted basis, after giving
effect to the application of the
net proceeds from the offering of
the Notes, and the transactions
described in "Recent
S-7
<PAGE>
Developments," the Notes would
have been effectively
subordinated to $6.0 billion of
indebtedness and redeemable
preferred stock of Adelphia's
subsidiaries; and our total
indebtedness would have been
approximately $8.6 billion.
. The Adelphia Parent Company's
ability to access the cash flow
of its subsidiaries is subject to
significant contractual
restrictions. You should read
"Risk Factors--Holding Company
Structure and Potential Impact of
Restrictive Covenants in
Subsidiary Debt Agreements" and
"Description of the Notes" for
more information.
Certain Covenants..................... . The Indenture pursuant to which
the Notes will be issued contains
certain restrictions on, among
other things:
. the incurrence of indebtedness,
. mergers and sales of assets,
. changes of control,
. the payment of dividends on,
or the repurchase of, capital
stock of Adelphia, and
. certain other restricted
payments by Adelphia and its
restricted subsidiaries and
certain transactions with and
investments in affiliates.
. The Indenture permits Adelphia's
subsidiaries to incur substantial
additional indebtedness.
Change of Control..................... . Upon some change of control
events, you will have the right
to require Adelphia to purchase
your Notes at a price equal to
100% of the aggregate principal
amount thereof, plus accrued and
unpaid interest and liquidated
damages, if any, to the date of
purchase. You should read
"Description of the Notes--
Covenants--Change of Control
Offer."
S-8
<PAGE>
. We cannot give you any assurances
that we will have adequate
financial resources to effect a
required repurchase of the Notes
if a change of control event
occurs.
. Our failure to make a required
repurchase of the Notes if such a
change in control occurs would be
an Event of Default under the
Indenture.
Use of Proceeds....................... The net proceeds of the offering,
after deducting offering expenses,
are estimated to be approximately
$495.5 million, a portion of which
will be used to redeem the $125
million aggregate principal amount
of our 11 7/8% Senior Debentures
due 2004 at 104.5% of principal
plus accrued interest, and the
remainder will be contributed to
Adelphia subsidiaries and used to
repay borrowings under revolving
credit facilities of such
subsidiaries, all of which, subject
to compliance with the terms of and
maturity of the revolving credit
facilities, may be reborrowed and
used for general corporate purposes
such as acquisitions, capital
expenditures, investments
(including investments in our
subsidiaries) or other corporate
purposes. Nothing in this
prospectus supplement shall
constitute an official notice of
redemption of our 11 7/8% Senior
Debentures. That notice, when made,
will be made separately in
accordance with the indenture
relating to those 11 7/8% Senior
Debentures.
S-9
<PAGE>
RISK FACTORS
Before you invest in our Notes, you should be aware that there are various
risks associated with investing in Adelphia, including those described below.
You should carefully consider these risk factors together with all of the other
information included or incorporated by reference in this prospectus supplement
before you decide to purchase our Notes.
High Level Of Indebtedness
As of June 30, 1999, Adelphia has a substantial amount of debt. We
we owed approximately borrowed this money to purchase and to expand our
$3.8 billion and as of cable systems and other operations and, to a lesser
that date we would have extent, for investments and loans to our
owed $9.2 billion had we affiliates. At June 30, 1999, our indebtedness
acquired FrontierVision, totaled approximately $3.8 billion. This included
Harron and Olympus and approximately:
closed the Century
acquisition prior to
that date. Our high
level of indebtedness
can have important
adverse consequences to
us and to you.
. $2.4 billion of Adelphia Parent Company public
debt;
. $601.7 million of debt owed by our subsidiaries
to banks, other financial institutions and other
persons; and
. $786.7 million of public debt owed by Adelphia
Business Solutions, Adelphia's subsidiary, which
is a super-regional provider of integrated
communications services.
Arahova and its subsidiaries have substantial
indebtedness. At August 31, 1999, Arahova and its
subsidiaries had long-term debt of approximately
$2.6 billion (exclusive of current maturities of
$290.0 million), including approximately $1.9
billion principal amount of public indebtedness
under indentures, $963.0 million of indebtedness
under four credit agreements entered into by
subsidiaries of Arahova and various banks and $80.0
million of indebtedness under a note agreement
entered into by a subsidiary of Arahova. Arahova is
the surviving corporation in the Century
acquisition, which closed on October 1, 1999.
FrontierVision and its subsidiaries have
substantial indebtedness. At the time of the
closing of the FrontierVision acquisition,
FrontierVision and its subsidiaries had
nonaffiliate long-term debt of approximately $1.1
billion, including approximately $662.5 million
owed to banks under a credit agreement and
approximately $468.9 million owed under indentures
for public notes. FrontierVision was acquired on
October 1, 1999.
At the time of the closing of the Harron
acquisition on October 1, 1999, we assumed
approximately $303.0 million of debt.
Olympus also had approximately $207.5 million of
debt as of June 30, 1999. Olympus was consolidated
with Adelphia upon Adelphia's acquisition of
Telesat's interests in Olympus.
The Century, FrontierVision, Olympus and Harron
acquisitions are reflected in Adelphia's unaudited
condensed consolidated pro forma financial
statements incorporated by reference in this
prospectus supplement.
S-10
<PAGE>
We may need to
refinance significant Under the indentures for Arahova's public notes
Arahova indebtedness which were assumed as part of the Century
that we have assumed. acquisition, Arahova is required to make an offer
to purchase the public notes if the merger results
in the public notes being downgraded to a specified
level by certain national rating agencies. Upon
announcement of the merger, certain rating agencies
announced that the Arahova notes were under review
with a view to a downgrade to a level which would
not require Arahova to make an offer to repurchase
public notes. In the event that Arahova would be
required to make an offer to repurchase the public
notes at 101% of the amount of the notes and a
significant amount of notes were tendered to
Arahova for repurchase, this could materially
decrease Adelphia's liquidity.
We may need to As a result of our acquiring FrontierVision, the
refinance significant indentures for FrontierVision's public debt
FrontierVision required that FrontierVision make an offer to
indebtedness that we repurchase all of its public notes at 101% of its
have assumed. principal amount plus accrued interest, for an
aggregate repurchase price of $476.2 million.
FrontierVision has made the required offers to
purchase which expire on November 30, 1999 and
December 3, 1999. In the event that a significant
amount of notes are tendered to FrontierVision for
repurchase, this could materially decrease
Adelphia's liquidity.
Debt service consumes Our high level of indebtedness can have important
a substantial portion of adverse consequences to us and to you. It requires
the cash we generate. that we spend a substantial portion of the cash we
This could affect our get from our business to repay the principal and
ability to invest in our interest on these debts. Otherwise, we could use
business in the future these funds for general corporate purposes or for
as well as to react to capital improvements. Our ability to obtain new
changes in our industry loans for working capital, capital expenditures,
or economic downturns. acquisitions or capital improvements may be limited
by our current level of debt. In addition, having
such a high level of debt could limit our ability
to react to changes in our industry and to economic
conditions generally. In addition to our debt, at
June 30, 1999, the Adelphia Parent Company had
approximately $148.3 million and Adelphia Business
Solutions had approximately $244.2 million of
redeemable exchangeable preferred stock which
contain payment obligations that are similar to
Adelphia's debt obligations.
Approximately 29% of Our debt comes due at various times up to the year
our debt outstanding at 2009, including an aggregate of approximately $1.1
June 30, 1999 must be billion as of June 30, 1999, which we must pay by
repaid by January 1, December 31, 2004.
2004 and all of it must
be paid by 2009.
As discussed above, Arahova, FrontierVision, Harron
and Olympus also have a substantial amount of debt.
Under its current terms, this debt comes due at
various times up to the year 2017, including an
aggregate of approximately $1.1 billion as of June
30, 1999 (May 31, 1999 as to Arahova), which must
be paid over the next five years. In addition, we
have made offers to purchase
S-11
<PAGE>
at least $468.9 million of this debt as a result of
the FrontierVision transaction and as described
above we could be required to offer to purchase
additional debt as a result of the Century
acquisition.
Our Business Requires Our business requires substantial additional
Substantial Additional financing on a continuing basis for capital
Financing And If We Do expenditures and other purposes including:
Not Obtain That
Financing We May Not Be
Able To Upgrade Our
Plant, Offer Services,
Make Payments When Due
Or Refinance Existing
Debt
. constructing and upgrading our plant and
networks--some of these upgrades we must make to
comply with the requirements of local cable
franchise authorities;
. offering new services;
. scheduled principal and interest payments;
. refinancing existing debt; and
. acquisitions and investments.
There can be no guarantee that we will be able to
issue additional debt or sell stock or other
additional equity on satisfactory terms, or at all,
to meet our future financing needs.
We Have Had Negative The Total Convertible Preferred Stock, Common Stock
Stockholders' Equity And and Other Stockholders' Equity at June 30, 1999 was
Large Losses And We approximately $267.7 million.
Expect This To Continue
Our continuing net losses, which are mainly due to
our high levels of depreciation and amortization
and interest expense, may create deficiencies in or
reduce our Total Convertible Preferred Stock,
Common Stock and Other Stockholders' Equity. Our
recent net losses applicable to our common
stockholders were approximately as follows for the
periods specified:
. fiscal year ended March 31, 1997--$130.6
million;
. fiscal year ended March 31, 1998--$192.7
million;
. nine months ended December 31, 1998--$135.8
million; and
. six months ended June 30, 1999--$97.6 million.
We expect to continue to incur large net losses for
the next several years.
S-12
<PAGE>
Our earnings have
been insufficient to pay Our earnings could not pay for our combined fixed
for our fixed charges charges and preferred stock dividends during these
and preferred stock periods by the amounts set forth in the table
dividends. below, although combined fixed charges and
preferred stock dividends included substantial non-
cash charges for depreciation, amortization and
non-cash interest expense on some of our debts and
the non-cash expense of Adelphia Business
Solutions' preferred stock dividends:
<TABLE>
<CAPTION>
Earnings Non-Cash
Deficiency Charges
---------- --------
(in thousands)
<S> <C> <C>
. fiscal year ended March 31, 1997 $ 61,848 $165,426
. fiscal year ended March 31, 1998 $113,941 $195,153
. nine months ended December 31, 1998 $116,899 $186,022
. six months ended June 30, 1999 $ 81,014 $152,406
</TABLE>
Historically, the cash we generate from our
If we cannot operating activities and borrowings has been
refinance our debt sufficient to meet our requirements for debt
including debt incurred service, working capital, capital expenditures and
in connection with the investments in and advances to our affiliates, and
acquisitions of we have depended on additional borrowings to meet
FrontierVision, Century, our liquidity requirements. Although in the past we
Harron and Telesat's have been able both to refinance our debt and to
interest in Olympus or obtain new debt, there can be no guarantee that we
obtain new loans, we will be able to continue to do so in the future or
would likely have to that the cost to us or the other terms which would
consider various affect us would be as favorable to us as current
financing options. We loans and credit agreements. Under these
cannot guarantee that circumstances, we may need to consider various
any options available to financing options, such as the sale of additional
us would enable us to equity or some of our assets to meet the principal
repay our debt in full. and interest payments we owe, negotiate with our
lenders to restructure existing loans or explore
other options available under applicable laws
including those under reorganization or bankruptcy
laws. We believe that our business will continue to
generate cash and that we will be able to obtain
new loans to meet our cash needs. However, the
covenants in the indentures and credit agreements
for our current debt provide some limitations on
our ability to borrow more money.
On an as adjusted basis, after giving effect to the
application of the net proceeds from the offering
of the Notes and the transactions described in
"Recent Developments," our earnings were
insufficient to cover our combined fixed charges
and preferred stock dividends by approximately
$510.4 million for the nine months ended December
31, 1998 and approximately $344.6 million for the
six months ended June 30, 1999.
Competition
The telecommunications services provided by
Adelphia are subject to strong competition and
potential competition from various sources.
S-13
<PAGE>
Our cable television
business is subject to Our cable television systems compete with other
strong competition from means of distributing video to home televisions
several sources which such as Direct Broadcast Satellite systems,
could adversely affect commonly known as DBS systems, and Multichannel
revenue or revenue Multipoint Distribution systems commonly known as
growth. wireless cable. Some of the regional Bell telephone
operating companies and other local telephone
companies are in the process of entering the video-
to-home business and several have expressed their
intention to enter the video-to-home business.
In addition, because our systems are operated under
non-exclusive franchises, other applicants may
obtain franchises in our franchise areas. For
example, some regional Bell telephone operating
companies and local telephone companies have
facilities which are capable of delivering cable
television service and could seek competitive
franchises.
The equipment which telephone companies use in
providing local exchange service may give them
competitive advantages over Adelphia in
distributing video to home televisions. The
regional Bell telephone operating companies
and other potential competitors have much greater
resources than Adelphia and would constitute
formidable competition for our cable television
business. We cannot predict either the extent to
which competition will continue to materialize or,
if such competition materializes, the extent of its
effect on our cable television business.
Our cable television systems also face competition
from other communications and entertainment media,
including conventional off-air television
broadcasting services, newspapers, movie theaters,
live sporting events and home video products. We
cannot predict the extent to which competition may
affect us.
Our cable modem and dial up Internet access
business is currently subject to strong competition
and there exists the potential for future
competition from a number of sources. With respect
to high-speed cable modem service, telephone
companies are beginning to implement various
digital subscriber line services (xDSL) that allow
high-speed internet access services to be offered
over telephone lines. DBS companies offer high-
speed Internet access over their satellite
facilities and other terrestrial based wireless
operators (e.g., MMDS) are beginning to introduce
high-speed access as well. In addition, there are
now a number of legislative, judicial and
regulatory efforts seeking to mandate cable
television operators to provide open access to
their facilities to competitors that want to offer
Internet access over cable services. With respect
to dial up Internet access services, there are
numerous competitive Internet Service Providers
(ISPs) in virtually every franchise area. The local
telephone exchange company typically offers ISP
services, as do a number of other nationally
marketed ISPs such as America Online, Compuserve
and AT&T Worldnet. Adelphia
S-14
<PAGE>
cannot predict the extent to which competition will
continue to materialize or, if such competition
materializes, the extent of its effect on our
Internet access business.
Adelphia Business In each of the markets served by Adelphia Business
Solutions' operations Solutions' networks, the competitive local exchange
are also subject to risk carrier services offered by Adelphia Business
because Adelphia Solutions compete principally with the services
Business Solutions offered by the incumbent local telephone exchange
competes principally carrier company serving that area. Local telephone
with established local companies have long-standing relationships with
telephone carriers that their customers, have the potential to subsidize
have long-standing competitive services from monopoly service
utility relationships revenues, and benefit from favorable state and
with their customers and federal regulations. The merger of Bell Atlantic
pricing flexibility for and NYNEX created a very large company whose
local telephone combined territory covers a substantial portion of
services. Adelphia Business Solutions' markets. Other
combinations are occurring in the industry. Mergers
are pending between SBC and Ameritech, Bell
Atlantic and GTE and Qwest and US West, which may
have a material adverse effect on Adelphia Business
Solutions' ability to compete and terminate and
originate calls over Adelphia Business Solutions'
networks.
We believe that local telephone companies will gain
increased pricing flexibility from regulators as
competition increases. Adelphia Business Solutions'
operating results and cash flow could be materially
and adversely affected by actions by regulators,
including permitting the incumbent local telephone
companies in Adelphia Business Solutions' markets
to do the following:
. lower their rates substantially;
. engage in aggressive volume and term discount
pricing practices for their customers; or
. charge excessive fees or otherwise impose on
Adelphia Business Solutions excessive obstacles
for interconnection to the incumbent local
telephone company's networks.
If the regional Bell The regional Bell telephone operating companies can
telephone operating now obtain regulatory approval to offer long
companies could get distance services if they comply with the local
regulatory approval to market opening requirements of the federal
offer long distance Telecommunications Act of 1996. To date, the FCC
service in competition has denied the requests for approval filed by
with Adelphia Business regional Bell operating companies in Adelphia
Solutions' significant Business Solutions' operating areas. However, Bell
customers, some of Atlantic's recent petition to provide long distance
Adelphia Business services originating in New York may soon be
Solutuions' major approved. An approval of such a request could
customers could lose result in decreased market share for the major long
market share. distance carriers which are among Adelphia Business
Solutions' significant customers. This could have a
material adverse effect on Adelphia Business
Solutions.
In addition, once they obtain long distance
authority, the regional Bell telephone operating
companies could be less cooperative in providing
access to their networks.
S-15
<PAGE>
The regional Bell
telephone companies Some of the regional Bell operating companies have
continue to seek other also recently filed petitions with the FCC
regulatory approvals requesting waivers of other obligations under the
that could significantly federal Telecommunications Act of 1996. These
enhance their involve services Adelphia Business Solutions also
competitive position provides such as high speed data, long distance,
against Adelphia and services to ISPs. If the FCC grants the
Business Solutions. regional Bell operating companies' petitions, this
could have a material adverse effect on Adelphia
Business Solutions.
Potential competitors Potential competitors for Adelphia Business
to Adelphia Business Solutions include other competitive local exchange
Solutions' carriers, incumbent local telephone companies which
telecommunications are not subject to regional Bell operating
services include the companies' restrictions on offering long distance
regional Bell telephone service, AT&T, MCIWorldCom, Sprint and other long
companies, AT&T, distance carriers, cable television companies,
MCIWorldCom and Sprint, electric utilities, microwave carriers, wireless
electric utilities and telecommunications providers, and private networks
other companies that built by large end users. Both AT&T and MCIWorldCom
have advantages over offer local telephone services in some areas of the
Adelphia Business country and are expanding their networks. AT&T and
Solutions. Tele-Communications, Inc. also recently merged, and
MCI WorldCom and Sprint announced that they will
merge. Although we have good relationships with the
long distance carriers, they could build their own
facilities, purchase other carriers or their
facilities, or resell the services of other
carriers rather than use Adelphia Business
Solutions' services when entering the market for
local exchange services.
Many of Adelphia Business Solutions' current and
potential competitors, particularly incumbent local
telephone companies, have financial, personnel and
other resources substantially greater than those of
Adelphia Business Solutions, as well as other
competitive advantages over Adelphia Business
Solutions.
We Are Subject To The cable television industry and the provision of
Extensive Regulation local telephone exchange services are subject to
extensive regulation at the federal, state and
Our cable television local levels, and many aspects of such regulation
and telecommunications are currently the subject of judicial proceedings
businesses are heavily and administrative or legislative proposals. In
regulated as to rates we particular, FCC regulations limit our ability to
can charge and other set and increase rates for our basic service
matters. This regulation package and for the provision of cable television-
could limit our ability related equipment. The law permits certified local
to increase rates, cause franchising authorities to order refunds of rates
us to decrease then paid in the previous 12-month period determined to
current rates or require be in excess of the permitted reasonable rates. It
us to refund previously is possible that rate reductions or refunds of
collected fees. previously collected fees may be required in the
future. In addition, the FCC has commenced a
proceeding to determine whether cable operators
will be required to carry the digital signals of
broadcast television stations. Such a requirement
could require the removal of popular programming
services with materially adverse results for cable
operators.
S-16
<PAGE>
We must comply with rules of the local franchising
authorities to retain and renew our cable
franchises, among other matters. There can be no
assurances that the franchising authorities will
not impose new and more restrictive requirements as
a condition to franchise renewal.
Similarly, Adelphia Business Solutions is subject
to state and local regulations and in some cases
must obtain appropriate certifications and/or local
franchises to construct facilities and offer
services. There can be no assurance that Adelphia
Business Solutions' state and local regulators will
not impose new and more restrictive requirements as
a condition to renew any required certifications
and franchises.
Proposals are continuing to be made before Congress
and the FCC to mandate cable operators to provide
"open access" over their cable systems to other
ISPs. To date, the FCC has declined to impose such
requirements. This same open access issue is being
considered by some local franchising authorities as
well. Several local franchising authorities have
mandated open access. This issue is being actively
litigated. Recently, a federal district court in
Portland, Oregon, upheld the authority of the local
franchising authority to impose an open access
requirement in connection with a cable television
franchise transfer and that decision has been
appealed to the U.S. Court of Appeals for the Ninth
Circuit. If the FCC or other authorities mandate
additional access to Adelphia's cable systems, we
cannot predict the effect that this would have on
our Internet access over cable business.
The federal The federal Telecommunications Act of 1996
Telecommunications Act substantially changed federal, state and local laws
of 1996 may have a and regulations governing our cable television and
significant impact on telecommunications businesses. This law could
our cable television and materially affect the growth and operation of the
telephone businesses. cable television industry and the cable services we
provide. Although this legislation may lessen
regulatory burdens, the cable television industry
may be subject to new competition as a result.
There are numerous rulemakings that have been and
continue to be undertaken by the FCC which will
interpret and implement the provisions of this law.
Furthermore, portions of this law have been, and
likely other portions will be, challenged in the
courts. We cannot predict the outcome of such
rulemakings or lawsuits or the short- and long-term
effect, financial or otherwise, of this law and FCC
rulemakings on us.
Similarly, the federal Telecommunications Act of
1996 removes entry barriers for all companies and
could increase substantially the number of
competitors offering comparable services in
Adelphia Business Solutions' markets or potential
markets. Furthermore, we cannot guarantee that
rules adopted by the FCC or state regulators or
other legislative or judicial initiatives relating
to the telecommunications industry will not have a
material adverse effect on Adelphia Business
Solutions.
S-17
<PAGE>
Unequal Voting Rights
Of Stockholders Adelphia has two classes of common stock--Class A
which carries one vote per share and Class B which
carries ten votes per share. Under Adelphia's
Certificate of Incorporation, the Class A shares
elect only one of our eight directors.
Control Of Voting Power While the public owns a majority of the outstanding
By The Rigas Family shares of Adelphia's Class A common stock, the
Rigas family owns about 13% of those shares as of
The Rigas family can November 9, 1999, as well as substantially all of
control stockholder the outstanding shares of Class B common stock. The
decisions on very Rigas family has also agreed to acquire
important matters. approximately 6,200,000 and 2,500,000 shares of
Class B common stock in the April Rigas Direct
Placement and the October Rigas Direct Placement,
respectively, which when consummated will result in
the Rigas family beneficially owning shares
representing approximately 26% of the total number
of outstanding shares of both classes of Adelphia's
common stock and approximately 68% of the total
voting power of Adelphia's shares. The Rigas family
also owns shares of Adelphia's 8 1/8% Series C
cumulative convertible preferred stock which, if
converted, would increase its voting power and
beneficial ownership. As a result of the Rigas
family's stock ownership and an agreement among the
Class B stockholders, members of the Rigas family
have the power to elect eight of nine Adelphia
directors, and if they converted their convertible
preferred stock might be able to elect all nine
directors. In addition, the Rigas family could
control stockholder decisions on other matters such
as amendments to Adelphia's Certificate of
Incorporation and Bylaws, and mergers or other
fundamental corporate transactions.
There Are Potential John J. Rigas and the other executive officers of
Conflicts Of Interest Adelphia, including other members of the Rigas
Between Adelphia And The family, own other corporations and partnerships,
Rigas Family which are managed by us for a fee. Subject to the
restrictions contained in a business opportunity
agreement regarding future acquisitions, Rigas
family members and the executive officers are free
to continue to own these interests and acquire
additional interests in cable television systems.
These activities could present a conflict of
interest with Adelphia, such as how much time our
executive officers devote to our business. In
addition, there have been and will continue to be
transactions between us and the executive officers
or the other entities they own or have affiliations
with. Our public debt indentures contain covenants
that place restrictions on transactions between us
and our affiliates.
S-18
<PAGE>
Holding Company
Structure And Potential The Adelphia Parent Company directly owns no
Impact Of Restrictive significant assets other than stock, partnership
Covenants In Subsidiary interests and equity and other interests in our
Debt Agreements subsidiaries and in other companies. This creates
risks regarding our ability to provide cash to the
Adelphia Parent Company to repay the interest and
principal which it owes, our ability to pay cash
dividends to our common stockholders in the future,
and the ability of our subsidiaries and other
companies to respond to changing business and
economic conditions and to get new loans.
The public indentures and the credit agreements for
The Adelphia Parent bank and other financial institution loans of our
Company depends on its subsidiaries and other companies in which we have
subsidiaries and other invested, restrict their ability and the ability of
companies in which it the companies they own to make payments to the
has investments to fund Adelphia Parent Company. These agreements also
its cash needs. place other restrictions on the borrower's ability
to borrow new funds. The ability of a subsidiary or
a company in which we have invested to comply with
debt restrictions may be affected by events that
are beyond our control. The breach of any of these
covenants could result in a default which could
result in all loans and other amounts owed to its
lenders becoming due and payable. Our subsidiaries
and companies in which we have invested might not
be able to repay in full the accelerated loans.
We May Not Have The The Indenture and most of Adelphia's other public
Resources To Repurchase debt indentures contain provisions requiring
The Notes Upon A Change Adelphia, upon a change of control, to offer to
of Control redeem the Notes and certain of Adelphia's other
debt. In the event a change of control occurs,
there is no assurance that Adelphia will have the
ability to make an offer to redeem the Notes, that
it will have sufficient funds to repurchase all of
the Notes or that it would be able to obtain any
additional debt or equity financing in an amount
sufficient to repurchase the Notes. Failure to do
so would constitute an event of default under our
indentures.
No Public Market Exists The Notes are new securities for which there is
For The Notes currently no market. Adelphia does not intend to
apply for listing of the Notes on any securities
exchange or automated quotation system. Although
the underwriters have advised Adelphia that they
currently intend to make a market in the Notes
after the completion of the offering, the
underwriters are not obligated to do so, and such
market making activities may be discontinued at any
time without notice. There can be no assurance that
any market for the Notes will develop, or that such
a market will provide liquidity for holders of the
Notes. If a market for the Notes were to develop,
the Notes could trade at prices that may be higher
or lower than their initial offering price
depending upon many factors, including prevailing
interest rates, Adelphia's operating results and
the markets for similar securities. Historically,
the market for non-investment grade debt has been
S-19
<PAGE>
subject to disruptions that have caused the prices
of securities similar to the Notes to fluctuate
dramatically. There can be no assurance that, if a
market for the Notes were to develop, such a market
would not be subject to similar disruption.
Our Acquisitions And Because we are experiencing a period of rapid
Expansion Could Involve expansion through acquisition, the operating
Operational And Other complexity of Adelphia, as well as the
Risks responsibilities of management personnel, have
increased. Our ability to manage such expansion
effectively will require us to continue to expand
and improve our operational and financial systems
and to expand, train and manage our employee base.
The Century, FrontierVision and Harron acquisitions
and some of our other recent acquisitions involve
the acquisition of companies that have previously
operated independently. We may not be able to
integrate the operations of these companies without
some level of difficulty, such as the loss of key
personnel. There is no guarantee that we will be
able to realize the benefits expected from the
integration of operations from these transactions.
Because the cable systems acquired in the Century,
FrontierVision and Harron acquisitions are in the
same industry as those of Adelphia, the acquired
systems will generally be subject to the same risks
as those of Adelphia, such as those relating to
competition, regulation, year 2000 issues and
technological developments.
Year 2000 Issues Present The year 2000 issue refers to the potential
Risks To Our Business inability of computerized systems and technologies
Operations In Several to properly recognize and process dates beyond
Ways December 31, 1999. This could present risks to the
operation of our business in several ways. Our
computerized business applications that could be
adversely affected by the year 2000 issue include:
. information processing and financial reporting
systems;
. customer billing systems;
. customer service systems;
. telecommunication transmission and reception
systems; and
. facility systems.
System failure or miscalculation could result in an
inability to process transactions, send invoices,
accept customer orders or provide customers with
products and services. Although we are evaluating
the impact of the year 2000 issue on our business
and are seeking to implement necessary solutions,
this process has not been completed.
There can be no assurance that the systems of other
companies on which our systems rely will be year
2000 ready or compatible with our systems. Our
failure or a third-party's failure to become
S-20
<PAGE>
year 2000 ready, or its inability to become
compatible with third parties with which we have a
material relationship, including parties acquired
by us, may have a material adverse effect on
Adelphia, including significant service
interruption or outages; however, we cannot
currently estimate the extent of any such adverse
effects.
Forward-Looking The statements contained or incorporated by
Statements In This reference in this prospectus supplement that are
Prospectus Supplement not historical facts are "forward-looking
Are Subject To Risks And statements" and can be identified by the use of
Uncertainties forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "intends" or
"anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by
discussions of strategy that involve risks and
uncertainties.
Certain information set forth or incorporated by
reference in this prospectus supplement, including
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Adelphia's
Transition Report on Form 10-K and in Adelphia's
Form 10-Qs, is forward-looking, such as information
related to the effects of future regulation, future
capital commitments and the effects of competition.
Such forward-looking information involves important
risks and uncertainties that could significantly
affect expected results in the future from those
expressed in any forward-looking statements made
by, or on behalf of, us. These risks and
uncertainties include, but are not limited to,
uncertainties relating to economic conditions, the
availability and cost of capital, acquisitions and
divestitures, government and regulatory policies,
the pricing and availability of equipment,
materials, inventories and programming,
technological developments, year 2000 issues and
changes in the competitive environment in which we
operate. Persons reading this prospectus supplement
are cautioned that such statements are only
predictions and that actual events or results may
differ materially. In evaluating such statements,
readers should specifically consider the various
factors which could cause actual events or results
to differ materially from those indicated by such
forward-looking statements.
S-21
<PAGE>
USE OF PROCEEDS
The net proceeds of the offering of the Notes, after deducting offering
expenses, are estimated to be approximately $495.5 million. A portion of these
net proceeds will be used to redeem $125 million aggregate principal amount of
our 11 7/8% Senior Debentures due 2004 at 104.5% of principal plus accrued
interest, and the remainder will be contributed to Adelphia subsidiaries and
used to repay borrowings under revolving credit facilities of such
subsidiaries, all of which, subject to compliance with the terms of and
maturity of the revolving credit facilities, may be reborrowed and used for
general corporate purposes such as acquisitions, capital expenditures,
investments (including investments in our subsidiaries) or other corporate
purposes. As of June 30, 1999, the average effective interest rate charged on
borrowings under such subsidiary credit facilities was approximately 6.5%.
S-22
<PAGE>
CAPITALIZATION
(dollars in thousands except par value amounts)
The following table sets forth the cash and cash equivalents and
capitalization of Adelphia as of June 30, 1999, on an actual and as adjusted
basis to reflect the offering of the Notes and the transactions described in
"Recent Developments." This table should be read in conjunction with Adelphia's
consolidated financial statements and related notes thereto and other financial
data contained elsewhere or incorporated by reference in this prospectus
supplement.
<TABLE>
<CAPTION>
June 30, 1999
----------------------------
Actual As Adjusted (b)
----------- ---------------
<S> <C> <C>
Cash and cash equivalents......................... $ 802,701 $ 370,553
U.S. government securities--pledged............... 44,178 44,178
----------- ------------
Total cash, cash equivalents and U.S. government
securities--pledged............................ $ 846,879 $ 414,731
=========== ============
Long-term debt including current maturities (a):
Subsidiary debt................................. $ 1,388,412 $ 5,774,606
Parent debt..................................... 2,406,127 2,781,127
----------- ------------
Total long-term debt including current
maturities................................... 3,794,539 8,555,733
----------- ------------
Adelphia Business Solutions redeemable
exchangeable preferred stock..................... 244,153 244,153
----------- ------------
Redeemable exchangeable preferred stock........... 148,277 148,277
----------- ------------
Convertible preferred stock, common stock and
other stockholders' equity (c):
8 1/8% Series C cumulative convertible preferred
stock ($100,000 liquidation preference)........ 1 1
5 1/2% Series D convertible preferred stock
($575,000 liquidation preference).............. 29 29
Class A common stock, $.01 par value,
1,200,000,000 shares authorized; 51,419,867
shares issued on an Actual basis and
113,022,635 shares issued on an As Adjusted
basis.......................................... 514 1,130
Class B common stock, $.01 par value,
300,000,000 shares authorized; 10,834,476
shares outstanding on an Actual basis and
19,506,300 shares outstanding on an As Adjusted
basis.......................................... 108 195
Additional paid-in capital........................ 2,317,383 6,280,528
Accumulated deficit............................... (1,842,991) (1,848,616)
Class A common stock held in escrow............... (58,099) --
Treasury stock, at cost, 1,091,524 shares of Class
A common stock and 20,000 shares of 8 1/8% Series
C cumulative convertible preferred stock ........ (149,213) (149,213)
----------- ------------
Total convertible preferred stock, common
stock and other stockholders' equity ........ 267,732 4,284,054
----------- ------------
Total capitalization........................ $ 4,454,701 $13,232,217
=========== ============
</TABLE>
- --------
(a) See Note 3 to Adelphia's consolidated financial statements in the Form 10-
K for a description of long-term debt of Adelphia and its subsidiaries.
See "The Company--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" in
the Form 10-K and the Form 10-Qs.
(b) Gives effect to (i) the application of the net proceeds of approximately
$495.5 million from the offering of the Notes as described in "Use of
Proceeds," and (ii) the transactions described in "Recent Developments."
(c) Authorized share amounts give effect to the amendments to our Certificate
of Incorporation that were approved at our annual stockholders' meeting
and effective on October 25, 1999. Actual Class A and Class B common stock
authorized as of June 30, 1999 was 200,000,000 shares and 25,000,000,
respectively.
S-23
<PAGE>
DESCRIPTION OF THE NOTES
Adelphia will issue the Notes under an Indenture, as supplemented by a
supplemental indenture (the "Indenture") between Adelphia and Bank of Montreal
Trust Company, or trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (the "Trust Indenture Act").
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. We urge you to
read the Indenture because it, and not this description, will define your
rights as a holder of the Notes. We will file a copy of the supplemental
indenture as an exhibit to a Form 8-K that will be incorporated by reference
into the registration statement which includes this prospectus supplement. You
can find the definitions of certain terms used in this description under the
subheading "Certain Definitions."
General
The Notes are general senior unsecured obligations of Adelphia and are
effectively subordinate in right of payment to the liabilities of Adelphia's
subsidiaries. See "Subordination to Subsidiary Debt" and "Certain Definitions"
below.
The Notes will mature on November 15, 2009. Adelphia will pay interest on
the Notes on May 15 and November 15 of each year, commencing May 15, 2000, to
the persons who are registered holders at the close of business on the April 30
and October 30 immediately preceding the interest payment date. Interest on the
Notes will be paid on the basis of a 360-day year comprised of twelve 30-day
months.
The Notes will be issued only in fully registered form without coupons and
will be issued in denominations of $1,000 and integral multiples thereof.
The Indenture and the existing indentures under which Adelphia's other
public debt were issued contain covenants which may afford holders of
Adelphia's other public debt certain protections regarding leverage and the
incurrence of indebtedness. These include covenants which limit the amount of
additional indebtedness that may be incurred by Adelphia and its subsidiaries,
which restrict mergers and consolidations by Adelphia unless after giving
effect to the transaction the consolidated fixed charge ratio of the surviving
entity satisfies certain compliance tests, and which require such Notes and
Adelphia's other public debt to be secured equally and ratably with other
indebtedness in certain circumstances where Adelphia creates or assumes liens
on its property or assets in connection therewith. See "Covenants" below.
On the date of the Indenture, the Unrestricted Subsidiaries, as that term is
defined in the Indenture, of Adelphia included Adelphia Business Solutions,
Global Cablevision, Inc., Orchard Park Cablevision, Inc. and the FrontierVision
companies, their respective subsidiaries and certain other subsidiaries.
The Notes are not redeemable and there is no mandatory redemption or sinking
fund prior to maturity.
Subordination to Subsidiary Debt
All liabilities of Adelphia's subsidiaries will be effectively senior in
right of payment to the Notes. As of June 30, 1999 and as adjusted for the
Notes offering and the transactions described in "Recent Developments," the
total public indebtedness and indebtedness of such subsidiaries to banks and
institutions, on a consolidated basis, aggregated approximately $5.8 billion.
See "Risk
S-24
<PAGE>
Factors-- Holding Company Structure and Potential Impact of Restrictive
Covenants in Subsidiary Debt Agreements." In addition, at June 30, 1999,
Adelphia Business Solutions had $244.2 million in redeemable preferred stock.
Covenants
The Indenture will contain, among others, the following covenants. Except as
otherwise specified, all of the covenants described below will appear in the
Indenture.
Limitation on Indebtedness. Adelphia will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume
or become liable for, contingently or otherwise (collectively an
"incurrence"), any Indebtedness unless, after giving effect to such incurrence
on a pro forma basis, Indebtedness of Adelphia and its Restricted
Subsidiaries, on a consolidated basis, shall not be more than the product of
the Annualized Pro Forma EBITDA for the latest fiscal quarter preceding such
incurrence for which financial statements are available, multiplied by 8.75.
Notwithstanding the above, the Indenture will not limit the incurrence of
Indebtedness which is incurred by Adelphia or its Restricted Subsidiaries for
working capital purposes or capital expenditures with respect to plant,
property and equipment of Adelphia and its Restricted Subsidiaries in an
aggregate amount not to exceed $50,000,000. Further, the Indenture will not
limit Permitted Refinancing Indebtedness, subject to the provisions of the
covenant set forth under "Limitation on Restricted Payments."
Limitation on Restricted Payments. So long as any of the Notes remain
outstanding, Adelphia shall not make, and shall not permit any Restricted
Subsidiary to make, any Restricted Payment (as defined below) if (a) at the
time of such proposed Restricted Payment, a Default or Event of Default shall
have occurred and be continuing or shall occur as a consequence of such
Restricted Payment, or (b) immediately after giving effect to any such
Restricted Payment, the aggregate of all Restricted Payments which shall have
been made on or after January 1, 1993 (the amount of any Restricted Payment,
if other than cash, to be based upon fair market value as determined in good
faith by Adelphia's Board of Directors whose determination shall be
conclusive) would exceed an amount equal to the greater of (i) the sum of
$5,000,000 or (ii) the difference between (a) the Cumulative Credit (as
defined below) and (b) the sum of the aggregate amount of all Restricted
Payments, and all Permitted Investments made pursuant to clause (v) of the
definition of "Permitted Investments," made on or after January 1, 1993 plus
1.2 times Cumulative Interest Expense (as defined above).
Mergers and Consolidations. Adelphia may not consolidate with, merge with
or into, or transfer all or substantially all of its assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions), to any Person unless: (i) Adelphia shall be the continuing
Person, or the Person (if other than Adelphia) formed by such consolidation or
into which Adelphia is merged or to which the properties and assets of
Adelphia are transferred shall be a corporation organized and existing under
the laws of the United States or any State thereof or the District of Columbia
and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all of the
obligations of Adelphia under the Notes and the Indenture, and the obligations
under the Indenture shall remain in full force and effect; (ii) immediately
before and immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and (iii) immediately
after giving effect to
S-25
<PAGE>
such transaction on a pro forma basis for the most recent quarter, the pro
forma Consolidated Fixed Charge Ratio of the surviving entity shall be at least
1:1; provided that, if the Consolidated Fixed Charge Ratio of Adelphia for the
most recent quarter preceding such transaction is within the range set forth in
Column A below, then the pro forma Consolidated Fixed Charge Ratio of the
surviving entity after giving effect to such transaction shall be at least
equal to the greater of the percentage of the Consolidated Fixed Charge Ratio
of Adelphia for the most recent quarter preceding such transaction set forth in
Column B or the ratio set forth in Column C below:
<TABLE>
<S> <C> <C>
A B C
----- ----- ------
1.1111:1 to 1.4999:1 90% 1.00:1
1.5 and higher 80% 1.35:1
</TABLE>
and provided, further, that if the pro forma Consolidated Fixed Charge Ratio of
the surviving entity is 2:1 or more, the calculation in the preceding proviso
shall be inapplicable and such transaction shall be deemed to have complied
with the requirements of such proviso.
In connection with any consolidation, merger or transfer contemplated by
this provision, Adelphia shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
Limitations on Investment in Affiliates and Unrestricted Subsidiaries. After
the date of the Indenture, Adelphia may not, nor will Adelphia allow any
Restricted Subsidiary to, make a Restricted Investment other than by way of
Permitted Investments unless pro forma for such Restricted Investment the
Leverage Ratio of Adelphia does not exceed 7.75:1.
Covenant to Secure Notes Equally. Except for Liens created or assumed by
Adelphia in connection with the acquisition of real property or equipment to be
used by Adelphia in the operation of its business which do not secure
Indebtedness in excess of the purchase price of such real property or
equipment, Adelphia covenants that, if it shall create or assume any Lien upon
any of its property or assets, whether now owned or hereafter acquired, it will
make or cause to be made effective provisions whereby the Notes will be secured
by such Lien equally and ratably with all other Indebtedness of Adelphia
secured by such Lien, as long as any such other Indebtedness of Adelphia shall
be so secured. The restriction imposed by this covenant shall not apply with
respect to a Lien, including a pledge of Capital Stock of a Subsidiary or an
Affiliate, to secure Indebtedness which is an obligation of such Subsidiary or
Affiliate and not an obligation of Adelphia.
Limitation on Transactions with Affiliates. Adelphia will not, and will not
permit any Restricted Subsidiary to, engage in any transaction with any
Affiliate upon terms which would be any less favorable than those obtainable by
Adelphia or a Restricted Subsidiary in a comparable arm's-length transaction
with a person which is not an Affiliate. Adelphia will not, and will not permit
any Restricted Subsidiary to, engage in any transaction (or series of related
transactions) involving in the aggregate $1,000,000 or more with any Affiliate
except for (i) the making of any Restricted Payment, (ii) any transaction or
series of transactions between Adelphia and one or more of its Restricted
Subsidiaries or between two or more of its Restricted Subsidiaries (provided
that no more than 5% of
S-26
<PAGE>
the equity interest in any of its Restricted Subsidiaries is owned by an
Affiliate), and (iii) the payment of compensation (including, without
limitation, amounts paid pursuant to employee benefit plans) for the personal
services of officers, directors and employees of Adelphia or any of its
Restricted Subsidiaries, so long as the Board of Directors of Adelphia in good
faith shall have approved the terms thereof and deemed the services theretofore
or thereafter to be performed for such compensation or fees to be fair
consideration therefor; and provided further that for any Asset Sale, or a
sale, transfer or other disposition (other than to Adelphia or any of its
Restricted Subsidiaries) of an interest in a Restricted Investment, involving
an amount greater than $25,000,000, such Asset Sale or transfer of interest in
a Restricted Investment is for fair value as determined by an opinion of a
nationally recognized investment banking firm filed with the Trustee.
Notwithstanding the foregoing, such provision will not prohibit any such
transaction which is determined by the independent members of the Board of
Directors of Adelphia, in their reasonable, good faith judgment (as evidenced
by a Board Resolution filed with the Trustee) to be (a) in the best interests
of Adelphia or such Restricted Subsidiary, and (b) upon terms which would be
obtainable by Adelphia or a Restricted Subsidiary in a comparable arm's-length
transaction with a Person which is not an Affiliate.
Limitation on Sale of Assets. Neither Adelphia nor a Restricted Subsidiary
shall sell an asset (including Capital Stock of Restricted Subsidiaries) or
reclassify a Restricted Subsidiary existing on the date of the Indenture as an
Unrestricted Subsidiary (a "Reclassification") unless (a) in the case of an
asset sale, (i) at least 75% of the net proceeds received by Adelphia or such
Restricted Subsidiary is in cash, cash equivalents or common or preferred
Capital Stock or debt securities issued by a Person which has Investment Grade
Senior Debt, and (ii) cash proceeds from the asset sale are used to reduce debt
and such debt reduction results in Adelphia's Leverage Ratio being lower pro
forma after such asset sale than prior to such asset sale, or (b) in the case
of an asset sale or Reclassification, pro forma for such asset sale or
Reclassification the Indebtedness of Adelphia and its Restricted Subsidiaries,
on a consolidated basis, shall not be more than 7.75 multiplied by Annualized
Pro Forma EBITDA, provided that in no case under either clause (a) or (b) shall
Adelphia undertake an asset sale or Reclassification, if pro forma for such an
asset sale or Reclassification Adelphia and its Restricted Subsidiaries would
be the owners of fewer than 75% of the cable systems (measured on the basis of
basic subscribers as of February 22, 1994) owned by Adelphia and its Restricted
Subsidiaries as of February 22, 1994, provided however, that Adelphia and its
Restricted Subsidiaries may sell additional assets of up to 10% of assets held
as of February 22, 1994 if the consideration received from such sale is (i)
cash which is used within 12 months to purchase additional systems of
equivalent value or (ii) other cable systems of equivalent value.
Change of Control Offer. Within 50 days of (i) the proposed occurrence of a
Change of Control or (ii) the occurrence of a Change of Control Triggering
Event, Adelphia shall notify the Trustee in writing of such proposed occurrence
or occurrence, as the case may be, and shall make an offer to purchase (the
"Change of Control Offer") the Notes at a purchase price equal to 100% of the
principal amount thereof plus any accrued and unpaid interest thereon to the
Change of Control Payment Date (as hereinafter defined) (the "Change of Control
Purchase Price") in accordance with the procedures set forth in this covenant.
Within 50 days of (i) the proposed occurrence of a Change of Control or (ii)
the occurrence of a Change of Control Triggering Event, Adelphia also shall (a)
cause a notice of the Change of Control Offer to be sent at least once to the
Dow Jones News Service or similar business news service in the
S-27
<PAGE>
United States and (b) send by first-class mail, postage prepaid, to the Trustee
and to each holder of the Notes, at his address appearing in the register of
the Notes maintained by the Registrar, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment,
provided that a Change of Control Triggering Event has occurred and
otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 50 days from the date such
notice is mailed and no later than 15 days after the date of the
corresponding Change of Control Triggering Event) (the "Change of
Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless Adelphia defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to
the Change of Control Offer shall cease to accrue interest after the
Change of Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender
the Notes to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the holder, the principal amount of the Notes delivered for
purchase, and a statement that such holder is withdrawing his
election to have such Notes purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, provided that each Note purchased and each
such new Note issued shall be in an original principal amount in
denominations of $1,000 and integral multiples thereof; and
(8) any other procedures that a holder must follow to accept a Change of
Control Offer or effect withdrawal of such acceptance.
Notwithstanding any other provision of this covenant, in the case of a
notice of a Change of Control Offer that is being furnished by Adelphia with
respect to a proposed Change of Control that has not yet actually occurred, the
Company may specify in such notice that holders of the Notes shall be required
to notify Adelphia, by a date not later than the date (the "Proposed Change of
Control Response Date") which is 30 days from the date of such notice, as to
whether such holders will tender their Notes for payment pursuant to the Change
of Control Offer and to notify Adelphia of the principal amount of such Notes
to be so tendered (with the failure of any holder to so notify Adelphia within
such 30-day period to be deemed an election of such holder not to accept such
Change of Control Offer). In such event, Adelphia shall have the option, to be
exercised by a subsequent written notice to be sent, no later than 15 days
after the Proposed Change of Control Response Date, to the same Persons to whom
the original notice of the Change of Control Offer was sent, to cancel or
otherwise effect the termination of the proposed Change of Control and to
rescind
S-28
<PAGE>
the related Change of Control Offer, in which case the then outstanding Change
of Control Offer shall be deemed to be null and void and of no further effect.
On the Change of Control Payment Date, Adelphia shall (a) accept for payment
Notes or portions thereof tendered pursuant to the Change of Control Offer, (b)
deposit with the Paying Agent money sufficient to pay the purchase price of all
Notes or portions thereof so tendered and (c) deliver or cause to be delivered
to the Trustee Notes so accepted together with an Officers' Certificate stating
the Notes or portions thereof tendered to Adelphia. The Paying Agent shall
promptly mail to each holder of Notes so accepted payment in an amount equal to
the purchase price for such Notes, and the Trustee shall promptly authenticate
and mail to such holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered; provided that each such new Note shall be
issued in an original principal amount in denominations of $1,000 and integral
multiples thereof.
There shall be no purchase of any Notes pursuant to this covenant if there
has occurred (prior to, on or after, as the case may be, the tender of such
Notes pursuant to the Change of Control Offer, by the holders of such Notes)
and is continuing an Event of Default. The Paying Agent will promptly return to
the respective holders thereof any Notes (a) the tender of which has been
withdrawn in compliance with the Indenture or (b) held by it during the
continuance of an Event of Default (other than a default in the payment of the
Change of Control Purchase Price with respect to such Notes).
Because a "Change of Control" for purposes of this covenant is defined in
terms of "beneficial ownership" (as defined in Rule 13d-3 under the Exchange
Act) of voting power, there may be circumstances in which the Rigas Family
could beneficially own (for purposes of Rule 13d-3) more than 35% of the
outstanding voting Capital Stock of Adelphia through options, warrants or other
purchase rights while directly holding 35% or less of the total voting power
required to elect or designate for election a majority of Adelphia's Board of
Directors, without a Change of Control Triggering Event occurring. Further, a
change in the composition of the Board of Directors of Adelphia could occur
without the occurrence of a Change of Control Triggering Event if either the
election or the nomination of the new directors was approved by two-thirds of
the continuing directors or by the Rigas Family and its Affiliates. See
"Certain Definitions--Change of Control."
Adelphia's Other Public Debt
In addition to the Notes, Adelphia has outstanding 7 7/8% Senior Notes due
2009, 7 1/2% Senior Notes due 2004, 7 3/4% Senior Notes due 2009, 8 1/8% Senior
Notes due 2003, 8 3/8% Senior Notes due 2008, 9 1/4% Senior Notes due 2002, 9
7/8% Senior Notes due 2007, 10 1/2% Senior Notes due 2004, 10 1/4% Senior Notes
due 2000, 9 1/2% Senior Pay-In-Kind Notes due 2004, 11 7/8% Senior Debentures
due 2004 and 9 7/8% Senior Debentures due 2005. For ease of reference, we refer
to all of this debt as Adelphia's other public debt in this prospectus
supplement.
The Indenture and the indentures for Adelphia's other public debt, which
together represent outstanding indebtedness in the aggregate principal amount
of approximately $2.8 billion as of June 30, 1999, adjusted for this offering,
provide that Adelphia must make an offer to purchase such debt at a purchase
price equal to 100% of the principal amount thereof, plus any accrued but
unpaid interest thereon, in the event of circumstances identical to those which
trigger a Change of Control Offer under this covenant. In addition, the credit
agreements of Adelphia's subsidiaries generally contain provisions under which
circumstances that would trigger a Change of Control Offer under this covenant
would constitute an event of default under such credit agreements. In the event
that Adelphia is required to purchase its outstanding other public debt and the
Notes in accordance with
S-29
<PAGE>
such provisions, and the indebtedness under subsidiary credit agreements were
to be accelerated, the source of funds for such purchases or payments will be
Adelphia's available cash, cash generated from Adelphia's operating activities,
and other sources including borrowings, asset sales or equity sales. There can
be no assurance that sufficient funds would be available to make any required
repurchases under the Indenture and under the indentures for our other public
debt or any such required payments under such credit agreements. Although in
the past Adelphia has been able to both refinance its indebtedness or obtain
new financing, there can be no assurance that Adelphia would be able to do so
under such circumstances or that, if Adelphia were able to do so, the terms
would be favorable to Adelphia. In the event that Adelphia is required to make
a Change of Control Offer, Adelphia will comply with all applicable tender
offer rules including Rule 14e-1 under the Exchange Act, to the extent
applicable.
Events of Default
The following events are defined in the Indenture as "Events of Default"
with respect to the Notes: (i) default in payment of any principal of such
Notes; (ii) default for 30 days in payment of any interest on such Notes; (iii)
default by Adelphia in the observance or performance of any other covenant in
such Notes or the Indenture for 60 days after written notice from the Trustee
or the holders of not less than 25% in aggregate principal amount of such Notes
then outstanding; (iv) failure to pay when due principal, interest or premium
aggregating $10,000,000 or more with respect to any Indebtedness of Adelphia or
any Restricted Subsidiary or the acceleration of any such Indebtedness which
default shall not be cured or waived, or such acceleration shall not be
rescinded or annulled, within ten days after written notice as provided in the
Indenture; (v) any final judgment or judgments for the payment of money in
excess of $10,000,000 shall be rendered against Adelphia or any Restricted
Subsidiary and shall not be discharged for any period of 60 consecutive days
during which a stay of enforcement shall not be in effect; or (vi) certain
events involving bankruptcy, insolvency or reorganization of Adelphia or any
Restricted Subsidiary with liabilities of greater than $10,000,000 under
generally accepted accounting principles as of the date of such bankruptcy,
insolvency or reorganization. The Trustee may withhold notice to the holders of
the Notes of any default (except in payment of principal or interest on the
Notes) if the Trustee considers it to be in the best interest of the holders of
the Notes to do so.
If an Event of Default (other than an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization) shall have occurred
and be continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may declare to be immediately
due and payable the principal amount of all of the Notes then outstanding plus
accrued but unpaid interest to the date of acceleration; provided, however,
that after such acceleration but before a judgment or decree based on
acceleration is obtained by the Trustee, the holders of a majority in aggregate
principal amount of such outstanding Notes may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
nonpayment of accelerated principal or interest, have been cured or waived as
provided in the Indenture. In case an Event of Default resulting from certain
events of bankruptcy, insolvency or reorganization shall occur, such amount
with respect to all of the Notes shall be due and payable immediately without
any declaration or other act on the part of the Trustee or the holders
of Notes.
S-30
<PAGE>
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or of the Notes and to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
subject to certain limitations specified in the Indenture.
No holder of the Notes will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as a trustee,
and unless the Trustee shall not have received from the holders of a majority
in aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a holder
of a Note for enforcement of payment of the principal of or interest on such
Note on or after the respective due dates expressed in such Note.
Defeasance and Covenant Defeasance
Adelphia may elect either (a) to defease and be discharged from any and all
obligations with respect to the Notes (except for the obligations to register
the transfer or exchange of the Notes, to replace temporary or mutilated,
destroyed, lost or stolen Notes of such series to maintain an office or agency
in respect of the Notes and to hold monies for payment in trust) ("defeasance")
or (b) to be released from its obligations with respect to the Notes under
certain covenants contained in the Indenture and described above under
"Covenants" ("covenant defeasance"), upon the deposit with the Trustee (or
other qualifying trustee), in trust for such purpose, of money and/or U.S.
Government Obligations which through the payment of principal and interest in
accordance with their terms will provide money, in an amount sufficient to pay
the principal of and interest on the Notes, on the scheduled due dates therefor
in accordance with the terms of the Indenture. Such a trust may only be
established if, among other things, Adelphia has delivered to the Trustee an
Opinion of Counsel (as specified in the Indenture) to the effect that the
holders of the Notes or persons in their positions will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred. Such opinion, in
the case of defeasance under clause (a) above, must refer to and be based upon
a private ruling of the Internal Revenue Service concerning the Notes or a
ruling of general effect published by the Internal Revenue Service.
Modification of Indenture
From time to time, Adelphia and the Trustee may, without the consent of any
holders of the Notes, amend the Indenture or the Notes or supplement the
Indenture for certain specified purposes, including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any holder. Adelphia and the
Trustee, with the consent of holders of at least one-half in principal amount
of the outstanding Notes, may modify or supplement the Indenture with respect
to the Notes, except that no such modification shall, without the consent of
each holder affected thereby, (i) reduce the amount of Notes whose holders must
consent to an amendment, supplement, or waiver to the Indenture or the Notes,
(ii) reduce the rate of or change the time for
S-31
<PAGE>
payment of interest on any Note, (iii) reduce the principal of or change the
stated maturity of any Note, (iv) make any Note payable in money other than
that stated in the Note or change the place of payment from New York, New York,
(v) change the amount or time of any payment required by the Notes or provide
for the redemption of the Notes prior to maturity, (vi) waive a default on the
payment of the principal of, interest on, or redemption payment with respect to
any Note, or (vii) take any other action otherwise prohibited by the Indenture
to be taken without the consent of each holder affected thereby.
Reports to Holders
So long as Adelphia is subject to the periodic reporting requirements of the
Exchange Act it will continue to furnish the information required thereby to
the Commission and to the holders of the Notes. Even if Adelphia is entitled
under the Exchange Act not to furnish such information to the Commission or to
the holders of the Notes, it will nonetheless continue to furnish such
information to the Commission (at such time as it would be required to file
such reports under the Exchange Act) and to the Trustee and the holders of the
Notes (within 15 days thereafter as required by the Indenture) as if it were
subject to such periodic reporting requirements.
Compliance Certificate
Adelphia will deliver to the Trustee on or before 105 days after the end of
its fiscal year and on or before 50 days after the end of its second fiscal
quarter in each year an Officer's Certificate stating whether or not the
signers know of any Default or Event of Default that has occurred. If they do,
the certificate will describe the Default or Event of Default and its status.
Global Notes
Adelphia has established a depositary arrangement with The Depository Trust
Company with respect to the Notes, the terms of which are summarized below.
Upon issuance, all Notes will be represented by one or more Global Notes.
The Global Notes representing the Notes will be deposited with, or on behalf
of, the Depositary and will be registered in the name of the Depositary or a
nominee of the Depositary. No Global Notes may be transferred except as a whole
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Note, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Notes represented thereby for all purposes under the Indenture.
Except as otherwise provided in this section, each actual purchaser of each
Note represented by a Global Note ("Beneficial Owner") will not be entitled to
receive physical delivery of certificated Notes and will not be considered the
holders thereof for any purpose under the Indenture, and no Global Note
representing the Notes shall be exchangeable or transferable. Accordingly, each
Beneficial Owner must rely on the procedures of the Depositary and, if such
Beneficial Owner is not a Participant, on the procedures of the Participant
through which such Beneficial Owner owns its interest in order to exercise any
rights of a Holder under such Global Note
S-32
<PAGE>
or the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Note representing the Notes.
The Global Notes representing the Notes will be exchangeable for
certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if (i) the Depositary
notifies Adelphia that it is unwilling or unable to continue as Depositary for
the Global Notes, (ii) the Depositary ceases to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(iii) Adelphia in its sole discretion determines that the Global Notes shall be
exchangeable for certificated Notes or (iv) there shall have occurred and be
continuing an Event of Default under the Indenture with respect to the Notes.
Upon any such exchange, the certificated Notes shall be registered in the names
of the Beneficial Owners of the Global Notes representing the Notes, which
names shall be provided by the Depositary's relevant Participants (as
identified by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Notes. The
Notes will be issued as fully registered securities registered in the name
of Cede & Co. (the Depositary's partnership nominee). Fully registered
Global Notes will be issued for the Notes, in the aggregate principal
amount of such issue, and will be deposited with the Depositary.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized/book-entry changes to Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants of the Depositary ("Direct Participants")
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission (the
"Commission").
Purchases of Notes under the Depositary's system must be made by or
through Direct Participants, which will receive a credit for such Notes on
the Depositary's records. The ownership interest of each Beneficial Owner
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Depositary
of their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants
through which such Beneficial Owner entered
S-33
<PAGE>
into the transaction. Transfers of ownership interests in the Global Notes
representing the Notes are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners of
the Notes representing the Notes will not receive certificated Notes
representing their ownership interests therein, except in the event that
use of the book-entry system for such Notes is discontinued.
To facilitate subsequent transfers, all Global Notes representing the
Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit
of Global Notes with, or on behalf of, the Depositary and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners
of the Global Notes representing the Notes; the Depositary's records
reflect only the identity of the Direct Participants to whose accounts such
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect
to the Global Notes representing the Notes. Under its usual procedure, the
Depositary mails an omnibus proxy to Adelphia as soon as possible after the
applicable record date. The omnibus proxy assigns Cede & Co.'s consenting
or voting rights to those Direct Participants to whose accounts the Notes
are credited on the applicable record date (identified in a listing
attached to the omnibus proxy).
Principal, premium, if any, and/or interest, if any, on the Global Notes
representing the Notes will be made to the Depositary. The Depositary's
practice is to credit Direct Participants' accounts on the applicable
payment date in accordance with their respective holdings shown on the
Depositary's records unless the Depositary has reason to believe that it
will not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers registered in "street name," and will be the responsibility of
such Participant and not of the Depositary, the Trustee or Adelphia,
subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, premium, if any, and/or interest,
if any, to the Depositary is the responsibility of Adelphia or the Trustee,
disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
The Depositary may discontinue providing its services as securities
depository with respect to the Notes at any time by giving reasonable
notice to Adelphia or the Trustee. Under such circumstances, in the event
that a successor securities depository is not obtained, certificated Notes
are required to be printed and delivered.
Adelphia may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, certificated Notes will be printed and delivered.
S-34
<PAGE>
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that Adelphia believes to be
reliable, but Adelphia takes no responsibility for the accuracy thereof.
The Trustee
Bank of Montreal Trust Company is to be the Trustee under the Indenture and
is the initial Registrar and Paying Agent with regard to the Notes. Bank of
Montreal Trust Company also serves as Registrar and Paying Agent and Trustee
under the indentures with respect to the 7 7/8% Notes, the 7 1/2% Notes, the 7
3/4% Notes, the 8 1/8% Notes, the 8 3/8% Notes, the 9 1/4% Notes, the 9 7/8%
Notes, the 10 1/2% Notes, the 10 1/4% Notes, the 9 1/2% Notes, the 11 7/8%
Debentures and the 9 7/8% Debentures as well as indentures with respect to
Adelphia Business Solutions' and Olympus' public debt. The Indenture provides
that, except during the continuance of an Event of Default, the Trustee will
perform only such duties as are specifically set forth in the Indenture. During
the existence of an Event of Default, the Trustee will exercise such rights and
powers vested in it under the Indenture and use the same degree of care and
skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
Certain Definitions
Set forth below is a summary of some of the defined terms used in the
covenants contained in the Indenture. We refer you to the Indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Affiliate" means a Person (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, Adelphia, (ii) which beneficially owns or holds 10% or more of any class
of the voting Capital Stock of Adelphia, or (iii) of which 10% or more of the
voting Capital Stock is beneficially owned or held by Adelphia, a Restricted
Subsidiary or an Unrestricted Subsidiary of Adelphia. Without limitation, an
Affiliate also includes any director or executive officer of Adelphia. As used
herein, "Affiliate" shall not include a Restricted Subsidiary.
"Aggregate Excess Restricted Investments" means for any fiscal quarter the
aggregate of Excess Restricted Investments with respect to the Restricted
Investments in all of the Unrestricted Subsidiaries and Affiliates of Adelphia.
"Allowable Securities" means (i) cash equivalents, (ii) common or preferred
Capital Stock in a Person which (x) has Investment Grade Senior Debt or (y)
whose ratio of Indebtedness plus Preferred Stock to Annualized Pro Forma EBITDA
is less than 7.75:1, or (iii) debt securities issued by a Person which (x) has
Investment Grade Senior Debt or (y) whose Leverage Ratio is less than 7.75:1,
provided that the securities in (ii)(y) and (iii)(y) above shall only be deemed
to be Allowable Securities if the principal business of the Person is owning
and operating cable television systems.
"Annualized Pro Forma EBITDA" means, with respect to any Person, (i) such
Person's Pro Forma EBITDA for the latest fiscal quarter multiplied by four,
minus (ii) in the case of Adelphia only, Adelphia's Aggregate Excess Restricted
Investments for such fiscal quarter.
"Asset Sale" means the sale, transfer or other disposition (other than to
Adelphia or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary, (b) all or substantially all of the
assets of Adelphia or of any Restricted Subsidiary, or (c) all or substantially
all of the assets of a Company
S-35
<PAGE>
System or part thereof serving at least 5,000 basic subscribers, a division,
line of business or comparable business segment of Adelphia or any Restricted
Subsidiary.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capital Stock Sale Proceeds" means the aggregate net sale proceeds
(including the fair market value of property, other than cash, as determined by
an independent appraisal firm) received by Adelphia from the issue or sale
(other than to a Subsidiary) by Adelphia of any class of its Capital Stock on
or after January 1, 1993 (including Capital Stock of Adelphia issued after
January 1, 1993 upon conversion of or in exchange for other securities of
Adelphia).
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles
and the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with generally accepted accounting
principles.
"Change of Control" means such time as (i) (a) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than the
Rigas Family and its Affiliates, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of more than 35% of the total voting power
required to elect or designate for election a majority of Adelphia's Board of
Directors and attaching to the then outstanding voting Capital Stock of
Adelphia and (b) the Rigas Family, together with its Affiliates, is not at such
time the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act)
of more than 35% of the total voting power required to elect or designate for
election a majority of Adelphia's Board of Directors and attaching to the then
outstanding voting Capital Stock of Adelphia, or (ii) during any period of two
consecutive calendar years, individuals who at the beginning of such period
constituted Adelphia's Board of Directors (together with any new directors
whose election by Adelphia's Board of Directors or whose nomination for
election by Adelphia's stockholders was approved by a vote of at least two-
thirds of the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved or approved by the Rigas Family and its Affiliates at a
time when they had the right or ability by voting right, contract or otherwise
to elect or designate for election a majority of Adelphia's Board of Directors)
cease for any reason to constitute a majority of the directors then in office.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Decline.
"Consolidated Fixed Charge Ratio" means, for any Person, for any period, the
ratio of (i) Annualized Pro Forma EBITDA to (ii) Consolidated Interest Expense
for such period multiplied by four.
"Consolidated Interest Expense" means, for any Person, for any period, the
amount of interest in respect of Indebtedness (including amortization of
original issue discount, amortization of debt issuance costs, and non-cash
interest payments on any Indebtedness and the interest portion of any deferred
payment obligation and after taking into account the effect of elections made
under any Interest Rate Agreement, however denominated, with respect to such
Indebtedness), the amount of Redeemable Dividends and the interest component of
rentals in respect of any Capitalized Lease Obligation paid, accrued or
scheduled to be paid or accrued by such Person during such period, determined
on a consolidated basis in accordance with generally accepted accounting
principles. For
S-36
<PAGE>
purposes of this definition, interest on a Capitalized Lease Obligation shall
be deemed to accrue at an interest rate reasonably determined by such Person to
be the rate of interest implicit in such Capitalized Lease Obligation in
accordance with generally accepted accounting principles consistently applied.
"Cumulative Credit" means the sum of (i) Capital Stock Sale Proceeds plus
(ii) cumulative EBITDA of Adelphia from and after January 1, 1993 to the end of
the fiscal quarter immediately preceding the date of a proposed Restricted
Payment, or, if such cumulative EBITDA for such period is negative, minus the
amount by which such cumulative EBITDA is less than zero.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense paid, accrued or scheduled to be paid or accrued by Adelphia
from January 1, 1993 to the end of the fiscal quarter immediately preceding a
proposed Restricted Payment, determined on a consolidated basis in accordance
with generally accepted accounting principles.
"EBITDA" means, for any Person, for any period, an amount equal to (A) the
sum of (i) consolidated net income for such period (exclusive of any gain or
loss realized in such period upon an Asset Sale), plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing consolidated net income and any provision
for taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
consolidated net income for such period, minus (B) all non-cash items
increasing consolidated net income for such period, all for such Person and its
Subsidiaries determined in accordance with generally accepted accounting
principles consistently applied, except that with respect to Adelphia each of
the foregoing items shall be determined on a consolidated basis with respect to
Adelphia and its Restricted Subsidiaries only.
"Excess Restricted Investment" means, with respect to any particular
Unrestricted Subsidiary or Affiliate of Adelphia for a fiscal quarter, the
lesser of the amounts described in the following clauses (i) and (ii), or, if
such amounts are equal, such amount:
(i) the aggregate amount of any Restricted Investments (other than the
Initial Investment) made by Adelphia or any Restricted Subsidiary
with respect to such Unrestricted Subsidiary or Affiliate and during
the twelve-month period ending on the last day of such fiscal
quarter;
(ii) cash income received during such quarter by Adelphia with respect to
its Restricted Investments in such Unrestricted Subsidiary or
Affiliate multiplied by four;
and provided that cash income from a particular Restricted Investment shall be
included only (x) if cash income has been received by Adelphia with respect to
such Restricted Investment during each of the previous two fiscal quarters, or
(y) if the cash income derived from such Restricted Investment is attributable
to Allowable Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Indebtedness" is defined to mean (without duplication), with respect to any
Person, any indebtedness, secured or unsecured, contingent or otherwise, which
is for borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion
S-37
<PAGE>
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute
subscriber advance payments and deposits, accounts payable or trade payables,
and other accrued liabilities arising in the ordinary course of business) if
and to the extent any of the foregoing indebtedness would appear as a liability
upon a balance sheet of such Person prepared in accordance with generally
accepted accounting principles, and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed, (iii) guaranties of items of other Persons which would be
included within this definition for such other Persons (whether or not such
items would appear upon the balance sheet of the guarantor), (iv) in the case
of Adelphia, Preferred Stock of its Restricted Subsidiaries and (v) obligations
of any such Person under any Interest Rate Agreement applicable to any of the
foregoing. Notwithstanding the foregoing, Indebtedness shall not include any
interest or accrued interest until due and payable.
"Initial Investment" means the Restricted Investment in a Person made by
Adelphia or a Restricted Subsidiary that first results in such Person becoming
an Unrestricted Subsidiary or Affiliate of Adelphia, except that in the case of
Olympus, "Initial Investment" shall mean any Restricted Investment made in
Olympus since February 22, 1994, but only to the extent that such Restricted
Investment when aggregated with the other Restricted Investments made in
Olympus since such date does not exceed $25,000,000.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investment Grade Senior Debt" means, with respect to any Person,
Indebtedness of such Person which has been rated with an investment grade
rating by Moody's or Standard & Poor's.
"Leverage Ratio" is defined as the ratio of (i) the outstanding Indebtedness
of a Person and its Subsidiaries (or in the case of Adelphia, its Restricted
Subsidiaries) divided by (ii) the Annualized Pro Forma EBITDA of such Person.
"Lien" means with respect to any property or assets of Adelphia (it being
understood that for purposes of this definition property or assets of Adelphia
do not include property or assets of any Subsidiary of Adelphia) any mortgage
or deed of trust, pledge, hypothecation, assignment, deposit arrangement,
security interest, lien, charge, easement (other than any easement not
materially impairing usefulness or marketability), encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind
or nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sale, or
other title retention agreement having substantially the same economic effect
as any of the foregoing) except for (i) liens for taxes, assessments or
governmental charges or levies on property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are being contested in
good faith and by appropriate proceedings; (ii) liens imposed by law, such as
carriers', warehousemen's and mechanics' liens and other similar liens arising
in the ordinary course of business which secure payment of obligations not more
than sixty (60) days past due or are being contested in good faith and by
appropriate proceedings; (iii) other liens incidental to the conduct of its
business or the ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit
and which do not in the aggregate materially detract
S-38
<PAGE>
from the value of its property or assets or materially impair the use thereof
in the operation of its business; (iv) utility easements, building restrictions
and such other encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character; or (v)
liens arising upon entry of a confession of judgment in Pennsylvania courts in
connection with borrowings not in excess of $1,000,000 in aggregate.
"Permitted Investments" means, for any Person, Restricted Investments made
on or after February 22, 1994 consisting of (i) advances for less than one year
issued in the ordinary course of business for working capital purposes or for
the purchase of property, plant and equipment in an amount not to exceed
$5,000,000 in the aggregate outstanding, (ii) with respect to a Restricted
Investment in Olympus, $25,000,000 plus the aggregate amount of cash income
received by Adelphia from Olympus, minus the aggregate amount of all Restricted
Investments made since February 22, 1994, with respect to Olympus, (iii)
$20,000,000 plus the cash proceeds from the sale or redemption of, or income
from, any Restricted Investments made on or after January 1, 1993, minus the
aggregate amount of all Restricted Investments (excluding Restricted
Investments made with respect to Olympus) since January 1, 1993, (iv) non-cash
Restricted Investments made with the non-cash proceeds from the sale or
redemption of, or income from, any Restricted Investments, or (v) an amount
which, at the time of such Restricted Investment, does not exceed the amount of
Restricted Payments that could then be made by Adelphia and its Restricted
Subsidiaries under the covenant set forth under "Limitations on Restricted
Payments"; provided further that no Restricted Investments may be made under
(ii), (iii), (iv) or (v) unless pro forma for such Restricted Investment
Adelphia could incur $1 of debt under the first paragraph of the covenant set
forth under "Limitation on Indebtedness."
"Permitted Refinancing Indebtedness" means any renewals, extensions,
substitutions, refinancings or replacements of any Indebtedness, including any
successive extensions, renewals, substitutions, refinancings or replacements so
long as (i) the aggregate amount of Indebtedness represented thereby is not
increased by such renewal, extension, substitution, refinancing or replacement,
(ii) in the case of Indebtedness of Adelphia, the average life and the date
such Indebtedness is scheduled to mature is not shortened and (iii) in the case
of Indebtedness of Adelphia, the new Indebtedness shall not be senior in right
of payment to the Indebtedness that is being extended, renewed, substituted,
refinanced or replaced.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such
Person as determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied after giving effect to the
following: (i) if, during or after such period, such Person or any of its
Subsidiaries shall have made any Asset Sale, Pro Forma EBITDA of such Person
and its Subsidiaries for such period shall be reduced by an amount equal to the
Pro Forma EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Sale for the period or increased by an amount equal
to the Pro Forma EBITDA (if negative) directly attributable thereto for such
period and (ii) if, during or after such period, such Person or any of its
Subsidiaries completes an acquisition of any Person or business which
immediately after such acquisition is a Subsidiary of such Person or whose
assets are held directly by such Person or a Subsidiary of such Person, Pro
Forma EBITDA shall be computed so as to give pro forma effect to the
acquisition of such Person or business; and provided further that, with respect
to Adelphia, all of the foregoing
S-39
<PAGE>
references to "Subsidiary" or "Subsidiaries" shall be deemed to refer only to a
"Restricted Subsidiary" or "Restricted Subsidiaries" of Adelphia.
"Rating Date" means the date which is 90 days prior to the earlier of (i) a
Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention of Adelphia to effect a Change of Control.
"Rating Decline" means the occurrence of the following on, or within 90 days
after, the date of public notice of the occurrence of a Change of Control or of
the intention by Adelphia to effect a Change of Control (which period shall be
extended so long as the rating of the Notes is under publicly announced
consideration for possible downgrade by Moody's or Standard & Poor's): (a) in
the event the Notes are rated by either Moody's or Standard & Poor's on the
Rating Date as Investment Grade Senior Debt, the rating of the Notes by both
Moody's and Standard & Poor's Corporation shall be below Investment Grade
Senior Debt; or (b) in the event the Notes are rated below Investment Grade
Senior Debt by both Moody's and Standard & Poor's on the Rating Date, the
rating of the Notes by either Moody's or Standard and Poor's shall be decreased
by one or more gradations (including gradations within rating categories as
well as between rating categories).
"Redeemable Dividend" means, for any dividend with regard to Redeemable
Stock, the quotient of the dividend divided by the difference between one and
the maximum statutory federal income tax rate (expressed as a decimal number
between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any Capital Stock that
by its terms or otherwise is required to be redeemed or is redeemable at the
option of the holder at any time prior to the maturity of the Notes.
"Restricted Investment" means any advance, loan, account receivable (other
than an account receivable arising in the ordinary course of business), or
other extension of credit (excluding, however, accrued and unpaid interest in
respect of any advance, loan or other extension of credit) or any capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others, or otherwise), any
purchase or ownership of any stocks, bonds, notes, debentures or other
securities (including, without limitation, any interests in any partnership or
joint venture) of, or any bank accounts with or guarantee of any Indebtedness
or other obligations of, any Unrestricted Subsidiary or Affiliate of Adelphia.
"Restricted Payment" means (i) any dividend or distribution (whether made in
cash, property or securities), on or with respect to any shares of Capital
Stock of Adelphia or Capital Stock of any Subsidiary which is consolidated with
Adelphia in accordance with generally accepted accounting principles
consistently applied, except for any dividend or distribution which is made
solely to Adelphia or another Subsidiary or dividends or distributions payable
solely in shares of Common Stock of Adelphia, or (ii) any redemption,
repurchase, retirement or other direct or indirect acquisition of (a)
Indebtedness of Adelphia which is subordinate in right of payment to the Notes,
except by exchange for or out of the proceeds of the substantially concurrent
issuance of Permitted Refinancing Indebtedness or from the proceeds of a sale
of Capital Stock by Adelphia or (b) shares of Capital Stock of Adelphia or any
warrants, rights or options to directly or indirectly purchase or acquire any
such Capital Stock of Adelphia or any securities exchangeable for or
convertible into any such shares, other than options issued or shares purchased
or granted under Adelphia's Stock Option Plan of 1986 or Adelphia's Restricted
Stock Bonus Plan, from any employee of Adelphia or any of
S-40
<PAGE>
its Subsidiaries who, together with any Person that, directly or indirectly,
controls (other than by virtue of being directly or indirectly the employer of
such employee), is controlled by or is under common control with such employee,
owns less than 1% of the outstanding Capital Stock of Adelphia, except for the
purchase, redemption, retirement or other acquisition of any shares of
Adelphia's Capital Stock by exchange for, or out of the proceeds of the
substantially concurrent sale of, other shares of its Capital Stock other than
any capital stock which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to January 15, 2009.
"Restricted Subsidiary" means (a) any Subsidiary of Adelphia, whether
existing on or after the date of the Indenture, unless such Subsidiary is an
Unrestricted Subsidiary or shall have been classified as an Unrestricted
Subsidiary by a resolution adopted by the Board of Directors of Adelphia and
(b) an Unrestricted Subsidiary which is reclassified as a Restricted Subsidiary
by a resolution adopted by the Board of Directors of Adelphia, provided that on
and after the date of such reclassification such Unrestricted Subsidiary shall
not incur Indebtedness other than that permitted to be incurred by a Restricted
Subsidiary under the provisions of the Indenture.
"Rigas Family" means collectively John J. Rigas and members of his immediate
family, any of their respective spouses, estates, lineal descendants, heirs,
executors, personal representatives, administrators, trusts for any of their
benefit and charitable foundations to which shares of Adelphia's Capital Stock
beneficially owned by any of the foregoing have been transferred.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which
more than 50% of the total voting power of the Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the
direction of the management and policies of such entity by contract or
otherwise if in accordance with generally accepted accounting principles such
entity is consolidated with the first-named Person for financial statement
purposes.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary, (b) any Subsidiary of Adelphia which is classified after the date
of the Indenture as an Unrestricted Subsidiary by a resolution adopted by the
Board of Directors of Adelphia and (c) any subsidiary which as of the date of
the Indenture has been declared an Unrestricted Subsidiary by a resolution
adopted by the Board of Directors of Adelphia; provided that a Subsidiary
organized or acquired after the date of the Indenture may be so classified as
an Unrestricted Subsidiary only if immediately after the date of such
classification, any investment by Adelphia and its Restricted Subsidiaries in
such Subsidiary made at the time of the organization or acquisition of such
Subsidiary would be a Restricted Investment permissible under the Indenture.
The Trustee shall be given prompt notice by Adelphia of each resolution adopted
by its Board of Directors under this provision, together with a copy of each
such resolution adopted.
S-41
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership, and
disposition of Notes by an initial beneficial owner of Notes that, for United
States federal income tax purposes, is not a "United States person" (a "Non-
United States Holder"). This discussion is based upon the United States federal
tax law now in effect, which is subject to change, possibly retroactively. For
purposes of this discussion, a "United States person" means a citizen or
resident of the United States; a corporation, partnership or other entity
created or organized in the United States or under the laws of the United
States or of any political subdivision thereof; an estate whose income is
includable in gross income for United States federal income tax purposes
regardless of its source; or a trust, if a U.S. court is able to exercise
primary supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the trust.
The tax treatment of the holders of the Notes may vary depending upon their
particular situations. U.S. persons acquiring Notes are subject to rules
different from those discussed below. In addition, certain other holders
(including insurance companies, tax exempt organizations, financial
institutions, and broker-dealers) may be subject to special rules not discussed
below. Prospective investors are urged to consult their tax advisors regarding
the United States federal tax consequences of acquiring, holding, and disposing
of Notes as well as any tax consequences that may arise under the laws of any
foreign, state, local, or other taxing jurisdiction.
Interest
Interest paid by Adelphia to a Non-United States Holder will not be subject
to United States federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the United
States by such Non-United States Holder and such Non-United States Holder
(i) does not actually or constructively own 10% of the total combined voting
power of stock of all classes of stock of Adelphia, (ii) is not a controlled
foreign corporation with respect to which Adelphia is a "related person" within
the meaning of the United States Internal Revenue Code of 1986, as amended (the
"Code"), and (iii) certifies, under penalties of perjury, that such holder is
not a United States person and provides such holder's name and address.
Interest paid to a Non-United States Holder that is effectively connected
with a United States trade or business conducted by such Non-United States
Holder is taxed at the graduated rates applicable to United States citizens,
resident aliens and domestic corporations, and is not subject to withholding
tax if the Non-United States Holder gives an appropriate statement to Adelphia
or its paying agent in advance of the interest payment. In addition to the
graduated tax, effectively connected interest received by a Non-United States
Holder that is a corporation may also be subject to an additional branch
profits tax at a rate of 30% (or such lower rate as may be specified by an
applicable income tax treaty).
Gain on Disposition
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption, or other
disposition of a Note unless (i) the gain is effectively connected with the
conduct of a trade or business within the United States by the Non-United
States Holder or (ii) in the case of a Non-United States Holder that is a
nonresident alien individual and
S-42
<PAGE>
holds the Note as capital asset, such holder is present in the United States
for 183 or more days in the taxable year and certain other requirements are
met.
If a Non-United States Holder falls under clause (i) in the preceding
paragraph, the holder will be taxed on the net gain derived from the sale under
the graduated United States federal income tax rates that are applicable to
United States citizens, resident aliens and domestic corporations, as the case
may be, and may be subject to withholding under certain circumstances (and,
with respect to corporate Non-United States Holders may also be subject to the
branch profits tax described above.) If an individual Non-United States Holder
falls under clause (ii) in the preceding paragraph, the holder generally will
be subject to United States federal income tax at a rate of 30% on the gain
derived from the sale and may be subject to withholding under certain
circumstances.
Federal Estate Taxes
If interest on the Notes is exempt from withholding of United States federal
income tax under the rules described above, the Notes will not be included in
the estate of a deceased Non-United States Holder for United States federal
estate tax purposes.
Information Reporting and Backup Withholding
Adelphia, when required, will report to the holders of Notes and the
Internal Revenue Service the amount of any interest paid on the Notes in each
calendar year and the amounts of tax withheld, if any, with respect to such
payments.
In the case of payments of interest to Non-United States Holders, Treasury
regulations provide that the 31% backup withholding tax and certain information
reports will not apply to such payments with respect to which either the
requisite certification, as described above, has been received or an exemption
has otherwise been established, except that neither Adelphia nor its payment
agent has actual knowledge that the holder is a United States person or that
the conditions of any other exemption are not in fact satisfied. Under Treasury
regulations, these information reporting and backup withholding requirements
will apply, however, to the gross proceeds paid to a Non-United States Holder
on the disposition of Notes by or through a United States office of a United
States or foreign broker, unless the holder certifies to the broker under
penalties of perjury as to its name, address, and status as a foreign person or
the holder otherwise establishes an exemption. Information reporting
requirements, but not backup withholding, will also apply to a payment of the
proceeds of a disposition of the Notes by or through a foreign office of a
United States broker or foreign brokers with certain type of relationships to
the United States unless such broker has documentary evidence in its file that
the holder of the Notes is not a United States person, and such broker has no
actual knowledge to the contrary, or the holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds of a disposition of the Notes by or through a foreign
office of a foreign broker not subject to the provisions outlined in the
preceding sentence.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability provided that the
required information is furnished to the Internal Revenue Service.
The Treasury Department has new regulations regarding the withholding and
information reporting rules discussed above. In general, the new regulations do
not significantly alter the
S-43
<PAGE>
substantive withholding and information reporting requirements, but rather
unify current certification procedures and forms and clarify reliance
standards. The new regulations are generally effective for payments made after
December 31, 1999, subject to certain transition rules. Non-United States
Holders should consult their own tax advisors with respect to the impact, if
any, of the new regulations.
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated November 10, 1999, we will sell to Credit Suisse First Boston
Corporation and Salomon Smith Barney Inc. as Representatives of the
Underwriters named below, the $500,000,000 aggregate amount of the Notes
offered hereby.
<TABLE>
<CAPTION>
Principal
Underwriter Amount
- ----------- ------------
<S> <C>
Credit Suisse First Boston Corporation............................ $329,333,333
Salomon Smith Barney Inc.......................................... 164,666,667
BNY Capital Markets, Inc.......................................... 1,000,000
Chase Securities Inc.............................................. 1,000,000
Nesbitt Burns Securities Inc...................................... 1,000,000
PNC Capital Markets, Inc.......................................... 1,000,000
Scotia Capital Markets (USA) Inc.................................. 1,000,000
TD Securities (USA) Inc........................................... 1,000,000
------------
Total $500,000,000
============
</TABLE>
The underwriters will offer the Notes for sale from time to time in one or
more transactions (which may include block transactions), in negotiated
transactions or otherwise, or a combination of both methods of sale, at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices. The underwriters may do so by selling the Notes
to or through broker/dealers, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the underwriters and/or
the purchasers of the Notes for whom they may act as agents. In connection with
the sale of the Notes, the underwriters may be deemed to have received
compensation from us in the form of underwriting discounts, and the
underwriters may also receive commissions from the purchasers of the Notes for
whom they may act as agents. The underwriters and any broker/dealers that
participate with the underwriters in the distribution of the Notes may be
deemed to be underwriters, and any discounts or commissions received by them
and any profit on the resale of the Notes by them may be deemed to be
underwriting discounts or commissions.
The underwriters are purchasing the Notes from us at 99.204% per Note
(representing $495,500,000 aggregate proceeds to us, after we deduct our out-
of-pocket expenses of approximately $500,000). The underwriting agreement
provides that the underwriters are obligated to purchase all the Notes if any
are purchased. The underwriting agreement provides that if an underwriter
defaults the purchase commitments of non-defaulting underwriters may be
increased or the offering may be terminated.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933, or contribute to payments which the underwriters may be
required to make in respect thereof.
S-44
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the Notes.
Representations of Purchasers
Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to us and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such Notes without the benefit of a
prospectus qualified under such securities laws, (ii) where required by law,
that such purchaser is purchasing as principal and not as agent, and (iii) such
purchaser has reviewed the text above under "Resale Restrictions".
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgement obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of Notes to whom the Securities Act (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any Notes
acquired by such purchaser pursuant to this offering. Such report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one such report must be
filed in respect of Notes acquired on the same date and under the same
prospectus exemption.
S-45
<PAGE>
Taxation and Eligibility for Investment
Canadian purchasers of Notes should consult their own legal and tax advisors
with respect to the tax consequences of an investment in the Notes in their
particular circumstances and with respect to the eligibility of the Notes for
investment by the purchaser under relevant Canadian legislation.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, as well as proxy statements
and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at its Regional Offices in Chicago, Illinois or New
York, New York. You may obtain further information about the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public over the Internet at the SEC's web site at
http://www.sec.gov, which contains reports, proxy statements and other
information regarding registrants like us that file electronically with the
SEC.
This prospectus supplement is part of a registration statement on Form S-3
filed by us with the SEC under the Securities Act. As permitted by SEC rules,
this prospectus supplement does not contain all of the information included in
the registration statement and the accompanying exhibits filed with the SEC.
You may refer to the registration statement and its exhibits for more
information.
The SEC allows us to "incorporate by reference" into this prospectus
supplement the information we file with the SEC. This means that we can
disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus supplement. If we subsequently file updating or superseding
information in a document that is incorporated by reference into this
prospectus supplement, the subsequent information will also become part of this
prospectus supplement and will supersede the earlier information.
We are incorporating by reference the following documents that we have filed
with the SEC:
. our Transition Report on Form 10-K for the nine months ended December
31, 1998, which incorporates, in Items 7 and 8 to such Form 10-K,
portions of the Form 10-K for the fiscal year ended December 31, 1998 of
Olympus Communications, L.P. and Olympus Capital Corporation, as amended
by Adelphia's Form 10-K/A;
. our Quarterly Reports on Form 10-Q for the quarters ended December 31,
1998, March 31, 1999 and June 30, 1999 (collectively, the "Form 10-Qs");
. our Current Reports on Form 8-K for the events dated January 11, 1999,
February 22, 1999, February 23, 1999, March 5, 1999, March 30, 1999,
March 31, 1999, April 9, 1999, April 19, 1999, April 21, 1999, April 23,
1999, April 27, 1999, April 28, 1999, May 26, 1999, June 22, 1999,
August 11, 1999, September 9, 1999, September 16, 1999, September 21,
1999, September 29, 1999, September 30, 1999, October 1, 1999, and
October 25, 1999;
. our definitive proxy statement dated October 4, 1999 with respect to the
Annual Meeting of Stockholders held on October 25, 1999; and
. the description of our Class A common stock contained in our
registration statement filed with the SEC under Section 12 of the
Exchange Act and subsequent amendments and reports filed to update such
description.
S-46
<PAGE>
We are also incorporating by reference into this prospectus supplement all
of our future filings with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act until the Common Stock Offering has been completed.
You may obtain a copy of any of our filings which are incorporated by
reference, at no cost, by writing to or telephoning us at the following
address:
Adelphia Communications Corporation
One North Main Street
Coudersport, Pennsylvania 16915
Attention: Investor Relations
Telephone: (814) 274-9830
You should rely only on the information provided in this prospectus
supplement or incorporated by reference. We have not authorized anyone to
provide you with different information. You should not assume that the
information in this prospectus supplement is accurate as of any date other than
the date on the first page of this prospectus supplement. We are not making
this offer of securities in any state or country in which the offer or sale is
not permitted.
LEGAL MATTERS
The validity of the Notes will be passed upon for us by Buchanan Ingersoll
Professional Corporation, Pittsburgh, Pennsylvania. Attorneys of that firm who
are representing us in this Offering own an aggregate of 5,850 shares of our
Class A common stock and 16,460 shares of Adelphia Business Solutions Class A
common stock. The validity of the Notes offered hereby will be passed upon on
behalf of the underwriters by Latham & Watkins, New York, New York.
EXPERTS
The consolidated financial statements of Adelphia and its subsidiaries as of
March 31, 1998 and December 31, 1998, and for the years ended March 31, 1997
and 1998 and the nine months ended December 31, 1998, and the consolidated
financial statements of Olympus and its subsidiaries as of December 31, 1997
and 1998, and for each of the three years in the period ended
December 31, 1998, all incorporated in this prospectus supplement by reference
from Adelphia's Transition Report on Form 10-K for the nine months ended
December 31, 1998, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of FrontierVision Partners, L.P. and
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three year period ended December 31, 1998, have been incorporated by reference
herein from Adelphia's Current Report on Form 8-K filed September 9, 1999, in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated financial statements of Harron Communications Corp. and
subsidiaries as of December 31, 1998 and 1997, and for each of the three years
in the period ended
S-47
<PAGE>
December 31, 1998, have been incorporated in this prospectus supplement by
reference from Adelphia's Current Report on Form 8-K filed September 9, 1999,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Century Communication Corp. and
subsidiaries as of May 31, 1998 and 1997 and for each of the three years in the
period ended May 31, 1998, incorporated by reference in this prospectus
supplement from Adelphia's Current Report on Form 8-K filed April 19, 1999, and
the consolidated financial statements of Century Communications Corp. and
subsidiaries as of May 31, 1999 and 1998 and for each of the three years in the
period ended May 31, 1999, incorporated by reference in this prospectus
supplement from Adelphia's Current Report on Form 8-K filed September 9, 1999
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
S-48
<PAGE>
Prospectus
ADELPHIA COMMUNICATIONS CORPORATION
Debt Securities
Preferred Stock
Class A Common Stock
Class B Common Stock
This prospectus relates to:
. Adelphia Communications Corporation's debentures, notes and other debt
securities in one or more series which may be senior debt securities or
subordinated debt securities,
. shares of preferred stock of Adelphia issuable in series designated by the
board of directors of Adelphia,
. shares of Class A common stock, and
. shares of Class B common stock, which may be offered in combination or
separately from time to time by Adelphia.
The aggregate initial offering price of all of the securities which may be
sold pursuant to this prospectus will not exceed U.S. $5,000,000,000, or its
equivalent based on the applicable exchange rate at the time of issue in one or
more foreign currencies or currency units as shall be designated by Adelphia.
The Class A common stock is quoted on the Nasdaq National Market. The Class
A common stock's ticker symbol is "ADLAC." On May 6, 1999, the closing sale
price on the Nasdaq National Market of a single share of Class A common stock
was $75.25.
Our common stock includes Class A and Class B common stock. The rights of
holders of the Class A common stock and Class B common stock differ with
respect to certain aspects of dividends, liquidations and voting. The Class A
common stock has preferential rights with respect to cash dividends and
distributions upon the liquidation of Adelphia. Holders of Class B common stock
are entitled to greater voting rights than the holders of Class A common stock;
however, the holders of Class A common stock, voting as a separate class, are
entitled to elect one of Adelphia's directors.
You should carefully review "Risk Factors" beginning on page 4 for a
discussion of things you should consider when investing in securities of
Adelphia.
----------------
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
This Prospectus May Not Be Used To Consummate Sales Of Securities Unless
Accompanied By A Prospectus Supplement.
----------------
The date of this Prospectus is May 14, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Adelphia................................................................... 2
Risk Factors............................................................... 4
Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.. 16
Dilution................................................................... 17
Use of Proceeds............................................................ 17
Description of Debt Securities............................................. 18
Description of Capital Stock............................................... 31
Book Entry Issuance........................................................ 36
Plan of Distribution....................................................... 38
Where You Can Find More Information........................................ 40
Legal Matters.............................................................. 41
Experts.................................................................... 42
</TABLE>
<PAGE>
ADELPHIA
Adelphia is a leader in the telecommunications industry with cable
television and local telephone operations. Our operations consist of providing
telecommunications services primarily over our networks, which are commonly
referred to as broadband networks because they can transmit large quantities of
voice, video and data by way of digital or analog signals. As of December 31,
1998, we owned or managed cable television systems with broadband networks that
passed in front of 3,252,830 homes and served 2,304,325 basic subscribers. John
J. Rigas, the Chairman, President, Chief Executive Officer and founder of
Adelphia, has owned and operated cable television systems since 1952.
We own cable systems in twelve states which are organized into seven
regional clusters: Western New York, Virginia, Western Pennsylvania, New
England, Eastern Pennsylvania, Ohio and New Jersey. These systems are located
primarily in suburban areas of large and medium-sized cities within the 50
largest television markets. As of December 31, 1998, the broadband networks for
these systems passed in front of 2,131,978 homes and served 1,528,307 basic
subscribers.
We also provide management and consulting services to other partnerships and
corporations engaged in the ownership and operation of cable television
systems. John J. Rigas and members of his immediate family, including entities
they own or control, have substantial ownership interests in these partnerships
and corporations. As of December 31, 1998, the broadband networks for cable
systems owned by these Rigas family partnerships and corporations passed in
front of 177,250 homes and served 134,443 basic subscribers.
We also own a 50% voting interest and nonvoting preferred limited
partnership interests in Olympus Communications, L.P. Olympus is a joint
venture limited partnership that operates a large cable system in Florida. As
of December 31, 1998, the broadband networks for this system passed in front of
943,602 homes and served 641,575 basic subscribers.
Through our subsidiary, Hyperion Telecommunications, Inc., we own and
operate a large competitive local exchange carrier in the eastern United
States. This means that Hyperion provides its customers with alternatives to
the incumbent local telephone company for local telephone and
telecommunications services. Hyperion's telephone operations are referred to as
being facilities based, which means it generally owns the local
telecommunications networks and facilities it uses to deliver these services,
rather than leasing or renting the use of another party's networks to do so. As
of December 31, 1998, Hyperion managed and operated 22 telecommunications
networks, including two under construction, serving 46 markets. Hyperion's
Class A common stock is listed on the Nasdaq National Market under the symbol
"HYPT."
Our executive offices are located at Main at Water Street, Coudersport,
Pennsylvania 16915, and our telephone number is (814) 274-9830.
2
<PAGE>
Recent Developments
Please see the applicable prospectus supplement and Adelphia's recent public
filings for recent developments.
3
<PAGE>
RISK FACTORS
Before you invest in Adelphia's securities, you should be aware that there
are various risks, including those described below. You should consider
carefully these risk factors together with all of the other information
included in this prospectus before you decide to purchase any securities of
Adelphia.
High Level Of
Indebtedness
As of December 31, Adelphia has a substantial amount of debt. We
1998, we owed borrowed this money to purchase and to expand our
approximately $3.5 cable systems and other operations and, to a lesser
billion. Our high level extent, for investments and loans to our
of indebtedness can have affiliates. At December 31, 1998, our indebtedness
important adverse totaled approximately $3,527,452,000. This included
consequences to us and approximately:
to you.
. $1,810,212,000 of Adelphia Parent Company
public debt. When we use the term "Adelphia
Parent Company" in this prospectus, we are
referring only to Adelphia Communications
Corporation as a parent holding company
entity, and not to its subsidiaries;
. $1,246,456,000 of debt owed by our
subsidiaries to banks, other financial
institutions and other persons; and
. $470,784,000 of public debt owed by Hyperion.
Debt service consumes Our high level of indebtedness can have important
a substantial portion of adverse consequences to us and to you. It requires
the cash we generate. that we spend a substantial portion of the cash we
This could affect our get from our business to repay the principal and
ability to invest in our interest on these debts. Otherwise, we could use
business in the future these funds for general corporate purposes or for
as well as to react to capital improvements. Our ability to obtain new
changes in our industry loans for working capital, capital expenditures,
or economic downturns. acquisitions or capital improvements may be limited
by our current level of debt. In addition, having
such a high level of debt could limit our ability
to react to changes in our industry and to economic
conditions generally. In addition to our debt, at
December 31, 1998, the Adelphia Parent Company also
had approximately $148,191,000 and Hyperion had
approximately $228,674,000 of redeemable
exchangeable preferred stock which contain payment
obligations that are
4
<PAGE>
similar to our debt obligations in these respects.
Olympus also has a substantial amount of debt.
Approximately 32% of Our debt comes due at various times up to the year
this debt must be paid 2009, including an aggregate of approximately
by April 1, 2003 and all $1,126,169,000 which, as of December 31, 1998, we
of it must be paid by must pay by April 1, 2003.
2009.
Our Business Requires Our business requires substantial additional
Substantial Additional financing on a continuing basis for capital
Financing And If We Do expenditures and other purposes including:
Not Obtain That
Financing We May Not Be . constructing and upgrading our plant and
Able To Upgrade Our networks--some of these upgrades we must make
Plant, Offer Services, to comply with the requirements of local
Make Payments When Due cable franchise authorities;
Or Refinance Existing
Debt. . offering new services;
. scheduled principal and interest payments;
. refinancing existing debt; and
. acquisitions and investments.
There can be no guarantee that we will be able to
issue additional debt or sell stock or other
additional equity on satisfactory terms, or at all,
to meet our future financing needs.
We Have Had Large Losses The Total Convertible Preferred Stock, Common Stock
And Negative and Other Stockholders' Equity (Deficiency) at
Stockholders' Equity And December 31, 1998 was a deficit of approximately
We Expect This To $1,021,746,000. Our continuing net losses, which
Continue are mainly due to our high levels of depreciation
and amortization and interest expense, have created
this deficiency. Our recent net losses applicable
to our common stockholders were approximately as
follows for the periods specified:
. fiscal year ended March 31, 1996--
$119,894,000;
. fiscal year ended March 31, 1997--
$130,642,000;
. fiscal year ended March 31, 1998--
$192,729,000; and
. nine months ended December 31, 1998--
$135,848,000.
5
<PAGE>
We expect to continue to incur large net losses for
the next several years.
Our earnings have Our earnings could not pay for our combined fixed
been insufficient to pay charges and preferred stock dividends during these
for our fixed charges periods by the amounts set forth in the table
and preferred stock below, although combined fixed charges and
dividends. preferred stock dividends included substantial non-
cash charges for depreciation, amortization and
non-cash interest expense on some of our debts and
the non-cash expense of Hyperion's preferred stock
dividends:
<TABLE>
<CAPTION>
Earnings Non-Cash
Deficiency Charges
------------ ------------
<S> <C> <C>
. fiscal year ended
March 31, 1996 $ 78,189,000 $127,319,000
. fiscal year ended
March 31, 1997 $ 61,848,000 $165,426,000
. fiscal year ended
March 31, 1998 $113,941,000 $195,153,000
. nine months ended
December 31, 1998 $116,899,000 $186,022,000
</TABLE>
Historically, the cash we generate from our
If we could not operating activities and borrowings has been
refinance our debt or sufficient to meet our requirements for debt
obtain new loans, we service, working capital, capital expenditures, and
would likely have to investments in and advances to our affiliates, and
consider various options we have depended on getting additional borrowings
such as the sale of to meet our liquidity requirements. Although in the
additional equity or past we have been able both to refinance our debt
some of our assets to and to obtain new debt, there can be no guarantee
meet the principal and that we will be able to continue to do so in the
interest payments we future or that the cost to us or the other terms
owe, negotiate with our which would affect us would be as favorable to us
lenders to restructure as our current loans and credit agreements. We
existing loans or believe that our business will continue to generate
explore other options cash and that we will be able to obtain new loans
available under to meet our cash needs. However, the covenants in
applicable laws the indentures and credit agreements for our
including those under current debt limit our ability to borrow more
reorganization or money.
bankruptcy laws. We can
not guarantee that any
options available to us
would enable us to repay
our debt in full.
6
<PAGE>
Competition
Our cable television The telecommunications services provided by
business is subject to Adelphia are subject to strong competition and
strong competition from potential competition from various sources. Our
several sources which cable television systems compete with other means
could adversely affect of distributing video to home televisions such as
revenue or revenue Direct Broadcast Satellite systems, commonly known
growth. as DBS systems, and Multichannel Multipoint
Distribution systems. Some of the regional Bell
telephone operating companies and other local
telephone companies are in the process of entering
the video-to-home business and several have
expressed their intention to enter the video-to-
home business. In addition, some regional Bell
operating companies and local telephone companies
have facilities which are capable of delivering
cable television service. The equipment which
telephone companies use in providing local exchange
service may give them competitive advantages over
us in distributing video to home televisions. The
regional Bell operating companies and other
potential competitors have much greater resources
than Adelphia and would constitute formidable
competition for our cable television business. We
cannot predict either the extent to which
competition will continue to materialize or, if
such competition materializes, the extent of its
effect on our cable television business.
We also face competition from other communications
and entertainment media, including conventional
off-air television broadcasting services,
newspapers, movie theaters, live sporting events
and home video products. We cannot predict the
extent to which competition may affect us.
Hyperion's operations In each of the markets served by Hyperion's
are also subject to risk networks, the competitive local exchange carrier
because Hyperion services offered by Hyperion compete principally
competes principally with the services offered by the incumbent local
with established local telephone exchange carrier company serving that
telephone carriers that area. Local telephone companies have long-standing
have long-standing relationships with their customers, have the
utility relationships potential to subsidize competitive services from
with their customers and monopoly service revenues, and benefit from
pricing flexibility for favorable state and federal regulations. The merger
local telephone of Bell Atlantic and NYNEX created a very large
services. company whose combined territory covers a
substantial portion of Hyperion's markets. Other
combinations are occurring in the industry, which
may have a material adverse effect on Hyperion and
us.
7
<PAGE>
We believe that local telephone companies will gain
increased pricing flexibility from regulators as
competition increases. Hyperion's operating results
and cash flow could be materially and adversely
affected by actions by regulators, including
permitting the incumbent local telephone companies
in Hyperion's markets to do the following:
. lower their rates substantially;
. engage in aggressive volume and term discount
pricing practices for their customers; or
. charge excessive fees to Hyperion for
interconnection to the incumbent local
telephone company's networks.
If the regional Bell The regional Bell operating companies can now
telephone companies obtain regulatory approval to offer long distance
could get regulatory services if they comply with the interconnection
approval to offer long requirements of the federal Telecommunications Act
distance service in of 1996. To date, the FCC has denied the requests
competition with for approval filed by regional Bell operating
Hyperion's significant companies in Hyperion's operating areas. However,
customers, some of an approval of such a request could result in
Hyperion's major decreased market share for the major long distance
customers could lose carriers which are among Hyperion's significant
market share. customers. This could have a material adverse
effect on Hyperion.
The regional Bell Some of the Regional Bell operating companies have
telephone companies also recently filed petitions with the FCC
continue to seek other requesting waivers of other obligations under the
regulatory approvals federal Telecommunications Act of 1996. These
that could significantly involve services Hyperion also provides such as
enhance their high-speed data, long distance, and services to
competitive position Internet Service Providers. If the FCC grants the
against Hyperion. regional Bell operating companies' petitions, this
could have a material adverse effect on Hyperion.
Potential competitors Potential competitors for Hyperion include other
to Hyperion's competitive local exchange carriers, incumbent
telecommunications local telephone companies which are not subject to
services include the regional Bell operating companies' restrictions on
regional Bell telephone offering long distance service, AT&T, MCIWorldCom,
companies, AT&T, Sprint and other long distance carriers, cable
MCIWorldCom and Sprint, television companies, electric utilities, microwave
electric utilities and carriers, wireless telecommunications providers and
other companies that private networks built by large end users. Both
have advantages over AT&T and MCIWorldCom have announced that they have
Hyperion. begun to offer local telephone services in some
areas of the country, and AT&T recently announced a
new wireless technology
8
<PAGE>
for providing local telephone service. AT&T and
Tele-Communications, Inc. have merged. Although
Hyperion has good relationships with the long
distance carriers, they could build their own
facilities, purchase other carriers or their
facilities, or resell the services of other
carriers rather than use Hyperion's services when
entering the market for local exchange services.
Many of Hyperion's current and potential
competitors, particularly incumbent local telephone
companies, have financial, personnel and other
resources substantially greater than those of
Hyperion, as well as other competitive advantages
over Hyperion.
We Are Subject To
Extensive Regulation
Our cable television The cable television industry and the provision of
and telecommunications local telephone exchange services are subject to
businesses are heavily extensive regulation at the federal, state and
regulated as to rates we local levels, and many aspects of such regulation
can charge and other are currently the subject of judicial proceedings
matters. This regulation and administrative or legislative proposals. In
could limit our ability particular, the FCC adopted regulations that limit
to increase rates, cause our ability to set and increase rates for our basic
us to decrease then and cable programming service packages and for the
current rates or require provision of cable television-related equipment.
us to refund previously The law permits certified local franchising
collected fees. authorities to order refunds of rates paid in the
previous twelve-month period determined to be in
excess of the permitted reasonable rates. It is
possible that rate reductions or refunds of
previously collected fees may be required in the
future.
The cable television industry is subject to state
and local regulations and we must comply with rules
of the local franchising authorities to retain and
renew our cable franchises, among other matters.
There can be no assurances that the franchising
authorities will not impose new and more
restrictive requirements as a condition to
franchise renewal.
9
<PAGE>
The federal
Telecommunications Act The federal Telecommunications Act of 1996
of 1996 may have a substantially changed federal, state and local laws
significant impact on and regulations governing our cable television and
our cable television and telecommunications businesses. This law could
telephone businesses. materially affect the growth and operation of the
cable television industry and the cable services we
provide. Although this legislation may lessen
regulatory burdens, the cable television industry
may be subject to new competition as a result.
There are numerous rulemakings that have been and
continue to be undertaken by the FCC which will
interpret and implement the provisions of this law.
Furthermore, portions of this law have been, and
likely other portions will be, challenged in the
courts. We cannot predict the outcome of such
rulemakings or lawsuits or the shortand long-term
effect, financial or otherwise, of this law and FCC
rulemakings on us.
Similarly, the Telecommunications Act of 1996
removes entry barriers for all companies and could
increase substantially the number of competitors
offering comparable services in Hyperion's markets
or potential markets. Furthermore, we cannot
guarantee that rules adopted by the FCC or state
regulators or other legislative or judicial
initiatives relating to the telecommunications
industry will not have a material adverse effect on
Hyperion.
Unequal Voting Rights Of Adelphia has two classes of common stock--Class A
Stockholders which carries one vote per share and Class B which
carries ten votes per share. Under our Certificate
of Incorporation, the Class A shares elect only one
of our directors.
Control Of Voting Power As of May 1, 1999, the Rigas family beneficially
By The Rigas Family owned outstanding shares representing about 42% of
the total number of outstanding shares of both
The Rigas family can classes of Adelphia's common stock and about 77% of
control stockholder the total voting power of Adelphia's shares. The
decisions on very public holds a majority of the outstanding Class A
important matters. shares, although the Rigas family also owns about
30% of those shares as of May 1, 1999. The Rigas
family owns about 99% of Adelphia's Class B shares.
The Rigas family also owns shares of Adelphia's 8
1/8% Series C Cumulative Convertible preferred
stock which, if converted, would increase its
voting power and beneficial ownership. The Rigas
family also has agreed to acquire 4,114,549 shares
of Class B common stock, and has rights to acquire
up to an additional 2,057,275 shares of Class B
10
<PAGE>
common stock. As a result of the Rigas family's
stock ownership and an agreement among the Class B
stockholders, members of the Rigas family as of May
1, 1999 have the power to elect seven of eight
Adelphia directors, and if they converted their
convertible preferred stock might be able to elect
all eight directors. In addition, the Rigas family
could control stockholder decisions on other
matters such as amendments to our Certificate of
Incorporation and Bylaws, and mergers or other
fundamental corporate transactions.
There Are Potential John J. Rigas and the other executive officers of
Conflicts Of Interest Adelphia, including other members of the Rigas
Between Adelphia And The family, own other corporations and partnerships,
Rigas Family which are managed by us for a fee. Subject to the
restrictions contained in a business opportunity
agreement regarding future acquisitions, Rigas
family members and the executive officers are free
to continue to own these interests and acquire
additional interests in cable television systems.
These activities could present a conflict of
interest with us, such as how much time our
executive officers devote to our business. In
addition, there have been and will continue to be
transactions between us and the executive officers
or the other entities they own or have affiliations
with. Our public debt indentures contain covenants
that place some restrictions on transactions
between us and our affiliates.
Holding Company The Adelphia Parent Company directly owns no
Structure And Potential significant assets other than stock, partnership
Impact Of Restrictive interests, equity and other interests in our
Covenants In Subsidiary subsidiaries and in other companies. This creates
Debt Agreements risks regarding our ability to provide cash to the
Adelphia Parent Company to repay the interest and
principal which it owes, our ability to pay cash
dividends to our common stockholders in the future,
and the ability of our subsidiaries and other
companies to respond to changing business and
economic conditions and to get new loans.
The Adelphia Parent The public indentures, and the credit agreements
Company depends on its for bank and other financial institution loans, of
subsidiaries and other our subsidiaries and other companies restrict their
companies in which it ability and the ability of the companies they own
has investments, to fund to make payments to the Adelphia Parent Company.
its cash needs. These agreements also place other restrictions on
the borrower's ability to borrow new funds and
include requirements for the borrowers to remain in
11
<PAGE>
compliance with the loans. The ability of a
subsidiary or a company in which we have invested
to comply with debt restrictions may be affected by
events that are beyond our control. The breach of
any of these covenants could result in a default
which could result in all loans and other amounts
owed to its lenders, to be due and payable. Our
subsidiaries and companies in which we have
invested might not be able to repay in full the
accelerated loans.
It Is Unlikely You Will Adelphia has never declared or paid cash dividends
Receive A Return On Your on any of its common stock and has no intention of
Shares Through The doing so in the foreseeable future. As a result, it
Payment Of Cash is unlikely that you will receive a return on your
Dividends shares through the payment of cash dividends.
Future Sales Of Sales of a substantial number of shares of Class A
Outstanding Common Stock common stock or Class B common stock, including
Could Adversely Affect sales by any pledgees of such shares, could
The Market Price Of Our adversely affect the market price of our Class A
Common Stock common stock and could impair our ability in the
future to raise capital through stock offerings.
Under various registration rights agreements or
arrangements, as of May 1, 1999, the Rigas family
has the right, subject to some limitations, to
require Adelphia to register substantially all of
the shares which it owns of the Class A common
stock--15,029,119 shares, Class B common stock--
10,736,544 shares and the equivalent number of
shares of Class A common stock into which they may
be converted, and convertible preferred stock--
80,000 shares and the 9,433,962 shares of Class A
common stock into which they may be converted.
Among others, Adelphia has registered or agreed to
register for public sale the following shares:
. for the Rigas family--up to 11,000,000 shares
of Class A common stock, 80,000 shares of
convertible preferred stock and the Class A
common stock issuable upon conversion of the
convertible preferred stock;
. for Booth American Company--3,571,428 shares
of Class A common stock owned as of March 24,
1998;
12
<PAGE>
. for the selling stockholders receiving shares
in the Verto Communications, Inc.
acquisition--2,561,024 shares of Class A
common stock;
. for a Rigas family partnership--4,000,000
shares of Class A common stock purchased by
it in connection with the January 14, 1999
equity offerings;
. for the owners of FrontierVision Partners,
L.P.--7,000,000 shares of Class A common
stock in connection with the FrontierVision
acquisition pending as of May 1, 1999, and
for the benefit of FrontierVision in certain
circumstances if that transaction does not
close, 1,000,000 shares of Class A common
stock; and
. in connection with the Century Communications
Corp. acquisition pending as of May 1, 1999,
Adelphia expects to register approximately
48,700,000 shares of Class A common stock.
Approximately 14,904,000 shares of Class A common
stock and up to 80,000 shares of convertible
preferred stock, including the underlying Class A
common stock, have been pledged in connection with
margin loans made to members of the Rigas family.
These pledgees could freely sell any shares
acquired upon a foreclosure.
Purchasers Of Our Common Persons purchasing common stock will incur
Stock Will Incur immediate and substantial net tangible book value
Immediate Dilution dilution.
Adelphia's Acquisitions Because we are experiencing a period of rapid
And Expansion Could expansion through acquisition, the operating
Involve Operational complexity of Adelphia, as well as the
Risks responsibilities of management personnel, have
increased. Our ability to manage such expansion
effectively will require us to continue to expand
and improve our operational and financial systems
and to expand, train and manage its employee base.
The Century, FrontierVision and Harron
Communications Corp. acquisitions, all pending as
of May 1, 1999, involve the acquisition of
companies that have previously operated
independently. We may not be able to integrate the
13
<PAGE>
operations of these companies without some level of
difficulty, such as the loss of key personnel.
There is no guarantee that we will be able to
realize the benefits expected from the integration
of operations from these transactions.
Because the cable systems in our pending
acquisitions are in the same industry as those of
Adelphia, the acquired systems will generally be
subject to the same risks as those of Adelphia,
such as those relating to competition, regulation,
year 2000 issues and technological developments.
Year 2000 Issues Present The year 2000 issue refers to the inability of
Risks To Our Business computerized systems and technologies to recognize
Operations In Several and process dates beyond December 31, 1999. This
Ways could present risks to the operation of our
business in several ways. Our computerized business
applications that could be adversely affected by
the year 2000 issue include:
. information processing and financial
reporting systems;
. customer billing systems;
. customer service systems;
. telecommunication transmission and reception
systems; and
. facility systems.
System failure or miscalculation could result in an
inability to process transactions, send invoices,
accept customer orders or provide customers with
products and services. Although we are evaluating
the impact of the year 2000 issue on our business
and are seeking to implement necessary solutions,
this process has not been completed.
There can be no assurance that the systems of other
companies on which our systems rely will be year
2000 ready or timely converted into systems
compatible with our systems. Our failure or a
third-party's failure to become year 2000 ready, or
our inability to become compatible with third
parties with which we have a material relationship,
may have a material adverse effect on us, including
significant service interruption or outages;
however, we cannot currently estimate the extent of
any such adverse effects.
14
<PAGE>
Forward-Looking
Statements In This The statements contained or incorporated by
Prospectus Are Subject reference in this prospectus that are not
To Risks And historical facts are "forward-looking statements"
Uncertainties and can be identified by the use of forward-looking
terminology such as "believes," "expects," "may,"
"will," "should," "intends" or "anticipates" or the
negative thereof or other variations thereon or
comparable terminology, or by discussions of
strategy that involve risks and uncertainties.
Certain information set forth or incorporated by
reference in this prospectus, including
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Adelphia's
1998 Annual Report on Form 10-K and in Adelphia's
Form 10-Qs, is forward-looking, such as information
relating to the effects of future regulation,
future capital commitments and the effects of
competition. Such forward-looking information
involves important risks and uncertainties that
could significantly affect expected results in the
future from those expressed in any forward-looking
statements made by, or on behalf of, us. These
risks and uncertainties include, but are not
limited to, uncertainties relating to economic
conditions, the availability and cost of capital,
acquisitions and divestitures, government and
regulatory policies, the pricing and availability
of equipment, materials, inventories and
programming, technological developments, year 2000
issues and changes in the competitive environment
in which we operate. Persons reading this
prospectus are cautioned that such statements are
only predictions and that actual events or results
may differ materially. In evaluating such
statements, readers should specifically consider
the various factors which could cause actual events
or results to differ materially from those
indicated by such forward-looking statements.
15
<PAGE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends of Adelphia for the periods indicated.
For purposes of calculating the ratio of earnings available to cover combined
fixed charges and preferred stock dividends:
. earnings consist of loss before income taxes and extraordinary items
plus fixed charges, excluding capitalized interest, and
. fixed charges consist of interest, whether expensed or capitalized, plus
amortization of debt issuance costs plus the assumed interest component
of rent expense.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
- ----------------------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C>
-- -- -- -- --
</TABLE>
For the years ended March 31, 1994, 1995, 1996, 1997 and 1998, and the nine
months ended December 31, 1998, Adelphia's earnings were insufficient to cover
its combined fixed charges and preferred stock dividends by approximately
$65,997,000, $69,146,000, $78,189,000, $61,848,000, $113,941,000, and
$116,899,000, respectively.
16
<PAGE>
DILUTION
The net tangible book value of Adelphia's common stock as of December 31,
1998 was a deficit of approximately $2,050,905,000 or negative $48.72 a share.
Net tangible book value per share represents the amount of Adelphia's
convertible preferred stock, common stock and other stockholders' equity
(deficiency), less intangible assets, divided by shares of Adelphia's common
stock outstanding. Purchasers of common stock will have an immediate dilution
of net tangible book value which, due to our having a net tangible book value
deficit, will exceed the purchase price per share. For example, in the January
14, 1999 equity offerings, the purchase price of a single share initially sold
to the public was $45.00 and the net tangible book value dilution per share was
$78.53 based on net tangible book value as of December 31, 1998. Net tangible
book value dilution per share represents the difference between the amount per
share paid by purchasers of shares of Class A common stock in an offering by
Adelphia and the pro forma net tangible book value per share of the common
stock immediately after completion of such offering.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, we
intend to apply the net proceeds from the sale of the securities to which this
prospectus relates to general funds to be used for general corporate purposes
including capital expenditures, acquisitions, the reduction of indebtedness,
investments and other purposes. We may invest funds not required immediately
for such purposes in short-term obligations or we may use them to reduce the
future level of our indebtedness.
17
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description sets forth general terms and provisions of the
debt securities to which any prospectus supplement may relate. We will describe
the particular terms and provisions of the series of debt securities offered by
a prospectus supplement, and the extent to which such general terms and
provisions described below may apply thereto, in the prospectus supplement
relating to such series of debt securities.
The senior debt securities are to be issued in one or more series under an
indenture, as supplemented or amended from time to time between Adelphia and an
institution that we will name in the related prospectus supplement, as trustee.
For ease of reference, we will refer to the indenture relating to senior debt
securities as the senior indenture and we will refer to the trustee under that
indenture as the senior trustee. The subordinated debt securities are to be
issued in one or more series under an indenture, as supplemented or amended
from time to time, between Adelphia and an institution that we will name in the
related prospectus supplement, as trustee. For ease of reference, we will refer
to the indenture relating to subordinate debt securities as the subordinate
indenture and we will refer to the trustee under that indenture as the
subordinate trustee. This summary of certain terms and provisions of the debt
securities and the indentures is not necessarily complete, and we refer you to
the copy of the form of the indentures which are filed as an exhibit to the
registration statement of which this prospectus forms a part, and to the Trust
Indenture Act. Whenever we refer to particular defined terms of the indentures
in this Section or in a prospectus supplement, we are incorporating these
definitions into this prospectus or the prospectus supplement.
General
The debt securities will be issuable in one or more series pursuant to an
indenture supplemental to the applicable indenture or a resolution of
Adelphia's board of directors or a committee of the board. Unless otherwise
specified in a prospectus supplement, each series of senior debt securities
will rank pari passu in right of payment with all of Adelphia Parent Company's
other senior unsecured obligations. Each series of subordinated debt securities
will be subordinated and junior in right of payment to the extent and in the
manner set forth in the subordinated indenture and the supplemental indenture
relating to that debt. Except as otherwise provided in a prospectus supplement,
the indentures do not limit the incurrence or issuance of other secured or
unsecured debt of Adelphia, whether under the indentures, any other indenture
that Adelphia may enter into in the future or otherwise. For more information,
you should read the prospectus supplement relating to a particular offering of
securities.
The applicable prospectus supplement or prospectus supplements will describe
the following terms of each series of debt securities:
. the title of the debt securities and whether such series constitutes
senior debt securities or subordinated debt securities;
. any limit upon the aggregate principal amount of the debt securities;
18
<PAGE>
. the date or dates on which the principal of the debt securities is
payable or the method of that determination or the right, if any, of
Adelphia to defer payment of principal;
. the rate or rates, if any, at which the debt securities will bear
interest (including reset rates, if any, and the method by which any
such rate will be determined), the interest payment dates on which
interest will be payable and the right, if any, of Adelphia to defer any
interest payment;
. the place or places where, subject to the terms of the indenture as
described below under the caption "--Payment and Paying Agents," the
principal of and premium, if any, and interest, if any, on the debt
securities will be payable and where, subject to the terms of the
indenture as described below under the caption "--Denominations,
Registration and Transfer," Adelphia will maintain an office or agency
where debt securities may be presented for registration of transfer or
exchange and the place or places where notices and demands to or upon
Adelphia in respect of the debt securities and the indenture may be
made;
. any period or periods within, or date or dates on which, the price or
prices at which and the terms and conditions upon which debt securities
may be redeemed, in whole or in part, at the option of Adelphia pursuant
to any sinking fund or otherwise;
. the obligation, if any, of Adelphia to redeem or purchase the debt
securities pursuant to any sinking fund or analogous provisions or at
the option of a holder and the period or periods within which, the price
or prices at which, the currency or currencies including currency unit
or units, in which and the other terms and conditions upon which the
debt securities will be redeemed or purchased, in whole or in part,
pursuant to such obligation;
. the denominations in which any debt securities will be issuable if other
than denominations of $1,000 and any integral multiple thereof;
. if other than in U.S. Dollars, the currency or currencies, including
currency unit or units, in which the principal of, and premium, if any,
and interest, if any, on the debt securities will be payable, or in
which the debt securities shall be denominated;
. any additions, modifications or deletions in the events of default or
covenants of Adelphia specified in the indenture with respect to the
debt securities;
. if other than the principal amount, the portion of the principal amount
of debt securities that will be payable upon declaration of acceleration
of the maturity thereof;
. any additions or changes to the indenture with respect to a series of
debt securities that will be necessary to permit or facilitate the
issuance of the series in bearer form, registrable or not registrable as
to principal, and with or without interest coupons;
19
<PAGE>
. any index or indices used to determine the amount of payments of
principal of and premium, if any, on the debt securities and the manner
in which such amounts will be determined;
. subject to the terms described under "--Global Debt Securities," whether
the debt securities of the series will be issued in whole or in part in
the form of one or more global securities and, in such case, the
depositary for the global securities;
. the appointment of any trustee, registrar, paying agent or agents;
. the terms and conditions of any obligation or right of Adelphia or a
holder to convert or exchange debt securities into preferred securities
or other securities;
. whether the defeasance and covenant defeasance provisions described
under the caption "--Satisfaction and Discharge; Defeasance" will be
inapplicable or modified;
. any applicable subordination provisions in addition to those set forth
herein with respect to subordinated debt securities; and
. any other terms of the debt securities not inconsistent with the
provisions of the applicable indenture.
We may sell debt securities at a substantial discount below their stated
principal amount, bearing no interest or interest at a rate which at the time
of issuance is below market rates. We will describe material U.S. federal
income tax consequences and special considerations applicable to the debt
securities in the applicable prospectus supplement.
If the purchase price of any of the debt securities is payable in one or
more foreign currencies or currency units or if any debt securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any debt securities is
payable in one or more foreign currencies or currency units, we will set forth
the restrictions, elections, material U.S. federal income tax considerations,
specific terms and other information with respect to such issue of debt
securities and such foreign currency or currency units in the applicable
prospectus supplement.
If any index is used to determine the amount of payments of principal,
premium, if any, or interest on any series of debt securities, we will describe
the material U.S. federal income tax, accounting and other considerations
applicable thereto in the applicable prospectus supplement.
Denominations, Registration and Transfer
Unless otherwise specified in the applicable prospectus supplement, the debt
securities will be issuable only in registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. Debt securities of
any series will be exchangeable for other debt securities of the same issue and
series, of any authorized denominations of a like
20
<PAGE>
aggregate principal amount, the same original issue date, stated maturity and
bearing the same interest rate.
Holders may present each series of debt securities for exchange as provided
above, and for registration of transfer, with the form of transfer endorsed
thereon, or with a satisfactory written instrument of transfer, duly executed,
at the office of the appropriate securities registrar or at the office of any
transfer agent designated by Adelphia for such purpose and referred to in the
applicable prospectus supplement, without service charge and upon payment of
any taxes and other governmental charges as described in the indenture.
Adelphia will appoint the trustee of each series of debt securities as
securities registrar for such series under the indenture. If the applicable
prospectus supplement refers to any transfer agents, in addition to the
securities registrar initially designated by Adelphia with respect to any
series, Adelphia may at any time rescind the designation of any such transfer
agent or approve a change in the location through which any such transfer agent
acts, provided that Adelphia maintains a transfer agent in each place of
payment for the series. Adelphia may at any time designate additional transfer
agents with respect to any series of debt securities.
In the event of any redemption, neither Adelphia nor the trustee will be
required to:
. issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before the day of mailing of a notice for redemption of debt securities
of that series, and ending at the close of business on the day of
mailing of the relevant notice of redemption, or
. transfer or exchange any debt securities so selected for redemption,
except, in the case of any debt securities being redeemed in part, any
portion not being redeemed.
Global Debt Securities
Unless otherwise specified in the applicable prospectus supplement, the debt
securities of a series may be issued in whole or in part in the form of one or
more global securities that we will deposit with, or on behalf of, a depositary
identified in the prospectus supplement relating to such series. Global debt
securities may be issued only in fully registered form and in either temporary
or permanent form. Unless and until it is exchanged in whole or in part for the
individual debt securities represented by it, a global debt security may not be
transferred except as a whole by the depositary for the global debt security to
a nominee of the depositary or by a nominee of the depositary to the depositary
or another nominee of the depositary or by the depositary or any nominee to a
successor depositary or any nominee of the successor.
The specific terms of the depositary arrangement with respect to a series of
debt securities will be described in the prospectus supplement relating to the
series. Adelphia anticipates that the following provisions will generally apply
to depositary arrangements.
Upon the issuance of a global debt security, and the deposit of the global
debt security with or on behalf of the applicable depositary, the depositary
for the global debt security or
21
<PAGE>
its nominee will credit on its book-entry registration and transfer system, the
respective principal amounts of the individual debt securities represented by
the global debt security to the accounts of persons, more commonly known as
participants, that have accounts with the depositary. These accounts will be
designated by the dealers, underwriters or agents with respect to the debt
securities or by Adelphia if the debt securities are offered and sold directly
by Adelphia. Ownership of beneficial interests in a global debt security will
be limited to participants or persons that may hold interests through
participants. Ownership of beneficial interests in the global debt security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the applicable depositary or its nominee with
respect to interests of participants and the records of participants with
respect to interests of persons who hold through participants. The laws of some
states require that certain purchasers of securities take physical delivery of
the securities in definitive form. These limits and laws may impair the ability
to transfer beneficial interests in a global debt security.
So long as the depositary for a global debt security, or its nominee, is the
registered owner of the global debt security, the depositary or its nominee, as
the case may be, will be considered the sole owner or holder of the debt
securities represented by the global debt security for all purposes under the
indenture. Except as provided below, owners of beneficial interests in a global
debt security will not be entitled to have any of the individual debt
securities of the series represented by the global debt security registered in
their names, will not receive or be entitled to receive physical delivery of
any debt securities of the series in definitive form and will not be considered
the owners or holders of them under the indenture.
Payments of principal of, and premium, if any, and interest on individual
debt securities represented by a global debt security registered in the name of
a depositary or its nominee will be made to the depositary or its nominee, as
the case may be, as the registered owner of the global debt security
representing the debt securities. None of Adelphia, or the trustee, any paying
agent, or the securities registrar for the debt securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interest of the global debt
security for the debt securities or for maintaining, supervising or reviewing
any records relating to those beneficial ownership interests.
Adelphia expects that the depositary for a series of debt securities or its
nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent global debt security representing any of the debt
securities, immediately will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of the global debt security for the debt securities as shown on the
records of the depositary or its nominee. Adelphia also expects that payments
by participants to owners of beneficial interests in the global debt security
held through the participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name." These payments will
be the responsibility of these participants.
22
<PAGE>
Unless otherwise specified in the applicable prospectus supplement, if the
depositary for a series of debt securities is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not
appointed by Adelphia within 90 days, Adelphia will issue individual debt
securities of the series in exchange for the global debt security representing
the series of debt securities. In addition, unless otherwise specified in the
applicable prospectus supplement, Adelphia may at any time and in its sole
discretion, subject to any limitations described in the prospectus supplement
relating to the debt securities, determine not to have any debt securities of
the series represented by one or more global debt securities and, in such
event, will issue individual debt securities of the series in exchange for such
global debt securities. Further, if Adelphia so specifies with respect to the
debt securities of a series, an owner of a beneficial interest in a global debt
security representing debt securities of the series may, on terms acceptable to
Adelphia, the trustee and the depositary for the global debt security, receive
individual debt securities of the series in exchange for such beneficial
interests, subject to any limitations described in the prospectus supplement
relating to the debt securities. In any such instance, an owner of a beneficial
interest in a global debt security will be entitled to physical delivery of
individual debt securities of the series represented by the global debt
security equal in principal amount to its beneficial interest and to have the
debt securities registered in its name. Individual debt securities of the
series so issued will be issued in denominations, unless otherwise specified by
Adelphia, of $1,000 and integral multiples thereof. The applicable prospectus
supplement may specify other circumstances under which individual debt
securities may be issued in exchange for the global debt security representing
any debt securities.
Payment and Paying Agents
Unless otherwise indicated in the applicable prospectus supplement, payment
of principal of, and premium, if any, and any interest on debt securities will
be made at the office of the trustee in New York or at the office of such
paying agent or paying agents as Adelphia may designate from time to time in
the applicable prospectus supplement, except that at the option of Adelphia
payment of any interest may be made:
. except in the case of global debt securities, by check mailed to the
address of the person or entity entitled thereto as such address shall
appear in the securities register; or
. by transfer to an account maintained by the person or entity entitled
thereto as specified in the securities register, provided that proper
transfer instructions have been received by the regular record date.
Unless otherwise indicated in the applicable prospectus supplement, we
will make payment of any interest on debt securities to the person or
entity in whose name the debt security is registered at the close of
business on the regular record date for the interest payment, except in
the case of defaulted interest. Adelphia may at any time designate
additional paying agents or rescind the designation of any paying agent;
however, Adelphia will at all times be required to maintain a paying
agent in each place of payment for each series of debt securities.
23
<PAGE>
Any moneys deposited with the trustee or any paying agent, or held by
Adelphia in trust, for the payment of the principal of, and premium, if any, or
interest on any debt security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable will, at
the request of Adelphia, be repaid to Adelphia or released from such trust, as
applicable, and the holder of the debt security will thereafter look, as a
general unsecured creditor, only to Adelphia for payment.
Option to Defer Interest Payments or to Pay-in-Kind
If provided in the applicable prospectus supplement, Adelphia will have the
right, at any time and from time to time during the term of any series of debt
securities, to defer the payment of interest for such number of consecutive
interest payment periods as may be specified in the applicable prospectus
supplement, subject to the terms, conditions and covenants, if any, specified
in such prospectus supplement, provided that an extension period may not extend
beyond the stated maturity of the final installment of principal of the series
of debt securities. If provided in the applicable prospectus supplement,
Adelphia will have the right, at any time and from time to time during the term
of any series of debt securities, to make payments of interest by delivering
additional debt securities of the same series. Certain material U.S. federal
income tax consequences and special considerations applicable to the debt
securities will be described in the applicable prospectus supplement.
Subordination
Except as set forth in the applicable prospectus supplement, the
subordinated indenture provides that the subordinated debt securities are
subordinated and junior in right of payment to all senior indebtedness of
Adelphia. If:
. Adelphia defaults in the payment of any principal, or premium, if any,
or interest on any senior indebtedness when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or
declaration or otherwise; or
. an event of default occurs with respect to any senior indebtedness
permitting the holders thereof to accelerate the maturity thereof and
written notice of such event of default, requesting that payments on
subordinated debt securities cease, is given to Adelphia by the holders
of senior indebtedness,
then unless and until the default in payment or event of default shall have
been cured or waived or shall have ceased to exist, no direct or indirect
payment, in cash, property or securities, by set-off or otherwise, will be made
or agreed to be made on account of the subordinated debt securities or interest
thereon or in respect of any repayment, redemption, retirement, purchase or
other acquisition of subordinated debt securities.
Except as set forth in the applicable prospectus supplement, the
subordinated indenture provides that in the event of:
. any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to
Adelphia, its creditors or its property;
24
<PAGE>
. any proceeding for the liquidation, dissolution or other winding-up of
Adelphia, voluntary or involuntary, whether or not involving insolvency
or bankruptcy proceedings;
. any assignment by Adelphia for the benefit of creditors; or
. any other marshaling of the assets of Adelphia;
all present and future senior indebtedness, including, without limitation,
interest accruing after the commencement of the proceeding, assignment or
marshaling of assets, will first be paid in full before any payment or
distribution, whether in cash, securities or other property, will be made by
Adelphia on account of subordinated debt securities. In that event, any
payment or distribution, whether in cash, securities or other property, other
than securities of Adelphia or any other corporation provided for by a plan of
reorganization or a readjustment, the payment of which is subordinate, at
least to the extent provided in the subordination provisions of the indenture,
to the payment of all senior indebtedness at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment and other than payments made from any trust described in the
"Satisfaction and Discharge; Defeasance" below, which would otherwise but for
the subordination provisions be payable or deliverable in respect of
subordinated debt securities, including any such payment or distribution which
may be payable or deliverable by reason of the payment of any other
indebtedness of Adelphia being subordinated to the payment of subordinated
debt securities will be paid or delivered directly to the holders of senior
indebtedness, or to their representative or trustee, in accordance with the
priorities then existing among such holders until all senior indebtedness
shall have been paid in full. No present or future holder of any senior
indebtedness will be prejudiced in the right to enforce subordination of the
indebtedness evidenced by subordinated debt securities by any act or failure
to act on the part of Adelphia.
The term "senior indebtedness" is defined as the principal, premium, if
any, and interest on:
. all indebtedness of Adelphia, whether outstanding on the date of the
issuance of subordinated debt securities or thereafter created, incurred
or assumed, which is for money borrowed, or which is evidenced by a note
or similar instrument given in connection with the acquisition of any
business, properties or assets, including securities;
. any indebtedness of others of the kinds described in the first bullet
point above for the payment of which Adelphia is responsible or liable
as guarantor or otherwise; and
. amendments, renewals, extensions and refundings of any such
indebtedness;
unless in any instrument or instruments evidencing or securing such
indebtedness or pursuant to which the same is outstanding, or in any such
amendment, renewal, extension or refunding, it is expressly provided that such
indebtedness is not superior in right of payment to subordinated debt
securities. The senior indebtedness will continue to be senior
25
<PAGE>
indebtedness and entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of the senior
indebtedness or extension or renewal of the senior indebtedness.
Except as provided in the applicable prospectus supplement, the subordinated
indenture for a series of subordinated debt does not limit the aggregate amount
of senior indebtedness that may be issued by Adelphia. As of December 31, 1998,
senior indebtedness of the Adelphia Parent Company aggregated approximately
$1,810,212,000. In addition, because Adelphia is a holding company, the
subordinated debt securities are effectively subordinated to all existing and
future liabilities of Adelphia's subsidiaries.
Modification of Indentures
From time to time, Adelphia and the trustees may modify the indentures
without the consent of any holders of any series of debt securities with
respect to some matters, including:
. to cure any ambiguity, defect or inconsistency or to correct or
supplement any provision which may be inconsistent with any other
provision of the indenture;
. to qualify, or maintain the qualification of, the indentures under the
Trust Indenture Act; and
. to make any change that does not materially adversely affect the
interests of any holder of such series of debt securities.
In addition, under the indentures, Adelphia and the trustee may modify some
rights, covenants and obligations of Adelphia and the rights of holders of any
series of debt securities with the written consent of the holders of at least a
majority in aggregate principal amount of the series of outstanding debt
securities; but no extension of the maturity of any series of debt securities,
reduction in the interest rate or extension of the time for payment of
interest, change in the optional redemption or repurchase provisions in a
manner adverse to any holder of the series of debt securities, other
modification in the terms of payment of the principal of, or interest on, the
series of debt securities, or reduction of the percentage required for
modification, will be effective against any holder of the series of outstanding
debt securities without the holder's consent.
In addition, Adelphia and the trustees may execute, without the consent of
any holder of the debt securities, any supplemental indenture for the purpose
of creating any new series of debt securities.
Events of Default
The indentures provide that any one or more of the following described
events with respect to a series of debt securities that has occurred and is
continuing constitutes an "event of default" with respect to that series of
debt securities:
26
<PAGE>
. failure for 60 days to pay any interest or any sinking fund payment on
the series of debt securities when due, (subject to the deferral of any
due date in the case of an extension period);
. failure to pay any principal or premium, if any, on the series of the
debt securities when due whether at maturity, upon redemption, by
declaration or otherwise;
. failure to observe or perform in any material respect certain other
covenants contained in the indenture for 90 days after written notice
has been given to Adelphia from the trustee or the holders of at least
25% in principal amount of the series of outstanding debt securities;
. default resulting in acceleration of other indebtedness of Adelphia for
borrowed money where the aggregate principal amount so accelerated
exceeds $25 million and the acceleration is not rescinded or annulled
within 30 days after the written notice thereof to Adelphia by the
trustee or to Adelphia and the trustee by the holders of 25% in
aggregate principal amount of the debt securities of the series then
outstanding, provided that the event of default will be remedied, cured
or waived if the default that resulted in the acceleration of such other
indebtedness is remedied, cured or waived; or
. certain events in bankruptcy, insolvency or reorganization of Adelphia.
The holders of a majority in outstanding principal amount of the series of
debt securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee of the
series. The trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the series may declare the principal due and
payable immediately upon an event of default. The holders of a majority in
aggregate outstanding principal amount of the series may annul the declaration
and waive the default if the default (other than the non-payment of the
principal of the series which has become due solely by the acceleration) has
been cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
trustee of the series.
The holders of a majority in outstanding principal amount of a series of
debt securities affected thereby may, on behalf of the holders of all the
holders of the series of debt securities, waive any past default, except a
default in the payment of principal or interest, unless the default has been
cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
trustee of the series, or a default in respect of a covenant or provision which
under the related indenture cannot be modified or amended without the consent
of the holder of each outstanding debt security of the series. Adelphia is
required to file annually with the trustees a certificate as to whether or not
Adelphia is in compliance with all the conditions and covenants applicable to
it under the indentures.
In case an event of default shall occur and be continuing as to a series of
debt securities, the trustee of the series will have the right to declare the
principal of and the interest on the
27
<PAGE>
debt securities, and any other amounts payable under the indenture, to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the debt securities.
No holder of any debt securities will have any right to institute any
proceeding with respect to the indenture or for any remedy thereunder, unless
the holder shall have previously given to the trustee written notice of a
continuing event of default and unless also the holders of at least 25% in
aggregate principal amount of the outstanding debt securities of the series
shall have made written request and offered reasonably indemnity to the trustee
of the series to institute the proceeding as a trustee, and unless the trustee
shall not have received from the holders of a majority in aggregate principal
amount of the outstanding debt securities of the class a direction inconsistent
with the request and shall have failed to institute the proceeding within 60
days. However, these limitations do not apply to a suit instituted by a holder
of a debt security for enforcement of payment of the principal or interest on
the debt security on or after the respective due dates expressed in the debt
security.
Consolidation, Merger, Sale of Assets and Other Transactions
Unless otherwise indicated in the applicable prospectus supplement, the
indentures provide that Adelphia will not consolidate with or merge into any
other person or entity or sell, assign, convey, transfer or lease its
properties and assets substantially as an entirety to any person or entity
unless:
. either Adelphia is the continuing corporation, or any successor or
purchaser is a corporation, partnership, or trust or other entity
organized under the laws of the United States of America, any State
thereof or the District of Columbia, and the successor or purchaser
expressly assumes Adelphia's obligations on the debt securities under a
supplemental indenture; and
. immediately before and after giving effect thereto, no event of default,
and no event which, after notice or lapse of time or both, would become
an event of default, shall have happened and be continuing.
Unless otherwise indicated in the applicable prospectus supplement, the
general provisions of the indentures do not afford holders of the debt
securities protection in the event of a highly leveraged or other transaction
involving Adelphia that may adversely affect holders of the debt securities.
Satisfaction and Discharge; Defeasance
The indentures provide that when, among other things, all debt securities
not previously delivered to the trustee for cancellation:
. have become due and payable, or
. will become due and payable at their stated maturity within one year,
28
<PAGE>
and Adelphia deposits or causes to be deposited with the trustee, as trust
funds in trust for the purpose, an amount in the currency or currencies in
which the debt securities are payable sufficient to pay and discharge the
entire indebtedness on the debt securities not previously delivered to the
trustee for cancellation, for the principal, and premium, if any, and interest
to the date of the deposit or to the stated maturity, as the case may be, then
the indenture will cease to be of further effect (except as to Adelphia's
obligations to pay all other sums due pursuant to the indenture and to provide
the officers' certificates and opinions of counsel described therein), and
Adelphia will be deemed to have satisfied and discharged the indenture.
The indentures provide that Adelphia may elect either:
. to terminate, and be deemed to have satisfied, all its obligations with
respect to any series of debt securities, except for the obligations to
register the transfer or exchange of such debt securities, to replace
mutilated, destroyed, lost or stolen debt securities, to maintain an
office or agency in respect of the debt securities and to compensate and
indemnify the trustee ("defeasance"); or
. to be released from its obligations with respect to certain covenants,
("covenant defeasance") upon the deposit with the trustee, in trust for
such purpose, of money and/or U.S. Government Obligations, as defined in
the indenture, which through the payment of principal and interest in
accordance with the term used will provide money, in an amount
sufficient (in the opinion of a nationally recognized firm of
independent public accountants) to pay the principal of, interest on and
any other amounts payable in respect of the outstanding debt securities
of the series.
Such a trust may be established only if, among other things, Adelphia has
delivered to the trustee an opinion of counsel (as specified in the indenture)
with regard to certain matters, including an opinion to the effect that the
holders of the debt securities will not recognize income, gain or loss for
Federal income tax purposes as a result of the deposit and discharge and will
be subject to Federal income tax on the same amounts and in the same manner and
at the same times as would have been the case if the deposit and defeasance or
covenant defeasance, as the case may be, had not occurred.
Redemption
Unless otherwise indicated in the applicable prospectus supplement, debt
securities will not be subject to any sinking fund requirements.
Unless otherwise indicated in the applicable prospectus supplement, Adelphia
may, at its option, redeem the debt securities of any series in whole at any
time or in part from time to time, at the redemption price set forth in the
applicable prospectus supplement plus accrued and unpaid interest to the date
fixed for redemption, and debt securities in denominations larger than $1,000
may be redeemed in part but only in integral multiples of $1,000. If the debt
securities of any series are so redeemable only on or after a specified date or
upon the satisfaction of additional conditions, the applicable prospectus
supplement will specify the date or describe the conditions.
29
<PAGE>
Adelphia will mail notice of any redemption at least 30 days but not more
than 60 days before the redemption date to each holder of debt securities to be
redeemed at the holder's registered address. Unless Adelphia defaults in the
payment of the redemption price, on and after the redemption date interest
shall cease to accrue on the debt securities or portions thereof called for
redemption.
Conversion or Exchange
If and to the extent indicated in the applicable prospectus supplement, the
debt securities of any series may be convertible or exchangeable into other
securities. The specific terms on which debt securities of any series may be so
converted or exchanged will be set forth in the applicable prospectus
supplement. These terms may include provisions for conversion or exchange,
either mandatory, at the option of the holder, or at the option of Adelphia, in
which case the number of shares of other securities to be received by the
holders of debt securities would be calculated as of a time and in the manner
stated in the applicable prospectus supplement.
Certain Covenants
The indentures contain certain covenants regarding, among other matters,
corporate existence, payment of taxes and reports to holders of debt
securities. If and to the extent indicated in the applicable prospectus
supplement, these covenants may be removed or additional covenants added with
respect to any series of debt securities.
Governing Law
The indentures and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
Information Concerning the Trustees
Each trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to these provisions, each trustee is under no obligation
to exercise any of the powers vested in it by the indenture at the request of
any holder of the debt securities, unless offered reasonable indemnity by the
holder against the costs, expenses and liabilities which might be incurred
thereby. Each trustee is not required to expend or risk its own funds or
otherwise incur personal financial liability in the performance of its duties
if the trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
30
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of Adelphia and certain
provisions of Adelphia's Certificate of Incorporation and Bylaws as of April
18, 1999 is a summary and is qualified in its entirety by Adelphia's
Certificate of Incorporation and Bylaws, which documents are exhibits to the
registration statement covering this prospectus.
Adelphia's authorized capital stock consists of 200,000,000 shares of Class
A common stock, 25,000,000 shares of Class B common stock, and 5,000,000 shares
of preferred stock.
Common Stock
Dividends. Holders of Class A common stock and Class B common stock are
entitled to receive such dividends as may be declared by Adelphia's Board of
Directors out of funds legally available for this purpose, but only after
payment of dividends required to be paid on outstanding shares of any other
class or series of stock having preference over common stock as to dividends.
No dividend may be declared or paid in cash or property on either class of
common stock, however, unless simultaneously a dividend is paid on the other
class of common stock as follows. In the event a cash dividend is paid, the
holders of Class A common stock will be paid a cash dividend per share equal to
105% of the amount payable per share of Class B common stock. In the event of a
property dividend, holders of each class of common stock are entitled to
receive the same value per share of common stock outstanding. In the case of
any stock dividend, holders of Class A common stock are entitled to receive the
same percentage dividend (payable in Class A common stock) as the holders of
Class B common stock receive (payable in Class B common stock).
Voting Rights. Holders of Class A common stock and Class B common stock vote
as a single class on all matters submitted to a vote of the stockholders, with
each share of Class A common stock entitled to one vote and each share of Class
B common stock entitled to ten votes, except:
. for the election of directors, and
. as otherwise provided by law.
In the annual election of directors, the holders of Class A common stock,
voting as a separate class, are entitled to elect one of Adelphia's directors.
The holders of Class A common stock and Class B common stock, voting as a
single class with each share of Class A common stock entitled to one vote and
each share of Class B common stock entitled to ten votes, are entitled to elect
the remaining directors. Consequently, holders of Class B common stock have
sufficient voting power to elect the remaining seven members of the current
eight-member board of directors. Holders of Class A common stock and Class B
common stock are not entitled to cumulate votes in the election of directors.
Under Delaware law and Adelphia's Certificate of Incorporation, the affirmative
vote of a majority of the outstanding shares of Class A common stock is
required to approve, among other matters, a change in the powers, preferences
or special rights of the shares of Class A common stock
31
<PAGE>
so as to affect them adversely, but is not required to approve an increase or
decrease in the number of authorized shares of Class A common stock.
Liquidation Rights. Upon liquidation, dissolution or winding up of Adelphia,
any distributions to holders of any class of common stock would only be made
after payment in full of creditors and provision for the preference of any
other class or series of stock having a preference over the common stock upon
liquidation, dissolution or winding up that may then be outstanding.
Thereafter, the holders of Class A common stock are entitled to a preference of
$1.00 per share. After this amount is paid, holders of the Class B common stock
are entitled to receive $1.00 per share. Any remaining amount would then be
shared ratably by both classes.
Other Provisions. Each share of Class B common stock is convertible at the
option of its holder into one share of Class A common stock at any time. The
holders of Class A common stock and Class B common stock are not entitled to
preemptive or subscription rights. Neither the Class A common stock nor the
Class B common stock may be subdivided, consolidated, reclassified or otherwise
changed unless concurrently the other class of common stock is subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner.
Preferred Stock
The 5,000,000 shares of authorized preferred stock may be issued with such
designations, powers, preferences and other rights and qualifications,
limitations and restrictions thereof as Adelphia's board of directors may
authorize without further action by Adelphia's stockholders, including but not
limited to:
. the distinctive designation of each series and the number of shares that
will constitute the series;
. the voting rights, if any, of shares of the series;
. the dividend rate on the shares of the series, any restriction,
limitation or condition upon the payment of dividends, whether dividends
will be cumulative and the dates on which dividends are payable;
. the prices at which, and the terms and conditions on which, the shares
of the series may be redeemed, if the shares are redeemable;
. the purchase or sinking fund provisions, if any, for the purchase or
redemption of shares of the series;
. any preferential amount payable upon shares of the series in the event
of the liquidation, dissolution or winding up of Adelphia or the
distribution of its assets;
. the prices or rates of conversion at which, and the terms and conditions
on which, the shares of such series may be converted into other
securities, if such shares are
32
<PAGE>
convertible. Adelphia has designated and has outstanding three classes
of preferred stock--8 1/8% Series C Convertible preferred stock, 13%
Cumulative Exchangeable preferred stock and 5 1/2% Series D Convertible
preferred stock. For ease of reference, we refer to the 8 1/8% Series C
convertible preferred stock as the 8 1/8% Convertible preferred stock,
to the 13% Series B Cumulative Exchangeable preferred stock as the
Exchangeable preferred stock and to the 5 1/2% Series D Convertible
preferred stock as the 5 1/2% Convertible preferred stock; and
. In connection with the foregoing designations, the maximum number of
shares authorized of 8 1/8% Convertible preferred stock, Exchangeable
preferred stock and 5 1/2% Convertible preferred stock is 100,000
shares, 1,500,000 shares and 2,875,000 shares, respectively. The 8 1/8%
Convertible preferred stock, Exchangeable preferred stock and 5 1/2%
Convertible preferred stock rank senior to the common stock of Adelphia
with respect to dividends and liquidation. The 8 1/8% Convertible
preferred stock, Exchangeable preferred stock and 5 1/2% Convertible
preferred stock rank equal in right of payment as to dividends and upon
liquidation, dissolution or winding-up of Adelphia, except that no cash
dividends nor any distributions may be declared or paid on, nor any
redemptions made with respect to the Exchangeable preferred stock or the
5 1/2% Convertible preferred stock unless full cumulative dividends have
been paid on all outstanding shares of 8 1/8% Convertible preferred
stock for all prior dividend periods.
8 1/8% Convertible Preferred Stock. The 8 1/8% Convertible preferred stock
accrues cumulative dividends at the rate of 8 1/8% per annum, or $81.25 per
share of the 8 1/8% Convertible preferred stock per annum. The 8 1/8%
Convertible preferred stock has a liquidation preference of $1,000 per share.
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the affairs of Adelphia, the holders of the 8 1/8% Convertible preferred stock
are entitled to receive the liquidation preference for the 8 1/8% Convertible
preferred stock, plus any accrued but unpaid dividends thereon, and no more.
Neither the voluntary sale, conveyance, exchange or transfer, for cash, shares
of stock, securities or other consideration, of all or substantially all of
the property or assets of Adelphia nor the consolidation or merger of Adelphia
with or into one or more corporations will be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of Adelphia, unless the
sale, conveyance, exchange or transfer shall be in connection with a
liquidation, dissolution or winding-up of the business of Adelphia.
Each share of 8 1/8% Convertible preferred stock is convertible based upon
its stated liquidation preference into shares of Class A common stock of
Adelphia at any time at the election of the holder of it at a conversion price
of $8.48 per share of Adelphia Class A common stock, or approximately 117.9245
shares of Class A common stock per share of 8 1/8% Convertible preferred
stock. The conversion price is subject to adjustment if Adelphia pays a
dividend in shares of Class A common stock or subdivides, combines or
reclassifies the shares of Class A common stock or distributes rights to
purchase common stock or makes certain other distributions to holders of
common stock. The 8 1/8% Convertible preferred stock is not entitled to vote
in the election of directors of Adelphia or upon any
33
<PAGE>
other matter, except as provided by law, unless a Voting Rights Triggering
Event, as defined in the related Certificate of Designation, occurs with
respect to the 8 1/8% Convertible preferred stock. If this occurs, the board of
directors will be expanded by two seats, the directors for which shall then be
elected by the holders of the 8 1/8% Convertible preferred stock. The 8 1/8%
Convertible preferred stock is not subject to mandatory redemption.
The 8 1/8% Convertible preferred stock may be redeemed at the option of
Adelphia, in whole or in part, at any time on or after August 1, 2000 at 104%,
102% and 100% of the liquidation preference of the 8 1/8% Convertible preferred
stock plus accrued dividends in the years beginning August 1, 2000, 2001 and
2002 and thereafter, respectively.
Exchangeable Preferred Stock. The shares of Exchangeable preferred stock are
redeemable at the option of Adelphia, on or after July 15, 2002. Adelphia is
required, subject to certain conditions, to redeem all of the Exchangeable
preferred stock outstanding on July 15, 2009, at a redemption price equal to
100% of the liquidation preference thereof, plus accumulated and unpaid
dividends to the date of redemption. Dividends on the Exchangeable preferred
stock accrue at a rate of 13% of the liquidation preference per annum and are
payable semiannually. The Exchangeable preferred stock is not entitled to vote
in the election of directors of Adelphia or upon any other matter, except as
provided by law, unless a Voting Rights Triggering Event, as defined in the
related Certificate of Designation, occurs with respect to the Exchangeable
preferred stock. If this occurs, the board of directors will be expanded by two
seats, the directors for which shall then be elected by the holders of the
Exchangeable preferred stock.
5 1/2% Convertible Preferred Stock. The 5 1/2% Convertible preferred stock
accrues cumulative dividends at the rate of 5 1/2% per annum, or $11.00 per
share of the 5 1/2% Convertible preferred stock per annum. The 5 1/2%
Convertible preferred stock has a liquidation preference of $200 per share.
Upon any voluntary or involuntary liquidation, dissolution or winding-up of the
affairs of Adelphia, the holders of the 5 1/2% Convertible preferred stock are
entitled to receive the liquidation preference for the 5 1/2% Convertible
preferred stock, plus any accrued but unpaid dividends thereon, and no more.
Neither the voluntary sale, conveyance, exchange or transfer, for cash, shares
of stock, securities or other consideration, of all or substantially all of the
property or assets of Adelphia nor the consolidation or merger of Adelphia with
or into one or more corporations will be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of Adelphia, unless the
sale, conveyance, exchange or transfer shall be in connection with a
liquidation, dissolution or winding-up of the business of Adelphia.
Each share of 5 1/2% Convertible preferred stock is convertible based upon
its stated liquidation preference into shares of Class A common stock of
Adelphia at any time at the election of the holder of it at a conversion price
of $81.45 per share of Adelphia Class A common stock, or approximately 2.45549
shares of Class A common stock per share of 5 1/2% Convertible preferred stock.
The conversion price is subject to adjustment in certain circumstances, such as
if Adelphia pays a dividend in shares of Class A common stock or subdivides,
combines or reclassifies the shares of Class A common stock or distributes
rights to purchase common stock or makes certain other distributions to holders
of Class A
34
<PAGE>
common stock. The 5 1/2% Convertible preferred stock is not entitled to vote in
the election of directors of Adelphia or upon any other matter, except as
provided by law, unless dividends are in arrears in an amount equal to at least
six quarters. If this occurs, the board of directors will be expanded by two
seats, the directors for which shall then be elected by the holders of the 5
1/2% Convertible preferred stock and serve until the arrearage is eliminated.
The 5 1/2% Convertible preferred stock is not subject to mandatory redemption.
The 5 1/2% Convertible preferred stock may be redeemed at the option of
Adelphia, in whole or in part, at any time on or after May 1, 2002, at the
option of Adelphia in shares of Class A common stock at a redemption price of
$206 per share plus accrued and unpaid dividends, if any, to the redemption
date, or for cash at a redemption price of $200 per share plus accrued and
unpaid dividends.
The rights of holders of shares of common stock as described above will be
subject to, and may be adversely affected by, the rights of holders of any
additional classes of preferred stock that may be designated and issued in the
future.
We will describe the particular terms and conditions of a series of
preferred stock offered by a prospectus supplement in the prospectus supplement
relating to such series of preferred stock. The applicable prospectus
supplement or prospectus supplements will describe the following terms of each
series of preferred stock being offered:
. its title;
. the number of shares offered, any liquidation preference per share and
the purchase price;
. any applicable dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation;
. if dividends apply whether they shall be cumulative or non-cumulative
and, if cumulative, the date from which dividends shall accumulate;
. any procedures for any auction and remarketing;
. any provisions for a sinking fund;
. any provisions for redemption;
. any listing of such preferred stock on any securities exchange or
market;
. the terms and conditions, if applicable, upon which it will be
convertible into common stock or another series of preferred stock of
Adelphia, including the conversion price (or manner of calculation
thereof) and conversion period;
. the terms and conditions, if applicable, upon which it will be
exchangeable into debt securities of Adelphia, including the exchange
price (or manner of calculation thereof) and exchange period;
. any voting rights;
35
<PAGE>
. a discussion of any applicable material and/or special United States
federal income tax considerations;
. whether interests in that series of preferred stock will be represented
by depositary shares;
. its relative ranking and preferences as to any dividend rights and
rights upon liquidation, dissolution or winding up of the affairs of
Adelphia;
. any limitations on the future issuance of any class or series of
preferred stock ranking senior to or on a parity with the series of
preferred stock being offered as to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of Adelphia; and
. any other specific terms, preferences, rights, limitations or
restrictions.
Transfer Agent
The Transfer Agent and Registrar for the Class A common stock, the
Exchangeable preferred stock and the 5 1/2% Convertible preferred stock is
American Stock Transfer & Trust Company. The Transfer Agent and Registrar for
the Class B common stock is Adelphia.
BOOK ENTRY ISSUANCE
Unless otherwise specified in the applicable prospectus supplement, DTC will
act as depositary for securities issued in the form of global securities. Such
securities will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
securities will be issued for such securities representing in the aggregate the
total number of such securities, and will be deposited with or on behalf of
DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among its participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, the American Stock Exchange
and the National Association of Securities Dealers, Inc. Access to the DTC
system is also available to others, known as indirect participants, such as
securities brokers and dealers, banks and trust companies that clear through or
maintain custodial relationships with direct participants, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the Commission.
36
<PAGE>
Purchases of securities within the DTC system must be made by or through
direct participants, which will receive a credit for such Securities on DTC's
records. The ownership interest of each actual purchaser of each Security,
commonly referred to as the beneficial owner is in turn to be recorded on the
direct and indirect participants' records. Beneficial owners will not receive
written confirmation from DTC of their purchases, but beneficial owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the direct
or indirect participants through which the beneficial owners purchased
securities. Transfers of ownership interests in securities issued in the form
of global securities are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in such securities,
except in the event that use of the book-entry system for such securities is
discontinued.
DTC has no knowledge of the actual beneficial owners of the securities
issued in the form of global securities. DTC's records reflect only the
identity of the direct participants to whose accounts such securities are
credited, which may or may not be the beneficial owners. The participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Although voting with respect to securities issued in the form of global
securities is limited to the holders of record of such securities, in those
instances in which a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to such securities. Under its usual procedures,
DTC would mail an omnibus proxy to the issuer of such securities as soon as
possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those direct participants to whose accounts such
securities are credited on the record date, identified in a listing attached to
the omnibus proxy.
Payments in respect of securities issued in the form of global securities
will be made by the issuer of such securities to DTC. DTC's practice is to
credit direct participants' accounts on the relevant payment date in accordance
with their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices and will be the responsibility of such participant and not
of DTC or Adelphia, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payments to DTC are the responsibility of the
issuer of the applicable securities, disbursement of such payments to direct
participants is the responsibility of DTC, and disbursements of such payments
to the beneficial owners is the responsibility of direct and indirect
participants.
37
<PAGE>
DTC may discontinue providing its services as depositary with respect to any
securities at any time by giving reasonable notice to the issuer of such
securities. In the event that a successor depositary is not obtained,
individual security certificates representing such securities are required to
be printed and delivered. Adelphia, at its option, may decide to discontinue
use of the system of book-entry transfers through DTC or a successor
depositary.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Adelphia believe to be accurate, but
Adelphia assumes no responsibility for the accuracy thereof. Adelphia has no
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
PLAN OF DISTRIBUTION
Any of the securities being offered under this prospectus may be sold in any
one or more of the following ways from time to time:
. through agents;
. to or through underwriters;
. through dealers; and
. directly by Adelphia to purchasers.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Securities may also be
offered or sold through depository receipts issued by a depository institution.
Offers to purchase securities may be solicited by agents designated by
Adelphia from time to time. Any agent involved in the offer or sale of the
securities under this prospectus will be named, and any commissions payable by
Adelphia to these agents will be set forth, in a related prospectus supplement.
Unless otherwise indicated in a prospectus supplement, any agent will be acting
on a reasonable best efforts basis for the period of its appointment. Any agent
may be deemed to be an underwriter, as that term is defined in the Securities
Act, of the securities so offered and sold.
If securities are sold by means of an underwritten offering, Adelphia will
execute an underwriting agreement with an underwriter or underwriters at the
time an agreement for such sale is reached, and the names of the specific
managing underwriter or underwriters, as well as any other underwriters, the
respective amounts underwritten and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in a related prospectus supplement. That
prospectus supplement and this prospectus will be used by the underwriters to
make resales of the securities. If underwriters are used in the sale of any
securities in connection with this prospectus, those securities will be
acquired by the underwriters for their own account and
38
<PAGE>
may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices
determined by the underwriters and Adelphia at the time of sale. Securities may
be offered to the public either through underwriting syndicates represented by
managing underwriters or directly by one or more underwriters. If any
underwriter or underwriters are used in the sale of securities, unless
otherwise indicated in a related prospectus supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
some conditions precedent and that the underwriters with respect to a sale of
these securities will be obligated to purchase all such Securities if any are
purchased.
Adelphia may grant to the underwriters options to purchase additional
securities, to cover over-allotments, if any, at the initial public offering
price, with additional underwriting commissions or discounts, as may be set
forth in a related prospectus supplement. If Adelphia grants any over-allotment
option, the terms of that over-allotment option will be set forth in the
prospectus supplement for these securities.
If a dealer is utilized in the sale of the securities in respect of which
this prospectus is delivered, Adelphia will sell these securities to the dealer
as principal. The dealer may then resell such securities to the public at
varying prices to be determined by such dealer at the time of resale. Any such
dealer may be deemed to be an underwriter, as such term is defined in the
Securities Act, of the securities so offered and sold. The name of the dealer
and the terms of the transaction will be set forth in the prospectus supplement
relating to those offers and sales.
Offers to purchase securities may be solicited directly by Adelphia and
those sales may be made by Adelphia directly to institutional investors or
others, who may be deemed to be underwriters within the meaning of the
Securities Act with respect to any resale of those securities. The terms of any
sales of this type will be described in the prospectus supplement.
Securities may also be offered and sold, if so indicated in the related
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment in connection with their terms, or
otherwise, by one or more firms "remarketing firms," acting as principals for
their own accounts or as agents for Adelphia. Any remarketing firm will be
identified and the terms of its agreement, if any, with Adelphia and its
compensation will be described in a related prospectus supplement. Remarketing
firms may be deemed to be underwriters, as that term is defined in the
Securities Act, in connection with the securities remarketed by them.
If so indicated in a related prospectus supplement, Adelphia may authorize
agents and underwriters to solicit offers by certain institutions to purchase
securities from Adelphia at the public offering price set forth in a related
prospectus supplement as part of delayed delivery contracts providing for
payment and delivery on the date or dates stated in a related prospectus
supplement. Such delayed delivery contracts will be subject to only those
conditions set forth in a related prospectus supplement. A commission indicated
in a related prospectus supplement will be paid to underwriters and agents
soliciting purchases of securities pursuant to delayed delivery contracts
accepted by Adelphia.
39
<PAGE>
Agents, underwriters, dealers and remarketing firms may be entitled under
relevant agreements with Adelphia to indemnification by Adelphia against some
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, underwriters, dealers and
remarketing firms may be required to make in respect thereof.
Each series of securities will be a new issue and, other than the Class A
common stock, which is quoted on the Nasdaq National Market, will have no
established trading market. Unless otherwise specified in a related prospectus
supplement, Adelphia will not be obligated to list any series of securities on
an exchange or otherwise. We cannot assure you that there will be any liquidity
in the trading market for any of the securities.
Agents, underwriters, dealers and remarketing firms may be customers of,
engage in transactions with, or perform services for, Adelphia and its
subsidiaries in the ordinary course of business.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, as well as proxy statements
and other information with the SEC. You may read and copy any document we file
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at its Regional Offices in Chicago, Illinois or New
York, New York. You may obtain further information about the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public over the Internet at the SEC's web site at
http://www.sec.gov, which contains reports, proxy statements and other
information regarding registrants like us that file electronically with the
SEC.
This prospectus is part of a registration statement on Form S-3 filed by us
with the SEC under the Securities Act. As permitted by SEC rules, this
prospectus does not contain all of the information included in the registration
statement and the accompanying exhibits filed with the SEC. You may refer to
the registration statement and its exhibits for more information.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus. If we
subsequently file updating or superseding information in a document that is
incorporated by reference into this prospectus, the subsequent information will
also become part of this prospectus and will supersede the earlier information.
We are is incorporating by reference the following documents that we have
filed with the SEC:
. our Annual Report on Form 10-K for the year ended March 31, 1998, which
incorporates, in Items 7 and 8 to such Form 10-K, portions of the Form
10-K for the
40
<PAGE>
fiscal year ended December 31, 1997 of Olympus Communications, L.P. and
Olympus Capital Corporation, as amended by Adelphia's Form 10-K/A dated
July 27, 1998;
. our Quarterly Reports on Form 10-Q for the quarters ended June 30, 1998,
September 30, 1998 and December 31, 1998;
. our Current Reports on Form 8-K for the events dated June 29, 1998, July
2, 1998, August 3, 1998, August 18, 1998, September 10, 1998, November
9, 1998, November 12, 1998, December 23, 1998, January 11, 1999,
February 22, 1999, February 23, 1999, March 5, 1999, March 30, 1999,
March 31, 1999, April 9, 1999, April 19, 1999, April 21, 1999, April 23,
1999, and April 28, 1999.
. our definitive proxy statement dated September 11, 1998 with respect to
the Annual Meeting of Stockholders held on October 6, 1998; and
. the description of our Class A common stock contained in our
registration statement filed with the SEC under Section 12 of the
Exchange Act and subsequent amendments and reports filed to update such
description.
We are also incorporating by reference into this prospectus all of our
future filings with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until this offering has been completed.
You may obtain a copy of any of our filings which are incorporated by
reference, at no cost, by writing to or telephoning us at the following
address:
Adelphia Communications Corporation
Main at Water Street
Coudersport, Pennsylvania 16915
Attention: Investor Relations
Telephone: (814) 274-9830
You should rely only on the information provided in this prospectus or
incorporated by reference. We have not authorized anyone to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the first page of
the prospectus. We are not making this offer of securities in any state or
country in which the offer or sale is not permitted.
LEGAL MATTERS
Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania will
pass upon the validity of the securities. Any required information regarding
ownership of Adelphia's securities by lawyers of such firm will be contained in
the applicable prospectus supplement. If the securities are underwritten, the
applicable prospectus supplement will also set forth whether and to what
extent, if any, a law firm for the underwriters will pass upon the validity of
the securities.
41
<PAGE>
EXPERTS
The consolidated financial statements of Adelphia and its subsidiaries as of
March 31, 1997 and 1998, and for each of the three years in the period ended
March 31, 1998, and the consolidated financial statements of Olympus and its
subsidiaries as of December 31, 1996 and 1997, and for each of the three years
in the period ended December 31, 1997, all incorporated in this prospectus by
reference from Adelphia's Annual Report on Form 10-K for the year ended March
31, 1998 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of FrontierVision Partners, L.P. and
subsidiaries as of December 31, 1998 and 1997, and for each of the years in the
three year period ended December 31, 1998, have been incorporated by reference
herein and in this registration statement from Adelphia's Current Report on
Form 8-K filed April 19, 1999, in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of Harron Communications Corp. and
subsidiaries as of December 31, 1998 and 1997 and for each of the three years
in the period ended December 31, 1998 incorporated in this prospectus by
reference from Adelphia's Current Report on Form 8-K filed April 19, 1999 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The consolidated financial statements of Century Communications Corp. and
subsidiaries as of May 31, 1998 and 1997 and for each of the three years in the
period ended May 31, 1998 incorporated in this prospectus by reference from
Adelphia's Current Report on Form 8-K filed April 19, 1999 have been audited by
Deloitte & Touche LLP, independent auditors as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
42
<PAGE>
ADELPHIA LOGO
