SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
____ Annual Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
X__ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from April 1, 1998 to
December 31, 1998
Commission File Number: 0-16014
ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2417713
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Main at Water Street
Coudersport, PA 16915
(Address of principal executive offices) (Zip code)
814-274-9830
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Class A common stock, $.01 par value.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
Aggregate market value of outstanding Class A common stock par value $.01 per
share, held by non-affiliates of the registrant at May 24, 1999 was $2.82
billion based on the closing sale price as computed by the NASDAQ National
Market system a of that date. For purposes of this calculation only, affiliates
are deemed to be directors and executive officers of the registrant.
At May 24, 1999, 50,328,343 shares of Class A common stock, par value $0.01 per
share, and 10,834,476 shares of Class B common stock, par value $0.01 per share,
of the registrant were outstanding.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the form 10-K or any amendment to the
Form 10-K. X
<PAGE>
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Transition Report on Form 10-K for
the nine months ended December 31, 1998 as set forth in the pages attached
hereto:
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADELPHIA COMMUNICATIONS CORPORATION
June 28, 1999 By: /s/ Timothy J. Rigas
-------------------------------
Timothy J. Rigas
Executive Vice President, Chief Financial
Officer, Chief Accounting Officer,
Treasurer and Director
<PAGE>
Item 10. Directors and Executive Officers of the Registrant
The information set forth in Part I under the caption "Executive
Officers of the Registrant" is incorporated herein by reference. All of the
following directors were first elected or appointed as directors in 1986 except
for Mr. Dennis Coyle. Mr. Coyle was first elected as a director of the Company
in 1995.
Perry S. Patterson
Age 81
Perry S. Patterson became a director of Adelphia Communications
Corporation ("Adelphia" or the "Company") on September 9, 1986. Since 1977, Mr.
Patterson has practiced law in Coudersport, Pennsylvania. From 1975 to 1977, Mr.
Patterson served as President Judge of the Court of Common Pleas of the 55th
Judicial District in Potter County, Pennsylvania. He was a partner of the law
firm of Kirkland & Ellis, in Chicago, Illinois and Washington, D.C. from 1950 to
1973. Mr. Patterson attended Georgetown University and graduated from
Northwestern University Law School in 1941.
John J. Rigas
Age 74
John J. Rigas is the founder, Chairman, President and Chief Executive
Officer of Adelphia and is President of its subsidiaries. He is also Chairman
and a director of Hyperion Telecommunications, Inc. ("Hyperion"). Mr. Rigas has
served as President or general partner of most of the constituent entities which
became wholly-owned subsidiaries of Adelphia upon its formation in 1986, as well
as the cable television operating companies acquired by the Company which were
wholly or partially owned by members of the John J. Rigas family or entities
controlled by them ("the Rigas Family"). Mr. Rigas has owned and operated cable
television systems since 1952. Among business and community service activities,
Mr. Rigas is Chairman of the Board of Directors of Citizens Bancorp., Inc.,
Coudersport, Pennsylvania, and a member of the Board of Directors of Charles
Cole Memorial Hospital. He is a director of the National Cable Television
Association and a past President of the Pennsylvania Cable Television
Association. He is also a member of the Board of Directors of C-SPAN and the
Cable Advertising Bureau, and is a Trustee of St. Bonaventure University. He
graduated from Rensselaer Polytechnic Institute with a B.S. in Management
Engineering in 1950.
John J. Rigas is the father of Michael J. Rigas, Timothy J. Rigas and
James P. Rigas, each of whom currently serves as a director and executive
officer of the Company.
Michael J. Rigas
Age 45
Michael J. Rigas is Executive Vice President, Operations of Adelphia
and is a Vice President of its subsidiaries. He is also Vice Chairman and a
director of Hyperion. Since 1981, Mr. Rigas has served as a Senior Vice
President, Vice President, general partner or other officer of the constituent
entities which became wholly-owned subsidiaries of Adelphia upon its formation
in 1986, as well as the cable television operating companies acquired by the
Company which were wholly or partially owned by members of the Rigas Family.
From 1979 to 1981, he worked for Webster, Chamberlain & Bean, a Washington, D.C.
law firm. Mr. Rigas graduated from Harvard University (magna cum laude) in 1976
and received his Juris Doctor degree from Harvard Law School in 1979.
Timothy J. Rigas
Age 43
Timothy J. Rigas is Executive Vice President, Chief Financial Officer,
Chief Accounting Officer and Treasurer of Adelphia and its subsidiaries. He is
also Vice Chairman, Chief Financial Officer and Treasurer and a director of
Hyperion. Since 1979, Mr. Rigas has served as Senior Vice President, Vice
President, general partner or other officer of the constituent entities which
became wholly-owned subsidiaries of Adelphia upon its formation in 1986, as well
as the cable television operating companies acquired by the Company which were
wholly or partially owned by members of the Rigas Family. Mr. Rigas graduated
from the University of Pennsylvania, Wharton School, with a B.S. degree in
Economics (cum laude) in 1978.
James P. Rigas
Age 41
James P. Rigas is Executive Vice President, Strategic Planning of
Adelphia and is a Vice President of its subsidiaries, and also serves as Vice
Chairman, Chief Executive Officer and Chief Operating Officer and a director of
Hyperion. Since February 1986, Mr. Rigas has served as a Senior Vice President,
Vice President or other officer of the constituent entities which became
wholly-owned subsidiaries of Adelphia upon its formation in 1986, as well as the
cable television operating companies acquired by the Company which were wholly
or partially owned by members of the Rigas Family. Among his business
activities, Mr. Rigas is a member of the Board of Directors of Cable Labs. Mr.
Rigas graduated from Harvard University (magna cum laude) in 1980 and received a
Juris Doctor degree and an M.A. degree in Economics from Stanford University in
1984. From June 1984 to February 1986, he was a consultant with Bain & Co., a
management consulting firm.
Daniel R. Milliard
Age 51
Daniel R. Milliard is Senior Vice President and Secretary of Adelphia
and its subsidiaries. He also serves as President, Vice Chairman, Secretary and
a director of Hyperion, having also served as Chief Operating Officer of
Hyperion from 1996 through March 1999. Since 1982, Mr. Milliard served as Vice
President, Secretary and/or General Counsel of Adelphia and the constituent
entities which became wholly-owned subsidiaries of Adelphia, as well as the
cable television operating companies acquired by the Company which were wholly
or partially owned by members of the Rigas Family. He served as outside general
counsel to the Company's predecessors from 1979 to 1982. Mr. Milliard graduated
from American University in 1970 with a Bachelor of Science degree in Business
Administration. He received an M.A. degree in Business from Central Missouri
State University in 1971, where he was an Instructor in the Department of
Finance, School of Business and Economics, from 1971-1973, and received a Juris
Doctor degree from the University of Tulsa School of Law in 1976. He is a
Director of Citizens Bancorp., Inc. in Coudersport, Pennsylvania and President
of the Board of Directors of Charles Cole Memorial Hospital.
Pete J. Metros
Age 59
Pete J. Metros became a director of Adelphia on November 4, 1986. Mr.
Metros has been President and a member of the Board of Directors of Rapistan
Demag Corporation, a subsidiary of Mannesmann AG, since December 1991. From
August 1987 to December 1991, he was President of Rapistan Corp., the
predecessor of Rapistan Demag Corporation, and of Truck Products Corp., both of
which were major subsidiaries of Lear Siegler Holdings Corp. From 1980 to August
1987, Mr. Metros was President of the Steam Turbine, Motor & Generator Division
of Dresser-Rand Company. From 1964 to 1980, he held various positions at the
General Electric Company, the last of which was Manager Manufacturing for the
Large Gas Turbine Division. Mr. Metros is also on the Board of Directors of
Hyperion, and Borroughs Corporation of Kalamazoo, Michigan. Mr. Metros received
a BS degree from the Georgia Institute of Technology in 1962.
Dennis P. Coyle
Age 60
Dennis P. Coyle is General Counsel and Secretary of FPL Group, Inc. and
Florida Power & Light Company. Mr. Coyle was named General Counsel of FPL Group,
Inc. and Florida Power & Light Company in 1989, and assumed the additional title
and responsibilities of Secretary of such companies in 1991. He graduated from
Dartmouth College in 1960 and received his law degree from Columbia University
in 1965. In an investment agreement with respect to Olympus Communications, L.P.
("Olympus," a joint venture of the Company), John, Michael, Timothy and James
Rigas had agreed to vote a sufficient number of shares of the Company's Class A
common stock to elect to the Board a nominee of Telesat Cablevision, Inc., which
is the Company's joint venture partner in Olympus. This agreement terminated on
January 29, 1999 when Telesat sold all of its Adelphia stock to the Company.
Prior to such termination, Mr. Coyle was the nominee of Telesat Cablevision,
Inc., which is an indirect, wholly-owned subsidiary of FPL Group, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company's
directors, executive officers and persons who beneficially own more than ten
percent of a class of the Company's registered equity securities to file with
the Securities and Exchange Commission and deliver to the Company initial
reports of ownership and reports of changes in ownership of such registered
equity securities.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company or written representations that no other
reports were required, the Company's directors, executive officers and more than
ten percent stockholders filed on a timely basis all reports due under Section
16(a) for the period from April 1, 1998 through December 31, 1998.
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid by the Company for services rendered during the Company's nine
and twelve months ended December 31, 1998 and the fiscal years ended March 31,
1998 and March 31, 1997 to the Company's Chief Executive Officer and the four
most highly compensated executive officers whose compensation exceeded $100,000
in salary and bonus during the twelve months ended December 31, 1998:
<TABLE>
<CAPTION>
Annual Compensation
Long-Term
Compensation
Period Compensation($) Restricted All Other
Name and Principal Position Ended (a) Salary Bonus Stock Awards($) Compensation ($) (b) (c)
- --------------------------- --------- ------ ----- --------------- ------------------------
<S> <C> <C> <C> <C> <C>
John J. Rigas 9 months ended 12/98 1,018,789 -- -- 200,750
Chairman, President and 12 months ended 12/98 1,367,399 -- -- 461,061
Chief Executive Officer 12 months ended 3/98 1,271,939 -- -- 461,378
12 months ended 3/97 1,235,194 -- -- 473,852
Michael J. Rigas 9 months ended 12/98 171,484 -- -- 10,950
Executive Vice President, 12 months ended 12/98 229,866 -- -- 10,950
Operations 12 months ended 3/98 213,011 -- -- 10,950
12 months ended 3/97 206,857 -- -- 10,950
Timothy J. Rigas 9 months ended 12/98 171,484 -- -- 10,950
Executive Vice President, Chief 12 months ended 12/98 229,866 -- -- 10,950
Financial Officer, Chief 12 months ended 3/98 213,089 -- -- 10,950
Accounting Officer and Treasurer 12 months ended 3/97 207,618 -- -- 10,950
James P. Rigas 9 months ended 12/98 171,003 -- -- 11,431
Executive Vice President, 12 months ended 12/98 229,385 -- -- 11,431
Strategic Planning 12 months ended 3/98 213,011 -- -- 11,410
12 months ended 3/97 206,857 -- -- 11,410
Daniel R. Milliard (d) 9 months ended 12/98 176,438 -- 760,500 5,340
Senior Vice President and 12 months ended 12/98 238,191 -- 760,500 5,340
Secretary 12 months ended 3/98 229,810 -- 27,000 5,340
12 months ended 3/97 238,863 75,000 156,000 5,340
<FN>
(a) On March 30, 1999, the Company changed its fiscal year end from March 31 to
December 31. The twelve months ended December 31, 1998 includes three
months of compensation from the fiscal year ended March 31, 1998.
(b) Nine months ended December 31, 1998, twelve months ended December 31, 1998
and fiscal years ended March 31, 1998 and 1997 amounts include: (i) life
insurance premiums paid during each respective period by the Company (or,
in the case of Daniel R. Milliard, Hyperion) under employment agreements
with John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas and
Daniel R. Milliard, in premium payment amounts of $200,000, $10,200,
$10,200, $10,681 and $4,590, respectively, during the nine and twelve
months ended December 31, 1998, $200,000, $10,200, $10,200, $10,660 and
$4,590, respectively, during the fiscal years ended March 31, 1998 and
1997, on policies owned by the respective named executive officers; (ii)
$0, $227,805, $230,746 and $250,970 for John J. Rigas which represents the
dollar value of the benefit of the whole-life portion of the premiums paid
by the Company during the nine and twelve months ended December 31, 1998,
respectively, and the fiscal years ended March 31, 1998 and 1997,
respectively, pursuant to a split-dollar life insurance arrangement
projected on an actuarial basis; (iii) $0, $32,506, $29,882 and $22,132 for
John J. Rigas which represents payments by the Company during the nine and
twelve months ended December 31, 1998, respectively, and the fiscal years
ended March 31, 1998 and 1997, respectively, pursuant to a split-dollar
life insurance arrangement that is attributable to term life insurance
coverage; and (iv) $750 in Company matching contributions for each
executive officer under the Company's 401(k) savings plan for the nine and
twelve months ended December 31, 1998 and the fiscal years ended March 31,
1998 and 1997, respectively. The amounts shown above do not include
transactions between the Company and certain executive officers or certain
entities which are privately owned in whole or in part by the executive
officers named in the table. See "Item 13, Certain Relationships and
Related Transactions."
In accordance with an agreement related to the split-dollar life insurance
arrangement referred to above, the Company will be reimbursed for all
premiums paid related to such arrangement upon the earlier of death of both
the insured and his spouse or termination of the insurance policies related
to such arrangement.
(c) Does not include the value of certain non-cash compensation to each
respective named individual which did not exceed the lesser of $50,000 or
10% of such individual's total annual salary shown in the table.
(d) Amounts shown for Daniel R. Milliard include amounts paid by the Company
under Mr. Milliard's employment agreement with the Company, which was
terminated March 4, 1997 and amounts paid since March 4, 1997 under Mr.
Milliard's new employment agreement with Hyperion as described below. Mr.
Milliard was granted, pursuant to his employment agreement, restricted
stock bonus awards under Hyperion's 1996 Long-Term Incentive Compensation
Plan ("1996 Plan") of 338,000, 58,500 and 58,500 shares of Hyperion Class A
common stock which had a value of approximately $156,000, $27,000 and
$760,500 as of March 4, 1997, April 1, 1997 and April 1, 1998 (the dates of
grant), respectively. The 455,000 shares are not subject to vesting and
will fully participate in dividends and distributions.
All of the executive officers are eligible to receive stock options or
stock bonuses of Class A common stock under the Company's 1998 Long-Term
Incentive Compensation Plan ("1998 Plan"), to be awarded or granted at the
discretion of the Plan Administrator (as defined therein), subject to
certain limitations on the number of shares that may be awarded to each
executive officer under the 1998 Plan. No awards were made under the 1998
Long-Term Incentive Compensation Plan or the Stock Option Plan of 1986
during the twelve months ended December 31, 1998, although Hyperion
approved the issuance of certain stock options and restricted stock awards
under its 1996 Plan to certain executive officers of Adelphia. (See Item
13).
</FN>
</TABLE>
Employment Contracts and Termination of Employment
During the nine months ended December 31, 1998, each of the named
executive officers other than Mr. Milliard had an employment agreement with the
Company which is automatically renewable each year unless one party gives the
other prior notice and which provides among other things for compensation review
by the Compensation Committee, the insurance premium payments listed in note
(a)(i) to the Summary Compensation Table above, and benefits. In addition, under
such employment agreements, upon termination of such employment for any reason
other than "for cause," each of the executive officers will be entitled to
receive severance pay equal to three months of his salary plus the amount of
insurance premiums payable under such officer's employment agreement which, as
of January 1, 1999, in the aggregate in the case of John J. Rigas would be
approximately $452,446.
As of March 4, 1997, Mr. Milliard entered into an employment agreement
with Hyperion, currently a 66% owned subsidiary of the Company, and terminated
his employment agreement with Adelphia. Mr. Milliard serves as President and
Vice Chairman of Hyperion. Mr. Milliard's employment agreement with Hyperion
provides for base salary, annual cash bonuses based on achievement, stock
options and stock bonuses, certain employee benefits and certain
change-in-control and other provisions, and expires on March 31, 2001 unless
terminated earlier pursuant to its terms. Mr. Milliard continues to serve as
a director, senior vice president and secretary of Adelphia, although he
receives no additional compensation for serving in such capacities.
The Company pays the annual premiums related to a split-dollar life
insurance arrangement for joint and survivor life insurance coverage for John J.
Rigas and his spouse. Upon the earlier of the death of Mr. Rigas and the death
of his spouse or the termination of the arrangement, the Company will recover
all of the premiums previously paid by the Company. The compensation related to
such arrangement is derived as described in notes (b)(ii) and (iii) to the
Summary Compensation Table above.
Compensation Committee Interlocks and Insider Participation
Perry S. Patterson and Pete J. Metros serve as members of the
Compensation Committee of the Board of Directors. Neither Mr. Patterson nor Mr.
Metros has been an officer or employee of the Company.
Board of Directors Compensation
Directors who are not also employees of the Company each receive
compensation from the Company for services as a director at a rate of $750 plus
reimbursement of expenses for each Board and committee meeting attended.
Directors who are employees of the Company do not receive any compensation for
services as a director or as a member of Board committees.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, based on information available to the
Company as of May 24, 1999, certain information with respect to the beneficial
ownership of Class A common stock and Class B common stock by each director or
nominee for director, all executive officers and directors of Adelphia as a
group, and each person known to Adelphia to own beneficially more than 5% of
such Common stock, based on 50,328,343 shares of Class A common stock and
10,834,476 shares of Class B common stock outstanding, respectively, as of such
date. Unless otherwise noted, each of the shareholders in the table has sole
voting and investment power. The business address of each 5% beneficial owner
named below, unless otherwise noted, is Main at Water Street, Coudersport,
Pennsylvania 16915.
<TABLE>
<CAPTION>
Shares of Percent of Shares of Percent of
Class A Class A Class B Class B
Common Common Common Common
Name Stock Stock Stock Stock
- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C>
John J. Rigas (a) (b) 5,883,004(c) 54.3%
Michael J. Rigas (a) (b) 1,915,970(c) 17.7%
Timothy J. Rigas (a) (b) 1,915,970(c) 17.7%
James P. Rigas (a) (b) 1,151,634(c) 10.6%
Daniel R. Milliard 1,000(d) (e) -- --
Perry S. Patterson 1,250 (e) -- --
Pete J. Metros 100 (e) -- --
Dennis P. Coyle 1,000 (e) -- --
All executive officers and directors
as a group (eight persons) 35,036,562(a)(c) (b) 10,572,731(c) 97.6%
Ellen K. Rigas (f) (g) 261,762(c) 2.4%
Doris Holdings, L.P. (h) 2,398,151 4.8% -- --
Highland Holdings II (i) 4,000,000 7.9% -- --
Highland Communications,
L.L.C.(i) 8,556,268 17.0% -- --
Highland Preferred
Communications, L.L.C. (i) 9,433,962 15.8% -- --
Highland Holdings (i) (i) (i) -- --
Janus Capital Corporation (j)
100 Fillmore Street
Denver, CO 80206-4923 6,262,306 12.4% -- --
Booth American Company
333 W. Fort Street, 12th Floor
Detroit, MI 48226 3,571,428 7.1% -- --
<FN>
(a) The holders of Class B common stock are deemed to be beneficial owners of
an equal number of shares of Class A common stock because Class B common
stock is convertible into Class A common stock on a one-to-one basis. In
addition, the following persons own or have the power to direct the voting
of shares of Class A common stock in the following amounts: John J. Rigas,
431,800 shares - 71,700 shares directly and 360,100 shares through Doris
Holdings, L.P. ("Doris"); Michael J. Rigas, 193,500 shares - 200 shares
directly and 193,300 shares through Doris; Timothy J. Rigas, 193,500 shares
- 200 shares directly and 193,300 shares through Doris; James P. Rigas,
193,300 shares through Doris. John J. Rigas shares voting power with his
spouse with respect to 106,300 of such shares held through Doris. Each of
John J. Rigas, Michael J. Rigas, Timothy J. Rigas and James P. Rigas also
shares voting and dispositive power with respect to the 17,990,230 shares
of Class A common beneficially owned by Highland Holdings and subsidiaries
("Highland"), the 4,000,000 shares of Class A common held by Highland
Holdings II ("Highland II") and the other 1,458,151 shares of Class A
common held by Doris. See notes (h) and (i) below.
(b) After giving effect to the conversion solely by each individual holder of
all of his Class B common stock into Class A common stock and including all
shares of Class A common stock, and the conversion into Class A common
stock of Series C Cumulative Convertible Preferred Stock, currently held by
such individual holder or over which such individual holder has or shares
voting or investment power as disclosed in notes (a) above or (h) and (i)
below, the percentage of Class A common stock owned by John J. Rigas,
Michael J. Rigas, Timothy J. Rigas and James P. Rigas would be 46.2%,
42.6%, 42.6% and 41.9%, respectively. Further, after giving effect to an
additional 4,856,540 shares of Class A common stock of which John J. Rigas
has the right to direct the voting in the election of directors pursuant to
a Class B Stockholders Agreement (and assuming the parties to such
agreement converted their Class B common stock into Class A common stock),
as to all of which additional shares John J. Rigas disclaims beneficial
ownership, the percentage of Class A common stock owned by John J. Rigas
would be 49.9%.
(c) The amounts shown include 97,949 of the same shares which are owned of
record by Dorellenic, a general partnership in which the five named
individual Rigas family members are general partners, and such shares are
only included once for "all executive officers and directors as a group."
The named Rigas individuals have shared voting and investment power with
respect to these shares. The amounts shown do not include any of the shares
from a minimum of 4,114,549 to a maximum of 6,171,824 shares of Class B
common stock that Highland has agreed to purchase from Adelphia on or
before January 23, 2000, pursuant to an agreement between Adelphia and
Highland dated April 9, 1999.
(d) Daniel R. Milliard shares voting and investment power with his spouse with
respect to these shares.
(e) Less than 1%.
(f) As a holder of Class B common stock, Ellen K. Rigas is deemed to be the
beneficial owner of an equal number of shares of Class A common stock
because Class B common stock is convertible into Class A common stock on a
one-to-one basis. In addition, Ellen K. Rigas owns 1,600 shares of Class A
common stock directly and shares voting and investment power with respect
to 17,990,230 shares of Class A common stock held by Highland and 4,000,000
shares of Class A common stock held by Highland II. See note (i) below.
Ellen K. Rigas is the daughter of John J. Rigas.
(g) After giving effect to the conversion of all of Ellen K. Rigas' Class B
common stock into shares of Class A common stock and including all shares
of Class A common stock, and the conversion into Class A common stock of
Series C Cumulative Convertible Preferred Stock held by Ellen K. Rigas or
over which Ellen K. Rigas has or shares voting or investment power as
discussed in note (i) below, the percentage of Class A common stock owned
by Ellen K. Rigas would be 37.1%.
(h) Doris and Eleni Acquisition, Inc., the general partner of Doris, are
affiliates of John J. Rigas, Michael J. Rigas, Timothy J. Rigas and James
P. Rigas, each of whom has shared voting and investment power with respect
to the shares held by Doris. In addition, through irrevocable proxies, each
of the above-named individuals shares with Doris the power to vote or
direct the vote of such number of shares of Class A common stock held as is
described in note (a) above.
(i) Each of Highland and Highland II is a general partnership, the general
partners of which are John J. Rigas, Michael J. Rigas, Timothy J. Rigas,
James P. Rigas and Ellen K. Rigas. These Rigas family members may be deemed
to share voting and investment power with respect to the shares held by
Highland's wholly owned subsidiaries, Highland Communications, L.L.C. and
Highland Preferred Communications, L.L.C., and also with respect to the
shares held by Highland II. The amount shown for Highland Preferred
Communications, L.L.C. includes, and the percentage shown reflects,
9,433,962 shares of Class A common stock into which the 80,000 shares of
Adelphia's Series C Cumulative Convertible preferred stock held by Highland
Preferred Communications, L.L.C. is convertible. The amount shown for
Highland Communications, L.L.C. includes 8,506,268 shares of Class A common
stock held directly by it and 50,000 shares of Class A common stock held by
Bucktail Broadcasting Corporation, another subsidiary of Highland.
<PAGE>
(j) According to a Schedule 13G, the named entity provides investment advice to
several clients that hold the shares indicated. In addition, Thomas H.
Bailey, its President and Chairman and one of its shareholders, may be
deemed to beneficially own the same shares due to his positions and stock
ownership which may be deemed to enable him to exercise control over the
named entity.
</FN>
</TABLE>
John J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas,
Ellen K. Rigas, Daniel R. Milliard, Dorellenic and the Company have entered into
a Class B Stockholders Agreement providing that such stockholders shall vote
their shares of common stock for the election of directors designated by a
majority of voting power (as defined in the Agreement) of the shares of Common
stock held by them. The Class B Stockholders Agreement also provides that, in
the absence of the consent of the holders of a majority of the voting power of
the shares of common stock owned by the parties to the Agreement, (i) none of
the stockholder parties may sell, assign or transfer all or any part of their
shares of common stock in a public sale (as defined in the Agreement) without
first offering the shares to the other parties to the Agreement and (ii) no
stockholder party may accept a bona fide offer from a third party to purchase
shares of such stockholder without first offering the shares to the Company and
then to the other parties to the Class B Stockholders Agreement. In addition,
each party has certain rights to acquire the shares of common stock of the
others under certain conditions. John J. Rigas is a party to an agreement
with the other holder of Class B common stock who is not a
party to the Class B Stockholders Agreement which gives John J. Rigas and his
descendants certain rights to acquire the shares of common stock of such
stockholder under certain conditions.
Item 13. Certain Relationships and Related Transactions
Management Services
During the nine months ended December 31, 1998, the Company provided
management services for certain cable television systems not owned by the
Company, including managed partnerships ("Managed Partnerships") in which John
J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas and Ellen K. Rigas
had varied ownership interests. These services included supervision of technical
and business operations, accounting, marketing, programming, purchasing, field
engineering and other technical and administrative nonfield services. During
this period, the Managed Partnerships paid the Company up to five percent of
system revenues for such services. Other fees were charged by the Company to the
Managed Partnerships during this period for goods and services including
mark-ups on the Company's volume purchases of equipment, pay programming and
other goods and services. In addition, the Managed Partnerships charged the
Company for system and corporate costs during this period. The net fees and
expenses charged by the Company to Managed Partnerships amounted to $2,713,000
for the nine months ended December 31, 1998. In addition, the Company paid
$3,422,000 to other entities owned by members of the Rigas family, primarily for
property, plant and equipment and services. The Company believes that these
charges were no less favorable than the charges which the Company believes it
could obtain in similar transactions with unrelated third parties.
Loans to and from Affiliates
Certain loans to and from the Company by or to affiliates (which do not
include Olympus) as of December 31, 1998 are summarized below. Interest is
charged on such loans to affiliates at rates which ranged from 9.00% to 11.31%
for the nine months ended December 31, 1998.
Total interest income on loans to affiliates, excluding Olympus,
aggregated $9,610,000 for the nine months ended December 31, 1998. In addition,
net settlement amounts under interest rate swap agreements with the Managed
Partnerships, recorded as adjustments to interest expense during the period
incurred, increased the Company's interest expense by $2,049,000 for the nine
months ended December 31, 1998.
The Company earned a $2,017,000 preferred return on its Preferred Class
B Limited Partner Interest in Syracuse Hilton Head Holdings, L.P. ("SHHH"), an
Adelphia managed partnership controlled by the Rigas family for the nine months
ended December 31, 1998.
Net receivables due from the Managed Partnerships for advances made by
the Company for the construction and acquisition of cable television systems and
for working capital purposes, including accrued interest thereon, were
$14,186,000 at December 31, 1998.
During the nine months ended December 31, 1998 the Company made net
advances of $4,005,000 to Dorellenic. At December 31, 1998, net receivables from
Dorellenic (including accrued interest) were $29,922,000. Amounts advanced to
Dorellenic were primarily used for working capital purposes.
During fiscal 1990 and 1991, the Company loaned an aggregate $255,000
to Daniel R. Milliard and an unaffiliated third party, pursuant to several
revolving term and term notes, for capital expenditures and working capital
purposes. As of December 31, 1998, the outstanding amount of these loans was
$152,500.
On an end-of-quarter basis, the largest aggregate amount of net
outstanding loans and advances receivable from affiliates (directors, executive
officers and five-percent shareholders) or entities they control, including John
J. Rigas, Michael J. Rigas, Timothy J. Rigas, James P. Rigas, Ellen K. Rigas,
Daniel R. Milliard, Dorellenic and/or the Managed Partnerships during the nine
months ended December 31, 1998 was $47,930,000.
Co-Borrowing Agreement
On March 29, 1996, a subsidiary of the Company entered into a
$200,000,000 loan agreement with a Managed Partnership and an Olympus
subsidiary, as co-borrowers, which agreement remained in effect during the nine
months ended December 31, 1998.
On May 6, 1999, certain subsidiaries and affiliates of Adelphia and
Olympus, including Hilton Head Communications, L.P., a Rigas family partnership,
closed on an $850,000,000 credit facility with several banks. The credit
facility consists of a $600,000,000 8 1/2 year reducing revolving credit loan
and a $250,000,000 9 year term loan.
Business Opportunities
The Company's executive officers have entered into a Business
Opportunity Agreement, dated July 1, 1986 (the "Business Opportunity
Agreement"), under which they have agreed not to acquire an interest (except
that such persons may, individually for their own account, engage in regular
portfolio trading of publicly traded securities of companies in the cable
television industry) in any cable television system except: cable television
systems which they or their affiliates (excluding the Company) owned, in whole
or in part, operated or had agreed to acquire as of July 1, 1986; any expansions
of such systems within the same county or an adjacent county (except for systems
which are also contiguous to Company-owned systems); and systems which the
Company elects not to acquire under its right of first refusal described below
and any expansions of such systems within the same county or an adjacent county
(except for systems which are also contiguous to Company-owned systems).
Otherwise, the executive officers will first offer to the Company the
opportunity to acquire or invest in any cable television system or franchise
therefor or interest therein that is offered or available to them. If a majority
of the Company's Board of Directors, including a majority of the independent
directors, rejects such offer, the executive officers may acquire or invest in
all of such cable television systems or franchises therefor or interest therein
or with others on terms no more favorable to them than those offered to the
Company.
The Company's executive officers may from time to time evaluate and,
subject to the Company's rights and covenants in the Company's loan agreements
and indentures, may acquire cable television systems or interests therein for
their own accounts separately or along with the Company and/or other joint
venture parties.
Except for the limitations on the ownership of cable television systems
as described herein, the executive officers of Adelphia and their affiliates are
not subject to limitations with respect to their other business activities and
may engage in other businesses related to cable television or other
telecommunications media. The executive officers will devote as much of their
time to the business of the Company as is reasonably required to fulfill the
duties of their offices.
In the event that any executive officer (or his affiliate) decides to
offer for sale (other than to another executive officer or his or another
executive officer's family member, trust or family controlled entity) for his
account, his ownership interest in any cable television system or franchise, he
or it will (subject to the rights of third parties existing at such time) first
offer such interests to the Company. Such selling person or entity has a
unilateral option to elect to require that, if the Company accepts such offer,
up to one half of the consideration for his or its interest would consist of
shares of Class B Common stock, which shares will be valued at the prevailing
market price of the Class A Common stock, and the remainder would consist of
shares of Class A common stock and/or cash. If a majority of the Company's
independent directors rejects such offer, the executive officer (or his
affiliate) may sell such interest to third parties on terms no more favorable to
such third parties than those offered to the Company.
Registration Rights, Stock Purchase and Other Matters
Pursuant to a Registration Rights Agreement, as amended, between the
Company and the holders of Class B Common stock, John J. Rigas has the right,
subject to certain limitations, to require the Company to register shares of the
Company's common stock owned by him for sale to the public and pay the expenses
(except for Mr. Rigas' counsel fees) of such registration on five occasions
selected by him (subject to certain limitations intended to prevent undue
interference with the Company's ability to distribute its securities) during a
fourteen-year period which began in December 1986. The other holders of Class B
common stock have the right to participate, at the option of John J. Rigas, as
selling stockholders in any such registration initiated by John J. Rigas. The
holders of Class B common stock also have unlimited rights to participate as
selling stockholders in any registered public offering initiated by the Company
and require the Company to pay their expenses (except counsel fees). Such rights
of participation are subject to limitation at the discretion of the managing
underwriter of such offering.
In addition, substantially all of the Class A common stock and Series C
Cumulative Convertible preferred stock owned by the Rigas family or entities
they own or control has been registered by the Company on shelf registration
statements which remain in effect.
In April 1998 and in recognition for valuable past service to Hyperion
and as an incentive for future services, Hyperion authorized the issuance under
its 1996 Plan to each of John J. Rigas, Michael J. Rigas, Timothy J. Rigas and
James P. Rigas of (i) stock options covering 100,000 shares of Hyperion Class A
common stock, which options will vest in equal one-third amounts on the third,
fourth and fifth year anniversaries of grant (vesting conditioned on continued
service as an employee or director) and which shall be exercisable at the
initial public offering price for the IPO and (ii) phantom stock awards covering
100,000 shares of Hyperion Class A common stock, which phantom awards will vest
in equal one-third amounts on the third, fourth and fifth year anniversaries of
grant (vesting conditioned on continued service as an employee or director).
At December 31, 1998, no such options or grants have been granted.
On August 18, 1998, Adelphia issued 8,190,315 shares of Class A common
stock to the public and the Rigas family. Of this total, 4,100,000 shares were
sold to the public at a price of $32.00 per share, with an underwriting discount
of $1.44 per share. The remaining 4,090,315 shares were sold to Highland
Communications, L.L.C., an entity controlled by the Rigas family, at the public
offering price less the underwriting discount.
On September 30, 1998, Adelphia merged one of its subsidiaries with the
subsidiary of AT&T that held an interest in SHHH. Pursuant to the merger
agreement, AT&T received 2,250,000 newly issued shares of Adelphia Class A
common stock. Simultaneously, SHHH distributed certain cable systems which
served approximately 34,100 basic subscribers in Virginia and North Carolina to
Adelphia, in exchange for the interest acquired by Adelphia from AT&T as
described above, Adelphia's preferred equity investment in SHHH and certain
affiliate receivables owed to Adelphia. The Virginia and North Carolina systems
were distributed to Adelphia without indebtedness.
On January 14, 1999, Adelphia completed offerings totaling 8,600,000
shares of Class A common stock. In those offerings, Adelphia sold 4,600,000
newly issued shares, including an overallotment option for 600,000 shares, to
Goldman, Sachs & Co. at $43.25 per share and it also sold 4,000,000 shares at
$43.25 per share to Highland Holdings II, an entity controlled by members of the
Rigas family.
On January 29, 1999, Adelphia purchased from Telesat Cablevision, Inc.,
a subsidiary of FPL Group, Inc., shares of Adelphia stock owned by Telesat for a
price of $149,213,000. In the transaction, Adelphia purchased 1,091,524 shares
of its Class A common stock and 20,000 shares of its Series C Cumulative
convertible preferred stock which are convertible into an additional 2,358,490
shares of Class A common stock. These shares represent 3,450,014 shares of Class
A common stock on a fully converted basis. Adelphia and Telesat also agreed to a
redemption of Telesat's interests in Olympus Communications, L.P. by July 11,
1999 for approximately $108,000,000. The redemption is subject to applicable
third party approvals. As noted earlier, Mr. Dennis Coyle is the nominee of
Telesat to Adelphia's Board of Directors.
On March 2, 1999, Hyperion Telecommunications, Inc. issued $300,000,000
of 12% Senior Subordinated Notes due 2007. Highland Holdings, an entity
controlled by members of the Rigas family, purchased $100,000,000 of the
$300,000,000 of Senior Subordinated Notes directly from Hyperion at a price
equal to the aggregate principal amount less the discount to the initial
purchasers of the other $200,000,000 of Senior Subordinated Notes.
On April 9, 1999, Adelphia entered into a stock purchase agreement with
Highland Holdings in which Adelphia agreed to sell to Highland Holdings, and
Highland Holdings agreed to purchase, from $250,000,000 to $375,000,000 of
Adelphia Class B common stock. The purchase price per share for the Class B
common stock will be equal to $60.76 (the public offering price in Adelphia's
April 28, 1999 public offering, less the underwriting discount), plus an
interest factor. The closing under this stock purchase agreement is to occur by
January 23, 2000. In addition, the Rigas family waived their rights under the
Business Opportunity Agreement to acquire certain basic subscribers in the
Philadelphia area in connection with Adelphia's pending acquisition of the cable
television systems owned by Harron Communications Corp.
From time to time, the Company makes announcements regarding proposed
transactions that may involve affiliates of the Company. No assurance can be
given that these transactions will be consummated.
