<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-78027
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May 14, 1999)
[LOGO OF ADELPHIA APPEARS HERE]
$750,000,000
Adelphia Communications Corporation
6% Convertible Subordinated Notes due 2006
-----------
We will pay interest on the notes each February 15 and August 15. The first
interest payment will be made on August 15, 2001. The notes will be unsecured
obligations of Adelphia and will be subordinated in right of payment to all of
our existing and future senior indebtedness. The notes are convertible by
holders at any time after the date of original issuance and prior to the close
of business on the business day immediately preceeding the maturity date into
shares of our Class A common stock at a conversion price of $55.49 per share,
subject to adjustment in certain events.
The notes will mature on February 15, 2006. The notes may be redeemed, in
whole or in part, at any time on or after February 16, 2004 at the redemption
prices set forth in this prospectus supplement, plus accrued and unpaid
interest.
We have granted the underwriters named in this prospectus supplement an
option to purchase up to an additional $112,500,000 principal amount of notes
under certain circumstances.
Our Class A common stock is quoted on the Nasdaq National Market under the
symbol "ADLAC." The last reported sale price of our Class A common stock on
Nasdaq on January 17, 2001 was $45 1/16 per share.
-----------
Investing in the Notes involves risks. See "Risk Factors" beginning on page
S-9 and page 4.
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.
-----------
<TABLE>
<CAPTION>
Per Note Total
-------- ------------
<S> <C> <C>
Public Offering Price 100.00% $750,000,000
Underwriting Discount 2.75% $ 20,625,000
Proceeds to Adelphia (before expenses) 97.25% $729,375,000
</TABLE>
Interest on the notes will accrue from January 23, 2001 to date of delivery.
-----------
The underwriters are offering the notes subject to various conditions. The
underwriters expect to deliver the notes to purchasers on or about January 23,
2001.
-----------
Joint Book-Running Managers
Salomon Smith Barney Banc of America Securities LLC
January 17, 2001
<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
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement Summary.............................................. S-2
Risk Factors............................................................... S-9
Use of Proceeds............................................................ S-22
Capitalization............................................................. S-23
Price Range of Adelphia's Common Equity and Dividend Policy................ S-24
Dilution................................................................... S-25
Description of Notes....................................................... S-26
Description of Capital Stock............................................... S-45
Certain United States Federal Income Tax Considerations.................... S-45
Underwriting............................................................... S-51
Notice to Canadian Residents............................................... S-53
Common Stock Offering...................................................... S-54
Where You Can Find More Information........................................ S-55
Legal Matters.............................................................. S-56
Experts.................................................................... S-56
</TABLE>
Prospectus
<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. 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 video, data and voice by way of digital
or analog signals. We owned cable television systems with broadband networks
that passed in front of approximately 9.0 million homes and served
approximately 5.7 million basic subscribers as of September 30, 2000, after
giving effect to pending cable system acquisitions and swaps. Our core cable
systems are organized into six clusters: Los Angeles, PONY (Western
Pennsylvania, Ohio and Western New York), New England, Florida, Virginia and
Colorado Springs. Approximately 44% of our basic subscribers are located in our
Los Angeles and PONY clusters and approximately 82% of our basic subscribers
are located in our six core 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 September 30, 2000, Adelphia Business Solutions was
serving 79 metropolitan statistical areas and had sold 612,544 access lines of
which 576,857 were installed, approximately 49% of which Adelphia Business
Solutions provisioned on its own switches. Adelphia Business Solutions had 282
central office collocations as of September 30, 2000. Adelphia Business
Solutions' Class A common stock is quoted on the Nasdaq National Market under
the symbol "ABIZ."
Recent Developments
January 2001 Common Stock Offering
Concurrently with this Offering we are offering 17,000,000 shares of
Adelphia Class A common stock by means of a separate prospectus supplement. For
ease of reference we will refer to that concurrent offering as the Common Stock
Offering. We expect to receive net proceeds of approximately $729.8 million
from the concurrent Common Stock Offering. The Common Stock Offering and this
offering are independent offerings and are not conditioned on each other. No
requirement exists that we sell the Class A common stock in order to sell the
Notes in this Offering.
S-2
<PAGE>
January 2001 Rigas Common Stock Direct Placement
On January 17, 2000, we entered into a stock purchase agreement with
Highland 2000, L.P., an entity controlled by members of the family of John
Rigas, under which Highland agreed to purchase 5,819,367 shares of Adelphia
Class B common stock. In this prospectus supplement, we will refer to this
stock purchase as the January 2001 Rigas Common Stock Direct Placement. The
January 2001 Rigas Common Stock Direct Placement will be at a per share price
equal to the public offering price less the underwriting discount in the Common
Stock Offering, plus an interest factor. Closing on the January 2001 Rigas
Common Stock Direct Placement will occur within 270 days of the closing of the
Common Stock Offering, and is subject to customary closing conditions.
January 2001 Rigas Notes Direct Placement
On January 17, 2000, we entered into a note purchase agreement with Highland
2000, L.P., an entity controlled by members of the family of John Rigas under
which Highland agreed to purchase $167.4 million aggregate principal amount of
6% convertible subordinated notes due 2006. In this prospectus supplement, we
will refer to this note purchase as the January 2001 Rigas Notes Direct
Placement. The January 2001 Rigas Notes Direct Placement will be at a per note
price equal to the public offering price less the underwriting discount in this
Offering, plus an interest factor. The economic terms of those notes will be
substantially similar to the terms of the notes we will be selling in this
Offering, except that those convertible subordinated notes are convertible into
shares of Adelphia Class B common stock. Closing on the January 2001 Rigas
Notes Direct Placement will occur within 270 days of the closing of this
Offering, and is subject to customary closing conditions.
January 2001 Credit Facility
On January 3, 2001, certain subsidiaries of Adelphia closed on a new short
term secured revolving credit facility. The facility is scheduled to expire
November 30, 2001 and provides for initial lending commitments of $1.3 billion,
subject to reductions over time and upon the happening of certain events,
including some debt financings and asset sales. Subject to compliance with the
terms of this new facility for borrowing, proceeds are available for general
corporate purposes. Approximately $360 million of the facility was used to
permanently repay another subsidiary credit facility.
Cable Systems Swap
On January 1, 2001, we closed the previously announced cable systems
exchange with Comcast Corporation. As a result of this transaction, Adelphia
added approximately 440,000 basic subscribers in Los Angeles, California and
West Palm/Fort Pierce, Florida. In exchange, Comcast received systems serving
approximately 457,000 basic subscribers in suburban Philadelphia, Pennsylvania,
Ocean County, New Jersey, Ft. Myers, Florida, Michigan, New Mexico and Indiana.
The cable systems exchange will be recorded at fair value and purchase
accounting will be applied as of the date of the transaction.
Cleveland Acquisition
On November 1, 2000 we completed the acquisition of cable television systems
owned by Cablevision Systems Corporation for approximately $990 million in cash
and 10.8 million shares of Adelphia Class A common stock. As of September 30,
2000, these cable television systems served approximately 310,000 basic
subscribers in the greater Cleveland, Ohio metropolitan area.
S-3
<PAGE>
Virginia Cluster Acquisitions
On June 13, 2000, we announced agreements regarding our acquisitions of
cable television systems, including GS Communications, Inc., which are expected
to add approximately 155,000 basic subscribers to our Virginia cluster for an
aggregate cash purchase price of approximately $836 million. With the addition
of these basic subscribers, our Virginia cluster is expected to exceed 700,000
basic subscribers. These transactions are subject to customary closing
conditions, including the receipt of necessary governmental approvals and other
consents, and are expected to close in the first or second quarter of 2001.
------------
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-4
<PAGE>
The Offering
Issuer................................ Adelphia Communications
Corporation.
Securities Offered.................... $750.0 million aggregate principal
amount of 6% Convertible
Subordinated Notes due 2006. For
ease of reference, we will refer to
the 6% Convertible Subordinated
Notes as the Notes. Adelphia has
also granted the initial purchasers
an option to purchase up to $112.5
million aggregate principal amount
of additional Notes to cover over-
allotments, if any.
Offering Price........................ 100% of the principal amount of the
Notes, plus accrued interest on the
Notes, if any.
Maturity Date......................... February 15, 2006.
Interest Payment Dates................ February 15 and August 15 of each
year, commencing August 15, 2001.
Conversion Rights .................... Holders may convert some or all of
their Notes into shares of our
Class A common stock at any time
after original issuance of their
Notes and before the close of
business on the Business Day
immediately preceding the maturity
date at an initial conversion price
of $55.49 per share. The initial
conversion price of $55.49 per
share is equivalent to an initial
conversion rate of 18.0213 shares
per $1,000 principal amount of
Notes. The conversion price is
subject to adjustment in certain
circumstances. See "Description of
Notes--Conversion Rights."
Mandatory Redemption; Sinking Fund.... None.
Optional Redemption .................. Adelphia may redeem the Notes, in
whole or in part, at any time on or
after February 16, 2004 at
specified prices, plus accrued and
unpaid interest.
Change in Control; Termination of
Listing .............................. Upon some change of control events
or if the securities issuable upon
conversion of the Notes are not
listed or quoted on certain
national stock markets or automated
quotation system, 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, to the
date of purchase. You should read
"Description of Notes--Repurchase
at the Option of Holders."
S-5
<PAGE>
Adelphia cannot give you any
assurances that it will have
adequate financial resources to
effect a required repurchase of the
Notes if a change of control or
termination of listing event
occurs.
Our failure to make a required
repurchase of the Notes if such a
change of control or termination of
listing occurs would be an Event of
Default under the Indenture.
Subordination......................... The Notes are unsecured
indebtedness of Adelphia Parent
Company ranking junior to other
unsubordinated indebtedness of the
Adelphia Parent Company and pari
passu with right of payment to any
future subordinated indebtedness of
Adelphia Parent Company.
The operations of Adelphia Parent
Company are conducted through its
subsidiaries. Therefore, 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.
The Indenture pursuant to which the
Notes will be issued will not
restrict Adelphia Parent Company's
ability to incur senior debt or
other indebtedness, nor will it
restrict the ability of Adelphia's
subsidiaries to incur indebtedness
or other liabilities. As of
September 30, 2000, on an as
adjusted basis, after giving effect
to the application of the estimated
net proceeds from the offering of
the Notes, the January 2001 Rigas
Notes Direct Placement and the
pending Virginia cluster
acquisitions and the completed
transactions described in
"Prospectus Supplement Summary--
Recent Developments," exclusive of
the Cable Systems Swap, the Notes
would have been subordinated to
approximately
S-6
<PAGE>
$3.4 billion of senior debt of
Adelphia Parent Company and the
Notes would have been effectively
subordinated to approximately $8.8
billion of indebtedness and
redeemable preferred stock of
Adelphia's subsidiaries; and
Adelphia and its subsidiaries'
total indebtedness excluding
redeemable preferred stock would
have been approximately $12.9
billion.
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
Notes" for more information.
Use of Proceeds....................... The net proceeds of this Offering,
after deducting offering expenses,
are estimated to be approximately
$728.9 million, which will be
contributed to Adelphia Parent
Company's subsidiaries and used to
repay borrowings under revolving
credit facilities of those
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 Adelphia
Parent Company's subsidiaries, or
other corporate purposes.
Nasdaq National Market symbol for
Class A Common Stock................. ADLAC
S-7
<PAGE>
Rights of Holders of Class A Common
Stock and Class B Common Stock..... The rights of holders of Class A
common stock and Class B common
stock differ with respect to
certain aspects of dividend,
liquidation and voting rights. The
Class A common stock has certain
preferential rights with respect to
cash dividends and distributions
upon the liquidation of Adelphia.
Holders of Class B common stock are
entitled to 10 votes per share
while the holders of Class A common
stock are entitled to one vote per
share on all matters presented to
stockholders; however, the holders
of Class A common stock, voting as
a separate class, are entitled to
elect one of Adelphia's directors.
See "Description of Capital Stock"
in the attached prospectus.
S-8
<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 September 30, Adelphia has a substantial amount of debt. We
2000, we owed borrowed this money to purchase and to expand our
approximately $11.0 cable systems and other operations and, to a lesser
billion. Our high level extent, for investments and loans to our
of indebtedness can have subsidiaries and other affiliates. At September 30,
important adverse 2000, our indebtedness totaled approximately $11.0
consequences to us and billion. This included approximately:
to you.
. $3.4 billion of Adelphia Parent Company public
debt;
. $831.8 million of public debt owed by our
subsidiary, Adelphia Business Solutions;
. $1.7 billion of public debt owed by our
subsidiary, Arahova Communications, Inc.;
. $516.8 million of public debt owed by our
subsidiary, FrontierVision Partners, L.P.;
. $203.1 million of public debt owed by our
subsidiary, Olympus Communications, L.P.; and
. $4.3 billion of other debt owed by our
subsidiaries to banks, other financial
institutions and other persons.
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
September 30, 2000, the Adelphia Parent Company had
approximately $148.5 million and Adelphia Business
Solutions had approximately $287.6 million of
redeemable exchangeable preferred stock which
contain payment obligations that are similar to
Adelphia's debt obligations.
Approximately 34% of Our debt comes due at various times through the
our debt outstanding at year 2017, including an aggregate of approximately
September 30, 2000 $3.7 billion as of September 30, 2000, which
matures on or before matures on or before December 31, 2004.
December 31, 2004 and
all of it matures prior
to December 31, 2017.
S-9
<PAGE>
Our Business Requires
Substantial Additional Our business requires substantial additional
Financing And If We Do financing on a continuing basis for capital
Not Obtain That expenditures and other purposes including:
Financing We May Not Be
Able To Upgrade Our . constructing and upgrading our plant and
Plant, Offer Services, networks--some of these upgrades we must make to
Make Payments When Due comply with the requirements of local cable
Or Refinance Existing franchise authorities;
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 Our Total Convertible Preferred Stock, Common Stock
And We Expect This To and Other Stockholders' Equity at September 30,
Continue 2000 was approximately $3.9 billion.
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, 1998--$192.7
million;
. nine months ended December 31, 1998--$114.5
million;
. fiscal year ended December 31, 1999--$282.7
million; and
. nine months ended September 30, 2000--$346.7
million.
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 Adelphia Business
Solutions' preferred stock dividends:
<TABLE>
<CAPTION>
Earnings Non-Cash
Deficiency Charges
---------- --------
(in thousands)
<S> <C> <C>
. fiscal year ended March 31, 1998 $113,941 $195,153
. nine months ended December 31, 1998 $ 95,595 $186,173
. fiscal year ended December 31, 1999 $281,975 $455,266
. nine months ended September 30, 2000 $523,470 $753,721
</TABLE>
S-10
<PAGE>
If we cannot Historically, the cash we generate from our
refinance our debt or operating activities and borrowings has been
obtain new loans, we sufficient to meet our requirements for debt
would likely have to service, working capital, capital expenditures and
consider various investments in and advances to our affiliates, and
financing options. We we have depended on additional borrowings to meet
cannot guarantee that our liquidity requirements. Although in the past we
any options available to have been able both to refinance our debt and to
us would enable us to obtain new debt, there can be no guarantee that we
repay our debt in full. will be able to continue to do so in the future or
that the cost to us or the other terms which would
affect us would be as favorable to us as current
loans and credit agreements. Under these
circumstances, we may need to consider various
financing options, such as the sale of additional
equity or some of our assets to meet the principal
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.
Your Right To Receive The Notes will be subordinated in right of payment
Payments On The Notes Is to all of Adelphia's current and future Senior
Subordinated To All Debt, as defined in the Indenture. Upon any
Existing And Future distribution to creditors of Adelphia in a
Senior Debt Of Adelphia liquidation or dissolution of Adelphia or in a
And Effectively bankruptcy, reorganization, insolvency,
Subordinated To The receivership or similar proceeding relating to
Claims Of Creditors Of Adelphia or its property, the holders of Senior
Our Subsidiaries And Debt will be entitled to be paid in full before any
Other Investments payment may be made with respect to the Notes. In
addition, the subordination provisions of the
Indenture will provide that payments with respect
to the Notes will be blocked in the event of a
payment default on Senior Debt and may be blocked
for up to 179 days each year in the event of
certain non-payment defaults on Senior Debt. In the
event of a bankruptcy, liquidation or
reorganization of Adelphia, holders of the Notes
will participate ratably with all holders of
subordinated indebtedness of Adelphia that are
deemed to be of the same class as the Notes, based
upon the respective amounts owed to each holder or
creditor, in the remaining assets of Adelphia. In
any of the foregoing events, there can be no
assurance that there would be sufficient assets to
pay amounts due on the Notes. As a result, holders
of Notes may receive less, ratably, than the
holders of Senior Debt. In addition, under the
subordination provisions of the Indenture, payments
that would otherwise be made to holders of the
Notes will instead be paid to holders of Senior
Debt under certain circumstances. As a result of
these provisions, other creditors of Adelphia
including trade creditors that are not holders of
Senior Debt may recover more, ratably, than the
holders of the Notes.
S-11
<PAGE>
The operations of Adelphia Parent Company are
conducted through its subsidiaries. Therefore,
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 September 30, 2000, on an as adjusted basis,
after giving effect to the application of the
estimated net proceeds of this Offering of the
Notes, the January 2001 Rigas Notes Direct
Placement and the estimated effect of the pending
Virginia cluster acquisitions and the completed
transactions described in "Prospectus Supplement
Summary--Recent Developments," exclusive of the
Cable Systems Swap, the Notes would have been
subordinated to approximately $3.4 billion of
Senior Debt of Adelphia Parent Company and the
Notes would have been effectively subordinated to
approximately $8.8 billion of indebtedness and
redeemable preferred stock of Adelphia's
subsidiaries; and Adelphia and its subsidiaries
total indebtedness excluding redeemable preferred
stock would have been approximately $12.9 billion.
The Indenture will permit the incurrence of
substantial additional indebtedness, including
Senior Debt, by Adelphia Parent Company and its
subsidiaries in the future. See "Description of
Notes--Subordination."
Competition The telecommunications services provided by
Adelphia are subject to strong competition and
potential competition from various sources.
Our cable television Our cable television systems compete with other
business is subject to means of distributing video to home televisions
strong competition from such as Direct Broadcast Satellite systems,
several sources which commonly known as DBS systems. Some local telephone
could adversely affect companies have expressed an interest in entering
revenue or revenue the video-to-home business.
growth.
In addition, because our systems are operated under
non-exclusive franchises, other applicants may
obtain franchises in our franchise areas and
overbuild our systems. 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. 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.
S-12
<PAGE>
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, or Multichannel Multipoint Distribution
Systems, commonly known as 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,
commonly known as 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 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.
We depend on third- We depend on vendors to supply the set-top
party equipment and converter boxes for analog and digital cable
software suppliers. If services. This equipment is available from a
we are unable to procure limited number of suppliers. We typically purchase
the necessary equipment, set-top converter boxes under purchase orders
our ability to offer our placed from time to time and do not carry
services could be significant inventories of set-top converter boxes.
impaired. This could If demand for set-top converter boxes exceeds our
adversely affect our inventories and we are unable to obtain required
growth, financial set-top converter boxes on a timely basis and at an
condition and results of acceptable cost, our ability to recognize
operations. additional revenue from these services could be
delayed or impaired. In addition, if there are no
suppliers who are able to provide converter devices
that comply with evolving Internet and
telecommunications standards or that are compatible
with other products or components we use, our
business may be materially impaired.
S-13
<PAGE>
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 mergers of Bell Atlantic
pricing flexibility for and NYNEX, SBC and Ameritech, and Bell Atlantic and
local telephone GTE, which created Verizon Communications, created
services. very large companies whose combined territories
cover a substantial portion of Adelphia Business
Solutions' markets. Other combinations are
occurring in the industry, such as the merger
between 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, other than in
customers, some of these New York and Texas, where Verizon's and SBC's
major customers could petitions to provide long distance services have
lose market share. been approved. Approvals of such requests could
result in decreased market share for the major long
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. This lack of cooperation,
or labor strikes or work stoppages similar to the
August 2000
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<PAGE>
Verizon strike, could impair or delay the ability
of Adelphia Business Solutions to connect its
networks with those of the incumbent local exchange
carriers.
The regional Bell Some of the regional Bell operating companies have
telephone companies also filed petitions with the FCC requesting
continue to seek other waivers of other obligations under the federal
regulatory approvals Telecommunications Act of 1996. These involve
that could significantly services Adelphia Business Solutions also provides
enhance their such as high speed data, long distance, and
competitive position services to ISPs. If the FCC grants the regional
against Adelphia Bell operating companies' petitions, this could
Business Solutions. 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, MCI/WorldCom, Sprint, Global
companies, AT&T, Crossing and other long distance carriers, cable
MCI/WorldCom and Sprint, television companies, electric utilities, microwave
electric utilities and carriers, wireless telecommunications providers,
other companies that and private networks built by large end users. Both
have advantages over AT&T and MCI/WorldCom offer local telephone
Adelphia Business services in some areas of the country and are
Solutions. expanding their networks. AT&T also merged with
both Tele-Communications, Inc. and MediaOne Group,
Inc., thereby becoming the largest operator of
cable television systems in the country. 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
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<PAGE>
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.
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 state 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.
On February 26, 1999, the FCC released a
Declaratory Ruling and Notice of Proposed
Rulemaking which held that calls to ISPs within a
local calling area are "non-local" because such
calls tend to continue beyond state borders,
meaning that the reciprocal compensation provisions
of the federal Telecommunications Act of 1996 did
not apply to calls to ISPs. However, the FCC left
open the possibility that state commissions could
impose reciprocal compensation obligations on local
exchange carriers that send calls to ISPs.
Imposition of reciprocal compensation obligations
would benefit the local exchange carriers that
terminate the calls with the ISP, such as
competitive local exchange carriers that provide
local exchange services to their own ISPs. As ISPs
do not make outgoing calls, the compensation for
terminating traffic would always flow from the LECs
that originate the calls to the LECs that terminate
the calls. The United States Court of Appeals for
the District of Columbia Circuit vacated this FCC
ruling on March 24, 2000, and remanded the matter
to the FCC, where this reciprocal compensation
matter remains pending.
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. 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. On appeal, the U.S. Court of
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<PAGE>
Appeals for the Ninth Circuit reversed the district
court and ruled that a local franchising authority
has no authority to impose an open access
requirement on cable television operators.
Additionally, federal district courts in Richmond,
Virginia and Miami, Florida have held that a local
franchising authority cannot impose an open access
requirement. The Virginia case has been appealed to
the U.S. Court of Appeals for the Fourth 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.
Unequal Voting Rights Adelphia has two classes of common stock--Class A
Of Stockholders which carries one vote per share and Class B which
carries 10 votes per share. Under Adelphia's
Certificate of Incorporation, the Class A shares
elect only one of our nine 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 19% of those shares as of
The Rigas family can January 17, 2001, as well as all of the outstanding
control stockholder shares of Class B common stock. As of such date,
decisions on very the Rigas family beneficially owns shares
important matters. representing approximately 30% of the total number
of outstanding shares of both classes of Adelphia's
common stock and approximately 67% of the total
voting power of Adelphia's shares. 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
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<PAGE>
eight of nine Adelphia 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. Sales of Class B common stock to the
Rigas family under the January 2001 Rigas Common
Stock Direct Placement, and the Class B common
stock which will be issuable upon the conversion of
the notes sold to the Rigas family under the
January 2001 Rigas Notes Direct Placement, will
increase the voting power of the Rigas family.
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 with which they
have affiliations.
Holding Company The Adelphia Parent Company directly owns no
Structure And Potential significant assets other than stock, partnership
Impact Of Restrictive interests and 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 for
Company depends on its bank and other financial institution loans of our
subsidiaries and other subsidiaries and other companies in which we have
companies in which it invested, restrict their ability and the ability of
has investments to fund the companies they own to make payments to the
its cash needs. Adelphia Parent Company. These agreements also
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.
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<PAGE>
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
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.
If You Convert Your Adelphia has never declared or paid cash dividends
Notes, It Is Unlikely on any of its common stock and has no intention of
You Will Receive A doing so in the foreseeable future. As a result, if
Return On Your Shares you convert your Notes, it is unlikely that you
Through The Payment Of will receive a return on your shares through the
Cash Dividends payment of cash dividends.
Future Sales Of Adelphia Sales of a substantial number of shares of Class A
Common Stock Could common stock or Class B common stock, including
Adversely Affect Its sales by any pledgees of such shares, could
Market Price adversely affect the market price of Class A 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 January 17, 2001, the Rigas
family has the right, subject to some limitations,
to require Adelphia to register substantially all
of the shares which it owns of Class A common
stock, consisting of approximately 25,600,000
shares, Class B common stock, consisting of
19,235,998 shares and the equivalent number of
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:
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<PAGE>
. for Citizens Cable Company--1,852,302 shares of
Class A common stock owned as of October 1,
1999;
. for the selling stockholders receiving shares in
the Verto Communications, Inc. acquisition--
2,574,379 shares of Class A common stock;
. for an entity controlled by members of the
family of John Rigas--5,819,367 shares of Class
B (and the underlying Class A) common stock to
be purchased by that entity within 270 days
following the closing of the Common Stock
Offering;
. for an entity controlled by members of the
family of John Rigas--approximately 3,000,000
shares of Class B (and the underlying Class A)
common stock, issuable upon conversion of the
notes to be purchased by that entity within 270
days following the closing of this Offering;
. for the owners of FrontierVision--7,000,000
shares of Class A common stock in connection
with the FrontierVision acquisition;
. in connection with the Century Communications
Corp. acquisition approximately 48,700,000
shares of Class A common stock; and
. in connection with the acquisition of the
Greater Cleveland systems from Cablevision
Systems Corporation, 10,800,000 shares of Class
A common stock.
Up to approximately 25,600,000 shares of Class A
common stock have been or may be pledged by members
of the Rigas family in connection with margin loans
made to members of the Rigas family. These pledgees
could freely sell any shares acquired upon a
foreclosure.
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.
Our recent and pending acquisitions involve, and
our future acquisitions will involve, the
acquisition of companies that have previously
operated independently. There is no guarantee that
we will be able to realize the benefits expected
from the integration of operations from these
transactions.
Purchasers of Our Common Persons purchasing Class A common stock will incur
Stock Will Incur immediate and substantial net tangible book value
Immediate Dilution dilution.
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<PAGE>
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
Annual Report on Form 10-K, as amended by Form 10-
K/A-2, and in Adelphia's Quarterly Reports on
Form 10- Q, as amended, is forward-looking. 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, dependence
on customers and their spending patterns, reliance
on vendors, product acceptance, our ability to
construct, expand and upgrade our cable systems,
fiber optic networks and related facilities,
technological developments 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.
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<PAGE>
USE OF PROCEEDS
The net proceeds to Adelphia from this Offering described on the cover page
of this prospectus supplement, are estimated to be approximately $728.9
million, after deducting estimated underwriting discount and commissions and
offering expenses. The net proceeds to Adelphia from the concurrent Common
Stock Offering are estimated to be approximately $729.8 million, after
deducting estimated underwriting discount and commissions and offering
expenses. No requirement exists that we sell any shares in the Common Stock
Offering in order to sell the Notes in this Offering. The net proceeds from
this Offering and the Common Stock Offering, initially will be invested in cash
equivalents or advanced or contributed to Adelphia's subsidiaries which will
apply such funds to repay revolving credit facilities of such subsidiaries. As
of September 30, 2000, the average effective interest rate on such credit
facilities was approximately 8.44%. Subject to compliance with the terms of and
to the maturity of the revolving credit facilities, Adelphia expects that these
subsidiaries will reborrow these amounts and distribute them to Adelphia which,
together with any cash equivalents into which the net proceeds were invested,
Adelphia intends to use for general corporate purposes including, in connection
with its pending Virginia cluster acquisitions described in "Prospectus
Supplement Summary--Recent Developments," for working capital and for other
corporate purposes.
On January 17, 2001, Highland 2000, L.P., an entity controlled by members of
the family of John Rigas, agreed to purchase $167.4 million of 6% convertible
subordinated notes due 2006 at a per note price equal to the public offering
price set forth on the cover page of this prospectus supplement, less the
underwriting discount, plus an interest factor. The convertible subordinated
notes to be purchased in the January 2001 Rigas Notes Direct Placement will be
substantially similar to the Notes in this Offering, except that these notes
will be convertible into shares of Adelphia's Class B common stock. The net
proceeds from the January 2001 Rigas Notes Direct Placement are expected to be
similarly advanced to Adelphia's subsidiaries to repay revolving credit
facilities, temporarily invested in short term investments or used for general
corporate purposes.
On January 17, 2001, Highland 2000, L.P., an entity controlled by members of
the family of John Rigas, agreed to purchase 5,819,367 shares of Adelphia's
Class B common stock at a per share price equal to the public offering price
set forth on the cover page of a separate prospectus supplement less the
underwriting discount, plus an interest factor. The net proceeds from the
January 2001 Rigas Common Stock Direct Placement are expected to be similarly
advanced to Adelphia's subsidiaries to repay revolving credit facilities,
temporarily invested in short term investments or used for general corporate
purposes.
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<PAGE>
CAPITALIZATION
(Dollars in thousands except share amounts)
The following table sets forth the cash and cash equivalents and
capitalization of Adelphia as of September 30, 2000, (1) on an actual basis,
(2) on an as adjusted basis to reflect this Offering, the January 2001 Rigas
Notes Direct Placement and the estimated impact of the pending Virginia cluster
acquisitions and the completed transactions described in "Prospectus Supplement
Summary--Recent Developments," exclusive of the Cable Systems Swap and (3) on
an as further adjusted basis to reflect the Common Stock Offering, the January
2001 Rigas Common Stock Direct Placement and the items described in (2) above.
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>
September 30, 2000
---------------------------------------
As As Further
Actual Adjusted (b) Adjusted (c)
----------- ------------ ------------
<S> <C> <C> <C>
Cash and cash equivalents............. $ 146,286 $ 146,286 $ 146,286
Restricted cash....................... 66,652 66,652 66,652
----------- ----------- -----------
Total cash, cash equivalents, and
restricted cash.................... $ 212,938 $ 212,938 $ 212,938
=========== =========== ===========
Long-term debt including current
maturities (a):
Subsidiary debt..................... $ 7,582,178 $ 8,527,098 $ 7,547,278
Parent debt......................... 3,423,233 4,340,609 4,340,609
----------- ----------- -----------
Total long-term debt including
current maturities................ 11,005,411 12,867,707 11,887,887
----------- ----------- -----------
Adelphia Business Solutions redeemable
exchangeable preferred stock......... 287,584 287,584 287,584
----------- ----------- -----------
Redeemable exchangeable preferred
stock................................ 148,492 148,492 148,492
----------- ----------- -----------
Convertible preferred stock, common
stock and other stockholders' equity:
5 1/2% Series D convertible
preferred stock ($575,000
liquidation preference)............ 29 29 29
Class A common stock, $.01 par
value, 1,200,000,000 shares
authorized; 122,875,159 shares
issued on an Actual basis,
133,675,159 shares issued on an As
Adjusted basis and 150,675,159 on
an As Further Adjusted basis....... 1,228 1,337 1,507
Class B common stock, $.01 par
value, 300,000,000 shares
authorized; 19,235,998 shares
issued and outstanding on an Actual
and As Adjusted basis and
25,055,365 shares issued and
outstanding on an As Further
Adjusted basis..................... 192 192 251
Additional paid-in capital............ 6,343,607 6,883,498 7,863,089
Accumulated deficit................... (2,279,624) (2,279,624) (2,279,624)
Accumulated other comprehensive loss.. (43,943) (43,943) (43,943)
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................................ (149,401) (149,401) (149,401)
----------- ----------- -----------
Total convertible preferred stock,
common stock and other
stockholders' equity ............. 3,872,088 4,412,088 5,391,908
----------- ----------- -----------
Total capitalization............. $15,313,575 $17,715,871 $17,715,871
=========== =========== ===========
</TABLE>
--------
(a) See Note 3 to Adelphia's consolidated financial statements in the Form
10-K/A-2 for a description of long-term debt of Adelphia and its
subsidiaries. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" in
the Form 10-K/A-2 and the Form 10-Q/As.
(b) Gives effect to (i) the application of the estimated net proceeds of
approximately $728.9 million from this Offering and $167.4 million from
the January 2001 Rigas Notes Direct Placement, as described in "Use of
Proceeds," and (ii) the estimated impact of the pending Virginia cluster
acquisitions and the completed transactions described in "Prospectus
Supplement Summary--Recent Developments," exclusive of the Cable Systems
Swap.
(c) Gives effect to (i) the application of the estimated net proceeds of
approximately $728.9 million from this Offering, $167.4 million from the
January 2001 Rigas Notes Direct Placement, approximately $729.8 million
from the Common Stock Offering and approximately $250.0 million from the
January 2001 Rigas Common Stock Direct Placement as described in "Use of
Proceeds," and (ii) the estimated impact of the pending Virginia cluster
acquisitions and the completed transactions described in "Prospectus
Supplement Summary--Recent Developments," exclusive of the Cable Systems
Swap.
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PRICE RANGE OF ADELPHIA'S COMMON EQUITY AND DIVIDEND POLICY
Our Class A common stock is quoted on the Nasdaq National Market under the
symbol "ADLAC."
The following table sets forth the range of high and low closing sale
prices of the Class A common stock for the fiscal periods indicated, as
reported by the Nasdaq National Market.
Class A common stock
<TABLE>
<CAPTION>
High Low
--------- ---------
1998
<S> <C> <C>
First Quarter Ended 3/31/98......................... $29 5/8 $16 1/2
Second Quarter Ended 6/30/98........................ $37 1/8 $22 1/8
Third Quarter Ended 9/30/98......................... $43 5/16 $31 11/16
Fourth Quarter Ended 12/31/98....................... $47 1/2 $32 5/8
<CAPTION>
1999
<S> <C> <C>
First Quarter Ended 3/31/99......................... $63 $45 5/8
Second Quarter Ended 6/30/99 ....................... $86 9/16 $56
Third Quarter Ended 9/30/99......................... $68 3/8 $55 1/2
Fourth Quarter Ended 12/31/99....................... $66 $48 1/2
<CAPTION>
2000
<S> <C> <C>
First Quarter Ended 3/31/00......................... $74 7/16 $45
Second Quarter Ended 6/30/00........................ $49 13/16 $39
Third Quarter Ended 9/30/00......................... $47 3/8 $24 1/8
Fourth Quarter Ended 12/31/00....................... $51 5/8 $25 1/4
<CAPTION>
2001
<S> <C> <C>
First Quarter (through 1/17/01)..................... $50 5/16 $43 11/16
</TABLE>
As of January 5, 2001, approximately 687 holders of record held our Class A
common stock.
No established public trading market exists for our Class B common stock.
As of the date hereof, the Class B common stock was held of record by six
persons, all members of the Rigas family, including a Pennsylvania general
partnership all of whose partners are members of the Rigas family. The
Class B common stock is convertible into shares of Class A common stock on a
one-to-one basis. As of the date of this prospectus supplement, the Rigas
family owned 100% of the outstanding Class B common stock.
Dividend Policy
We have never paid a cash dividend on our common stock and anticipate that
for the foreseeable future any earnings will be retained for use in our
business. Our ability to pay cash dividends on our common stock is limited by
the provisions of our indentures.
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DILUTION
The net tangible book value of Adelphia's common stock as of September 30,
2000 was a deficit of approximately $8,707,969,000 or a negative $61.75 a
share. Net tangible book value per share represents the amount of Adelphia's
convertible preferred stock, common stock and other stockholders' equity, less
intangible assets, divided by the number of shares of Adelphia's common stock
outstanding. If purchasers of the Notes immediately convert them into Class A
common stock the purchasers will have an immediate dilution of net tangible
book value which, due to our having a net tangible book value deficit, will
exceed the conversion price per share.
Net tangible book value dilution per share represents the difference between
the conversion price per share of common stock issuable upon conversion of the
Notes and the pro forma net tangible book value per share of the common stock
immediately after completion of this Offering, assuming immediate conversion of
all of the Notes, and excluding the January 2001 Rigas Common Stock Direct
Placement, the January 2001 Rigas Notes Direct Placement, the Common Stock
Offering and the other pending and completed transactions described in
"Prospectus Supplement Summary--Recent Developments." After giving effect to
the assumed conversion of the Convertible Subordinated Notes into 13,515,949
shares of Class A common stock at an assumed conversion price of $55.49 per
share and after deducting the underwriting discount and commissions and
estimated offering expenses, the pro forma net tangible book value of Adelphia
as of September 30, 2000 was a deficit of approximately $7,979,094,000 or
negative $51.63 per share of common stock. This represents an immediate
increase in net tangible book value of $10.12 per share to existing
stockholders and an immediate dilution of net tangible book value of $107.12
per share to purchasers of the Notes who immediately convert them into Class A
common stock, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed public conversion price per share of Class A common
stock....................................................... $ 55.49
Net tangible book value per share of common stock before
this Offering............................................. $(61.75)
Increase per share of common stock attributable to
this Offering............................................. 10.12
-------
Pro forma net tangible book value per share of common stock
after this Offering......................................... (51.63)
--------
Net tangible book value dilution per share................... $(107.12)
========
</TABLE>
S-25
<PAGE>
DESCRIPTION OF NOTES
Adelphia Parent Company will issue the Notes under an Indenture, as
supplemented by a supplemental indenture (as supplemented, the "Indenture")
between Adelphia and The Bank of New York, successor entity by acquisition to
Harris Trust Company of New York, as trustee (the "Trustee"). The terms of the
Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture
Act").
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. Adelphia urges
you to read the Indenture because it, and not this description, will define
your rights as a holder of the Notes. Adelphia will file a copy of the
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," and other definitions are contained in the
Indenture.
In this section of the prospectus supplement entitled "Description of Notes"
when we refer to Adelphia, or "we," "our," or "us," we are referring only to
Adelphia Parent Company and not any of its subsidiaries.
General
The Notes are unsecured obligations, subordinated in right of payment to all
of Adelphia's existing and future Senior Debt (as defined below) as described
under "--Subordination" and convertible into Adelphia's Class A Common Stock as
described under "--Conversion Rights." The Indenture does not contain any
financial covenants or restrictions on the payment of dividends, the incurrence
of Senior Debt or the issuance or repurchase of Adelphia's securities. The
Indenture contains no covenants or other provisions to afford protection to
holders of the Notes in the event of a highly leveraged transaction by Adelphia
except to the extent described under "--Repurchase at the Option of Holders."
The Notes are not guaranteed by any of Adelphia's subsidiaries.
The operations of Adelphia Parent Company are conducted through its
subsidiaries. Therefore, 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.
Adelphia will issue Notes in this offering with a maximum aggregate
principal amount of $750.0 million ($862.5 million if the over-allotment option
is exercised in full). The Notes mature on February 15, 2006. Interest on the
Notes accrues at a rate of 6% per annum from the date of original issuance,
payable semiannually on February 15 and August 15, commencing on August 15,
2001. Adelphia will make each interest payment to the holders of record of the
Notes on February 1 and August 1 immediately preceeding the interest payment
date. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
The Notes will be payable both as to principal and interest on presentation
of the Notes if in certificated form at the offices or agencies Adelphia
maintains for such purpose within the City and State of New York or, at
Adelphia's option, payment of interest may be made by check mailed to the
holders of the Notes at their respective addresses set forth in the register of
holders of Notes or by
S-26
<PAGE>
wire transfer of immediately available funds to an account previously
specified in writing by such holder to Adelphia and the Trustee. Until
otherwise designated by Adelphia, Adelphia's office or agency in New York will
be the offices of the Trustee maintained for such purpose. Except in the
limited circumstances described below, the Notes will be issued in registered
book-entry form, without coupons, and in denominations of $1,000 and integral
multiples of $1,000 and will be represented by one or more Global Notes.
Conversion Rights
The holder of any Note will have the right, exercisable at any time after
the date of original issuance of the Note and before the close of business on
the Business Day immediately preceding the maturity date, to convert the
principal amount of the Note (or any portion of it that is an integral
multiple of $1,000) into shares of Adelphia's Class A common stock at the
conversion price set forth on the cover page of this prospectus supplement,
subject to adjustment as described below, which Adelphia refers to as the
"Conversion Price." The foregoing notwithstanding, if a Note is called for
redemption, the conversion right will terminate at the close of business on
the Business Day immediately preceding the date fixed for redemption, unless
Adelphia defaults in making the payment due on the redemption date.
Except as described in this paragraph, Adelphia will not make any payment
or other adjustment for accrued interest on the Notes or dividends on any
Class A common stock issued upon conversion of the Notes. If any Notes are
converted during the period after any record date for the payment of an
installment of interest but before the next interest payment date, interest on
such notes will be paid on the next interest payment date, notwithstanding
such conversion, to the holder of record on the record date of those Notes.
Any Notes that are, however, delivered to Adelphia for conversion after any
record date but before the next interest payment date must, except as
described in the next sentence, be accompanied by a payment equal to the
interest payable on such interest payment date on the principal amount of
notes being converted. Adelphia will not require the payment to Adelphia
described in the preceding sentence if, during that period between a record
date and the next interest payment date, a conversion occurs on or after the
date that Adelphia has issued a redemption notice and prior to the date of
redemption. No fractional shares will be issued upon conversion, but a cash
adjustment will be made for any fractional shares.
The Conversion Price is subject to adjustment upon the occurrence of
certain events, including:
(1) the issuance of shares of Class A common stock as a dividend or
distribution on the Class A common stock;
(2) the subdivision or combination of the outstanding Class A common
stock;
(3) the issuance to substantially all holders of Class A common stock of
rights or warrants to subscribe for or purchase Class A common stock
(or securities convertible into Class A common stock) at a price per
share less than the then Current Market Price per share (as defined);
(4) the distribution of shares of Adelphia's capital stock (other than
Class A common stock), evidences of indebtedness or other assets
(excluding dividends in cash, except as described in clause (5) below)
to all holders of Class A common stock;
(5) the distribution, by dividend or otherwise, of cash to all holders of
Class A common stock in an aggregate amount that, together with the
aggregate of any other distributions of cash
S-27
<PAGE>
that did not trigger a Conversion Price adjustment to all holders of
Class A common stock within the 12 months preceding the date fixed for
determining the stockholders entitled to such distribution and all
Excess Payments in respect of each tender offer by Adelphia or any of
Adelphia's subsidiaries for Class A common stock concluded within the
preceding 12 months not triggering a Conversion Price adjustment,
exceeds 10% of the product of the Current Market Price per share on
the date fixed for the determination of stockholders entitled to
receive such distribution times the number of shares of Class A common
stock outstanding on such date;
(6) the payment of an Excess Payment in respect of a tender offer by
Adelphia or any of Adelphia's subsidiaries for Class A common stock,
if the aggregate amount of such Excess Payment, together with the
aggregate amount of cash distributions made within the preceding 12
months not triggering a Conversion Price adjustment and all other
Excess Payments in respect of each tender offer by Adelphia or any of
its subsidiaries for Class A common stock concluded within the
preceding 12 months not triggering a conversion price adjustment,
exceeds 10% of the product of the Current Market Price per share on
the expiration of the tender offer, as the case may be, times the
number of shares of Class A common stock outstanding on that date; and
(7) the distribution to substantially all holders of Class A common stock
of rights or warrants to subscribe for securities (other than those
referred to in clause (3) above). In the event of a distribution to
substantially all holders of Class A common stock of rights to
subscribe for additional shares of Adelphia's capital stock (other
than those referred to in clause (3) above), Adelphia may, instead of
making any adjustment in the Conversion Price, make proper provision
so that each holder of a Note who converts the Note after the record
date for the distribution and prior to the expiration or redemption of
the rights will be entitled to receive upon that conversion, in
addition to shares of Class A common stock, an appropriate number of
rights.
(8) the occurrence of a Change of Control, in which both (a) our
stockholders receive consideration per share of Class A common stock
that is greater than the Conversion Price, without giving effect to
the adjustment described below, at the effective time of the Change of
Control, and (b) at least 10% of the total consideration paid to our
stockholders consists of cash, cash equivalents, securities or other
assets (other than publicly traded securities), which we refer to as
"non-public consideration." In such circumstances, upon conversion of
the Notes after the Change of Control, in addition to the Class A
common stock or other securities deliverable upon the conversion of
the Notes as described under "Conversion Rights" and in paragraphs (1)
through (7) above, the holder will receive a number of publicly traded
securities of the acquiror determined through the following
calculation:
PV cashflows X (non-public consideration/total consideration)
------------------------------------------------
Acquiror stock price
<TABLE>
<CAPTION>
Where
<C> <C> <S>
PV cashflows = the present value of the aggregate interest payments that
would have been payable on the Notes from the date of
conversion through February 16, 2004, calculated using a
discount rate equal to the yield to maturity of U.S.
Treasury securities having a maturity closest to, but not
later than, February 16, 2004
</TABLE>
S-28
<PAGE>
<TABLE>
<C> <C> <S>
Total consideration = the total value of the consideration payable to our
stockholders at the effective time of the Change of
Control, with the value of any assets or securities
other than cash or a publicly traded security being
determined in good faith by our Board of Directors
based upon an opinion as to that value obtained from
an accounting, appraisal or investment banking firm
of international standing
Acquiror stock price = the price per security of the acquiror's publicly
traded securities delivered in connection with the
Change of Control transaction at the effective time
of the Change of Control
</TABLE>
provided, however, that if the consideration received by our stockholders in
respect of the Change of Control consists of at least 75% non-public
consideration or if the acquiror's common stock is not publicly traded, then
upon conversion of the Notes after the Change of Control, in lieu of issuing
additional securities of the acquiror, as set forth above, the holder will be
entitled to receive an additional amount in cash calculated as follows:
PV cashflows X (non-public consideration/total consideration)
No adjustment of the Conversion Price will be made until cumulative adjustments
amount to one percent or more of the Conversion Price as last adjusted.
If Adelphia reclassifies or changes its outstanding Class A common stock, or
consolidates with or merges into or transfers or leases all or substantially
all of its assets to any person, or Adelphia is a party to a merger that
reclassifies or changes Adelphia's outstanding Class A common stock, the Notes
will become convertible into the kind and amount of securities, cash or other
assets which the holders of the Notes would have owned immediately after the
transaction if the holders had converted the Notes immediately before the
effective date of the transaction.
The Indenture also provides that if rights, warrants or options expire
unexercised, the Conversion Price will be readjusted to take into account the
actual number of warrants, rights or options which were exercised.
Adelphia may decrease the Conversion Price for any period of at least 20
days, upon at least 15 days notice, if Adelphia's Board of Directors determines
that such decrease would be in Adelphia's best interest. The Board of
Directors' determination in this regard will be conclusive. Adelphia will give
holders of the Notes at least 15 days notice of such a decrease in the
Conversion Price. Any decrease, however, will not be taken into account for
such purposes of determining whether the closing price of Adelphia's Class A
common stock exceeds the Conversion Price by 105% in connection with an event
which would otherwise be a Change of Control.
Adelphia will be permitted to make such reductions in the Conversion Price
as Adelphia, in Adelphia's discretion, determines to be advisable in order that
any stock dividend, subdivision of shares, distribution of rights to purchase
stock or securities or distribution of securities convertible into or
exchangeable for stock made by Adelphia to its stockholders will not be taxable
to the recipients.
Subordination
The Notes will be subordinate in right of payment to all of Adelphia's
existing and future Senior Debt. The Indenture does not restrict the amount of
Senior Debt or other Indebtedness that Adelphia
S-29
<PAGE>
or any of its subsidiaries can incur. As of September 30, 2000, as adjusted for
the Notes offering and the pending and completed transactions described in
"Prospectus Supplement Summary--Recent Developments," except for the Cable
Systems Swap, the Notes would be subordinated to $3.4 billion of Senior Debt of
Adelphia Parent Company. In addition, all liabilities of Adelphia's
subsidiaries will be effectively senior in right of payment to the Notes. As of
September 30, 2000 and as adjusted for the Notes Offering, the January 2001
Rigas Notes Direct Placement and the pending Virginia cluster acquisitions and
the completed transactions described in "Prospectus Supplement Summary--Recent
Developments," except for the Cable Systems Swap, the total public indebtedness
and indebtedness of such subsidiaries to banks and institutions, on a
consolidated basis, aggregated approximately $8.5 billion. See "Risk Factors--
Holding Company Structure and Potential Impact of Restrictive Covenants in
Subsidiary Debt Agreements." In addition, at September 30, 2000, Adelphia
Business Solutions had $287.6 million in redeemable exchangeable preferred
stock.
The payment of the principal of, interest on or any other amounts due on the
Notes is subordinated in right of payment to the prior payment in full of all
of Adelphia's existing and future Senior Debt. No payment on account of
principal of, redemption of, interest on or any other amounts due on the Notes,
including, without limitation, any payments on the Fundamental Change Offer,
and no redemption, purchase or other acquisition of the Notes may be made,
except payments comprised solely of Permitted Junior Securities, if:
(1) a default in the payment of Designated Senior Debt occurs and is
continuing beyond any applicable period of grace (called a "Payment
Default"); or
(2) a default other than a Payment Default on any Designated Senior Debt
occurs and is continuing that permits the holders of Designated Senior
Debt to accelerate its maturity, and the Trustee receives a notice of
such default (called a "Payment Blockage Notice") from Adelphia or any
other person permitted to give such notice under the Indenture (called
a "Non-Payment Default").
Adelphia may resume payments and distributions on the Notes:
(1) in the case of a Payment Default, upon the date on which such default
is cured or waived or ceases to exist; and
(2) in the case of a Non-Payment Default, the earliest of the date on
which such Non-Payment Default is cured or waived or ceases to exist
or 180 days from the date notice is received, if the maturity of the
Designated Senior Debt has not been accelerated.
Notwithstanding the foregoing, only one Payment Blockage Notice with respect
to the same event of default or any other events of default existing or
continuing at the time of notice on the same issue of Designated Senior Debt
may be given and no new Payment Blockage Period may be commenced by the holders
of Designated Senior Debt unless 360 consecutive days have elapsed since the
initial effectiveness of the immediately preceding Payment Blockage Notice.
Upon any distribution of Adelphia's assets in connection with any
dissolution, winding-up, liquidation or reorganization of Adelphia or
acceleration of the principal amount due on the Notes because of any Event of
Default, all Senior Debt must be paid in full before the holders of the Notes
are entitled to any payments whatsoever (except payments comprised solely of
Permitted Junior Securities). If the payment of the Notes is accelerated
because of an Event of Default, Adelphia or the Trustee shall promptly notify
the holders of Senior Debt or the Trustee(s) for the Senior Debt of the
acceleration.
S-30
<PAGE>
As a result of these subordination provisions, in the event of Adelphia's
insolvency, holders of the Notes may recover ratably less than the holders of
Adelphia's Senior Debt and Adelphia's general creditors.
If the Trustee or any holder of Notes receives any payment or distribution
of Adelphia's assets of any kind in contravention of any of the terms of the
Indenture, whether in cash, property or securities, in respect of the Notes
before all Senior Debt is paid in full, then the payment or distribution will
be held by the recipient in trust for the benefit of holders of Senior Debt,
and will be immediately paid over or delivered to the holders of Senior Debt or
their representative or representatives to the extent necessary to make payment
in full of all Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the
holders of Senior Debt.
The Notes are Adelphia's exclusive obligations. Since Adelphia's operations
are conducted through Adelphia's subsidiaries, its cash flow and its consequent
ability to service debt, including the Notes, will depend in part upon the
earnings of its subsidiaries and the distribution of those earnings to, or
under loans or other payments of funds by those subsidiaries to, Adelphia. The
payment of dividends and the making of loans and advances to Adelphia by
Adelphia's subsidiaries may be subject to statutory or contractual
restrictions, will depend upon the earnings of those subsidiaries and are
subject to various business considerations.
Adelphia's right to receive assets of any of Adelphia's subsidiaries upon
their liquidation or reorganization, and the consequent right of the holders of
the Notes to participate in those assets, is effectively subordinated to the
claims of that subsidiary's creditors, including trade creditors, except to the
extent that Adelphia is recognized as a creditor of that subsidiary, in which
case Adelphia's claims would still be subordinate to any security interests in
the assets of that subsidiary and any indebtedness of that subsidiary senior to
that held by Adelphia.
The Indenture does not limit the amount of additional indebtedness,
including Senior Debt, which Adelphia can create, incur, assume or guarantee,
nor does the Indenture limit the amount of indebtedness and other liabilities
which any subsidiary can create, incur, assume or guarantee. The instrument,
agreement or other document evidencing any Designated Senior Debt may place
limitations and conditions on the right of such Senior Debt to exercise the
rights of Designated Senior Debt.
Optional Redemption of the Notes
At any time on or after February 16, 2004, Adelphia may redeem any portion
of the Notes, in whole or in part, on at least 30 days but no more than 60
days' notice at the following prices (expressed as a percentage of the
principal amount), together with accrued and unpaid interest to, but excluding,
the redemption date:
<TABLE>
<CAPTION>
Redemption
Redemption Period Price
----------------- ----------
<S> <C>
February 16, 2004 through February 14, 2005 102.40%
February 15, 2005 through February 14, 2006 101.20%
</TABLE>
and 100.00% of the principal amount on February 15, 2006.
S-31
<PAGE>
If Adelphia redeems less than all of the outstanding Notes, the Trustee will
select the Notes to be redeemed in multiples of $1,000 by lot, pro rata or any
other method the Trustee considers fair and appropriate. If a portion of your
Notes is selected for partial redemption and you convert a portion of the
Notes, the portion selected for redemption will be converted. Adelphia may not
give notice of any redemption if Adelphia has defaulted in payment of interest
and the default is continuing.
Mandatory Redemption
Adelphia is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
If a Fundamental Change occurs, holders of Notes will have the right, at
their option, to require Adelphia to repurchase all of such holder's Notes not
previously called for redemption, or any portion of the principal amount
thereof, that is equal to $1,000 or an integral multiple of $1,000, pursuant to
a Fundamental Change Offer. In the Fundamental Change Offer, Adelphia will
offer a Fundamental Change Payment in cash equal to 100% of the aggregate
principal amount of the Notes to be repurchased, together with interest accrued
to, but excluding, the repurchase date.
Within 10 days following any Fundamental Change, we will mail a notice to
each holder and the Trustee describing the transaction or transactions that
constitute the Fundamental Change, offering to repurchase the Notes on a
certain date (which shall not exceed 30 Business Days from the date of such
notice) (the "Fundamental Change Payment Date") specified in such notice,
pursuant to the procedures required by the Indenture and described in such
notice.
On the Fundamental Change Payment Date, Adelphia will, to the extent lawful:
(1) accept for payment all the Notes or portions thereof properly tendered
pursuant to the Fundamental Change Offer;
(2) deposit with the paying agent an amount equal to the Fundamental
Change Payment in respect of all the Notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate, stating the aggregate
principal amount of Notes or portions thereof being purchased.
The paying agent will promptly mail to each holder of Notes so tendered the
Fundamental Change Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount or principal amount at maturity, as
applicable, to any unpurchased portion of the Note surrendered, if any;
provided that each such new Note will be in a principal amount or principal
amount at maturity, as applicable, of $1,000 or an integral multiple thereof.
The provisions described above that require us to make a Fundamental Change
Offer following a Fundamental Change will be applicable regardless of whether
or not any other provisions of the Indenture are applicable. Except as
described above, the Indenture does not contain provisions that permit the
holders of the Notes to require that we repurchase or redeem the Notes in the
event of a takeover, recapitalization or similar transaction.
S-32
<PAGE>
Adelphia will not be required to make a Fundamental Change Offer following a
Fundamental Change if a third party makes the Fundamental Change Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Fundamental Change Offer made by
Adelphia and purchases all of the Notes validly tendered and not withdrawn
under such Fundamental Change Offer.
The holders of Notes will have the right, at their option, to require
Adelphia to repurchase all of the holders' Notes not previously called for
redemption or repurchase, or any portion of the principal amount thereof, equal
to $1,000 or an integral multiple thereof, if at any time, (1) the Rigas Family
or any of its Affiliates purchases, in a transaction or series of transactions,
shares of Class A common stock, and solely as a result of such purchases, the
aggregate number of shares of Class A common stock held by the Rigas Family and
its Affiliates exceeds 70% of the total number of shares of Class A common
stock issued and outstanding at such time and (2) the closing price per share
of the Class A common stock for any five trading days within the period of the
10 consecutive trading days immediately after the later of the last date of
such purchase or the public announcement of such purchase is less than 100% of
the conversion price of the Notes in effect on each of those trading days,
Adelphia will then offer a payment equal to 100% of the aggregate principal
amount of the Notes to be repurchased together with the interest accrued to,
but excluding, the repurchase date. For purposes of this "Description of Notes"
such event shall constitute a "Change of Control," and Adelphia will follow
procedures substantially similar to the procedures for a Fundamental Change
Offer as outlined above and described further in the indenture.
For purposes of the foregoing paragraph, a purchase will not include any
shares of Class A common stock acquired by the Rigas Family or its Affiliates
as a result of the exchange or conversion of shares of Adelphia's Class B
common stock, and the calculation of the number of shares of Class A common
stock held by the Rigas Family and its affiliates will not include securities
exchangeable or convertible into shares of Class A common stock.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Adelphia and its subsidiaries, taken as a whole. Although
there is a limited body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of Notes to require us to repurchase
such Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less then all of the assets of Adelphia and its subsidiaries,
taken as a whole, to another Person or group may be uncertain.
The foregoing provisions would not necessarily provide you with protection
if we are involved in a highly leveraged or other transaction that may
adversely affect you.
In addition to the Notes, Adelphia has outstanding 10 7/8% Senior Notes due
2010, 9 3/8% Senior Notes due 2009, 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, 9 1/2% Senior Pay-In-Kind Notes 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 Indentures for Adelphia's other public debt, which together represent
outstanding indebtedness in the aggregate principal amount of approximately
$3.4 billion as of September 30, 2000, provide that Adelphia must make an offer
to purchase such debt at a purchase price equal to
S-33
<PAGE>
100% of the principal amount thereof, plus any accrued but unpaid interest
thereon, in the event of circumstances which trigger a "Change of Control" as
defined in those indentures. In addition, the credit agreements of Adelphia's
subsidiaries generally contain provisions under which circumstances that would
constitute a Change of Control under this covenant may 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
such provisions, and the indebtedness under subsidiary credit agreements were
to be accelerated, the source of funds for such purchase 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 Adelphia's 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 Fundamental Change Offer, Adelphia will comply with all applicable
tender offer rules including Rule 14e-1 under the Exchange Act, to the extent
applicable.
Consolidation, Merger and Sale of Assets
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:
(1) 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; and
(2) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
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.
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
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with respect to the Notes, except that no such modification shall, without the
consent of each holder affected thereby:
(1) reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes;
(2) reduce the rate of or change the time for payment of interest on any
Note;
(3) reduce the principal of or change the stated maturity of any Note;
(4) make any Note payable in money other than that stated in the Note or
change the place of payment from New York, New York;
(5) change the amount or time of any payment required by the Notes or
provide for the redemption of the Notes prior to maturity;
(6) waive a default on the payment of the principal of, interest on, or
redemption payment with respect to any Note; or
(7) take any other action otherwise prohibited by the Indenture to be
taken without the consent of each holder affected thereby.
Events of Default
The following events are defined in the Indenture as "Events of Default"
with respect to the Notes:
(1) default in payment of any principal of such Notes when due, at its
stated maturity, upon optional redemption, in connection with a
Fundamental Change Offer or otherwise, whether or not such payment is
prohibited by the subordination provisions of the Indenture;
(2) default for 30 days in payment of any interest on such Notes, whether
or not such payment is prohibited by the subordination provisions of
the Indenture;
(3) 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;
(4) 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;
(5) 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
(6) certain events involving bankruptcy, insolvency or reorganization of
Adelphia or any Restricted Subsidiary with liabilities of greater than
$10,000,000 under GAAP 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.
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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, subject to the provisions limiting payment described in "--
Subordination," 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.
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.
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 Officers' 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.
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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 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 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) or such other name as
may be requested by an authorized representative of the Depositary. 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 ("Direct Participants") deposit with the Depositary. The
Depositary also facilitates the settlement among
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Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized/book-entry changes to
Direct Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants of the Depositary
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
Direct Participants are on file with 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
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 partnership nominee, Cede & Co.
or such other name as may be requested by an authorized representative of
the Depositary. The deposit of Global Notes with, or on behalf of, the
Depositary and their registration in the name of Cede & Co. or such other
nominee do not effect any 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. (nor such other Depositary
nominee) 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).
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Principal, premium, if any, and/or interest, if any, on the Global Notes
representing the Notes will be made to Cede & Co., or such other nominee as
may be requested by an authorized representative of the Depositary. The
Depositary's practice is to credit Direct Participants' accounts, upon the
Depositary's receipt of funds and corresponding detail information from
Adelphia or the Trustee on payable date in accordance with their respective
holdings shown on the Depositary's records. 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.
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
The Bank of New York, successor entity by acquisition to Harris Trust
Company of New York, is to be the Trustee under the Indenture and is the
initial Registrar and Paying Agent with regard to the Notes. The Bank of New
York also serves as Registrar and Paying Agent and Trustee under the indentures
with respect to Adelphia's 10 7/8% Senior Notes due 2010, 9 3/8% Senior Notes
due 2009, 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, 9 1/2% Senior Pay-In-Kind Notes due 2004 and 9 7/8%
Senior Debentures due 2005 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.
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"Affiliate" means a Person:
(1) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such
Person; or
(2) which beneficially owns or holds 10% or more of any class of the
voting Capital Stock of such Person; or
(3) of which 10% or more of the voting Capital Stock is beneficially owned
or held by such Person or a Subsidiary of such Person.
Without limitation, an Affiliate also includes any director or executive
officer of Adelphia. As used herein, "Affiliate" shall not include a Restricted
Subsidiary.
"Business Day" means any date which not a Saturday, Sunday or other day on
which banking institutions in the State of New York are authorized or required
by law to close.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Change of Control" means the occurrence of any of the following:
(1) The sale, transfer, conveyance, lease or other disposition (including
by way of liquidation or dissolution, but excluding by way of merger
or consolidation), in one or a series or related transactions, of all
or substantially all of the assets of Adelphia Communications
Corporation and its subsidiaries, taken as a whole, to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or dissolution of
Adelphia Communications Corporation;
(3) the consummation of any transaction (including, without limitation,
any merger or consolidation), the result of which is that any "person"
or "group" (within the meaning of Section 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
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majority of Adelphia's Board of Directors and attaching to the then
outstanding voting capital stock of Adelphia.
(4) 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; or
(5) Adelphia consolidates with, or merges with or into, any person, or any
person consolidates with, or merges with or into, Adelphia, in any
such event pursuant to a transaction in which any of the outstanding
Voting Stock of Adelphia is converted into or exchanged for cash
securities or other property, other than any such transaction where
the Voting Stock of Adelphia outstanding immediately prior to such
transaction is converted into or exchanged for Voting Stock (other
than Disqualified Stock) of the surviving or transferee person
constituting a majority of the outstanding shares of such Voting Stock
of such surviving or transferee person immediately after giving effect
to such issuance.
However, a Change of Control will not be deemed to have occurred if either
(A) the closing price per share of the Class A Common Stock for any five
trading days within the period of 10 consecutive trading days ending
immediately after the later of the Change of Control or the public announcement
of the Change of Control, in the case of a Change of Control relating to an
acquisition of Voting Stock, or the period of 10 consecutive trading days
ending immediately before the Change of Control, in the case of Change of
Control relating to a merger, consolidation or asset sale, equals or exceeds
105% of the Conversion Price of the Notes in effect on each of those trading
days or (B) all of the consideration (excluding cash payments for fractional
shares and cash payments made pursuant to dissenters' appraisal rights) in a
merger or consolidation otherwise constituting a Change of Control under clause
(3) and/or clause (5) above issuable to the holders of the Class A Common
Stock, consists of shares of common stock traded on a national securities
exchange or quoted on the Nasdaq National Market (or will be so traded or
quoted immediately following such merger or consolidation) and as a result of
such merger or consolidation the Notes become convertible into such common
stock.
"Current Market Price" per share of Class A Common Stock on any date means
the average of the daily closing or last sale prices for the shorter of:
(1) 10 consecutive Business Days ending on the last full trading day on
the exchange or market referred to in determining the daily closing or
last sale prices prior to the time of determination (as defined in the
Indenture); or
(2) the period commencing on the date next succeeding the first public
announcement of the issuance of rights or warrants or distribution
through the last full trading day prior to the time of determination.
"Designated Senior Debt" means:
(1) Indebtedness outstanding on the date of the Indenture; and
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(2) Adelphia's obligations under any particular Senior Debt in which the
instrument creating or evidencing the same or the assumption or
guarantee thereof, or related agreements or documents to which
Adelphia is a party, expressly provides that such indebtedness shall
be Designated Senior Debt for purposes of the Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder of the Capital Stock),
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 of the Capital Stock, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Excess Payment" means the excess of:
(1) the aggregate of the cash and value of other consideration paid by
Adelphia or any of its subsidiaries with respect to shares acquired in
a tender offer over
(2) the market value of such acquired shares after giving effect to the
completion of a tender offer.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fundamental Change" means a Change of Control or a Termination of Listing.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness, secured or unsecured, contingent or otherwise, which is for
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof), or evidenced by bonds,
notes, debentures or similar instruments or representing the balance deferred
and unpaid of the purchase price of any property (excluding, without
limitation, any balances that constitute subscriber advance payments and
deposits, accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included:
(1) any Capitalized Lease Obligations,
(2) 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,
(3) 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),
(4) in the case of Adelphia, Preferred Stock of its Restricted
Subsidiaries; and
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(5) 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.
"Interest Rate Agreements" means, with respect to any Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Permitted Junior Securities" means:
(1) shares of stock of any class of Adelphia other than Disqualified
Stock; or
(2) securities of Adelphia other than Disqualified Stock that are
subordinated in right of payment to all Senior Debt that may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the
Notes are so subordinated pursuant to the terms of the Indenture.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"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.
"Restricted Subsidiary" means:
(1) 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
(2) 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.
"Senior Debt" means the principal of, premium, if any, interest, including
all interest accruing subsequent to the commencement of any bankruptcy or
similar proceeding, whether or not a claim for post-petition interest is
allowable as a claim in any such proceeding, and rent payable on or in
connection with, and all fees, costs, expenses and other amounts accrued or due
on or in connection
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with, Indebtedness of Adelphia, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed, guaranteed or in effect
guaranteed by Adelphia.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall
not include:
(1) Indebtedness of or amounts owed by Adelphia for compensation to
employees, or for goods or materials purchased or for services
obtained in the ordinary course of business;
(2) Adelphia's Indebtedness to any of Adelphia's subsidiaries; or
(3) Adelphia's Indebtedness that expressly provides that it shall not be
senior in right of payment to the Notes or expressly provides that it
is on the same basis or junior to the Notes.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired:
(1) 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
(2) 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 GAAP such entity is consolidated with the first-
named Person for financial statement purposes.
"Termination of Listing" means that the Class A Common Stock (or other
Capital Stock into which the Notes are then convertible) is neither listed for
trading on a United States national securities exchange nor quoted on the
Nasdaq National Market.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of an Unrestricted Subsidiary;
(2) 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
(3) 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 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.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
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DESCRIPTION OF CAPITAL STOCK
Adelphia's authorized capital stock consists of 1,200,000,000 shares of
Class A common stock, 300,000,000 shares of Class B common stock, and
50,000,000 shares of preferred stock. For a further description of the terms
and conditions of our capital stock, see "Description of Capital Stock" in the
attached prospectus.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes some of the U.S. federal income tax considerations
relating to the purchase, ownership, and disposition of the Notes and of Class
A common stock into which the Notes may be converted. This summary does not
provide a complete analysis of all potential tax considerations. The
information provided below is based on existing authorities. These authorities
may change, or the Internal Revenue Service (IRS) might interpret the existing
authorities differently. In either case, the tax consequences of purchasing,
owning or disposing of Notes or Class A common stock could differ from those
described below. The summary generally applies only to "U.S. Holders" that
purchase Notes in the initial offering at their issue price and hold the Notes
or Class A common stock as "capital assets" (generally, for investment). For
this purpose, U.S. Holders include citizens or residents of the United States,
corporations organized under the laws of the United States or any state and
estates the income of which is subject to United States federal income taxation
regardless of its source. Trusts are U.S. Holders if they are subject to the
primary supervision of a U.S. court and the control of one of more U.S.
persons. Special rules apply to nonresident alien individuals and foreign
corporations, estates or trusts ("Non-U.S. Holders"). This summary describes
some, but not all, of these special rules. Income earned through a foreign or
domestic partnership or similar entity is subject to special rules not
discussed here. The summary generally does not address tax considerations that
may be relevant to particular investors because of their specific
circumstances, or because they are subject to special rules. Finally, the
summary does not describe the effect of the federal estate and gift tax laws on
U.S. Holders or the effects of any applicable foreign, state, or local laws.
INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AND THE CONSEQUENCES OF FEDERAL ESTATE OR GIFT TAX LAWS,
FOREIGN, STATE, OR LOCAL LAWS, AND TAX TREATIES.
U.S. Holders
Taxation of Interest
U.S. Holders will be required to recognize as ordinary income any interest
paid or accrued on the Notes, in accordance with their regular method of
accounting. In general, if the terms of a debt instrument entitle a holder to
receive payments other than qualified stated interest that exceed the issue
price of the instrument, the holder may be required to recognize additional
interest as "original issue discount" over the term of the instrument. We
believe that the Notes will not be issued with original issue discount.
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Sale, Exchange or Redemption of the Notes
A U.S. Holder will generally recognize capital gain or loss if the holder
disposes of a Note in a sale, redemption or exchange other than a conversion of
the Note into Class A common stock. The holder's gain or loss will equal the
difference between the proceeds received by the holder and the holder's
adjusted tax basis in the Note. The proceeds received by the holder will
include the amount of any cash and the fair market value of any other property
received for the Note. The holder's tax basis in the Note will generally equal
the amount the holder paid for the Note. The portion of any proceeds that is
attributable to accrued interest will not be taken into account in computing
the holder's capital gain or loss. Instead, that portion will be recognized as
ordinary interest income to the extent that the holder has not previously
included the accrued interest in income. The gain or loss recognized by a
holder on a disposition of the Note will be long-term capital gain or loss if
the holder held the Note for more than one year. Long-term capital gains of
individual taxpayers are generally taxed at a maximum rate of 20 percent. The
deductibility of capital losses is subject to limitation.
Conversion of the Notes
A U.S. Holder generally will not recognize any income, gain or loss on
converting a Note into Class A common stock. If the holder receives cash in
lieu of a fractional share of stock, however, the holder would be treated as if
he received the fractional share and then had the fractional share redeemed for
the cash. The holder would recognize gain or loss equal to the difference
between the cash received and that portion of his basis in the stock
attributable to the fractional share. The holder's aggregate basis in the Class
A common stock will equal his adjusted basis in the corresponding Note, less
any portion allocable to any cash received in lieu of fractional shares. The
holder's holding period for the stock will include the period during which he
held the Note.
Dividends
If, after a U.S. Holder converts a Note into Class A common stock, we make a
distribution in respect of that stock, the distribution will be treated as a
dividend, taxable to the U.S. Holder as ordinary income, to the extent it is
paid from our current or accumulated earnings and profits. If the distribution
exceeds our current and accumulated profits, the excess will be treated first
as a tax-free return of the holder's investment, up to the holder's basis in
its Class A common stock. Any remaining excess will be treated as capital gain.
If the U.S. Holder is a U.S. corporation, it would generally be able to claim a
deduction equal to a portion of any distribution received that is considered a
dividend.
The terms of the Notes allow for changes in the conversion price of the
Notes in certain circumstances. A change in conversion price that allows
noteholders to receive more shares of Class A common stock on conversion may
increase the noteholders' proportionate interests in our earnings and profits
or assets. In that case, the noteholders would be treated as though they
received a dividend in the form of our stock. Such a constructive stock
dividend could be taxable to the noteholders, although they would not actually
receive any cash or other property. A taxable constructive stock dividend would
result, for example, if the conversion price is adjusted to compensate
noteholders for distributions of cash or property to our shareholders. Not all
changes in conversion price that allow noteholders to receive more stock on
conversion, however, increase the noteholders' proportionate interests in the
company. For instance, a change in conversion price could simply prevent the
dilution of the noteholders' interests upon a stock split or other change in
capital
S-46
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structure. Changes of this type, if made by a bona fide, reasonable adjustment
formula, are not treated as constructive stock dividends. Conversely, if an
event occurs that dilutes the noteholders' interests and the conversion price
is not adjusted, the resulting increase in the proportionate interests of our
shareholders could be treated as a taxable stock dividend to them. Any taxable
constructive stock dividends resulting from a change to, or failure to change,
the conversion price would be treated like dividends paid in cash or other
property. They would result in ordinary income to the recipient, to the extent
of our current or accumulated earnings and profits, with any excess treated as
a tax-free return of capital or as capital gain.
Sale of Class A Common Stock
A U.S. Holder will generally recognize capital gain or loss on a sale or
exchange of Class A common stock. The holder's gain or loss will equal the
difference between the proceeds received by the holder and the holder's
adjusted tax basis in the stock. The proceeds received by the holder will
include the amount of any cash and the fair market value of any other property
received for the stock. The gain or loss recognized by a holder on a sale or
exchange of stock will be long-term capital gain or loss if the holder held the
stock for more than one year. In the case of individuals, long-term capital
gains are generally taxed at a maximum rate of 20 percent, while the
deductibility of capital losses is subject to limitation.
Special Tax Rules Applicable to Non-U.S. Holders
Taxation of Interest
Payments of interest to Non-U.S. Holders are generally subject to U.S.
federal income tax at a rate of 30 percent, collected by means of withholding
by the payor. Payments of interest on the Notes to most Non-U.S. Holders,
however, will qualify as "portfolio interest," and thus will be exempt from the
withholding tax, if the holders certify their nonresident status as described
below. The portfolio interest exception will not apply to payments of interest
to a Non-U.S. Holder that
. owns, directly or indirectly, at least 10 percent of our voting stock, or
. is a bank and the interest is received on an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of its
trade or business,
. is a "controlled foreign corporation" that is related to us.
In general, a foreign corporation is a controlled foreign corporation if at
least 50 percent of its stock is owned, directly or indirectly, by one or more
U.S. persons that each owns, directly or indirectly, at least 10 percent of the
corporation's voting stock.
The portfolio interest exception and several of the special rules for Non-
U.S. Holders described below apply only if the holder certifies its nonresident
status. A Non-U.S. Holder can meet this certification requirement by providing
a Form W-8BEN or appropriate substitute form to us, or our paying agent. If the
holder holds the Note through a financial institution or other agent acting on
the holder's behalf, the holder will be required to provide appropriate
documentation to the agent. The holder's agent will then be required to provide
certification to us or our paying agent, either directly or through other
intermediaries. For payments made to a foreign partnership, the certification
requirements generally apply to the partners rather than the partnership.
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Sale, Exchange or Redemption of Notes
Non-U.S. Holders generally will not be subject to U.S. federal income tax on
any gain realized on the sale, exchange, or other disposition of Notes. This
general rule, however, is subject to several exceptions. For example, the gain
would be subject to U.S. federal income tax if
. the gain is effectively connected with the conduct by the Non-U.S. Holder
of a U.S. trade or business,
. the Non-U.S. Holder was a citizen or resident of the United States and
thus is subject to special rules that apply to expatriates, or
. the noteholder is treated as a stockholder of Adelphia and we are, or
have been, a "U.S. real property holding corporation" ("USRPHC") at any
time within the shorter of the five-year period before the sale, exchange
or redemption of the Notes or such noteholder's holding period.
For USRPHC purposes, the noteholder will be treated as owning the stock that
the noteholder could acquire on conversion of its Notes. Although not free from
doubt, we believe that we are not, and have not been for the past five years, a
USRPHC.
Conversion of the Notes
A Non-U.S. Holder generally will not recognize any income, gain or loss on
converting a Note into Class A common stock. Any gain recognized as a result of
the holder's receipt of cash in lieu of a fractional share of stock would also
generally not be subject to U.S. federal income tax. See "Special Tax Rules
Applicable to Non-U.S. Holders--Sale of Common Stock," below.
Dividends
Dividends paid to a Non-U.S. Holder on Class A common stock received on
conversion of a Note will generally be subject to U.S. withholding tax at a 30
percent rate. The withholding tax might not apply, however, or might apply at a
reduced rate, under the terms of a tax treaty between the United States and the
Non-U.S. Holder's country of residence. A Non-U.S. Holder must demonstrate its
entitlement to treaty benefits by certifying its nonresident status. Some of
the common means of meeting this requirement are described above under "Special
Tax Rules Applicable to Non-U.S. Holders--Taxation of Interest." A Non-U.S.
Holder may also be required to provide a United States taxpayer identification
number.
Sale of Class A Common Stock
Non-U.S. Holders will generally not be subject to U.S. federal income tax on
any gains realized on the sale, exchange, or other disposition of Class A
common stock. This general rule, however, is subject to exceptions, some of
which are described under "Special Tax Rules Applicable to Non-U.S. Holders--
Sale, Exchange or Redemption of Notes."
Income or Gains Effectively Connected With a U.S. Trade or Business
The preceding discussion of the tax consequences of the purchase, ownership
or disposition of Notes or Class A common stock by a Non-U.S. Holder assumes
that the holder is not engaged in a U.S. trade or business. If any interest on
the Notes, dividends on Class A common stock, or gain
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from the sale, exchange or other disposition of the Notes or stock is
effectively connected with a U.S. trade or business conducted by the Non-U.S.
Holder, then the income or gain will be subject to U.S. federal income tax at
the regular graduated rates. If the Non-U.S. Holder is eligible for the
benefits of a tax treaty between the United States and the holder's country of
residence, any "effectively connected" income or gain will be subject to U.S.
federal income tax only if it is also attributable to a permanent
establishment maintained by the holder in the United States. Payments of
dividends that are effectively connected with a U.S. trade or business, and
therefore included in the gross income of a Non-U.S. Holder, will not be
subject to the 30 percent withholding tax. To claim exemption from
withholding, the holder must certify its qualification, which can be done by
filing a Form W-8ECI. If the Non-U.S. Holder is a corporation, that portion of
its earnings and profits that is effectively connected with its U.S. trade or
business would generally be subject to a "branch profits tax." The branch
profits tax rate is generally 30 percent, although an applicable tax treaty
might provide for a lower rate.
U.S. Federal Estate Tax
The estates of nonresident alien individuals are subject to U.S. federal
estate tax on property with a U.S. situs. The Notes will not be U.S. situs
property as long as interest on the Notes paid immediately before the death of
the holder would have qualified as portfolio interest, exempt from withholding
tax as described above under "Special Tax Rules Applicable to Non-U.S.
Holders--Taxation of Interest." Because we are a U.S. corporation, our Class A
common stock will be U.S. situs property, and therefore will be included in
the taxable estate of a nonresident alien decedent. The U.S. federal estate
tax liability of the estate of a nonresident alien may be affected by a tax
treaty between the United States and the decedent's country of residence.
Backup Withholding and Information Reporting
The Code and the Treasury regulations require those who make specified
payments to report the payments to the IRS. Among the specified payments are
interest, dividends, and proceeds paid by brokers to their customers. The
required information returns enable the IRS to determine whether the recipient
properly included the payments in income. This reporting regime is reinforced
by "backup withholding" rules. These rules require the payors to withhold tax
at a 31 percent rate from payments subject to information reporting if the
recipient fails to cooperate with the reporting regime by failing to provide
his taxpayer identification number to the payor, furnishing an incorrect
identification number, or repeatedly failing to report interest or dividends
on his returns. The information reporting and backup withholding rules do not
apply to payments to corporations, whether domestic or foreign.
Payments of interest or dividends to individual U.S. Holders of Notes or
Class A common stock will generally be subject to information reporting, and
will be subject to backup withholding unless the holder provides us or our
paying agent with a correct taxpayer identification number.
The information reporting and backup withholding rules do not apply to
payments that are subject to the 30 percent withholding tax on dividends or
interest paid to nonresidents, or to payments that are exempt from that tax by
application of a tax treaty or special exception based on a non-U.S. status
certificate. Therefore, payments of dividends on Class A common stock, or
interest on Notes, will generally not be subject to information reporting or
backup withholding. To avoid backup withholding on dividends, a Non-U.S.
Holder will have to certify its nonresident status. Some of the common means
of doing so are described under "Special Rules Applicable to Non-U.S.
Holders--Taxation of Interest."
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Payments made to U.S. Holders by a broker upon a sale of Notes or Class A
common stock will generally be subject to information reporting and backup
withholding. If, however, the sale is made through a foreign office of a U.S.
broker, the sale will be subject to information reporting but not backup
withholding. If the sale is made through a foreign office of a foreign broker,
the sale will generally not be subject to either information reporting or
backup withholding. This exception may not apply, however, if the foreign
broker is owned or controlled by U.S. persons, or is engaged in a U.S. trade or
business.
Payments made to Non-U.S. Holders by a broker upon a sale of Notes or Class
A common stock will not be subject to information reporting or backup
withholding as long as the Non-U.S. Holder certifies its foreign status.
Any amounts withheld from a payment to a holder of Notes or Class A common
stock under the backup withholding rules can be credited against any U.S.
federal income tax liability of the holder.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE
INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S.
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING, AND
DISPOSING OF OUR NOTES OR CLASS A COMMON STOCK, INCLUDING THE CONSEQUENCES OF
ANY PROPOSED CHANGE IN APPLICABLE LAWS.
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UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we have agreed to sell to such underwriter, the principal amount
of Notes set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
Principal Amount
Name of Notes
---- ----------------
<S> <C>
Salomon Smith Barney Inc....................................... $375,000,000
Banc of America Securities LLC................................. $375,000,000
------------
Total........................................................ $750,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the Notes included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the Notes if they purchase any
of the Notes (other than those covered by the over-allotment option described
below).
The underwriters, for whom Salomon Smith Barney Inc. and Banc of America
Securities LLC are acting as representatives, have advised us that the Notes
will initially be offered at the public offering price set forth on the cover
of this prospectus supplement. Any Notes sold by the underwriters to securities
dealers may be sold at a discount from the public offering price of up to 2.75%
of the principal amount of Notes. If all the Notes are not sold at the initial
offering price, the underwriters may change the offering price and the other
selling terms.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus supplement, to purchase up to an additional
$112,500,000 principal amount of Notes at the public offering price less the
underwriting discount. The underwriters may exercise such option solely for the
purpose of covering over-allotments, if any, in connection with this offering.
To the extent such option is exercised, each underwriter will be obligated,
subject to certain conditions, to purchase additional principal amount of Notes
approximately proportionate to such underwriter's initial purchase commitment.
Adelphia and the Rigas family have agreed that, for a period of 90 days
after the date of this prospectus supplement, they will not, without the prior
written consent of Banc of America Securities LLC and Salomon Smith Barney Inc.
offer, sell, contract to sell or otherwise dispose of any shares of Class A
common stock or any securities convertible into or exercisable or exchangeable
for Class A common stock or grant any options or warrants to purchase shares of
Class A common stock (except in connection with pending acquisitions, other
strategic acquisitions and certain other permitted transactions).
The Rigas family has agreed, subject to certain exceptions, not to sell any
of their shares of our Class B common stock without the prior written consent
of a majority of the independent members of our Board of Directors for a period
of 180 days from the closing of the January 2001 Rigas Notes Direct Placement,
but not to exceed a year from the closing of this Offering.
The Notes are a new issue of securities with no established trading market.
We have been advised by the underwriters that the underwriters intend to make a
market in the Notes but are not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
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In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell Notes in the open market. These
transactions may include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of notes than they are required to purchase in
the offering. Stabilizing transactions consist of certain bids or purchases
made for the purpose of preventing or retarding a decline in the market price
of the Notes while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased notes sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the Notes. As a result, the price of the Notes may
be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the underwriters at
any time. These transactions may be effected in the over-the-counter market or
otherwise.
Also, because the net proceeds to us from the offering may be paid to
affiliates of all of the underwriters other than Salomon Smith Barney Inc. to
repay existing loans, the offering is being conducted in accordance with Rule
2710(c)(8) and Rule 2720 of the NASD. That rule requires that the yield on the
Notes can be no lower than that recommended by a "qualified independent
underwriter," as defined by the NASD. Salomon Smith Barney Inc. has served in
this capacity and performed due diligence investigations and reviewed and
participated in the preparation of the registration statement of which this
prospectus supplement forms a part. Salomon Smith Barney Inc. has not received
any additional compensation for such role.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $500,000. The
representatives of the underwriters have agreed to reimburse us for certain
expenses in connection with this Offering.
The underwriters and certain of their affiliates have provided and may in
the future provide investment banking and other financial services to us and
certain of our affiliates for which they have received and will receive
customary fees. The underwriters and their affiliates acted as underwriters of
the public debt and common stock of both us and our affiliates. In addition,
the underwriters and their affiliates, acted as lenders under our existing
credit facilities, including the January 2001 Credit Facility entered into by
certain of our subsidiaries and affiliates. See "Prospectus Supplement
Summary--Recent Developments--January 2001 Credit Facility," "Risk Factors--
High Level of Indebtedness" and "Use of Proceeds."
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the underwriters may be required to make in respect of any of those
liabilities.
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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.
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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.
COMMON STOCK OFFERING
Concurrently with the Notes being offered hereby, Adelphia is offering
17,000,000 shares of Adelphia Class A common stock. These shares of Class A
common stock will only be offered by delivery of a separate prospectus
supplement relating to such offering. No requirement exists that we sell shares
of Class A common stock in order to sell the Notes offered hereby. We could
decide not to sell these shares of Class A common stock or to sell more or less
shares of Class A common stock than we presently are offering in the Common
Stock Offering.
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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 Annual Report on Form 10-K for the year ended December 31, 1999, as
amended by our Form 10-K/A and our Form 10-K/A-2;
. our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2000, June 30, 2000 and September 30, 2000, in each case as
amended by our Form 10-Q/As;
. our Current Reports on Form 8-K for the events dated January 3, 2001,
January 1, 2001, December 18, 2000, September 20, 2000, September 15,
2000, September 13, 2000, June 13, 2000, January 21, 2000, September 9,
1999 (as amended by our Form 8-K/A filed on January 2, 2001), June 22,
1999 (as amended by our Form 8-K/A filed on January 2, 2001), and April
20, 1999 (as amended by our Form 8-K/A filed on January 2, 2001);
. our definitive proxy statement dated July 7, 2000 with respect to the
Annual Meeting of Stockholders held on July 31, 2000 (except that
Appendix A thereto has been superseded by the Form 10-K/A-2, filed on
December 19, 2000); 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 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 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:
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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 7,350 shares of our
Class A common stock and 41,600 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
December 31, 1998 and 1999, and for the year ended March 31, 1998, the nine
months ended December 31, 1998 and the year ended December 31, 1999,
incorporated in this prospectus supplement by reference from Adelphia's Annual
Report on Form 10-K, as amended by Form 10-K/A-2, for the year ended December
31, 1999, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference (which report
expresses an unqualified opinion and includes an explanatory paragraph
referring to the restatement described in Note 14 to the consolidated financial
statements), 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 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 December 31, 1998, 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.
S-56
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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 by reference in this prospectus
supplement from Adelphia's Current Report on Form 8-K filed April 20, 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-57
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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
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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
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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.
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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
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<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.
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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.
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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,
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
-- -- -- -- --
</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.
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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.
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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;
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<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;
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<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.
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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.
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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;
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. 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
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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:
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. 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
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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,
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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.
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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.
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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
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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
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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
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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
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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;
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. 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.
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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.
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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
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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.
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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
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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.
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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.
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$750,000,000
Adelphia Communications Corporation
6% Convertible Subordinated Notes due 2006
[LOGO OF ADELPHIA APPEARS HERE]
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PROSPECTUS SUPPLEMENT
January 17, 2001
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Salomon Smith Barney Banc of America Securities LLC
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