HomeMy WebLinkAbout2001-02-20; City Council; 16074; Transfer Daniels Cablevision to Highland FranchiseAB# &07f’
MTG. 2-20-01
DEPT. PWIM&O
CITY OF CARLSBAD -AGENDA BILL
TITLE:
TRANSFER OF CABLE TELEVISION FRANCHISE
FROM DANIELS CABLEVISION, INC. TO HIGHLAND
CARLSBAD CABLEVISION CITY MGR.
RECOMMENDED ACTION:
Adopt Resolution No. 900 /.- 57 approving the transfer of the City of Carlsbad cable
television franchise from Daniels Cablevision, Inc. to Highland Carlsbad Cablevision, Inc. and
authorizing the Mayor to sign a Guaranty agreement with Adelphia Communications
Corporation.
ITEM EXPLANATION:
The Estate of Bill Daniels, the owner of all of the stock of Daniels Cablevision, Inc., (“Daniels”)
has entered into an agreement with Adelphia Communications Corporation and Adelphia
California Cablevision, LLC (collectively “Adelphia”) under which Adelphia would acquire the
stock of Daniels and thus control the cable television system in the City of Carlsbad. Adelphia,
in turn, has assigned its rights and obligations under this agreement to Highland Carlsbad
Cablevision, Inc. (“Highland”). Highland is wholly owned by members of the Rigas family, the
same persons who control Adelphia.
On October 26, 2000, the City received a request from Daniels to consent to the transfer of
control by sale of Daniels to Highland. This request is made pursuant to Chapter 5.28 of the
City of Carlsbad Municipal Code, and FCC Regulations. Council consent must be expressed
by resolution, provided that the new owner/transferee can show financial responsibility as
determined by the Council, and must agree to comply with all the provisions of the existing
Franchise Agreement. To provide the City with the information necessary to assess the
financial, legal and technical qualifications of the new owner, Daniels has prepared and
submitted FCC Form 394. The City Attorney and Finance offices have reviewed this
document and have determined that Highland Carlsbad Cablevision is competent and
qualified to assume responsibility for the City’s cable television franchise. Adelphia has also
submitted a Guaranty agreement by which Adelphia warrants that Highland will perform each
and every obligation contained in the existing Franchise Agreement.
In accordance with FCC Regulations, the City has 120 days from the date of submission of the
completed FCC Form 394 (Oct. 26, 2000) to act upon the consent request. If the City takes
no action by February 23, 2001, the request is deemed granted unless the City and Daniels
agree to an extension of time. If the City questions the accuracy of the information provided in
FCC Form 394, the City must notify Daniels within 30 days of the submission date, othervvise
the information is deemed accepted.
Action taken by the Council in this matter is administrative only and will have no material affect
on cable television services currently being provided by Daniels. Daniels, which will become a
wholly-owned subsidiary of Highland, will continue to hold the Franchise and operate the
Page 2 of Agenda Bill No. /d,G7Lf
System subsequent to the transfer to Highland.
In January 1994, the existing Franchise Agreement was extended an additional ten years
effective to November 2006. Pursuant to this Agreement, in November 2001, the City will
have an opportunity to evaluate DanielsIHighland’s pace with new and proven cable television
technologies.
FISCAL IMPACT:
There is no fiscal impact as a result of this action. The proposed new Franchisee will continue
to pay to the City a franchise fee of 5% of their gross annual revenues as defined in by
Chapter 5.28 of the City of Carlsbad Municipal Code.
EXHIBITS:
I. City Council Resolution No.E$approving the transfer of the City of Carlsbad cable
television franchise from Daniels Cablevision, Inc. to Highland Carlsbad Cablevision, Inc.
2. Document titled, “Guaranty”.
3. Document titled, “Acceptance of a Franchise for a Cable Television System in the City of
Carlsbad, California”,
4. Report titled, “City of Carlsbad, FCC Form 394”, on file in the City Records Management
Office.
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RESOLUTION NO. 2001-59
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, APPROVING THE TRANSFER OF
THE DANIELS CABLEVISION, INC. CABLE TELEVISION
FRANCHISE TO ADELPHIA CALIFORNIA CABLEVISION, LLC,
ADELPHIA COMMUNICATIONS CORPORATION AND HIGHLAND
CARLSBAD CABLEVISION
WHEREAS, Daniels Cablevision, Inc. (“Franchisee”) owns, operates, and maintains a
cable television system (“System”) in the City of Carlsbad, California (the “City”), pursuant to an
Agreement dated October 18, 1977, Ordinance 6058, Ordinance 6081, and Resolution No. 94-30
(the “Franchise”), and Franchisee is the duly authorized holder of the Franchise; and
WHEREAS, Franchisee, Adelphia California Cablevision, LLC (“Adelphia LLC”) and
Adelphia Communications Corporation (“Adelphia”) have entered into an Acquisition Agreement,
dated as of July 21, 2000 (the “Acquisition Agreement”), providing for, among other things, control
of Daniels Cablevision, Inc. and the System to be transferred to Adelphia LLC (the “Transfer”);
and
WHEREAS, Adelphia LLC and Adelphia have exercised their right under the Acquisition
Agreement to assign their rights and obligations there under to Highland Carlsbad Cablevision,
Inc. (“Highland”); and
WHEREAS, Highland, a Delaware corporation wholly-owned by the Rigas family, which
family controls Adelphia, has agreed to acquire and assume the rights and obligations of Adelphia
LLC and Adelphia under the Acquisition Agreement (“Assignment and Assumption Agreement”);
and
WHEREAS, Daniels Cablevision, Inc., which will become a wholly-owned subsidiary of
26 Highland, will continue to hold the Franchise and operate the System subsequent to the Transfer
27 to Highland; and
28 WHEREAS, pursuant to Carlsbad Municipal Code Chapter 5.28, Franchisee, Adelphia
LLC, Adelphia and Highland have requested the City’s consent to the Transfer; and
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1 WHEREAS, in order to the provide the City with the information necessary to assess the
2 financial, legal and technical qualifications of Highland, Franchisee, Adelphia and Highland have
3 filed Federal Communications Commissions Form 394 with the City; and
4 WHEREAS, pursuant to Carlsbad Municipal Code Chapter 5.28, Adelphia has submitted
5 to the City for approval a corporate guarantee (“Guaranty”) attached hereto as Exhibit “A” and
6 incorporated herein by reference, which guarantees that Highland will perform each and every
7 obligation contained in the Franchise Agreement; and
8 WHEREAS, Highland has submitted to the City an acceptance declaration (“Acceptance
9 of a Franchise for a Cable Television System in the City of Carlsbad, California”) attached hereto
10 as Exhibit “B” and incorporated herein by reference, which declares that Highland accepts all
11 rights, duties, and obligations created pursuant to the Transfer, represents that it has the legal,
12 technical and financial qualifications to perform all Franchise obligations, and agrees to be bound
13 by the Franchise; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad,
California, as follows:
1. That the above recitations and true and correct.
2. That the City confirms that (a) the Franchise was properly granted or transferred to
WHEREAS, the City has investigated the qualifications of Highland and finds Highland to
be a suitable transferee,
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Franchisee, (b) the Franchise is currently in full force and effect and will expire on November 19, 21
2006, subject to options in the Franchise, if any, to extend such term, (c) the Franchise represents
the entire understanding of the parties and Franchisee has no obligations to the City other than
those specifically stated in the Franchise, and (d) Franchisee is materially in compliance with the
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25 provisions of the Franchise and there exists no fact or circumstance known to the City which
26 constitutes or which, with the passage of time or giving of notice or both, would constitute a
27 material default or breach under the Franchise or would allow the City to cancel or terminate the
28 rights there under.
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3. That Highland has demonstrated financial responsibility and has agreed to comply with
all provisions of Chapter 5.28 of the Carlsbad Municipal Code.
4. That the City hereby consents to the Transfer to Highland in accordance with the terms
of the Franchise.
5. That the Mayor is hereby authorized to sign the Guaranty on behalf of the City.
6. That this Resolution shall be deemed effective upon the closing of the Transfer.
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8 PASSED, APPROVED AND ADOPTED at a regular meeting of the City of Carlsbad City
9 Council held on the 20th day of February , 2001 by the following vote, to wit:
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11 AYES: Council Members Lewis, Kulchin, Finnila, Nygaard and Hall.
NOES: None
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CLAUDIA. LEWTS, f#jyor ”
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L&F&INE M. WOOD, City Clerk
(SEAL)
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EXHIBIT "A"
GUARANTY
This GUARANTY is made and entered into as of the 24 day of X~L~E,--V ,2001, by
Adelphia Communications Corporation (which company is hereinafter referkd to as “the
Guarantor”) on behalf of itself.
WHEREAS, members of the FZigas family of Coudersport, Pennsylvania, control Adelphia
Communications Corporation and are the sole owners of Highland Carlsbad Cablevision, Inc.
(“Transferee”); and
WHEREAS, Guarantor and Transferee have petitioned the City of Carlsbad, California (the
“Franchising Authority”) to consent to the transfer of control of the franchise agreement executed
by the Franchising Authority and Daniels Cablevision, Inc. on October 18, 1977 (the “Franchise
Agreement”) to Transferee;
NOW, THEREFORE, to induce the Franchising Authority to consent to said transfer, in
addition to other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantor hereby agrees as follows:
1. The Guarantor, on behalf of itself, guarantees unconditionally to the Franchising
Authority the due and punctual performance, by the Transferee, of each and every obligation
contained in such Franchise Agreement, except to the extent that any such provision or obligation
is unenforceable under applicable law.
2. The guaranty set forth in Section 1 above shall (a) be effective contemporaneously
with the transfer of control of the Franchise Agreement to Transferee and (b) shall remain in effect
until the termination of the Franchise Agreement, unless terminated, substituted, or canceled as
follows: upon the Franchising Authority’s prior written approval of a substitute guarantor, which
approval shall not be unreasonably withheld. Any such substitution will be implemented in a
manner that ensures that the substitute guarantor is in place and effective prior to or
contemporaneously with the termination, substitution or cancellation of this Guaranty so that there
is no breach in coverage.
3. Except as set forth in paragraph 2 above, no termination, amendment, waiver or
modification of this Guaranty or any of its terms or provisions shall be effective unless it is set forth
in a written instrument signed by the affected Guarantor(s) and the Franchising Authority.
4. This Guaranty shall be governed by and construed in accordance with the laws of the
State of California, as applicable to contracts entered into and to be performed entirely within that
state.
5. If any section, subsection, sentence, clause, phrase, or other portion of this Guaranty
is, for any reason, declared invalid, in whole or in part, by any court, agency, commission, legislative
body, or other authority of competent jurisdiction, such portion shall be deemed a separate, distinct,
and independent portion, and such declaration shall not affect the validity of the remaining portions
hereof, which other portions shall continue in full force and effect.
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IN WITNESS WHEREOF, the Guarantor, on behalf of itself, has caused this Guaranty to
be executed under seal by its duly authorized representatives on the date first above written.
ADELPHIA COMMUNICATIONS CORPORATION.
By: A. >A
Its: Mayor v /
.Ap oved as to Fo
d-,IpL
124434.1
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EXHIBIT "B"
ACCEPTANCE OF A FRANCHISE FOR A CABLE
TELEVISION SYSTEM IN THE CITY OF CARLSBAD, CALIFORNIA
WHEREAS, the City of Carlsbad, Californi
wry 20 ,2001, adopted a Resolution NoJd q f (“City”) by action of its governing body on
approving the transfer of control Resolution”)
of the Franchise to operate a cable system in the City held by Daniels Cablevision, Inc.
(“Franchisee”) to Highland Carlsbad Cablevision, Inc. (“Highland”) and subject to this Acceptance
and a Guaranty from Adelphia Communications Corporation.
NOW, THEREFORE, pursuant to the terms and requirements of the Franchise and the
Resolution, and in consideration of the City’s approval of the transfer of the Franchise, Highland
accepts the Franchise and all conditions in the Resolution and makes the following representations
and warranties to the City:
1. Highland is a corporation duly organ&d, validly existing, and in good standing under
the laws of the State of Delaware, and is authorized to do business in California and has full power,
authority, and legal capacity to execute, deliver, and perform this Acceptance and perform the terms
and conditions of the Franchise and the Resolution.
2. All actions necessary to authorize the execution and delivery of this Acceptance, and
the performance of the Franchise and Resolution, have been duly author&d by all necessary and
required proceedings.
3. The execution and delivery of the Acceptance and the performance of the Franchise
and the Resolution, does not and will not conflict with or result in the breach or termination of, or
constitute a default under, any indenture or instrument with respect to the borrowing of money, or
any material contract, lease, or agreement, or order, judgment, or decree or any law, rules, or
regulation to which Highland is a party or by which it or any of its property is bound or affected.
4. Highland has carefully read the terms and conditions of the Franchise and the
Resolution transferring control of the Franchise, and accepts the rights, duties, and obligations
created thereunder, subject to its rights under applicable state and federal law.
5. Highland represents that is has the legal, technical, and financial qualifications to
petiorm fully and timely all obligations of the Franchise and agrees to be bound by the Franchise.
[The Remainder of this Page Intentionally Left Blank.]
HIGHLANDCARLSBADCABLEVISION,INC.
&FL
Its: Vice President and Assiskan~Secretary
Dated: 01/19 ,200l
Stateof Pennsylvania )
1 ss:
county of Potter 1
The foregoing instrument was subscribed and sworn to before me this l!XJ%day of
JanWry ,2001,by Randall 6.:'Fisher ,the VP / Asst. Secretary of
Highland Carlsbad Cablevision, Inc.
SEAL
C:\WINDOWS\TEMP~CARLSB-1 .wPD
Member. Pennsyhfania Associatic4-1 oi NotaMs
City of Carlsbad
Records Management Department
February 28,200l
Joni Odum, President & General Manager
Daniels Cablevision, Inc.
5720 El Camino Real
Carlsbad, CA 92008-7298
Re: Cable Television Franchise
The City of Carlsbad has approved the resolution no. 2001-59; a resolution of the City Council of
the City of Carlsbad, California, approving the transfer of the Daniels Cablevision, Inc. cable
television franchise to Adelphia California Cablevision, LLC, Adelphia Communications
Corporation and Highland Carlsbad Cablevision.
Please find enclosed for you records a conformed copy of Agenda Bill No. 16,074 which adopted
Resolution No. 2001-59. Exhibits 1,2, & 3 to the Agenda Bill are also attached.
If you have any questions, please feel free to contact our offices.
Debra Doerfler v Carlsbad City Clerk’s Office
Enclosure
1200 Carlsbad Village Drive - Carlsbad, CA 92008-1989 * (760) 434-2808 @
CITY OF CARLSBAD, CALIFORNIA
COPY OF 394 SUBMISSION
FKO M
Chr Ph 1 bps
(--Q-nwI) d2!Te2 73 7
Federal Communications Commission wastlington, D. c. 20554 FCC 394 Approved OMB 3r!iL513
APPLICATION FOR FRANCHISE AUTHORITY
r CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL OF CABLE TELEVISION FRANCHISE
FOR FRANCHISE AUTBORITY USE ONLY
SECTION I. GENERAL INFORMATION
I DATE September 30,200O I 1. Community Unit Identification Number: CA 0764 and CA 07 16 1
2. Application for: q Assignment of Franchise lm Transfer of Control
I 3. Franchising authority: City of Carlsbad, California I
4. Identify community where the system/franchise that is the subject of the assignment or transfer of control is located: City of Carlsbad (including La Costa)
I 5. Date system was ac service was nrovided to B uired or (for system’s constructed by the transferor/assignor) the date on which e first subscrtber in the franchise area: I 10/18/77 I
6. Proposed effective date of closing of the transaction assigning or transferring ownership of the system to transferee/assignee: When all conditions to closing have been met. Currently antici ated to be 120 days from he filing of this Form P 394.
7. Attach as an Exhibit a schedule of any and all additional information or material filed with this application that is identified in the franchtse as required to be provided to the franchising authority when requesting its approval of the type of transaction that is the subject of this application.
1 jxhiyNo:-]
r PART I - TRANSFEROR/ASSIGNOR
1. Ind&te the name. mailinp address. and teleDhone number of the transfero&sienor.
Legal name of Transferor/Assignor (if individual, list last name first)
Daniels Cablevision, Inc.
I Assumed name used for doing business (if any)
I
Mailing street address or P.O. Box I 5720 El Camino Real
City Carlsbad State CA ZIP Code 92008 Telephone No. (include area code) 760-438-7741
2.64 Attach as an Exhibit a co control (including any ex IT y of the contract or agreement that provides for the assi i nment or transfer of tbits or schedules thereto necessary in order to understan the terms thereof). If there is only an oral agreement, reduce the terms to writing and attach. (Confidential trade, business, pricing or marketing informatton, or other information not otherwise publicly available, may be redacted).
Exhib;lt No*
(b) Does the contract submitted in response to ‘3) above embody the full and complete agreement between the q ONo Yes transferor/assignor and the transferee/assigr~:e?
If No, explain in an Exhibit.
,- FCC 394
sepmlba 19%
PART II -TRANSFEREE/ASSIGNEE
1. (a) Indicate the name, mailing address, and telephone number of the transferee/assignee.
Legal name of Transferee/Assignee (if individual, list last name first)
'ahland Carlsbad Cablevision, Inc.
Assumed name used for doing business (if any)
Mailing street address or P.O. Box
1 North Main St
City
Coudersport
State
PA
ZIP Code Telephone No. (include area code)
16915 (814) 274-9830
(b) Indicate the name, mailing address, and telephone number of person to contact, if other than transferee/assignee.
Name of contact person (list last name first)
( Firm or company name (if any) I Adelphia Communications Corporation
Mailing street address or P.O. Box
1 North Main Street
City State
Coudersport PA
ZIP Code
16915
Telephone No. (include area code)
(814) 274-9830
(c) Attach as an Exhibit the name, mailing address, and telephone number of each additional person
who should be contacted, if any.
1 Exhiy No. 1
-.- (d) Indicate the address where the system’s records will be maintained.
Street Address
1 North Main Street
City
Coudersport
State
PA
ZIP Code
16915
2. Indicate on an attached exhibit any plans to change the current terms and conditions of service
and operations of the system as a consequence of the transaction for which approval is sought.
,.“”
FCC 394 (Page 2) September 1996
SECTION II. TRANSFEREEWASSIGNEE’S LEGAL QUALIFICATIONS
1. Transferee/Assignee is:
3 Corporation
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El
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a. Jurisdiction of incorporation: d. Name and address of registered agent in
Limited Partnership c. Name and address of registered agent in
General Partnership a. Jurisdiction whose laws govern formation:
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b. Date of formation:
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Individual
Other. Describe in an Exhibit.
2. List the transferee/assignee, and, if the transferee/assignee is not a natural person, each of its officers, directors, stockholders
beneficially holding more than 5% of the outstanding voting shares, general partners, and limited partners holding an equity interest
of more than 5%. Use only one column for each individual or entity. Attach additional pages if necessary. (Read carefully - the
lettered items below refer to corresponding lines in the following table.)
,-- (a) Name, residence, occupation or principal business, and principal place of business. (If other than an individual, also show name,
address and citizenship of natural person authorized to vote the voting securities of the applicant that it holds.) List the applicant
first, officers, next, then directors and, thereafter, remaining stockholders and/or partners.
(b) Citizenship. (c) Relationship to the transfer&assignee (e.g., officer, director, etc.).
(d) Number of shares or nature of partnership interest.
(e) Number of votes.
(f) Percentage of votes.
(a) (See Attachment)
(W
03
(9
FCC 394 (Page 3) September 1996
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3. If the applicant is a corporation or a limited partnership, is the transferee/assignee formed under the laws of, or duly qualified to transact business in, the State or other jurisdiction in which the system
operates?
If the answer is No, explain in an Exhibit.
r-
. Has the transferee/assignee had any interest in or in connection with an applicant which has been
dismissed or denied by any franchise authority?
If the answer is Yes, describe circumstances in an Exhibit.
5. Has an adverse finding been made or an adverse final action been taken by any court or
administrative body with respect to the transferee/assignee in a civil, criminal or administrative
proceeding, brought under the provisions of any law or regulation related to the following: any
felony; revocation, suspension or involuntary transfer of any authorization (including cable
franchises) to provide video programming services; mass media related antitrust or unfair
competition: fraudulent statements to another government unit; or employment discrimination?
If the answer is Yes, attach as an Exhibit a full description of the persons and matter(s) involved,
including an identification of any court or administrative body and any proceeding (by dates and file
numbers, if applicable), and the disposition of such proceeding.
6. Are there any documents, instruments, contracts or understandings relating to ownership or future
ownership rights with respect to any attributable interest as described in Question 2 (including, but
not limited to, non-voting stock interests, beneficial stock ownership interests, options, warrants,
debentures)?
If Yes, provide particulars in an Exhibit.
7. Do documents, instruments, agreements or understandings for the pledge of stock of the
transferee/assignee, as security for loans or contractual performance, provide that: (a) voting rights
will remain with the applicant, even in the event of default on the obligation; (b) in the event of
- default, there will be either a private or public sale of the stock; and (c) prior to the exercise of any
ownership rights by a purchaser at a sale described in (b), any prior consent of the FCC and/or of the
franchising authority, if required pursuant to federal, state or local law or pursuant to the terms of
the franchise agreement will be obtained?
If No, attach as an Exhibit a full explanation,
SECTION III. TRANSFEREES/ASSIGNEE’S FINANCIAL QUALIFICATIONS
1. The transferee/assignee certifies that it has sufficient net liquid assets on hand or available from
committed resources to consummate the transaction and operate the facilities for three months.
2. Attach as an Exhibit the most recent financial statements, prepared in accordance with generally
accepted accounting principles, including a balance sheet and income statement for at least one full
year, for the transferee/assignee or parent entity that has been prepared in the ordinary course of
business, if any such financial statements are routinely prepared. Such statements, if not otherwise
publicly available, may be marked CONFIDENTIAL and will be maintained as confidential by the
franchise authority and its agents to the extent permissible under local law.
SECTION IV. TRANSFEREES/ASSIGNEE’S TECHNICAL QUALIFICATIONS
Set forth in an Exhibit a narrative account of the transferee’slassignee’s technical qualifications, experience
and expertise regarding cable television systems, including, but not limited to, summary information about
appropriate management personnel that will be involved in the system’s management and operations. The transferee/assignee may, but need not, list a representative sample of cable systems currently or formerly
owned or operated.
q Yes 0 No
1 Exhh;No. 1
q Yes q No
j Ex;y;No. 1
0 Yes q No
0 Yes q No
(1
0 Yes f?fJ No
q Yes q No
1 Exhigbit No. ]
FCC 394 (Page 4) September 1996
SECTION V - CERTIFICATIONS
Part I - Transferor/Assignor
All the statements made in the application and attached exhibits are considered material representations, and all the Exhibits are a
rryJptia1 part hereof and are incorporated herein as if set out in IX1 in the application.
I CERTIFY that the statements in this application are true, complete and correct to the best of my knowledge and belief and are made in good faith.
Signature
SEE THE ATTACHED
Date WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, TITLE 18, SECTION 1001. Print full name
Check appropriate classification:
0 Individual cl General Partner Ill coiporate Officer 0 Other, Explain: (Indrcate Title)
Part II - Transferee/Assignee
All the statements made in the application and attached Exhibits are considered material representations, and all the Exhibits are a
material part hereof and are incorporated herein as if set out in full in the application.
The transferee/assignee certifies that he/she:
(a) Has a current copy of the FCC’s Rules governing cable television systems.
(b)JIas a current copy of the franchise that is the subject of this application, and of any applicable state laws or local ordinances and r’ regulations.
(c) Will use its best efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related regulations, and to effect changes, as promptly as practicable, in the operation of the system, if any changes are necessary to cure any
violations thereof or defaults thereunder presently in effect or ongoing.
I CERTIFY that the statements in this application are true, Signature
complete and correct to the best of my knowledge and belief and are made in good faith.
Date WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, TITLE 18, SECTION 1001. Print full name
Check appropriate classification:
cl Individual El General Partner q Corporate Officer c] Other, Explain: (Indicate Title)
FCC 394 (Pa08 5)
September 1595
SECTION V - CERTIFICATIONS
Part I - Transferor/Assignor. All the statements made in the application and attached exhibits are considered material representations, and all the Exhibits are a
material part hereof and are incorporated herein as if set out in full in the application.
“-‘RTIFY that the statements in this application are true, plete and correct to the best of my knowledge and belief and Signature
are made in good faith.
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE Date A
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, October 5, 2000
TITLE 18, SECTION 1001. Print full name H _ DeWitt Mitchell
Check appropriate classification:
cl Individual 0 General Partner 0 Corporate Officer El Other, Explain: Personal Representative of the Estate
(Indicate Title) of Bill Daniels, sole owner of the franchisee
I CERTIFY that the statements in this application are true, complete and correct to the best of my knowledge and belief and are made in good faith.
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE Date PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, October 5, 2000 - TITLE 18, SECTION 100 1. Print full name Kenneth Farabee
Check appropriate classification: q Individual cl General Partner III Corporate Officer Ix1 Other, Explain: Personal Representative of the Estate
(Indicate Title) of Bill Daniels. sole owner of the franchisee
I CERTIFY that the statements in this application are true, Signatu .*-%ete and correct to the best of my knowledge and belief and /’
lade in good faith. 6Jdy
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE Date PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, October 5, 2000
TITLE 18, SECTION 1001. Print full name Robert C. Russo
Check appropriate classification:
III Individual III General Partner 0 Corporate Officer IXI Other, Explain: Personal Representative of the Estate
(Indicate Title) of Bill Daniels, sole owner of the franchisee
I CERTIFY that the statements in this application are true, complete and correct to the best of my knowledge and belief and are made in good faith.
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT.. U.S. CODE, L TITLE 18, SECTION 1001. Print full name Bri& Deevy
Check appropriate classification:
cl Individual 0 General Partner III Corporate Offrcer IXI Other, Explain: Personal Representative of the Estate
(Indicate Title) of Bill Daniels, sole owner of the franchisee
/--
SECTION V - CERTIFICATIONS
Part I - Transferor/Assignor
All the statements made in the application and attached exhibits are considered material representations, and
all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application.
Signature
I CERTIFY that the statements in this application are true,
complete and correct to the best of my knowledge and belief By:
and are made in good faith.
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S.
CODE, TITLE 18, SECTION 1001.
p
Check appropriate classification:
cl Individual cl General Partner 0 Corporate Officer 0 Other. Explain:
(Indicate Title)
Part II - Transferee/Assignee
All the statements made in the application and attached Exhibits are considered material representations, and
all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application.
/- The transferee/assignee certifies that he/she:
(a) Has a current copy of the FCC’s Rules governing cable television systems.
(b) Has a current copy of the franchise that is the subject of this application, and of any applicable state laws
or local ordinances and related regulations.
(c) Will use its best efforts to comply with the terms of the franchise and applicable state laws or local
ordinances and related regulations, and to effect changes, as promptly as practicable, in the operation
system, if any changes are necessary to cure any violations thereof or defaults thereunder presently in
effect or ongoing.
Signature .
I CERTIFY that the statements in this application are true,
complete and correct to the best of my knowledge and belief
and are made in good faith.
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S.
CODE, TITLE 18, SECTION 1001.
Check appropriate classification:
cl Individual cl General Partner W Corporate Officer 0 Other. Explain:
(Indicate Title) Assistant Secretary
/-
Exhibit 1
Additional information required by the franchise
,- C:\WINNnTemporary Internet Files\OLK89\etiibits -- Highland.WPD/Page 1
Exhibit 2
ACQUISITION AGREEMENT
and
ASSIGNMENT AND ASSUMPTION AGREEMENT
f- C:\WMNnTemporary Internet Files\OLK89\exhibits - Highland.WF’D/Page 2
Execution Copy
ACQUISITION AGREEMENT
BY AND BETWEEN
ESTATE OF BILL DANIELS
AND
ADELPHIA CALIFORNIA CABLEVISION, LLC, AND
ADELPHIA COMMUNICATIONS CORPORATION
DATED AS OF
JULY 21,200O
TABLE OF CONTENTS
/--
.
Page
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
1.13
1.14
1.15
1.16
1.17
1.18
1.19
1.20
1.21
1.22
1.23
1.24
1.25
1.26
1.27
1.28
1.29
1.30
1.31
1.32
1.33
1.34
1.35
1.36
1.37
Affiliate ................................................... 1
Assets ..................................................... 1
Basic Service ............................................... .
Business ................................................... .
Business Day ............................................... .
CableAct .................................................. .
Closing .................................................... .
Closing .................................................... .
Contracts ...................................................
Credit Facility ............................................. .2
Encumbrance ............................................... .
Environmental Law ......................................... .3
Equipment ................................................. .
Equivalent Basic Subscribers ................................... 3
Equivalent Basic Rate ........................................ 3
ERISA Affiliate ............................................ .4
Excluded Assets ............................................. .
Expanded Basic Service ...................................... .4
Former ERISA Affiliate ...................................... .4
GAAP .................................................. ...1
Governmental Authority ..................................... .4
Governmental Permits ....................................... .4
Hazardous Substances ....................................... .4
High Speed Data Service ...................................... 5
Intangibles ................................................. .
Knowledge ................................................. .
Legal Requirement ........................................... 5
Losses ................................................... ..j
Material Adverse Effect ....................................... 5
Pay TV .................................................... .
Permitted Encumbrances ...................................... 5
Person .................................................. ...6
PlannedUpgrade ............................................ .
Real Property ............................................... .
Registration Statement ....................................... .6
RequiredConsents ........................................... .
Service Area.. .............................................. .
i
Section 2. SaleofCommonStock ............................................. .
Section 3. Consideration ..................................................... .
3.1 Base Purchase Price ......................................... .9
3.2 Adjustments to Base Purchase Price ............................ .9
3.3 Determination of Adjustments ................................. 11
3.4 Make-Well ................................................ 12
3.5 Allocation of Consideration ................................... 12
Section 4.
Section 5. Representations and Warranties of Seller .............................. 15
Page
1.38 Share Consideration Value .................................... 6
1.39 System .................................................... .
1.40 Taxes ..................................................... .
1.41 TaxReturn ................................................. .
1.42 UpgradePlan ............................................... .
1.43 Other Definitions ............................................ 7
Related Matters .................................................. 13
4.1 Real Property, Transaction .................................... 13
4.2 EmployeePlans .......................................... ..14
4.3 Excluded Assets/Liabilities ................................... 15
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13
5.14
5.15
5.16
5.17
5.18
Organization. Qualification. .4uthority and Validity ................ 15
Capitalization. Share Ounership and Subsidiaries ................. 16
No Conflict: Requited Consents ............................... 17
Assets.. ................................................ ..I 7
Governmental Permits ....................................... 17
Contracts ............................................... ..18
RealProperty. ............................................ ..18
Environmental Matters ....................................... 18
Compliance Lvith Legal Requirements ........................... 19
Patents. Trademarks and Copyrights ............................ 19
Financial Statements ........................................ 19
Absence of Certain Changes ................................. .20
Legal Proceedings ......................................... .20
TaxMatters ............................................. ..2 0
Employment Matters ....................................... .22
System Information ........................................ .23
Findersand Brokers ....................................... ..2 3
Free Subscribers.. ........................................ ..2 4
ii
Page
5.19 Guarantees and Security Interests ............................. .24
5.20 Insurance ............................................... ..2 4
5.2 1 Transactions With Affiliates .................................. 24
5.22 Securities Law Matters ...................................... .24
5.23 Schedules.. ............................................. ..2 5
.-
Section 6. Buyer’s Representations and Warranties .............................. .25
6.1 Organization and Qualification ............................... .26
6.2 Authority and Validity ...................................... .26
6.3 No Conflicts; Required Consents .............................. .26
6.4 Buyer’s Independent Investigations Regarding the Real Property.
Governmental Permits and Approvals .......................... .27
6.5 Findersand Brokers ....................................... ..2 7
6.6 Legal Proceedings ........................................ ..2 7
6.7 Securities Law Matters ...................................... .27
6.8 Delivery of Share Consideration .............................. .28
6.9 SEC Filings; Financial Information ............................. 28
6.10 Put Agreement: Put Obligor Financial Information ................. 28
Section 7. Additional Covenants, . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . .39
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10
7.11
7.12
7.13
7.14
7.15
Access to Premises and Records .............................. .29
Continuity and Maintenance of Operations: Financial Statements ..... 29
Requiredconsents.. ...................................... ..3 I
HSR Notification ........................................... 3 1
Code Section 338(h)( 10) Election .............................. 3 1
Tax Returns: Other Tax Matters ............................... 32
Transfer Taxes ........................................... ..3 2
Use of Names and Logos ..................................... 32
Satisfaction of Conditions ................................... .33
Confidentiality and Publicity .................................. 33
Credit Facility ............................................ .33
Environmental Assessment of the Office Properties ................ 34
Transitional Billing Services .................................. 34
Employee Matters ......................................... .35
Filing and Maintenance of Registration and Listing of Share Consideration
. ......................................................... 35
Section 8. ConditionsPrecedent ............................................ ..3 7
8.1 Conditions to the Obligations of Buyer and Seller ................. 37
F 8.2 Conditions to the Obligations of Buyer .......................... 37
. . . 111
.
Page
8.3
8.4
Conditions to Obligations of Seller ............................ .39
Waiver of Conditions ....................................... .40
Section 9. Closing ....................................................... ..4 0
9.1 The Closing; Time and Place ................................. .40
9.2 Seller’s Delivery Obligations ................................. .40
9.3 Buyer’s Delivery Obligations ................................. .4 1
Section 10. Termination ................................................... ..4 I
10.1 Termination Events ........................................ .41
10.2 Effect of Termination ....................................... .41
Section 11. Survival of Representations. Warranties. Covenants and Agreements: Indemnification
............................................................... 42
Il. 1 Survival of Representations, Warranties. Covenants and Agreements . . 42
11.2 Indemnification by Seller .................................... .42
11.3 Indemnification by Buyer. ................................... .42
11.4 Indemnification by Buyer for Securities Matters ................... 42
11.5 Third Party Claims ......................................... .43
I 1.6 Limitations on Indemnification - Seller .......................... 44
11.7 Limitations on Indemnification - Buyer. ........................ .45
11.8 Nonrecourse .............................................. .45
11.9 SoleRemedy ............................................ ..4 5
Section 12. Miscellaneous ................................................. ..4 5
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10
12.11
12.12
12.13
12.14
12.15
Parties Obligated and Benefitted .............................. .45
Notices ................................................. ..4 5
Right to Specific Performance ................................ .46
Waiver ................................................. ..4 7
Captions ................................................ ..4 7
ChoiceofLaw ........................................... ..4 7
Terms .................................................. ..4 7
Rights Cumulative ......................................... .47
Further Actions ........................................... .47
Time ................................................... ..4 7
Late Payments ........................................... ..4 7
Counterparts.. ........................................... ..4 7
Entire Agreement .......................................... .48
Severability ............................................. ..4 8
Construction.. ........................................... ..4 8
‘J-
Page
12.16 Expenses ............................................... ..4 8
12.17 Systems’ Financial Statements ................................ ,48
I.17
1.31
1.42
3.1
3.2.1
4.1-A
4.1-B
5.3
5.4
5.5
5.6
5.7
5.8
5.9.2
5.10
5.13
5.14
5.15
5.16-A
5.16-B
5.18
5.19
7?3 .a.
8.2.-I
LIST OF SCHEDULES
Excluded Assets
Permitted Encumbrances
Upgrade Plan
Allocation of System Purchase Price
Example Calculation of Net Liabilities
Carlsbad Office Property
Desert Hot Springs Office Property
Required Consents
Encumbrances to Be Discharged Prior to Closing
Governmental Permits
Seller Contracts
Real Property
Environmental Matters
Copyright Matters
Intellectual Property Rights
Proceedings and Judgments
Tax Matters
Employee Matters
The BusinessKarlsbad Systems Information
The Business/Desert Hot Springs Systems Information
Free Subscribers
Guarantees and Security Interests
Covenant Exceptions
Estimated Equivalent Basic Subscribel,s per Franchise
LIST OF EXHIBITS
A - Put Agreement
B - FCC Counsel Opinion
c - Estate Counsel Opinion
ACOUISITION AGREEMENT
This Acquisition Agreement (“Agreement”) is made as ofJuly 2 I,2000 (the “Effective
Date”), by and between the Estate of Bill Daniels (“Seller”) and Adelphia California Cablevision,
LLC, a Delaware limited liability company (“Adelphia LLC”) and Adelphia Communications
Corporation, a Delaware corporation (“Adelphia” and together with Adelphia LLC, “Buyer”).
Recitals
rc‘
Seller owns all ofthe outstanding capital stock ofeach of (a) Daniels Cablevision. Inc..
a Delaware corporation (“DCI”), which is engaged in the business of providing cable television
service to subscribers of a System (as defined below) located in and around Carlsbad, California (the
“Carlsbad System”), (b) Desert Hot Springs Cablevision. Inc., a California corporation
(“DHS”),which is engaged in the business of providing cable television service to subscribers of a
System located in and around Desert Hot Springs, California (the “Desert Hot Springs System”), and
(c) Cablevision Business Services. Inc., a Colorado corporation (“CBSI” and together with DC1 and
DHS, the “Companies” or each a “Company”), which primarily provides advertising sales and
equipment and related services to DC1 and DHS. Buyer desires to acquire and Seller desires to
transfer all of the outstanding capital stock in the Companies on the terms and conditions set forth
in this Agreement in exchange for cash and common stock of Adelphia.
Apreement
In consideration of the above recitals and the mutual agreements stated in this
Agreement. the parties agree as follows:
Section 1. Definitions.
In addition to terms defined elsewhere in this Agreement. the following capitalized
terms, when used in this Agreement. will have the meanings set forth below:
1.1 Affiliate. With respect to any Person. any other Person controlling, controlled
by or under common control with such Person, with “control” for such purpose meaning the
possession. directly or indirectly. of the power to direct or cause the direction ofthe management and
policies of a Person. whether through the ownership of voting securities or voting interests, by
contract or otherwise.
. 1.2 Assets. All properties, privileges, rights, interests and claims. real and
personal. tangible and intangible. of every type and description that are owned, leased or otherwise
possessed by DCI. DHS or CBS1 and used or held for use in, or in connection with, the Business,
whether now in existence or hereafter acquired by DCI. DHS or CBS1 on or before the Closing Date. - including Governmental Permits, Intangibles, Contracts, Equipment, Real Property and deposits
relating to the Business that are held by third parties for the account of any Company or for security
for any Company’s performance of its obligations, but excluding any Excluded Assets and any assets
disposed of prior to the Closing in the ordinary course of business and not in violation of this
Agreement.
1.3 Basic Service. The lowest tier of service offered to subscribers of a System.
1.4 Business. The cable television business conducted by the Companies on the
date ofthis Agreement through the Systems, as described on Schedules 5.16-A and 5.16-B. including
the business conducted by CBS1 with respect to each System.
1.5 Business Day. Any day other than Saturday, Sunday or a day on which
banking institutions in Denver, Colorado or San Diego, California are required or authorized to be
closed.
1.6 Cable Act. Title VI of the Communications Act of 1934,47 U.S.C. Section
15 1 et seq., and all other provisions of the Cable Communications Policy Act of 1984, the Cable
Television Consumer Protection and Competition Act of 1992, the provisions of the
Telecommunications Act of 1996 amending Title VI of the Communications Act of 1934. each as
amended, and the FCC rules and regulations promulgated thereunder, all as in effect from time to
time.
.- 1.7 The consummation of the transactions contemplated by this Closing.
Agreement, as described in Section 9.1.
1.8 Closing Date. The date of the Closing, as contemplated in Section 9.1.
1.9 Contracts. All contracts. licenses. easements. rights of entry. customer
agreements and other agreements. written or oral (including any amendments and other modifications
thereto), other than Governmental Permits. pertaining to the ownership, operation and maintenance
of the Assets or the Business or used or held for use in the Business. as described on Schedule 5.6
or. in the case ofcontracts and agreements relating to Real Property. on Schedule 5.7, but excluding
Contracts constituting Excluded Assets.
1.10 Credit Facility. The Second Amended and Restated Credit Agreement dated
as of December 16, 1997 among DCI. CBS1 and Bank of America National Trust and Savings
Association. as it may be amended.
1.11 Encumbrance. Any security interest. interest retained by the transferor under
a conditional sale or other title retention agreement, mortgage, transfer restriction, lien, pledge, . option. encumbrance, adverse interest, exception to or defect in title or other ownership interest
(including reservations? rights ofentry. possibilities of reverter, encroachments. easements. rights-of-
way, restrictive covenants, leases and licenses) of any kind, which constitutes an interest in or claim
against property, whether arising pursuant to any Legal Requirement. Governmental Permit. Contract - or otherwise.
1.12 Environmental Law. Any Legal Requirement pertaining to land use, air, soil,
surface water, groundwater (including the protection, cleanup, removal, remediation or damage
thereof), or to the protection ofpublic health and safety, or any other environmental matter, including
the following laws as amended and in effect from time to time: (a) Clean Air Act (42 U.S.C 3 7401,
et seq.); (b) Clean Water Act (33 U.S.C. 8 1251, et seq.); (c) Resource Conservation and Recovery
Act (42 U.S.C. 3 6901, et seq.); (d) Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. 0 9601, et seq.); (e) Safe Drinking Water Act (42 U.S.C. 3OOf, et seq.); and
(f) Toxic Substances Control Act (1.5 U.S.C. § 2601, et seq.).
1.13 Eouinment. All electronic devices, trunk and distribution coaxial and optical
fiber cable, amplifiers, drops, power supplies, conduit, vaults and pedestals, grounding and pole
hardware, subscriber’s devices (including converters, encoders, transformers behind television sets
and fittings), headend hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned or leased by the
Companies, or any of them, and used or held for use in the Business, but excluding any such personal
property included in the Excluded Assets.
,?--
1.14 Eauivalent Basic Subscribers. For any System, an active customer of such
System for Basic Service or High Speed Data Service either in a single household, a commercial
establishment or in a multi-unit dwelling (including a hotel unit); provided, however, that the number
of “Equivalent Basic Subscribers” in a multi-unit dwelling or commercial establishment that obtain
service on a “bulk-rate” basis will be determined by dividing the aggregate gross bulk-rate billings for
Basic Service and Expanded Basic Service (including billings for additional outlets and connections
after the first outlet or connection and billings for Expanded Basic Services billed to individuals who
receive Basic Service through a bulk account. but not billings from a la carte tiers or premium
services, installation orothernon-recurring charges. converter rental or from any pass-through charge
for sales taxes. line-itemized franchise fees. fees charged by the FCC and the like). attributable to such
multi-unit dwelling or commercial establishment during the most recent billing period ended prior to
the date ofcalculation (but excluding billings in excess of a single month’s charge) by the Equivalent
Basic Rate. For purposes of this definition. an “actile customer” will mean any person. commercial
establishment or multi-unit dwelling at any gi\,en time that is paying for and receiving Basic Service
from the System who has an account that is not more than 90 days past due (except for past due
amounts of $5 or less, provided such account is otherwise current). For purposes of this definition,
an “active customer” does not include any person. commercial establishment or multi-unit dwelling
that as of the date of calculation has not paid in full the charges for at least one month of the services
ordered or who has requested prior to the Closing Date that its service be disconnected. For
purposes of this definition, the number of days past due of a customer account will be determined
from the first day of the period for which the applicable billing relates.
. 1.15 Equivalent Basic Rate. $3 1.07 with respect to the Carlsbad System and $30.85
with respect to the Desert Hot Springs System.
C- 1.16 ERISA Affiliate. With respect to the Companies, any other Person that,
together with each Company, would be treated as a single employer under Section 4 14 of the Code.
3
1.17 Excluded Assets. All interests in the following Assets: (a) the DCI/AT&T
Broadband Agreement and the DHS/AT&T Broadband Agreement and all rights and interests held
by AT&T Broadband in connection with the management of the Systems, including those Contracts
specified on Schedule 1.17, (b) the DC1 Agreement, (c) all trade marks, trade names, service marks,
service names, logos and similar proprietary rights and all derivations and abbreviations and related
names and marks with the word “Daniels” in them, (d) all tax refunds and claims for tax refunds. (e)
insurance policies and claims under insurance policies, (f, all “employee benefit plans” (as defined
in Section 3.3 of ERISA) maintained by Sellers, the Companies, any ERISA Affiliate or Former
ERISA Affiliate, including all assets and liabilities of such empioyee benefit plans, (g) all of the
personal memorabilia, artwork, and other personal property located at either Office Property that
were owned by Bill Daniels in his personal capacity, or are owned by Seller or an Affiliate of Seller
other than DCI, DHS or CBSI, and (h) all Assets described on Schedule 1.17.
1.18 Expanded Basic Service. Any video programming provided over a cable
television system, regardless of service tier other than (a) Basic Service and (b) video programming
offered on a per channel or per program basis.
1.19 Former ERISA Affiliate. With respect to the Companies, any other Person
that, together with each Company, was in the past treated as a single employer under Section 414
of the Code.
,- 1.20 GAAP. Generally accepted accounting principles as in effect from time to time
in the United States of America.
1.21 Governmental Authoritv. The United States of America, any state,
commonwealth. territory or possession of the United States of America and any political subdivision
or quasi-governmental authority of any of the same. including any court. tribunal, department.
commission. board, bureau. agency. count!.. municipalit>,. province, parish or other instrumentality
of any of the foregoing.
1.22 Governmental Permits. All cable television franchises and related agreements
and FCC licenses and all other material approvals. authorizations. permits, licenses. easements.
registrations. qualifications. leases. variances and similar rights obtained with respect to the Business
or Assets from any Governmental Authority. including those set forth on Schedule 5.5.
\
.-
1.23 Hazardous Substances. The following: (a) any “hazardous waste” as defined
by the Resource Conservation and Recovery Act of :976 (RCRA) (42 U.S.C. $9 6901 et seq.), as
amended. and the rules and regulations promulgated th.:reunder, all as in effect from time to time; (b)
any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (15 U.S.C. 63 9601 et seq.) (CERCLA), as amended, and the rules and
regulations promulgated thereunder. all as in effect from time to time; (c) any substance regulated by
the Toxic Substances Control Act (TSCA) (15 U.S.C. $$2601 et seq.), or the Insecticide, Fungicide
and Rodenticide Act (IFRA) (7 U.S.C. $5136 et seq.), each as amended, and the rules and
regulations promulgated thereunder. all as in effect from time to time; (d) asbestos or asbestos-
4
,-’ containing material of any kind or character; (e) polychlorinated biphenyls; (f) any substances
regulated under the provisions of Subtitle I of RCRA relating to underground storage tanks; (g) any
substance the presence, use, handling, treatment, storage or disposal of which on real property is
prohibited by any Environmental Law; and (h) any other substance which by any Environmental Law
requires special handling, reporting or notification of any Governmental Authority in its collection,
storage, use, treatment or disposal.
1.24 High Sneed Data Service. DCI’s high speed data service known as
Cablevision@Home.
1.25 Intangibles. All Assets constituting intangible assets, including subscriber lists.
accounts receivable, claims (excluding any claims relating to Excluded Assets). patents, copyrights
and goodwill, if any, owned, used or held by DCI. DHS or CBS1 for use in the Business. but
excluding the Excluded Assets.
1.26 Knowledge. The actual knowledge of a particular matter of the President of
each of the Companies and General Manager of each of the Systems. assuming reasonable internal
inquiry regarding the matter or issue in question.
1.27 Legal Requirement. Applicable common law and any statute. ordinance. code,
or other law, rule, regulation, order. decree. judgment. technical or other written standard or
- procedure enacted, adopted or applied by any Governmental Authority.
1.28 Losses. Any claims. losses. liabilities. damages. penalties. costs and expenses.
including interest that may be imposed in connection therewith. expenses of investigation. reasonable
fees and disbursements of counsel and other experts. and settlement costs.
1.29 Material .4dverse Effect. A material adverse effect on the aggregate
operations. assets. or financial condition of DCI. DHS and CBSI. taken as a whole. but without
taking into account any effect resulting from changes in conditions (including economic conditions.
changes in FCC regulations. or go\pernmental actions. legislation or regulations) that are applicable
to the economy or the cable tele\?sion industr). on a national basis or any changes in competition
affecting the Business.
1.30 Pav TV. Premium programming services selected by and sold to subscribers
on a per channel or per program basis.
.
1.3 1 Permitted Encumbrances. The following Encumbrances: (a) those
Encumbrances set forth on Schedule 1.31. (b) liens securing Taxes, assessments and governmental
charges not yet due and payable, (c) any zoning law or ordinance or any similar Legal Requirement,
(d) any right reserved to any Governmental Authority to regulate the affected property and (e) any
Encumbrance that does not individually or in the aggregate materially interfere with the continued
use of Assets subject thereto in the operation of the Business as currently being used, and which does
.- not materially detract from the xpalue of the property subject thereto.
1.32 Person. Any natural person, corporation, partnership, trust, unincorporated
organization, association, limited liability company, Governmental Authority or other entity.
1.33 Planned Ungrade. The upgrade and rebuild of the Carlsbad System as
described in the Upgrade Plan.
1.34 Real Pronertv. All assets held by the Companies related to the Business
consisting of realty, including appurtenances, improvements and fixtures located on such realty, and
any other interests in real property, including fee interests, leasehold interests and easements, wire
crossing permits, rights of entry (except agreements related to multiple dwelling units) described on
Schedule 5.7, but excluding Real Property constituting Excluded Assets.
1.35 Registration Statement. A registration statement (including the related
prospectus) of Adelphia under the Securities Act on any form selected by Adelphia for which
Adelphia then qualifies and which permits the sale thereunder of Share Consideration by Seller
following the Closing. The term “Registration Statement” shall also include all exhibits. financial
statements, and schedules and all documents incorporated by reference in such Registration Statement
when it becomes effective under the Securities Act. and in the case of the references to the
Registration Statement as of a date subsequent to the effective date, as amended or supplemented as
of such date.
1.36 Required Consents. All franchises, licenses, authorizations, approvals and
consents required under Governmental Permits. Contracts or otherwise for (a) Seller to transfer the
Purchased Shares and the Business to Buyer and (b) Buyer to conduct the Business and to own,
lease. use and operate the Assets at the places and in the manner in which the Business is conducted
as of the date of this Agreement and on the Closing Date.
1.37 Service Areas. The areas in which the Companies operate the Business.
specifically in and around the communities described on Schedules 5.16-A and 5.16-B.
1.38 Share Consideration Value. An amount less than or equal to $
designated in writing by Buyer under Section 3.1(a)(i); provided that the Share Consideration Value
will not be a nonzero amount less than S
.
1.39 System. A complete cable television reception and distribution system
operated in the conduct of the Business. consisting of one or more headends, subscriber drops and
associated electronic and other equipment. and which is. or is capable of being without modification.
operated as an independent system without interconnections to other systems. The Systems that
comprise the Business are the Carlsbad System. which is described in Section E of Schedule 5.16-A,
and the Desert Hot Springs System. which is described in Section E of Schedule 5.16-B.
.-
1.40 Taxes. All levies and assessments of any kind or nature imposed by any
Governmental Authority. including all income. sales, use, ad valorem, value added, franchise.
severance. net or gross proceeds. withholding. payroll. employment. excise or property taxes and
levies, together with any interest. penalties, additions to tax or additional amounts with respect
thereto and any interest in respect of such penalties. additions or additional amounts.
6
,-
.-
1.4 1 Tax Return. Any return, declaration, report, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
1.42 UDgrade Plan. The description of the Planned Upgrade and budgeted
expenditures associated with the Planned Upgrade attached as Schedule 1.42.
1.43 Other Definitions. The following terms are defined in the Sections indicated:
Term Section
Action 11.5
Actual Upgrade Capital Expenditures 3.2.2(b)
Adelphia Preamble
Adelphia LLC Preamble
Adjustment Time 3.2.1
Agreement Preamble
Allocation Date 3.5
Antitrust Division 7.4
Assumed Employees 7.14
AT&T Broadband 4.3
Audited Balance Sheets 3.2.1
Audited Financial Statements 5.11
Base Purchase Price 3.1
Blue Sky Law 6.7.1
Buyer Preamble
Carlsbad Office Property 4.1.1
Carlsbad Subscriber Shortfall 3.2.3
Carlsbad System Recitals
Cash Consideration 3.1 (a)(i)
CBS1 Recitals
CBS1 Shares 52.3
Closing Share Price 3.1 (a)(ii)
Code 5.14.1(f)
Company and Companies Recitals
Current Filings 5.22.4
Daniels 40 1 (k) Plan 4.2.2
DC1 Recitals
DCI/AT&T Broadband Agreement 4.3
DC1 Agreement 4.3
Desert Hot Springs Office Property 4.1.1
Desert Hot Springs Subscriber Shortfall 3.2.4
Desert Hot Springs System Recitals
DHS Recitals
DHS/AT&T Broadband Agreement 4.3
Draft Financial Statements 5.11
7
Term Section
Effective Date Preamble
ERISA 5.15.1
Exchange Act 11.4
Facilities Agreement 5.6
Fair Market Value 4.1.3
Final Adjustments Report 3.3.2
FTC 7.4
Higher Initial Appraisal 4.1.2(b)
HSR Act 7.4
Indemnified Party 11.5
Indemnifying Party 11.5
Long Term Debt 3.2.1
Lower Initial Appraisal 4.1.2(b)
NASDAQ 12.17
Net Liabilities 3.2.1
Office Properties 4.1.1
Office Property Purchase Price 4.1.2
Phase I Assessment 7.12.1
Phase II Assessment 7.12.1
Preliminary Adjustments Report 3.3.1
Prime Rate 12.11
Purchased Shares 2
Put Obl igor 6.10.1
SEC 12.17
Section 338(h)( 10) Election 7.5
Securities Act 6.7.1
Seller Preamble
Share Consideration j.l(a)(ii)
Share Sales Certificate 3.4.2
Survival Period 11.1
System Bonus Plans 4.3
System Purchase Price 3.1(a)
Targeted Upgrade Capital Expenditures 3.2.2(b)
Title Policies 4.1.4
Transaction Documents 5.1.2
Transitictnal Billing Services 7.13
Sale of Commotl Stock. Section 2.
Subject to the terms and conditions set forth in this Agreement, at the Closing, Seller
will sell, assign and transfer to Adelphia LLC. and Adelphia LLC will purchase. accept and acquire
from Seller, free and clear of all Encumbrances. all of the outstanding shares of common stock of
each of DCI, DHS and CBS1 (collectively. the “Purchased Shares”). effective at 9:00 a.m., California
time. on the Closing Date.
8
Section 3. Consideration.
,-
3.1 Base Purchase Price. Buyer will pay to Seller for the Purchased Shares total
consideration equal to:
(a> $1 (the “System Purchase Price”). consisting of
(9 cash in the amount of $ & the Share
Consideration Value. which Share Consideration Value will be designated b!,
Buyer in writing delivered to Seller no later than five Business Days prior to
the Closing Date (such difference. the “Cash Consideration”) and
(ii) shares of Adelphia Communications Corporation Class A
Common Stock. $0.01 par value (the “Share Consideration”). the number of
shares of Lvhich \vill equal a fraction. the numerator of which is the Share
Consideration Value and the denominator of which will be the iveighted
average of the close price of such common stock on the NASDAQ National
Market System as listed in the Wall Street Journal in the 5full trading da>
period ending three Business Da>x before the Closing Date (the “Closing
Share Price”). p&
(b) the Office Propert!. Purchase Price.
Collecti\.el\,. the sum of the System Purchase Price plus the Office Property Purchase Price are
referred to as the “Base Purchase Price”. Schedule 3.1 describes the allocation of the System
Purchase Price (s) bet\veen the Carlsbad S>.srcm and the Dcscrt Hot Springs S!xtem (which allocation
includes an allocable portion to each System of‘ the 1.31ue of CBSI) and (>r) among the three
Companies. The Base Purchase Price \\.ill be sub$cct to adjustment as pro\.ided in Sections 3.2 and
3.3. The Cash Consideration \\,ill be paid a~ C’losing b> \\-ire transfer of immediately ai.ailable fLmds
pursuant to \l.ire instructions deli\ ered b!. Scllcr IO Bu!,cr no later than tlvo Business Da>x prior to
the Closing Date.
as follows:
3.2 Adiustments to Base Purchase Price. The Base Purchase Price uill be ad.justed
3.2.1 The Base Purchase Price [kill bc subject to adjustment. upward or dowmvard.
b>, the amount of the consolidated Net Liabilities of’ the Companies as of close of business on the
Business Day immediately preceding the Closing Date (th+: “Adjustment Time”). “Net Liabilities” as
ofan), date Lvill mean the current assets less liabilities ofthe Companies. determined on a consolidated
basis in accordance Lvith GAAP (except as modified in this Section) applied on a basis consistent with
the audited balance sheets of the Companies for the fiscal year ended December 31. 1999 (the
“.Audited Balance Sheets”). Current assets Lvill include cash and cash equivalents. marketable
securities. accounts recei\,able and prepaid expenses. but escluding inventories. and liabilities bvill
include accounts pa>,able. accrued expenses and Long Term Debt. in each case in accordance lvith
G.-UP applied on a basis consistent \\-ith the Audited Balance Sheets. but excluding liabilities referred
to in Section 4.3. For purposes of this Section. “Long Term Debt” as of an!’ date Lvill mean notes
payable, on a consolidated basis, in each case determined in accordance with GAAP applied on a basis
consistent with the Audited Balance Sheets (provided, however, that for purposes of calculating the
Net Liabilities, the Long Term Debt will be measured as of the Adjustment Time). Attached hereto
as Schedule3.2.1 is an example calculation ofthe Net LiabiIities adjustment for illustrative purposes
only, prepared on the basis of good faith unaudited estimates of the current assets and liabilities of
the Companies made by Seller as if the Cfosing Date were December 3 I, 1999.
3.2.2 (a) The Base Purchase Price will be increased by the actual cost incurred with
respect to any modifications to the Upgrade Plan made under Section 7.2.9.
.-
@I If the Planned Upgrade is not completed as of the Adjustment Time
and the Actual Upgrade Capital Expenditures is less than the Targeted Upgrade Capital Expenditures,
the Base Purchase Price will be decreased by an amount equal to the difference between the Targeted
Upgrade Capital Expenditures and the amount of the Actual Upgrade Capital Expenditures. For
purposes of this Agreement. the “Actual Upgrade Capital Expenditures” means expenditures made
by DC1 or CBS1 prior to Closing in connection with the Planned Upgrade, as generally described on
the Upgrade Plan (without taking into account an>’ modifications made to the Upgrade Plan under
Section 7.2.9), including all (a) coaxial trunk or distribution (feeder) cable. (b) external drop cable.
(c) MDU wiring. (d) active and passive devices. power supplies 2nd pedestals, (e) ad\.anced settop
digital boxes. including the DCT-5000 series cable box. and (f) fiber overlay and nodes: and
-‘Targeted Upgrade Capital Expenditures” means the aggregated planned capital expenditures for the
Planned Upgrade as described on the Upgrade Plan (Lvithout taking into account any modifications
made to the Upgrade Plan under Section 7 2.9). The negative Base Purchase Price adjustment
described in this Section 3.2.2(b) ivill not nppl!. \iith respect to modifications to the Upgrade Plan
made under Section 7.2.9.
3.2.3 The Base Purchase Price \i.ill be decreased by the dollar amount equal to the
product of( 1) the Carlsbad Subscriber Shortfall. ifan!.. multiplied bv (2) $ For purposes
ofthis Agreement. the “Carlsbad Subscriber Shortfall” equals the number. ifan),. b>’ Lvhich the total
number of Equivalent Basic Subscribers for the Carlsbad S!.stem as of the Ad.justment Time is less
than 59.598.
3.2.3 The Base Purchase Price ivill be decreased by the dollar amount equal to the
product of (1) the Desert Hot Springs Subscriber Shortfall. if any. multiulied bv (2) $ . For
purposes ofthis i\greement. the “Desert Hot Springs Subscriber Shortfall” equals the number. ifan!..
by which the mean average of Equi\,alent Basic Subscribers for the Desert Hot Springs System for
each of the twelve full calendar months preceding the Adjustment Time is less than 7.821.
. 3.3 Determination of Adiustments. All ad.justments to the Base Purchase Price under
Section 3.2 will be made to the Cash Consideration onl!,. Preliminary and final adjustments to the
Base Purchase Price will be determined as follo\vs:
rc- 3.3.1 Not later than n date Seller reasonably believes is at least 15 Business Days
prior to the expected Closing Date. Seller Lvill deii\,er to Bu>,e;areport (the “Preliminary .4djustments
Report”). certified as to completeness and accurac!. b>. Seller. sho\ving in detail the preliminar:,
IO
determination ofthe adjustments referred to in Section 3.2, which are calculated as ofthe Adjustment
Time (or as of any other date and time agreed by the parties) and any documents substantiating the
adjustments proposed in the Preliminary Adjustments Report. Following receipt of such Preliminary
Adjustments Report and supporting information, Buyer will have 10 Business Days to review such
Preliminary Adjustments Report and supporting information and to notify Seller ofany disagreements
with Seller’s estimates. If Buyer provides a notice of disagreement with Seller’s estimates of the
adjustments referred to in Section 3.2 within such 10 Business Day period, Buyer and Seller will
negotiate in good faith to resolve any such dispute and to reach an agreement prior to the Closing
Date on such estimated adjustments as of the Adjustment Time. The basis for determining the Base
Purchase Price to be paid at Closing will be (a) the estimate so agreed upon by Buyer and Seller or
(b) if no notice of disagreement is provided, or if such notice is provided but the parties do not reach
such an agreement prior to the Closing Date, the estimate of such adjustments set forth in the
Preliminary Adjustments Report.
3.3.2 Within 90 days after the Closing. Seller will deliver to Buyer a report (the
“Final Adjustments Report”). similarly certified by Seller, showing in detail the final determination
of all adjustments which were not calculated as of the Adjustment Time and containing an)
corrections to the Preliminary Adjustments Report, together with any documents substantiating the
adjustments proposed in the Final Adjustments Report. Buyer will provide Seller with reasonable
access to all records which Buyer has in its possession and which are necessary for Seller to prepare
the Final Adjustments Report.
3.3.3 Within 30 days after receipt of the Final Adjustments Report, Buyer will give
Seller written notice of Buyer’s objections. if any. to the Final Adjustments Report. If Buyer makes
any such objection, the parties will agree on the amount, ifany. which is not in dispute within 30 days
after Seller’s receipt of Buyer’s notice of objections to the Final Adjustments Report and payment of
the amount not in dispute kvill be made b>r the responsible party by wire transfer of immediately
available funds within three Business Days after such agreement. If the dispute is not fully resolved
within such 30-day period. all disputed amounts \vill be determined Lvithin 120 days after the Closing
Date by the accounting firm of KPMG Peat Marwick. whose determination will be conclusive. All
of the fees and expenses payable to such firm in connection with such determination will be shared
by Buyer. on one hand. and Seller. on the other hand. on a pro rata basis in proportion to the
difference between such accounting firm’s determination ofthe disputed amounts and each of Seller’s
and Buyer’s determination of the disputed amounts. The payment required after such determination
will be made by the responsible party by \vire transfer of immediately available funds to the other
part!’ within three Business Days after the final determination.
3.4 Make-Well.
3.4.1 Buyer acknowledges and agrees that Seller may sell all or part of the Share
Consideration at any time following the Closing. Seller covenants and agrees that any such sales will
be done in an orderly and customary fashion.
3.4.2 In the event that Seller sells any of the Share Consideration within six months
after the Closing. Seller will deliver to Adelphia within 30 days after the six-month anniversary ofthe
Closing. a certificate (the”Share Sales Certificate“) setting forth (a) the number of shares ofthe Share
11
Consideration sold during the six months following the Closing, (b) the aggregate gross sales price
for such sales, (c) the amount of any reasonable discounts, commissions and other direct transaction
costs incurred by Seller in connection with such sales, (d) the net sales proceeds for such sales (i.e.,
the aggregate gross sales price less reasonable discounts, commissions and other direct transaction
costs) and (e) the average net sales proceeds (i.e., the net sales proceeds divided by the number of
shares sold). If such average net sales proceeds is less than the Closing Share Price, then Adelphia
will pay to Seller, in cash, an amount equal to the product of(x) the difference between the Closing
Share Price and such average net sales proceeds times (y) the aggregate number of shares of the
Share Consideration sold by Seller during the six-month period following the Closing.
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3.4.3 Seller will provide Adelphia with such supporting documentation and other
information reasonably requested by Adelphia to verify the accuracy of the Share Sales Certificate.
Within 30 days after its receipt ofthe Share Sales Certificate, Adelphia will give Seller written notice
of its objections, if any, to the Share Sales Certificate. Any amounts owing by Adelphia under
Section 3.4.2 that are not in dispute will be made by wire transfer of immediately available funds at
that time. The parties will attempt to resolve any dispute within 30 days following Adelphia’s
delivery of its written objections. If such dispute cannot be resolved, any disputed amounts will be
determined within 60 days by the accounting firm of KPMG Peat Marwick, whose determination will
be conclusive. All fees and expenses payable to such firm will be shared by Seller, on the one hand,
and Adelphia. on the other hand. on a pro rata basis in proportion to the difference between the
accounting firm’s determination and each of Seller’s and Adelphia’s determination. The payment
required after such determination will be made by Adelphia by wire transfer of immediately available
funds to Seller within three Business Days after the final determination. Adelphia’s payment
obligations under this Section 3.4 will survive until discharged in full.
3.5 Allocation of Consideration. The consideration payable by Buyer under this
Agreement will be allocated among the Assets as set forth in a schedule to be prepared not later than
45 days after the Closing Date (the “Allocation Date”). If the Parties are unable to mutually agree
upon such allocation by a date that is 10 Business Days prior to the Allocation Date. then such
schedule will be prepared by an independent appraiser with significant experience in the cable
television industry. Such appraiser Lvill be selected by the mutual agreement of Buyer and Seller
within 30 days after the date of this Agreement. and the fees of such appraiser will be shared equally
by Buyer and Seller. Buyer and Seller agree to be bound by the allocation and will not take any
position inconsistent with such allocation and will file all returns and reports with respect to the
transactions contemplated by this Agreement. including all federal. state and local Tax returns. on the
basis of such allocation.
Section 4. Related Matters.
4.1 Real Prooertv Transaction.
4.1 .l On the date of and immediately prior to Closing, Seller will cause the
ownership of the office building and adjacent lot described on Schedule 4.1-A (collectively, the
- “Carlsbad Office Property”). currently owned by Bill Daniels LLC to be transferred to DC1 and the
ownership of the office building and two adjacent lots described on Schedule 4.1-B (collectively,
the “Desert Hot Springs Office Property”, and together with the Carlsbad Office Property, the “Office
Properties”), currently owned by Bill Daniels LLC to be transferred to DHS, in each case subject to
Permitted Encumbrances. Upon such transfers, the Office Properties will be considered owned Real
Property for purposes of this Agreement, and Schedule 5.7 will be deemed amended to include the
Office Properties.
4.1.2 Buyer will be obligated to pay the Office Property Purchase Price for the
Office Properties as a part of the Base Purchase Price at Closing. The “OffIce Property Purchase
Price” will be equal to the aggregate Fair Market Value of the Office Properties, subject to prorations
for all current, nondelinquent ad valorem real property taxes, special taxes and assessments, if any,
based on the current tax bill. Buyer will be responsible for the payment of all taxes, assessments and
supplemental taxes payable for the period following closing. The Fair Market Value of each Office
Property will be determined as follows:
(a> If within 20 days after the Effective Date, Seller and Buyer have not
agreed upon the Office Property Purchase Price, then Seller and Buyer will each designate in a written
notice to the other, within two Business Days after the end of such 20-day period, a real property
appraiser qualified to appraise commercial real property in the Service Area in which the applicable
Office Property is located, and such selected appraisers will, within 30 days of their selection. render
their respective determinations of Fair Market Value. Such determinations will be delivered
concurrently, so that Seller and Buyer will each learn at the same time the determination ofthe other’s
appraiser.
(W If the Fair Market Value reflected in the higher of the two appraisals
(the “Higher Initial Appraisal”) is not greater than 110% of the Fair Market Value reflected in the
lower of the two appraisals (the “Lower Initial Appraisal”), Fair Market Value will be the average of
the two appraisals. If the two appraisals are not within this range, the two appraisers will within two
Business Days select a third qualified appraiser to determine Fair Market Value. The third appraiser
will deliver to Seller and Buyer its determination of Fair Market Value within 30 days of its selection.
cc> Ifthe Higher Initial Appraisal is greater than 110% but not greater than
120% of the Lower Initial Appraisal, then Fair Market Value will be equal to the average of the two
of the three appraisals that are closest to one another (or if the highest and lowest appraisal are
equidistant from the middle, then Fair Market Value will be equal to the middle appraisal).
(4 Ifthe Higher Initial Appraisal is greater than 120% ofthe Lower Initial
Appraisal, then Fair Market Value will be equal to either the Higher Initial Appraisal or the Lower
Initial Appraisal, whichever is closest to the third appraisal (or if the Higher Initial Appraisal and the
Lower Initial Appraisal are eqL;idistant from the third appraisal, then such Fair Market Value will be
equal to the third appraisal).
. W Each party will pay the cost of the appraisal by the appraiser selected
by it. and if a third appraisal is necessary, Seller and Buyer will split the costs of the third appraisal.
4.1.3 For purposes of this Agreement, “Fair Market Value” means the highest price
on the Effective Date that would be agreed to by a seller, being willing to sell but under no particular
or urgent necessity for so doing, nor obliged to sell. and a buyer, being ready, willing and able to buy.
13
but under no particular necessity for so doing, each dealing with the other with full knowledge of all
the uses and purposes for which the applicable Office Property is reasonably adaptable and available.
4.1.4 Seller has ordered the reissuance of title insurance policies (collectively, the
“Title Policies”) on the 1990 California Land Title Association Standard Coverage Policy owner’s
form by Chicago Title Insurance Company insuring fee simple title in DC1 and DHS, respectively,
to the Office Properties and containing policy limits and coverages consistent with the terms and
limits described on the existing 1998 owner’s title insurance policies for the Office Properties
insuring fee simple title in Bill Daniels LLC and subject to all current taxes, liens, encumbrances
and easements ofrecord as of the date of issuance. Any special endorsements, additional coverages,
policy changes or supplemental terms requested by Buyer will be at the sole cost, risk and expense
of Buyer exclusively and any changes requested by Buyer will not be a condition of Closing.
4.2 Emulovee Plans.
.s-
4.2.1 As of the Closing, the Seller will cause to be terminated all employee welfare
benefit plans (as that term is defined insection 3(l) of ERISA) covering the employees of the
Companies. As ofthe Closing, Buyer will provide all Assumed Employees with the benefits provided
by Buyer under employee welfare benefit plans sponsored by Buyer for similarly situated employees.
Buyer will grant full service credit for purposes of determining eligibility and vesting to all Assumed
Employees under welfare plans sponsored by Buyer for employment with Companies.
4.2.2 Buyer will have no liability under the Daniels Communications, Inc. 401K Plan
(the “Daniels 401(k) Plan”) except to the extent accounts are transferred from the Daniels 401(k)
Plan to a 401(k) plan maintained by Buyer. In the event that the transaction contemplated under this
Agreement fails to result in a distributable event for participants in the Daniels 401 (k) Plan, Buyer
will ensure that the accounts of participants in the Daniels 40 1 (k) Plan who become employees of
Buyer will be transferred. at Buyer’s cost. from the Daniels 401 (k) Plan to a 401 (k) plan maintained
b\v the Buyer. The Companies’ participation in the Daniels 401 (k) Plan will cease as of the Closing.
.
rc‘
4.3 Excluded Assets/Liabilities. The parties agree that Seller will cause the Excluded
Assets and liabilities related thereto to be distributed. terminated or otherwise transferred and
discharged by the DCI, DHS and/or CBS1 prior to or contemporaneously with Closing. Without
limiting the foregoing, the parties agree that prior to or contemporaneously with Closing (a) Seller
will cause all deferred or other consulting fees or other amounts owed to Daniels Communications,
Inc. under the Agreement effective July 1. 1998 between DC1 and Daniels Communications, Inc.
relating to Daniels Communications. Inc.‘s providing of consulting services to DC1 (the “DC1
Agreement”) to be paid in full, and the DC1 Agreemenz will terminate, and DC1 will have no rights
or obligations under the DC1 Agreement for periods following Closing, (b) Seller will cause all
amounts owed to AT&T Broadband. LLC (“AT&T Broadband”). under the Management Agreement
dated August 31, 1988 between DC1 and United Artists Cable Investments, Inc., predecessor in
interest to AT&T Broadband (the “DCI/AT&T Broadband Agreement”) to be paid in full, and the
DCI/AT&T Broadband Agreement will terminate. and DC1 will have no rights or obligations under
the DCI/AT&T Broadband Agreement for periods following Closing, (c) Seller will cause all amounts
owed to AT&T Broadband under the Management Agreement dated August 3 1,1988 between DHS
14
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.
and United Artists Cable Investments, Inc., predecessor in interest to AT&T Broadband (the
“DHS/AT&T Broadband Agreement”) to be paid in full, and the DHS/AT&T Broadband Agreement
will terminate, and DHS will have no rights or obligations under the DHS/AT&T Broadband
Agreement for periods following Closing, (d) Seller will cause all of the Companies’ obligations to
pay employee bonuses and other amounts payable under all employee bonus plans, severance and
other programs relating to System employees (collectively, the “System Bonus Plans”) with respect
to the Closing under this Agreement to be paid in full, and the System Bonus Plans will terminate,
and the Companies will have no rights or obligations under the System Bonus Plans for periods
following Closing and (e) Seller will cause all amounts owed by the Companies to Seller to be paid
in full.
Section 5. Representations and Warranties of Seller.
Seller represents and warrants to Buyer, as of the date of this Agreement and as of the
Closing, as follows:
5.1 Organization, Oualification. Authoritv and Validity.
5.1.1 Each Company is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization and has all requisite corporate power and
authority to own, lease and use the Assets owned. leased or used by it and to conduct the Business
as it is currently conducted. Each Company is duly qualified to do business and is in good standing
under the laws of California.
5.1.2 Seller has all requisite power and authority to execute and deliver. to perform
its obligations under, and to consummate the transactions contemplated by, this Agreement and all
other documents and instruments to be executed and delivered in connection with the transactions
contemplated by this Agreement (collectively. the “Transaction Documents”) to which Seller is a
party. The execution and delivery by Seller of. the performance by Seller of its obligations under. and
the consummation by Seller ofthe transactions contemplated by. this Agreement and the Transaction
Documents to which Seller is a party havre been duly and validly authorized by all necessary action
by or on behalf of Seller. This Agreement has been. and when executed and delivered by Seller the
Transaction Documents will be. duly and validly esecuted and delivered by Seller and the valid and
binding obligations of Seller. enforceable against Seller in accordance with their terms, except as the
same may be limited by applicable bankruptc\-. insolvency. reorganization. moratorium or similar laws
now or hereafter in effect relating to the enforcement of creditors’ rights generally or by principles
governing the availability of equitable remedies.
5.2 Cauitalization. Share Ownership and Subsidiaries.
5.2.1 The authorized capital stock of DC1 consists of 100,000 shares of common
stock, par value $.Ol, 10,500 shares of which are issued and outstanding. All issued and outstanding
shares of DC1 common stock have been duly authorized. validly issued and are fully paid and
nonassessable, are not subject to and have not been issued in violation of any preemptive rights and
have not been issued in violation of any federal or state securities laws. There are no options.
warrants, calls or other rights, agreements or commitments of any character, to which DC1 or Seller
is a party, relating to the issued or unissued capital stock or other securities of DCI.
5.2.2 The authorized capital stock of DHS consists of 10,000 shares of common
stock, no par value, 100 shares of which are issued and outstanding, All issued and outstanding
shares of DHS common stock have been duly authorized, validly issued and are fully paid and
nonassessable, are not subject to and have not been issued in violation of any preemptive rights and
have not been issued in violation of any federal or state securities laws. There are no options.
warrants, calls or other rights, agreements or commitments of any character, to which DHS or Seller
is a party, relating to the issued or unissued capital stock or other securities of DHS.
5.2.3 The authorized capital stock of CBS1 consists of 10,000 shares of common
stock, no par value, all of which shares are issued and outstanding (the “CBS1 Shares”). All issued
and outstanding shares of CBS1 Common Stock have been duly authorized, validly issued and are
fully paid and nonassessable, are not subject to and have not been issued in violation of any
preemptive rights and have not been issued in violation of any federal or state securities laws. There
are no options, warrants, calls or other rights. agreements or commitments of any character. to which
CBS1 or Seller is a party, relating to the issued or unissued capital stock or other securities of CBSI.
I--
5.2.4 Seller has good and marketable title to, and owns, the Purchased Shares in a
fiduciary capacity pursuant to Colorado Revised Statutes Section 15-12-711, as successor to Bill
Daniels, deceased, the record owner of the Purchased Shares at the time of his death. subject on11
to Permitted Encumbrances arising under the Credit Facility. The Purchased Shares constitute all of
the outstanding shares of capital stock of the Companies. The Purchased Shares are fully paid and
nonassessable and, except for any rights of Buyer under this Agreement. are free and clear of all
Encumbrances, demands, preemptive rights and adverse claims of any nature. Other than this
Agreement, there is no agreement. option or other right with respect to the disposition of the
Purchased Shares or otherwise relating to the Purchased Shares.
5.2.5 None of the Companies has any subsidiaries.
.
A-
5.3 No Conflict: Required Consents. Except for the Required Consents listed on
Schedule 5.3, the execution and delivery by Seller, the performance of Seller under, and the
consummation by Seller of the transactions contemplated b>‘. this Agreement and the Transaction
Documents to which Seller is a party do not and will not: (a) violate any Legal Requirement or
conflict with any provision of the Articles of Incorporation or Bylaws of DCI, DHS or CBSI:
(b) require any consent, approval or authorization of. or filing of any certificate, notice, application,
report or other document with any Governmental Authority or other Person; or (c) (i) violate or
result in a breach of or default under (without regard to requirements of notice, lapse of time, or
elections of any Person, or any combination thereof), (ii) permit or result in the termination,
suspension or modification of, (iii) result in the acceleration of (or give any Person the right to
accelerate) the performance of Seller, DCI. DHS or CBS1 under, or (iv) result in the creation or
imposition of any Encumbrance under any Governmental Permit, Contract or any other instrument
evidencing any of the Assets or by which Seller. DCI. DHS or CBS1 or any of their assets is bound
or affected, except for purposes of this clause (c) such violations, conflicts, breaches, defaults.
terminations, suspensions. modifications, and accelerations as would not, individually or in the
16
aggregate, reasonably be expected to have a Material Adverse Effect or a material adverse effect on
the ability of Seller to perform its obligations under this Agreement or the Transaction Documents
to which Seller is a party.
5.4 Each of the Companies has good and marketable title to the Assets owned Assets.
by it (other than Real Property, as to which the representations and warranties in Section 5.7 apply).
Each of the Companies has a valid leasehold interest in all of the Assets leased by it (other than Real
Property, as to which the representations and warranties in Section 5.7 apply). The Assets are free
and clear of all Encumbrances, except (a) Permitted Encumbrances and (b) Encumbrances described
on Schedule 5.4, all of which will be terminated, released or waived, as appropriate, at or prior to
the Closing. Except for the Excluded Assets, the Assets constitute all the assets necessary to permit
Buyer to conduct the Business substantially as it is being conducted and to operate the Systems
substantially as they are being operated on the date of this Agreement and in compliance in all
material respects with all Legal Requirements, Governmental Permits and Contracts. The Assets are
in good operating condition, reasonable wear and tear excepted. To Seller’s Knowledge, none ofthe
cable used in the Systems requires any rearrangement or “make ready” costs other than those costs
accounted for in the costs of the Planned Upgrade as described in the Upgrade Plan or accrued for
as a liability for purposes of calculating the Net Liabilities. The Assets include such spare parts as
are necessary in order to permit the operation of the Systems without material interruption for a 30-
day period.
_- 5.5 Governmental Permits. All Governmental Permits are listed on Schedule 5.5. The
Governmental Permits listed on Schedule 5.5 constitute all of the material governmental
authorizations necessary or required to conduct the Business substantially as it is being conducted
and to operate the Systems substantially as they, are being operated on the date of this Agreement.
Complete and correct copies of all Governmental Permits have been delivered by Seller to Buyer.
Each Governmental Permit is in full force and effect and the Company party thereto is not and, to
Seller’s Knowledge. the other party thereto is not. in breach or default of any material terms or
conditions thereunder. There is no legal action. governmental proceeding or investigation, pending
or. to Seller’s Knowledge threatened. to terminate. suspend or modify any Governmental Permit. As
of the date of this Agreement. except as disclosed on Schedule 5.5, to Seller’s Knowledge. no third
party has been granted a cable television franchise in any ofthe communities or unincorporated areas
currently served by the Business. Escept as set forth on Schedule 5.5, with respect to the System.
the Company has not made a commitment to any franchising authority to maintain a local office in
any location.
.
5.6 Contracts. All material Contracts (other than those constituting Excluded Assets) are
described on Schedule 5.6 or 5.7. Complete and correct copies of all Contracts have been made
avaiiable to Buyer by Seller. Except as set forth on Schedule 5.6 or 5.7 (a) each Contract is in full
force and effect in all material respects and constitutes the valid. legal, binding and enforceable
obligation of DCI, DHS or CBSI. and (b) neither DCI. DHS, CBS1 nor Seller, as applicable, is and
to Seller’s Knowledge no other party thereto is. in breach or default of any material terms or
conditions thereunder. No “Leased Facilities” have been or are being provided under the Facilities
Agreement dated July 3 1. 1996 between the Company and TCG San Diego (nka AT&T Local
Services) (as referenced in Schedule 5.6) (the “Facilities Agreement”). There are no Supplemental
17
.
Schedule l’s to the Facilities Agreement. The Company has not provided and is not currently
providing any services to Lessee (under the Facilities Agreement) under Section 8 of the Facilities
Agreement.
5.7 Real Pronertv. All the Assets consisting of owned or leased Real Property interests
are described on Schedule 5.7. Except as otherwise disclosed on Schedule 5.7, each Company holds
or at the time of Closing will hold good, marketable and indefeasible fee simple title to the Real
Property shown as being owned or to be acquired by such Company on Schedule 5.7 and the valid
and enforceable right to use and possess such Real Property, subject only to the Permitted
Encumbrances. To Seller’s Knowledge, each Company has valid and enforceable leasehold interests
in Real Property shown as being leased by such Company on Schedule 5.7 and, with respect to other
Real Property not owned or leased by such Company, to Seller’s Knowledge, such Company has the
valid and enforceable right to use all such other Real Property pursuant to the easements, licenses.
rights-of-way or other rights described on Schedule 5.7, subject only to Permitted Encumbrances.
5.8 Environmental Matters.
5.8.1 Except as disclosed in Schedule 5.8: (i) the Real Property complies in all
material respects with applicable Environmental Laws; (ii) the Real Property is not the subject of any
court order, administrative order or decree arising under any Environmental Law and out of any
proceeding to which any Seller is or was a party and, to Seller’s Knowledge, out of any other
proceeding; and (iii) the Real Property has not been used by the Companies for the generation,
storage, discharge or disposal of any Hazardous Substances except as permitted under applicable
Environmental Laws. Except as set forth in Schedule 5.8, none of the Companies has received any
written notice from any Governmental Authority alleging that the Real Property is in violation of any
Environmental Law, and no claim based on any applicable Environmental Law has been asserted
against any Company in writing in the past or is currently pending or, to the Knowledge of Seller.
threatened with respect to any Real Property.
5.82 Seller has provided Buyer ivith complete and correct copies of (a) all studies,
reports. surveys or other materials in each Company’s possession relating to the presence or alleged
presence of Hazardous Substances at, on or affecting the Real Property, (b) all notices or other
materials in each Company’s possession that were received from any Governmental Authority
administering or enforcing any Environmental Laws relating to current or past ownership. use or
operation of the Real Property or activities at the Real Property and (c) all materials in each
Company’s possession relating to any litigation or allegation by any Person concerning any
Environmental Law.
5.9 Comnliance nith Legal Reauirements.
5.9.1 The operation of the Business is in compliance in all material respects with all
applicable Legal Requirements. including the Cable Act.
5.9.2 Except as disclosed on Schedule 5.9.2, the Companies have made timely
filings with respect to the Business under Section 111 of the Copyright Act.
18
5.9.3 A valid request.for renewal has been duly and timely filed by each of the
Companies under Section 626 of the Cable Communications Policy Act of 1984 with the proper
Governmental Authority with respect to applicable Governmental Permits with franchising authorities
that have expired prior to, or will expire within 30 months after, the date of this Agreement.
5.10 Patents, Trademarks and Convrights. Except for Excluded Assets and except as
described in Schedule 5.10, the Companies do not possess any patent, patent right. trademark or
copyright material to the operation of the Business, and none of them is a party to any license or
royalty agreement with respect to any such patent, trademark or copyright except for licenses
respecting program material and obligations under the Copyright Act of 1976 applicable to cable
television systems generally and commercially available software. Except as would not reasonably
be expected. individually or in the aggregate, to have a Material Adverse Effect, the Business and the
Systems have been operated in such a manner so as not to violate or infringe upon the rights of. or
give rise to any rightful claim of any Person for copyright, trademark. service mark. patent. license.
trade secret infringement or the like.
5.11 Financial Statements. Within 30 days after the Effective Date, Seller will deliver to
Buyer a correct copy of the audited financial statements of the Companies as of December 3 1. 1999.
including an audited income statement and balance sheet which fairly present in all material respects
the financial condition and results of operation of the Companies in conformity lvith GAAP.
consistently applied (the “Audited Financial Statements”). Seller has delivered drafts ofthe .4udited - Financial Statements as of December 3 I. I999 to Buyer (the “Draft Financial Statements”). Neither
DCI. DHS nor CBS1 has any indebtedness. liability, or obligation, whether accrued or unaccrued.
contingent or otherwise, that is not reflected or reser\,ed against in the Audited Balance Sheets.
except for such indebtedness. liability or obligations arising in the ordinary course of business
consistent with past practice, and except with respect to items described in Section 4.3. At March
3 1. 2000. the quarterlv cross operatinrr re\‘enues of the Carlsbad Svstem were not less than
S a;ld the q&rterl!; gross operating rel’enues of the Desert Hot Springs System were not
less than S
5.12 Absence of Certain Chances. Since December 31. 1999 (a) neither DCI. DHS nor
CBS1 has incurred any non-ordinary course obligation or liability. the performance of which would
be reasonably likely. individually or in the aggregate. to have a Material Adverse Effect. (b) there has
not been any event or circumstance Lvhich. individually or in the aggregate. would reasonably be
expected to have a Material Adverse Effect. and (c) the Business has been conducted only in the
ordinary course of business.
.
.-
5.13 Legal Proceedings. Except as set fonh in Schedule 5.13: (a) there is no claim.
investigation or litigation pending or. to Seller’s Knowledge, threatened, by or before any
Governmental Authority or private arbitration tribunal against DCI. DHS or CBS1 which, if adversely
determined. would have a Material Adverse Effect or would materially adversely effect the ability of
Seller to perform its obligations under this Agreement: and (b) there is not in existence any judgment
requiring DCI. DHS or CBS1 to take any action of any kind with respect to the Assets or the
operation of the Business. or to Lvhich DCI. DHS. CBSI. the Business or the Assets are subject or
by’ lvhich they are bound or affected.
19
5.14 Tax Matters.
5.14.1 Except as set forth in Schedule 5.14:
(a> each of DCI, DHS and CBS1 has timely filed all federal income Tax
Returns, and all other Tax Returns which it is required to file under applicable Legal Requirements;
W all such Tax Returns are true and accurate in all material respects, and
copies ofthe Companies’ last three filed income Tax Returns have been provided to Buyer and copies
of all other filed Tax Returns have been made available to Buyer;
cc> each of DCI, DHS and CBS1 has paid all Taxes due and owing by it
(whether or not such Taxes are required to be shown on a Tax Return) and has withheld and paid
over to the appropriate taxing authority all Taxes which it is required to withhold from amounts paid
or owing to any employee, stockholder, creditor or other third party;
(4 the accrual. for Taxes on the Audited Balance Sheets will be sufficient
to pay in full a11 liabilities for Taxes of the Companies related to periods prior to such date, including
any liability for Taxes arising from pre-Closing transfers of assets:
W DCI, DHS and CBS1 have filed, or received extensions to file, all
federal income Tax Returns required to be filed by them through the date hereof. and as of the date
hereof, there are no pending audits of such Tax Returns. nor continuing liability under any previously
audited Tax Return;
(0 each of DC1 and DHS has been a validly existing S corporation within
the meaning of Sections 1361 and 1362 of the Internal Revenue Code of 1986. as amended (the
‘Code”) at all times since February 8. 1982. lvill continue to be an S corporation up to and including
the date immediately preceding the Closing Date. and CBS1 has been a validly existing S corporation
within the meaning of Code Sections 136 1 and 1362 at all times since August 12. 1994. will continue
to be an S corporation up to and including the date immediately preceding the Closing Date; and
(6) each of DCI. DHS and CBS1 has disclosed in its federal income Tax
Returns, all positions taken therein that could give rise to a substantial understatement of federal
income tax within the meaning of Code Section 6662.
5.14.2 No claim has been made by a taxing authority in a jurisdiction where DCI,
DHS or CBS1 does not file Tax Returns that DCI. DHS or CBS1 is or may be subject to taxation by
that jurisdiction.
. 5.143 To the knowledge of Seller, there are no foreign, federal, state or local Tax
audits or administrative or judicial proceedings pending or being conducted with respect to DCI.
DHS or CBSI.
5.14.4 No information related to Tax matters has been requested from Seller. DCI,
DHS or CBS1 by any foreign. federal. state or local Taxing authority and no written notice indicating
20
an intent to open an audit or other review has been received by Seller, DCI, DHS or CBS1 from any
foreign, federal, state or local taxing authority.
liability.
5.14.5 There are no unresolved claims concerning DCI’s, DHS’s or CBSI’s Tax
5.14.6 No waivers of statutes of limitation have been given or requested with respect
to DCI, DHS or CBS1 in connection with any Tax Returns covering any of them.
5.14.7 Neither DCI, DHS nor CBS1 has executed or entered into a closing agreement
pursuant to Code Section 7 12 1 or any predecessor provision thereof or any similar provision of state,
local or foreign law; nor has DCI, DHS or CBS1 agreed to or is required to make any adjustments
pursuant to Code Section 48 1 (a) or any similar provision of state, local or foreign law by reason of
a change in accounting method initiated by DCI, DHS or CBSI. The IRS has not proposed any such
adjustment or change in accounting method. There is no application pending with any taxing
authority requesting permission for any changes in accounting methods that relate to the business or
operations of DCI, DHS or CBSI.
5.14.8 Neither DCI. DHS nor CBS1 has made an election under Code Section 34 1 (f).
5.14.9 Neither DCI, DHS nor CBS1 is liable for the Taxes of another Person under
P Treasury Regulation 1.1502-6 or (except as a withholding agent) otherwise.
5.14.10 Neither DCI. DHS nor CBS1 is a party to any Tax allocation. indemnity.
sharing or similar agreement.
5.14.11 Neither DCI. DHS nor CBS1 has made any payments nor is it obligated to
make payments nor is it a party to an agreement that could obligate it to make any payments that
would not be deductible under Code Section 280G.
5.15 Emnlovment Matters.
5.15.1 Seller has separately delivered to Buyer on a confidential basis a list ofnames
and positions of all employees of DCI. DHS or CBS1 engaged in the Business as ofthe date set forth
in such list, along with other pertinent employment information. Except as set forth on Schedule
5.15. neither DCI, DHS nor CBS1 has any employment agreements, either written or oral, with any
employee of the Business. The Business has complied in all material respects with applicable Legal
Requirements relating to the employment of labor, including WARN, the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), continuation coverage requirements with
respect to group health plans, and those relating to wages, hours, collective bargaining,
unemployment insurance, worker’s compensation, equal employment opportunity, age and disability
discrimination, immigration control and the payment and withholding of Taxes.
-- 5.15.2 Except as set forth on Schedule 5.15, neither the Companies, any ERISA
Affiliate nor any Affiliate of the Companies maintains or sponsors, nor are they required to make
21
any contribution to, any pension, profit sharing, thrift or other retirement plan, medical,
hospitalization, vision, dental, life, disability or other insurance or benefit plan, deferred
compensation, bonus, fringe benefit, savings or other incentive plan, severance plan or other similar
plan, agreement, arrangement or understanding with respect to any employee or former employee,
and none of such plans is or is intended to be subject to the provisions of ERISA or qualified under
Section 401(a) of the Code, including, without limitation, an “employee welfare plan” within the
meaning of Section 3( 1) of ERISA, an “employee benefit plan” within the meaning of Section 3(3)
of ERISA, a “defined benefit plan” within the meaning of Section 3(35) of ERISA or any “multi-
employer plan” within the meaning of Section 3(37) of ERISA. Neither the Companies, any ERISA
Affiliate nor any Former ERISA Affiliate with respect to the period in which such Person was an
ERISA Affiliate, has breached any of the fiduciary responsibility provisions of Title I of ERISA nor
engaged in a transaction prohibited under Section 406 of ERISA or Section 4975 of the Code which
could result in material liability to any of the Companies or ERISA Affiliate or Former ERISA
Affiliate and for which no exemption from the provisions thereof is available or was obtained.
Other than benefit claims and/or any contribution and administration expenses arising under the
Companies’ benefit plans in the normal course, none ofthe Companies, any ERISA Affiliate nor any
Former ERISA Affiliate with respect to the period in which such Person was an ERISA Affiliate,
has incurred, with respect to any employee benefit plan, any material liability under ERISA or the
Code, contingent or otherwise, to any Person including, without limitation, the Pension Benefit
Guaranty Corporation and any multi-employer plan. Other than usual claims for benefits arising
under the Companies’ benefit plans in the normal course or as noted in Schedule 5.15, there are no,
and the transactions contemplated by this Agreement will not give rise to, any claims, suits or
proceedings which might cause any ofthe Companies to incur any material liability to any employee
under any of its benefit plans, including any liability for severance payments to any employee or
former employee of any of the Companies. Except as noted in Schedule 5.15, and except as
required by the provisions of Section 60 1 et seq. of ERISA, none of the Companies have made any
commitments to provide any health or welfare benefits to any employee or former employee of such
Company after such employee resigns or retires from employment with such Company. The
Closing will not result in any multi-employer plan liability which could be assessed against any of
the Companies, any ERISA Affiliate or Former ERISA Affiliate.
5.15.3 Neither DCI. DHS nor CBS1 is a party to any collective bargaining
agreements and neither DCI, DHS nor CBS1 has recognized or agreed to recognize or has any duty
to bargain with any labor organization or collective bargaining unit. There are not pending any unfair
labor practice charges against DCI. DHS or CBSI. any demand for recognition or any other request
or demand from a labor organization for representative status with respect to any Person employed
by D?I, DHS or CBSI. To Seller’s Knowledge, the employees of DCI, DHS and CBS1 are not
engaged in organizing activity with respect to any labor organization.
\
.-
5.16 Svstem Information. Schedule 5.16-A sets forth the approximate number of plant
miles (aerial and underground) for the Carlsbad System. the minimum bandwidth capability of each
System, the stations and signals carried by the Carlsbad System and the channel position of each such
signal and station, and the counties. cities and towns served by the Carlsbad System, which
information is true and correct in all material respects. in each case as ofthe applicable dates specified
therein and subject to any qualifications set forth therein. Schedule 5.16-A also sets forth the
22
approximate number of homes passed by the Carlsbad System as of May 31,2000, the aggregate
number ofEquivalent Basic Subscribers ofthe Carlsbad System as of December 3 1, I 999, and March
3 1,200O. Schedule 5.16-B sets forth the approximate number ofplant miles (aerial and underground)
for the Desert Hot Springs System, the minimum bandwidth capability of each System, the stations
and signals carried by the Desert Hot Springs System and the channel position ofeach such signal and
station, and the counties, cities and towns served by the Desert Hot Springs System, which
information is true and correct in all material respects, in each case as ofthe applicable dates specified
therein and subject to any qualifications set forth therein. By December 3 1,2000, and assuming the
continued operation and conduct of the business of the Desert Hot Springs System as is currently
operated and conducted, the minimum bandwidth capability of the Desert Hot Springs System will
be 550 MHZ. Schedule 5.16-B also sets forth the approximate number of homes passed by the
Desert Hot Springs System as of May 3 1, 2000, the aggregate number of Equivalent Basic
Subscribers of the Desert Hot Springs System as of December 3 1,1999, and March 3 1) 2000. Seller
has delivered to Buyer information on the channel lineups and the monthly rates charged for each
class of service for each System, which information is true and correct in all material respects, in each
case as of the applicable dates specified therein and subject to any qualifications set forth therein.
5.17 Finders and Brokers. Neither Seller, DCI. DHS nor CBS1 has employed any financial
advisor, broker or finder or incurred any liability for any financial advisory, brokerage. tinder’s or
similar fee or commission in connection with the transactions contemplated by this Agreement for
which Buyer (directly or indirectly) could be liable.
rC
5.18 Free Subscribers. Except as generally set forth (by category and number of
subscribers) on Schedule 5.18. there is no free service liability to subscribers existing with respect
to the Systems. Except with respect to deposits for converters. encoders, decoders and related
equipment. and any other prepaid item which Buyer is to receive credit pursuant to Section 3.2.1,
neither DC1 nor DHS has any obligation or liability for the refund of monies to its subscribers.
5.19 Guarantees and Securitv Interests. Except as set forth on Scheduie5.19. neither DCI.
DHS nor CBS1 has guaranteed. become a surety or contingent obligor for or assumed any obligation.
debt or dividend of any Person or entity. Except as set forth on Schedule 5.19, none of the Assets
have been pledged. hypothecated. delivered for safekeeping, subjected to a security interest or
otherwise provided in any way as security for pa>‘ment or performance of any obligation of a person
other than the Companies.
.
5.20 Insurance. The Companies and the Assets are and have been insured. and all such
insurance policies are in full force and effect and are in terms and scope and amounts which are
customary in accordance with mdustry standards for cable television systems of comparable size. All
such policies are provided to Buyer under the terms of the DHS/AT&T Broadband Agreement and
the DCI/AT&T Broadband Agreement. None of the Companies nor Seller has received any notice
of cancellation with respect to such policies. During the past one year, no application by any
Company for insurance with respect to the Assets has been denied for any reason.
-- 5.21 Transactions With Affiliates. Except as disclosed in the financial statements and as
included in the Excluded Assets. neither DCI. DHS nor CBS1 has been involved in any business
23
arrangement or business relationship with any of its Affiliates (other than in any such Affiliate’s
capacity as a direct or indirect equity or debt holder of the DCI, DHS or CBSI).
5.22 Securities Law Matters.
5.22.1 Seller represents and acknowledges to Adelphia that Seller (i) is
purchasing the Share Consideration for investment purposes only, and not with a view to or for sale
in connection with any distribution, except in accordance with an effective registration statement
or an exemption from U.S. securities laws and (ii) understands that the Share Consideration being
acquired is characterized as “restricted securities” under the federal securities laws inasmuch as they
are being acquired in a transaction not involving a public offering and have not been registered by
Adelphia with the Commission for sale to Seller.
5.22.2 Seller represents and warrants that it is an “accredited investor” as that
term is defined under Rule 501 promulgated under the Securities Act.
5.22.3 Seller represents and acknowledges to Adelphia that it has such
knowledge and experience in financial and business matters that it is capable of evaluating the
merits and risks inherent in acquiring the Share Consideration.
;c‘ 5.22.4 Seller represents to Adelphia that Seller(i) has received and reviewed
Adelphia’s Form 1 O-Q for the quarter ended March 3 1, 2000, all Form 8-K’s filed subsequent to
March 3 1, 2000, Form 1 O-K for the year ended December 3 1, 1999, as amended, Proxy Statement
for July 3 1,200O Annual Meeting ofStockholders, Registration Statement No. 333-40546 including
the Prospectus contained therein, the Prospectus dated May 14, 1999 and Prospectus Supplements
thereto dated October 1, 1999 and November 10. 1999 (collectively, the “Current Filings”) in which
information, risks and facts about Adelphia are set forth, (ii) is aware that Adelphia is a publicly
traded company that is listed on the NASDAQ Stock Market under the ticker symbol “ADLAC” and
files reports, registration and proxy statements and other information with the Commission on its
EDGAR System, all of which are available to Seller over the intemet at the Commission’s web site
at http://www.sec.gov, and (iii) has had the opportunity to make detailed inquiry concerning
Adelphia, its business, its officers and its personnel, and has had answered by the officers of
Adelphia to its own satisfaction all inquiries which it has made.
.
5.22.5 Seller agrees not to offer, sell, pledge, hypothecate, or otherwise
dispose of the Share Consideration, unless such offer, sale, pledge, hypothecation or other
disposition is (i) registered under the Securities Act, or (‘i) in compliance with an opinion of counsel
of such Seller, delivered to Adelphia and reasonably acceptable to Adelphia, to the effect that such
offer, sale, pledge, hypothecation or other disposition thereof does not violate the Securities Act.
The certificates for the shares of the Share Consideration sold hereunder shall bear the following
legend:
- THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
24
AMENDED, OR ANY STATE SECURITIES LAW, AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID
ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE, TRANSFER, PLEDGE OR
HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS
THEREOF.
Seller hereby agrees not to transfer the shares of the Share Consideration which it acquires
hereunder in contravention of the above legend.
5.23 Schedules. Any item required to be disclosed on more than one Schedule to this
Agreement will be deemed properly disclosed on all such Schedules if it is disclosed in reasonable
detail on any Schedule to this Agreement.
Section 6. Buyer’s Representations and Warranties.
To induce Seller to enter into this Agreement, Buyer represents and warrants to Seller, as of
the date of this Agreement and as of the Closing. as follows:
6.1 Organization and Oualification. Adelphia is a corporation duly organized. validly
existing and in good standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and use the assets owned, leased or used by it and to conduct its
business as it is currently conducted. Adelphia LLC is a limited liability company duly organized.
validly existing and in good standing under the laws of the State of Delaware and has all requisite
limited liability company power and authority to own, lease and use the assets owned, leased or used
by it and to conduct its business as it is currently conducted. Each of Adelphia and Adelphia LLC
is duly qualified to do business and is in good standing under the laws of each jurisdiction in which
the ownership, leasing or use of the assets owned, leased or used by it, the nature of its activities or
the transactions contemplated by this Agreement makes such qualification necessary. except in any
such jurisdiction where the failure to be so qualified and in good standing would not have a material
adverse effect on it or on its ability to perform its obligations under this Agreement.
6.2 Authoritv and Validitv. Each of Adelphia and Adelphia LLC has all requisite power and
authority to execute and deliver, to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement and the Transaction Documents to which it is a party. The
execution and delivery by Adelphia and Adelphia LLC of, the performance by them of their respective
obligations under, and the consummation by them of the transactions contemplated by, this
Agreement and the Transaction Documents to which either of them is a party have been duly and
validly authorized by all necessary action by or on behalf of each ofthem. This Agreement has been,
and when executed and delivered by Adelphia and Adelphia LLC, as applicable, the Transaction
Documents will be, duly and validly executed and delivered by Adelphia and Adelphia LLC, as
applicable and the valid and binding obligations of it, enforceable against it in accordance with their
terms. except as the same may be limited by applicable bankruptcy, insolvency, reorganization.
25
F moratorium or similar laws now or hereafter in effect relating to the enforcement of creditors’ rights
generally or by principles governing the availability of equitable remedies.
6.3 No Conflicts: Reauired Consents. Except for the Required Consents, the execution and
delivery by Adelphia and Adelphia LLC, the performance of them under, and the consummation of
the transactions contemplated by, this Agreement and the Transaction Documents to which Adelphia
or Adelphia LLC is a party do not and will not (a) violate any provision of the organizational
documents of either of them, (b) violate any Legal Requirement or conflict with any provision of any
of their organizational documents, (c) require any consent, approval or authorization of, or filing of
any certificate, notice, application, report or other document with any Governmental Authority or
other Person or (d) (i) violate or result in a breach of or constitute a default under (without regard
to requirements of notice, lapse of time or elections of any Person or any combination thereof).
(ii) permit or result in the termination, suspension, modification of, (iii) result in the acceleration of
(or give any Person the right to accelerate) the performance of either of them under, or (iv) result in
the creation or imposition of any Encumbrance under, any instrument or other agreement to which
either of them is a party or by which either of them or any of their assets is bound or affected, except
for purposes ofthis clause (d) such violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate, have a material adverse
effect on the validity, binding effect or enforceability of this Agreement or on the ability of Adelphia
and Adelphia LLC to perform their respective obligations under this Agreement or the Transaction
Documents to which either of them is a party.
6.4 Buyer’s Indenendent Investigations Regarding the Real Pronertv, Governmental Permits
and Annrovals. Buyer, by its execution of this Agreement, acknowledges that it has made or will
make its own independent investigations. or will have the opportunity to do so. as it deems necessary
or appropriate concerning the use. sale. physical condition, development or suitability for
development of the Real Property and the status of all governmental land use approvals for the Real
Property. Except as otherwise specifically provided in this Agreement, Buyer will rely solely on its
own investigations and not on any representations made by Seller. Buyer acknowledges that. except
as expressly set forth in Sections 5.7 and 5.8, Seller has made no representations regarding the Real
Property, the physical condition of the Real Property. the status of any existing, pending or future
entitlements and/or the necessity or existence of any fees, dedications, charges or costs associated
with the Real Property or future regulations relating to the Real Property or whether any approvals
or permits may be required or granted or. if granted, whether such approvals or permits may be
subject to reversal by reason of challenges thereto by private parties or governmental agencies. In
the event any of the matters investigated by Buyer should change during the term of this Agreement
or new regulations or requirements of governmental agencies are imposed or there is a challenge or
reversal, or otherwise of any approvals or permits previously obtained, Buyer will in no event be
entitled to rescind this Agreement.
. 6.5 Finders and Brokers. Buyer has not employed any financial advisor, broker or finder
or incurred any liability for any financial advisory. brokerage, finder’s or similar fee or commission
in connection with the transactions contemplated by this Agreement for which Seller could be liable.
6.6 LePal Proceedings. There are no claims, actions, suits, proceedings or investigations
pending or, to Buyer’s knowledge. threatened. by or before any Governmental Authority, or any
26
arbitrator, by or against or affecting or relating to Buyer which, if adversely determined, would
restrain or enjoin the consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any of such transactions
to be rescinded.
6.7 Securities Law Matters.
6.7.1 Buyer (a) understands that the Purchased Shares have not been registered under
the Securities Act of 1933, as amended (the “Securities Act”) or under any state securities law or
Blue Sky Law of any jurisdiction (“Blue Sky Law”) and that the Purchased Shares are being offered
and sold in reliance upon federal and State exemptions fortransactions not involving a public offering;
(b) is an “accredited investor” as that term is defined under Rule 501 promulgated under the
Securities Act; (c) has had the opportunity to obtain information as desired in order to evaluate the
merits and risks inherent in holding the Purchased Shares; (d) is able to bear the economic risk in
holding the Purchased Shares; and (e) is acquiring the Purchased Shares solely for investment and not
with a view to the distribution or resale thereof. The term “solely for investment” used in this Section
has the meaning given to that term for purposes of determining the availability of an exemption from
registration under Section 4(2) of the Securities Act.
6.7.2 Buyer will not sell. assign. transfer or otherwise dispose ofthe Purchased Shares
without registration under the Securities Act and under applicable Blue Sky Law unless an exemption
from registration thereunder is available. Buyer acknowledges that the stock certificates evidencing - such Purchased Shares will bear a legend to the effect of the foregoing.
6.8 Deliver-v of Share Consideration. The Share Consideration being issued hereunder,
when issued and delivered in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly authorized and validly issued. The delivery of such Share
Consideration pursuant to this Agreement \\,ill transfer to the Sellers good and valid title to such
Share Consideration, free and clear of all Encumbrances and any other limitations or restrictions
(including any restrictions on the right to vote. sell or otherwise dispose of such interest), As of the
Closing Date, each of the shares comprising the Share Consideration will be subject to an effective
Registration Statement, registered or qualified for sale under the Blue Sky Laws of such of the 50
United States and the District of Columbia as is practical after commercially reasonable efforts to
do so, listed and freely tradeable on the NASDAQ National Market System.
6.9 SEC Filings; Financial Information.
6.9.1 Adelphia has delivered or made available to Seller the Current Filings. The
Current Filings, as of the date of the filing thereof did not contain any untrue statement of a material
. fact or omit to state a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading.
6.9.2 The financial information for Adelphia and its subsidiaries contained in the
Current Filings fairly present in all material respects, as of the dates thereof and for the periods then
ended, the financial condition and results of operation of Adelphia and its consolidated subsidiaries
27
in conformity with GAAP (except as indicated in the notes thereto), subject to normal year-end
adjustments with respect to unaudited financial statements.
6.10 Put Agreement; Put Obliger Financial Information.
610.1 The Put Agreement attached as Exhibit A, when executed and delivered by
Highland Holdings, a Pennsylvania general partnership, (the “Put Obligor”) will be duly and validly
executed and delivered by the Put Obligor and the valid and binding obligation of Put Obligor,
enforceable against it in accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating
to the enforcement of creditors’ rights generally or by principles governing the availability of equitable
remedies.
6.10.2 The financial information of John J. Rigas, Michael J. Rigas, Timothy J. Rigas
and James P. Rigas, who are general partners of the Put Obligor, delivered to Seller in connection
with the execution and delivery of this Agreement as of the date thereof is accurate and complete
in all material respects and fairly presents in all material respects the financial condition of the Put
Obligor.
Section 7. Additional Covenants.
- 7.1 Access to Premises and Records. Between the date ofthis Agreement and the Closing
Date, Seller will cause each of the Companies to give Buyer and its counsel, accountants and other
representatives full access during normal business hours upon reasonable notice to all the premises
and books and records of the Business and to all the Assets and to the System personnel and to
furnish to Buyer and such representatives all such documents, financial information, and other
information regarding the Purchased Shares. the Business and the Assets as Buyer from time to time
reasonably may request; provided that no such investigation will affect or limit the scope of any of
Seller’s representations, warranties. covenants and indemnities in this Agreement or any Transaction
Document or limit liability for any breach of any of the foregoing.
7.2 Continuitv and Maintenance of Operations: Financial Statements. Except as Buyer may
otherwise consent in writing (which consent will not be withheld unreasonably), between the date of
this Agreement and the Closing. Seller agrees to cause DCI. DHS and CBS1 to comply with the
following:
.
Y-.
7.2.1 DCI. DHS and CBS1 will conduct the Business and operate the Systems only
in the usual, regular and ordinary course consistent with past practices and will use commerciall)
reasonable efforts to (a) preserve its current business intact, including preserving existing relationships
with franchising authorities, suppliers, customers and others having business dealings with DCI, DHS
or CBS1 relating to the Business. (b) keep available the services of its employees and agents providing
services in connection with the Business and (c) continue making marketing, advertising and
promotional expenditures with respect to the Business consistent with past practices.
28
7.2.2 DCI, DHS and CBS1 will maintain the Assets in good repair, order and
condition (ordinary wear and tear excepted), will maintain equipment consistent with past practices,
will maintain a level of inventory of spare equipment and parts as are necessary to permit the
operation of the Systems without material interruption for a 30-day period, will maintain in full force
and effect, policies of insurance with respect to the Business in such amounts and with respect to such
risks as customarily maintained by operators of cable television systems of the size and geographic
location as the Systems and will maintain its books, records and accounts in the usual, regular and
ordinary manner on a basis consistent with past practices.
7.2.3 DCI, DHS and CBS1 will not except as disclosed on Schedule
7.2.3, (a) change the rates charged for Basic Service, Expanded Basic Service or Pay TV or add.
delete, retier or repackage any programming services except to the extent required under any Legal
Requirement, (b) sell, transfer or assign any portion of the Assets other than sales in the ordinary
course of business, or permit the creation of any Encumbrance on any Asset other than a Permitted
Encumbrance or any Encumbrance which will be released at or prior to Closing, (c) modify in any
material respect, terminate, suspend or abrogate any Governmental Permits, material contracts or any
other material agreement (other than those constituting Excluded Assets), (d) conduct any amnesty
programs or (e) enter into any nonordinary course contract or commitment involving an expenditure
in excess of $100,000, other than as contemplated by this Agreement, DCI’s, DHS’s or CBSI’s
operating and capital budgets previously furnished to Buyer or the Upgrade Plan and other than
contracts or commitments which are cancellable on 60 days’ notice or less without penalty.
7.2.4 Seller promptly will deliver to Buyer true and complete copies of monthly and
quarterly financial statements and operating reports kvith respect to the Business prepared by or for
Seller at any time between the date ofthis Agreement and the Closing Date. All financial statements
so delivered will be prepared in accordance lvith G.4.AP on a basis consistent with the Audited
Financial Statements except as otherwise noted therein.
7.2.5 DC1 and DHS. as applicable. \vill duly and timely file a valid notice of renewal
under Section 626 of the Cable Communications Policy Act of 1984 with the appropriate
Governmental ‘4uthority with respect to all cable television franchises ofthe Business that will expire
within 30 months after any date bet\veen the date of this Agreement and the Closing Date.
.
7.2.6 Seller will not and Lvill not permit any of the Companies to (a) sell or pledge or
agree to sell or pledge any capital stock owned in such Company, (b) amend or propose to amend
the Certificate of Incorporation or Bylaws of such Company. (c) split, combine or reclassify the
outstanding capital stock or issue or authorize or propose the issuance of any other securities in
respect of. in lieu of or in substitution for shares of clpital stock of such Company, or cause such
Company to declare, set aside or pay any dividend or other distribution payable in stock or property,
(d) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or
otherwise acquire any shares of capital stock of such Company, or (e) agree to do any of the
foregoing.
- 7.2.7 Seller agrees that the Companies will not issue, deliver or sell or agree to issue.
deliver or sell any additional shares of. or rights of any kind to acquire any shares of, its capital stock
29
-
of any class, or any option, rights or warrants to acquire, or securities convertible into, shares of their
capital stock, or agree to do any of the foregoing.
7.2.8 Seller will promptly notify Buyer of any fact, circumstance, event or action by
it or otherwise (a) which, if known at the date of this Agreement, would have been required to be
disclosed in or pursuant to this Agreement or (b) the existence, occurrence or taking of which would
result in any of Seller’s representations and warranties in this Agreement or any Transaction
Document not being true, complete and correct when made or at the Closing.
7.2.9 Buyer may request additional work to be performed and additional equipment
to be purchased by Seller in connection with its upgrade and rebuild of the Carlsbad System. If Seller
agrees, in its discretion, to make any modifications to the Upgrade Plan at Buyer’s request, the
Upgrade Plan will be modified in a writing signed by the parties and the Base Purchase Price will be
increased by the actual cost incurred with respect to effecting such modifications as agreed upon by
the parties. If this Agreement is terminated under Section 10.1, Buyer will pay to Seller the
unrecoverable costs of all work performed and equipment purchased by Seller to effect such
modifications prior to the date of termination.
7.2.10 Seller will not and will not permit DC1 to agree to provide any Leased Facilities
or other services under the Facilities Agreement.
7.3 Reauired Consents. Prior to Closing. Seller will use commercially reasonable efforts
to obtain in writing, as promptly as possible and at its expense, all the Required Consents and any
other consent, authorization or approval required to be obtained by Seller in connection with the
transactions contemplated by this Agreement. in form and substance reasonably satisfactory to Buyer,
including a provision permitting Buyer to transfer the underlying franchise or agreement to an
Affiliate of Buyer; provided. however. that (i) such Affiliate agrees in Lvriting to be bound by any
obligations in connection therewith. and (ii) the inclusion of such provisions does not otherwise cause
such consent or approval to be withheld. delayed or otherwise conditioned. Seller will deliver to
Buyer copies of such Required Consents and such other consents. authorizations or approvals
promptly after they are obtained by Seller. Buyer Lvill cooperate with Seller to obtain all Required
Consents, but Buyer will not be required to accept or agree or accede to any modifications or
amendments to, or changes in. or the imposition of any condition to the transfer to Buyer of any
Contract or Governmental Permit that are not reasonably acceptable to Buyer. The parties will use
commercially reasonable efforts to cause all such filings with Governmental Authorities to be made
within 30 days after the Effective Date. Notwithstanding the foregoing, as soon as practicable after
the Effective Date. but in no event later than 20 days after the Effective Date, the parties will
cooperate with each other to complete. execute and deliver to the approsriate Governmental
Authority, an FCC Form 394 with respect to each franchise as to which such Form 394 is required.
. 7.4 HSR Notification. As soon as practicable after the execution of this Agreement, but
in any event no later than 30 days after such execution, Seller and Buyer will each complete and file,
or cause to be completed and filed at its own expense (except as set forth below), any notification and
report required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the “HSR Act”); and each such filing will request early termination of the waiting period
30
/c- imposed by the HSR Act. The parties will use their commercially reasonable efforts to respond as
promptly as reasonably practicable to any inquiries received from the Federal Trade Commission (the
“FTC”) and the Antitrust Division of the Department of Justice (the “Antitrust Division”) for
additional information or documentation and to respond as promptly as reasonably practicable to all
inquiries and requests received from any other Governmental Authority in connection with antitrust
matters. The parties will use their respective commercially reasonable efforts to overcome any
objections which may be raised by the FTC, the Antitrust Division or any other Governmental
Authority having jurisdiction over antitrust matters. Buyer and Seller will share equally the cost of
the filing fees incurred by them with respect to the notifications required to be made by them under
the HSR Act. ->
7.5 Code Section 338(h)(lO) Election. At Buyer’s option, Seller will join with Buyer in
making an election under Code Sections 338(g) and 338(h)(lO) (and any corresponding elections
under state, local or foreign tax law) (collectively, a “Section 338(h)( IO) Election”) with respect to
the purchase and sale of the stock of each of the Companies. In connection with such election, Seller
will cooperate in executing and tiling all returns, reports, documents or elections required to be
executed and filed.
7.6 Tax Returns; Other Tax Matters.
7.6.1 Seller will prepare and permit Buyer to review (at least 20 days prior to the due
date). the income Tax Returns (federal, state, local or otherwise) of the Companies not filed as ofthe - date of this Agreement for all taxable periods ending on or before the Closing Date before the filing
thereof and will thereafter file or cause to be filed all such Tax Returns. To the extent permitted by
applicable law, Seller will include any income, gain. loss. deduction or other tax items for such period
or periods on its individual income Tax Returns in a manner consistent with the Schedule K-Is
furnished by the Companies to Seller for such periods. Seller will be liable for and will pay or cause
to be paid all income Tax Liabilities with respect to such periods. including income Taxes imposed
at either the S corporation or stockholder level.
7.6.2 Buyer will file or cause to be filed all Tax Returns of. or that include, the
Companies for all taxable periods ending after the Closing. Seller will be provided an opportunity
to review and provide comments on such Tax Returns prior to filing.
.
7.6.3 Each party hereto will. and will cause its subsidiaries and Affiliates to, provide
to each of the other parties hereto such cooperation and information as any of them reasonably may
request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for
Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information will include providing copies of all relevant portions of
relevant Tax Returns, together with relevant accompanying schedules and relevant work papers,
relevant documents relating to rulings or other determinations by Taxing authorities and relevant
records concerning the ownership and Tax basis of property, which such party may possess. Each
party will make its employees reasonably available on a mutually convenient basis at its cost to
provide explanation of any documents or information so provided. Subject to the preceding sentence,
each party required to file Tax Returns pursuant to this Agreement will bear all costs of filing such
Tax Returns.
31
7.7 Transfer Taxes. Any state or local sales, use, transfer, or documentary transfer Taxes
or fees or any other charge (including filing fees) imposed by any Governmental Authority arising
from or payable by reason of the transfer of the Office Properties, the Purchased Shares or the Share
Consideration as contemplated by this Agreement will be shared equally by Buyer and Seller.
7.8 Use ofNames and LOPOS. The parties agree that Seller and its Affiliates will retain all
rights with respect to the names “Daniels Cablevision, ” “Daniels,” or any and all derivations thereof
or any name which may include the word “Daniels,” and after the Closing, Buyer will remove or
delete the names “Daniels Cablevision,” “ Daniels,” or any and all derivations thereof or any name
which may include the word “Daniels” from the Business and Assets as soon as reasonably practicable
but in any event by the 120th day following the Closing. Notwithstanding the foregoing, nothing in
this Section 7.8 will require any party to remove or discontinue using any such name or mark that
is affixed to converters or other items in or to be used in consumer homes or properties. or as are
used in a similar fashion making such removal or discontinuation impracticable.
7.9 Satisfaction of Conditions. Each party will use commercially reasonable efforts to
satisfy, or to cause to be satisfied, the conditions to the obligations of the other party to consummate
the transactions contemplated by this Agreement, as set forth in Section 8.
7.10 Confidentialitv and Publicitv.
- 7.10.1 Neither Buyer nor Seller will. nor will it permit any Affiliate to, issue any press
release or make any other public announcement or any oral or written statements to DCI’s. DHS’s
or CBSI’s employees concerning this Agreement or the transactions contemplated hereby except as
required by applicable Legal Requirements (including any legal obligation imposed on Buyer in
connection with Adelphia’s status as a publicly-held company), without the prior written consent of
the other party. Each party will hold. and Lvill cause its employees. consultants, advisors and agents
to hold the terms of this Agreement in confidence: provided that (a) such party may use and disclose
such information once it has become publicly disclosed (other than by such party in breach of its
obligations under this Section) or which rightfully has come into the possession of such party (other
than from the other party) and (b) to the extent that such party may be compelled by Legal
Requirements to disclose any of such information. but the party proposing to disclose such
information will first notify and consult with the other party concerning the proposed disclosure, to
the extent reasonably feasible. Each party also may disclose such information to employees.
consultants, advisors, agents and actual or potential lenders whose knowledge is necessary to
facilitate the consummation of the transactions contemplated by this Agreement. The obligation by
either party to hold information in confidence pursuant to this Section will be satisfied if such party
exercises the same care with respect to such information as it would exercise to preserve the
confidentiality of its own similar information.
\
-
7.10.2 All information concerning the Business, Assets or Purchased Shares obtained
by Buyer or its Affiliates pursuant to or in connection with negotiation of this Agreement will be used
by Buyer and its Affiliates solely for purposes related to this Agreement and, in the case of non-public
information, will, except as may be required for the performance of this Agreement or by Legal
Requirement, be kept in strict confidence by Buyer and its Affiliates in accordance with the terms of
the letter agreement dated April 26. 2000 among Daniels & Associates. L.P., Seller and Adelphia.
32
which letter agreement is hereby incorporated in this Agreement by reference. Any breach of such
letter agreement will be deemed a material breach of this Agreement.
7.11 Credit Facilitv. At or prior to the Closing, Buyer will, at its expense, (a) take such
actions reasonably requested by Seller to permit Seller to procure from the lenders under the Credit
Facility a written waiver, in form and substance reasonably satisfactory to Buyer and the Sellers, that
(i) will permit the transactions contemplated by this Agreement to be consummated without an event
of default or acceleration thereunder being caused thereby and (ii) will permit the sale and transfer
of the Purchased Shares as contemplated by this Agreement and the receipt by the Sellers of the Base
Purchase Price therefor and adjustments thereto free and clear of any Encumbrances or other
restrictions and (b) cause the Seller and CBS1 to be released from all of their respective obligations
under the Credit Facility, including obligations arising under the Daniels Pledge Agreement and the
Guaranties (each as defined in the Credit Facility), whether by substitution of parties or refinancing
of all of DCI’s and CBSI’s existing indebtedness for borrowed money under the Credit Facility, or
otherwise. Seller will use commercially reasonable efforts to cooperate with Buyer in connection
with the foregoing.
7.12 Environmental Assessment of the Office ProDerties.
7.12.1 Seller acknowledges and agrees that Buyer may commission. at Buyer’s cost
and expense. a so-called “Phase I” environmental site assessment of the Office Properties (a “Phase
I Assessment”). If the Phase I Assessment or any other information known to Buyer (including
information disclosed in connection with the negotiation of this Agreement or described in the
Schedules hereto) indicates that a so-called “Phase II” assessment or other additional testing or
analysis of the Office Properties as the Buyer may deem appropriate (a “Phase II Assessment”) is
advisable, then Buyer may elect to cause its agents or representatives to conduct such testing and
analysis at Buyer’s cost and expense. Seller will use its commercially reasonable efforts to comply
with any reasonable request for information made by Buyer or its agents in connection with any such
investigation. but in no event will Seller be required under this Section 7.12.1 to disclose any
materials constituting attorney-client privileged communications. Seller will afford Buyer and its
agents or representatives access to the Office Properties at all reasonable times and in a reasonable
manner in connection with any such imfestigation. Should Buyer commission such an investigation,
such investigation will have no effect upon the representations and warranties made by Seller to
Buyer under this Agreement except that if any Phase I Assessment or Phase II Assessment uncovers
an environmental condition which then comprises a breach of Seller’s representations or warranties
herein and such breach is capable of being cured. Seller will be deemed not to have breached such
representation or warranty if Seller cures such breach in accordance with the provisions of this
Agreement. Buyer will indemnify. protect. defend, and hold Seller and its personal representatives
free and harmless from and against any and all claims, actions. causes of action, suits, proceedings.
costs, expenses (including reasonable attorneys’ and consultants’ fees and costs), liabilities, damages.
and liens of any type arising directly out of any act or omission of Buyer or any of its representatives
on or about the Office Properties in the course of such investigative activities.
F 7.12.2 All information collected and generated as a result of the environmental due
diligence authorized by Section 7.12.1 will be subject to the terms and conditions of Section 7.10
of this Agreement. Buyer will provide to Seller copies of all draft and final reports, assessments and
33
other information composed or compiled by Buyer’s environmental consultants within five Business
Days after Buyer’s receipt of copies thereof.
7.13 Transitional Billing Services. Seller has requested AT&T Broadband to provide to
Buyer at reasonable rates and to the extent reasonably practicable, access to and the right to use its
accounting and billing systems, software and related fixed assets in connection with the Systems for
a period of up to 180 days following the Closing to allow for conversion of existing billing
arrangements, including billing and related arrangements regarding intemet access services being
provided to customers of the Systems on the Closing Date (“Transitional Billing Services”) and will
cooperate in good faith with Buyer to implement such request. Buyer will notify Seller at least thirty
days prior to the Closing as to whether it desires Transitional Billing Services from AT&T
Broadband.
.?--
7.14 Emolovee Matters. Except as otherwise provided in this Section 7.14, nothing herein
will require Buyer to continue the employment of any employees of the Companies for any period of
time following the Closing. Within 30 days after representatives of Buyer meet with the Companies’
employees to discuss employment opportunities with Buyer following the Closing, Seller will provide
to Buyer a list of all employees of DCI. DHS and CBSI, and will designate those employees that are
not available for continued employment with Buyer following the Closing. Within a reasonable
period of time following the receipt of such list and not less than 60 days prior to the Closing Date.
Buyer will provide Seller with written notice of which of the available employees of the Companies
that Buyer intends to retain following the Closing (the “Assumed Employees”). Seller will cause the
Companies to terminate the employment of all employees that are not Assumed Employees on or
prior to the Closing Date.
7.15 Filing and Maintenance of Relristration and Listing of Share Consideration.
7.15.1 Prior to the Closing, Adelphia will:
(4 prepare and file with the SEC a Registration Statement as described in Section
6.8 covering the registration of the disposition by Seller of the Share Consideration and cause
such Registration Statement to become effective:
(b) furnish at Adelphia’s expense to Seller such number of copies of a preliminary,
final. supplemental or amended prospectus. in conformity with the requirements of the
Securities Act and the rules and regulations promulgated thereunder. as may reasonably be
required in order to facilitate the disposition of the Share Consideration by Seller; and
.
(c> register or qualify the disposition by Seller of the Share Consideration under the
Blue Sky Laws of such ofthe 50 United States and the District of Columbia as is practical after
commercially reasonable efforts to do so.
7.15.2 Following the Closing. Adelphia will:
(4 prepare and file with the SEC such amendments and supplements to the
Registration Statement described in Section 7.151 and the prospectus used in connection
34
.
therewith as may be necessary to maintain the effectiveness of such registration and to comply
with the provisions of the Securities Act with respect to the disposition of the Share
Consideration until the earliest of(i) such time as all of the Share Consideration has been
disposed of by Seller (ii) the date which is two years after the Closing Date or (iii) when all
Share Consideration then held by Seller is freely tradeable in a single transaction under Rule
144 under the Securities Act. Adelphia shall use its commercially reasonable efforts to keep
the Registration Statement continuously effective for the period described above to ensure that
it is available for sales of the Share Consideration;
(W use its commercially reasonable efforts to maintain the applicable registration
or qualification of the Share Consideration for sale under the Blue Sky Laws in such of the
50 United States and the District of Columbia as Seller shall reasonably request, (provided
that Adelphia shall not be obligated to qualify as a foreign corporation to do business under
the laws of any jurisdiction in which it is not then qualified or to file any general consent to
service of process);
cc> maintain the listing of Adelphia Class A Common Stock on the NASDAQ
National Market System or a similar trading market or exchange for as long as such
Registration Statement is required to remain in effect under Section 7.15(a);
(4 advise the Seller after Adelphia shall receive notice or otherwise obtain
knowledge ofthe issuance ofany order b>, the Commission suspending the effectiveness of the
Registration Statement or amendment thereto or of the initiation or threatening of any
proceeding for that purpose. and promptly use its commercially reasonable efforts to prevent
the issuance of any stop order or to obtain its ivithdrawal promptly if such stop order should
be issued:
W Adelphia Lvill notie Seller ofthe happening ofany event during the period that
the Registration Statement is effective ivhich makes any statement made in such Registration
Statement or the related prospectus untrue in any material respect or which requires the
making of any changes in such Registration Statement or prospectus so that, as of such date:
the statements therein are not misleading in any material respect and do not omit to state a
material fact required to be stated therein or necessary to make the statements therein not
misleading (which advice Lvill be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made. as to which Seller hereby agrees to so
suspend any such use) and consistent with Adelphia’s past practices, prepare a supplement or
post-effective amendment to the Registration Statement or the related prospectus or any
document incorporated by reference therein so that such prospectus will not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein. in light of the circumstances under which they were
made. not misleading.
(f) within three Business Days following a written request of Buyer, which request
is accompanied by a share certificate or certificates evidencing all or any portion of the Share
Consideration. reissue the shares evidenced by such certificate or certificates in one or more
35
certificates representing the same number of aggregate shares and in such denominations as
Seller requests, provided that Seller has supplied Adelphia with all reasonably requested legal
opinions and other documentation regarding such transfer or reissuance; and
(g) give the transfer agent of the Adelphia Class A Common Stock instructions to
remove all applicable legends from certificates evidencing the Share Consideration ifand when
the Share Consideration becomes subject to Rule 144(k) under the Securities Act.
7.15.3 Seller will promptly notify Adelphia in writing of any sales or
transfers of the Share Consideration made pursuant to any Registration Statement filed pursuant to
this Agreement, and, if requested, will do so in such form of notices or letters of representation to
Adelphia and its transfer agent as Adelphia shall reasonably require or request. The rights of Seller
under this Section 7.15 will not be assignable or transferable to any third party other than the
Permitted Transferee (as set forth in the Put Agreement) without the prior express written consent
of Adelphia.
It shall be a condition precedent to the obligation of Adelphia to take any action with respect to the
initial filing of the Registration Statement and maintaining the effectiveness of the Registration
Statement including the obligations set forth in this Section 7.15, that Seller will furnish to Adelphia
such information regarding the Share Consideration and the intended method of disposition thereof
as Adelphia reasonably requests and as is required in connection with the action taken by Adelphia,
including without limitation the information required by Items 507 and 508 ofRegulation S-K under
the Securities Act. Adelphia may reasonably rely upon any such information so furnished by Seller.
Section 8. Conditions Precedent
8.1 Conditions to the Obliaations of Buver and Seller. The obligations of each party to
consummate the transactions contemplated by this Agreement are subject to the satisfaction, at or
before the Closing, of the following. which ma>’ be ivaived by the parties in writing to the extent
permitted by applicable Legal Requirements:
8.1.1 HSR Act Filings. All filings required under the HSR Act have been made and
the applicable waiting period has expired or been earlier terminated without the receipt of any
objection.
8. I .2 Absence of Legal Proceedincs. No judgment has been entered and not vacated
by any Governmental Authority and no Legal Requirement has been enacted, promulgated or issued
or become or deemed applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority. which would prevent or make illegal the purchase and sale ofthe Purchased
Shares contemplated by this Agreement.
8.2 Conditions to the Obligations of Buver. The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at or before the Closing,
of the following conditions, which may be waived by Buyer in writing (or in the case of Sections
36
,- 8.2.6 and 8.2.9, deemed waived under such Sections) to the extent permitted by applicable Legal
Requirements:
8.2.1 Reuresentations and Warranties. The representations and warranties of Seller
in this Agreement, without giving effect to any references to or qualifications based on Material
Adverse Effect or materiality contained therein, will be true, complete and correct in all respects, at
and as of the Closing with the same effect as if made at and as of the Closing, except for any
representation or warranty which is made as of a specified date, which representation or warranty will
be so true and correct as of such specified date; provided, this condition will be deemed satisfied if
all such untrue or incorrect representations and warranties in the aggregate, do not have a Material
Adverse Effect.
8.2.2 Performance of Agreements. Seller has performed in all material respects all
obligations and agreements and complied in all material respects with all covenants and conditions
in this Agreement and any Transaction Document to be performed or complied with by Seller at or
before the Closing.
8.2.3 Deliveries. Seller has delivered the items and documents required to be
delivered by it pursuant to this Agreement, including those required under Section 9.2.
.C
8.2.4 Consents. Seller has delivered to Buyer evidence, in form and substance
satisfactory to Buyer, that all ofthe Required Consents marked with an asterisk on Schedule 5.3 have
been obtained or given (or deemed to have been given) and are in full force and effect;provided that
this condition, to the extent it relates to required approvals and consents of Governmental Authorities
for cable franchises. will be deemed to be satisfied when (i) with respect to cable franchises which
represent, in aggregate, not less than 90% of the Equivalent Basic Subscribers of the Systems (as
determined by reference to the estimated Equivalent Basic Subscribers per franchise set forth on
Schedule 8.2.4). such approvals and consents (A) have been received, or (B) are deemed to have
been received in accordance with Section 617 of the Communications Act (47 U.S.C. Section 537).
or(C) are not required under the applicable franchise, and (ii) any applicable waiting period (including
extensions thereof) has expired with respect to the FCC Form 394 filed in connection with the
requests for consent to the transfer of the cable franchises for which required approvals and consents
have not then been obtained.
8.2.5 No Material Adverse Effect. Since December 3 1. 1999, no event has occurred
which has had, or is reasonably likely to result in, a Material Adverse Effect.
.
-
8.2.6 Environmental Assessments. No environmental audit or assessment conducted
by Buyer with respect to the Office Properties, a copy of which is provided to Seller within 120 days
after the Effective Date along with a written notice of Buyer’s intent to exercise its rights under this
Section 8.2.6. will have indicated the presence thereon of Hazardous Substances of a kind or in a
quantity as could reasonably be expected to give rise to a liability in excess of $1 ,OOO,OOO, other than
environmental matters with respect to which Seller has committed in writing to remediate as promptly
as practicable after the Closing Date or to indemnify Buyer (which indemnity will not be subject to
the indemnification cap set forth in the penultimate sentence of Section 11.6). If Buyer fails to notify
37
Seller of its intent to exercise its rights under this Section 8.2.6 within the 120-day period described
above, then the condition to Closing described in this Section 8.2.6 will be deemed irrevocably
waived.
8.2.7 Real Propertv Transfer. The transfer of the Office Properties to DC1 and DHS
as contemplated in Section 4.1 is occurring on the date of and immediately prior to the Closing as
contemplated in Section 4.1, and the Title Policies will issue concurrently therewith in accordance
with Section 4.1.4.
8.2.8 UCC Lien Search Results. Seller has delivered to Buyer, at Seller’s expense.
at least two weeks prior to the Closing Date, lien searches dated not more than 40 days prior to the
Closing Date showing all UCC- 1 financing statements filed with any tiling offices applicable to the
Service Areas wherein Seller, DCI, DHS or CBS1 is named a debtor, all federal, state or local tax
liens filed against the Seller, DCI, DHS or CBSI, all recorded mortgages naming Seller, DCI, DHS
or CBS1 as a mortgagor, all unsatisfied judgments naming Seller, DCI, DHS or CBSI as a judgment
debtor and all pending litigation in which Seller, DCI, DHS or CBS1 is a defendant.
_-
8.2.9 Draft Financial Statements. No differences exist between the Draft Financial
Statements and the Audited Financial Statements, which differences are identified by Buyer in a
written notice to Seller delivered within 30 days after Buyer’s receipt of the Audited Financial
Statements and, when taken as a whole. have a material adverse effect on the value of the Business.
If Buyer fails to notify Seller of its intent to exercise its rights under this Section 8.2.9 within the 30-
day period described above, then the condition to Closing described in this Section 8.2.9 will be
deemed irrevocably waived.
8.3 Conditions to Oblications of Seller. The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject to the satisfaction by Seller at or before the
Closing, of the following. which may be \vai\fed by Seller in writing to the extent permitted by
applicable Legal Requirements:
8.3.1 Renresentations and \Varranties. The representations and warranties of Buyer
in this Agreement, without giving effect to any references to or qualifications based on Material
Adverse Effect or materiality contained therein. will be true. complete and correct in all respects, at
and as of the Closing with the same effect as if made at and as of the Closing, except for any
representation or warranty which is made as of a specified date, which representation or warranty will
be so true and correct as of such specified date: provided, this condition will be deemed satisfied if
all such untrue or incorrect representations and warranties in the aggregate, do not have a Material
Adverse Effect.
. 8.3.2 Performance of Apreements. Buyer has performed in all material respects all
obligations and agreements, and complied in all material respects with all covenants and conditions
in this Agreement and any Transaction Document to be performed or complied with by Buyer at or
before the Closing.
38
8.3.3 Deliveries. Buyer has delivered the payment, items and documents required to
be delivered by it pursuant to this Agreement, including those required under Section 9.3.
8.3.4 Release of Obligations.
(a> All guaranties of the Companies’ obligations made by Seller, Bill
Daniels or any Affiliate of Bill Daniels or Seller have been terminated and released in full; and
@I Seller and CBS1 have been released from all of their respective
obligations under the Credit Facility, including obligations arising under the Daniels Pledge
Agreement and the Guaranties (each as defined in the Credit Facility).
8.3.5 Effectiveness of Registration Statement and Listing. Each of the shares
comprising the Share Consideration is subject to an effective Registration Statement, registered or
qualified for sale under the Blue Sky Laws in such of the 50 United States and the District of
Columbia as Seller reasonably requests, and listed and freely tradeable on the NASDAQ National
Market System.
8.4 Waiver of Conditions. Any party may waive in writing any or all of the conditions to
its obligations under this Agreement.
ic‘ Section 9. Closing.
9.1 The Closing: Time and Place. The parties agree to close the transactions contemplated
by this Agreement within 10 days after all the conditions to Closing have been satisfied or waived
(other than those based on acts to be performed at the Closing); provided that if Closing would
otherwise occur under this Section 9.1 during the month of December 2000. then the Closing will
occur on January 5, 2001. Subject to the provisions of the immediately preceding sentence, the
Closing will take place on such date and at such time as is designated by either party in a written
notice to the other delivered at least five Business Days prior to such designated date. The Closing
will be held at 9:00 a.m. local time at Seller’s counsel’s office located at 633- 17th Street. Suite 3000.
Denver. Colorado 80202. or at such place and time as Buyer and Seller may agree.
9.2 Seller’s Deliverv Oblieations. At the Closing. Seller will deliver (or cause to be
delivered) to Buyer the following:
(4 certificates representing the Purchased Shares, duly endorsed in blank
or accompanied by duly executed stock powers in blar?k in form acceptable for transfer on the books
of the applicable Company;
(b) the corporate stock and minute books of each Company;
Cc) a certificate. dated the Closing Date. signed by an authorized Person
on behalf of Seller, stating that to Seller’s kno\vledge. the conditions set forth in Sections 8.2.1 and
8.2.2 are satisfied;
39
(4 Good Standing Certificates from the Secretary of State of each
Company’s incorporation, and certificates from each foreign jurisdiction in which each Company is
qualified to conduct business;
Cd Articles of Incorporation, as amended, certified as of a recent date by
the Secretary of State of each Company’s incorporation;
03 an opinion from Cole, Raywid and Braver-man, L.L.C., FCC counsel
for Seller, DC1 and DHS, dated the Closing Date and substantially in the form attached hereto as
Exhibit B; and an opinion from Sherman & Howard L.L.C., counsel for Seller, dated the Closing
Date and substantially in the form attached hereto as Exhibit C; and
(g) such other documents as Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
9.3 Buver’s Deliverv Obligations. At the Closing, Buyer will deliver (or cause to be
delivered) to Seller the following:
ta> the Cash Consideration required to be paid at the Closing. as adjusted
in accordance with this Agreement;
-- ‘3) unless the Share Consideration Value is zero, a certificate or certificates
representing the Share Consideration. which certificates will be in denominations aggregating to the
full Share Consideration as requested by Seller at least three Business Days prior to Closing:
cc> unless the Share Consideration Value is zero. a Put Agreement in the
form attached as Exhibit A. duly executed by the Put Obliger;
(4 a certificate. dated the Closing Date. signed by an executive officer of
Buyer, stating that to Buyer’s knowledge. the conditions set forth in Sections 8.3.1 and 8.3.2 are
satisfied; and
63 such other documents as Seller may reasonably request in connection
with the transactions contemplated by this Agreement.
Section 10. Termination.
10.1 Termination Events. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned:
. 10.1.1 At any time by the mutual written agreement of Buyer and Seller;
10.1.2 By either party at any time upon 30 days prior written notice to the other, if the
- other is in material breach or default of any of its covenants. agreements or other obligations in this
Agreement or in any Transaction Document and fails to cure such breach or default within the 30-day
40
,-, period following such written notice or, if such breach or default is incapable of being cured within
such 30-day period and the defaulting party promptly initiates and diligently pursues such cure to
completion upon receipt of such notice, within a reasonable period of time; or
IO. 1.3 By either party upon written notice to the other, if Closing has not occurred
within 12 months after the Effective Date, for any reason other than a material breach or default by
such party of its respective covenants, agreements or other obligations under this Agreement.
10.2 Effect of Termination. If this Agreement is terminated pursuant to Section 10.1, all
obligations of the parties under this Agreement will terminate, except for the obligations set forth in
Section 12.16. Notwithstanding a party’s right to pursue remedies for breach of contract upon
termination of this Agreement in accordance with Section 10.1, no remedies for breaches of
representations and warranties will be available if this Agreement is terminated pursuant to
Section 10.1.
Section 11. Survival of Representations, Warranties, Covenants and Agreements;
Indemnification.
rC-
.
11.1 Survival of Representations, Warranties, Covenants and Agreements. The
representations, warranties covenants and agreements of Seller in this Agreement (other than
covenants and agreements which by their terms are to be performed after the Closing Date) will
survive until six months after the Closing Date: provided however that representations, warranties.
covenants and agreements of Seller (other than the covenants and agreements which by their terms
are to be performed after the Closing Date) relating to environmental matters will survive for twelve
months after the Closing Date. The representations. \\,arranties. covenants and agreements (other
than the covenants and agreements which by their terms are to be performed after the Closing Date)
of Buyer in this Agreement will survive until six months after the Closing Date. No representation
or warranty contained in any Transaction Document \fill survive the Closing Date. The covenants
and agreements of the parties in this Agreement and in the Transaction Documents to be delivered
by Seller or Buyer pursuant to this Agreement. that are by their terms intended to be performed after
Closing will survive the Closing and Lvill continue in full force and effect in accordance with their
terms. The applicable periods of sun*ival of the representations, warranties, covenants and
agreements prescribed by this Section 11.1 are referred to as the “Survival Period.” The liabilities
ofthe parties under their respective representations. warranties. covenants and agreements will expire
as of the expiration of the applicable Survival Period; provided, however, that such expiration will
not include. extend or apply to any breach of which has been asserted by Buyer in a written notice
to Seller before such expiration or about which Seller has given Buyer written notice before such
expiration indicating that facts or conditions exist that. with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential breach in reasonable
detail).
.C-
11.2 Indemnification bv Seller. Following the Closing, Seller will indemnify and hold
harmless Buyer and its owners. directors. officers. employees, agents, successors and assigns and any
Person claiming by or through any of them. as the case may be. from and against all Losses resulting
from or arising out of (i) any breach of any representation or warranty made by Seller in this
41
,-- Agreement or in the Transaction Documents delivered by Seller, (ii) any breach of any covenant,
agreement or obligation of Seller contained in this Agreement or in the Transaction Documents
delivered by Seller and (iii) any liability or obligation relating to or arising under any of the Excluded
Assets.
11.3 Indemnification bv Buyer. Following the Closing, Buyer will indemnify and hold
harmless Seller and Seller’s personal representatives, directors, officers, employees, agents, successors
and assigns, and any Person claiming by or through any of them, as the case may be, from and against
all Losses resulting from or arising out of(i) any breach of any representation or warranty made by
Buyer in this Agreement or in the Transaction Documents delivered by Buyer, and (ii) any breach of
any covenant, agreement or obligation of Buyer contained in this Agreement or in the Transaction
Documents delivered by Buyer.
rC--
11.4 Indemnification bv Buyer for Securities Matters. Following the Closing, Buyer will
indemnify and hold harmless Seller and Seller’s personal representatives, directors, officers,
employees, agents, successors and assigns, and any Person claiming by or through any of them, as
the case may be, from and against all Losses resulting from or arising out of or under (a) any breach
of any representation or warranty made by Buyer contained in Sections 6.8, 6.9 and 6.10, (b) any
breach of any covenant, agreement or obligation of Buyer contained in Section 7.15, and (c) the
Securities Act, Securities Exchange Act of 1934. as amended (the “Exchange Act”), Blue Sky Laws,
common law or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, any prospectus contained therein or in any post-effective amendments or
supplements thereto, (ii) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (iii) any violation by Buyer of the Securities Act, the
Exchange Act or Blue Sky Laws, and Buyer will reimburse each such Person for any reasonable fees
and expenses of outside legal counsel for such Persons., or other expenses reasonably incurred by
them, as incurred, in connection with investigating or defending any such claims; provided,
however, that Buyer will not indemnify or hold harmless any Person from or against any such
Losses (including any related expenses) to the extent such Losses (including any related expenses)
result from (i) an untrue statement, omission or allegation thereof which was (x) made in reliance
upon and in conformity with written information provided by or on behalf of such Person
specifically and expressly for use or inclusion in the Registration Statement or applicable prospectus
or (y) made in any prospectus used by such Person after such time as Adelphia advised such Person
that the filing of a post-effective amendment or supplement thereto was required, except that this
proviso will not apply if the untrue statement, omission, or allegation thereof is contained in such
prospectus as so amended or supplemented or (ii) the reckless or willful misconduct of such Person.
Such indemnity will remain in full force and effect regardless of any investigation made by or on
. behalf of the Seller and Seller’s personal representatives, directors, officers, employees, agents.
successors and assigns and will survive the transfer of such securities by the Seller. If the
indemnification provided for in clause (c) above is unavailable or insufficient to hold the indemnified
Persons thereunder harmless in respect of any Losses referred to therein for any reason other than - as specified therein, then Buyer will contribute to such Persons the amount paid or payable by them
as a result of such Losses in such proportion as is appropriate to reflect the relative fault of Buyer,
42
on the one hand, and the indemnified Persons, on the other, in connection with the statements or
omissions which resulted in such Losses, as well as any other relevant equitable considerations. The
amount paid or payable by an indemnified Person as a result of the Losses referred to above will be
deemed to include any legal or other expenses reasonably incurred by such indemnified Person in
connection with the investigating or defending any such action or claim. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 1 l(f) of the Securities Act) will be
entitled to contribution from any Person who is not guilty of such fraudulent misrepresentation.
In the event that an indemnified item arises under both Section 11.3 and under this Section 11.4,
Seller’s rights to indemnification will be deemed to arise under this Section 11.4.
11.5 Third Party Claims. Promptly after the receipt by any party of notice of any claim.
action, suit or proceeding by any Person who is not a party to this Agreement (collectively, an
“Action”), which Action is subject to indemnification under this Agreement, such party (the
“Indemnified Party”) wilI give reasonable written notice to the party from whom indemnification is
claimed (the “Indemnifying Party”). The Indemnified Party will be entitled, at the sole expense and
liability of the Indemnifying Party, to exercise full control of the defense, compromise or settlement
of any such Action unless the Indemnifying Party, within a reasonable time after the giving of such
notice by the Indemnified Party, (a) admits in writing to the Indemnified Party the Indemnifying
Party’s liability to the Indemnified Party for such Action under the terms of this Section 11, (b)
notifies the Indemnified Party in writing of the Indemnifying Party’s intention to assume such defense,
(c) provides evidence reasonably satisfactory to the Indemnified Party of the Indemnifying Party’s
ability to pay the amount, if any, for which the Indemnified Party may be liable as a result of such
Action and (d) retains legal counsel reasonably satisfactory to the Indemnified Party to conduct the
defense of such Action. The other party will cooperate with the party assuming the defense.
compromise or settlement of any such Action in accordance with this Agreement in any manner that
such party reasonably may request. If the Indemnifying Party so assumes the defense of any such
Action, the Indemnified Party will have the right to employ separate counsel and to participate in (but
not control) the defense. compromise or settlement of the Action, but the fees and expenses of such
counsel will be at the expense of the Indemnified Party unless (i) the Indemnifying Party has agreed
to pay such fees and expenses. (ii) any relief other than the payment of money damages is sought
against the Indemnified Party or (iii) the Indemnified Party will have been advised by its counsel that
there may be one or more defenses available to it which are different from or additional to those
available to the Indemnifying Party. and in any such case that portion ofthe fees and expenses of such
separate counsel that are reasonably related to matters covered by the indemnity provided in this
Section 11 will be paid by the Indemnifying Party. No Indemnified Party will settle or compromise
any such Action for which it is entitled to indemnification under this Agreement without the prior
written consent of the Indemnifying Party, unless the Indemnifying Party has failed, after reasonable
notice. to undertake control of such Action in the manner provided in this Section 11.5. No
Indemnifying Party will settle or compromise any such Action (A) in which any relief other than the
payment of money damages is sought against any Indemnified Party or (B) in the case of any Action
relating to the Indemnified Party’s liability for any Tax, if the effect of such settlement would be an
increase in the liability of the Indemnified Party for the payment of any Tax for any period, unless the
Indemnified Party consents in writing to such compromise or settlement.
43
11.6 Limitations on Indemnification - Seller. Seller will not be liable for indemnification
arising under Section 11.2 for any Losses of or to Buyer or any other person entitled to
indemnification from Seller unless the amount of such Losses for which Seller would, but for the
provisions of this Section 11.6, be liable exceeds, on an aggregate basis, $550,000, in which case
Seller will be liable for all such Losses in excess of such amount, which excess will be due and payable
within 15 days after Seller’s receipt of a statement therefor. Seller will tiher not be liable for
Buyer’s punitive damages. The maximum aggregate amount that Seller will be required to pay for
indemnification arising under Section 11.2 in respect of all claims by all indemnified parties is an
amount equal to 10% of the System Purchase Price. Notwithstanding the preceding, neither the
minimum nor maximum limits specified in this Section 11.6 will apply to (i) the obligation to pay
post-Closing adjustments pursuant to Section 3.3, (ii) the obligations of Seller under Section 4.3 with
respect to Excluded Assets and liabilities related thereto and (iii) the obligations of Seller under
Section 7.6.
11.7 Limitations on Indemnification - Buver. Buyer will not be liable for indemnification
arising under Section 11.3 for any Losses of or to Seller or any other person entitled to
indemnification from Buyer unless the amount of such Losses for which Buyer would. but for the
provisions of this Section 11.7, be liable exceeds, on an aggregate basis, $550,000, in which case
Buyer will be liable for all such Losses in excess of such amount, which excess will be due and
payable within 15 days after Buyer’s receipt of a statement therefor. Buyer will further not be liable
for Seller’s punitive damages. The maximum aggregate amount that Buyer will be required to pay
for indemnification arising under Section 11.3 in respect of all claims by all indemnified parties is an
amount equal to 10% of the System Purchase Price. Notwithstanding the preceding, neither the
minimum nor maximum limits specified in this Section 11.7 will apply to (i) the obligation to pay
post-Closing adjustments pursuant to Section 3.3. to (ii) Adelphia’s obligations under Section 3.4
or to (iii) indemnification arising under Section 11.4.
11.8 Nonrecourse. Except as expressly provided in this Article 11. it is expressly understood
and agreed by the parties hereto that each and every representation, warranty. covenant, agreement
and obligation made in this Agreement \vas not made nor intended to be made as a representation.
warranty. covenant, agreement or obligation on the part of any incorporator. stockholder, director.
officer, partner. employee, trustee. personal representative or agent, past, present or future. or any
of them. of Seller, DCI, DHS, CBS1 or Buyer and any recourse on account of any representations,
warranties, covenants, agreements or obligations made in this Agreement, whether in common law.
in equity, by statute or otherwise. against any such incorporator, stockholder, director. officer,
partner, employee. trustee, personal representative or agent of Seller. DCI, DHS, CBS1 or Buyer is
hereby forever waived and released.
.
11.9 Sole Remedv. Each party acknowledges and agrees that, should the Closing occur, its
sole and exclusive remedy against the other with respect to any breach of representation. warranty.
covenant, agreement or obligation will be pursuant to the indemnification provisions set forth in this
Section 11.
Section 12. Miscellaneous.
,-
.
12.1 Parties Obligated and Benefitted. Subject to the limitations set forth below, this
Agreement will be binding upon the parties and their respective assigns and successors in interest and
will inure solely to the benefit of the parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this Agreement. Without the
prior written consent of the other party, neither party may assign any of its rights under this
Agreement or delegate any of its duties under this Agreement; provided, however, that Buyer may
assign this Agreement to one or more of Adelphia’s Affiliates, without the prior written consent of
Seller, provided Buyer remains primarily liable to fully perform the terms of this Agreement and such
assignment will not hinder or delay the Closing or increase Seller’s costs or expenses in connection
therewith.
12.2 Notices. All notices and communications hereunder will be in writing and will be
deemed to have been duly given to a parry when delivered in person, faxed (with confirmation) or
three Business Days after such notice is enclosed in a properly sealed envelope, certified or registered.
and deposited (postage and certification or registration prepaid) in a post office or collection facility
regularly maintained by the United States Postal Service, or one Business Day after delivery to a
nationally recognized overnight courier service. and addressed as follows:
To Seller at:
c/o Daniels Communications. Inc.
3200 Cherry Creek South Drilre. Suite 500
Denver. Colorado 80209
Attention: Kenneth Farabee. Esq.
Facsimile: (303) 778-5500
With a copy (which \vill not constitute notice) to:
Sherman & Holvard LLC
633 Seventeenth Street
Denver. Colorado 80202
Attention: Arlene S. BobroLv. Esq./Gregory J. Ramos, Esq.
Facsimile: (303) 298-0940
To either Buyer at:
c/o Adelphia Communications Corporation
One North Main Street
Coudersport, PA 169 15
Attention: Colin Higgin. Esq.
Facsimile: (8 14) 274-6586
With a copy (which will not constitute notice) to:
Buchanan Ingersoll Professional Corporation
One Oxford Centre
301 Grant Street, 20th Floor
Pittsburgh, PA 15219
Attention: Bruce I. Booken, Esq.
Facsimile: (412) 562-1041
Any party may change the address to which notices are required to be sent by giving notice of such
change in the manner provided in this Section 12.2. Any notice of a change of address will be
effective only upon actual receipt.
12.3 Right to SDecific Performance. Each party acknowledges that the unique nature of the
transactions contemplated by this Agreement and the circumstances under which this Agreement has
been entered into renders money damages for a breach of the parties’ respective obligations to
consummate the transactions contemplated by this Agreement an inadequate remedy, and the parties
agree that either party will be entitled to pursue specific performance as a remedy for such breach
without the requirement of posting a bond or other security therefor.
12.4 Waiver. This Agreement or any of its provisions may not be waived except in writing.
The failure of any party to enforce any right arising under this Agreement on one or more occasions - will not operate as a waiver of that or any other right on that or any other occasion.
12.5 Cautions. The captions of this .4greement are for convenience only and do not
constitute a part of this Agreement.
12.6 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES
UNDER IT WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO THE CONFLICTS OF LAWS RULES OF DELAWARE.
12.7 Terms. Terms used \vith initial capital letters will have the meanings specified.
applicable to both singular and plural forms, for all purposes ofthis Agreement. The word “include”
and derivatives of that word are used in this Agreement in an illustrative sense rather than limiting
sense.
.
12.8 Rights Cumulative. All rights and remedies ofeach ofthe parties under this Agreement
will be cumulative. and the exercise of one or more rights or remedies will not preclude the exercise
of any other right or remedy available under this Agreement or applicable law.
12.9 Further Actions. Seller and Buyer will execute and deliver to the other, from time to
time at or after the Closing, for no additional consideration and at no additional cost to the requesting
c- party, such further assignments. certificates. instruments, records, or other documents. assurances
or things as may be reasonably necessary to give full effect to this Agreement and to allow each party
fully to enjoy and exercise the rights accorded and acquired by it under this Agreement.
46
12.10 Time. Time is of the essence under this Agreement. If the last day permitted for the
giving of any notice or the performance of any act required or permitted under this Agreement falls
on a day which is not a Business Day, the time for the giving of such notice or the performance of
such act will be extended to the next succeeding Business Day.
12.11 Late Pavments. If either party fails to pay the other any amounts when due under this
Agreement, the amounts due will bear interest from the due date to the date of payment at the annual
rate publicly announced from time to time by Bank of America National Trust and Savings
Association in San Francisco, California, as its “reference rate” (the “Prime Rate”) plus two
percentage points per annum, adjusted as and when changes in the Prime Rate are made.
12.12 Counteroarts. This Agreement may be executed in counterparts, each of which will be
deemed an original.
12.13 Entire Agreement. This Agreement (including the Schedules referred to in this
Agreement, which are incorporated in and constitute a part of this Agreement) and the Transaction
Documents contain the entire agreement of the parties and supersedes all prior oral or written
agreements and understandings with respect to the subject matter (other than the Confidentiality
Agreement referred to in Section 7.10). This Agreement may not be amended or modified except
by a writing signed by the parties.
,- 12.14 Severabilitv. Any term or provision ofthis Agreement which is invalid or unenforceable
will be ineffective to the extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining rights of the Person intended to be benefitted by such provision or any
other provisions of this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer and Seller and their
respective legal counsel. and legal or equitable principles that might require the construction of this
Agreement or any provision of this Agreement against the party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.
13.16 Expenses. Except as othenvise expressly provided in this Agreement, each party will
pay all of its expenses. including attorneys’ and accountants’ fees. in connection with the negotiation
of this Agreement. the performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
12.17 Svstems’ Financial Statements. Seller hereby consents to the inclusion by Buyer of the
Systems financial statements. if required to be so included by Buyer. in any report required to be filed
by Adelphia with the Securities and Exchange Commission (“SEC”), National Association of
Securities Dealers’ Automated Quotations (“NASDAQ”) System or any stock exchange pursuant to
applicable law, rule or regulation, including the Securities Act or the Exchange Act. All accounting
costs and fees incurred by reason of the reformatting of the Systems’ financial statements in
connection with the inclusion by Adelphia of the Systems’ financial statements in any such report will
be borne by Buyer. Upon the request of Buyer. Seller agrees to promptly prepare (not later than
thirty (30) days after the date of such request) such financial statements relating to the Systems as
may be required to be riled by Adelphia with the SEC. NASDAQ or any stock exchange. All
17
accounting costs and fees incurred by reason of the preparation of such financial statements will be
borne by Buyer. Seller agrees to request, and use commercially reasonable efforts at no out-of-
pocket cost to Seller to obtain, the consent of the independent public accountants of Seller to the
inclusion of the Systems’ financial statements in any report required to be filed by Adelphia with the
SEC, NASDAQ System or stock exchange. However, Buyer acknowledges that Seller obtains
accounting services through the DCI/AT&T Broadband Agreement and the DHSIAT&T Broadband
Agreement, that such services include the audit of the Seller’s financial statements by independent
public accountants engaged by AT&T Broadband, and that Seller has no relationship with such
independent public accountants.
[the remainder of this page has intentionally been left blank]
-
.
48
written.
The parties have executed this Acquisition Agreement as of the day and year first above
SELLER:
ESTATE OF BILL DANIELS
By: The Personal Representatives of the Estate of Bill
Daniels
By:
By:
By:
By:
By:
By:
By:
BUYER:
John (Jack) Wilson Daniels
John Saeman
Linda Childears
H. DeWitt Mitchell
Kenneth Farabee
Brian Deevy
Robert C. Russo
ADELPHIA COMMUNICATIONS CORPORATION
By:
Name:
ADELPHIA CALIFORNIA CABLEVISION, LLC
By: ACC Operations, Inc., its sole member
By:
Name:
SCHEDULE 1.17
CARLSBAD SYSTEM AND CBS1
EXCLUDED ASSETS
1. Amended and Restated Management Agreement dated l/1/96 between Daniels
Cablevision, Inc. and Desert Hot Springs Cablevision, Inc.
2. ASCAP license benefits. (No Agreement exists- the Company receives the benefit of this
as an Affiliate of AT&T Broadband, LLC.)
3. HITS benefits. (No Agreement exists- the Company receives the benefit of this through
an arrangement with AT&T Broadband, LLC, which arrangement will terminate upon the
Closing.)
4. ATT TCI Tariff 12. (No Agreement exists- the Company receives the benefit of this through
an arrangement with AT&T Broadband, LLC, which arrangement will terminate upon the
Closing.)
5. The benefits of the Restated and Amended TCI Master Subscriber Management System
Agreement between CSG Systems, Inc. and TCI Cable Management Corporation dated 8/10/97.
as indicated by letters dated 4122199 and 5/l 5199, and the First and Third Amendments.
6. IBM/TCI Maintenance Agreement benefits. (No Agreement exists- the Company
receives the benefit of this through an arrangement with AT&T Broadband, LLC, which
arrangement will terminate upon the Closing.)
7. The benefits of the National Cable Communications Advertising Agreement. (No
Agreement exists- the Company receives the benefit of this through an arrangement with AT&T
Broadband, LLC, which arrangement will terminate upon the Closing.)
8. Satellite Services, Inc. (“SSI”)Agreement benefits. (No Agreement exists- the Company
receives the benefit of this through an arrangement with AT&T Broadband, LLC, which
arrangement will terminate upon the Closing.)
9. The benefits of the TV Guide Distribution Agreement. (No Agreement exists- the
Company receives the benefit of this through an arrangement with AT&T Broadband, LLC,
which arrangement will terminate upon the Closing.) .
Carisbad System
10. Any other Agreement with AT&T Broadband, LLC and/or any of its Affiliates (including
without limitation, the At Home Network Solutions, Inc. Distribution Agreement), but excepting
the Facilities Agreement with TCG San Diego (nka AT&T Local Services).
11. Any other Agreement with Seller, the Company, or any Affiliate of the Company (other
than Cablevision Business Services, Inc.) other than the lease between Bill Daniels, LLC and the
Company for the La Costa AML site.
.
Carlsbad System
SCHEDULE 1.17
DESERT HOT SPRINGS SYSTEM
EXCLUDED ASSETS
1. Amended and Restated Management Agreement dated l/1/96 between Daniels Cablevision,
Inc. and Desert Hot Springs Cablevision, Inc.
2. Agreement dated 12/29/-(99) between Daniels Cable and Credit Management, Inc. (for
collection services rendered to the Company.)
3. ASCAP license benefits. (No Agreement exists- the Company receives the benefit of this
through an arrangement with AT&T Broadband, LLC, which arrangement will terminate upon the
Closing.)
4. HITS benefits. (No Agreement exists- the Company receives the benefit of this through an
arrangement with AT&T Broadband, LLC, which arrangement will terminate upon the Closing.)
5. ATT TCI Tariff 12. (No Agreement exists- the Company receives the benefit of this through
an arrangement with AT&T Broadband, LLC, which arrangement will terminate upon the Closing.)
_I
6. The benefits of the Restated and Amended TCI Master Subscriber Management System
Agreement between CSG Systems, Inc. and TCI Cable Management Corporation dated 8/l O/97, as
indicated by letters dated 4122199 and 5/l 5199, and the First and Third Amendments.
7. IBM/TCI Maintenance Agreement benefits. (No Agreement exists- the Company receives
the benefit of this through an arrangement with AT&T Broadband, LLC, which arrangement will
terminate upon the Closing.)
8. The benefits of the National Cable Communications Advertising Agreement. (No Agreement
exists- the Company receives the benefit of this through an arrangement with AT&T Broadband.
LLC, which arrangement will terminate upon the Closing.)
9. Satellite Services, Inc. Agreement benefits. (No Agreement exists- the Company receives the
benefit of this through an arrangement Lvith AT&T Broadband, LLC, which arrangement will
terminate upon the Closing.)
10. Any other Agreement with AT&T Broadband, LLC and/or any of its Affiliates, including
wit1 out limitation, the At Home Network Solutions, Inc. Distribution Agreement.
\
-
11. Any other Agreement with Seller, the Company, or any Affiliate ofthe Company (other than
Cablevision Business Services, Inc.)
-
SCHEDULE 1.31
CARLSBAD SYSTEM AND CBS1
PERMITTED ENCUMBRANCES
1. Second Amended and Restated Credit Agreement dated as of 12/16/97 between Bank of
America National Trust and Savings Association and Daniels Cablevision, Inc. and Cablevision
Business Services, Inc.
2. First Amended and Restated Daniels Pledge Agreement dated as of 12/l 6/97 between
Bank of America National Trust and Savings Association and Bill Daniels.
3. CBI Continuing Guaranty executed as of 12/16/97 by Cablevision Business Services, Inc.
for the benefit of the Bank of America National Trust and Savings Association.
4. Various bonds and/or letters of credit posted in the usual course of business, and not
exceeding $100,000 individually or S 1 ,OOO,OOO in the aggregate.
.-
5. Various liens and security interests relating to leases for office equipment (e.g. copiers,
printers, fax and postage machines), propane storage tanks, and a modular trailer located at 5720
El Camino Real, none of which are material in nature.
6. Various liens and encumbrances of record relating to the Carlsbad Office Property as set
forth below:
a. 5720 El Camino Real
1. GENERAL AND SPECIAL COUNTY’ AND/OR CITY TAXES FOR THE
FISCAL YEAR 2000-2001, A LIEN NOT YET PAYABLE.
7 -. GENERAL AND SPECIAL COUNTY AND/OR CITY TAXES FOR THE
FISCAL YEAR 1999-2000 INCLUDING PERSONAL PROPERTY TAX, IF ANY.
FIRST INSTALLMENT: $8,7 14.15 (PAID)
SECOND INSTALLMENT: $8.7 14.15 (PAID)
LAND: $404,408.00
IMPROVEMENTS: $1,225,374.00
EXEMPT: $0.00
CODE AREA: 090 13
PARCEL NO. 209-041-23-00
,-
3. THE LIEN OF SUPPLEMENTAL TAXES, IF ANY, ASSESSED PURSUANT
TO THE PROVISIONS OF CHAPTER 3.5 (COMMENCING WITH SECTION 75) OF THE
REVENUE AND TAXATION CODE OF THE STATE OF CALIFORNIA.
Carlsbad system
4. AN EASEMENT AFFECTING SAID LAND FOR THE PURPOSES STATE1
HEREIN AND INCIDENTAL PURPOSES
IN FAVOR OF: LILLIE KELLY ORTEGA, ET AL
FOR: ROADWAY, POLE LINE AND PIPE LINES
RECORDED: JULY 29,1936 IN BOOK 541, PAGE 244 OF OFFICIAL RECORDS
SAID DEED DOES NOT CONTAIN THE LOCATION OF SAID EASEMENT.
5. THE RIGHT TO EXTEND AND MAINTAIN DRAINAGE STRUCTURES
AND EXCAVATION AND EMBANKMENT SLOPES BEYOND THE LIMITS OF THE
RIGHT OF WAY GRANTED THEREIN WHERE REQUIRED FOR CONSTRUCTION AND
MAINTENANCE
GRANTED TO: COUNTY OF SAN DIEGO
RECORDED: NOVEMBER 5, 1969 AS FILE NO. 203562 OF OFFICIAL RECORDS
6. THE FACT THAT THE OWNERSHIP OF SAID LAND DOES NOT INCLUDE
ANY RIGHT OF INGRESS OR EGRESS TO OR FROM THE HIGHWAY CONTIGUOUS
THERETO, SAID RIGHT HAVING BEEN RELINQUISHED BY DEED
TO: EL CAMINO REAL
RECORDED: JULY 6,1973 AS FILE NO. 73- 186934 OF OFFICAL RECORDS. .-
AND RE-RECORDED SEPTEMBER 13, 1973 AS FILE NO. 73-258164 OF OFFICAL
RECORDS.
7. AN EASEMENT AFFECTING SAID LAND FOR THE PURPOSES STATED
HEREIN AND INCIDENTAL PURPOSES
IN FAVOR OF: SAN DIEGO GAS AND ELECTRIC COMPANY
FOR: PUBLIC UTILITIES, INGRESS AND EGRESS
RECORDED: MARCH 12. 198 1 AS FILE NO. 8 I-075374 OF OFFICAL RECORDS
SAID DEED DOES NOT CONTAIN THE LOCATION OF SAID EASEMENT.
8. AN EASEMENT AFFECTING SAID LAND FOR THE PURPOSES STATED
HEREIN AND INCIDENTAL PURPOSES
IN FAVOR OF: COSTA REAL MUNICIPAL WATER DISTRICT
FOR: PIPELINE(S)
RECORDED: APRIL 3, 198 1 AS FILE NO. 8 1- 10 1776 OF OFFICIAL RECORDS
SAID MATTER AFFECTS A PORTION OF SAID LAND AS MORE PARTICULARLY
DESCRIBED IN SAID DOCUMENT.
Carlsbad system
9. AN EASEMENT AFFECTING THE PORTION OF SAID LAND AND FOR THE
PURPOSES STATED HEREIN AND INCIDENTAL PURPOSES, SHOWN OR DEDICATED
BY
MAP NO.: 13199
FOR: DRAINAGE
AFFECTS: SAID DEDICATION RECITES THAT EASEMENT TO BE DETERMINED AT
TIME OF FUTURE DEVELOPMENT
10. PROVISIONS OF THE DEDICATION STATEMENT ON THE MAP OF THE
TRACT SHOWN BELOW WHICH RELINQUISH CERTAIN RIGHTS OF INGRESS AND
EGRESS TO THE PUBLIC STREET HEREIN NAMED, UPON THE TERMS THEREIN,
EXCEPT FOR THE GENERAL PUBLIC RIGHT TO TRAVEL THE SAME
MAP NO.: PARCEL MAP 13 199
STREET AFFECTED: EL CAMINO REAL
11. AN AGREEMENT TO WHICH REFERENCE IS HEREBY MADE FOR FULL
PARTICULARS
DATED: FEBRUARY 27,1984
BY AND BETWEEN: R. W. DANIELS AND CITY OF CARLSBAD
REGARDING: HOLD HARMLESS AGREEMENT DRAINAGE
RECORDED: MARCH 6, 1984 AS FILE NO. 84-082025 OF OFFICIAL RECORDS -
12. ANY MATTERS WHICH MAY BE DISCLOSED BY AN INSPECTION OF
SAID LAND.
b. Vacant Land
1. GENERAL AND SPECIAL COUNTY AND/OR CITY TAXES FOR THE
FISCAL YEAR 2000-2001, A LIEN NOT YET PAYABLE.
3 -. GENERAL AND SPECIAL COUNTY AND/OR CITY TAXES FOR THE
FISCAL YEAR 1999-2000 INCLUDING PERSONAL PROPERTY TAX, IF ANY.
FIRST INSTALLMENT: $3,330.43 (PAID)
SECOND INSTALLMENT: $3,330.43 (PAID)
LAND: $616,116.00
IMPROVEMENTS: $0.00
EXEMPT: $0.00
CODE AREA: 090 13
. PARCEL NO. 209-041-05-00
3. THE LIEN OF SUPPLEMENTAL TAXES, IF ANY, ASSESSED PURSUANT
TO THE PROVISIONS OF CHAPTER 3.5 (COMMENCING WITH SECTION 75) OF THE
rz- REVENUE AND TAXATION CODE OF THE STATE OF CALIFORNIA.
Carlsbad system
4. RIGHTS OF THE PUBLIC IN AND TO ANY PORTION OF THE PROPERTY
HEREIN DESCRIBED LYING WITHIN ROADS, STREETS OR HIGHWAYS.
5. THE RIGHT TO EXTEND AND MAINTAIN DRAINAGE STRUCTURES
AND EXCAVATION AND EMBANKMENT SLOPES BEYOND THE LIMITS OF THE
RIGHT OF WAY GRANTED THEREIN WHERE REQUIRED FOR CONSTRUCTION AND
MAINTENANCE.
GRANTED TO: COUNTY OF SAN DIEGO
RECORDED: JANUARY 5,1938 IN BOOK 727, PAGE 441 OF OFFICIAL RECORDS
6. THE RIGHT TO EXTEND AND MAINTAIN DRAINAGE STRUCTURES
AND EXCAVATION AND EMBANKMENT SLOPES BEYOND THE LIMITS OF THE
RIGHT OF WAY GRANTED THEREIN WHERE REQUIRED FOR CONSTRUCTION AND
MAINTENANCE
GRANTED TO: COUNTY OF SAN DIEGO
RECORDED: AUGUST 2 1, 1940 IN BOOK 1054, PAGE 360 OF OFFICIAL RECORDS
7. AN EASEMENT AFFECTING THE PORTION OF SAID LAND AND FOR
THE PURPOSES STATED HEREIN AND INCIDENTAL PURPOSES
IN FAVOR OF: PALOMAR VISTA, LTD. A LIMITED PARTNERSHIP
FOR: ROAD PURPOSES, INSTALLATION AND MAINTENANCE OF WATER PIPE
LINES, PUBLIC UTILITIES
RECORDED: MAY 18, 1960 AS FILE NO. 103249 OF OFFICIAL RECORDS
AFFECTS: WITHIN THE NORTHERLY 30 FEET.
8. THE RIGHT TO EXTEND AND MAINTAIN DRAINAGE STRUCTURES
AND EXCAVATION AND EMBANKMENT SLOPES BEYOND THE LIMITS OF THE
RIGHT OF WAY GRANTED THEREIN 1VHERE REQUIRED FOR CONSTRUCTION AND
MAINTENANCE
GRANTED TO: COUNTY OF SAN DIEGO
RECORDED: AUGUST 20, 1969 AS FILE NO. 152450 OF OFFICIAL RECORDS.
9. A PENDING ASSESSMENT FOR THE DISTRICT SHOWN BELOW. WHEN
NOTICE OF THE ASSESSMENT IS RECORDED WITH THE COUNTY RECORDER THE
ASSESSMENT SHALL BECOME A LIEN ON SAID LAND.
DISTRICT: PROPOSED BOUNDARIES OF COMMUNITY FACILITIES DISTRICT NO. 3,
CARLSBAD UNIFIED SCHOOL DISTRICT, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA
DISCLOSED BY: ASSESSMENT DISTRICT BOUNDARY
RECORDED: FEBRUARY 9, 1994 AS FILE NO. 1994-0090630, AND JANUARY 13, 2000
AS FILE NO. 2000-0021564, BOTH OF OFFICIAL RECORDS.
Carlsbad system
r”
10. ANY MATTERS WHICH MAY BE DISCLOSED BY AN INSPECTION OF
SAIDLAND.
.-
Carlsbad system
-
SCHEDULE 1.31
DESERT HOT SPRINGS SYSTEM
PERMITTED ENCUMBRANCES
1. Various bonds and/or letters of credit posted in the usual course of business, and not
exceeding $100,000 individually or $1 ,OOO,OOO in the aggregate.
2. Various liens and security interests relating to leases for office equipment (e.g. copiers,
printers, fax and postage machines), propane storage tanks, and a modular trailer located at 5720
El Camino Real, none of which are material in nature.
3. Various liens and encumbrances of record relating to the Desert Hot Springs Office property,
as set forth below:
a. OFFICE (Lots 45 and 6)
1. PROPERTY TAXES, INCLUDING ANY ASSESSMENTS COLLECTED
WITH TAXES, TO BE LEVIED FOR THE FISCAL YEAR 1999-2000 THAT ARE A LIEN
NOT YET DUE.
2. THE LIEN OF SUPPLEMENTAL TAXES, IF ANY, ASSESSED PURSUANT
TO THE PROVISIONS OF CHAPTER 3.5 (COMMENCING WITH SECTION 75) OF THE
REVENUE AND TAXATION CODE OF THE STATE OF CALIFORNIA.
3. COVENANTS, CONDITIONS AND RESTRICTIONS, BUT “OMITTING ANY
COVENANT OR RESTRICTION BASED ON RACE, COLOR, RELIGION, SEX,
HANDICAP, FAMILIAL STATUS, OR NATIONAL ORIGIN UNLESS AND ONLY TO THE
EXTENT SAID COVENANT (A) IS EXEMPT UNDER CHAPTER 42, SECTION 3607 OF
THE UNITED STATES CODE OR (B) RELATES TO HANDICAP BUT DOES NOT
DISCRIMINATE AGAINST HANDICAPPED PERSONS.”
RECORDED: MARCH 30, 1949 IN BOOK 1063 PAGE 454 OFFICIAL RECORDS
AMONG OTHER THINGS, SAID DOCUMENT PROVIDES:
EASEMENTS.
4. COVENANTS, CONDITIONS AND RESTRICTIONS, BUT “OMITTING ANY
COVENANT OR RESTRICTION BASED ON RACE, COLOR, RELIGION, SEX,
HANDICAP, FAMILIAL :<TATUS, OR NATIONAL ORIGIN UNLESS AND ONLY TO THE
EXTENT SAID COVENANT (A) IS EXEMPT UNDER CHAPTER 42, SECTION 3607 OF
THE UNITED STATES CODE OR (B) RELATES TO HANDICAP BUT DOES NOT
DISCRIMINATE AGAINST HANDICAPPED PERSONS.”
Desert Hot Springs System
-
RECORDED: MARCH 30,1949 IN BOOK 1063 PAGE 452 OFFICIAL RECORDS
AMONG OTHER THINGS, SAID DOCUMENT PROVIDES:
EASEMENTS.
5. COVENANTS, CONDITIONS AND RESTRICTIONS, BUT “OMITTING ANY
COVENANT OR RESTRICTION BASED ON RACE, COLOR, RELIGION, SEX,
HANDICAP, FAMILIAL STATUS, OR NATIONAL ORIGIN UNLESS AND ONLY TO THE
EXTENT SAID COVENANT (A) IS EXEMPT UNDER CHAPTER 42, SECTION 3607 OF
THE UNITED STATES CODE OR (B) RELATES TO HANDICAP BUT DOES NOT
DISCRIMINATE AGAINST HANDICAPPED PERSONS.”
RECORDED:AUGUST 9,1943 IN BOOK 591 PAGE 110 OFFICIAL RECORDS
AMONG OTHER THINGS, SAID DOCUMENT PROVIDES:
EASEMENTS.
6. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS
INCIDENTAL THERETO AS SET FORTH IN DOCUMENT
GRANTED TO: NEVADA CORPORATION ELECTRIC POWER CO.
PURPOSE: POLE LINES
RECORDED: JULY 3 1, 1941 IN BOOK 507 PAGE 433 OFFICIAL RECORDS
AFFECTS: SAID LAND
7. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS
INCIDENTAL THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: DESERT HOT SPRINGS WATER COMPANY
PURPOSE: PIPE LINES
RECORDED: DECEMBER 12, 1917 IN BOOK S79 PAGE 241 OFFICIAL RECORDS
AFFECTS: SAID LAND
8. A LEASE IN FAVOR OF DESERT HOT SPRINGS CABLEVISION INC.
DESCRIBED BY DOCUMENT RECORDED APRIL 1. 1988 AS INSTRUMENT NO. 87189
OFFICIAL RECORDS.
b. Adjacent Lots (Lots 7 and 8)
1. PROPERTY TAXES, INCLUDING ANY ASSESSMENTS COLLECTED
WITH TAXES, TO BE LEVIED FOR THE FISCAL YEAR 1999-2000 THAT ARE A LIEN
NOT YET DUE.
2. AN ASSESSMENT BY THE IMPROVEMENT DISTRICT SHOWN BELOW
ASSESSMENT (OR BOND) NO: NOT SHOWN
SERIES: AD-3
Desert Hot Springs System
DISTRICT: COUNTY OF RIVERSIDE
FOR: SEWERS
BOND ISSUED: SEPTEMBER 1,1977
ORIGINAL AMOUNT: $ NOT SHOWN
SAID ASSESSMENT IS COLLECTED WITH THE COUNTY/CITY PROPERTY TAXES.
BY NOTICE RECORDED JUNE 20,1975 AS INSTRUMENT NO. 73 100 OFFICIAL
RECORDS
AFFECTS: BOTH LOTS.
3. THE LIEN OF SUPPLEMENTAL TAXES, IF ANY, ASSESSED PURSUANT
TO THE PROVISIONS OF CHAPTER 3.5 (COMMENCING WITH SECTION 75) OF THE
REVENUE AND TAXATION CODE OF THE STATE OF CALIFORNIA.
4. COVENANTS, CONDITIONS AND RESTRICTIONS, BUT “OMITTING ANY
COVENANT OR RESTRICTION BASED ON RACE, COLOR, RELIGION, SEX
HANDICAP, FAMILIAL STATUS, OR NATIONAL ORIGIN UNLESS AND ONLY TO THE
EXTENT SAID COVENANT (A) IS EXEMPT UNDER CHAPTER 42, SECTION 3607 OF
THE UNITED STATES CODE OR (B) RELATES TO HANDICAP BUT DOES NOT
DISCRIMINATE AGAINST HANDICAPPED PERSONS.”
RECORDED: SEPTEMBER 27,194O IN BOOK 479 PAGE 63 OFFICIAL RECORDS.
SAID COVENANTS, CONDITIONS AND RESTRICTIONS PROVIDE THAT A
VIOLATION THEREOF SHALL NOT DEFEAT THE LIEN OF ANY MORTGAGE OR
DEED OF TRUST MADE IN GOOD FAITH AND FOR VALUE.
5. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS
INCIDENTAL THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: A. WARDMAN AND BONNIE WARDMAN
PURPOSE: POLE AND PIPELINES
RECORDED: SEPTEMBER 27, 1940 IN BOOK 479, PAGE 63 OFFICIAL RECORDS
AFFECTS: A STRIP OF LAND 4.00 FEET IN WIDTH ALONG THE REAR AND/OR SIDE
LINE OF LOT 8.
6. COVENANTS, CONDITIONS AND RESTRICTIONS, BUT “OMITTING ANY
COVENANT OR RESTRICTION BASED ON RACE, COLOR, RELIGION, SEX,
HANDICAP, FAMILIAL STATUS, OR NATIONAL ORIGIN UNLESS AND ONLY TO THE
EXTENT SAID COVENANT (A) IS EXEMPT UNDER CHAPTER 42, SECTION 3607 OF
THE UNITED STATES CODE OR (B) RELATES TO HANDICAP BUT DOES NOT
DISCRIMINATE AGAINST HANDICAPPED PERSONS.”
Desert Hot Springs System
RECORDED: JUNE 12,194l IN BOOK 505 PAGE 576 OFFICIAL RECORDS
SAID COVENANTS, CONDITIONS AND RESTRICTIONS PROVIDE THAT A
VIOLATION THEREOF SHALL NOT DEFEAT THE LIEN OF ANY MORTGAGE OR
DEED OF TRUST MADE IN GOOD FAITH AND FOR VALUE.
7. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS
INCIDENTAL THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: A. WARDMAN AND BONNIE WARDMAN
PURPOSE: POLE AND PILELINES
RECORDED: JUNE 12, 1941 IN BOOK 505 PAGE 576, OFFICIAL RECORDS
AFFECTS: A STRIP OF LAND 4.00 FEET lN WIDTH ALONG THE REAR AND/OR SIDE
LINE OF LOT 7
8. AN EASEMENT FOR THE CONSTRUCTION AND MAINTENANCE OF
ELECTRIC POLE LINES AND UNDERGROUND CONDUITS AND APPURTENANCES
UPON OR BENEATH THE STREETS AND ALLEYS, AND ALONG AND UPON AND
BENEATH ALL DIVISION PROPERTY LINES (EXCEPT SUCH LINES AS COINCIDE
WITH BOUNDARY LINES OF STREETS AND ALLEYS) WHICH ARE SHOWN ON MAP
OF SAID TRACT,
IN FAVOR OF: NEVADA-CALIFORNIA ELECTRIC POWER COMPANY
RECORDED: JULY 3, 1941 IN BOOK 507, PAGE 433, OFFICIAL RECORDS
Desert Hot Springs System
SCHEDULE 1.42
CARLSBAD SYSTEM
UPGRADE PLAN
A. Please see the attached “System Rebuild Summary” made as of 3/3 l/00.
B. The design schematics for the rebuild of the Systems are contained on a CD Rom, a copy
of which can be provided to the Buyer upon request.
Carlsbad system
SCHEDULE 1.42
Carlsbad System Rebuild Summary as of 3/31/00
Introduction
The rebuild of the System to 862 MHz, two-way active is currently underway and is projected to
be complete by the end of December 2000. The Company anticipates the total cost of the rebuild
will be approximateiy $37,433,000. This cost includes the cost of the plant rebuild as well as the
3,900 square foot expansion of the headend facility (expected to be complete by December or
shortly thereafter) and the new headend equipment. A breakout of the rebuild costs follows this
summary.
The rebuilt architecture will include a single headend or primary hub that will be located at the
System’s main office on El Camino Real (Carlsbad Headend/Hub A). This headend will deliver
optical signals to seven secondary hubs via multiple fiber rings, as well as to 115 local nodes.
The secondary hubs will be located in De1 Mar/Solana Beach, Encinitas, La Costa, Carlsbad Hub
B, Vista, San Marcos and Fallbrook. An eighth hub has been provided for and is expected to
serve the titure development of Ranch0 San Elijo. A fiber ring map follows this summary.
The Headend/ Primary Hub
The current headend for the System is located at Squires Reservoir, approximately two miles
from the office and new headend. The Squires headend currently receives and processes all of
the satellite programming and most of the broadcast signals, and transmits them to the new
Carlsbad Headend via an existing fiber optic link. When the expansion of the new headend
building is completed in late 2000, the Squires site will only be used to receive satellite and off-
air reception, while also serving as a secondary hub for Vista. The satellite and off-air signals
will then be transported from Squires to the new headend via diverse/ redundant fiber feeds. The
System is also investigating an alternative approach that contemplates the installation of a
Simulsat antenna on the rooftop of the new headend. If approved by the City of Carlsbad,
satellite signals could be received without the fiber transport from Squires.
The Carlsbad headend will be a state-of-the-art facility, with new signal processing equipment, a
96x96 (expandable to 128x128) audio-visual routing system, and planned SeaChange digital ad
insertion equipment. The audio-visual router allows the System to switch virtually any analog
source to any analog output channel with fully automated switching capability, and can perform
automated audio/video testing and Emergency Alert System switching, with remote accessibility
for multiple users. The facility will employ extensive srmdby powering from multiple UPS
systems, backed up by a large diesel standby generator. Space is also planned in the facility for
workstations for maintenance staff, and there will be ample excess space as the System continues
to grow to add channels, full node scalability, telephony and video-on-demand servers.
Distribution/ Fiber Hub Design
There are currently 799 miles of coaxial plant in the System, including 195 miles (24%) of aerial
and 604 miles (76%) of underground. As part of the rebuild, the System will be deploying
approximately 185 miles of fiber to seven secondary hubs and 115 fiber nodes. The Carlsbad
headentiub will also provide service to each 1,000 home node via a dedicated narrowcast laser.
Ultimately, all hubs, except for De1 Mar/Solana Beach and Fallbrook, will be located on self-
healing fiber rings. Secondary hubs are designed to serve an average of 10,000 homes passed,
but can accommodate over 20,000 homes passed. De1 Mar/Solana Beach and Fallbrook will rely
on an AML backup feed to provide broadcast signals in the event of a ring failure until redundant
routes can be secured.
The secondary hubs will typically be housed in 6x10 foot concrete precast structures. These hubs
will include seven, seven-foot high swing-gate racks of equipment, with excess room for future
expansion. Each hub will be fully status monitored for alarm conditions, including intrusion,
high water, high temperature, gas, smoke and AC failure, and have up to eight hours of standby
power via a 48 VDC power plant. Each hub will also be equipped with an external generator
inlet for emergency power beyond eight hours and dual one-ton air conditioners.
-
The System will have scalable asymmetrical nodes, which initially will serve 1,000 homes in the
forward direction and 500 homes in the reverse path - using optical lasers in the nodes that
transport the 5-42 MHZ spectrum directly back to the headend. Each node will be designed and
constructed with four RF busses, each serving 250 homes. The nodes can be scaled down to 500
or 250 homes in the forward direction with 250 homes in the reverse. This can be accomplished
with additional laser modules in the nodes and associated optical equipment in the hubs and
headend. To support the present scalable node as well as future architectures, a minimum of 12
fibers will be installed to each node.
Due to the high cost of adding fiber at a later date, the System is incorporating substantial dark
fiber and many undersized nodes into its rebuild architecture. This is particularly true in high
growth areas of the System, where many of the nodes will currently serve less than 500 total
passings. This loading will allow the System to add homes from new tracts without having to
deploy additional fiber or install more nodes. This architecture has added substantially to the
rebuild cost, but it will save the operator substantial money in the future.
Dedicated fiber will also be installed for PEG use, allowing each franchise to send three or more
locally originated channels back to the headend where they can be placed on their respective
channels 66,67 or 68.
The existing power supplies will be upgraded with new status monitored uninterruptible units.
. These units will provide two to three hours of instantaneous backup power in the event of
commercial power loss. Where it is necessary to install new power supplies, they will have six-
battery cabinets with only three batteries installed, allowing for the easy addition of more
batteries for future telephony powering requirements. With new network configuration, and - diverse power supplies for each node, the System’s reliability will be greatly enhanced, and a
failed power supply should only affect about 250 homes.
The rebuild has been contracted to Fishel Technologies and West Coast Communications,
although the Company’s Contract Project Manager and Construction Supervisor will oversee the
day-to-day construction activities to assure quality and production. A third contractor - Cable &
Data Associates - has been retained to handle the rebuild related to MDUs. A summary of some
of the distribution equipment selected for the rebuild is listed below.
Selected Rebuild Equipment
Headend and Hub Optical Transmission Equipment
l Harmonic Lightwaves DWDM product family 13 10 nM local nodes
1550 nM DWDM in the node
l Broadcast - MAXLink external modulated wavelength selected 1550 m-n, 50 to 750
MHz
l Narrowcast - METROLink directly modulated wavelength selected 1550 nm, 50 to
870
l Local Node Broadcast - PWRLink 13 10 DFB
l SA Continuum 78 channel modulators
. GI QAM modulators
Nodes:
. Harmonic Lightwaves
l PWRBIazer Scaleable Optical Node 52-870 MHZ, 5-42 NNC Reverse
Active Line Equipment:
l C-COR
l Flex-Net 900 amplifiers, 1 GHz housing with 52-862 MHZ modules
Passive Line Equipment:
l Regal 1 GHz wide-body taps (telco drop-power upgradeable)
l Regal 1 GHz line splitters, couplers and power inserters
l C-COR 862 MHZ in-line equalizers
Power Supplies:
l Alpha XM2 Uninterruptible
Fiber:
l CommScope armored, loose tube, arid core (Node)
l Siecor - armored, loose tube, dry (Ring)
l ARD
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SCHEDULE 3.1
ALLOCATION OF SYSTEM PURCHASE PRICE
SCHEDULE 3.2.1
EXAMPLE OF CONSOLIDATED NET LIABILITY CALCULATION
BASED UPON THE UNAUDITED BALANCE SHEET OF THE COMPANIES AS OF
DECEMBER 31.1999
(in 000's)
,-
SCHEDULE 4.1-A
CARLSBAD OFFICE PROPERTY
The building and property located at 5720 El Camino Real, Carlsbad, California and the vacant
land adjacent thereto, as described below:
1. Parcel 1 of Parcel Map No. 13 199, in the City of Carlsbad, County of San Diego, State
of California, filed in the office of the County Recorder of San Diego County, February 29, 1984
as File No. 84-076541 of Official Records.
2. Please see the attached Legal Description.
f--
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Carlsbad system
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01-188885
LEGAL DESCRIPTION
.
m w REFzXED TO EEREiN IS EiTUA’P~ TN z STATE OF CAKFORNTA, CO-JNTY OF SAN DIEGO AND IS DESCRIXD AS FOLLOWS:
mT CERTAIN PORTION OF LOT "3" OF %.NCHO AGUA HEDIONDA, TN l-R! COUNT'S: 0~ SAN DSEGC, STATE OF CALXc"ORNIA, ACCORDING TO MAP
THERZOF NO. 823, FILED IN TZiE OFFICE OF TIIE: COUNTY RECORDZR OF
SALD SAN DIEGO COUNTY, NOVENEER 16, 1896, DESCRIBED AS FOLLOWS:
aEG:m:NG AT 'I?-? CORNER OF LOTS "C" MD "D" ON THE BouNDmy LINE SF SAT;3 13'J' 'I,“; ?!ac sow 20a19
2273.70 ;EET ‘1‘3 m $LtdG’ Po,hT; ?‘?=c~ som 20°31
NORTHERLY UZST, 30" WEST, 2391.5c FEET T9 ZE NORTHEAST~~Y i;llGHT OF WAY LLNZ OF tOIF- L -- ROAD A- 13, 60.00 FHc'T WIDE AS SHOWN ON RECORD OF SL'RVEY .X&l? NC.
517, FILZD IN THZ OFFICE OF THE COINT fLFCORDER OF SAID SA2-l DIE"Go COL'NTY; CHZNCE P13NG SALD RIGHT-Of-WAY LINE SOUTH 80°12' EAST, 3.S4 ZTET TO AN ANGLZ PGfNT IN SAID RIGHT-OF-WAY LI,NE;
THENCE SOUTH 21*35' EAST, 1278.06 FEET TO AN ANGLE TOINT IN SAID RIG=-OF-'XAY LINE; THENCH RETRACING SAID IAST i'fF.NTIOhm C3uRSE, NORFTIi fL035' EST, 69.52 FEZ: THENCE SOLm 82O32'4~"
LEST, 3c.94 'EST TO T','" (-nTER -*I X-NE OF SAID COUNTY ROAD A- 13, SAID ?CXT 3EZNG ALSO ON -rz SOL%XZSTERLY LINE: OF SAZD XT +='a" -w-c A&E ALSO SAID POINT BEING TZ TRbj POINT OF BEGINNING; T'HZNCE
ALONG TEX C!Z.NTZR LiNE OF SAID ROAD AND SAID BOUNDj!RY LINE c)F 5323 LGT t, 3 II , SOUTH 2i*35' EAST, 81.55 ZEET TO AN PMGit" TGINT: THENCE SCLTH 38O35' CEX-ER LINE OF SAID SAt3 LCT "3", NORTH
EAST &, i20.07 -FEET; THENCE LEAVZNG SAID ' ;xiD2Ai;3 *ND TEE SOUTHWESTERLY BOUNDARY OF a j H A.ST, 278.97 FEE?; TXZNCE NORTH 38O35' UEST 212.46 FEET; THENCE SOITI'E 82'32'44" UEST, 25i.if FEET TO THE TRUE POINT OF EEGINNING.
WITXN 3EED TO RELEXZE ANY INTE!REST OF THOSE CERTAIN LEASES COVERING THE ABOVE PROPERTY AS DATED AUGUST 6, 1958, RECORDED JANUARY 12, 1960, SERIES 1, BOOK 1960, FiLE NO. 6665 AND DECEMXR 30, 1959, BOOK 8071, RAGE 29 OF OFFICIAL RECORDS.
EXCEPTZNG THERZFROM THAT PORTION OF LOT IrB" OF RANCH0 AGUA E$EDZONTJA, ACCORDING TO MAP THEF!EOF NO. 823, FILED Iti TEE OFFICE OF 'ZH?Z COUNTY RECORDER OF SAN DIEGO COUNTY, DZSCRi3HD IN DEED TO ZZNRY YADA AND TTSUKO YADA, HUSm&D AND WIFE, REC3RDE.D AUGUST 15, 1967 AS FILZ NO. 121671, OF OFFICIAL RECORDS iN SAID
OFFiCE OF THE COUNTY RZCORDER LYING WITHIN A STRIP OF LAND 90
FZET HIDE, 45 FEET ON EACH SIDE OF TEE FOLLOWING PESCRX322 CENTER LINE:
BEGXN'ING AT A POINT ON THE EXST AND WEST CENTER LINE OF SECTION 26, TOWNSHfP 12 SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN, DISTAN! THZREON 1109.51 FHZT EASTERLY FROM 5 CHNTER 01 SECTION 26, SAfD POINT KAVSNG COORDINATES NOR?% = ,,927.67 AND EAST = 1,688,972.96 OF T-SE CALIFORNIA COORDINAT'&
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01-188885
SYSTEM GRID ZONE 6; THENCE ALONG BZARING AND DISTANCZS BASED ON SAfb CAXFOiWIA COOXJX~ATE SYSTEM ZONE 6 AS FOLLOWS:
NORTH 7O35'11" WEST 1067.19 FEET TO TX2 BZGINNING OF A TANGENT CURVE TO THE LEFT liAVTNG A RADIUS Of 1800 FEET; THZNCE NOR~~ST~Y ALONG SAID CURE THROUGH A CENT= ANGLE OF
25"25'30", A DISTANCE Of 798.75 FEET; THENCE TANGENT TO SAID
CURVE NORTH 33O00'41 " WEST 1603.06 FEET TO 'IXE BEGiNNING OF A T~GE&"T CURVE TO THE RlGXT EAVING A RADIUS OF 1500 'EET; T:ENCE NORTHWES?'~~ , NORmRLY AND NORTHEASTERLY ALONG SAX3 CURVE TxRoUCE A Cm ANGLE 03 70a05'37" A DISTANCE OF 1834.51
FEET; TXENCE &iNGENT TO SAXI CURVE NORTH 37OO3'56" EAST 1344.45 FEET TO TEE BEGINNING OF A TANGENT CURVE TO THE I.Hi?T -&VING A WTUS OF 1800 FEET; TKENCE NORTX~STERLY AND NORTBERLY ALCNG SAID CLIRVE THROUGH A CENTRAi ANGLE OF 28'54'36" A DLSTZNCE OF 908.23 FEET; THENCE TANGENT TO SAID CURVE NORTH 8°09'20" EAST 1986.45 FEET TO THZ BEC-ZNNING OF A TANGiZNT CURVZ TO T'KE LEFT ,XAVING A 'ilTIDIUS OF 2000 FEZ?; TXEWZE NORTIZZRLY PXD NOR'XWESTERLY ALONG SAID CUZvil THROUGH A CEbJTW WGZE 3F 46O21'Z5" A DiSTANCE OZ 1628.07 FEET: THENCE TANGENT TO SAID c-LjjL= NOR'% 38O1'1'55" 'WEST 3014.58 TANG&T &VT TO-TEE RLGKT FEET To TEE BEGINNING OF A X.%VING A Z%DIUS OF 3900 FEET; ZtFaCE N0RTE'WESTERI.Y ALONG SAID CU?%VE 'XROUGE A CENTlUiZ., AHGE OT 15029'00" A DISTANCE 0; 486.42 FEET; THENCE TANGBNT TO SAID CURVE NORTH 22°42'55n VEST 403.31 FEET TO TXZ BEGZ.NNING OF A TANGENT CURVE TO TfE: LEFT HAVING A RADSUS OF 1800 FEET; Z<EzfCE NORT3.WTXTE.UY ALONG SAI3 C-XRTE: THROUGH A CENTRAT, ANGLE OF 51O41'45" A DISTANCS OF 1624.07 FEET; ZZNCE TANGEN'? TO SATZ) C-LXVZ NORT-Z! 74°24'40" XST 917.30 FEET TO TZE SEGINhT'fNG O? A TANGENT cCLlRV2 TO 'Eii FCGHT FAVvING A RADIUS OF 2000 FEET; ~Z%CE N3RTHWESTZRLY AL3NG SAID Cl3.E TEROUGH A CENTR.X AN3i.X OF ""='3'11n A DISTANCE OF 763.98 FEET; TKBNCE T?WGENT TO SX?D z-km NORTH 52031'29" WEST 1052.64 FEET TO THE 32GINNING CF A TANG-ZTT CURVE TO THE ',H'T :-%rVZNG A =IUS OF 3500 FEET; TE;,ENCE NORTZidESTERLY ALONG SAID C'J-RVB TXROUGB A CENrR3J, ANGLE OF 5OZC'24" A DISTANCE 0' 316.02 FEET TO A PGIh+ WICH BEARS SOUTH 3201 8'07" WEST 86.45 FEET FROM A 3/4 INCH PIPE IQRKNG TBZ COMMON POiNTS:
POSE' 1 OF LOT "E" AND POINT 11 OF LOT "B" OF BANCZiO AGUA HEDIONDA, ACCOm5NG TO Mi9e TXEXEOF NO. 823, FT'sBD X&Y THE Or'FfCE OF TEE COUNTY F!.ECORZIER OF SAN DIEG3 CO-, SAID COMMON POINTS PiZVVING COORDINATES NORTH = 357,861.59 AND EAST = 1,682,720.26 OF SAID CALIFORNIA COORllINATZ SYSTEM ZONE 6.
ALSO EXCEPTING THEREFROM ALL OIL J&D MINE= RIGHTS, AS RESERVED IN T?IAT CERTAZN GRANT DEED RECORDED MAY 1E, 1960 AS =TTE NO. .a- 10324s OF OFFICIAL RZCORDS.
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SCHEDULE 4.1-B
DESERT HOT SPRINGS
OFFICE PROPERTY
The building and property located at 11855 Palm Drive, Hot Desert Springs, California, and
the two lots adjacent thereto, as described below.
1. The real property in the County of Riverside, State of California, described as Lots 4,5, and
6 in Block “L” ofDesert Hot Springs Cabinsites as per map recorded in Book 19 Pages 66 and 67 of
Maps, in the offices of the County Recorder of said County.
2. The real property in the County of Riverside, State of California, described as Lots 7 and 8 in
Block “L” of Desert Hot Springs Cabinsites in the City of Desert Hot Springs, County of Riverside,
State of California, as shown on map recorded in Book 19 Pages 66 and 67 of Maps, in the offices of
the County Recorder of said County.
.
*-
Desert Hot Springs System
SCHEDULE 5.3
CARLSBAD SYSTEM AND CBS1
REQUIRED CONSENTS
1. Bank of America National Trust and Savings Association*
2. Cable License Agreement to Receive and Use Scarborough Reports dated 3/24/2000
between the Arbitron Company and Daniels Cablevision, Inc. (No consent is needed, but notice
of the change in ownership must be given within 30 days of such change.)
3. Franchises:
Carlsbad*
De1 Mar*
Encinitas*
Lake San Marcos*
Pala Mesa (Fallbrook)*
San Marcos*
Solana Beach*
Unincorporated North County*
Vista*
4. Brookwood Financial Partners L.P. (landlord for 562 1 Palmer Way, Carlsbad Gateway
Center)
5. The Settlement Agreement dated 4/12!2000 between the City of Encinitas and Daniels
Cablevision, Inc. will be terminated upon the transfer of the Company to the Buyer.
6. The Settlement Agreement dated 4/l/2000 between the City of Solana Beach and Daniels
Cablevision, Inc. will be terminated upon the transfer of the Company to the Buyer.
7. The Sales and Bonus Plan specified in Schedule 5.15 will be terminated, and paid out
concurrently with the Closing.
Carlsbad system
SCHEDULE 5.3
DESERT HOT SPRINGS SYSTEM
REQUIRED CONSENTS
1. City of Desert Hot Springs*
2. The Sales and Bonus Plan specified in Schedule 5.15 will be terminated, and paid out
concurrently with the Closing.
,.-
--
Desert Hot Springs System
SCHEDULE 5.4
CARLSBAD SYSTEM AND CBS1
ENCUMBRANCES TO BE DISCHARGED PRIOR TO CLOSING
1. Release of Deed of Trust dated March 22, 1984 in the amount of $500,000.00 on 5270 El
Camino Real executed by R. W. Daniels, Jr. AK4 Bill Daniels, Trustor for the benefit of
Columbia Savings, a Federal Savings and Loan Association (Recorded March 23, 1984 as File
No. 84- 107549 of Official Records.)
2. Release of the Assignment pledged as additional security for the obligations secured by
the Deed of Trust referenced above, which Assignment was recorded March 23, 1984 as file no.
84-107550 of Official Records.
.-.
.-
Carlsbad system
SCHEDULE 5.4
DESERT HOT SPRINGS SYSTEM
ENCUMBRANCES TO BE DISCHARGED PRIOR TO CLOSING
None
.-
Desert Hot Springs System
.--
SCHEDULE 5.5
CARLSBAD SYSTEM AND CBS1
GOVERNMENTAL PERMITS
A. Franchises
1. Carlsbad
a. Agreement dated October 18, 1977 between Daniels Cablevision, Inc. and
the City of Carlsbad.
b. Ordinance 6058
C. Ordinance 608 1
d. Resolution No. 94-30
e. Conditional Use Permit No. 184(Bxl).
f. Conditional Use Permit #88 2x2
NOTE: Daniels Cablevision, Inc. must maintain a local office in the City.
2. De1 Mar
a. Franchise Agreement between the City of De1 Mar and Daniels
Cablevision, Inc. to Operate a Cable Communications System entered into
as ofJanuary 1, 1998.
NOTE: Daniels Cablevision, Inc. must maintain an office at 1050 Camino De1
Mar.
3. Encinitas
a. Franchise Agreement between the City of Encinitas, California and
Daniels Cablevision, Inc. to Operate a Cable Communications System
effective April 15,200O.
NOTE: Daniels Cablevision, Inc. must maintain a business office within 20 miles
of the City limits.
.-
Carlsbad system
4. Lake San Marcos
a. Cable Television License Issued to Daniels Cablevision, Inc. dba Cable
TV of Lake San Marcos effective March 3, 1986. (License No. 101-l 986)
b. First Amendment to License No. 101-l 986 dated November 24, 1986.
5. Pala Mesa (Fallbrook)
a. Cable Television License Issued to Daniels Cablevision, Inc. Operating
under the name of Pala Mesa Cablevision by the County of San Diego
effective January 5, 1987. (License No. 107-l 986)
6. San Marcos
a. Franchise to Provide Cable Television Services Between the City of San
Marcos and Daniels Cablevision, Inc. dated April 27, 1999.
NOTE: Daniels Cablevision, Inc. must maintain a local office in the franchise
area, or such other location approved by franchise authority in writing.
.- 7. Solana Beach
a. Franchise Agreement between the City of Solana Beach, California and
Daniels Cablevision, Inc. to Operate a Cable Communications System
executed 4/l 8/00.
b. Encroachment Maintenance Agreement and Encroachment Permit #1588
dated 12/8/99 from City of Solana Beach and Daniels Cablevision, Inc.
NOTE: Daniels Cablevision, Inc. must maintain a pay station within 10 miles of
the City, and a business office within 20 miles of the City limits.
8. Unincorporated North County
a. Cable Television License issued to North County by the County of San
Diego effective January 5, 1986 (License No. 108-1986)
9. Vista
-
a.
Carlsbad system
Ordinance 80-20 granting Pala Mesa Cablevision, Inc. the right, privilege
and franchise to lay and use lines, wires, coaxial cable and appurtenances
for transmitting, distributing and supplying radio and television antenna
service along, across and upon the public streets, ways, alleys and places
within a designated service area of said City of Vista.
NOTE: Daniels Cablevision, Inc. must maintain an office within the City limits,
or within the telephone toll free service area of subscribers.
B. FCC licenses
1. CARS Licenses
WGV-957 expires 6/l/2001
WGZ-34 1 expires 7/l I2003
2. TVRO Licenses
E3 199 expires 1 O/9/200 1
E3201 expires 6/30/2001
C. Other material approvals, etc.
/- Various Seller’s Permits granted to Cablevision Business Services, Inc. for sales locations
at 5270 El Camino Real, Carlsbad, California and 11855 Palm Drive, Desert Hot Springs,
California.
D. Third Party Franchise Holders
Cox Communications has been granted franchises in San Marcos, Vista, Solana Beach,
Encinitas, and unincorporated San Diego County.
Orion Cable has been granted a franchise in unincorporated San Diego County for
Ranch0 Santa Fe.
,-
Carlsbad system
SCHEDULE 5.5
DESERT HOT SPRINGS SYSTEM
GOVERNMENTAL PERMITS
A. Franchises
1. City of Desert Hot Springs
a. Ordinance 84
b. Ordinance 84-5
C. Ordinance 84-6
d. Resolution 79-36
e. Ordinance 95- 15
NOTE: the system is required to maintain an office within the City limits, or at a
location which subscribers may call without incurring added message or toll charges.
2. County of Riverside
a. A Non-Exclusive License of the County of Riverside for a period of 15 years
to Construct, Operate and Maintain a Community Antenna Television System
Along, Under and Across such Public Roads as now or may hereafter exist in
the Whitewater, Desert Hot Springs, Sky Valley and Thousand Palms Areas
of the County of Riverside, dated December 9, 1991.
B. FCC Licenses
1. TVRO Licenses
E3238 expires 6/30/01
.
Desert Hot Springs System
SCHEDULE 5.6
CARLSBAD SYSTEM AND CBS1
SELLER CONTRACTS
A. Material Contracts
1. Second Amended and Restated Credit Agreement dated as of 12/16/97 between Bank of
America National Trust and Savings Association and Daniels Cablevision, Inc. and Cablevision
Business Services, Inc.
2. CBI Continuing Guaranty for the benefit of Bank of America National Trust and Savings
Association executed as of 12/l 6/97.
3. First Amended and Restated Daniels Pledge Agreement dated as of 12/16/97 between
Bank of America National Trust and Savings Association and Bill Daniels.
4. Agreement to provide Cable TV Support Services between City of De1 Mar and Daniels
Cablevision, Inc. effective 12/27/99.
5. Access Agreement dated 1 l/l/96 between Lodgenet Entertainment Corporation and
P-- Daniels Cablevision, Inc.
6. Settlement Agreement dated 4/l/2000 between Daniels Cablevision, Inc. and the City of
Solana Beach.
7. Settlement Agreement dated 4/12/2000 between Daniels Cablevision, Inc. and the City
of Encinitas.
8. Converter Metering Agreement dated 6/l l/92 between Daniels Cablevision, Inc. and
Neilsen Media Research.
9. Agreement No. 10026WM dated l/31/2000 between 2DotCom Inc. and Daniels
Cablevision, Inc., and related Acknowledgment of Terms and Conditions for Web Development
and Hosting Services dated 3/6/00.
B. Contracts with Daniels Affiliates
.
1. Amended and Restated Agreement dated l/1/96 between Daniels Cablevision, Inc. and
Cablevision Business Services, Inc. (Re: Advertising)
2. Agreement dated 7/3 l/95 between Daniels Cablevision, Inc. and Cablevision Business
Services, Inc. (Re: sale of equipment to subs)
Carlsbad system
C. Contracts with or through AT&T Broadband, LLC AfiiIiates
1. AT&T Local Telecommunications Service Agreement dated g/3/99 between AT&T and
Daniels Cablevision, Inc. (Re: high speed data circuits for Cablevision @Home Service)
2. Distribution Agreement dated 3/3 l/99 between At Home Network Solutions, Inc and
Daniels Cablevision, Inc.
3. Facilities Agreement dated 7/3 I/96 between Daniels Cablevision, Inc. and TCG San
Diego (nka AT&T Local Services). Letter of Understanding dated l/7/2000 from AT&T Local
Services (fka TCG San Diego) relating to joint trench on El Camino Real between Palomar
Airport Road and Highway 78.
D. Programming Contracts
1. Letter Agreement dated 3/12/97 between Daniels Cablevision, Inc. and Cox
Communications (Cox-Padres).
2. Private Carriage Agreement dated II/ 12/99 between Daniels Cablevision, Inc. and
Entravision Communications (XUPN-TV).
,F-- 3. Cable Television Affiliation Agreement dated 1 O/l/96 between Fox News Network LLC
and Daniels Cablevision, Inc.
4. GRTV Affiliate Deal Memo dated 519197.
5. Retransmission Consent Extension 12/3 l/99 Agreement between McGraw Hill
Broadcasting Company, Inc. and Daniels Cablevision, Inc. (Re KGTV) (Missing main
Agreement dated 1 O/4/93. Amendment dated g/2/96, Amendment dated 12/3 l/96).
6. Letter Agreement dated 12/l 3199 between KFMB Stations and Daniels Cablevision, Inc.
7. First Amendment dated 12/23/99 to Affiliation Agreement dated 9122198 between
Daniels Cablevision, Inc. and Pax TV.
8. Educable Education Showcase Videotape Distribution Agreement dated 1 O/7/93 between
Educable Inc. and Daniels Cablevision, Inc.
. 9. Shop at Home Letter Agreement dated 1 O/30/97 with Shop at Home Inc., Crown
Connection and CBI-Carlsbad.
.- 10. Affiliate Receiver Decoder Agreement dated 6/27/94 between Telemundo Group, Inc.
and Daniels Cablevision, Inc.
Carlsbad system
11. The Company is currently in negotiations with the Starz! Encore Media Group, but any
agreement ultimately reached between the parties will be treated as an Excluded Asset and
terminated upon the Closing.
12. The Company also receives programming through SSI, however its ability to receive
such programming under its current arrangement with SSI will terminate upon the Closing.
E. Construction and Rebuild Contracts
1. Consulting Agreement dated l/27/99 between Daniels Cablevision, Inc. and R. Gary
Odum dba Odum and Associates.
2. Cable Television Construction Agreement dated l/29/90 between Daniels Cablevision,
Inc. and Cable Ready Systems.
3. Agreement dated 7/5/99 between Daniels Cablevision, Inc. and JM Consulting Group,
Inc.
4. Strand Mapping, Field Engineering, Design and Drafting Agreement dated 8/9/99
between Daniels Cablevision, Inc. and Compass Communication, Inc.
5. Consultant Services Agreement dated 8/25/98 between Daniels Cablevision, Inc. and
Ross Carr.
6. Master Construction and Installation Agreement dated 1 l/17/99 between Daniels
Cablevision, Inc. and Coastal Communications, Inc.
7. Master Construction and Installation Agreement dated 8/26/99 between Daniels
Cablevision, Inc. and The Fishel Company.
8. Master Construction and Installation Agreement dated 7/l/99 between Daniels
Cablevision, Inc. and Pat West Construction.
9. Master Construction and Installation Agreement dated 1 l/5/99 between Daniels
Cablevision, Inc. and Cable & Data Associates.
10. Master Construction and Installation Agreement dated 2/l 8/2000 between Daniels
. Cablevision, Inc. and W.C. Communications, Inc. (aka West Coast Communications)
.,-
11. Master Construction and Installation Agreement dated 6/25/2000 between Daniels
Cablevision, Inc. and Audit Masters & Communications, Inc.
Carlsbad system
SCHEDULE 5.6
DESERT HOT SPRINGS SYSTEM
SELLER CONTRACTS
A. Material Contracts
1. Cost-Sharing Agreement between Desert Hot Springs Cablevision Inc. and Time Warner
(successor to Total TV of California Inc.) executed 3/20/95.
2. Limited Liability Company Agreement of Adlink Cable Advertising, LLC, and related
Class B Member System Agreement executed by Desert Hot Springs Cablevision, Inc. as of
5/2/2000.
3. Non Subscriber Audit and Sales Representation Agreement between Audit Masters &
Communications and Desert Hot Springs Cablevision Inc. dated 1 O/23/95.
B. Contracts with Daniels Affiliates
1. Agreement between Cablevision Business Services, Inc. and Desert Hot Springs
Cablevision, Inc. dated 6/l/95 (Re: equipment). F-
2. Agreement between Cablevision Business Services, Inc. and Desert Hot Springs
Cablevision, Inc. dated l/l/95 (Re: advertising).
C. Programming Contracts that will survive the Closing
1. Cable Television Affiliation Agreement dated 1 O/l/96 between Fox News Network LLC
and Desert Hot Springs Cablevision Inc.
2. Letter Agreement between JB Broadcasting, Inc. and Desert Hot Springs Cablevision Inc.
dated g/15/98 (for KDPX channel 58).
3. GRTV Network Deal Memo dated 7/25/97 with Daniels Cablevision Inc. for carriage of
programming on Desert Hot Springs Cablevision’s system, and related GRTV Affiliate Deal
Memo dated 6/g/97.
.
4. Shop at Home Letter Agreement dated lo/30197 with Shop at Home Inc., Crown
Connection and CBI-Carlsbad.
5. Product Information Network Letter Agreement dated l/29/98 with Daniels Cablevision
Desert Hot Springs System
Inc. for carriage of programming on Desert Hot Springs Cablevision’s system.
6. Affiliation Agreement between Cablevision Business Service Inc. and Access Television
Network, Inc. dated 12/l 7/97 for carriage of paid promotional programming on Desert Hot
Springs Cablevision’s system.
D. Programming Contracts that will not survive the Closing
1. The Company is currently in negotiations with the Starz! Encore Media Group, an
Affiliate of AT&T Broadband, LLC, but any agreement ultimately reached between the parties
will be treated as an Excluded Asset and terminated upon the Closing.
E. Construction and Rebuild Contracts
1. United Artists CATV Construction Agreement dated 4/22/91 between Co&ran
Communication Construction and Desert Hot Springs Cablevision Inc.
2. United Artists Installer Agreement between Desert Hot Springs Cablevision Inc. and
Co&ran Communication Construction dated 4/5/91.
3. United Artists Extension, MDU Installation, PreWiring or Post Wiring Agreement Y-- between Desert Hot Springs Cablevision Inc. and CS. Underground dated 7/3 l/92.
4. United Artists Extension, MDU Installation, PreWiring or Post Wiring Agreement
between Desert Hot Springs Cablevision Inc. and Cochran Communication Construction dated
41519 1.
.
Desert Hot Springs System
.-
SCHEDULE 5.7
CARLSBAD SYSTEM AND CBS1
REAL PROPERTY
A. Owned Real Property
None at the present time, however the Office Property will become an owned property on
or prior to the Closing Date.
B. Leased Real Property
1. Extension Agreement dated 12/30/90 between Robert William Daniels, Jr. Trust and
Daniels Cablevision, Inc. (for 5270 El Camino Real), and underlying Lease Agreement dated
l/l/81.
2. Facilities Site Lease dated 3129194 between Rainbow Municipal Water District and
Daniels Cablevision, Inc. (Fallbrook AML and Headend on Vem Dr. near Beck Reservoir)
.c-
3. License Agreement dated 1 O/l/87 between Costa Real Municipal Water District and
Daniels Cablevision, Inc. (Squires Dam- Carlsbad headend), and notice of renewal dated 3/3/97.
4. Lease Agreement dated l/l/98 between City of De1 Mar and Daniels Cable Television
[sic], Inc. (240 10lh St., De1 Mar)
5. Standard Industrial/Commercial Multi-Tenant Lease dated l/95 between Carlsbad
Property LLC and Daniels Cablevision, Inc. (5621 Palmer Way at Carlsbad Gateway Center
(Warehouse)). Addendum to Standard Industrial/Commercial Multi-Tenant Lease dated l/27/95.
First Amendment to Standard Industrial Lease dated 3/l l/98. Second Amendment to Standard
Industrial Lease dated 6/4/99 between Brookwood Carlsbad Realty Investors LLC and Daniels
Cablevision, Inc.
6. Ground Lease dated 1 l/30/72 between Park Place Homeowners Association and San
Dieguito Cable Company (master communications antenna “MATV”).
7. Lease between Bill Daniels, LLC and Daniels Cablevision, Inc. for the La Costa AML
receive site (.368 acres next to city water tank at Alga Rd. arid El Fuerte.)
. C. Easements, licenses, rights-of-way, or other rights affecting real property
1. De1 Mar AML receive site for 655 Crest Drive (see franchise license).
Carlsbad system
2. Encroachment Permit dated 2/3/8 1 fkom Encinitas Union School District for
Encinitas/Solana Beach AML receive site.
3. Easement Agreement dated 9/l 5/79 between AVCO Community Developers Inc and
North County Cable (predecessor to Daniels Cablevision, Inc. ) (Encinitas hub site).
4. Cable Television Wiring Agreement dated 1 l/8/74 between Lake San Marcos Cable
Television, Inc. and Villa San Marcos, and Corporation Grant Deed dated 1 l/21/77 (San Marcos/
La Noche and McMar Streets secondary hub site).
5. Cable Television Wiring Agreement dated l/20/88 between Darby CreeWCarlsbad
L.L.C. and Daniels Cablevision, Inc. (La Costa hubsite)
6. Quit Claim Deed dated 5/24/78 Frazar Brothers. Inc. to Citizens Development
Corporation, and Easement Agreement between Citizens Development Corporation and Lake
San Marcos Cable Television (receive site).
7. Pole and Conduit License Agreement dated 1 O/20/88 between Pacific Bell and Daniels
Cablevision, Inc.
8. License Agreement dated 1 l/25/86 between San Diego Gas & Electric and Daniels
Cablevision, Inc.
a. Master Joint Trench Agreement dated 7/l 8/86
b. Aerial Non Exclusive Easement
9. Railroad Right of Way Licenses dated 4/9/96 between North San Diego County Transit
Development Board (Pioneer Management) and Daniels Cablevision, Inc.:
?.
Carlsbad, underground fiber optic cable MP 229.66
Carlsbad underground fiber optic cable at MP 230.10
C. Carlsbad, underground fiber optic cable at MP 232.35
d. Carlsbad, underground fiber optic cable at MP 233.12
e. De1 Mar, 2 underground fiber optic cables at MP 243.60
f. De1 Mar, underground fiber optic cable at MP 244.0
g- San Marcos, 2 underground fiber optic cables at MP 18.85
.
10. Numerous easements and other rights of access have been granted to the Company
pursuant to MDU Agreements or various wiring, trench or other agreements to which the
Company is a party. Due to the confidential nature of this information, a Schedule of such
easements, licenses, rights of way or other rights will be provided to the Buyer after execution of
this Agreement.
Carlsbad system
SCHEDULE 5.7
DESERT HOT SPRINGS SYSTEM
REAL PROPERTY
A. Owned Real Property
None at the present time, however the Office Property will become an owned property on
or prior to the Closing Date.
B. Leased Real Property
1. 11855 Palm Drive
a. Lease Agreement between Desert Hot Springs Cablevision Inc. and Bill
Daniels dated 9/l/82.
b. Extension and Modification Agreement dated 813 II97 between Desert Hot
Springs Cablevision Inc. and Bill Daniels LLC (assignee of the Robert William
Daniels, Jr. Trust dated 1 l/9/84.)
,- C. Easements, licenses, rights-of-way, or other rights affecting real property
1. CATV Pole Lease Agreement dated 411518 1 between General Telephone Company of
California with Desert Hot Springs Cablevision Inc.
2. The Company is currently negotiating an Agreement with the Southern California
Edison Company through its agent, the California Cable Television Association.
3. Numerous easements and other rights of access have been granted to the Company
pursuant to MDU Agreements or various wiring, trench or other agreements to which the
Company is a party. Due to the confidential nature of this information, a Schedule of such
easements, licenses, rights of way or other rights will be provided to the Buyer after execution of
this Agreement.
4. Pole License Agreement dated as of July 1, 2000 between Southern California Edison
and Desert Hot Springs Cablevision.
.
Desert Hot Springs System
SCHEDULE 5.8
CARLSBAD SYSTEM AND CBS1
ENVIRONMENTAL MATTERS
None
.
/)‘
Carlsbad system
SCHEDULE 5.8
DESERT HOT SPRINGS SYSTEM
ENVIRONMENTAL MATTERS
None
Desert Hot Springs System
SCHEDULE 5.9.2
COPYRIGHT MATTERS
None
.-
Carlsbad system
SCHEDULE 5.9.2
COPYRIGHT MATTERS
None
..-
Desert Hot Springs System
SCHEDULE 5.10
CARLSBAD SYSTEM AND CBS1
INTELLECTUAL PROPERTY RIGHTS
1. KDCI registered service marks in Class 38 for “Cable Television Broadcasting Services”
and Class 4 1 for “Cable Television Programming and Production Services”.
2. Cable License Agreement to Receive and Use Scarborough Reports dated 3/24/2000
between the Arbitron Company and Daniels Cablevision, Inc.
3. License Agreement and Customer Service and Support Agreement dated 4/2/99 behveen
Cable Computerized Management Systems, Inc. and Daniels Cablevision, Inc.
,-
.
Carlsbad system
SCHEDULE 5.10
DESERT HOT SPRINGS SYSTEM
INTELLECTUAL PROPERTY RIGHTS
The Company may have certain common law rights in the marks “KDHS” used by the System.
Desert Hot Springs System
SCHEDULE 5.13
CARLSBAD SYSTEM AND CBS1
PROCEEDINGS AND JUDGMENTS
A. Pending or threatened claims, investigations or litigation
1. An industry-wide Notice of Infringement Letter dated g/10/99 has been received from
Beam Laser System, Inc. regarding infringement of U.S. Patents 4,814,883 and 5,200,825.
B. Judgments
1. Late fee policy effective l/2001 as per Order dated 1 l/30/95 in a class action suit brought
by Rusty & Angie Preisendorfer et. al. vs Cox San Diego et. al. (Case no. 678 198 in the Superior
Court of the State of California.)
F
Carlsbad system
SCHEDULE 5.13
DESERT HOT SPRINGS SYSTEM
PROCEEDINGS AND JUDGMENTS
A. Pending or threatened claims, investigations or litigation.
1. An industry-wide Notice of Infringement Letter dated 9/l O/99 has been received from Beam
Laser System, Inc. regarding infringement of U.S. Patents 4,814,883 and 5,200,825.
B. Judgments
1. FCC Order approving an Agreement among Desert Empire Television Corp. (“KMIR”),
Gulf California Broadcast Company (“KESQ”), Desert Hot Springs Cablevision Inc., Warner Cable
Communications, Inc. and Colony Cablevision of California, Inc dated 1 l/1/93.
.-
Desert Hot Springs System
SCHEDULE 5.14
CARLSBAD SYSTEM AND CBS1
TAX MATTERS
1. The Company received an Inquiry Regarding Records and Preaudit Questionnaire on
4/l l/O0 from the California Employment Development Department regarding the independent
contractors hired for KDCI.
2. The Company received a notice from the Internal Revenue Service on May 8, 2000 in
which it was alleged that the Company had not paid federal unemployment taxes in the
approximate amount of $44,591. AT&T Broadband, LLC has informed the Company that the
payment was in fact made by AT&T Broadband, LLC on behalf of the Company, and that the
Internal Revenue Service is mistaken in its allegation. AT&T Broadband, LLC has informed the
Company that it will notify the Internal Revenue Service of its error regarding this matter.
3. CBS1 received a notice from the Internal Revenue Service on March 27, 2000 in which it
was alleged that the Company had not paid federal unemployment taxes in the approximate
amount of $4,465. AT&T Broadband, LLC has informed the Company that the payment was in
fact made by AT&T Broadband, LLC on behalf of CBSI, and that the Internal Revenue Service
is mistaken in its allegation. AT&T Broadband, LLC has informed CBS1 that it will notify the
Internal Revenue Service of its error regarding this matter.
.
Carlsbad system
SCHEDULE 5.14
DESERT HOT SPRINGS SYSTEM
TAX MATTERS
1. The Company received a notice from the Internal Revenue Service on May 8,200O in which
it was alleged that the Company had not paid federal unemployment taxes in the approximate
amount of $5,606. AT&T Broadband, LLC has informed the Company that the payment was in fact
made by AT&T Broadband, LLC on behalf of the Company, and that the Internal Revenue Service is
mistaken in its allegation. AT&T Broadband, LLC has informed the Company that it will notify the
Internal Revenue Service of its error regarding this matter.
.
Desert Hot Springs System
SCHEDULE 5.15
CAFtLSBAD SYSTEM AND CBS1
EMPLOYEE MATTERS
1. Cablevision Associates [Employee] Manual dated l/1/2000.
2. Daniels Communications, Inc. 40 1K Plan.
3. The Sale and Bonus Plan
4. Daniels Cablevision Inc. Flexible Benefits Plan effective 7/l/99, together with Premium
Conversion Plan Addendum effective 7/l/99 and adopted as of l/l/98.
5. Series of Agreements with Aetna US Healthcare for healthcare, medical and vision
coverage:
a. Aetna US Healthcare Inc. (Kentucky) Group Agreement Cover Sheet undated
but effective 7/l/99, with Group Agreement for HMO and PPO benefits.
b. Aetna US Healthcare Inc. (California) Group Agreement Cover Sheet undated,
unsigned, but effective, 7/l/99 with Group Agreement for HMO and PPO
benefits.
C. Aetna US Healthcare Request for Participation and Joiner Agreement (dated
approximately 6/99).
d. Aetna Prospectively Rated Integrated Multiple Option Combined Administration
Agreement (dated approximately 6/99).
6. Administrative Agreement dated 7/l/99 between Wilmington Trust Company and Life
Insurance Company of North America appointing the latter as administrator for group insurance
benefits.
7. Trust Agreement dated 7/l/99 between Wilmington Trust Company and Daniels
Cablevision, Inc.
8. Gro;ip Services Agreement (for EAP) dated 7/l/99, between Human Affairs International
of Califomid and Daniels Cablevision, Inc., as amended by Addendum A.
9. Application for Group Insurance to Cigna dated l/19/2000, and copy for Life Insurance
Company of North America for group life, AD&D and disability coverage.
Carlsbad system
10. Corporate Service Agreement II dated 6/30/99 (for Emergency Travel Assistance
Services) between Worldwide Assistance Services, Inc. and Daniels Cablevision, Inc.
11. Metlife Dental Plan dated approximately, Y2000.
12. Manager’s Incentive Program.
13,. Other Employee Plans include:
Wellness Program
Child care reimbursement or health club membership
Education assistance
Vacation, sick leave and holidays
Voluntary life, AD&D, and short term disability coverage
Free Cable TV service
Service Anniversary Awards
Credit Union membership
F-
Carlsbad system
.
SCHEDULE 5.15
DESERT HOT SPRINGS SYSTEM
EMPLOYEE MATTERS
1. Cablevision Associates [Employee] Manual dated l/1/2000.
2. Daniels Communications, Inc. 401 K Plan.
3. The Sale and Bonus Plan
4. Daniels Cablevision Inc. Flexible Benefits Plan effective 7/l/99, together with Premium
Conversion Plan Addendum effective 7/l/99 and adopted as of l/l/98.
5. Series of Agreements with Aetna US Healthcare for healthcare, medical and vision coverage:
a. Aetna US Healthcare Inc. (Kentucky) Group Agreement Cover Sheet undated but
effective 7/l/99, with Group Agreement for HMO and PPO benefits.
b. Aetna US Healthcare Inc. (California) Group Agreement Cover Sheet undated,
unsigned, but effective, 7/l/99 with Group Agreement for HMO and PPO benefits.
C. Aetna US Healthcare Request for Participation and Joiner Agreement (dated
approximately 6199).
d. Aetna Prospectively Rated Integrated Multiple Option Combined Administration
Agreement (dated approximately 6/99).
6. Administrative Agreement dated 7/l/99 between Wilmington Trust Company and Life
Insurance Company of North America appointing the latter as administrator for group insurance
benefits.
7.
Inc.
Trust Agreement dated 7/l/99 between Wilmington Trust Company and Daniels Cablevision,
8. Group Services Agreement (for EAP) dated 7/l/99, t etween Human Affairs International of
California and Daniels Cablevision, Inc., as amended by Ad3endum A.
9. Application for Group Insurance to Cigna dated l/19/2000, and copy for Life Insurance
Company of North America for group life, AD&D and disability coverage.
Desert Hot Springs System
10. Corporate Service Agreement II dated 6/30/99 (for Emergency Travel Assistance Services)
between Worldwide Assistance Services, Inc. and Daniels Cablevision, Inc.
11. Metlife Dental Plan dated approximately, 5/2000.
12. Manager’s Incentive Program.
13. Other Employee Plans include:
Wellness Program
Child Care reimbursement or health club membership
Education assistance
Vacation, sick leave and holidays
Voluntary life, AD&D, and short term disability coverage
Free Cable TV service
Service Anniversary Awards
Credit Union membership
Desert Hot Springs System
SCHEDULE 5.16-A
CARLSBAD SYSTEM
THE BUSINESS/SYSTEMS INFORMATION
A. Please see the attached “Distribution Equipment” which shows the approximate number
of plant miles (aerial and underground) for the headend, and miles of 2-way active plant as of
313 l/00.
B. See the Upgrade Plan attached as Schedule 1.42 hereto for details regarding the bandwith
capability of the headend and each system as of 3/31/00, and as contemplated upon completion
of the present rebuild.
C. Please see the attached “Analog and Digital Channel Lineups” which shows the stations
and signals carried by each headend, and the channel position of each such station and signal as
of 3/3 l/00.
D. Please see the attached “Homes Passed -Equivalent Basic Subscribers” which lists the
approximated number of homes passed by the Systems as of 5/31/00, and the number of
Equivalent Basic Subscribers for the System as of 1213 l/99 and 313 l/00.
- E. Each franchise listed below serves the following counties, cities, and towns:
Carlsbad Cities of Carlsbad and La Costa
De1 Mar City of De1 Mar
Encinitas City of Encinitas
Lake San Marcos San Diego Country Estate area of the County of San Diego (Lake San
Marcos area)
Pala Mesa Fallbrook
San Marcos City of San Marcos
Solana Beach City of Solana Beach
Unincorporated North
County the unincorporated areas of San Diego County (including certain areas
now located within the town of Ranch0 Santa Fe.)
Vista City of Vista
Carlsbad system
Ott-12-2000 05:43pm Fram-
,-
-
I
1 :E I :h i IC
11
iJ !i
T-340 P.O07/01; F-029
DANIELS CABLEWS~ON~ INC.
Distribution Equipment
Year UpgdedRebulk Currently being rebuiff to 862 Mtlz Sway active
Homes Passed at 3!3VOO:
Miles of Plant:
Aenal
Underground
TaaJ Planr Mires
t-lame I Mile of Plant:
Channels in Use:
3andwidt.k
ff iles of Two-Way Acrive Plant
:able:
Fiber:
Trunk
Feeaer:
Drops:
lam Electronics :
Amptiflefs
Longest AmpliBer Cascade
Longest LE Cascade
aps:
remium Secuftty:
Addressable
Channels Trapped
onvetters:
Anabg AdciressaDle:
Non-addressable AnEIl~:
Digital
74,117
799
93
Basic: 26
Cable Flus: 28
New Produn 7-w -cl-
Premium: 3
Omer: 33
TOW 70
Disital Special Interest: 36
Premium: 18
DigItal Music: 37
PPV: 23 AULN PPV: 4
fuavigator Gulae: A
Tow: 119
Currently being rebuilr ta 862 Mfiz; Z-way active
AT&T 18 count
CommSwpe 8 Times (.750/1.0017.160)
CommScope & Times (.500/.625)
CommScope 8. Xmer (Rr;-59/ RG WRG-11)
Note: All drops rwllec! since 1988 have been TI% braid bonded
C-COR 519,529. E519. ES29
23 amps
3
Regal 600 and 750 MHz
-62pJgllf 1
Siecot and CommSwpe
CommScope 8 Times (.750/1.00/l .160) !
CommScope & 3imes (.500/.625;‘.750 I’ express) j:
CommScope (RG59IRG-WRG11; j
1’
C-COR FlexNet 900 Senes
Regal l-C%k CPB widebody
Saemific Ananra aociressable, GI DCT dlgiral
Cable Plus tier channels are uappen w&n negative tier traps (channels I 518,25 50, and 69-78)
Sdendfc Marxa 6570 and 8590 (phase 1 and 2) I
SA 8510,8525.8520.0529.8535,6536 i DCT-1000. DCT 1200 and DCT 2000 (100% stereo) -
Ott-I 2-2000 05 :43pm From- T-340 P.OWO15 F-029
1 a
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DANIELS CABLEVISION, INC.
Analog Channel Lineup
n'r;uidc
MlL-1 kl-lar- ; ,r",r :. .h pT*-.;‘;
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k;iu-B $99, UE -.I'
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oc t-1 2-2000 05:44pm From- T-340 P.O08/015 F-o2g
.
DANIELS CA5LEvlSION, hc.
Digital Channel Lineup
3IGTtAL MUSIC EXPRESS rnA. - -. _ _-. _ c-c
l n Larmvlpopm 924 --r* -z
rrl Jas\irpIEMu T.5 -.-F..- .
10 tbmeafi;r, !ca ..‘<;: -*--.- _.
w nrkn i.rsrlrY ?z . r-,:7 *..- --.:-,-‘--ad
6 b&llLww 93 _----
l k i.ammunm %,-Sal a --..-- _.
III ;ni Ha, $9’ -.-a
,I2 *a s tllts Cl * .-
113 czha& tllu wrm cr=f -;- ._ .-- .:
114 .LkmYKL c _.--
6 Tmab .-A L. ,
qi l;n nlc I CL:, z-
117 lun% cr. - -. . . -
'l? L-a Jw z-b* _-. .
@lY Rr3r-B 1ru.c w: -- -. -- -
3 .;eac * tie < -.-
Cl b-.-a b&7 -Aa * -
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P
S’CHEDULE 5.16-A
SUBSECTION D- HOMES PASSED AND EQUIVALENT BASIC SUBSCRIBERS
Homes passed as of S/31/2000: 74,700
Equivalent Basis Subscribers
As of 12/31/99:
As of 3/31/00:
58,482
58,846
Carlsbad system
SCHEDULE 5.16-B
DESERT HOT SPRINGS SYSTEM
THE BUSINESS/SYSTEMS INFORMATION
A. Please see the attached “Distribution Equipment” which shows the approximate number of
plant miles (aerial and underground) for the headend as of 3/3 l/00.
B. The minimum bandwith capability of the System is currently 450 Megahertz, and the
Company represents that by December 3 1,200O the minimum bandwith capability of the System
will be 550 Megahertz.
C. Please see the attached “Analog and Digital Channel Lineups” which shows the stations and
signals carried by each headend, and the channel position of each such station and signal as of
313 l/00.
D. Please see the attached “Homes Passed- Equivalent Basic Subscribers” which lists the
approximated number of homes passed by the Systems as of 5/3 l/00, and the number of Equivalent
Basic Subscribers for the Systems as of 12/3 l/99 and 3/3 l/00.
E. Each franchise listed below serves the following counties, cities, and towns:
Desert Hot Springs City of Desert Hot Springs
County of Riverside unincorporated areas of the County near the City of Desert Hot
Springs including the Whitewater, Sky Valley and Thousand Palms
Areas
Desert Hot Springs System
Ott-12-2000 05:44pm From-
DESERT HOT SPRINGS CABLEVISION, INC.
Distribution Equipment
Homes Passed at 3/31/00:
I
Mfles of Plant
Coaxlaf Aerial
/
Coaxial undargrounU
i Total Plant Miles
I Average Homes I Miie of PIam:
Ghannets:
Channel Capacity:
j In Use:
,
Miles of Two-Way Active Plant
CabliX
Fiber :
Trunk :
Feeder : il ii Drops :
fj Piant Electronics :
i I Amplifiers
Longest Amplifier Cascade
longest LE Cascade
i Taps :
; Premium Security:
Addressable
T-340 P.0121015 F-029
16,788
171.9
zL5
7 83.4 (includes 8.7 miles of fiber)
92
78
&
Basic: 31
Expanded Basic: 26
New hx?uct Tier: 0
Premium: 5
Other a
Total: 73
550 MHz (40 miles at 450 MHZ)
None
Diaital
Specrarry: 36
Premium: 2:
Digital Music: 37
Nawgafor Guide: Yes
WV/Other: z
Total: i23
8 count AT&T LXE
CommScope .750
CommScope SO0
RG6, F59 Tmes Fiber, Befdon. CommScope
Sc~entic At&ma
Node - 15, Headend - 17
2
Regal 600,lOOO and 750 Mt-lz and SA 550 Mnz
Yes
Cnannels Trapped
Conveners:
Analog Addressable:
Non-addressable Analog:
Digital
25 channels I 2 negative traps. Negarrve 24-37
Low-pass - 63 m
SA 8590
. SA8511.8529.8%0
General Instrument DC7 2000
Ott-12-2000 05:44pm From-
/-- DESERT HOT SPRINGS CABLEVISION, INC.
Analog Channel Lineup
T-340 P.O13/015 F-029
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DC t-1 2-2000 05 :44pm From-
DESERT HOT SPRINGS CAELEVISIUN~ INC.
Oigital Channel Lineup
T-340 P.O14/015 F-029
.-
AI.m!!I HIRlC
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1-z WC’ ~lr*-**.~ as Encore h: n I,,~ 520 Encwc Low 5lnrm 1-I 114..r’.* 521 Encore Fb5aay 1-Z - ~b.lIl-,ll !a Encurc MJiscm5 “$1 I *rs.nr-n Ilwr A t;,srr. L’“.,l~l41 Encuft hc swics I’z*, IQN..XSf~ r1.,rtn z bICCWca%CbM -** l-1. tL,Ilr -Ll,.3Vi .-w 534 3w:
A!1 T% inqwriJ.r~i ht:%..- s&z’3
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3 Ik~.n,n iA\li,~Il4 ;;uwL 5.53 -I-V v.s Ih?s.nc?: irxrlir ctl.Jllk 533 ii&Is ::a Jlw%rnrP: \\ aIt* ass ~13 HBOW “‘5 7%. Il,.dr.pn,~ ~~~nk.~ w. 5% HBO i3lmily 2Tri iit~i~t-4 i.3du-u I~~kmul.~~~~l CiKmsr 34 ziin- E Blare .?4as WI F..r +n. \-l..rlJ 576 !?a¶& Jut E.<l’\..>.~. sbHwJc% &III 1hrlJ.n.r l.IlV iii shrr*rm*3
JIG 731s L.4 iJlJIlllSl sho4irncN
J‘** 1 UJ.-.r iUf:~h.~ E I&JtmwQaaIae?
;*a: e;n LL..,. .P..T[r 553 7hc)bcircaam&z
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DIGITAL MUSIC EXPRESS ,/n..f”~~~rn:..~r~~‘~-,rh~~l.~;n--
9~ L*Hawg Lnn Y,‘4 km. ii:
!w? la\;atuJd 93 5Pyv,.~l.
YeI twIti llru 926 t:fr‘ll -1,.“,7:
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id5 .uwmKn* !e- LT. ‘d’.“.
!w3 C~nrnnp~r~n- t’nnrr4dt Y3 .n,...:. 2
Yll ;*I 5 t 1113 431 I<, e-t
YK! Y,A Hcu 931 IL.-
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YI i .Uhum I(.,* y :: , ..,‘.
Ylj Trmbh u:, ll.,,\~
Y 16 ..n ?+I12 C.5 : .>7
YI: tJ.lrK, y :,. ,:r .- . . - ‘9) - .LrJ Jaz 1’ I’ J‘.. .
YIY tktr.. lL2Jl.r **i ;::
:‘i’ . L-&s? ‘ I!.b* ‘.I’ “ e
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‘1.r ik.L I< .% I: ‘a,:
Y,J n-d. .A c’wn:r: . . . : - . . --.-*.-.---I.- . . . . e.. .r ” .
SCHEDULE 5.16-B
SUBSECTION D- HOMES PASSED AND EQUIVALENT BASIC SUBSCRIBERS
Homes passed as of 5/3 l/2000: 16,909
Equivalent Basis Subscribers
As of 12/3 l/99:
As of 313 1 /OO:
8,132
8,208
Desert Hot Springs System
SCHEDULE 5.18
CAFUABAD SYSTEM
FREE SUBSCRIBERS
Category Number of Free Subscribers
Employee/Reciprocal Accounts 91
MDU Manager Accounts 191
School Accounts 46
In Office/Training Accounts 10
Donation Accounts 29
Government Accounts 35
VIP/Easement Accounts 43
Total 445
.
Carlsbad system
SCHEDULE 5.18
DESERT HOT SPRINGS SYSTEM
FREE SUBSCRIBERS
Category Number of Free Subscribers
Associates Accounts
MDU Manager Accounts
In Office/Training Accounts
Donation Accounts
Government/Public Facilities/
School Accounts
Reciprocal Accounts
Easement Accounts
Total
16
4
2
3
30
14
0
69
Desert Hot Springs System
SCHEDULE 5.19
CARLSBAD SYSTEM AND CBS1
GUARANTEES AND SECURITY INTERESTS
1. CBI Continuing Guaranty executed as of 12/16/97 by Cablevision Business Services, Inc.
for the benefit of the Bank of America National Trust and Savings Association.
,F-
Carlsbad system
SCHEDULE 5.19
DESERT HOT SPRINGS SYSTEM
GUARANTEES AND SECURITY INTERESTS
None
Desert Hot Sprmgs System
SCHEDULE 7.2.3
CARLSBAD SYSTEM AND CBS1
COVENANT EXCEPTIONS
1. Late fee policy effective l/2001 as per the Preisendorfer et. al. class action suit.
2. The Company currently intends to raise its rates in the period prior to the Closing.
3. The Company may modify, add, delete, retier or repackage its programming services or
channel lineup in the period prior to the Closing on a node by node basis as the rebuild of its
systems is completed.
.
Carlsbad system
F-- SCHEDULE 7.2.3
DESERT HOT SPRINGS SYSTEM
COVENANT EXCEPTIONS
1. The Company currently intends to raise its rates in the period prior to the Closing.
2. The Company may modify, add, delete, retier or repackage its programming services or
channel lineup in the period prior to the Closing.
,.-
,-
Desert Hot Springs System
.-
FRANCHISE
Carlsbad 17569
Lake San Marcos 1912
San Marcos 2815
No. County 451
Vista 4362
De1 Mar 2038
Las Costa 10364
Fallbrook 8987
Solana Beach 3202
Encinitas 7341
Desert Hot Springs 4422
Riverside County 3329
SCHEDULE 8.2.4
ESTIMATED EQUIVALENT BASIC SUBSCRIBERS
5/31/2000
TOTAL EBS
PERCENTAGE OF
TOTAL EBS
26.3%
2.86%
4.21%
0.68%
6.53%
3.05%
15.52%
13.46%
4.79%
10.99%
6.62%
4.98%
./“- TOTAL 66792 99.99%
.-
Carlsbad system
EXHIBIT A
PUT AGREEMENT
(copy not provided as it contains confidential information not otherwise publicly available)
,- EXHIBIT B
FCC COUNSEL OPINION
(copy not provided as it contains confidential information not otherwise publicly available)
/-
EXHIBIT C
ESTATE COUNSEL OPINION
(copy not provided as it contains confidential information not otherwise publicly available)
.-
ASSIGNMIWT AND ASSUMPTION OF ACQUISITION AGREEMENT
(from Adelpbia Communications Corporation and Adelphia California Cablevision, LLC to
Highland Carlsbad Cablevision, Inc.)
This Assignrncnt is entered into as of this 30th day of September, 2000 by and
between ADELPHIA COMMUNICATIONS CORPORATION, a Delaware corporation (“ACC”)
and ADELPHIA CALIFORNIA CABLEVISION, LLC, a Delaware limited liability company
(“Adelphia LIZ’) and HKWLAND CAIUSBAD CAJ3LEVISION, INC., a Delaware
corporation (“Highland”).
STATEMENT OF FACTS
1. Each of ACC and Adelpbia LLC is a party to that certain Acquisition
Agreement by and among ACC, Adelpbia UC and the Estate of Bill Daniels dated as of
Scplember 30,ZOOO (the ‘*Acquisition Agreement”).
2. Each of ACC and Adelphia LLC wishes to assign all of its rights and
obligations under the Acquisition Agreement to Highland.
3. I-Iighland desires to acquire and assume all of ACC’s and Adclphia LLC’s
rights and obligations under the Acquisition Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
- valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
partics, intending to be legally bound hereby, agree as follows:
1. ACC assigns to Highland all of ACC’s right, title and interest in, and
obligations and duties under, the Acquisition Agreement.
2. Adelphia LLC assigns to Highland all of Adelphia LLC’s right, title and
interest in, and obligations and duties under, the Acquisition Agreement-
3. Highland assumes all of ACC’s and Adelphia LLC’s right, title and interest
in the Acquisition Agreement and agrees to fully discharge and perform all of ACC’s and
Adeiphia LLC’s duties and obhgations under the Acquisition Agreement.
[Remainder of page intentionally left blank]
.c
IN WITNESS WHEREOF, the parties have caused this Assignment and
Assumption Agreement to be executed by a duly author&d officer as of the date fmt written
above.
ADELPHIA COMMUNICATIONS
CORPORATION ,~.L!?L . .
Name: ~;‘LvID?%/T R,.ns s c Title: EXedt.&ve kke 4% es . UG .Pl?
ADELPHM CALIFORNIA CABLEVISION,
LLC
l3y: ACC Operations, Inc., its sole member
ame: kT+v b f/C JT Rrada s
Title: &e~uh& i4Le &k&~;de~t~
I-QGI~LAN~~ cAmBm CAE~LEVISION,
INC.
,- -2-
** TOTQL PFIGE.03 **
Exhibit 3
Stuart F. Feldstein, Esq.
Fleischman and Walsh, L.L.P.
1400 Sixteenth Street, N. W.
Washington, D.C. 20036
(202) 939-7900
C:\WMNnTemporary Internet Files\OLK89\exhibits - Highland.WF’D/Page 3
Exhibit 4
Adelphia does not currently have any plans to change the service and operations of the
system as a consequence of this transaction. However, Adelphia may, after it has an opportunity
to familiarize itself with the system’s operations, determine that such changes are desirable or
necessary.
,.-
/-
C:\WINNTlTemporary Internet Files\OLKS9\exhibits -- Highland.WPD/Page 4
Exhibit 5
The answer is in the negative because there are no documents, instruments, agreements or
understandings for the pledge of Highland stock as security for loans or contractual performance.
C:\WINN~Temporary Internet Files\OLK89\exhibits - Highland.WPD/Page 5
Exhibit 6
Highland is owned by the Rigas family which owns a significant portion of Adelphia.
The family owns systems with over 300,000 subscribers in their own right. Thus, they have
sufficient financial resources to complete the proposed transaction and operate the system. In
addition, Adelphia Communications Corporation will provide a corporate guarantee. The most
recent Form 10-K of Adelphia Communications Corporation is attached hereto. It contains the
most recent audited financial statements. The most recent Form 10-Q is also attached.
,-
H:\CLIENTlGR4MOS\026255012\consents\exhibits -- Highland.WPD/Page 6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.G. 20549
FORM 10-K
X Annurl Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
FortheYcarEndedDamnber31.1999
-Transition report pursuant to Section 13 or 15(d) of the Securities Excbrnge Act of 1934 for the transition period
Commission File Number: O-16014
ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DclaWale 23-2417713 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
OneNorthMaiaStreet
couderspors PA 16915-I 141 (Address of principal exmutive offices) (Zip code)
814-274-9830
(Registraut’s telephone numbm including area code)
Securities registered pursuant to Section U(b) of the Act: None. Securitia registered pursuant to Section 12(g) of the Act: Class A Common Stock S.01 par value.
Indicate by check mark whether the registrant ( 1) has filed all reports ra@red to be filed by Section 13 or 1 S(d) of the Securities Exchange Act of
1934 during the pmeding 12 months (or for such shorter period that the registmnt was rap&d to file such reports), and (2) has been subject’to such
wing requiranents for the past 90 days.
Yes X No -
Aggregate market value of outstanding Class A Common Stock par value $0.01, held by non&XIiam of the registrant at March 29.2000 was $4.64 billion based on the closing sale price as computed by the NASDAQ National Market system as of that date. For purposes of this calculation only, afmiates are deemed to be dixectors and executive officers of the registrant.
AtMarch29,2000, l13,05i,l18sharrsofClassACommonStock,parvaluc~.Ol,and16,735,998sharesofC~BCommonStock,parvalue
SO.01) of the registrant were olmtanwg.
Documents Incorporated by Refaarcc: Potions of the Proxy Statanent for the 2000 Annual Meeting of Stockholders are incorporated by reference
into Part IlI hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained ha+ and will not be contained, to the best of registrant’s knowledge. in deftitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amatdment to the Form IO-K.
ADELPFBA C-CATIONS CORPORATION
TABLE OF CONTENTS
,-- PART1
n-EM 1.
ITEM 2.
ll?%3.
ITEM 4.
PARTII
ITEMJ.
lTEM6.
BUSMESS
PROPERTes
LEGAL PROCEEDINGS
SUBMISSION OF hiATl-ERS TO A VOTE OF SECURlTY HOLDERS
MABKETFORREmTRAM’SCOhfMONEQuRy ANDRELATED STOCKHOLDERMAlTERS
SELECTED FINANCIAL DATA
rmA7. hlANAciEM%TS DISCUSSIGN AND ANALYSIS OF RNANCIAL CONDrl-lON AND RESULTS OF OPERATIONS
rrZMfA.QU~A~ANDQU~ATIVEDISCLOSUREABOVTMARKETRlSK
rrEM 8. RNANCXAL STAl’EMNEi AND S UPPLEMZNTARY DATA
rrEM 9. CHANGES IN AND DISA- WrITI ACCOUNTANTS ON ACCOUNIING AND FINANCIAL DISCLOSURE
,-
PART m
REM IO.
n-EM 11.
rlR4 12
IlEM 13.
PARTIV
REM 14.
DmCTORS AND EXECUIWE OFFICERS OF lIlE REGISTRANT
E!mmmE COMPENSATION
SECUIUTYOWNERSHlpOFcERrAINBENEFKML owNERsANDMAN-Nr
CERTAW RELATIONSHU’S AND REUTED ‘IRANSAcnoNS
EXiiBI’K.FlNANCIALSTATEAENTSCHED~ ANDREPORTS0NFGRMS-K
30
31
34
49
50
81
81
Market Areas
The syntemn an “clustcrcd” in hveive market areas as follows:
MARKETAREA LOCATION OF SYSTEMS
Florida Portions of southern Dade, Citm. orange. HillSborough, Palm Beach, Martis Browml, Lee and St. Lucie Counties and Hilton Head, south Carolina
Western New York
Virginia
City and suburbs of Buffalo and the adjacent Niagara Falls area, city of Erie, Pennsylvarua, communities near Cleveland, Ohio end several mall communities in the southem tier of New York
wiiuter. Ch6rlottesville, Staun~ Riehland, . . Martmsnlle. Blacksburg, Salem,
Hope=& priace G-w, Harrisonburg, Petersburg
and surrounding communities in
VirgiG., and South Boston and Elizabeth City, NorthCarolina
western Pennsylvania Suburbs of Pittsburgh and sevaal small
fxmmunitie8 in we!aem Pennsylva&
MarylaIldandwestvirginia
New England Cape Cod ccmmuities, South Shore communities (theaTctlbetweenBostonandc8qleco4 Mll8uchllsetts). Marws vineya& -useIts and Bamiqm, Burhngtq Rutland and Montpelier, V-t end mnmndiq communities in Veimon& New HaqxhimaudNewYorlcandSeymouraudWatabuty, ComvetiadlUldCOIUXIlUIlitiUinSO~CUllUl6tld
--&-
FastemPemylvania
Ohio
suburbs of Fsladelphia and Scmlton
SW of ciacinnat auic01umbusandaeved8mau wmmunitia in Ohio. 8ublubs OfLcxingm lmd sevaal
small cunmunitiu ill Kentucky, neveral small commllnitie8inhldiaMandKa&muoo, Mi~and
sevdsmau cunmunitia in Michigan
New Jersey
Los Angeles
Puerto Rico
Colorado
other
Ocean County, New Jersey
City md suburba of Lm Angeles
Cities of San Jum md Levittown
City of Colomdo Springs
ihriou8 loc6nu throughout the m&hut
Recent Development of the Systems
- The Company has focused on =Wing and developing systems m markets which have tkwable historical growth trends. The Company believes that me strong household growth trends in its Systems market areas are a key factor in positioning itself for future growth in basic subscnben. For a
description of acquisitions by the Company from April 1, 1997 through the date of this filing, see Notes 1 and 13 to Adelphia’s Con~li&ted Financial Statements iduded in Itan 8 of this Form 10-K.
On May 26, 1999, the Company announced that it had agreed to swap certain cable systems with Comcast Corporation (Tomcast”) and Jones Jntercable, inc. (“Jones”) in a geographic rationalization of the companies’ respecuve markets. Adelphia will add approximately 440,000 subscribers
in the Los Angeles, CA area and the West Palm@ort Pierce, FL area. Jn exchange, Comcast and Jones will receive systems currently owned or
managed serving approximately 464,ooO subscribers in suburban Philadelphia, PA, Ocean County, NJ, Ft. Myers, FL., Michigan, New Mez&o and Mia118. All systems involved in the transactions will be valued by agreement between the parties or, following a failure to reach agreement, by
h.@endCtH valt~tion~, with my difference in rdative V&C to be fttt’tdd with C&I or addit&& cable systans. ne systan swaps me subject to
customary closing conditions and regulatory approvals and are expected to close by mid-2000.
In December 1999, the Compsny entaed into definitive merits under which Cablevision Systans Corporation will sell its cable systems in the
greater Cleveland metropolitan area to Adelphia for approximately S1.530,OOO tn cash and sumitia. As ofDecember 31,1999, these systems served approximately 307,350 basic subscribers. The transaction is subject to customary closing conditions and regulatory approval and is expected to close by mid-2000.
The Company has entered into a definitive agreement under which Prestige Communications ofNC, Inc. will se4 its cable systems in Virginia, North Carolina and Maryland to Adelphia for approximately 5700,000. These systems me approximately 120,000 basic subscribers. This transaction is subject to customary closing conditions and regulatory approval is expected to be close by mid-2000.
The Company will continue to evaluate new opportunities that allow for the expansion of its business through the acquisition of additional fable television systems in geog@tic proximity to its misting regional market areas or in locations that can serve as the basis for new market areas, either directly or indirectly through joint ventures, where appmp&e.
The following table indiostes the gruwth of the Company Systems by slrmmarizinp the numkr of homes passed by cable and the number of basic subscribasfortachofthcthrecyeaninthepaiodmdedMarch31,1998~df~esdrofthe~~intheperiodmdedDecrmkr31,1999.The table also indicates the munerical growth in subscribers auributable to acquisitions and the numeri4 and pacentsge growth attributable to internal
Pd.
.-- YUrElKbd
COMPANY SYtmMs:
H-prrredbb) Beginning of Year Intad Growth (c) % Inlerd clrowtb Aquimi Homa Paued End ofYear
B&c aubaaibm (4 b)
6CgilXlill8OfYCU lntand Growth (c) % lnlandGrowtb Acquired Subruih End ofYear Basic PmetrUion (e)
l.dSZ.860 2.053.679 2.220.695 2.413689 3.075.J80 42,715 54.189 4331 45.850 77,261 2.3% 2.6% 1.9% 1.9% 2.5% 158.104 112.827 161,337 616,341 4.570.092 2.053.679 2.220.695 2.425.253 3.075.5# 7.722933
1.281383 1.443.605 1.555,174 1.71 I.372 2.169.882 3&5U 33355 28.137 27,892 28,449 3.0% 2.3% 1.8% 1.6% 1.3% 123,678 78.3 14 133,451 430.6 18 2.791.761 1.443.6oJ 1.555.174 1.716.762 2.169.882 4990,092
70.3% 70.0% 70.8% 70.6% 64.6%
(a) A home which a broadb&networkpassesin!?ontofisdeemedtobe”passed”bycableifitcanbe corme&d to the distribution system without
any further extension of the cable distribution plant.
(b) Data for the Olympus systems (which became wholly owned and consolidated on October 1,1999) is included under Company Systems for all periodspresented.
(c) The number of additional homes passed or additional basic subscribers not attributable to acquisitions of new cable systems.
(d) A home with one or more television sets connected to a cable system is counted as one basic subscriber.
(e) Basic subscribers as a percentage of homes passed by cable. _
.- In addition to prOew typical enhanced ScNices such as volcema$ call transfer and conference calling, Adelphia Business Solutions offen addlbonai value-added enhanced XMCU t0 compkment its core local and long distance services. These enhanced service offerings mclude:
Access to Internet Scrvicea-Enables customers to use its available capacity for access to ISPs.
Data NetwoWq Services-Adelphia Business Solutions can provide high-speed, broadband sewices to use for data and Internet access such as Integrated Services Digital Network (“ISDN”) and Primary Rate Interface (“PRY).
Specialized Application Services-Adelphia Business Solutions can create products and services that are tailored for target industries with special communications needs such as the hospitality induany. These se&-es typically include non-measured
rate local calling, expanded local calling area, discounted long distance ratea and tailored tnmking contigurations.
Internet Support Sewicea-Adelphia Business Solutions can provide web hosting solutions for commercial and non-profit organiutions. These service may include co-location sewrces, storage savices, domain name registration, virtual hosting services. tm5c statistien, and 24-hour access for web site changes
Growthstmtegy
Adelphia Business Solutions provides its seryices to communicationa-intensive customem. These customers include busmess. govemmental and educdtional end users, as well as other communications service providers. Adelphia Business Solutions believes that its target customers rcpr#cnt a 1-e and under-served customer pool that generally has limited choices in their wmmtmication8 servicu purchasing deci8ion8. These c- generally ncek reliability, high quality, broad geographic coverage, end-to-end nemice. solutions-oriented customer service and timely introduction of new and innovative servxes. Adclphia Business Solutions offers dedicated access services on a whohale his to interexchange or long distance carriers (“MY) and ha8 altered into national service agxements with AT&T and MClWorldCom to be their preferred supplier.
llte broad deplwt of fiber optic cable in Adelphia Business Solutions’ markets typically enables connectivity among Adelphia Business
Solutions, the incumbent local exchaqe carrier (“LEC”) cenual offices and Adelphia Business Solutions’ customas. Adelphia Business Solutions expeas~stratcgytoresultinahigh~~of~thatisboth~~ardtaminuedoaitsnctwlorksystem,wfiichvvouldprovi&
AQlphiaBusinessSol~~withhigherlong-tam~~.AsofDeccmba31, 1999,AdelphiaBusiness Solutions had collocated in 167 incumbentLECcentmlo5wa,a6gurcwhichi8Qcpectcdto incrase to over 500 during 2ooO. In addition, Adelphia Business Solutions had
,-- appmxhuy33l,oooinstalled-litlaas0fDecullber31, 1999,55%0fwtticllwereon-switch.
In addition to the lmsd deplmt of fikr optic cable in its markets, Adelphia Bushess Solutions has been qgressively adding an inter-city fiber networksystcmthtcamvaSitr~~markets.~fullydeployed,this~~y33,ooOmilefibaopticbackbontwillmhanceAdclphia
Bushess Mutic& ability to o&ate and tumhate Adelphia Business Solutions’ customn commuui~oas tra5c over iU networh. Management
of Adelph Business Solutions believes l--tam opemhg margins on Adelpbia Business Solutioas’ long distaw. Internet and data transfer busiaesseswillincrauesisnificmtlyasarrraltofcamectingthesemarkets.ManagemmtofAdelphiaB~ Solutions also believes that its planued deploymcot of Local Multipoint Dis&ibution savice (“LMDS”) and Digital Subscriber Line (“DSL”) technologies will provide additional, akemative-toconneet cuiomemtoitanehwrks.
Inruponsetomarketdemand8andtomrucimize its selling effintq Adel@ia Businas Solutions offers a full suite of communications services to its
customan. Adelphia Busitws Solutioas offas its aa-vicu sepemtely to suit specific cwtomexneedsorbun&dtogethertoprovidecustomerstitha wst4ective and eompnbmsive wmtmmidonn soluth in addition to the pricing baufirs Adelphia Business Solution@ cwomers receive fhm
~~pdlcd-~~-=m ~tofAdelpb.iaBuainas Solutions believes that bundled newices provide Adeiphia Business hrcascdcustotwretenti~highopehngmarginsandara&cdcostofaquiringwwcMomcrs.
Adelphia Business Solution’ Price o&&a mtly include a wide range of local dial tau and long distaacc services in all of Adelpbia Business Solutionkt opaating markets In Wition, Adelpb Bushess Solutions has reeqni& the exparhg demand forhigh-bandwidth by its customers in order to support the growing nuabu of data appticatians. Adelphia Business Solutior& tint daYa product to take adwmtage of these additional revenue opportunities is high-q& Iatanet uxus, which has beers intmduced in most of Adelphia Busineas Solutions’ original 22 local markets
(“Original Markets”) and will be rolled out to all of Adelpbia Business Solutions’ markets over the next several months. Additionally, Adelphia
Business Solutions plans to add to its product capabilitia by activating data centers and providing such products as e-mail, directory services and webhoating,andbylaune&gDSL,framerelayandAaynchoronouaT rzmsmhion Mode (“ATM”) services over the next six months. To accelerate Adelpbia Business Solutions’ hme relay and ATM sdvicc offerings, Adelpbia Business Solutions enta& into a wholesale provider agreement with Intamalia Communications (“Intamcdia”), whereby Adelphia Bushess Solutions will use Intermed& hme relay network and &ta switches to offer data sewices to Adelphia Business Solutions’ cwhncrs and then move Adelphia Business Solutions’ cuamme& tra,Eic onto its own network symemaaitbecomeaoperational. Mmwgment of Adelphia Buaineaa Solutions believes this approa& provides an efficient marketcntry strategy under the Adelpbia Business Solutions trade name. while providing better long-term opemthg margins though the use of Adelphia Business Solutions’ own netwwk systan. Management of Adelphia Business Solutions believes that the introduction of high margin data products should
enhance revenue growth and better leverage Adelphia Business Solutions’ significant fiber assets.
Adelphia Business Solutions intends to extend its fiber optic network into the \mstan half of the United States. This expansion will increase Adelphia Busmeas Solutions’ addreawble market from 35% to 65% of the business access linea in the United Statea and will allow Adelphia Busmess SObltion~ to offer services in approximately 200 markets by December 31.2001. These markets will provide Adelpbia Business Solutrons with a
market opp~rtunrty of more than 39 million addressable busmess access lines, which currently generate over S75,000,000 of annual communications semces revenues.
. The Company ais0 OlTerS tradinonal dial Up Internet access for those customers wil0 illitially+prefer this method of Internet access to the higher speeds of our broadband network. This establishes the Company as a full servxe Internet provtder and creates a customer base whrch can be upgraded to the h@ speed servtce in the firture.
other services .
Adelphia offers wireless messaging services through it8 wholly owned subsidiary. Page Time, Inc. (“Page Time”). Page Tune provides one-
way messaging 8ervices to the Companys Systems via resale arrangements with existing paging network operators.
Adelphia also offers long distance telephone 8ervice on a resale basis. Services offered include state-to-state and in-state long distance, as well as 800 service, international calling, calling card 8ervices and &bit card services. The Company’s sale8 effort is focwd on the consumer market and emphasizes the simplicity and savings of one low usage fee available 24 hours a day, 7 days a week with no monthly fee.
The Companvs cable television operations strategy is to wnstruct and operate a broadband network capable of~offering a broad range of telecommunications KNjces and providing 8uperior customer 8ervice while maximizing operating efficiencies The Company mtends to bmld on ns expertise as a cable television service provider, as well as to become a provider of bundled communications 8ervices. It intends to combine tts cable television service with high speed data and internet access, paging and telephony 8ervices.
By acquiring and developing systems in geogrqhic proximity, the Company has been able to real& significant operating effkienctes through the
consolidation of many managerial, administrative and technical lkWions. The Systems have consolidated virtually all of their admimstratwe
operationa, including cu8tomer service, sdyice call dispatchin& markctin& human reaource8, adver&ing sales and government relations u-no regional offices. Each regional office ha8 a related technical center which contains the facilities neceswy for the Systems’ technical funcuons, including consuwiou installation and system maintenance and monitoring. Consolidating cwtomer sewice fimctions into regional OfflccS allows the Company to provide customer service through better tmining and MIing of customer tie mpresenmtives, and by providing more advanced telecommunication8 and computer equipmart and 8ofIwnre to its customer scnrice mpre8entative~ than would othenvine be economically feasible in smaller systems. To this end, Adelphia ha8 completed several cable system swaps in order to further clusta systems in close geographic pnxmity. Adelphia has entered into a aignifiumt cable ayatem swap with Comcaat that is expected to close in 2000. (See “Recent Development of Systems”).
The company considus technological innov8ui~ to be an impormnt ccqonentofitsserviceofferingsaudcwtomer satisfaction. TIE company intcndstocwtinuctheupgradcofiUnctwork~toIdd~lcapacity, herease digital hansmissiocl capabilities and farther improve
systrm reliability. These improvemam will enable the Company to contimre its inuoduetion of additi~irvivisucrc~ video, high speed data and internet xryice and impvlsMwdaed pay-per-vkv pmgmmm& which expaud cus&ner i=-=CompanY revenues Management bclieven that the Cunpmy is among the leaders of the cable indwtry in the deployment of fiber optic cable with one of the
mo8tadvaneedbro&mnd lletwuk illbmleturu.
Adelphia Businus Solutions
Productsandservice3
Adelphia Business SolutioasproduasMdservicesrur~to~tothe~~commrmicationsneedsofitsbusiness, govemmental andeducationalcust~.AdelphiraadAdelphiaBurintsssOlutionscmnotincampaitionforthesamecustoma base. Adelphia concentrates on residential customers. while Adelphia Busmess Solutions eoncultrates on bus&as, gOvernmen ulandeducationalcustomQs.
Locdsetvicu
Ad&&a Business Sohnion8 provide8 load dial-tone sefvice8 to cuWara8. whichaUowsthemtocompletecallsinitscaUingareaandto accessalonsdistancccallinerrrrLoulservicessrrdl~distanccservicesclmk~~togethausingthePame~,rffacility. A&lphiaBusinessSolutioPr’~rre~tgallowacustomatoeasily incrcw~dccreastcapscityanddtacahancedserviCCS asthewmmlmication8req . of the busmesa change. In addition to its core local services, Adelphia Busine88 Solutions also provides public payphone savice8, acccu to third party directory a8ai8tance and opemtor 8ervice-a.
Adelphia Business Solutions providea domestic and internatianal long distance sekces for completing intrastate. interstate and internationai calls. Long distance wvice is offered as an additional service to Adelphia Business Solutions local exchange cuatorners. Long distance calls which do not terminate on Adelpbia Business Solutions’ nehworks (which are cutrentiy the bulk of such calls) are passed to long distance carriers which route the mmamingpoltionofthecau.
John J. Rigas, the Chairman, President, Chief Executive ofilcer and controlling stockholder of Adelphia, 1s a pioneer in the cable television industry, having built his fust system in 1952 in Coudersport, Pennsylvania. Adelphia was incorporated in Delaware on July 1. 1986 for the purpose of - reorganiziq five cable television companies, then principally owned by the Rigas family, into a holding company structure 111 connection with the mitiai public offering of its Class A common stock. The Company% operations consist of providing telecommunications sewices primarily over ns broadband networks. The Company did not have any material foreign operations or foreign sales in the twelve months ended December 3 1, 1999.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for fonvard-looking statements. ‘Certain information included in thus
Amtual Report on Form IO-K, including Management’s Discusa~on and Analysis of Financial Condition and Reauita of Operations, 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 inpomnt risks and wxrtainties that could significantly afTect expected results in the future from those expressed in any forward-looking statements made by, or on behalf of, the Company. These “forward looking statements” can be identified by the use of forward- looking terminology such as “believes”, “expects,” “may,” “will,” “should,” ” mtends” or “anticipates” or the negative thereof or other vanauons thereon or comparable terminology, or by discussions of strategy that mvolve risks and uncertainties. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions, acquisitions and dwest.tture.s, the availability and cost of capital, government and
regulatory policies, the pricing and availability of equipment materials, inventories and programming. product acceptance, developments and changes in de competitive en vimnment in which the Company operates. Persons reading this Ammal Report on Form 10-K are cautioned that
forward-looking statements herein are only predictions, that no assurance can be given that the finure results will be achieved, and that actual events or results may differ materially BS a result of the risks and uncerthti~ facing the Company. For further information regardmg those risks and
uncertainties and their potential impact on the Company, see the prospectus and moat recent prospectus supplement filed under Registrauon
Statement No. 333-78027, under the caption “Risk Factors.”
Cable Television Operations
Products and Services
Video Sewices
Systems receive a variety of television, radio and data signals transmitted to receiving sites (“headends”) by way of off& antennas,
microwave relay systems and satellite earth stations. Signals are then mafuiated, amplified and distributed primarily through fiber optic and coaxial cable to aubaeribera, who pay feea for the service. Cable television ayatema are generally constmeted and operated pursuant to non- exclusive W awarded by atate or local govermnen t authorities for specified paioda of time.
Syntems typi* off= au&r&s a peekage of basic video services ccm&ing of local and diStmt television tew&aat signals, satellite-delivered non-bwdcast &armela (which offer ProIcnmrmiog such aa newa. sporta, family enteH&ment, music. weather, shopping, etc.) and public, govcmmentalandeducdtionalacc.u8~.
Insddition,praniumsavicechmuulr,whichpovidcmovies,livecmdtapedcoacataspartrevmtsradotherp, areofferedforanextra monthly charge. Syatcma alao offer pay-per-view pmgmmm& wfiich~o~thesubscribcrtoorQspecialewnuormaviaandtopayonapa event baais. Lmal, regional and naliod adverUsing time in sold in the majority of the Systema, with commercial advatiaements insated on certain
8atellitedelivered non-- channels.
Digital video servieu are available to Acklpbia aubacribers who lease or pwchaae a digital convater. Digital TV is a computer&d method of
&finin&transmittingandstaringiafarmatianthatmakesupatelevisionJigPal.Sincedigitalsignalscanbe “wquwed,” Adelphia can transmit up
to 12 chanuela in the apse currently used to tmmmrit just tme analog channel. AdelpWs digital TV subamibau may alao receive “multichannel”
~~saviccs.suchluHBO1.2.3~4~eartsndwcstcorutsatcllitcfecQ,enbancedpay-pa-viewaptionswithl8moviechannels,up~
40 channels of CDquality music ti Music Choice and an interactive on-acreur program guide to help them navigate the new digital choices.
Adelphia alao aella adve to various au&tea for local and national adwrtiaiq on certain channela carried by Adelphia. aa well as mailings and other media
High-SpUdD&SWiWSdIUtUIEtACWU
Power Link, the Coatpu#s hishrpad data service provided through cable modems, which includea residential. institutional, and business service offeringa, umslitutu an altunatjve to the tradition84l slower speed data offerings available through Internet Service Providers (“ISPS”). Power Link offera wtomas speeds comparable to those available through a Tl line, at coats that compare to a typical ISP plus a second telephone line. Alao, M a rault of the aquiaition of Century on October 1.1999, Adelpuia offers high speed data services through
@-IOtllCillWltliItS+Ul8iUAlXhOV&
The Compan~s deep fiber design allows the use of the expanded bandwidth potential of digital wmprehon technology for cable data and video services High speed cable data aavieea are now available at ape& far in excess of that which is currently available via a 28.8 kilobit or 56 kilobit
per second telephone modem. In addition using a high speed cable modem and special ethemet card allows the user to bypass telephone lines, does
not require the user to log ah and allows for multiple sessions or connections to multiple aewicea aimuhaneoualy.
-. The Company also offers high sped Intemet access through the use of one way cable modana, which provide the high speeds of broadband on the
data downstream and utilizc a telephone line retum path. One way cable modems enable the Compauy to offer the high speed data servrce to the bulk of its customers, while completing the system buildout of hvo way broadband plant
PART I
(Dollars in thousands, except subscriber rates and per share amounts)
/-
Introduction
Adelphia Communications Corporation and subsidiaries (“Adelphia” or the “Company”) is a leader in the telecommunications industry with cable television and local telephone operations. Adelphia’s operations consist of providing telecommunications services primarily over networks, which are commonly dared 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 3 1, 1999, Adelphia owned or managed cable television systems (“Systems”) with broadband networks that passed in front of
7,902,707 homes and served 5,124,594 basic subscribers. John J. Rigas, the Chauman, President, Chief Executive Offker and founder of Adelpma, has own&and operated cable television systems since 1952.
,
On October 1.1999, Adelphia acquired Century Communications Corp. (“Century”) through a merger whereby Centuiy was merged with and into a wholly owned subsidiary of Adelphia, Arahova Communications, Inc. (“Arahova”) pursuant to an agnxment and plan of merger, dated as of March 5, 1999, and as amended on July 12, 1999 and as further amended on July 29, 1999. This transaction was approved by Century and Adelphia stockholders at their respective stcckholders’ meetings on October 1, 1999. As of October 1. 1999, Century had approximately 1,610,OOO basic subscribers primarily in California, Puerto Rico, and throughout the United States, after giving effect to Centurys pending joint venture with AT&T, which closed on December 7, 1999. At the effective time of the merger, Adelphia also pumbased Citizens Cable Companys 50% interest m the
CitiaenKentury Cable Television Joint Venture, one of Centmy’s 50% owned joint ventures.
Also on October 1. 1999 Adelphia acquired From&Vision Partners, L.P. (“FrontierVision’) and Harron Communications Corp. (“Hatron”). As of the date of acquisition, FrontierVision had approximately 710.000 basic subscribers primarily in Ohio, Kentucky, New England and Virginia and Harron had approximately 296.000 basic subscribers primarily in Sotnheastern Pcnr@vania, Michigan, Massachusetts and New Hampshire.
A&lphia also owns 100%. of the interests in Olympus Commuuicationa, L.P. (“Olympus”). On October 1.1999, the redemption of the partnership interests in Olympus held by Telesat Cablevision, Inc.. a subsidiary of FPL Group, Inc. was completed. Olympus is a limited partnership that operatesalargecablesysteminFlorida.AsofDecember31,1999,the l-nwdbd netwsnk for this system passed in lkont of 974,861 homes and saved 651,308 basic subscribers.
CabltsystmuownedbythcColnpany(the”CampanySystans”)~l~in32states~puatoRico,snd~organizedinto12rrgioaal cluster-~ Florida, Western New Yc& Virgi&, Weatern Pennsylvani& New Engl&, Eastern Pennsylvania, Ohio, New Jersey, Los Angeles, Puerto -- Rico, Colorado and Other. The Company Systems are located primarily in s&urban areas of large and medium-sized cities within the 50 largest television markets As of Defzember 31, 1999, the broadbd &works for the Company Systems ‘passed in tit of 7,722,933 homes and served 4990,092 basic subsuibas.
See kte 1 to AdelPhia’s Consolidated Fmancial Statmvnts inch&i in Itan 8 ofthis Form 10-K for discu&on of additional acquisitions during the
year- Decemba 31, 1999.
Adelphia also provides managunatt and consulting savicer to other par&m&@, corporatitnts and limited liability companies engaged in the
ownership and operation of cable television systems (the “Managai m”). John J. Rigas and members of his immediate family (collectively, the “Rigas family”), including entities they om or control, have controlling owner&p interests in these entities. As of December 31,1999, the broedbarsdRetworksfor~lesrstmw~by~Rigarfamiypartnenhipsandcorporatianspasscdinfrontof179,n4homcsandsaved 134,502 basic subscrib.
On October 25. 1999, the sharebolh of Hypcrion Telecommunications, Inc. (“Iiypaion”). a majority owned subsidiary of Adelphia, elected to
change the name of Hypaion to Adelphia BGneas Solutions, Inc. (“Adelpbia Busmess Solutions” or “ABIZ”). The name change was effective October 25. 1999.
Adelphia Business Solutions is a leading natid provider of facilities&& integmted communications savices to customers that include businesses, governmental and educational end users and other communications service providers throughout the United States. This means that Adelphia Business Solutions provides its cu&nmrs with alternatives to the incumbent local telephone company for local telephone and commuuications services. Adelphia Business Solution$ telephone operations are refund to as being facilities-based, which means it generally owns the local communications netw&s and facilities it uses to deliver these services, rather than leasing or renting the use of anok ms networks to do so. A&lphia Business Solutions currently offers a full range of co.snunications scn&s in 53 markets and expects by the end of the year 2000 to be offering services in approximately 115 markets nationwide, including substantially all of the top 40 metropolitan statistical areas in the United States.
On November 30, 1999, Adelphia Business Solutions issued and sold 8,750.OOO &arcs of Class A common stock at a price to the public of 530.00
per share. Simultaneously, Adelphia purchased 5.181.350 shares of Class B common stock at a price equal to the public offering price less the
underwriting discount for the Class A common stock T&e tmnsactions raised approximately $403,000 of net procur& to continue to fund the expansion of Adelpbia Business Solutions’ existing markets and to build new markets. At December 3 1.1999. Adelphia owned approximately 60%
/- of the Adelphia Business Solutions’ outstand@ common stock and held approximately 90% of the total voting power.
Adelphia Business Solutions, Olympus, Arahova and FrontierVision are also Securities and Exchange Commission (“SEC”) registrants due to filing requirements for certain publicly held securities. Addittonal information regarding these entities can be obtained by reviewmg their separate company filings with the SEC.
‘me followtng table summ~ by multa vu the homes purcd by cable,
tmsicsubshbmdprrrm~~~~~~ti fortheSptemsrrofDcambcr31.
1999.
New EngkId
FlOlid8
Ohio Western New York
viigiIlir
. Weswm Paulsyhlir
Edstem PenMylwnia
Puerto Rico
COlondO
New Jersey
other
Total
MuugedSynrmr:
western PeIlmylvulia
PlOti&
Eukm PalNyhwlia
Vi+li~
I-Cal syslans: Las Angeles New Eaghnd Flode
Ohio
Worran New York
Vi&h waan Pamsytvauia Eaaan Pe!cluylvMic PuatoRico colondo New Jusey 0th
1,464,419 808,849 55.23% 5 12,927 63.41M 1,065,827 766.372 71.90 284,852 37.17 l.039.728 684.724 65.86 273.091 39.88 939.131 633.242 67.43 258,776 40.87 750.658 500.700 66.70 295.9 16 59.10 598,757 434.995 72.65 190.166 43.71 347,736 249.262 71.68 71,459 28.67 271,439 199.821 73.62 103.866 51.98 305.826 134,927 44.12 83,754 62.07 191,311 111.544 58.31 44.215 39.64 133,431 109,675 82.20 57,572 52.49
614.670 355,981 57.91 88,503 24.86
a=9 61,982
29,713 25.569
36.543 25,449
1,464*419
1.065.827
1.069,Ul
939.131
750.658
629:986
430.025
307.982
305;826
191.311
133,431 614.670
75.32
86.05
69.64
a&?
45.19 29.49 66.82 11,11
808,849 55.23 512,927 63.41 76632 71.90 284,852 37.17 710393 66.42 280,631 393 1 633.242 67.43 258.776 40.87 500.700 66.70 295.916 59.10
456,497 n.46 20z021 44.25
311344 72.38 99,468 31.96
zzstm 73.14 120,870 53.66
1%=7 44.12 83.754 62.07
111,544 58.31 44315 39.64
109.675 82.20 57.92 52.49 355.981 57.91 88,503 24.86
Premilml
Unirr Rmuum
P-On
Financial Information
Thefinancialdatare@ingtherevemw, results of opaa!ions and identifiable assets for the Compan~s two businas segments as of and for each of thetbreeyearsinthepenodendedMarch31, 1998,theninemonthsendalDecember31,1998andtheyearendedDecember31, 1999aresetforth in,andincarpanrtcdhaeinbyrefaawto.Item6ofthisFam10-K
Cable Television Operations
Technologies and Capital Improvanatts
The Company has made a substantial commitment to the technological development of the Systems and is aggressively investing in the upgrade of the technical capabilities of its cable plant in a cost efficient manner. The Company contin~ to deploy fiber optic cable and to upgrade the techtucal capabilitms of its broadband netwrks. The result is significant inmasts in network capacity, digital capability, two-way c~mmunicau~n and network reliability.
The design of the current System up@e, what comple@ will deploy on average one tilxr optic node for every two system plant miles or approximately one fiber node for every 180 homes passed compamd to the industq norm of 500 to 1000 homes passed per tiber opuc node. Approximately 75% of the System will be upgmded to 750 Mbz. Approximately 25% of the plant will remain at 550 h&z. The upgraded system ~111 be completely addressable and provide twwvay communication capability. The additional bandwidth will enable the Company to offer addittonal video progmmming services. A portion of the bandwidth will be allocated to the new service offerings such as two-way data, telephony and vrdeo- ondemand. The Company believes this combination of bandwidth and the relatively low mrmber of homes passed per tiber node will provide
- adequate capacity and flexibility to offer existing and anticipated services into the f oreseeable future with limited additional capital expendnures.
The upgraded System, on average, will include only two active pieces of equipment between the headend and the home. Limiting the number of active pmces of ecpupment combined with the small number of homes per fiber nde reduces the potential for mechanical failure and the number of customers affected by such a failure, all of which provides increased reliability to the customers.
Subscriber Services and Rates
_-
The CornpaW revenues are derived WWally thorn monthly subscriptron fees for VENOUS &CCS. Rates to subscribers vary in accordance ~th the type of service selected. Although service offerings vary across franchise areas because of differences in plant capabilities, each of the areas typically offers servtces at monthly prices ranging as follows:
selvice Rate Range
Basic Cable Television
Cable Value Cable Television Premium Cable Television Digital Cable Television High Speed Intemet Access
Dial-up Internet Access
paging LongDistance
$7.00 - 19.00 Sll.OO-28.00 $9.00 - 14.00 s10.00 $35.00 - 50.00 516.00 37.00 - 35.00
S.07 - .08 per minute
In addition, the Company derives other telephony revenues with rates determmed on a usage basis.
,--.
An installation fee, which the Company may wholly or partially waive during a promotional period, is usually charged to new subscribers. Subscribers are free to terminate services at any time without charge, but often are charged a fee for rewnneetion or change of service.
The Cable Communications Policy Act of 1984 (the ” 1984 Cable Act”) as amended by the Cable Television Consumer Protection and Compeution Act of 1992 ( the * 1992 Cable Act”), deregulated basic service rates for systems in communities meeting the Federal Communication Commissions (“FCC”) deftition of effective competition. Pursuant to the FCC’s definition of effective competition adopted following enactment of the 1984 Cable Act, substantially all of the Company+ fran&xs were rate deregulated. However, in June 1991, the FCC amended its effective compeuuon standard, which increased the mrmber of cable systems which could be subject to local rate regulation. The 1992 Cable Act contains a detiniuon of
effective competition mder which nearly all cable systans in the United States are subject to reguhtion of basic service rates. Additionally, the legislation (i) eliminated the 5% annual basic rate increase allowed by the 1984 Cable Act without lccal approval; (ii) allows the FCC to adjudicate the reasonableness of rates for non-basic SQvice tiers, otha than premium savices. for cable systems not subject to effective competition in responx to complaints filed by &anchising authorities and/or cable subscrikn; (iii) prohibits cable systems f&n requiring subscribers to purchase savice tiaJabovebasicsaviceinordato~prcmiumsavicesiftttesystcmistechnicallycapableofdoingso,(iv)allowstheFCCtoimpose restriaiansantheretiaingandrearrangenvntofcablcserviceslmder~ circumstances; and (v) permits the FCC and bchising authorities morelatitudeinwnbdlingratesandrejectingrateincmase rapests. The Telecommunications Act of 19% (the “19% Act”) ended FCC regulation on nonbasic tier rates on March 31.1999. See Xegislation and Regulation”
For a discussion of recent FCC rate rqulation and related developments, see “Legislation and Regulation” and Management’s Discussion and Analysis of Financial Condition and Results of Qerations-Regulatory and Competitive Matters.”
The 1984 Cable Act provides that cable opemtom may not offer cable service to a particular community without a franchise unless such opcratorwaslawfullyproviding~etothccanmunityonJuiy1.1984andthe~~authoritydoesnotrrquirea~chise.Thc Systems operate pursuant to hndises or otha authmisxtions issued by govenunartat authorities, substantiaRy all of which are nonexclusive. Such &m&iaes or at&xi&ons awarded by a governmen tal authority generaUy are not transferable without the consent of the authority. As of Decankr 3 1,1999, the Company held 2.885 bax&ses. and the Managed Systems held 102 franchises. Most of these &xhisescankte ’ -dpriortotbeirstatedexpimtionbytherelevantgovernmen talauthority,afterdueprocess,fbrbreachofmatenal provisions ofthe francbe.
Under the terms of most of the Cmupanys m, a 6ancMse fee (generally ranging up to 5% of the gross revemres of the cable system) is payable to the govemmen tal authority. For the past three years, -se fee expense incurred by the Company has averaged approximately 2.4% of gross system revenues.
TheGanchisesissueclbythegovernmen tal authoritiu am subject to periodic renewal. In renewal hearings. the authorities generally consider, among
other things, whether the bmchise holder has provided adequate service and complied with the franchise terms. In commction with a renewal, the authority may impose different and moee stringent terms, the impact of which cannot be predicted. To date, all of the Company’s material franchises have been renewed or extemW, at or effective upon their stated expiration, generally on modified terms. Such modified terms have not been matially adverse to the company.
The Company believes that all of its mataial franchises are in good standing. From time to time, the Company notifies the franchising authorities of the Compan~s intent to seek renewal of the franchise in - with the pmcedmw set forth in the 1984 Cable Act The 1984 Cable Act process
requires that the governmental authority consider the franchise holder’s renewal pmposal on its own merits in light of the franchise holder’s past performance and the community’s needs and interests, without regard to the presence of competing applications. See “Legislation and Regulation.” The 1992 Cable Act alters the administrative process by which operators utilize their 1984 Cable Act franchise renewal rights. Such changes could make it easier in some mstances for a tranchising authority to deny renewal of a franchise. -
Adelphia Business Solutions
Networks
Network Construction
.- Adelphia Busmess Solutrons networks are constructed to cost-effectively access areas of significant end user commurucations traffic, as well as the ma~onty of the Local Exchange Camers Central OfEces (“LECCOs”) and Points of Presence (“POPS”) and most of the IXCs. Adeipha Business Solutions establishes general requirements for network design mchrding engineering specifications, f&r type and amount, construction timelines and quality control. Adelphia Business Solutions’ engineering pmonnel provide project management, including contract negotiation and overall supervision of the constn~ction, testing and certification of all facilities. The construction period for a new network varies depending upon the number of route miles to be mstalled. the mitial number of buildings targeted for wnnection to the network, the general deployment of the network and other factors. Networks that Adelphra Business Solutions has installed to date have generally become
operattonai within tm to twelve months after the beginnmg of constructron.
Network Operating Control Cmta (“NOCC”)
Adelphia Business Solutions’ NOCC is located in Coudasport, Pennsylvruua. The NOCC is equipped with state-of-the-art system monitormg and control technology. The NOCC is a single point interface for monitoting all of Adelphia Business Solutions’ networks and provisioning all services and systems necessary to operate the networks. The NOCC supports all of Adelphia Busmess Solutions’ nehvorks including the managrmmt of 2,194 building connections, 22 switches or remote switching modules and 16,060 network route miles as of December 3 1.1999. The NOCC is designed to
accommodate Adelphia Business Solutions’ anticipated growth.
The NOCC is utilised for a variety of network managemmt and control functions including monitoring, managmg and diagnosing Adelphia Business Solutions’ SONET networks, central office equipment, customer circuits and signals and Adelphia Business Solutions switches and associated equipment. The NOCC is also the location where Adelphia Business Solutions provisions, coo&m&s. tests and awepts all orders for switched and dedicated circuit orders. In addition, the NOCC maintains the database for Adelpbia Business Solutions’ circuits and network availability. Network personnel at the NOCC also develop and distribute a variety of software utilized to manage and maintain the networks.
Comections to Customer Locations
Office buildings are connected by network backbone extensions to one of a number of physical rings of fiber optic cable, which originate and
teminate at the company+s central of&e. Signals are sent simultaneously cm both primary and altematc pmtcctia paths through a network backbone to the compan~s central office. Within each building Companyowned internal wiring wmtects the Company53 Gber optic teminal equipment to the customer premises. customa equipment is comxted to Compsny-provided electronic equipment generally located where customer transmissions
aredigitized,~~andumvatedtoanopticalsignal.ThetrafficisthentransmittedthroughthenetworkbackbonetotheC~~scentral
,-- Officewhcreitcanknconfigurcdf~rwtinstoitsultimatedMinatianonthtntnvok
Cable Television Operations
COXllpCtitiOIl
Although the Company and the cable television imhmtry have historically faced modest competition, the competitive landscape is changing and competition has increased. The Company t&eves that the inuease in competition within its communities will wntinue to occur over the next several
Years.
At the present time, cable television systems compete with other communications and mtatainmen t medk in&ding offair television broadcast si~swhicha~~isabletoreceivtdirectlyusingtheviewdsowntelevisianKtsnd~teanaTheextcntto~chacablesystcm~~swith over-the-air broadcasting depends upon the quality and quantity of the brwdwst signals available by direct antenna reception compared to the quality
and quantity of such signals and alternative servicea offered by a cable system In many areas, television signals which constitute a substantial part of basic service can be received by vim who use their own antennas Local television reception for residents of apartment buildings or other multi- unit dwelling complexes may be aided by uw of private mssta antenna setvices. Cable systems also face competition from alt&ative methods of distributingandreceivingt&visions&nalsand6umothersourcesofmter&mmm such as live qorling events, movie theaters and home video products, including multimedia comprtas, videotape reco&rs, digital video disc playess and compact disc players. In recent years, the FCC has adopted policies providing for aatbarizlltian of m technologies and a more favorable opemtmg environment for certain existing technologies that provide, or may provide, substantial additional com@tiw for cable television systems. The extent to which cable television service is competitive depends in significant part upon the cable television system’s ability to provide an even greater variety of programming andotherserviwsthsndlat available off-air or through competitive alternative delivery sources. In addition, certain provisions of the 1992 Cable Act and the 1996 Act are
expected to increase competition signihmtly in the cable industry. See “Legislation and Regulation.”
The 1992 Cable Act prohibits the award of exclusive lranchises, prohibits Ban&sing authorities from mwawnably refusing to award additional hnchises and permits them to operate cable systems themselves without tranchises.
_a--.
Individuals presently have the option to purchase earth stations, which allow the direct reception of satellite-delivered program savices formerly available only to cable television subscribers. Most satellite-distributed program signals are being electronically scrambled to petmit recepuon only
with authorized decoding equipment, gmerally at a cost to the viewer. From time to time, legislation has been introduwd in Congress which, if enacted into law, would prohibit the scrambling of certain satellitedistributed pmgrams or would make satellite ScNices available to private earth stattons on terms comparable to those offered to cable systems. Broadcast television signals are being made available to owners of earth stattons under the Satellite Home View Copyright Act of 1988, which became effective Januaty 1,1989 for a six-year period. This Act establishes a statutory compulsory license for certain transmissions made by satellite owners to home satellite dishes for which carriers are required to pay a royalty fee to the Copyrrght Offrw. This Act was formally extmded through December 31, 1999 and deliberabons relative to tiuther extension of this Act are
ongoing, The 1992 Cable Act enhances the right of cable competitors to PU&SC nonbroadcast satellite-delivered progranmung. See “Legtslauon
and Regulanon-Federal Regulatmn. ”
,-c Video programming is now being delivered to individuals by high-powered direct broadcast satellites (“DBS”) utilizing video compressron technology. This technology has the capability of providing more than 100 channels of progmmmtng over a single high-powered DBS satellite WI&I
si@kantly higher capacity available if multiple satellites are placed in the same orbital position. Video compression technology IS bemg used by cable operators to similarly increase their chatmel capacity. DBS service can be received vntually anywhere in the United States through the installation of a small rooftop or side-mounted antenna, and it is more accessible than cable television smrice where a cable plant has not been constructed or where tt is not cost effective to wnstruct cable television facilities. DBS is being heavily marketed on a nationwide basis by competmg
service providers. Congress passed the Satellite Home Viewer Act in late 1999 The law allows DBS providers to begin offering local broadcast
channels. DBS companies have since added a limited number of local channels m some regions, a trmd that will continue, thus lessemng the distinction between cable television and DBS service.
Cable communications systems also wmpete with wireless program disttibutmn services such as multichannei, multipoint distribution service (“MMDS”), commonly called wireless cable systems, which use low-power rmcrowave frequencies to transmit video programmmg over-the-an to
subscribers. There are MMDS operators who are author&d to provide or are providing broadcast and satellite programming to subscribers m areas
served by the Companys Systems. MMDS systems are less capital intensne. are not required to obtain local hanchises or to pay franchise fees and are subject to fewer regulatory requiranmts than cable television systems. h4hJDS systems’ ability to compete with cable television systems has previously been limited by channel capacity, the inability to obtain progmmming and regulatory delays. Recently, however. MMDS systems have
developed digital compresston technology which provides for more channel capacity and better signal delivery. Although relatrvely few MMDS systems in the United States are Currently in operation or under wnstruction, vimrally all markets have been licensed or tentatively licensed. A series of actions takm by the FCC, inchrding reallocating certain frequencies to wireless services, are intended to facilitate the developmmt of wireless cable television spectrum that will be used by wireless operators to provide additional channels of programming over longer distances. Several Regional Bell Operating Companies acquired interests in major MMDS companies. The Company is unable to predict whether wueless video semices will have a material impact on its operations.
Additional competition may come from private cable television systems servicing condominiums, apartmmt complexes and certain other multiple unit residential developments. The operators of these private systems, 11111111111 as satellite master antenna television (“SMATV”) systems, often enter into exclusive agruments with aparbmnt building owers or homeowners’ associations which prechrde franchised cable television operators from serving residmts of such private complexes. However, the 1984 Cable Act gives fmnchi& cable operators the right to use exkting compatible easanmtswithintheir~areasuponnQldiscriminatorytamsandconditions.Accordingly.whacthae~~compatibleeasanents,
cableopaatwsmaynotkunfairlydcniedeccessordiscriminatedagainstwithrrspecttothtamsandcoaditionsofaccesstothoseeasernents.
Thaehavekcncontlictingjudiciald&isiau~~~scopcofthesccessright~tcdbythe1984CableAct,particularlywithrespcctto
.- easanentslocatedcntirrlyonprivatepropaeyF~,~ea6raachisedcabletclevisionJystcmtypicallyisobligatedtoextcndsavice~~lanas ofawmmtmityregardlasofpopuMiondensityor economicrisL,aSMA’ZVsystemmayconfinr:itoapaationtosmallareasthatareeasytoKNe and more likely to be profitable. Under the 1996 Act, SMATV systems can inkmmnect non4ommonly owned tmildings without having to comply withlocal,stateandfederalmgulatory rrquirrmmts~arrimpoacduponublesystemsprovidingsimilarsavices,aslang~~theynotusepublic rights-of-way. The U.S. Copyright Of&e has wncl~ that SMATV systems are “cable systems” for v of qualily& for the compulsory
copyright license established for cable systems by federal law.
The FCC has authorized an interactive television service which permits non-video transmission of information between an individual’s home and mtatainmmt and information seke provkkrs. This XNice provides an alternative means for DBS systems and other video progmmming disttibutors, including television stations, to initiate the interactive television savices. This setvice may also be used by the cable television industry.
TheFCCalsobssinitiatcdanmrul~ploccsdinslooLingtoward~allocationof~~~inthc28~rangeforanewmulti-ehannel wirrlessvidcosaviccwhichwuld~98videochanrvlsavailableina~emarketItcMnotkpndidedatthistimewhttha~titorswill emerge utilizing such kquencies or whether such competition would have a ma&al impact on the operations of cable television systems.
TheFCChasrrcentlyauctionedasizableclmwntofspcctMnintbe31~brrdforusebyanewwirrlesssavice,LMDS,whidramongothcruses, candelivffowr100Ehrmnclrofdigital~dirrctlytournsrmwJ homes. The FCC auctioned this specuum to the public during 1998. withcableopaatarsaadlocaltelepholltcompanicsrrstrictedintheirpamciparioninthisauctiaLTheancnttowhichthewinninglicauesinthis servtce will use this spe&um in particular regions of the country to deliver multichamtel video programming to subscribers. and therefore provide wmpetition for 6anchised cable systems, is at this tune, m See Wanagemmt’s Discussion and Analysis of Financial Condition and Results of operatmns.”
The 1996 Act eliminates the restriction against ownership and operation of cable systems by local telephone companies within their local exchange service areas. Telephone companies m now bee to enter the retail video distribution business through any means, such as DBS, MMDS, SMATV or as traditional franchised cable systen operators. Alternatively, the 19% Act author&s local telephone companies to operate “open video systems” without obtaining a local cable banchise. although telephone wmpanies opera@ such systems can be required to make paymmts to local governmental bodies in lieu of cable kanchise fees. Up to two-thirds of the channel capacity of an “open video system” must be available to pgrammers unafEliated with the local telephone company. The open video system concept replaces the FCC’s video dialtone tules. The 1996 Act also includes numerous provisions designed to make it easier for cable operators and others to compete directly with local exchange telephone carriers. With certain limited exceptions, neither a local exchange carrier nor a cable operator can acquire more than 1094 of the other mtity operating within its own senrice area.
Advances in co~uni~ati~~ technology, as well as changes ,m the marketplace and the regulatory and legislative mviromner& are COIWBIIUY Occ~. Thus. it is not possible t0 predict the effect that ongoing or future developmmis might have on the cable industry. The ability of cable systems to compete with present, emergmg and future distributron media ~111 depend to a great extent on obtainmg and dehvering attractive
progmmmmg. The availability and exclusive use of a suflicient amount of quality pgmming may in turn be affected by developments m regulation or copwght law. See “Legtslation and Regulation.”
A-- The cable television industry competes with radio, television, the Internet, and print media for advertising revenues. As the cable television industry continues to develop programming designed specifically for distribution by cable, advertising revenues may increase. Premium programming provided by cable systems is subject to the same competitive factors which exist for other propnm@ discussed above. The contmued protitabihty of premium services may depend largely upon the contmued availability of attractive progmmming at competitive pnces.
Adelphia Business Solutions
Competition
In each of the markets served by Adelphia Business Solutions networks, the sc~ces offered by Adelphia Business Soluuons compete principally with the services offered by the incumbent LEC serving that area. Inc~mbm~ LECs have long-standing relationships with their customers, have the potential to subsidize competitive services from monopoly service revenues, and benefit from favorable state and federal regulations. In light of the passage of the 19% Act, federal and state regulatory initiatives till provide increased business opportunities to competitive local exchange camers (“CLECs”) such as Adelphia Business Solutions, but regulators are likely to provide incumbent LECs with imzased prtcing flexibility for theu servqs as competition increases Further, if a Regional Bell Gperatmg Company ( “RBGC”) is author&d to provide in region long distance servtce in one or more states by fultilling the market operating provisions of the 1996 Act, the RBGC may be able to offer “one stop shoppmg” that would be competitive with Adelphia Buaineas Solutions’ offerings. To date, the FCC has approved Bell Atlantic’s application for such authority in New York, Any approval could result in decmsed market share for the major IXCs, which are among the operating companies’ signiticant customers. Any of these results could have an adverse effect on Adelphia Business Solutions.
There has ken significant merger activity among the RBOCs in anticipation of entry into the long distance market including the merger of
Ameritech and SBC. whose combined territory covers a substantial p0rti0n of Adelphia Business Solutions’ markets. Gther combinations have occurred in the indusuy, which may have an effect on Adelphia Business Solutions, such aa the combination of AT&T Corp. and MediaOne and the proposed mergers betw#n Bell Atlantic and GTE, Qwest and US West, and MClWorldCom aud Sprint. The effects of these combinations are unknown at this time. Management of Adelphia Business Solutions believes that combinations of RBGCs and others will pose a greater competitive threat to Adelphia Business Soltio& strategy of originating and terminating a significant propmtion of its customem’ commuuications tdfic over
itsownnetworks,rathathannlyingonthenaworkoftheincumkntLEC.
Adelphia Business solufionsalsofsces,andwillcontinuttoface,competitiM~~currcntrmdpotmtialmarlcetentnmts,includingotha CLECs and data ceutric local providers. incumbent LECs which are not subject to RBOC restrictions on long distance, AT&T, MCIWorldCom,
,- Sprint and other IXCs, cable television cotnpaniea, electric utilities. microwave carriers, wireless telecomtuunications providers and private networks builtbylargeendusers.Inadditioqacwcarrias,suchasGlobalCrossin&Williams,~andLevcl3arebuil~andrmrnaging nationwide tutwoW which, in some cases, are duigned to provide local &a. Further, AT&T’s acquisition of various cable companies will exploit
ubiquitous local cable in6nstructlac for telecommunications and other servicea provided by the opaating campaniea. Finally, although Adelphia BusinessSolutiaw~g~ygoodrr~onahipswiththeotha~IXCs,thaeanno~ that any of these IXCs will not build their
own facilitia. purchase othr cnrsiers or their facilitia, or resell the services of other carriers IIlthcr than uae Adelphia Business Solutions’ services whenenteringthemarketforhcalex&angeservices.
Many of Adelphia Businas Sohnioad curTurt and potential competitor& particublrIy incumbent LECS. have timmcml, perslmuel and other resources substantially greater than those of Adelphia Business Solutions, as wrcll as other competitive advantagea over Adelphia Business Solutions.
EmplOY-
At February 26.2000. there were 11,740 fbil-tirne employees of the Company and the Managed Par&m&@. of which 724 employees were coti by colle&ive bqainiq qeanatts at 2S loWions. The Company cunsidcrs its relations with its employea to be good.
Legislatiorl and Rcgulatim
~eC~~~s~sting~rmticipatedbusinessesarcrrgulatedbytheFCC,ramcstatego vemnents and most local governments In addition, various legislative and rcguhry pmpoaals under consideration kom time to time by Congress and various fedaal agencies may materially affect the Company’s existing aud anticipated buinusu. The following is a summary of feQal laws and mgulations affecting the growth and operation of the Companys existing and anticipated businesses and a description of certam state and local laws.
Cable Television/Federal Lam and Regulations
Cable Communications Policy Act of 1984
The 1984 Cable Act became effective on December 29, 1984. This federal statute, which amended the Communications Act of 1934 (the “Communications Act”), created uniform national standards and guidelines for the regulation of cable television systems. Violations by a cable television system operator of provisions of the Communications Act, as well as of FCC regulations, can subject the operator to substantial monetary penalties and other sanctions. Among other things, the 1984 Cable Act afIii the right of wing authorities (state or local, depending on the Y practice in individual states) to award one or more fianchisea within their ~urbdictio~. It aho prohibited non-grandfathered cable television systems from operating without a franchise in such jurisdictions. In connection with new franchises, the 1984 Cable Act provides that in granting or renewmg franchises, franchising authorities may establish requirements for cable-related facilities and quipmenf but may not establish or enforce requirements for video programmm g or information services other than m broad categories.
.
Cable Television Consumer Protection and Competition Act of 1992
rc-- On October 5, 1992, Congress enacted the 1992 Cable Act. This legislation effected significant changes to the legislative and regulatory envuonment
in v&ch the cable industry operates. It amended the 1984 Cable Act m many respects. The 1992 Cable Act became effecttve on December 4, 1992, ahhough certain provisions, most notably those dealing with rate regulation and retransmission consent, became effective at later dates. The
legislation also rquired the FCC to initiate a number of rulemaking proceedhg~ to implement various provisions of the statute. The 1992 Cable Act allows for a greater degree of regulation on the cable industry with respect to, among other things: (i) cable system rates for both basic and certam nonbasic services, (ii) programmmg access and exclusivity arrangements, (iii) access to cable channels by unaffiliated pr Ogramrmng services, (iv) I& access terms and conditions, (v) horizontal and verttcal ownership of cable systems, (vi) customer service requuements. (vii) francmse
renewals, (viii) televisron broadcast signal camage and retnrnsmission consent, (ix) technical standards, (x) subscriber privacy, (xi) consumer protection issues, (xii) cable quipment compatibility, (xiii) obscene or indecent programming and (xiv) requiring subscribers to subscribe to tiers of service other than basic wrvice as a condition of purchasing premmm servtces. Atit~onally, the legislatron encourages compethon ~7th eustmg cable systems by allowing municipalities to OWI and operate their own cable systems without having to obtain a franchise, preventmg franchismg authorities from granting exclusive franchises or umeasohably refusmg to award additional lbbis~ qvering an existing cable system’s service area and prohibiting the common ownership of cable systems and co-located MMDS or ShIATV systems. The 1992 Cable Act also precludes vtdeo progmmmers affiliated with cable television cmpania from fawning cable operators over competitors and requires such programmers to sell their prom to other multichannel video distributors. This provision may limtt the ability of cable m suppliers to offer excluswe progmmmmg arrangements to cable television compania. A number of provrsions m the 1992 Cable Act relating to, among other things, rate regulation, have had a negative impact on the cable industry and the Companys business.
Telecommumcations Act of 19%
The 19% Act significantly revised the fedaa regulatory s’twtwe. As it pertaim to cable television, the 19% Act, among other things, (i) eliminated
the regulatiou of certain nonbasic programming services in 1999, (ii) expamkd the defmition of effective comgctition, the existence of which di@aces rate regulatton, (iii) eliminated the restriction against the o~naship and ppaation of cable systema by telephone companies within their local exchange se&e areas and (iv) liberal&s certain of the FCC’s cross-ownership reskctiona. The FCC has been conducting a number of rulemakingpPoceedingsinordatoimplcmmtmqllyofthe~~sionsofthelQ%Act
FCC kgulation
The FCC, the principal federal reg&mry agency with juriadicticm over cable tekviaion, has promulgated regulations covering such areas as the
izz=&?““” -
aosMnrmarhipbetwencablesystansandothercommunicationabusincsses carriage of television broadcast ~~~andlockboxeafacaem f origination cablqastmg and sponao&p identi&i~ childrenk programming, the
_ ~~~~basic cable amvice rata in.arew where cable systems are not subject tn effective competition,,sig@ leakage and tkquency use. ormanw. mammmce of various me&a, equal employment opportwty. and antesma structure nohfica~on. markmg and hghting. The FCChastheauthoritytocpf~thesengulatiansthrouehthtimpositionofsu~~fincs,~issuanccofceascanddesinordasand/orthe imp&ion of other admi&rative sawtions, such as the rewcation of FCC licenses needed to operate certain tramunkion facilitia often used in tzonneitiun with cable operationa. F-. the 1992 Cable Act rquiral the FCC to adopt regulations covering, among other things, cable tates,
signal catriage, consumapotrctiolland amtomer~~leaaed~mdecem~ psogmma access to cable television systems,
- agreamlts,tuhnical~wnsumcr electronics quim ccmpatibility, ownenbip of home wiring, program exclusivity, qual employment oppWunity, and various aspecta of direct bndcaat satellite system ownership and operation. The 19% Act requires certam changes to variousprovisionsofthcscrrgulatians.Akid~ofthemost~fedaalrrgulationslurdoptcdtodatcfollows.
Rate Regulah
The 1984 Cable Act codified uisting FCC prranption of rate reguktion fw prunium chanuels a14 optional nonbasic progmm tiers. The 1984 Cable
Act also ®ulated b&c cable rates for able televiaiar ayatana E - d by the FCC to be subject to effective com+ion. The 1992 Cable Act substantiaIly changed the statukq ad FCC rate raguhtion stadds. The 1992 Cable Act rcpkai the FCC’s old standard for determinmg effective competition,rmdawhichmostcablcsystaarwacnotsubjeEttolocalraterrgulation,witha~provisionthathasrrsultedinnearlyallcable
television systems becoming subject to local rate mgulaticm of beak service. Additional.ly, the 1992 Cable Act ekinated the 5% annual rate increase for basic service pmiously allow& by tim 1984 Cable Act without local approval; rquired the FCC to acicgrt a formula, for tianchising authorities to enforce, to asme that buic cable tata are raaonabl~ allows the FCC to review ratea for n~baaic sewice tiers (other than pewhaxmel or per- program smica) in rapmse to uxnpiab tild by ksauhk& authoritiq prohibita cable television systems knn rquiring customers to purchase service t,ie~ above basic senrice in ada to pwchaae premium aewices if the system is technically capable of doing so; required the FCC to adopt
regulations to establish, on the barna ofactual coata. the price for installation of cable service, remote controls, converter boxes and additional outlets; andallows~FCCtoimpose~~~a!thcrrtiaingandrrarrangarvntofcablesavices~~catainlimitcdcirc umstanws. The 1996 Act expands the definition of effective competition to cover situations where a local telephone company or its affiliate, or any multichannel video provider using telephone company hciIitia, off&s comparable video service by any means except D:3S. Satisfaction of this test deregulates both basicandnonbaaictim.The 1996ActcndedFCCrrgulatianofnonbasictiaratcsonMarch31,lQQQ.
The FCC’s rqulations set standards for the regulation of basic and nonbasic cable service rates (other than per-channel or per-program services). The FCC’s original rules became effqtive on September 1.1993. The rules have been amended several times. The rate regulations adopt a benchmark
pticecapsystemfornlewrmgthe reaaonableneas of existing basic and nonbasic sewice ratea, and a formula for future rate increases based on intlation and incmnsa in cutain costs. Altematively, cable operators have the oppormmty to make costof-service showings which, in some cases, - may just@ rates above the applicable benchmarks The rula also require that charga for cable-related quipment (e.g., converter boxes and remote control devtces) and installation services be unbundled Tom the provkion of cable se&w and based upon actual costs plus a reasonable profit. Local
franchising authorities and/or the FCC are empowered to order a reduction of existing rates which exceed the benchma& level for either basic and/or nonbasic cable services and associated equipment, and refunds could be re+ired. The retroactive refund pmod for hit cable Sernce rates was hUted to one year. A significant nlirnber of franchising authonties have become certified by the FCC to regulate the rates charged by the Cornpan!
for basic cable service and for associated quipment. The Company’s ability to unplement rate Creases consistent UVIJ its past practices will likely be limited by the regulations that the FCC has adopted.
Carriage of Broadcast Television Signals
The 1992 Cable Act contains new mandatory carriage requirements. These new rules allow commercial television broadcast stations which are “local” to a cable system (i.e., the system is located in the station’s area of dominant influence), to elect every three years whether to require the cable system to carry the station, subject to ce&tin exceptions, or whether the cable system wdl have to negotiate for’ “retransrmssion consent” to cany the station. Local, noncommercial television stations are also given mandatory carriage rights, subject to certain exceptions, within the larger of(i) a 50 mile radius from the station’s city of license or (ii) the station’s Grade B contour (a measure of signal strength). Unlike commercial stations, noncommercial stations are not given the option to negotiate retransmission consent for the carriage of their signal. In addition, cable svstems will have to obtain retransmission consent for the carriage of all “distant” commercial broadcast stations, except for certain “superstauons,” (i.e., commercial satellite-delivered independent stations such as WTBS). The 1992 Cable Act also eliminated, effective December 4, 1992, tte FCC’s regulations requiring the provision of input selector switches. The statutory mustcarry provisions for noncommercial stations became effective on December 4, 1992. Must-carry rules for both commercial and noncommercial stations and retmnsmim ion consent rules for commercial stations were adopted by the FCC on March 11, 1993. The muat- requiremerit for commercial stations went into effect on June 2, 1993, and any stations for which retransmission consent had not been obtained (other than must- stations, noncommcrcia.l stations and superstations) had to be dropped as of October 6, 1993. The most recent election between must-carry and retransmission consent for local commercial television broadcast stations was on October 1, 1996. A number of stations previously carried by the Companys cable television systems elected retransmission consent, The
Company was able to reach agreements with lmadwem who elected rehmsmiss’ ion consent and has therefore not been rquued to pay cash compensation to broadcastem for retmnmGsion consent or been required by broadcaners to remove broadcast stations from the cable television channel line-ups. The Company has, however, agreed to carry some services (e.g., ESPN2 and a new service by FOX) in specified markets pursuant to retransmission consent arrangements which it believes are compnrable to those entered into by most other large cable operators.
Channel Set-Asides
The 1984 Cable Act permits local franchising authorities to require cable operators to set aside certain channels for public, educational and
govenutlentJll accas proglammhg. The Company believes that none of the Systems 6nnch&s contain unuaualIy onerous access rquirements. The 1984 Cable Act Mha requima cable systems with 36 or more activated channels to desiguate a portion of their channel capacity for commercial leased access by un&il.iated third parties. While the 1984 Cable Act presently allows cable operators substantial latitude in setting leased access
rates.the1992CableAct~uiresleased~ratestok~accarding~aformuladetrrminedbythcFCC.TheFCChaJmisedtheexistrngrate formula in a way which wilI siguificantly lower the ratea cable operators have been able to charge. It is possible that such leased access will result in
competition to sewices off&red by the Company on the other channels of its cable systems.
/-- Competing Franchises
Questions wncuning the ability of municipalities to award a single cable television banchise and to imp&e certain tichise restrictions upon cable television wmpanies have bcui considered in several recent federal appellate and district court decisions. These de&ions have been somewhat inconsistent and, until the U.S. Supreme Court rula definitively on the scope of cable television’s First Ammdment protections, the legality of the
franchisingprocWandofvaliouaspecifIc- mqu&mentsislikelytobeinastateofflux.Itisnotpossibleatthepresenttimetopredictthe constitutionally perm&ible bounda of cable &an&i&g and particular tianchise requiremat ts. However, the 1992 Cable Act, among other things,
prohibits franchising authoritia kom txaammbly refusing to grant franc&w to competing cable systems and permits kanchising authorities to
operate their own cable systems without W.
The l9%Actrrpealedthel984cableAcrsprohibitianonLECsprovidingvidcoprogrammingdinctlytocustomas Within their local exchange
telephone service areas. except in turaI areaa a by specific waiver of FCC rules. ‘Ihe 1996 Act alao authorid LECs to operate “open video systems” without obtaining a local cable e, aNhougb LECs operating such systems can be required to make payments to local govanmen talbodiesin
lieu of cable f?anchise fees. Where demand exceeda channel capacity, up to two-thirds of the channels on an “open video system” must be available to pmglammers unal?iliated with th LEC.
The 1996 Act eliminated the FCC rule prohibiting common ownership ktwecn a cable system and a national bro&ast television network. The 19% Act also eliminated the statutory ban covering certain common ownership interest& open&ion or control between a television station and cable system within the station’s Grade B signal wverage area. However, the parallel FCC rules against cableltelevision station cross-ownership remam in place, subject to review by the FCC within two years. Finally, the 1992 Cable Act prohibits common ownership, wntrol or interest in cable television systems and MMDS facilities or Sh4ATV systems having overlapping savice areas, except in limited circumstances. The 1996 Act exempts cable systems facing “effective competition” horn the h&IDS and SMATV cross-ownership restrictions.
Pursuant to the 1992 Cable Act, the FCC has imposed limits on the number of cable systems which a single cable operator can own. In general, no cable operator can have an attributable interest in cable systems which pass more than 30% of all homes nationwide. Attributable interests for these
purposes include voting interests of 5% or more (unIess there is another single holder of more than 50% of the voting stock), officerships, directorships and general partnership interests. The FCC has stayed the effectiveness of these rules pending the outcome of the appeal Gem the U.S. District Court decision holding the multiple ownership limit provision of the 1992 Cable Act unwnstitutional.
The FCC has also adopted rules which limit the number of channels on a cable system which can be occupied by propmmiq in which the cable
system’s owner has an attributable interest. The limit is 40% of all activated channels.
Franchise Transfers
I.
The 1992 Cable Act rCqUd franChiSa authorities to act on any franchise transfer rquest submitted after December 4, 1992 wnJtm 120 &vs after recerpt of all mfotmation required by FCC regulations and by the t?ancmsmg authority. Approval is deaned to be granted if the francmsmg authont);
fails to act within such petiod.
Technicd Rquirements
&torically, the FCC has imposed technical standards applicable to the cable channels on which broadcast stations are carried, and has prohibited franchising authorities from adopting standards which were in conflict with or more restrictive than those established by the FCC. The FCC has recently revised such standards and made them applicable to all classes of channels which carry downsueam NTSC video programmmg. Local franchising authorities are permitted to enforce the FCC’s new technical standards. The FCC also has adopted additional standards applicable to cable television systems using fkp~~l~~ in the 108-137 MHZ and 225400 MHZ bands in order to prevent harmful interference with aeronautrcat navigation and safety radio services, and has also established limits on cable system signal leakage. Periodic testing by cable operators for wmpliance with these technical standa& and signal leakage limits is reqmred. The Company believes that the Systems are m compliance with these standards in all material respects. The 1992 Cable Act requires the FCC to update penodically its technical standards to take into account changes m technology, The FCC has adopted regulations to implement the rquirements of the 1992 Cable Act designed to improve the compatibility of cable systems and wnsumer electronics quipment
Pole Attachments
The FCC currently regulates the rates and conditions imposed by certain public utilities for use of their poles, unless under the Federal Pole
Attachments Act, state public service commissions are able to demonstmte that they regulate rates. tams and conditions of the cable television pole
attachments. A number of states (including Massachusetts, Michigan, New Jersey, New York, Ohio and Vermont) and the District of Columbia have certified to the FCC that they regulate the rates, terms and conditions for pole attachmema. In the absaux of State regulation, the FCC admirusters such pole attachment rates through USC of a formula which it has devised and fMt time to time rrvise~. The 19% Act directs the FCC to adopt a new rate formula for any auaching parry, iucluding cable systems, which offers telecommunications services. This new formula will result in stgnificantly higher attachment rates for cable systems which choose to offer such servicea.
otherMatters
FCC regulation also includes matters regard@ a cable system’s uuriage of local sports prosramming, teat&ions on origination and cablecwting by
cable system operaWq application of the da governing political broa&&& customaservice;hOKMwirine;MdlimitationsOlladVCltiSillg contained in nonbroadwt childrak4 programming.
Cable television systems are subjed to fedenl cqyright liceasizq covering carriage of broadc& signals. In exchange for making semi-annual payminUtoafederalcoWrightrayaltypool~meetingcataiaothcrob~~cableaperatossobtainaslatutorylicenseto remnsmitbrqadcast
signals.The~~tofthisroyaltypaymmt*Irries,dcpcadingantheamormtofsystemmenucs~catain~thenumkrofdistants~gnals
carried, and the location of the cable syatau with mapect to ow-the& televisnm stations.
VariousbillshavebeenintroducedintoCaagrrssovat&pastsevaalyearsthatwwldelimiaate~modifythecabletelevisioncompulsorylicarsc.
AttherequeatofCongrcm,the~Of&ehaswmmcn& an inquiry into possible nviatons of the compulsory license. Without the wmpuIsory liceme, cable opera&m might need to negotiate rights t?om the copyright owners for each program carried on each broadcast stauon m
the&tItnelliMlp.SlXhwgot&XlagEUWltscouldiruJew the coat to cable operators of carry&g bro&aat signals. The 1992 Cable Act’s
retranam&ioncnnaentproviaions~y~videthatretmn&&onconaatt agrrtabetwecnteleviaionbro&aatstationsandcableopemtom ¬obviatethenecdforcablcoperatastooMainafoWrightlicawfortbt~ carriedclclach bmadwsws signal.
Copyrighted music performed in pmpamm& suppIied to cable television systems by pay cable netwrks (au& as HBO) and basic cable networks (such as USA Network) has gazmlly heen licawed by the netwoks through private agreements with the American Society of Composers and
Publishers (“ASCAP”) and BMI, Inc. (“BMI”), tk two major performing tights oqanizations in the United States. As a result of extensive litigation, ASCAP and BMI are both now reqired to offer “through to the viewer” licenses to the cable netwnks which wuld cover the retransmission of the cable networka ppmmi&gbyc4IblCsystemstl3tbdrsldX&kn.
Copyrighted music perhued by cable syatans themselves on local origination channels, Public Education Grant (“PEG”) channels, and in locally ill. -lted advertising and cross promotional annormcrmentsmustalsoklicmJedAblanLetlicensc~obtaincdforpaiodsthroughDecember31, 19% Gem BMI. A settlemeut with ASCAP has beut made for all periods through December 3 1.1999. Cable industry negotiationa with both BMI and ASCAP are ongoing for periods subaquatt to these settlements.
Cable Television/State and Local Rqulation
Because a cable television system uses local streets and rights-of-way, cable television systems are subject to state and local regulation, typically
imposed through the franchising process. State and/or local offmials are usually involved in franchise selection, system design and constructton, safety, m-vice rates, conmmur relations, billing practices and community related progmmming and scrviws.
c Cable televiston systems generally are operated pursuant to nonexclusive Ganchises. permits or licenses granted by a municipality or other state or local government entity Franchises generally are granted for ftxed terms and in many cases are terminable if the franchise operator fails to comply with matertal provrstons. The 1984 Cable Act established renew-al procedures and cnteria designed to protect mcumbem franchises agarnst arbrtrary deruals of renewal. mle these formal procedures are not mandatory unless tunely invoked by either the cable operator or the francbsmg authority.
they can poti& subsmtd Pt=tion to incumbent Ganchi~. Even after the formal renewal procedures are invoked, Ganchismg authonties and cable operators r~marn Gee to negouate a renewal outside the formal process. Nevertheless, renewal is by no means assured, as the Grmhsee must meet certam statutory standards. Even if a franchise is renewed, a franchising authonty may impose new and more onerous requuemems such as .-c upgrading facihtles and eqlllpmer& ahhotrgh the municipality must take mto account the cost of meeting such requirements. The 1992 Cable Act makes several changes to the process under which a cable operator seeks to enforce tts renewal nghts which could make it easier in some cases for a Ganchising authority to deny renewal.
Franchises usually call for the payment of fees, often based on a percentage of the system’s gross subscriber revenues, to the granting authortty. Although franchising authorities may impose franchise fees under the 1984 Cable Act, such payments cannot exceed 5% of a cable system’s annual gross revenues. In those communities in which Ganchise fees are required, the Company currently pays G~IIC~~SC fees ranging up to 5% of gross revenues. Franchising authorities are also empowered in awarding new franchises or renewing existing franchises to require cable operators to provide cable-related facilities and quipment and to enforce compliance wtth voluntary commitments. In the case of Ganchises in effect prior to the effecttve date of the 1984 Cable Act, Ganchising authorities may enforce rqmrements contained in the franchise relating to facilities, quipment and services, whether or not cable-related. The 1984 Cable Act, under m lrmrted crrcumstances, pennits a cable operator to obtain mcdificattons of
Ganchise obligations.
Upon receipt of a Ganchise, the cable system owner usually is subject to a broad range of obligations to the issuing authority directly affecting the business of the system. The terms and conditions of Ganchiaes vary materially Gom jurisdiction to jurisdiction, and even from city to cny withm the same state, historically ranging Gem reasonable to highly resttictive or burdensome. The 1984 Cable Act places certain limitations on a Ganchtsmg authoritys ability to wntrol the operation of a cable system operator and the courts have Gem time to time reviewed the wnstnutionalny of several general Ganchise requirements, including Ganchise fees and access channel tquirements, often with inconsistent results. On the other hand, the 1992 Cable Act prohibits exclusive Ganchises, and allows Ganchising authorities to exercise greater control over the operauon of Ganchised cable systems, especially in the area of customer service and rate regulation. The 1992 Cable Act also allows Gauchising authorities to operate their own multichannel video distribution system without having to obtain a Ganchise and permits states or local fr~~hising authorities to adopt certain restrictions on the ownership of cable systems. Moreover, franchising authorities are immunized Gout monetary damage awards arising Gom
regulation of cable systems or decisions made on franchise gtants, renewals, transfers and amendments.
The specific terms and conditions of a Gmmhiae and the laws and regulations under which it was grauted directly affect the profitability of the cable television system. Cable fkanchk generally contain provisions governing charga for basic cable television ScrviceJ, fees to be paid to the
Ganchiaing authority, la@ of the franchise tam, renewal, sale or transfer of the Ganchise, territory of the Ganchise, design aud technical gcrf-ormanceOfthesystcmuseaud~ of public streets and number aud typea of cable services provided. The 19% Act prohibits a fhchiaing authority Gem either reqking or limiting a cable operator’s provision of telecnmm unicationasavicu.
Vatioua proposals have been iutrodwed at the state aud local levels with regard to the reguktion of cable television systems, and a number of states /- have adopted legislation aubjectiug cable television systans to the jurisdiction of centraked state gov ermnental agencies, even to the exclusion of local community mgulation Some of these states reguke jointly and impose mgulatirm of a chamcta similar to that of a public utility. Attempts in otherstatestoregulatccable~l~~~arcean~~andcanbeexpectcdtoinnease. such propads and legislation may be preempted by federal statute and/or FCC regukion. To date, the states in which the Company operatea that have enacted such state level regulaUon are New York, NewJasey,MassachusearandVamaatThcCampanycanaotprdiawhethaothrstatesin~chit~yopnates.orinwhichitmayacquirr systcms,willes3gageinsllchregtuauoaintbefilture.
Theforrgoingdoesnot~todescriberll~tandpmposedfedaalstateandlocalngulationsandl~ti~rrlatingtothecabletelevision indutty. Other existing federal mgulationa, copyright licensing aud in many juriadictioua, state and local franc&e requirements currently are the subject of a variety of judicial pmceed@. legislative hearings and a&&kuaUve and legiaktive propo& which could change, in varying degrees, the manner in which cable t&viaion systems operate. Neither the outcome of theee proceedings nor their impact upon the cable television industry or theCompatlywIlbepredictedatthistime.
Telephony and Tel -unicatidedemI Laws and Regulations
The 19% Act also alters federal, atate aud l#al laws and regulatious m telecommunications providers and services, including the Company, and creates a favomble envimnmeu t in which the Company may provide telephone and other telccommumcations services and facilities. The following is a summary of the key gmrvisicms of the 19% Act that wuld materially affect the telecommunications business of the Company.
The 1996 Act was intended to psumote the provision of competitive telephone services and facilities by cable television companies and others. The 19% Act declares that no state or local laws or rqulations may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommuuicntions service. States are authorized to impose “competitively neutral” requirements regarding universal service, public safety and welfare, SQyicc quality, and coummer protection. The 19% Act further provides that cable operators and affiliates providing telecommunications savices are not rquired to obtain a separate Ganchise Gom local Ganchising auo?orities (“LFAs”) for such services. An LFA may not order a cable operator or affiliate to discontinue providing teleconununicauons services or discontinue operating its cable system on the basis that it has failed to obtain a separate Ganchise or renewal for the provision of teleconununications savices. The 19% Act prohibits LFAs Gom requiring cable operators to provide telecomm unications service or facilities as a condition of the grant of a franchise. Ganchise renewal, or franchise transfer, except that LFAs may seek “institutional networks” as part of such franchise negotiations.
The 19% Act provides that, when cable operators provide telecommunications KNices, LFAs may require reasonable, wmpetitively neutral
*- compensation for management of the public rights-of-way. The LFA must publicly disclose such compensauon requirements.
The Company believes that it qudifies BS a camnccting carrier under federal law and therefore does not need FCC certification to provide intrastate semce. in the event that it is determmed that the Company must seek FCC cert&ation, the Company believes that such certification wilt be granted by the FCC in a tunely manner. The Company may be required to file cem tariffs and reports with the FCC,
Interconnection and Other Telecommunications Ca&r Obligations
,- To facilitate the entiy of new telecommunications providers (including cable operators), the 1996 Act imposes interconnection obligations on all telecommunications carriers. Ail carriers must interconnect their networks with other carriers and must not deploy network features and
functions that interfere with inter&rability. LECs also have a set of separate identified obligations beyond those that apply to new entrants: (i) good faith negotiation with those seeking interconnection, (ii) unbundling, equal access and nondi s&ruination rquirements. (iii) resale of services, including “resale at wholesale rates,” (iv) notice of changes in the network that would afIect interconnection and interoperability
and (v) physical wllocation unless shown that practical techcal reasons, or space limitations, make physical collocation unpractical.
Under the 1996 Act, individual inmrwnnec tion ratea must be just and reasonable. based on cost, and may include a reasonable profit. Traffic termination charges shall be “mutual and reciprocal. ” The 1996 Act permits carriers to agree on a “bill and keep” system, but does not rqmre such a
system.
The 1996 Act contemplates that inmrwnnection mts will be negotiated by the parties and submitted to a state public service commission (“SPSC”) for approval. A SPSC may become involved, at the request of either party, if negotiations fail. If the state regulator refuses to act, the FCC may determine the matter. If the SPSC acts, an aggrieved partys remedy is to tile a cam in federal district court. The 1996 Act provides for a mml exemption to interconnection rquests. but also provides that the exception does not apply where a cable operator makes au lIltUCOMCC&lO~ request of a rural LEC within the operator’s Ganchise area.
The 1996 Act requires that all telewmm uuications providers (including cable operators that provide tel ecammunications smrices) contribute equitably to a Universal Savile Fund (“USF”), aud the FCC may exempt an interstate. cattier a CRESS of carriers if its contribution would be mimmal under the USF formula. The 19% Act allows states to demrmine which intrastate tel CwrMlUIliWtiOllS providers contribute to the USF. The 1996 Act prohibits geographic end user rate de-averaging to protect rural s~bsctikrs’ rates.
FCC Intercormection Order
OttAugust8, lQ%theFCCrrleascditsFint~aad(Xda.SecondRcportandOrdaandmamrrandrr~OpinianandOrdapromulgatingruleJ and regulations to implement Congre& statutory directive concaning the in- on obligations of all telewmmuications carriers, including
obligations of CLECs aud LECs, and incumhatt LEC pricing of interconnect 011 and unb&laI elements (the “Local Competition OrdaY). The
LacalCompetitionOrda3adoptedanationaI Gsanewd for int,awun&on but left to the individual states the task of implementing the FCC’s rules.
The Local Competition Orders also atabbshed rules implauenting the 19% Act -ta that LECs negotiate inmrumnec tion agmunents, and prwide guideIines for review of such agreemcma by State WCs.
,- In July 1997. the United States Court of Appeala for the Eighth Circuit vacated in part the FCC’s local autqmtition rules. That wurt concluded that
the FCC did not have the authority to establish rules to govern the pricing of iutacmme& an, network elements, and resale services provided by
incumbt local exchange carviem. In addition, it found certain other FCC rules to be unlawlul. On January 251999, the Supreme Court issued an opinion in which it reversed portions of the court of appeals decision The Supreme Court held that the FCC haa authority uuda the Communications
Act to establish rules. including pricing rula to implmt the local wmpetitiar povlaicms of the 19% Aef even with respect to intrastate services. ‘IheSupremcCourtdidnotaddrrssthcmesitsofthcFCCs1996pricingrula.Inadditioa,theSuprrme~~~sevaaloftheotharules
which had been promulgated by the FCC, but which had b&n found unlawful by the court of appeals. These included a rule allowing requesting carriers to select provisions Gem among difTautt inta#nwction w apppo-lby- wmmiuiona (the mcalkd “pick-and&3ose” rule) and a rule allowing requesting carriers to obtain Gem &unbent local exchange carriers assembled wmbinations of unbundled network elements (sometima cakd unbuncgal nehvnrk element platforms). The Supreme Court vacated a FCC rule ideutifyins specific network elementa which incumbentlocalexchaogecMiasmustmaLea~letorcqucstinecrnicnonthebasisthattheFCChsdfailedto~~(i)~ethaJuch network elements were necessary, aud (ii) whether the fXure to make ndwurk elementa available would impair the ability of requesting carriers to provide the services they seek to offer. The FCC has iudicatal that it will conduct further pmqed@s to comply with the Supreme Court’s opinion regarding the availability of netwa‘k elm. Whether incumbent local ex&ange c&em will be rquired to make available combined platforms of network elements will depard on how the FCC implementa the *neceasa@ and “impair” standa& governing network element availability in light of the Supreme Court opinion
Internet Smic&Faieral Lawa aud &@tiona
TransmittingindffentmataialviathcIntnnetwasmadecriminalbythel996ActHowever,on-lincaccessprovidasaremanptedfromcriminal
liability for simply providing in ~~urvicr,,tbey~~grantedana8[irmativedefcnse~crimihalorotheractionwfimin”goodfaith they restrict access to indecent ma&ala. These provisions have &en challenged in fedaal court The 19% Act further exanpts on-line access
providers Gem civil liability for actiona taken in good faith to restrict access to obscene, excessively violent or otheWse objectionable material.
Forced Internet Access
Cable operators have begun to offer high-a@ Internet access to subacrlbem. These services are in d&t competition with a number of other companies, many of which have substantial resources. such as existing ISPs and local and long distance telephone companies.
Recently, a number of ISPs have asked local franchising authorities and the FCC to grant them rights of access to cable systems broadband mfiastructure so that they can deliver their SQyices directly to cable systems’ customers. Several local Gun&sing authorities and state legislatures have been examining the issue and a few local authorities have required cable operators to provide such access. A U.S. District Court recently ruled that the City of Portland, OR was author&d to rquue such access. This decision is on appeal. Some cable companies have initiated their own litigauon challenging municipal forced access requirements. CUSS and the FCC have thus far declined to take action on the issue of ISPs access to broadband cable facilities. If cable operators are subject to this forced access, it could prohibit the Company Gom entering into agreements or
limiting exlsting agreements with ISPs which could adversely impact our antictpated revenues from high-speed Internet access servrces. Francmse renewats and transfers could become more difficult depending upon the outwme of this tssue.
7 Telephony and Telecommunications/State Law and Regulauon
In 1995, the Florida Legislature amended Chapter 362 of Florida Statutes by enacting “An Act Relating to Local Exchange Telecommunicauons Companies” (“Florida Act”) (Chapter 362. FL. Stat. (I 995)). This new law substantially altered Florida law regarding telecommunicauons provrders and setvices, such as Olympus The following is a summary of the key provisions of the Florida Act and associated Florida Public Service Commission (“PSC”) actions that wuld materially affect Adelphra’s telecommumcations business in Florida.
The Florida Act
The Florida Act vests in the PSC virtually exclusive jurisdiction over intrastate telecommunications matters. The Florida Act limits municipaliues to
. taxation of certain tel ecommuni~ations seryice~ or management of long drstance camers’ occupation of local rights-of-way. The Flonda Act further directs the PSC to employ flexible regulatory treatment to ensure the wtdest possible range of telecommunications services, and provrdes that new entrants such as the Company are subject to a lesser level of regulatory oversrght than LECs.
PSC Actions
Florida has also promulgated legislation that fosters competition in intrastate tel ewmmunications semices. which is administered by the Florida
Public Service Commission (“PSC”). The PSC grants certification to competitive, alternative providers upon a showing of sufficient techmcal, fmancial, and managerial capability. The PSC also remains active in govenung the business of alternative carriers, such as imposmg certain
continuing reporting and other obligations (or restrictions) on such carriers. For matance, although the PSC has mandated that competitive providers file certain price lista, the PSC has resisted allowing competitive carriers to tile 111 tariffs, which would deny them the ability to rely on terms and conditions normally included in such tariffs and required instead reliance on individual contracts. In addition, the PSC conducts proceedmgs and rulemaLings to Adams local competition issuea including pricing of unbundled network elements and wholesale setvices available for resale. Finally, pursuant to its obligation under the 1996 Act, the PSC also reviews or arbittates intexconnection apanent negotiations.
Baaed on the forego& the Company believes that the Florida Act and actions of the PSC to date reflect a generally favorable legal and regulatory envinmment for new entrants. such aa the Company, to inuastate telewmm lmications in Florida.
ITEM 2. PROPERTIES
- The Compan~s principal physical aasets con& of cable television operating plant and quipmet& including signal receiving, encoding and decoding devices, headends and distributicm syatans and subsaikr house drop quipment for each of its cable television systems. The signal receivmg appantua typically includea a towa, autau~ ancillary electronic equipment and earth stations for reception of satellite signals. Headends, consisting of associated electronic quipment nazuaty for the reception amplification and modulation of signals, are located near the receiving devices. The Compaq+ distribution system con&s primarily of coaxial and fiber optic cables and related electronic equipment. Subsctiber devrces consist of
dewding umverim. The physical compow& of cable television systems require maintenance and periodic upgrading to keep pace with technological advances.
The Company’s cables and related equipLuau are genedy attached to utility poles under pole rental agreements with local public utiliues, although in some areas the distribution cable is buried in un&gmu& ducta or trenches. See “Legislation and Regulation-Federal Regulation.”
The Company owlw or leases parcels of real property for signal reception sitea (antenna towers and headends), microwave facilities and business offices in each of its market areas. and owns moat of its service vehicles. The Company also leases certain cable, oper&ng and support qmpment
Gom a wrporation ovmai by menb of th Rigas family. All leasing tnmsacuons between the Company and its officers, directors or prmctpal
stockholders, or any of their affilirtrr, are, in the opinion of management, on terms no leas t&m&e to the Company than could be obtained Gom unatliliated third parties.
Substantially all of the aaaeta of Ad&hi& suheidiaria are subject to encumbmncea as wilataal in connection with the Companys credit ammgements, either directly with a security iutereat or indirecUy through a pledge of the stock in the respective subsidiaries. See Note 3 to the Adelphia Consolidated Finan&l Statanmts. The Company believes that its properties, both owned and leased are in good operating condition and are suitable and adequate for the Compauys bus&as operations.
Adelphia Business Solutiona’ fiber optic cable, fiber optic communications equipment and other proper& and quipment used in its networks, are owned or leased by Adelphia Business Solutions and its subsidiaries, or in certain circm. its joint ventures. Fiber optic cable piant used in providing service is primarily on or under public roads, highways or streets, with the reman&r being on or under private property. As OfDecember 3 1.1999, Adelphia Business Solutions’ total commuui~ation~ qttipment in service wnsists of fiber optic conmumications equipment. fiber optic cable, switches, other electronic quipma& furniture and fixtures. leasehold improvements and wnsbucUon in progress. Such properties do not lend
themselves to description by chamcmr and location of principal units.
ITEM 3. LEGAL PROCEEDINGS
.- In Febnmry 2000, the Company settled all disputes and claims arising out of a summons and complaint filed in the United States Distnct Court for the Northan District of New York, Case Number 99-W-268, against the Company by Hype&t Solutions Corporation (“Solutions”), which is described in the complaint as a company in the business of developing, marketmg and support@ comprehensive computer sofhvare tools, execuuve information systems and applications that wmpanies use to improve thev business performance. The complaint alleged, among other matters. that the Company’s use of the name “Hypetion” m 1t.s busmess mGmged upon various trademarks and setvme marks of Solutrons m vrolatron of federal
trademark laws and nolate VENOUS NCW York business practices, advertrsing and busmess reputatton laws. Management of the Company believes that the Company had meritonous defenses to the complaint and has vigorously defended this lawsuit tncluding tiling a counterclatm agamst
Solutions. As part of the setienMlt, Sofutio~’ Complaint and the Companys counterclaim were dismissed with premdice and both the Company and Solutions entered mto mutual releases regarding the complaint and counterclaim. Management believes that this matter wrll not have a matenal - adverse effect upon the Company.
On or about h4arch 10.1999, Robert Lowing=. on behalf of himself and all others similarly situated (the “PlaintifI”) commenced an action by filing a Class Action Complaint (the “Complaint”) in the Superior Court of Connecticut, Judicial District of StamfordN~ against Century, all of its directors, and Adelphia. The Plaintiff, claiming that he owns shares of Class A Common Stock of Century, alleged that in connection with the proposed merger of Centuty with Adelphia, holders of Class B Common Stock of Century (which has superior voting rights to the Class A Common
Stock of Century) will receive consideration for their shares that exceeds by Y.00 per share the consideration to be paid to Century+s Class A shareholders resulting in the Centq’s Class B shareholders recetving approxrmately S 170,000 more than if they held the eqmvalent number of the Centuq+s Class A shares. The Plaintiff claimed that the individual defendants breached their fiduciary duties of loyalty, good faith, and due care to
Century’s Class A shareholders by approving the higher payment to Century4 Class B shareholders and that Century and Adelphia aided and abetted these alleged breaches of fiduciary duty. The PlaintiE seeks certification of a class of Centur@ Class A shareholders and seeks recovery on behalf of him&and the class of unspecified damages, profits, and special knefits alleged to have been wro@ully obtain4 by the defendants, as well as all costs, expenses and attorneys fees. On October 2 1,1999, Adelphia and Century filed motions to strike the Complaint, and several of the mdividual defendants moved to dismiss all counts in the Complaint against them for lack of pemonal jurisdiction over each of them. On January 3.2000, the court dismissed all counts in the Complaint as to two of the individual defendants. On January 13,2000, the court granted defendants’ motions to s&&e and dismissed PlaintiEs complaint in its entirety for failure to state a claim upon which relief can be granted. The court entered ~udgmcnt on February 16.2000. To the Cornwy’s knowledge the Plaintiff has not tiled an appeal in this action within the time provided by local court rules for
the filing of an appeal.
Adelphia and certain subsidiaries are defendants in several putative subscriber class action suits in state courts in Vermont, Pennsylvania and Mississippi initiated during 1999. The suits ah chakng~ the propriety of late fecJ charged by the subsidiaries to customers who fail to pay for
servica in a timely manner. The suits seek injunctive relief and various formulations of dmaga under various claimed muses of action under
various bodies of state law. These actiwrs are in various stages of defenae and, in one case, the Company was required to refund the late fees,
however, Adelphia has appealed this decision. u of these actions are being defended vigorously. The outcome of these matters cannot be predicted
at this time.
Thacarenoothamataialpcndinglcgalproceedings,othathanroutinelitigatianiacidcntaltothebusiness,towhichtheCompanyisapartofor
whichanyofitaprapatyissubject.
1lEh.f 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
,- A special meetmg of the stockholders of the Company was held on October 1, 1999. Stockholders entitled to vote a total of 137.0 18,185 votes out of
158,673,103 votes attributable to all shares of the Company’s outstanding capital stock were represented at the meeting either m person or by proq
At such meeting (a) the stockholders approved, as required by the Nasdaq National Market, the issuance of shares of Adelpma’s Class A common stock in connection with the merger of Cennuy Communications Corp. wrth and into a wholly owned subsidiary of Adelphia.
Class of Broka w Vote For WilhhclQ &g&g NC+voting
(a) Approval of issumoo of Clur A
cQmalollatockincama!lion
*mcga ClassA 28A69.361 197,555 6,509 Class B 108,344.760 .*
The annual meeting of the stockholders of the Company was held on October 25.1999. Stockholders entitled to vote a total of 145,396,632 votes out of 158,673,103 votes attributable to all shares of the Companys outstanding capnal stock were repmsented at the meeting either in person or by proxy. At such meeting, (a) one director (the “Class A Director”) was elected by vote of the holders of Class A common stock voting as a separate class, (b) nine directors, (“Class A and B Directors”) were elected by vote of the holders of Class A common stock and the holders of Class B
common stock voting together and (c) an ame&nent to Article TV of the Certificate of Incorporation increasing author&d shares of capital stock fkom 230.000,COO to 1.550,000,000. authorid shares of Class A common stock from 200,000,000 to 1200,000,000, authorised shares of Class B commonstockfrom25,000,000to300,000,000~autborizedsbarrsofPrcfemdStockfirom5,000,000to50,000,000wasapproved.
The slockbolda WJtiq rwulb a0 08 followa:
clu of
Sk&
(a) Class A DiraW Elected
Ponys.Patlalm ClanA
(b) ClassAsndBD&cwrsElectcd JolmIRipI ChUA ChuB
36,U1359
31,7469P 101~44,760
Miclwl J. Rip ChA ChB 3 1.746269 10894,760
Tkotby J. Rip3 ClOUA 3 1.746,369 ClU8B 1oa94.760
Jama P. Ripr CLA 3 1.74639
ChB 10194.760
Pete J. IbWm ChUA
ClUBB
DumlkP.coylo ClUlA ChB
Lulic I. Gclbu ClvA ChaB
3 1.746.369 lOIM760
3 1.146MP 101344,760
3 1.746369 1083y760
P0tUL.V~ ClouA CbUB
Erhd E. - ClmA CLVB
3 1,746369 lo&344760
3 1.746369 1os3y760
(c) Amendmalt to Article Iv
-iE~pitOlStOCk Clns A
ClluB
2PsQl3118 108344.760
460313
2717.0% 2169 2535.P38
2717.oP6 246P 2S35.938
2717.OP6 24as 2S35,938
2717.096 246P 2535.938
2717.096 2469 2S35.938
2717,096 2469 2535.938
2717.OP6 2169 2535.938
2717,096 2169 253S.938
2717,096 246P 2535,938
6.7&347 283307
Akin Bruka
Nm-vota
x--
Executive Officers of the Registrant
The executive off~icers of the COmp’Iy, first elected to hold their respective positions on July 1, 1986, serve at the dixretlon of the Board of F Directors.
The executive officers of the Company are:
NAME AGE POSmON
John I. Rig*8 75 Chcitman, ChiefExecutwc offca, President and Dire&r
!hcltacl J. Rip 46 Executive Vice President, Gpmtmna, Secretmy and Dkctm
Tiiothy I. Ripa 43 EXE&VC Vice Pruidat~ Chef Fuuncrrl OBiccr, T- andDitaor
Jeer P. Rip 42 Executive Vice Pmidenk Stratepc Plamtng and Diitm
J&n J. Rigas is the founder, Chairman, President and Chief Executive Offker of Adtlphia and is President of its subsidiaries. He is also Chairman of Adelphia Business Solutions. Mr. Rigas has served as President or gend partmr of most of the constituent entihes which became wholly-owned subsidiaries of Adelphia upon its formation in 1986, as well as the cable television operat@ companies acquired by the Company which were wholly or partidy owned by members of the Rigas family. Mr. Rigas has owned and operated cable television systems since 1952. hong his business and community savice activities, Mr. Rigas is Chairman of the Board of Dkctors of Citizens Bancorp., Inc., Coudersport, Pennsvlvania, and a member of the Board of Directors of Charles Cole Memorial Hospital. He is a dktor of the National Cable Television Association and a past President of the Pennsylvania Cable Television Association. He is also a member of the Board of Directors of C-SPAN and the Cable Advertising Bureau, and is a Trustee of St. Bonaventure University. He graduated fkom Rensselacr Polytechnic Institute with a B.S. m
Management Engineering in 1950.
John J. Rigas is the father of Michael J. Rigas. Timothy J. Rigas and James P. Rigas, each of tiom currently serves as a director and executive officer of the Company.
Michael J. Rigas is Executive Vice Fksident, Operations and Secretary of Adelphia and is a Vice President of its subsidiaries. He is also Vice Chaixman and kretary of Adelphia Business Solutions. Since 1981. Mr. Rigas has saved as a Senior Vice President, Vice President, general partner or other officer of the wnstitumt cntitia which beame whollyowned subsidiaria of Adeiphia upon its formation in 1986, as well as the cable television opera&g wmpania squired by the Company which WQC wholly OT @ally oIkacd by members of the Rigas family. From 1979 to 19gl,hcworkedfarWebster,C~~&~aW~D.C.lawtinn.Mr.Ri~~d~~Univasity(~cumlaude) .-- in1976MdreceivedhisJurisDoctardegnefrom~Lawschoolin1979.
Timothy J. Rigas is Executive Vice President Chief Financial Of&r and Tteasurrr of Adelphia and its subsidiaia. He is also Vice Chair&n, ChiefFinancial Officer and Tm of Adelphia Business Soltiona. Since 1979, Mr. Rigas haa semd IU Senior Vice President, Vice Pres&nf general partner or other officer of the constituakt entities which became whollyowned subsidiaria ofkiclphia upon its formation in 1986, as well as the cable television opera@ cmpauia squired by the Company which were wholly or pa&lly owned by manhers of the Rigas family. Mr. Rigas graduated hm the University of Pennsylvania. Wharton School, with a B.S. degree in Economics (cum laude) in 1978.
James P. Rigas is Executive Vice President, Strategic Planning of Adclphia and is a Vice President of its subsidiaria. and also serves as Vice Chaiman, President, Chief Executive officer and Chief a Officer of Adelphia Business Solutions. Since February 1986, Mr. Rigas has served as a Senior Vice President, Vice Pr&imt or other officer of the constituent cntitia which became whollyowned subsidiaries of Adelphia upanitsfonnatianin1986,aswell~tbccabletclevisicmapaatins~aacquirrdbythccompanY~~~whoUyorpamallyownedby manknoftheRigasfamily.~hisbusincssaaivitia,Mr.RigssisamcmkroftbeBaardofDirrctonofCableLabs.Mr.Rigas~~~ hm Harvard University (magna cum laude) in 1980 and received a Juris Doctor degree and an MA. degree in Economics from Stanford University in1984.FromJlme1984toFebruary1986,hewasaconsultantwithBain&Co.,amanagemcntconsultingfum.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATl’ERS C
The Companys Class A comm~tt stock is quoted on the National Association of Securities Dealers Automated Quotations System Natronal Market
System (NASDAQNMS). Adelphia’s NLSDAQ-NMS symbol is “ADL.AC ,”
The following table sets forth the range of high and low prices of the Class A common stock on NASDAQ-NMS for the periods presented. Such prices represent inter-dealer quomtmns, without retail mark-up, markdown or commrssion, and may not necessarily represent actual transactrons.
CLASS A COMMON STOCK
QUARTER ENDED: HIGH LOW
June 30, 1998 S37 18 S21 1R Scptentber 30.1998 s44 S30 7116
December 31, 1998 S48 118 529 l/8
March 31. 1999 s64 3t8 s447/8 June 30, 1999 S87 SSS l/8 September 30. 1999 569 114 SW December 31,1999 S67 S47 l/4 As of March 23, 2000, there were approximately 667 holders of record of Adelphia’s Class A common stock. As of March 23, 2000. five record holders were registered clearing agencies holding Class A common stock on behalf of participants in such clearing agencies.
No established public trading market exists for Adc~phids Class B common stock.Asofthedatehereof.theClassBcommon stock was held of record by seven persons, principally members of the Rigas family, inchrding a Pennsylvania general par&mhip 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 March 28,200O the
Rigas family owned 100% of the outstanding Class B common stock.
Adelphia has never paid a cash dividend on its cammonstod;and~ti~~~thatf~thcf~lefuturranyearningswillbe~forusein its business. The ability of Adelphia to pay cash dividends on its commcm stock is limited by the provisions of its indentures. See “Managements Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”
.--- On October 1, 1999, Adelphia pt&ased Citizens Cable Company+ 50% interest in the CitiusuICentmy Cable Television Joint Venture, one of Century? 50% owned joint ventures, for a pm&se price of appoximatcly 5131.9 milli- eamprised of appmbmatcly 527.7 million m cash,
approximately 1,850,OOO shares of Adelphia Class A commanstod:andthe~~~ofindebtedacss.TheClassAcommanstockwasissued
pursuanttothcexanptian~~~~Scaionq2)oftheS&uritiaAaofl933,llsrrmadcd
On October 1, 1999, Adelphia squired FrontierVision Par&eta, L.P. (“FrruttierVisimt”). In amnection with the acquisition, Adelphia issued
7,000,000 shara of its Class A common stock to the partnas of Fronti~Visimr, assumed debt of appdmately S1.15 billion and paid cash of
approximately $543 million. The Class A common stock was issued pursuant to the exemption ti registration under section 4(2) of the Securities
Act of 1933, as amended.
On December29,1999, Adelphiaissued 13,355 sbaraofClass Acommon stocktothefom#ownasof~Vatocablesrstrmpurchasedearliain 1999, as part of the postclosing adjustment far that acquisition. The Class A commotlstockwas~pursuMlttotheexanptionfromrrgistratlon under Section 4(2) of the Securitia Act of 1933, as amended
ITEM 6. SELECTED F’tNt4NCLd.L DATA (Dollan in thousands, except per share amounts)
. I.
The selected consolidated financial data as of and for each of the three years in the period ended March 3 1.1998, the nine months ended December 3 I,1998 and the year ended December 3 1, I999 have been derived horn the audited consolidated financial statements of the Company. The selected
co~klatcd financial data fbr the W&e months endal December 31, 1998 have km de&d from unaudited ~andansed consolidated financial
statemmt~ of the Company not included hmin; however, in the opinion of management, such data reflect all ad&tments (consisting only of now
and recurring adjustments) necessary to fairly present the data for such period. This data should be read in conjunction with the consolidated field statetm-tts and related notes thaao as of December 3 1, 1998 and 1999 and the year ended March 3 1.1998, the nine months ended December 3 1, 1998 and the year ended December 3 1, 1999 and “Management’s Discussion and Analysis of Financial Condition and Results of operations” m&&d elsewhere in this kmual Report on Form 10-K. The statement of operations data with respect to fiscal years ended March 31.1996 and 1997, and the balance sheet data at March 31, 1996, 1997 and 1998, have been derived from audited consolidated financial statements of the
Company not included herein.
YafEndedMmch31.
RCVMIU~
Direct opmtiag and propmming
=I== Selling, gawnl end edmmimrtive
E&ion and eamtizhoa expama
Merger and idcwoo COIU
Rate roguletion dluge
opmingincome
Ptiofityinveltmentincomefroat01yatpua
cuhilmutexpulse-flu
,- NWUtlilWUtUpStBO
EquityinloasofjoidvaWra
Adolphia Blninm soluIiam pmtkral
rtodt dividenda
k&unity-innakmneof suhaidiuia
Lou before income tutu end
Iurmdbyloa
fn.CUXbdlt
Lossbefome4lumdirrtryla3
Emaordimry lose on euIy ret-
of&
Net lob Dividtad~imnaus~
to prefad mck
Net lorr appliable ta catmtm
stockhol&rs
&sic ud diluted loan per wei&ed OVaylcSlWOfCUBUlUl socktdbe
exlrradinary Ion
Besicmddilutednetlompcr
weighted
WbXgCShUtOf-rtodc
CuhdiVidSdSdOClUdprCOWUl share
1996
S403,J97 124,116
68,357
Ill,031
ti
2922
28.#2
(183,780)
$5~
=
(122.680)
(1 lQ,S’W
(119.8Q+
Z
S(4.56)
(4.56)
1991 J2.28
Sm.778 148,982
81,763
l24,0&5
Z
l.us
42.086
W.965)
(41360) (J9.169)
9524.889
167.288
95.731
145041
=
J.lLa2
47.76s
(206,124)
(37,430)
PQ.OW
(12682)
(I IQSJ)
218
(I 18,932)
(11,710)
(168.160) (117.595) (163.201)
(162554) (110;793) (lL329 (4337)
(130,642) (173.87Q)
=
S(4.50) W.07l
(4.94) (6.4s)
Nino Mmths E&d YUrElldCd
-31,
1998
(u-dw 5630.999 213327
132.89s
181.294
1999
s196.014 167,963
107.249
140.823
= =
36.000
(156.789)
(23.663) (S8.471)
(2::;)
(31.112) VgJQ3)
51.287.968
432,612
340,579
370.836
4,736
=
lam
36.000
(307.15 17)
(52.068)
@X376)
(2 1.536) (2GW 02.113) 25.772 23.m 38.699
u2§2
(15W34)
(4.337)
WJ.365)
u
(229,872)
(10,658)
(115,IM) (154.571) (240,530)
f2!Am i2um iilla2l
S(3.63) S(5.10) X3.73)
(3.75) (5.23) (3.88)
Business Segment InformaWn:
As more fully described in this Form 10-K. Addphia operates primarily in two opera- segments witbin the tekcommunications mdustry: cable television and related mvestments (“Adelphia, excluding Adelphia Business Solutions” or “Cable and Other Segment”) and compeuuve local exchange carrier telephony (“Adelphia Business Solutions” or “CLEC Segment”). The balance sheet data and other data as of and for each of the
threeyearsintbepenodendedh4arch31, 1998,theninemonthsendedDecember31. 1998andtheykendedDecember31, 1999ofAdelptua Business Solutions have been derived kom audited consolidated financial statements of Adelphia Bus&as Solutions not included herem. The
selected consolidated financial data for the twelve months ended December 3 1, 1998 have been derived f&n unaudited condensed consolidated
f&nclal statements of Adelpbia Business Solutions not mcluded herein, however, in the opinion of management, such data reflect all adjustments (consisting only of normal and recurring adjustments) necessary to fairly present the data for such period.
Bdonco shoot Da:
Adelphir Camolidated
Toul amets TotA de& Cash and cash equivala~
Invutmeatr (0) Redanvble prcfured stock Convaiblc prrfand atack (liquidation prcfamc8)
Adelphio Bminm SOltiON
TOtAlUdl foul d&t cuborldurbequivrlelus
In- (0) Redeemable plofwml ntock
ZF&g@ -
T&l- TOUld&t codlMdcnba+%law
- (0) Raiuadepfrndd
canutiblepefaKdstock
aipPidrtism-=d
Ez
s1.367.579 Sl,643.E26 Ll75.473 2.544.039
10,m 61.539 74,% 1 130,005
535,269 50.855
27,900
s174,601 215.67s 59,814
56,6Q5
s1332310 El.469225 2124.618 ua$6) lO.sOQ 1.m 47.061 73310
leea
S2,304,67 1 S3.294.457 $17.267.500 2.909.745 3.521.452 9.291.732 276,895 398.644 186.874 150.787 22Q.494 308,342 35s366 376.865 409,211
lOO,OOO l00.000 675.000
S6399Q2 5836,342 s1,171.074 (b) 528.776 494,109 845.178 230,750 242,570 2133 69,x36 138.614 61.400 ~7fM 228674 260.848
Sl,664,67Q ~451.115 $16.096.426 2m,%9 3.033343 8.446.554 46,145 156.074 184,741 81.191 QO,o,rrO 246942 148,062 148.191 148,363
100,ooo 100,000 675.000
/- olklmx
Rwenue8 %nity income opdina cxpnrcr (cl Depfui8tion and
rmaciutioo ncpaucr
Ooaatim income lniomt &Mo - not
R&mdmckdividmds
Cqhl aapditamea Cuhpridfcsquisitkm- not of cub mquircd cuhuedfor-
8mortiutionupeIlu8 WlTl- htautexpmw-nst(d)
F'mfmodatnckdividoadr
*mlY. _ cuhpidfccolzqmmm
netofu8hequiKd
chhu8edhrinvouaparr
s403,J97
28.852 192473
I Il.03 1 94,793 GWW
loo.089
wm 24,333
s3.322 5,774
1.184 (3,636) (5.8W
6.084
12815
sloom 21,852
lW@Q
loQs47
(1X)
94,095
wa 11.518
m leea E22
(unauditcd)(unauditcd)
sm.778 5524.889 s496.0 14 S630.999 51.287968 5188,301 5635.273
42,086 47.765 36,OOO 4a.ooo 36,ooO 12,000 ._
230.745 263.019 275.212 346,222 773.191 10?,?25 367.608
124.066 I17967
(232.325)
lW609
143.412 51.415
145.04 I 140.823 181.294 370.836 56,181 184.646 116,829 79,979 103.483 139,205 24,395 78.283
(243.554) ( 180.4S2) W6.W (359,JSS) (60.820) (187.945)
(3 1.532) (42.254) (55,am) (74.136) (14.330) (23,217) 183.586 253,797 321,823 819,197 76,945 415.188
146.546 403.851 462,lao 2J78.037 86,85 1 81.558 lO6.219 56,365 56.570 1.988.249 14,342
s5,oa: $13,510 S34,7?6 10312 22118 54.05o 15.043 555.575 23,182 71.485
3,945
(Q&69)
Gvw
36.127
%M 34.769
11,4?? 26.671
(20.085) (45.945) (36.OW (20,010) ( 12682) (21.536) 68.629 146,752
lO.?o8 19.955
(18.847) (33,865) W5’4) (16.103) (7.424 (8.586) 35.057 220.788
65,%:
64m 69.018
839.5% s154,57s 61.106 201.140
31,121 65.24)
(53;131) (111,~)
(28,057) (45.89w
m2w OZl73) I80$47 453206
583W lW,ll8 87,159 24.4% 54pa (2925)
UfT~ Mllf79 S461,23: S591,403 SlJ33dQ3 173258
420% 47,765 36,OOO 4amo 36,OOO 12ooo 220333 240901 221.162 284,416 5?2$51 84,543
9579,698
296.123
120.121 127.036
OfJQ9W
150.173 3os392 156,814 251.014
Qw-2
133364 114,152 136914 125924 WV24 mM42) (wm (10.7111 114957 109,045
45,473 164,691 43.242 114.148
t53.m (171.842) WW (14.631)
41,888 lQ4.4OO
I38372 8o.m 403,lf 1 168546 22591 12540
(m&w (313.m
(n.Sm) (41.98) 141,276 365991
403.8Jl 2048.919
19.960 31,869 1.911249
17.267
Ni Mondn
Thru blontln Ended
(a) RepmeW total invcsmmta befmcum~reequityinMlossea.
(b) Amount cxduda rcceivabia bm Adelphia of $392,629 as of Dambcr 3 1,1999
(c) Amotmtexcluda~atld~expenaaandmcrgerandintegrationcoats.
(4 Amouutsincl~illtautiwome 6ran Adclphia of SO, SO, $0,58,395. Sll.223, $8,483, 33,576 emd 51.540 for the respective peaioda.
(e) Amounts include intaest expense to Adelphia Business sOlutiom of SO, SO, SO, $8.395, SII,223,S8,483, $3.576 and 51,540 for the respective peliods.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCLU CONDITION
AND RXSULTS OF OPERATIONS
(Dollars in thousands)
/I lmoduction
During the year ended December 3 1, 1999, the Company completed the acquisition of the Olympus partnership interests held by FFL Group, Inc., and the acquisitions of FrontierVision Partnen, L.P., Century Commun.ications Corp. and Harron Communications Corp. (collectively, the “Aqukitions”). The Aquisitiotts were all completed on October 1, 1999 and were accounted for under the purchase method of accountmg. Accordingly. the financial results of the Acquisitions have been mcluded III the results of Adelphta effective kom October 1, 1999. The Company had additional acquisitions during the year ended December 3 1,1999 whrch are disclosed in Note 1 to the Adelphia consolidated financial statements that are included in Adelphia’s results of operations effective from the dates acquired. In addition, during the year ended December 3 1, 1999, the
Company entered into several fiicing tsansaction~, the proceeds of which were patttally used to fund one or more of the Acquisittons or for other general Mrporate purposes.
Please refer to the discussion of the Private Securities Litigation Reform Act of 1995, which is mcotporated herein by reference to Item 1, “Business-
Jntro&ctton”.
Results of Operations
General
.
On March 30.1999. the Board of Directors of Adelphia changed its fiscal year from March 3 1 to December 3 1. The decision was made to conform to general industry practice and for admintstrattve putposes. The change became effective for the ntne months ended December 3 1, 1998.
Managanent’s discussion and analysis of finencial condition and results of operations compams the twelve months ended December 3 1, I998 and 1999andtheninemonthsendedDecembcr31.1997and1998.
AdelphiaeMledsubstantiallyallofitsrrvenrwintheyearended~h31, 1998,theninemonthsendedBecember31,1998andtheyearer&d December 3 I.1999 !ktm monthly subscriber fees for basic, satellite. premmm and ancillary services (such as instalMons and equipment-rentals), local and national advettistng sales, pay-per-view m. highspeeddatasarricesandcLEctel-lmicatiotlsservices.
ThechangesinAdelphia’srrsultsofoperatiansfortheninemonthscndedDecemkr31, 1998andtheycaratdedDecember31, 1999,comparedto the respective prior periods, were pimarily the result of aqutsitions, expanding existing cable television o~xratimts and the impact of increased adveeisiug sales and other saviw offerings as well as ixlaeam tn cable ratea, effective October 1,1998, January l,lPPP and August 1,1999.
,- The high level of depreciation and amortization associated with the si@fk.ant munber of aquisitions in recent years, the continued upgrade and expanstonofsystems,interestcosts associatedwithfkrmcmgnctivitiesandAdelphiaBusiness Solutiond wutimed investment m the CLEC busmess willcontinuctohaveanegatiwimpMantherrportedrcsultsofopaations.Adel~Qcpeastoreportnalossesforthenextseveralyuus.
Adelphia Busmess Solutions, together with its subsidimies, operates certain wholly owned CLEC telecommunications systems and owns certam
~~VCSQIEII~S in CLEC joint ventures and manages those ventures. Adelphia Busmess Solutions is an unrestricted subsidiary for purposes of the Compnrl~s indentures.
TheinformationbelowfortheyearendedMamh31. 1998,thentnemonthsendedDecember31. 1998andtheyearendedDeczmber31, 1999is derived fimn Adeiphta’s consolidated iknoiaJ artanmtsthatanincludedinthisAMualRepartonForm10-K.Infarmationfortbeninemonths endedDecember31,1997andthetwelvemonthsendedDecunber31, 1998isdelivedfiomunandited candema wnaolidated financial statements
of the Company not included ,hereim ho-, in the opinion of management, such data refleot all adjustments (consisting only of normal and recurrtng adjustments) necessary to fairly present the data for such periods.
.-
,--
This table sets forth the pe=ttUge relanonship to revenues of the components of operating income contained in such fmanctal statements for the periods indicated.
PaGcnhgc of Revalues Nine Md .
Year Ended Ended YUrEIldCd
Mardl31. Dccembu31, Damlber31,
1998 1998 m 1999
Rewmles. 100.0% 100.0% 100.0% 100.0%
.
opartins%== Direa opauing and programming sellia&galdaadedmiamdve
3 1 9% 33.9% 33.8% 33.6% 18.2% 21.6% 21.1% 26.4% 27.6% 28.4% 28.7% 28.8%
z = Z 0.4%
223A
The information below separately discusses the operating results of Adelphia’s two operating segmenta: Cable and Other Segment and CLEC
segment.
Cable and Other Segment
ComparisonoftheYearsEndedDecember31,l998and1999
Revenues. The primary revenue sources reflected as a percentage of total revenues for the cable and other segment were as follow YCrrEadcd -31.
Jm 1999
RegulAtedreviceaud~palma 79% 79%
-prow==& 10% 10%
Advdisingmlmdath68mficar 11% 11%
Revenucsinaewdapprmcimately91.6%fortbe~endedDecemkr31. 1999campandwiththe~~year.‘Iheincrraseisateibutabletothe following:
Acquhitioas 91%
BWiCSU&rikrqouch 2%
Raleiaueasm 12%
-FfJ- VW Advatisingnlm8adotbrcnior 3%
Effeotive August 1, 1999, certatn rnte inaasc3relatedtorrgulatedcable savieu wac imple!mcnted in substantially all of the compatly+s systems. Adv~~rrevenuesaadrevenucsderived~otbastratcgic~ccoffaingsNehaspagin&high-specddataandlongdistanccsavices~sohad a positive impact on revennes fa the year ended -31.1999.Thecomplulyogwastoialp1emal1rateill- related to certain regulated
cable sexvices in subsmntialIy ail of the Company’s systems during 2000.
Directopemtingandprogrammine~Directopaatingandprognnnming ~,whicharemainlybasicandpremiumprognunmingcosts
andtechnicalexpuws,krensaIP4.8%fortlteyearendedJkember31, 1999comparrdwiththcpriayear.Acquisitionsaccountedfor91.0%of
the increase in 1999. The remaihg increasewasdueprimarilytoincressed~costs,incrancntalcostsBssociatedwithinrruued
subscribers and new senrices.
Selling, General and ,4dmi&dve Expemes. These expemes, which are mainly comprised of costs related to system otlices. customer service representatives and sales and adminisfmtive employees, increased 114.4% for the year ended December 31, 1999 compared with prior year. Acquisitions accounted for 77.8% of the -in 1999. -fhClU~rainingincrrasc was due p&tartly to subscriber growth, new services, and an increase in adminismtive employeea due to the recently completed aquisttions.
Jkpreciation and Amortization. Depreciation and amortktion for the cable and other segment kreased 103.5% for the year ended December 31, 1999. compared with the prior year. Acquisitions accounted for 84.3% of the increase in 1999. The remain& mcreasewnsdueprimarilytoincreased
capital expenditures made durtng the past several years.
c Priority Investment Income. Priority investment income is comprised of payments received from Olympus of accrued priority return on the Company+ mvcstment in 16.5% preferred limited partner (“PLP”) interests in Olympus prior to the consolidation of Olympus effective October 1, 1999.
bkre.9 Em - net. herest eXpense - net increased 50.4% for the year ended December 31, 1999, compared wth he par year ..kqulsl~ons
aam~ted for 114.7% of the increase in 1999. T’hs increase was partially offset by paying down debt for a pomon of the year due to fmacmg
mmons and increased interest income. F
Equity in Loss of Joint VentureS. Ihe equity in loss of joint ventures representS primarily (i) the Company’s prc+rata share of Olympus’ losses and he mtion requirements of Olympus’ PLP ittterests prior to the consolidation of Olympus, and (ii) Adelphia Business Solutions’ pro-rata share of its less than majority owned partnmhips’ opaating losses. Equity in loss of jomt ventures decreased in 1999 as compared to 1998, primarily due to the
consolidation of Olympus.
&rity Interest in Net Losses of Subsidiaries. Minority interest in net losses of subsidiaries &eased 50.2% for the year ended December 3 I, 1999 compared with the prior year. Acquisitions accounted for 45.4% of the increase m 1999. The femaining increase WBS primarily due to increased net
losses of Adelphia Business Solutions attributable to minority interests
Extraordhary Loss on Early Retirement of Debt. During the year ended December 3 I, 1999, Adelphia redeemed $154,500 of its 9 I/2% Senior Pay- ’ in-Kind due 2004 at 103.56% of principal, Sl25.000 of its II 718% Semor Debentures at 104.500/b of principal and repaid certain mstltuuonal indebtedness. As a result of these transactions, Adelphia recogohd an emordinary loss on retirement of debL net of income tax benefit, of $10,658 f0rtheyearendedDecember31.1999.
Comparison of the Nine Months Ended December 3 1.1997 and 1998
Revemxs. The primary revenue sources reflected as a percentage of total revenues for the cable and other segment were as follows: Nine Months Ended bcr3L
Regulated service and cquipmmt fees Premium pqr8mming fees Advert&g sales md other auviccs
1997 1998
78% 79%
12% lO?h 10% 11%
Revenues mcreased approrumately 2 1 .O% for the nine months ended December 3 1, 1998 compared with the same period of the pnor year The mcrease is attributable to the followmg:
Nine Months Ended
December 31. 1998
Acquisitions 65% Basic rubscliber glwtll 5% Rate increases 27% Premium programming (7%) Advertising sales and other services 10% Effective August 1.1998, certain rate increases related to regulated cable setvices were implemented in substantially all of the Companys Systems. Advertising revenues and revenues derived from other strategic service offerings such as paging, high speed data servtces and long distance servuxs alsohadapositiveimpactonreven~fortheninemonthsettdedDecember31, 1998.
Direct Operating and prosnnnming Expenses. Direct operating and programming expenses, which are mainly basic and premium programming costs and technical expenses, &teased 27.9% for the nine months ended December 31. 1998. compared with the same period of the pnor year. The
inmasewasprimarilyductoinneasedoperatingexpaws~acquirrdsystans,incruued~ costs and incremental costs associated with incread subsclibers.
Selling, General and Administrative Expenses. These expem~. which are mainly comptised of costs related to system of&es, customer service representatives, and safes and administrative employees, increased 17.9% for the nine months ended December 3 l.1998, compared wtth the same period of the prior year. The increase was primarily due to incremental costs associated with acquisitions and subscriber growth.
Depreciation and Amortization. Dep&ation and am&zationincreased 17.0%fortheninemonthperiodendalDecember31,1998,comparedwith the same paiod of the prior year. The incruse is primarily due to increased depreciation and amortization related to aquisitions, as well as increased
capital expenditures made during the past sevaal years.
Priority Investment lnwme. Priority investmalt inwme is comprkd of payments received tiotn Olympus of accrued priority remrn on the
Compn~s investment in 16.5% PU’ intereats in Olympus.
InterrstExpense-netlntacstcrcpcaw-netincnascd~~~yO.~fartheninemonthsmdedD&emkr31,1998,comparrdwiththesame period of the prior year. This iUUULUiSprimarilydlUtOillUUltCZlti?IldlSbt~tOIlqUiSitiOtlS.ThUCinaews were partially offset by (i)
utilhtion of the proceeds &om the convertible prefd stock and the redeemable preferred stock offerings to repay outstanding debt, (ii) the retklancixlg of oummnding borrowings and (iii) in&at inwmeonwshbalances.
Equity in Lass of Joint Ventnres. The equity in loss of joint ventures mpreaatts primarily (i) the Company’s pro rata share of Olympus’ losses and the accretion requirements of Olympus’ PLP interests, and (ii) Adelphia Business Solutions’ pro rata share of its leas than majority owned partnerships’
opemling losses.
Extraordmaty Loss on Early Re&anent of Debt. During the nine months ended December 31.1998,S69,838 of 12 112% Senior Notes due 2002 were-at 103%ofpriacipaland~~debtintheamountofS52,000wasrrpaidpriortaitsmaturityatapremium.Asarrsultofthcr transactions, Adelphia reoc@& an exoaordinary loas on early tetkment of debt of $4,574.
CLEC Segment
Comparison of the Years Ended Decemkr 31,1998 and 1999
/-- Revenues. Revenues inmased 290% to $154,600 for the year ended December 31.1999, from 539,600 in the prior year The incmase is attributable to the following: GrowthinorigirlalMarkets 575,978 Acquisition of local partner interests 27,955 New markets 9,798 Management feea 1347
The primary sources of revenues, reflected as a percenta8e of total revenue were as follows:
Year Ended DeCaXllbet31. 1998 1999
Local service 53.0% 69.1% De&Wed aoeess 37.5 21.1
Managcmont fees 9.3 3.2 Enhanced sakes 3.1 Long distance 0.1 1.1 other 0.1 2.3 Network Operations Expense. Network operations expense increased 175% to 558,500 for the year ended December 31, 1999. from $21,300 m the year. The imuse is l ttributhk to tbe following: Growth in oligind Mukots Sl7.270
Acquisition of loeal partner &ruts 8.381 New markets 10,888 Network control ccntcr 701 The increased number and size of the operations of the networks resulted in mcreaaed employee related costs, equipment maintenance costs and
expansion costs
Selling, oeneral and Administrative Bxpense. SeRitt8, general and admini?lbative expense increased 251% to $142,600 for the year ended December 31,1999,from540,600mtheprioryenr.
The incruss is attributable to the following: omwthinorigindMukeb 628.406 Acquisition of loul partner interats 12.242 New ma&as 42.609 sales and marketing dvitia 6,865 tLxpomcovuhadchuga 11,830
DeprrciationandAmoRizationExpcnsc.Depnciatianand~ortization~increasedlloo/~tO5JoO~thcytarendedDeccmber31, 1999,~S31,100intbcpriaryear,~y~araultofinaesseddepnciationrrsulting~thehigherdeprrciableassetbaseattheNOCCand the networks, amfJltimion of &fen-al finane@ costs and the acquisition of local partner interests.
IntaestExpetw-net.Intntstexpensc-oet~63%to545,900f~theyearcndedDeccmkr31,1999,~S28,100intheprioryearasa result of the issuance of the 12% senior Subordinated Notes due 2007 discussed previously p&ally offset by an incruae in the amomt of interest capitalized on projects under -on in 1999.
Equity in Net Loss of Joint Venturee. Equity in net loss of joint ventures decreased by 41% to $7,800 for the year ended Decemba 31.1999, from
S13,300intheprioryearasarrsuttoftbtcauo~~~ofscvaaljointventrmsrcsulting~thcprachaseofthtlocal~’interrsts,andtothe matunng of the remaining joint venture netw&u. The &creaud net losses of the joint ventures were primarily the result of increased revenues only partiallyoffsettin8smmlpattdothercostslmdexpenXsassoc&dwithdestgn, -an,opemtionandmMaganen t of the networks.
The number of nonumsolidated joint venture Mworks payin8 management fees to Adelphia Business 8olutions demued hm eight at December 3 I,1998 to four at December 3l.lPPP.Tbae n&works paid management and monitoring fees to Adelphia Business 8ohttions, which are included in revenues, aggngattn8 apfXo.ximately 54.900 for the twelve months ended December 3 1, 1999, an increase of approximately S 1200 over the prior
twelve-month period. The non-wnsolidated networks net losses, including networks under c4mstnhon, for the twelve months ended December 3 1, 1998 and 1999 aggrrgatai approximately 528.400 and $1 5,200 respectively.
preferred Stock Dividends. preferred stock dividends increa& 14% to $32,200 dtnin8 the year a&d Becember 31.1999 from $28,200 during the prior year. The increase was due to a higher oumtambt~ preferred stock base resuitin8 from the payment of dividends in additional shares of
preferred stock.
Companson of the Nine Months Ended December 3 I.1997 and 1998
,- Revenues. Revenues increased 300% to S34.800 for the nine months ended December 31.1998, from $8,700 for the same period in the pnor year Growth tn revenues of $26,100 resulted from an tncreaae in revenues from majority and whollyowned Networks of approxtmately 527,200 as compared to the same period in the prior fiscal year due to the continued expansion of Adelphia Business Soluttons’ customer base, Its success tn the roll out of switched servtces and the consolidation of the Buffalo, Syracuse, New Jersey, Louuvtlle. Lexmgton and
Harrisburg nehvorks. Management fees Gom nonumsolidated subsidiaries decreased S1.100 as compared to the same penod m the pnor fiscal year pnmarily due to the consolidation of the above mentioned networks.
- Network Operations Expense. Network operations expense increased 255% to 518,700 for the nine months ended December 31, 1998 from 55,300
for the same period in the prior year. The inmase was attributable to the expansion of operations at the NOCC, and the increased number and size of the operations of the Networks which resulted in increased employee related COSTS and qmpntent maintenance costs and the consolidation of the Buffalo, Syracuse, New Jersey, Louisville, Lexington and Harrisburg networks.
Selling, General and Administrative Expense. Selling. general and administrauve expense inuased 288% to 535.300 for the nine months ended December 31, 1998 Gom S9.100 for the same period in the pnor year. The mcrease was due primarily to mcreased expense assoctated v& the
network expansion plan, an increase in the sales force in the original markets and an increase in coxporate overhead costs to accommodate the growth in the number, sue and operations of Networks managed and monitored by Adelphia Business Solutions, as well as the consolidation of the Buffalo,
Syracuse, New Jersey, Louisville, Lexington and Harrisburg networks.
Depreciation and Amortization Expense. Depreciation and amortization expense Lncreased 280% to S26.700 during the nine months ended December
3 1, 1998 Gom 57,100 for the same period in the prior year primarily as a result of mcreased amotttzation of deferred financing costs and increased depreciation resulting from the higher depreciable asset base at the NOCC and the majonty and wholly owned Networks and the consolidatton of the Buffalo, Syracuse, New Jersey, Louisville, L&x&ton and Harrisburg networks.
InterestExpense-net.interestexpense-net decreased 29% to S20,OOO during the nine months ended Decun& 31.1998 from S28.200 for the same periodintheprioryear.The incmase was attributable to interest income related to mueased cash and cash equivalents and U.S. Government
Securities related to proceeds of various offerings, partially offset by interest on the 12 114% Senior Secured Notes.
Equity in Net Lass of Joint Ventures. Equity in net 10s~ of joint ventures increased to S9,600 during the nine months ended December 3 1, 1998 from
S9,3ooforthesameperiodiathepriarfiscalyear.Thenctlossesofthenanconso 1idatedNehvorksfortheninemonthsendedDeumber 31, 1998 were primady the result of &eased revenues oniy partially OfMtillg startup and Other costs and Qq#ucs associated with desrgn, construction,
opaationand~ementofthenawnks,andtheeffiaofthetypicallagtimebetwecntheincumnce ofsudrcostsandexpensesandthe subsequent generation of reverwes by a network The increa~ was partially offset by the consolidation of the Buffalo. Symcuse, New Jersey,
Louisville, Laington and Hmisburg networks for the current period.
The number of non~lidated Netwrks paying managanalt fets to Adelphia Business Solutions was eight at December 31, 1998. These Networks and neworks under -cm paid managwwt and monitoring fees to Adelphin Bwineas Solutions, which are included in revenues, S2.700 for the nine months ended Decrmkr 31.1998. as wmpeued with S3.800 for the same period in the prior fiscal includingnetwo&underumstwtion,fortheninemoUhsendedDecember31. 1997and 1998 - aggigati apprmdmatcly $13.700 and $22,300. lwpectively.
~fandStockDi~~.~faedstockdividmdsinaesscdby271%to521,5oOfortheninemonthserdcdDecankr31, 1998fromS5,8OO’for thesamepeziodinthepriorfisdyear.l%e iocrraseisductotheprrfcrrrdstocliwhichwasissuedinoctokr1997.
Liquidity and Capital Resourw
Cable television and otha teleunnmuuic&ms bwinusu are capital intaMe aud typically require continual financing for the umstzuction, modert&tian, maintensuw, expansion rmd uquisition of cable and other tel- unicdtionssystans.DuringtheninemonthsendedDecember31. 1997and 1998andtheyearendedDacun~31. 1998and1999,theCompanycomminedsubstantislcapital~~forthesepurposesandfor inv~~inOlympusanddhcraffiliatcs~entities.ThescQcpmditrPtswacfrmdcdthrwghthesaleof~ Md prefared St& long-term borrowingsandintanallyg~fimdr.IIhe~~sabilitytogeapatecashtomectitsfueurrneedswilldepcndgenaallyonitsnsultsof
operationsandthecuntinuedavailabi.li~ofextemalfinau&g.
For information regard@ signi.6~~ m ami financings &sequent to December 31.1999, see Note 13 to Adelphia’s Consolidated Financial SWCElaltS.
For the year ended DeeanW 31, 1998 and 1999, cash provided by apcrating activities totaled $145.592 and $332,139, rcspcctively, cash used for investing activitia totaled 51.155345 and $3.522.222, respectively and cash provided by fwncing activities totaled Sl.O29,894 and 52.978.313, respectively. The Compan~s aggrc@e o- bonmv@s as of December 3 1,1999 were $9391,732. The Company also had total redeemable preferredstockofS409~11 outWm&gasofDecember31.1999.
For the nine months ended Decuntw 3 1,1997 and 1998, cash provided by opemting activities totaled 562.038 and S 138,360, respectively, cash used for investing activitia totaled $423,965 and S1,015,690, rrspectively and cash provided by 6nancing activities tot&d 5681.791 and 5999.079. respectively. The Company+s aggregate outstanding borrowings as of December 3 1,1998 were S3,527,452. ‘Ihe Company also had total redeemable preferred stock of 5376,865 ouumnding as of December 3 1.1998.
Capital Expenditures
Cable and Other Segment
Y-- Capital expenditures for the years ended December 3 1.1998 and 1999 were 5141,276 and S365,991 resp~tively. This increase was primanly due to acquisitions and cable plant rebuilds and upgrades to expand services. The Company expects that capital expenditures for the Cable and Other Segment for the year ending December 3 1.2000 will be in a range of approximately S700,OOO to 5800,000.
CapId expenditures for the nine months ended December 3 1, 1997 and 1998 were 582,726 and 5109,045, respectively. The increase in capltal eqa&ures for the nine months ended December 31, 1998, compared to the nine months ended December 3 1, 1997, was prima& due to acquisitions and cable plant rebuilds and upgrades to expand servtces.
CLEC Segment
Capital expenditures for the years ended December 31,1998 and 1999 were S180,547 and S453,206, respectively. This increase was primarily due to expenditures necessary to &VelOp the original Markets and the new markets, as well as the fiber purchases to interconnect the networks. Adelphla Business Solutions estimates that a total of approximately S500,OOO ~111 be required to fund Adelphia Busmess Solutions capital expendnmes,
working capitsd requirements, opaatlng losses and pro rata mvestments in the Jomt ventures for the year ending December 3 1,2000.
Capital expenditures for Adelphia Business Solutions for the nine months ended December 31, 1997 and 1998 were S34,834 and 5146,752, respectively. The increase in capital expenditures for the nine months ended December 3 1,1998, compared to the nine months ended December 3 1,
1997, was primarily due to expenditures necessary to develop the ongmal markets and the new markets and Adelpma Business Solutto&
introductron of switchmg services.
Financing Activities
The Company’s fihancing strategy has been to maintain its public long-term debt at the parent holding company level while the Company’s consolidated subsidiaries have their own senior and subordinated credit arrangements with banks and insurance companies, or for Adelphra Busmess Solutions, its own public debt and quity. As a result of the Aquisitions, Adelphia has four other wholly owned subsidiaries with public long-term
debt: Olympus, Arahova, FrontierVision Holdings, L.P. and FrontierVision Operating Partners, L.P. The Company’s ability to generate cash adequate to meet its future needs will depend generally on its results of operations end the continued avail&i@ of exten& tinancing. During the year ended
March 3 1,1998, the nine months ended December 3 1.1998 and the year ended December 3 1,1999, the Company generally funded its aquisttions,
working capital rquirements, capital expenditures. and in vestments in Olympus, CLEC joint vattures and other affiliates and entities through long- term bolTowiIlgs plimaldy Gom banks, short-term borrowings, intemauy generated flmds and the issuanw of public debt or equity The Company genaallyhasfundcdtbeprinci~andinterrstobligationsonitslong-tamborrowings~~pndinsunrn ce companies by refinancing the principal with new loans or through the issuance of parent and subsidiary compgny debt securitia, aud by paying the interest out of internally generated funds. Adelphia has generall9 funded the interest obligations on its public borrowings hn intemally generated fimds.
Most of Adelphiak wholly or majority*w& subsidiaries have their own senior ncdit agmanents with banks and/or insurance compauies. Typically, borrowings under these agrranents ~collatnalizcdbythestockanQinsowurses,bytheassaSofthc~~subsidiaryandits
subsidiaries and, in some cases, are gwantud by such subsidiary’s subsidiaries. At Decemlxr 31.1999, an aggmgam of S3.088.477 in borrowtngs
wasou~underthueagreemmu.-fllese agruments coritain ccrtin proVisi0nS hi& among other things, provide for limitations on bonnwings of and investmcnu by the borrowing subsidiaries. transa&ons U the barowing subsidiaria and Adeiphia and its other subsidiaries and affiliates, and the payment of dividends and fees by the borrowing subsidiaia. Several of these agreements also contain certain crossdefault
provisions relating to Adelphia or other subsidiaries. These agreemmtsalsorequirethe ~ofcutainhaucialratiosbythebormwkg
subsidiaries. See Note 3 to the Adelphia Cotmmmicatioas Corpomtion consolidated fhmcial stakments. Management believes the Company is in
compliance with the financial wvenanb and related fhmcial ratio req*ts contained in its various credit egnaaents.
At December 31, 1999, Adelphia’s subsidiaries had an aggre@e of 51.456.620 in unused credit lines with banks. part of which is subject to achieving certain levels of operahg performance. In~tian,theC~yhadan~~S186,874incashaadcashequivalcntsatDecrmba 31, 1999 which combined with the Compm~s uuusecl c&it lines with tnmks aggregated to 51,643,494. Based upon the results of operations of subsidiaries for the quarter ended Decembe 31, 1999, approximntely 51362,472 of available assets could have been transferred to Adelpha at December31. 1999,underthe~rrstrictivcco~~ofthcsubaidiaridcnditsgraments.Insddition.subQequenttoDccember31. 1999,celtain subsidiaries and sites of Adelphia have received commitments and subscriptions for a new $2,500,000 bank credit fhcility. This bank credit facilitywillconsistofbothreducing~lvingaedit~onandatamloan~onandis~tocloscinApril2000.?hesubsidiariesalso have the ability to sell, dividend or diatrib& c&ain assets to other subsidiaries or Adelphia, which tid have the net effect of increasing availability. At December 3 1,1999, the Cornpa@ unusal credit lines - provided by raking revolving credit facilities whose revolver periods expire through December 31.2007. The w scheduled maturities of debt are currently 5390,746 for the year ending December 3 1.2000.
.
.-
At December 31. 1999. the Company’s total outstanding debt aggregated S9,291,732, which included s2,777,919 of parent debt and 56.513.813 of subsidiary debt. Bank debt mtemst rates are based upon one or more of the following rates at the optton of Adelphia: prune rate plus 0% to I .5%; certificate of deposit rate plus 1.25% to 275%; or LIBOR plus .625% to 2.5%. The Companys weighted average interest rate on notes payable to banks and inst~t’utions was approximately 7.89% at December 31, 1998, compared to 7.72% at December 31. 1999. At December 31, 1999, approximately 26.2% of subsidiary debt with banks and institutions was subject to fixed interest rates for at least one year under the terms of such
debt or applicable interest rate mp, cap and collar agreements. Approximately 75.0% of the Company+s total indebtedness was at fixed interest rates as0fDecu&er31,1999aftergivingeffectto~intacstratcswapsandcaps. I/
Adelpga has cntcrd into intaeSt rate swap, cap and CO&U agrrrm~nts with banks and affiliates to reduce the impsct of changes in interest rates on its debt, A&lphia enters into pay-fixed agreements to effectively convert a portmn of its variable-rate debt to fixed-rate debt. Adelphta enters into receive-&& agreements to effectively convert a portion of its fixed-rate debt to variable-rate debt which is indexed to LlBOR. Interest rate cap and
COU~W tigfeanents are used to reduce the impact of &eases in interest rates on variable rate debt Adelphia is exposed to market risk tn the event of nonperformance by the banks and the afEliates. The Company does not expect any such nonperformance. At December 3 1, 1999, Adelphta would have received approximately S6.603 to settle its interest rate swap, cap and collar agreements, mpresenting the excess of fair market value over canying value of these agreements.
Financing Transactions
Adelphia, Excluding Adelphia Business Solutions (Cable and Other E3egment)
During the nine months ended Dewmber 3 1, 1998, Adelphia issued a total of S300.000 of sarior Notes.
Also,dur&theninemonthsendedDeccmkr31, 1998,Adelphiaissued8,1~,315sharesofClassAcotnmonstocktothepublicandtotheRi8as family (principal shareholders and executive officers of Adelphia). Of this total, 4,100,OOO shares were sold to the public. The mmaining 4,090,3 15 shares were sold to entities controlled by the Rigas family. In a related tmnsa&m on September 14,1998. the Company issued and sold 615,000 shares of Class A common stock pursuant to the undawriters’ over-allotment option, Net pmceeds to the Company for these transactions was approximately S26g.000.
Procecds&omthesaleoftheSeniorNoteaandtheClassA common stock were used to repay subsidiaries’ senior notes and revolving credit facility
borrowings.
On May 15,1998, Adelphia mdeemed the remain@ 569,838 of the 12 112% senior Notes dne 2002 at 103% of principal.
DuringtheninemonthsaldalDuunber 31.1998, Adelphia rrd#mcd S137.200 aggregate principal amMmt of subsidiary notes to banks and ,- institutiolls. Al a real& of them tmmmctia. Adelphia mcogmzd an B loss on early mtimmentofdebtofs1.970.
During the nine months edal Deeember 31.1998, a majority owned subsidiary closed on a S700,000,8 l/2 year credit facility. The credit facility con&s of a S350,OtM mducing revolving credit poatim and a S350.000 turn loan portion. FVoce& &om initial bortowings were used to repay exi&gindebtednas.
DmingtheyearendedDecember31. 1999,AdclphiaissusdatarlofS1350,000ofSeniorNotes.
DuringtheY=- -31,1999,Adelphiaisauai22$00,000sharuofClassA camwmstockfop~tothepublicandtheRigasfamily. Of this total, 18600,000 shares wue sold to the public. The remai&g 4.000,OOO shares were sold to entities controlled by the Rigas family. Net
proceedsfrom* -oalstotheCompanywerragproximately11,188,000.
Also,duringtheyearended ~31,1999,~~1danrsgrrsstr!2,875,000sbmsof51/236SeriaDconvatibe~farrdstockwitha liquidation prefemnoe of 5200 pa share. The @erred stock - dividaulsatS11 pershareannuallyandisconvertibleatS81.45pershareinto an aggregate of 7,059,546 shrrrr of Class A cmnnm~of~l~ThpefcmdstocLisndccmable~~~optianofA&lphiaonor~May 1,2OQ2 at 103% of the liquidation pref&ame. Net profesds to the Company for this transacttat wue approximately S557.000.
C&I Aprrl9, 1999 and October 1, 1999, Adelphia entered into stock purchase agreements with H&hland Holdings, a general mershp Connolly by the Pigas Family, pursuant to wfuch Adetphia agreed to sell to Highland Holdings and Highland Holdings agreed to purchase 8375,~ md 5 137,500, of Adelphia’s Class B common stock, respectively. Closing under the April 9. I999 agreement occurred on January 2 1,2000. The &ober *- 1, 1999 agreement IS expected to close by July 2,200O.
Proceeds from the sale of the Senior Notes, the Class A common stock and the convertible prefetred stock were used to repay subsidiaries’ revolving credit factlities of which a portion was reborrowed to fund the Acquisitions which closed on October 1, 1999. I,
On January 29, 1999. Adelphia purchased Gom Telesat shares of Adelphia’s stock. owned by Telesat, for a price of S149,2 13. In the transactron, Adelphia purchased 1,091,524 shares of Class A common stock and 20,000 shares of Series C Cumulative convertible preferred stock which are convertible into an additional 2,358.490 shares of Class A common stock. These shares represent 3,450,014 shares of Class A common stock on a fully wnvcrted basis.
On February 16, 1999, Adelphia redeemed S154.500 of its 9 l/2% Senior Pay-In-Kind Notes due 2004 at 103.56% of ptinctpal. As a result of this
transaction, Adelphia recognised an extraordinary loss on early retirement of debt of 56.676.
On May 6, 1999, certain subsidiaries and afl[iliates of Adelphia closed on an 5850,000 credit facility. The credit facility consists of a S600,OOCt. 8 l/2 year reducing revolvmg credit loan and a 5250,000,9 year tam loan. Proceeds Gom initial borrowings were held as cash and used to repay existmg indebtedness, which may be reborrowed and used for acquisitions, capital expenditures, investments. and other general corporate purposes
On December 15, 1999, Adelphia redeemed the entire S125,OOO of its 11 718% Senior Debentures due 2004 at 104.5% of principal amount plus accrued interest. As a result of this transaction, Adelphia mcogn&d an extraordinary loss on early retirement of debt of S7.302.
Also, on December 7, 1999, a majority-owned joint venture of Adelphia closed on a 51,000,000 credit facility. The credit facility consists of a
SSOO,OOO, 8 year reducing revolving credit loan and a SSOO,OOO, 8 year tam hn. Pme& h the initial borrohngs were used to pay existing indebtedness.
Adelphia Business Solutions (CLEC Segment)
During the nine months ended December 31,1998, Adelphia Business Solutions suusfdly completed an JPC of Adelphia Business Solutions Class A wmmon stcck (“ABIZ Stock”). As part of the offering, Adelphia purchased an imremental3,324,001 shares of ABIZ Stock for 549,900 and
converted mdebtedness owed to the Company by Adelphia Business Solutions into 3.642666 shares of ABIZ Stock. In additim Adelphia pmchased
wammts issued by Adelphia Business Solutions to MCI Metro Access TmnauGsi on savices, Inc., and pumhaaed shares of Adelphia Business Solutions Class B - commonstockfrom&ainexeeutiveofficersofAdelphiaBuainess Solutions for a total purchase price of approximately S12,580 and 53,000, mspectively. Additional net pmcceds of 3191.411 to Adelphia Business Soluticms WE received as a result of the sale of 12,500,OOO shara of ABIZ Stock to the public. In a related mmsaction on June 5.1998. Adelphia Business Solutions issued and sold 350,000 shares of ABE
Stock at the $16.00 IPO price pursuant to the m&nvrit& over allotment option in the IFO. As a result of the IPO. Adelphia’s additional paid-in capitnl increased approximately S147.000 and minority interests &eased mly 845.000. Net pmceeds Gom this transaction have &II used
primardy to fmd capital expenditures, working capital. memasesinownemhipmtematsinexistmg-andforgeneralcorporateputposes.
On March 2.1999 Adelphia Business Solutions issued S3$WOO of 12% Senior S&o&Wed Notes due 2007 (the “Subordinated Notes”). An entity
controlled by members of the Rigas family pureha& S100,OOO of the Subordmated Notes directly Gom Adelphia Business Solutions at a price equal
to the aggregate principal amount less the discount to the initial purchascn. The net proceeds of approximately g295,OOO wrrc used to fund Adelphia Business Solutions’ aqmsition of interests held by local pmtners in certain of its markets and were used to fund capital expenditures and investments initsnetworksandforgenemlwrpomteandworkingcapitalpmpoaes.
During November 1999, Adelphia Busiaas Solutions issued and sold 8,750,OOO shares of ABIZ Stock at a price to the public of 530.00 per share, prior to the exercise of any umknvriters’ o~-allotment option. Sixnulmneously, Adelphia pu&ased 5,181,350 shares of Adelphia Business Solutions Class B Common Stock at a price apral to the public offering price less the u&nvriting discount in the public offering. These transactions raised approximately 5403,000 of net pnxeeds to ceatinue tbc expansicm of Adelphia Business Solutions’ e&ing markets and to build new markets. At December 3 1.1999, Adelphia owned approximately 60% of the Adelphia Business Solutions’ outstanding common stock and approximately 90% of the total voting power. As a result of this offering, Adelphia’s additional paid-in-capital increased approximately S109.0 I5 and minonty interests increased approximately 5144.000.
For additional information mgardmg Adelphia’s and Adelphia Business Solutions’ financing transactions, see Notes 3, 4 and 6 to Adelphia’s Consolidati Financial Statements.
Acquisitions
Adelphia, excluding Adelphia Business Solutions (Cable and Other Segment)
On January 2 1.1999, Adelphia acquired Vat0 Communications, Inc. (“Vetto”) pursuant to a merger agreement between Adelphia, Verto and Verto’s shareholders. These systems served approximately 56,000 subscribers in the greater Scranton, PA area at the date of acquisition. In COnnectron wtth the Vet-to acquisition, Adelphia issued 2.561.024 shares of its Class A common stock to the former owners of Vet-to and assumed approximately S35.000 of net liabilities of Verto. The acquisition was accounted for under the purchase method of accounting. Accordingly, the fmancutl results of the aqutred systems are included in the consolidated results of Adelphia effective from the date acquired.
On October 1, 1999, the redemptton of the partnership interests in Olympus held by Telesat Cablevision, mc., a subsidiary of FPL Group, Jnc was completed The redemptton was made m exchange for non cash assets of Olympus of approxtmatety S l 00,000.
On October 1, 1999, Adelphia acquired Ce~~tuty through a merger whereby Century WBs merged with and into a wholly owned subsidiary of
Adelphia, Arahova pursuant to art agreement and plan of merger, dated as of March 5, 1999. and as amended on July 12, 1999 and as further - amended on July 29, 1999. In CO~~~C~~OII with the closing of the Century acquisttton, Adelphia issued approximately 47,800,OOO new shares of Adelphia Class A common stock and paid approximately S8 11,900 to the stockholders of Century, and assumed approximately S 1,700,000 of debt. This transaction was approved by Century and Adelphia stockholders at their respective stockholders meetings on October 1.1999. As of August 3 1, 1999, Century had approximately 1,610,OOO basic subscribers a&r giving effect to Cetttmy’s pending joint venture with AT&T, which closed on December 7, 1999. At the effective time of the merger, Adelphia also pumhased Citizens Cable Company’s 50% interest m the Citizens/Century Cable Television Joint Venture, one of Century’s 50% owned joint ventures, for a purchase price of approxtmately 313 1.900, comprised of approximately 527,700 m cash, approximately I .850.000 shares of Adelphia Class A common stock and the assumption of indebtedness. This joint venture serves approxrmately 92,300 basic subscribers in California and was JOUS& owned by Century and Citizens Cable Company, a subsidiary of Citizens Utilities Company. Accordi@y, the fuurncial results of the aqutred systems are included in the wnsolidated results of Adelphia effective Gom the date acquired.
On October 1, 1999, Adelphia acquired FrontierVision. As of October 1. 1999, FrontierVision ~crved approxjmately 710,000 baste subscribers primarily in Ohio, Kentucky, New England and Vii. In connection with the acquisition, Adelphia issued 7,OOO.OCKl shares of its Class A
common stock, assumed debt of approximately $1.150,000 and paid cash of approximately $543.300. Accordingly, the ftnanciai results of the aqutred systems are included in the consolidated results ofAdelphia effective t&n the date acquired.
On October 1, 1999, Adelphia acquired &rron Communications Corp. (“Jiarron”). As of October 1, 1999. Hanon served approximately 296,000
basic subscribers primarily in Southeastern Pennsylvania, Mkhig~, Massachusetts and New Hampshire and were purchased for an aggregate
purchase price of approximately Slfll,704. Acwrdmgly, the fiaMcial results of the squired systems are included in the consolidated results of Adelphia effective from the date acquired.
On December 7, 1999, subsidiaria of Arahova CoILNmmated a transaction with AT&T to form a joint venture limited parme&up in the Los Angeles, CA area. Pursuant to this agmanent, the Company, Arahova and AT&T contributed cable systems that suved approximately 800.000 basic subscribers. Atahova and Adelphia hold a combined interest of 75% and AT&T holds a 25% in- in the parblaship. As part of thus transactton,
At&ova and AT&.T exchanged cable systmu owned by Arahova in certain comtmmitia in mathern California for certatn cable systems owned by AT&T in southcmr California, allowing each of them to unify operations in extsbng &ce areas. AT&T exchanged its East San Femando Valley cable system sdyine approximately 103.500 basic subscribers for A&ova’s northem Califii cable systems (San Pablo, Benecia, Fairfield and RohnatPsrk,california),whichsave~y%.5oObasicsubsaibas.Nogainorloawas~anthissystemswapduetothe C~~SapplicaticmOfplrchaseaccormtinein~~withtheArahovamega.
Inadditimtotheafquisitioasmmti~abovt,fartbeyeerendcdDecemba 31.1999. Adelphia ccnnpleted several other acquisitions. These - aquisitions served approximately 136.700 basic subscribers at the date of aquisiticm primmily in Ohio, Virginia, Kentucky, Pennsylvanta, Califolnia and West Virginia and were w for an w price of appwximately $539200. Acwrdi@y. the fmancial results of the acquirrdsystansarrincludcdintbe~~~rrrmltsofAdelphiaeff~vt~~datccrquired
Adelphia Business Solutions (CLEC Segment)
During h4arch 1999, Adelphia Business Mltions cauummatcd pm&Me agmements with subsidiaries of Mllltimed& Inc. and Mediaone of Colorado Inc. to acquire their rupective intereats in jointly owned n&h&s located in the Wichita, KS. Jacksonville, FL and Richmond, VA markets foranaggmgamof~S89,8oO.The qreatmU inmasai Addphia Bushess Solutions! ownaship interest in each of these networks to 100%. Acwrdi&y, the financial results of the squired netwu&s axe included in the consolidamd results ofAdelphia Business Solutions effective GomthedatesKquiEd
DuringJtme1999,AdelphiaBusinessSol~~apumhaae agmament with Entergy Corporation (‘Entagy”), the parent of its local
partner in the Baton Rouge, IA, Little RCI& interesuintheaem6rketa.nlergrrcmmo 4A+3zwmB m+cts, whereby Entergy rcc+d ap?mximately 536,500 for its ownership usmess Solutians ownership ntterest m each of these netiwMcs to 100%. Awwdingly, the tinan&l results of tlm aqnired neLworks are in&dud in the consolidated results of Adelphia Business Solutions effective from the date squired.
Resources
The Company plans to continue to explore and consider new commitments, amngments or tmmmctions to refinance existing debt, increase the Company+s liquidity or decmase the Comp@s leverage. These could include, among other things, the future issuance by Adelphia, or tts subsidiaries. of public or private amity or debt and the negotiation of new or amended credit facilities. These could also include entering into aquis:tions, joint ventures or other in vestment or financing activitia, although no assumnw canbegiventbatanysuch tramacuons will bc wnsummated. The Companvs ability to borrow mder cumnt credit facilities and to enter into rcfirwcings and new fuwcings is limited by wvenants contained in Adelptis indentmes and its subsidiarid credit agmematts, including covenants under which the ability to incur indebtalness is in part a function of applicable ratios of total debt to cash flow.
The Company believes that cash and cash equivalents, intemally generated funds, borrowings under ex&ing credit facilities, and future facing sources will be sufficient to meet its abort-term and long-term liquidity and capital requirements. Although in the past the Company has been able to - refinance its indebtedness or obtain new fmancing, there can be no assurancethattheCompsnywillkableto&sointhcfuturcorthatthctermsof such financings would be favorable.
wment believes that the telecommunications industry, including the cable television and telephone industries, continues to be m a penod of consohdatlon charactenzed by mergers, joint ventures, aqtusttions. sales of all or part of cable companies or theu assets, and other partnenn8 and
investment mansactl~~ of Various structures and stzes involving cable or other telecommunications companies. The Company continues to evaluate new oppomties that allow for the expansion of its buskess through the acquisition of additional cable television systems in geographic proxmuty
to its existing regional markets or in locations that can serve as a basis for new market areas. The Company, like other telecommumcations companies, has participated from time to time and is participating in preliminary discusions with third parties regarding a vanety of potentul transactions, and the Company has wnsidered and expects to continue to consider and explore potential transactions of various types with other cable and telecommunications wmpanies. However, no assurances can be given as to whether any such transaction may be consumma ted or, if so, when.
Affiliates
0lymp~~. On October 1, 1999, the remain@ 50% partnership interest m Olympus was redeemed and Olympus became a consolidated, wholly owned subsidiary of Adelphia as of that date. Therefore, all intercompany accounts and transactions have been eliminated subsequent to October 1, 1999. Prior to October 1, 1999, the Company served as the managing general partner of Olympus and held S5 of votmg general partnership interests representing, m the aggregate, 50% of the voting interests of Olympus. The Company also held nonvoting PLP interests in Olympus, which entitled
the Company to a 16.5% per annum priority return. The remair& qmty m Olympus consisted of voting and non-voting partnership interests held by Telesat, which wexe redeemed on October 1.1999.
On January 29, 1999, Adelphia purchased h Telesat shares of Adelphia’s stock owned by Telesat for a price of S149.213. In the transaction, Adelphia purchased 1.09 1,524 shares of Class A common stock and 20,000 shares of Series C Cumulative convertible preferred stock which are convertible into an additional 2,358,490 shares of Class A common stock. These shares xpresent 3,450,014 shares of Class A wmmon stock on a fully converted basis. Adelphia and Teleaat also agreed to a redemption of Telesars interests in Olympus for approximately S100.000. The redemption occun-ed on October 1,1999.
DmingtheyearendedMarch31.1998,th eninemonthsendedDecember31, 1998andtheninemonthsendedSeptember30.1999,theCompany
made net investments in and advances to Olympus totaling $11,466. SZ2.610 and 5350,053. respactively. The mcrease in the investments and advances to Olympus for the nine months ended September 30.1999 is due primmily to advances used to pay down subsidiaty credit facilities with
banLsandinstihltions.DuringtheyearendedMarch31,1998,thcnincmonthsendcdDecemkr31,1998,MdthenincmanthscndedSeptankr30, 1999, the Company received priority investment income brn C?lympus of 547,765,S36,000 and S36,OOO. reqectively.
DuringtheycarendedMnrch31,1998andtheninemonthsendedDecember31. 1998,OlympPuaquiredseveralcableandsecuritysystems,adding approximately 128,000 subscribers for app~&~&ly 5269,900. No sign&ant acquisitions occured during the year ended December 3 1.1999. For additionalinfonnaticr!regardingOlympus~ti~amd~s.secOlympus’AnnualReportanFann10-Kfortheyesr~~~31, 1999, also filed with the SEC.
h&magedPartna&ipa. D\lringtheya~se&dMarch31,1998andDecanber31, 1999,theCompanymsdeadvaacainthtaa~~~ofS21,458 andS134,469.rrspectively.tothescandotherrrlatedpaaies,~yforcapitalurpcediturrsandwwkingcapitalpurpojcs.Duringthenine monthsendcdDaxmber31. 1998,th~PartnershipsandotharrlstedpartiesrrpaidsdvancesinthenetamwntofS8,150.
Recent Accounting Pronouncements
..- Statement of Financial Accounting Standards (“SFAS”) No, 133, “Accounting for Derivative hrstroments and Hedging Activittes,” establishes accounting and reporting Standards for daivatk i!~~W~ments and for hedging activities. It requires that an entity recogruze all denvahves as enher
assets or liabilities in the statement of financial position and measure those instruments at fair value. Management of the Company has not completed its evaluation of the impact of SFAS NO. .133 on the Companys consohdated finencial statements. In July 1999, SFAS No. 137 was tssued to delay the effective date of SFAS NO. 133 to fiscal quartas of fiscal years beginning after June 15,200O.
At its January 2000 meeting, the Emerging Issues Task Force (“EITF”) reached consensus with respect to issues related to EITF 98-3, “Determinin8 Whether a Transaction is an Exchange of Similar Productive Assets or a Busmess Combination,” As a result of this consensus, Adelphia will be required to account for cable system swaps as a purchase and a disposition of a business at fair value. Management of the Company will monitor the impact of Em 98-3 as it relates to future transactions of the Company.
In the year ended March 31, 1998. the nine months ended December 31, 1998 and the year ended December 31, 1999, inflation did not have a sign&ant effect on the Company. Periods of high intlation could have an adverse effect to the extent that lncrrased borrowing costs for floating-rate debt may not be offset by increases in SU~SCC&CI rates. At December 3 1, 1999, atk giving effect to interest rate hedging agreements, approximately S3,010,981 of the Companys total debt was subject to floating interest rates.
Regulatory and Competitive Matters
The cable television operations of the Company may be adversely affected by changes and developments in gov anmental regulation, competitive forces and technology. The cable television industry and the Company are subject to extensive reguktion at the federal, state and local levels. The 1992 Cable Act significantly expamkd the scope of regulatirm of certain subscriber rates and a number of other matters in the cable industry, such as mandatory carriage of local bro&ast stations and reeansmissiancansenfand~the~vecosuofcomplyingwithsuchregulations. The FCC has adopted rate regulations that establish, on a system-by-system basis, maximum aknvable rates for (i) basic and cable progmmming servica(orhcrthanprogramming offkredonaper&tmrelorper-programbasis),tmseduponakmhmark methodology, and (ii) associated equipment and instabtion services based upon cost plus a reasonable profit. Under the FCC rules, km&sing authotities are author&d toregulatc ratesforbesicsenicesandassociatedequipmmtwdinstallationstrvicet,andthFCCwillrrgulattntcsf~rrgulatrdcableprogrammingsavices inrrspansetocomplaintshiedwiththeasency.Thc1996ActendedFCCrrsulatianofcable~ sa-vicetiamteeonMarch31.1999.
Ratesforbasicservicuareaetpmsumttoaba4munk formula Altematively, a cable operator may elect touse a cost*f-service methodology to
showthatratcsforbasic3avi#sarrrrarmable.Refrmdswithintaatwillbersquirrdtokpaidbycable~wftoarrrequindtoreduce -- qulatedratea.TheFCChasreaemedthetighttomduceakreasetheben&m&s itltasestablished.Themteregulationsalsolimitincreasesin
reguk!dmtestoani&tionindexedamotmtp1us incrWesincertaincostsstmhastwa,~fces,costs~withspecificfratlchise
requiranaltsand-m costs. Cost-based adjustmats tothcstcappedm~um~be~intheventacableopenrtor~or
delaer~~orcomplettsa~~tsystanrebuildor~.Bsawcofthtlimitatimannrttinenws for qulated services, future
revcnutgrowth~cableserviccswillrelytoamuchgreatacxMtthrmhskcnPuein~pastonianewd~~~~unrrgulatedsaviccs andncwsubscribersthan~incraua iIlpmiouslyunrrgulatedrata
?heFCChasadoptcd~~~l~~~oftherequirrmmtsoftbc1992CablcAct’IbeFCCisalso~lytocontinuetomodify,clarify orrrfinethentcrrgulatians.Adclphircannaprrdictthcffeaofthc1996ActafuturrrulemaLingpoceediagsopchangestotheratcrrgulatians.
Cable television companies operate un& W granted by local authmitiea which M subjezt to renewal and renegotiation fium time to time. &cause such hchisa arc gumally non-exdusive, there is a potential far competition with tlm systans kom other operators of cable television sptatts, including public systems apcnt#i by tmmici~ &an&is@ at&nit& thunaelvu, and &WI ok distribution systems capable of delivaing tckvision programmingtohana.‘Ibc1992cablcActandtbe19%Aacontainprovirianswhich~ecampetition~suchotha sources. The Company cmmot pdict tba aUaU to which cxmpctition will matcrializ &om other cable television opaatom. local telephone cxmpania, other distrilnltim systems for deiivering television progrtmmmiq totheh~,OrOtherpotentialcompctitors,Or.ifsuchcOmpetitiOn matcrialixs,theextcntofita&ectmtheCanpmy.
The 19% Act repealed the pmhibitim at CLECs 6om providing video progg~ directly to customas within their llxal exchange areas other than in rural areas or by spccik waive of FCC rules. The 19% Act also authot&d CLECs to operate “open video systems” (“OVS”) without obtaining a local cable &an&se, although CLECs opera@ such a system can be required to make payments to local govemmentaJ bodies in lieu of cable kanchise fees. Where danmd exceeds capacity, up to twpthirds of the chat&s on an OVS must be available to programmers unaffiliated with the CLEC. The statute states that the OVS scheme supplants the Xc’s “video dialtone” rules. The FCC has promulgated rules to implement the OVS concept, and New Jersey BeIJ Telephone Company has been granted permission to convert its video dialtone authorization in Dover Township, New Jersey to an OVS authkzation.
The Company believa that the provision of video prog~gmmmiq by telephone coqania in cmnpetition with the Compan~s existing operations could have an adverse effect on the Compan~s financial condition and results of operations. At this time, the impact of any such effect is not known or estimable.
*- The Company also competes with DBS s4vice providers. DBS has been available to cxmsumm since 1994. A single DBS satellite can provide more than 100 channels of programming. DBS sen4ce can be received virtually anywhere in the United States through the installanon of a small outdoor antenna. DBS service is being heavily marketed on a nationwide basis by several setvice providers. At this time, any impact of DBS compention on the Company+s future results is not known or estimable.
ITEM 7A QUmA?m AlW QUALITATIVE DISCLOSURE ABOUT MARKET UK (Dollars in thousanda)
The Company ws fiXCd and variable mte debt to tid its work& capital requirement& cap&d expenditures and acquisitions These debt
arrangements expose the Company to market risk related to changes m interest rates. The Company enters into pay-fixed agreements to effectively convert a portion of its variable-rate debt to &d-rate debt to reduce the risk of incurring higher interest costs due to rising interest rates. As of
December 3 1, 1999, the Company had interest rate swap agreements covering notional principal of Sl 15,000 that expire through 2008 and that fix the interest rate at an average of 6.68%. The Company also enters into receive-fLued agreements to effectively convert a portion of its fixed-rate debt
to a variable-rate debt which is indexed to LIEOR to reduce the risk of recurring higher interest costs in periods of falling interest rates. As of December 3 1, 1999, the Company had interest rate swap agreements covenng notional principal of S80.000 that expire through 2003 and that have a
variable rate at an average of 5.86%. The Company enters into interest rate caps to reduce the risk of incurring higher interest costs due to rising interest rates. As of December 31, 1999, the Company had interest rate cap agreements covering a notional amount of S400,000, which expire m
2002 and cap rates at an average rate of 6.88%. As of December 3 1, 1999, the Company had interest rate collar agreements covenng a notional
amount of S200,000, with SlOO,OOO expir@ in each of 2001 and 2002. The mterest rate collar agreements have average floor rates of 5.95% and
6.30% and average cap rates of 5 .9S”h and 6.30%, respectively. These agreements also have maximum cap rates of 6.64% and maxunum floor rates of 4.65% and 4.950/o, respe&vely. The Company does not enter into any mterest rate swap, cap or collar agreements for tradmg purposes. The Company is exposed to market riak in the event of non-perfbmunce by the banks. No such non-performance is expected. The table below sumunzs the fair values and contract tams of the Compan)rs financial mstrurnents subject to interest rate risk as of December 3 1.1999.
Fair
2Qa ml a?!22 lppt 2!w lb0muem u8l hk
FiXEdRAtE AvmpIcuawtRolo
VolioblO to Fii swap
Avwop Pry R,ata AvOnpROCOiWRocoivc
Fibodlo voriabio ssp Avaap Pay iLt0 AVU8gOROO8hRJtO
--clp Avonp cop Rat0
tnlmaRotocQlh MaximumcapRAto AVarpclpdRwRU MinimumFloorRJto
a2375 9.86%
lOY71 797%
WJPOO 6.68%
6.24%
s2xooo 9.87%
262401 8.50%
s-
ml.wo 6.64%
595% 4.65%
s545,ooo 9.88%
341,571 8.62%
s-
35,aKl 5.86% 7.08%
Joow 6.:8%
100.000 6.64%
6.30% 4.95%
sm~ 9.87%
u3250 8.62%
8-
45,am 5.86% 7.10%
s531.847 9.86%
387300 8.64%
s-
s4,899$m s7.179.506 9.78%
1.553.574 3.0%.567 8.45%
S75,ooo s115.ooo 6.68% 7.32%
80,000
~,ooo
mm
S6.625.41 I
3.096.567
S5.287
(2113)
3.470
(41)
Interat rata on variable debt arc u&etai by us using the average imp&d forward London Interbank Offer Rate (“LJBOR”) rates for the year of maturitybaaedontheyieldcurvcine&ctatDecu&er 31, 1999,plustheborrow@marginin&ctatDecember31, 1999.Averagereceiverate-s onthevarisbletofucedswapsrrrestiraatsdby~usingtheaverageimpliedforwardLIBORratesfarthe~ofmahKitybasedontheyieldcurvein effeciat December 31,1999.
lTEM8. FINANCIAL STA- AND SUPPLEMENTARY DATA
The consolidated finand 8manalt8 OfAdelphia and related notes thereto and hdepa&nt auditors’ xepat follow.
,-
HEX To FINANCIAL STATEMENTS OF ADELIWA COhihWNICATlONS commnoN
AND suESIDtARM
-
lndspcndmt Auditon’ Repat
Consolidated Balance Sheets Decemk 31.1998 a14 1999 52
ccmdi~- ofOpntian.Y=EaddM8rch31.1998,NiiMo&tded 53
~zcemk31.1998andYarEnkdDwembu31.1~ qA
CamolidUadSUtemuU ~-~~~-dStodr.COllUMOStOCkudOlhor~ldar’Equity
-
(Dofkicncy). Year Ended Mwd131.1998, Nine Mm&~&d Do~mbcr31.1998md You Ended December 31.1999
Coasolidated SWamUs ofCubnowr,YerrEadcdMuch31,1998,NincM~Ended Decembn31.1998mdYurEndedDeccmbu31.1999
Nota to Consolidated Financial Statana~
55
57
58
/-
A&lphia Communications CorpOrath:
We have audited the accompanying consolidated balance sheets of Adelphia Communications Corporation and subsidiaries as of December 3 1.1998 and 1999, and the related consolidated statements of operations, of convertible preferred stock, common stock and other stockholders’ equity (deficiency), and of cash flows for the year ended March 31, 1998, the nine months ended Decemkr 31, 1998 and the year ended December 3 1, 1999. Our audits also included the financial statement schedules listed in the Index at Item 14. These financial statements and financial statement schedules are the responsibility of the Company’s management. Cur responsibility is to express an opinion on these f-ml statements and fmanctal
statemnt schedules based on our audits.
We conducted our audits in accordance with garerally accepted auditing standards. ThOsC Jtandards require that WC plan and pdbtm the audit to obtain reasonable assurance about whether the financial statements are tree of matertal misstatement. An audit tncludes examming. on a test bass,
evidence qportmg the amounts and disclosures in the financial statements. An audit also inch&s assess@ the accounttng prmciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation We believe that our audits provide a reasonable basrs for our opinion.
In our opinion, such consolidated Gnancial sta&ments present fairly, in all material respects, the financial position of Adelphia Commurncations Corporation and subsidiaries at December 3 1,1998 and 1999, and the results of their operations and their cash flow for the year ended March 3 1,
1998, the nine months ended December 3 1, 1998 and the year ended December 3 1, 1999 in conformity with generahy accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all mat&al respects the information set forth therein.
DELOITTE& TOUCHELLP
Pittsburgh, Pennsylvania March29,2000
ASSETS:
ADELPHIA COMMUN’lCATlONS CORKHUTION AND SUB!JlDlARlES
CONSOLIDATED BALANCE SHEETS
(DollurinIllouu&exappaoharormamtr)
Roperty, pl~n md equipment-ad
Imrngiblc UWU-net
Cab md urh equivllcnts
U.S. 8OVWlUtlti SOCUdCS-pkdgd
IllVdllUlUS
Subeuibcr receivlbla--net
R@d cxpens~ md other usets-act
lnvs~ent in md 8mcnmts due kom Olympus (No@ 1)
Relltcd puty reaiwbla-net
LIABILITIES, PREFERRED STOCK COMMON STOCK AND
OTHER STOCKHOLDERS’ EQUXTY (DEFICIENCY):
Subsidiwy dehr
Parentdobt
Acarunte pyrble
Subsuihcr advance pqmmte md deposita
AcauedintsWpldotkrli&ilitia Defezrai income taxa
Tocrl lisbiiitiu
MiD%ilyimuutl
Adclphie Bueiaul sohuiau -ee~cprsfuredlrodr
8 l/S% Serim C mawtibie pnfd #ock (S100.000 @i&ia~ Hwence)
5 1RW Sai= D anwertibla pntand ti (S575.000 liquibtioo pr&rmco)
Clam A aaxnm @ock, S.01 plr V&J& 200,000,ooO od 1.200.000.000 sbs~
wthorizad,31,258.843aui113,0S1.118~aaaradiry.rqmctively
Clam B m uodr, S.01 p w&c, 25,000,ooO ad 300,WO,O00 rbrr
ouhahd, roqaztivdy. 10.834.476 nbum B twditioMlpid-inaphl
Accumuleted cNbef omqdmeive income Acaumilued hticit
Treuwy @ock a co& l.OPl.S24 ti afClm Acauma~ #o&and
20.000 oharu of 8 l/8% Saia C cunwiblr w atock
camrcibk~rtods- rtodt8daQr stockholda’ equity (&ficialcy)
TOtd
Sl,207,6J5
1,029.159
398,644
58.054
196.893
53,911 114,625 191,408
w
S3.972329 12.05’5.873 186.874
29,899 280,874 194,399 328,675
178:577
Sl.717.240 56.513.813 1.810,212 2.777.9 19
%$85 442,561
19277 57.6s 1
137,131 495.564
J@.W 2.113.037
1
313
108
738,102
(1.76&k
=
f.LQ2ua
12.4oo.605
736.491
1
29
1.131
108
S.863.633
3,239
(l*PP7,JJ3)
1149,401)
3.111.181
c
RCVCIIW
open*- Dirocl Opcntill~ ld pIU(lnmmin@ Sclfing. gwml md dnliniltrativl
Depdimmdamorriulh Morgu and intcgntim coau
TotJl
~~ COMMUNlC.4TlONS CORw~nON AND S~SIDIARIES CONSOLIDATED STATE~~ENTS OF oPERAnONS (Do~~tbocilmbcxfcpcprSllUO-tl)
NillCMOlUh#
YUfEdCd Ended Ycu Ended . Malcll31. DocQbcr31, lkanbcr31.
leee leea l222
f4%.014 slaallm
167,266 167%3 432,612
95.73 1 107349 340,579 145,041 140,623 370,636
2 = AZ4
ulw L148.763
othlrinwmc(~): Riaity wcllmn! inc.omo fmm Olympul llucmtcJcpeMc-nct(Notc1) Equity in IOU of Olymplu aed olba joif mdttm Equity in IOU of Adclpba Bwiaem SohUiom joint vctdmw MimiayiatemtinKclouuof~ukid~
Adclphia Buainem s01utioN pdemd ltock diidmds 0th
Total .
Laubefmcicronw tlxcsrndatladkyIw
lncomctlxbcaotit
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ofs7Jooia 1999)
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compehonrinincomc
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Bticmddibdainadimylamaiy .’ rob-P- WOightldlWlplLlUOOfCOllUMOrraF
47,163 (243.S54)
WON) (12967)
(126~)
WUW u!a
(162554)
36,000 (160,452)
(48.691) cwm 25.m (21.5361
Llu
1197.571)
(llSJ30) (20,716)
(135.W
36.000 (359,565) WHEW (7.W 36,699
(32173)
(244,365)
l2u.a
w3.530)
(41.963)
(28249%
3232
E(6.W y3.63) Y3.73,
Balance. Much 31.1991 IUWUUOfCkrA~ atock ior cable telwiaim
As&J
lmunco ofsaia C canmiblc
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to oxcbnpblo
tocawwtiblepmfhmdntock otbw Net la
BahueUutb31.1996
claAcommonamk IuuuwdCluAcommmlrock Dividd : .w
~-~@-d* Dividadnq’ .gpliublr .-
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AD~~~H~~~MM~NI~ATI~N~c~R~~RATIO~~~L~)S~IARIE~ CONSOLlOATED STATEhEN OFCoNvEKwLE -STOCK.COMMONSTOCK AND OTHER STOCKHou)ERs’ EQUlTY (DEFICIENCY)
SCTiCOC saica D
coavaibl~ cmvaiblc CLP A CLr B Additioml
PrdadPlcfad a!?& stpflr
s- s-
1 -
J =
1 =
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S161 El09
39
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66
23
=
lQ2
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33,792
(14.246)
(4.604)
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267#38
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W93)
n.ots
s-
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s(l.473.5S9)
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S(1.253.661)
33,631
97,000
(14,246)
(4.604) (66) fl’3.6791
146.440
267,926
(14,625)
WW3)
77,106
- (63.676) - - - (63.676)
1 (1) - - - -
1 - (130) - 2.16;
Z 5 =. = = f &i
u b su upIsaun2 k -L;w
Sr-htO-U-
ADELPHIA COMMVNICA’IIONS CORPO~TION AND’SJJBSlDlARIES CONSOLIDATED STATEMEWES OF CONVERWE PREFERRED ST- COMMON STOCK AND OnER sTcclclioL.DERs EQlJI= (D~CIMCW (caltinwd)
(Dollm in thnuadr) “/- *-’ *
saiac S.ZliUD Cmvmibio Conwtiblo CLU A
PrdalodPrdd C-
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Bhnco. Docmhr 3 1.1996
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S&a D
Convatibio Prhmd ltak Molphia Bviaop Solutiau IJSUODCC of Clau A commm stock
Trsuury stock puctuu Divdakd z8q) qYpliwbl0 to oxchmprblo prefu=d stock Dividmdrrq l ppliubloto coovwtiblo pofonvd aock
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swwitia otlxr - I Notlar ’ .
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=
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223
29
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s29 51.131
F
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z -
s108
.
Paid-h C-he ,tccwnhtod T-W ilal6llpcpmrQsfisil &cii
S736.102 E Y 1,76u79) s-
1,186.290 -
ss7.430 - 537,459
109.015 - 109,015 - - (149,401) (149,401)
(19,Jal) - (WW
(22m - (22239)
3.336.145 - 3.336.736
3.239 (21,6;b, - 3247 ‘=, =. f,ia&ml. .i
s5.863633 83239 y1,9n,5s3)f(149,401)
z&ill
S&021.746)
1,166,515
3,239 ( W63)
63.721,167
ADELPHkc- CATIONS CORPO&-ON AND SUBSlDL4RlE.S
CONSOLIDATED STAlEhEm OF CAW ROWS
(Dolhn in tlKluu&
NkMonthr
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W73.679) s(115.130) S(24O,S30,
14s.041 37.430 12682 66.Oa9 12961 (2536)
140,623 23,663 21.536 46.691 9,560
(2S.773
370.836
52066 32,173 60,616 7,758 (23W (3VW
llf25 4.337 10,656 W’W (6.510) (16.179)
(4.35 1) (19,674) (70.110)
(23.437) WW 210,361
4.212 31,029 232991 6S1 1.6n (14.594)
w.us) wwm w3m a2m
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ewm
1zsn
Z
147,976
mw
194322
u;m
m
215356
(403.85 1)
cwm (69.0 1:) (12540) W.JW)
15212
C%216)
=
136,176
m%m
gi:; 2o!j99 275.880
mm
a 178.037) (619.197)
(24,496)
(3 LW
30,626
3.164.579 (1.971.S34) (35.562)
(13.566) 262,413 1,21s999
(30366)
ss7.649
,-
ADELPHIA COlbfMUNICA13ONS CORPORATION AND ~IDIARXES NOTES TO CONSOLIDATED FfNANCIAL STATEMENTS (Dollars in thousaads, except per share amounts)
I^ 1. The Company and Summary of Significant Accounting Policies:
The Company and Basis for Consolidation
A&lphia Communications Corporation and subsidiaries (“Adelphia”) ows, operates and manages cable television s@ems and other related telecommunications businesses. Adelphia’s operations consist primarily of selling video programming which is distributed to subscribers for a monthly fee though a network of fiba optic and Coaxial cables. These tices are offered in the respective tichise areas under the name Adelphia. Adelphia Business Solutions, Inc. (formerly Hyperion Teleconununications. Inc.) and subsidiaries (“Adelphia Business Solutions” or “ABE”) is a consolidated subsidiary of Adelphia which owns. operates and manages entities which provide campctitive local exchange tamer
(“CLEC”) telecommunications services under the name Adelphia Business Solutions.
OnUardr30,i999,theBoardofDirrctorsofAdclphiachangedA&lphia’sfiscalyear~Manh31to~Dccemkr31.Thed#isianwasmadtto ~nfonn lo general indulq practice and for administrative purposes. The change became efkctive for the nine months ended December 3 1,1998.
On October 25,1999. the shareholders of Hypekm Tel ewtnmuuications, Inc. elected to change the name Hyperim to Adelphia Business Solutioos,
Inc. The name change wa6 effective October 25,1999.
The mns&iad financial statements include the accounts of Adelphia, its majtity owned 6ubaidiaria and sub&diaries that are 50% owned and
controlled by Adelphia. All significdnt interwmwn y acmmts and tramactions have been elimimed in conaolidatiox~
Duringtheyearc~dedMarch31,1998,theninemonthsendedDecember31, 1998andtheyearendedDewnber31,1999.Adelphiacoxuwwted several a+i6itions, each of which was accolllltcd for using the purchase method. Accordingly, the financial results of each acquisition have beam included in the consolidated results of Adelphia effkctive kom the date aquired
on September 12. 1997, Adelphia Business Solurions wmsumn~ted an mt with Time Warner Entcknmeat-Advanc&kwhouse (“TWEAN”)toexchanecintacstsiafourNewYorkCLECnctwaks.Asarrsultof~~~AdelphiaBusiness Solutions paid -IwEAN
57,638 and inmasai its o&p in the aeturorks saving ButIhlo and Syracuse, New York to 60% aud lo(r/b, respectively, and eliminated its
interestintheAlbany~B~tannctwaks,whicbbecamcwholly~by?WEAN.
-
On Decaber 3.1997. Adelphia txdmged its inter@ in Oxfbni, North Carolina, a system which served approximately 4,400 subscribers, for
TWEANs intaeat in ita DuBois, Penusylvania systew which served appr&&ely 3,800 subs&cm.
On February 12,1998, Adelphia Bosintss Solutions issued a warrant far 731,624 sham of Adelphia Buakss Solutions Claps A Common StOCktO
its 50% partner in Adelphia Buskss Solutic#lsofHarliwQinexchangeforsuchparmashipinterut
On February 12.1998, Adelphia Buakss Solutions acquired the ~~pinterrstsinitsBuffao.NY,Lwisville.KYandLexingtan.
KY netwaks for appmximately Sl8.300.
OnFebruary 12.1998.AdelphiaBwinessSolutionsacquMthe ra&dng~pintexestsinitsMxMmvnandNewBnmswickNJnetwrks
for ~ximately 326,328.
Onhkch6.1998.Adelphiaexcrckditsoptiontopu&asethere&ning 15HofitsN~~le.Inc.systemAdelpbiaiasued341$20sharrs
ofClassA colmMmstocktothe6eller6hdontiththi6~.
Inadditi~tothcacquisitionsmenti~above,~thc~csdcdUlrch31,199%.A~~campletedsmralotha~~ti~.S~ aquired served approximately 65,500 basic subsaibus at the date of acquiaitia primarily iu Vii -New York Pennsylvania, Maryland andWestVirginiaandwerepw&asaiforan~priceof mly S107,OOO in cash and 3.571.428 shares ofAdelphia Class A common
StOCk.
On April 1, 1998. Adelphia exchangai its intawt in its Mansfield, Ohio area systems. which sewed appmxkmtely 64,400 subscribers, and approximately Sll,OOO ush for Tii Warner -t’s interests in systems adjacent to systems owned or managed by Adelphia in Virginia, New England and New York, which KIved appmxkMy 70,200 subscribers.
OxiJuly31. 1998,Adelphiaconsrmmrrt#iits~withATBTtoformajointventrm~~parmashipinthcWestanNewYarkrrgion(the “Western New York Parmemhip”). Pmuaat to this mt, Adelphia cuntributai its Westan New York and Lorain, Ohio systems waling approximately 298,000 subscribers and certain progrslmning assets aud S440,OOO in debt Subdiaria of AT&T cxnmibuted their cable systems in Buffalo, New York Erie, Pennsylvania; and Ashtabula aud Lake County, Ohio, to@liug wximately 171,000 subsuibers and S228.000 in debt. Adelphia and AT&T hold e 66.7% and 33.3% interest, respectively, in the partna&p. Adelpbia manages the wp.
On September 30, 1998, Adelphia merged one of its subsidiaries with the subsidiary of AT&T that held an intacst in Syracuse Hilton Head /“- Holdings, L.P. (“SHHH, L.P.“). an Adelphia managed partnership controlled by the Rigas family, principal stockholders of Adelphia. Pursuant to the merger ageenuot, AT&T received 2.250.000 newly issued shares of Adelphia’s Class A common stock. Simultaueously, SHHH, L.P. distributed certain cable systrms. which served approximately 34,100 subscribers, in Virginia and North Carolina to Adelphh, h c&ange for he interest aqulred by Adalphia from AT&T a~ de&bed above, Addphids prefenrd quity investmat & -4 Pm&p ad c-b affiliate receivables owed to Adelphia.
In addition to the acquisitions mentioned above, for the nine months ended December 3 1.1998, Addphia completed several other acquisitions. These aquisnions served approximately 75,250 basic subscribers at the date of acquisition primarily in southern New York, western Pennsylvama, _- Connecticut and Vermont and WQC purchased for an aggregate price of approximately S163.500.
on January 2 1,1999. Adelphia aquired Vet-to Communications, Inc. (“Verto”) pursuant to a merger agreement among Adelphia, Verto and Verto’s solders. These systam saved approximately 56,000 subscribers in the greater Scranton, PA area at the date of acquisition. In connection with the Verto aquisttion, Adelphia issued 2.561.024 shares of its Class A common stock to the former owners of Verto and assumed approximately S35,OOO of net liabilities of Verto.
Ott March 31, 1999, Adelphia Business Solutions wnsummated purchase agmements with subsidiaries of MediaOne of Colorado, Inc.
(‘Mediaone”), its local partner in the Jacksonville, FL and Richmond, VA networks, whereby MediaOne received approximately 581,520 in cash for
MediaOne’s ownership interests in these netw&s. In addition, Adelphra Bustness Solutions will k responsible for the payment of fiber lease liabilities due to MediaOne in tbe amount of approximately 314,500 over the next ten years. As a result of the transactions, Adelphia Business - Solutions’ ownership interest in each of these networks increased to 100%.
On October 1. 1999, the wp interests of Olympus held by Telesat Cablevision, Inc.. a subsidiary of FPL Croup, inc. were redeemed. The redemption was made in exchange for noncash assets of Olympus of approxunately S 100,000. As a result of this tmnmction, Adelphia’s ownership in Olympus increased to 100% and Adelphia began to consolidate Olympus into its facial statements effective October 1.1999.
On Cktokr 1.1999, Adelphia acquired Century Communications Corp., (“Century”) through a merge whereby Century was merged with and into a
wholly owned subsidiary of Adelphia, -ova Communications, Inc., (“Arahova”) pursuant to an agmanent and plan of merger, dated as of March
5, 1999, and as amended on July 12, 1999 and as further amended on July 29, 1999. In conne&on with the closing of the Century acquisition, Adelphia issued approximately 47800,000 new &ares of Adelphia Class A common stock and paid mly S811,900 to the stockholders of
Century, and assumed apprmrimately S1,700.000 of debt. This transaction was approved by Century and Adelpbia stockholders at their respective
stockholdos’ meetmgs on October 1.1999. As of October 1.1999, Century had approximately 1,610.OOO basic subscribers primarily in California, Puerto Rico, and &ou&out the United States after giving effect to Century’s pending joint venture with AT&T, which closed on December 7.1999. At the effective time of the merger, Adelphia alao purchased Citizens Cable Company’s 50% iutereet in the Cit&n&entury Cable Television Joint Venture, one of Cent@ 50% owned joint venm for a pumbase price of mly 5131,900. CQnprised of approximately 527,700 in car& appm&aMy 1,850,OOO abares of Adelphia Class A wnrman stockandtheassun@onofi&bWnem.Tbisjointventurescrvesapproximately 92,300 basic 6ubauiber6 in tZ.alS* and was jointly owed by Century and Citimu Cable Company, a subsidiary of Citizens Utiliti~ Company.
Ou October 1.1999. Adelpbia m FrontierVision psrblas. L.P. (“FrontiVision”). As of octokr 1.1999, FrontierVision served approximately 7lO.ooObaficsubsaibar~inohio.KcatuJry.New~~VirginiaIn commAon with the acqui6itiol& Adelphia issued 7.000,000 .- sham of its Class A ~~ruMncddcbtof~~S1,15o,ooO~paid~of~lyS543,3oO.
onoctoba 1,1999,AdelphiaaquiredH8Irunc atmlunication6 Corp. (“Hamm”). A6 of Woba 1.1999, Harron served approximately i%,OOO baaicsub6cribersprimmilyin ~pamsYlvmir,Michigaa.~~mdNewHampshirrsndwac~foranaggngatepriceof my sL211,704.
OnDecembW7,1999,subaidiariesofArabova~ a~~withAT&TtoformajointwnturrlimitedpsrtwshipintheLos Angeles, CA area Pursuant to this agrgrt, Aralmv& Adelpbia and AT&T connibutcd cable v that serval approximately 800.000 basic
subscribers. Arahova and Adelpbia hold a comb&i in- of 75% and AT&T holds a 25% interest in the pn~ne&ip. As part of this hanmctia ArahoMandAT&TQcchanecdcablesystansownedby~~incataia~~ti~innorthrn~~for~cablesystcmsownedby AT&Tin~uthrncalifania,~owing~ofthmto~~~~~savicc~.AT&T~itrEastSanFananQV~cy cable system set& apprm&&y 103,500 basic subs&au for Amhova’s oarthn! California cable systems (San Pablo, Berm&, Fairfield and
RohnatParLcalifornia),~~y%.5oo~csubsaibas.No~orlosswas~anthissystcmswapduetotheCom~~s application of purchase accouuting in txmmction with the Arabova merger.
ln addition to the aquiaitiw mallid abov4 fa the year a&d Decemkr 31.1999, Adelpbia completed several other aquisitions. These acquisitions wmed appmimady 136,700 basic subscribers at the date of acquisition primarily in Ohio, Virgin& Kentucky, Pennsylvania, California and wst vii ad wae ptlrchd for au aggre@e price of apprommately 5539200.
The approximate aggegaw pmha6e price for the signiflcattt 1999 acquisitions was comprised of the followiug:
calIl.n#ofaahac@ad S1392.~ : Asulmddo~ 4.s30.ooo
zlzuB!2
Thevalueassi~tothcAdclphiaClassA~~stodrwasbwdont&avaageclosingpriceofAdelphiaClassAcommonstocLafewdayJ kforeandaftcrthcrrspectivcscquisitionswerr~cedtoandannounced.
The COmPW has made a pchhll’~ ahcation of the purchase price based on estimated fair values. A fi allocation oft& purchase price will be
- made upon receipt of fmfd third party appraisals. The prebminaty allocation was as follows:
Repay. plant and equipment Sl,963.000 Intollgiblo aslou @&Drily &ulchiw) 10,473,ooo Qlb (2.S97.ooq
.- The following unaudited Grtakal information assumes that the acquisitions that WcTr wnaummatedduringtheyearendedDe.cember31,1999httd occumdonApril1.1997.
YUrEll&d March31,
1998
RovomIoI 51.675.023
LoIIbdorolllhdhqlaI 522,659
Net loss 553.385
. BuicuddilutadaItlmIportiglsod W-60 IhUl Of -OlI aO& 6.21
Nim Mcadu
YlUhdOd
DamIber31, Dambcr31.
SlJs3.431 s2.486.645 369,721 35 1.858
439J29 405.083
4.60 3.51
hestmatt in Olympus Joint Vanurc P-p
As des&bed above, Adelphia’s ownuahip in Olympus kreaaed to 100% effective October 1.1999, at which time Adelphia began to consolidate Olympusintoitsfinanciaistatemmts.pIliortooaoba1,1999,Adelphia’sinvestmentintbtpartnashipcompiscdbothlimitedandgcneral~~ in-. The general partner intere6t repmented a 50% voting intere6t in Olympus and was being accounted for using the quity method. Under this method, Adelphia’s investment, initially rwxdad at the historM cost of contributed pmperty, was adjusted for 6ub6equent capital contributions and itJsharrofthelossesofthe~p~s~cuitrsharrofthcaccmion~ uirement6 of the partnc&pk interests. The limited partner interest repmscntcd a prefarrd interest (“PLP &crests”) a&led to a 16.5% annual retum. At Merch 31. 1998 and December 31, 1998, Adclphia owned 5325,911 and 5366,861 in Olympus PLP iuteruts, mspcutively.
TbcPLPintaestswaemmvotine,~.seniarto~of~otherpartwripxaests,andprovidedforanarmualpriorityretumof16.5%. Olympuswasnotrequindto~tbemtirr16.5%narmcurrcntlyardpriorityrr[rrmonPLPinterrsu~~asincamtbyAdclphiawficn received. Compod@y, equity in net loss of Olympus excluda accumulated unpaid priarity return (Note 2). After October 1.1999,.all such
investmultsandretumsehmiMtaintheamaainitttionofAdelphia
SUbSKik :- revenua~recuuedintkmalthtk~i6provided
RopatySP~~Equiparent
t1317.467 s&427.724 59,764 139,248 NUWlllk~ 165,697 431.011
Rdauoaad@rolmma 81,934 194383 30.J33 -438
133USP 3.110.736
f22um 13.1311.4073
Deprrciationiscamputcda!tbe~~mcLbDd~~usclllivuof5to12yearsf~opaatineplsntandequipmentand3to2O yeanfarsupportq~~tmdmlatmc.~~toproperty,p~mdequipmmt~rrcardcdatcostwhichincludesamountsformataial. applicable labor and ovahad. md intacd. Dcpra&imr axpense amounted to 593688.598.699 and S222.158 for the year ended March 3 1,1998, theninemonthscndcdDccem~31,199%andtheya~endalDecuubcr31, 1~.rrspectively.capitalizedintacstamountedto55,985.511$85 andS25.135 fortheycarendalMarch31,199&thenincmonthscndedJkanbcr31, 1998andtheyearendcdDecember31,1999,rcspectivcly.
Jntangible Assets
Jntangible assets, at cost, net of aammulatui mwrkation, are cunprkd of the following:
, mrcluad-
ooodwiu
Non-compete -mu . Purchuod~ llua
A portlon of the aggregate purchase price of systems acquired has been allocated to purchased h&ises, pu&aaed subscriber lists, goodwill and non-compete agreements. Purchad fbachks and goodwill are amortized on the straight-line method over 40 years. Purchased subscriber lists are amortrzed on the straight-line method Over periods which range from 5 to IO yearS. Noncompete apemeats are aamtizd oa the straight-line method over their conbactual lives which range lkm 4 to 12 years. Accumulated amoRization of intangible assets amounted to S249.618 and 5615,772atDecember31.1998aod199%rrspcctively.
Cash and Cash Equivalents
Adelphia considers all highly liquid investments with orighl awwitia of three moaths or less to be cash equivaknts. Merest income on liquid investmentswasS13,383,S10,752andS31,809forthe)FearendedMarrh31, 1998,theoincmonthsendedDecember31,1998andtheyeareoded
December 31, 1999, respectively. Book over&& of 57,855 and S35,OOO existed at December 31, 1998 and 1999, respectively. These book
overdrafts were reclassified as BcQuod interM and Otha Militia and accosts payable.
U.S. Govemaxnt Securities - PlaIgal
U.S. Government Securitia - PI- consist of highly liquid investments which will be used to pay the first six semi-annual interest payments of
the Adelpka Business Solutiona 12 114% senior seclrrrd NO~CS. Such ~UV~~~ICZI~S are classified as held-to-maturity and the canying value
approximates market value.
Investants
Theequitymethodof~~~isgeaaallywdto~tfor~~~whichangnata~2~butaotwrcthan50%owned.Ua~this
method, Adelphia’s initial invatmeat isra#dcdstcost~subsequmtyadjustedf~theamarmt0fiUepuityinthe~in#rmeorlossesofits
investees. Dividends or other distributiom~ UIC xuxhd as a r&cti011 of A&lpi& investment. ~VU&UCW 8ccountcdforuaiugtheequitymethod generally reflect Adelpbia’s a@ty in th in-s mxklying asacts.
InvestmmtsinentitiainwhichAdclphirsownashipir20$(arl~arr~y~ted~uaingthccodmcthodUadatbecast.mahod, Adelpha’s initial investment is record& at cost Imd wtiy adjurted for the excesS. if say. of dkidaxia or 0th distrihtiona raxived over its sharrofcumulativeurmings.Di~~rrcci~inoteesrof~subssquenttothdatctbc~~twasmadcarrncordcdasrrdPctionsof
the cost of the investma&
Adelphia’s noaconsolidated investments are as follows:
IIlVCSttlldS wxaumedfauringthcequitymethod:
GTOSS invea
Adclphia Busiae8s Sohtions’ joint ventures
Mobile cotnmutuutiotu
Rogmmmingvctnwu
Dcccmber31, 1999
5138.614 561,400
18,249 19.865
1.469 10.627
1.430
In-m fausingtheoxlmahod:
Niaprc Frontier Hodcey. L.P.
Henbow PCS Venturco, Inc. Gxwatibie prcfared stock
Otha
Dsl
Invulmauo ocanmtd fa u maihbic-fa-ulc sccurih:
stodtwcmtlu
Totd invme before cutdctive equity in act louu
Cumuluive emitv in net louca
J@.fj40 22222
44,897 47.533
17,170 17.192
87,433
6.78’1 m
6#iE!!! 165.130
= w
229,494 308.342
‘(32.601‘) m
As a result of the acquisition of Arahova, Adelphia obtained approtitely 113,983 shares of United International Holdings, Inc. (“UTH”) series B convertible preferred stock. Each share of this stock is convertible into approximately 21 shares of UIH Class A common stock at a conversion price of S10.625 per &axe. This quity &rument was rewded at its fair value of 387,433 on October 1.1999 in connection with purchase accounting.
Asaresultofaeontract~ArahoPaandAtHomeC~~(”~)toplovide~~highspeedinianasecessoncatainsystcms, Adclphiahurrceivedawammtcon~topachaseupto5)60,000sharrsof~omcSaicsAcammon stock at 35.25 pa hare. Deferd reveaue ,A--- isrec&edforthefidrvalueofthewclrranll WkldWith~rrwnuC~OVUthCranaining life of the contract, which
expiresinMay2004.lIIeinwstmaltin@Home warrants is class&d as an available-for-sale security. During 1999. Adelphia reqnized revenue of s1.500 related to these warmats. Adelphia’s investment in @Home warrants of 534,366 at Decunber 31.1999 includes 52,354 of unrealized loss.
Adelphia received wazmnts to purchase 325.000 shares of carmnon stodcin~~withtheP~Ofdigi~convaun.Th#ewamrntsarr reuxded at fair value as a raductioa of the cost of such convuta-s whut earnaL This invmt is classified as an available-far-sale security. Adclphiahas 18monthstoexcrcisethue wturtmts oace they are earned wly 108,000 of these warrants must be exercised by June 30, 2000 or they expire. As of December 31,1999, Adelphia’s investment in these wammts totaled 315,524 and inch&s an weali& gain of 57.830.
CatainmanbersoftheRigasf&milyhavcawaiintoan agreema to acquire all the votiag iataats of Nii Frontier Hockey, L.P. (“NFIW”). Closing of the agmmeat is subject to third party approvals. Adelpbia ha capital &nding noted of NFHLP of 544,897 and 547,533 as of December
3 I,1998 and 1999, rupectively. lhe capital funding notu are convtible into non-votiug prefd quiv of NFHL.P at the option of Adelphia.
These amouats represent advances to NFHLP plus afxmed return of 11.5% to 14.0%. The return on these capital f&&g notes amounted to approximately 35.100. S4,400 and 53,800 fix the year ended March 31, 1998. the nine montha ended Dazmbcr 31.1998andtheyearended Decemba 3 1, 1999, reapcctiveiy. Adelphia &an& mly S7,SOO and S14.700. rqectively, during the nine months ended December 3 1, 1998tofundworkingcapitai rrquirrmmtrofNFHLP.ThgcamountrcouldkrrpaidbyNFHLPin~futllrr~convertedintoprogrammingri%ts to air future Buffalo Sabres hockey ~~IIEX NPHLP continues to genaate net losses and working capital deficiencia and is attempt@ to re-negotiate
thetermsofcatainofitaopemtiqandfinandal agrrts. The ability of NFHLP to m-negotiate the terms of certain operat@ and financial agnemcnts will impact the ability of NFHLP to generate positive operating cash flow in the future. Adclphia is uoable to predict the ability of NFHLP to swx&ully re-negotiate these agreawnts on tums that are favorable to NFHLP. Management believes that all amounts advanced to
NFHLP and the related acauai retmn are recoverable.
On Septeaher 30.1999. the FCC granted Adelphia Business Solutions’ request to transfer, and Adelphia Business So.utions transferred 195 3 I-Ghz licenses &om Baker Creek Communications (an equity method investment) to a wholly owned subsidiary of Adelphia Business Solutions. At Decemkr31,1999,344,605rrlatedtotheli~arrincludedinpepaidexpensclandothcrassas-naontheCansolidatedBalanceSh#tat Decuaba 31.1999.
Subscriber Receivables
Aa allowance for doubtful accounts of 32,853 and 317,796 is record4 as a raiuction of subscriber mcivabla at December 31, 1998 and 1999,
,I - respectively.
hortization of Otha Assets and Debt Discwnts
Deferred debt financing costs, included in prepaid expenses and other assets, and debt discotmts, a reduction of the carwing amount of the debt, are amonlzed over the term of the related debt. The unamort~ed amounts of deferred debt financing costs included in pq&d expenses and other assets
wae $47,542 and 5117,838 at December 31, 1998 and 1999, respectively. The aggregate amount by which fair value assigned in purchase accounting to debt and interest rate swaps exeeded or was less than carrying value at the acquisition date IS being amortued ova the respective remaming 1 to 18 year lives of the underlying debt obligations.
,- FranchiseExpmse .
The typical tam of Adelphia’s t?anchi~e agreements upon renewal is IO years. Franchise fees range from 3% to 5Oh of certain subscriber revenues
and arc expawd c-fly.
Basic and Diluted Net Loss Pa Weighted Average Share of Common Saxk
Basic net loss per weighted average share of common stock is computed based on the weighted average number of common shares outstandin after giving effect to dividend requirements on Adelphia’s preferred stock. Diluted net loss per weighted average common share is equal to basic net loss
per weighted average comma share because Adelphia’s convertible preferred stock had an antidilutive cffoct for the periods presented; however, the
‘convertible preferred stock could have a dilutive effect on eanungs per share m future periods.
Asset Impainacata
Adelphia periodically reviews the ca&q value of its long-lived assets for impairment wbeneva events or changes in circumstances indicate that the canying value of assets may not be recoverable. M eanxcateat of any impaumait would include a comparisan of estimated future operating cash
flows anticipated to be generated during the mmainiq lifeoftheaasetswiththeirnetcarqingvalue.An hphacat loss would be recognized as the
amountbywhichthecarryingvalueoftheassetsucceedstheirfairvaluc.
Noncash Financing and Investing Activities
Capitalleasesenteredintodtxingtbeyearendalh&ch31, 1998,theninemonthsendedDaxmber 31,1998andtheyearendedDecember31,1999 totaled 32,842. S15.522 and 510,034, reqectively. for Adelphia, excluding Adelphia Business Solutiam Adolpbia Business Solutions entered into capitalleascstotalings24.5oO,S1.156andSS,~,~ve1y,duringtheyearmdedMarch31. 1998,tbeninemontbsendedDecember31,1998 andtheyearardedDecemba31,1999.RefcrrnceismadctoNotesland6forQaiptioasof~ti~nonccuh~andinvestingactivities.
Iataat expauc - act iae1uda iataat ilmmc of s23.949, x20.952 sad 597.797 for tba year uukd Ma&l 31, 1998, the nine months ended December31, 1998~tbeyerrendedDarmba31,1999,respcctively.lntaestiacomc~1~intacst~~~onl~~loans - andforroim- ofinteratexpalacmrevolvingcredit agmmeata,rcIataitoshorttam~bysuehafGuata(Notc II).
IlltUCStRittCSwaps,caprMdCOlblr~tS
UwofEstimatuintheRepamtionofFinmmiaIStaumxns
ThepreparationofGmmeialsmmmalb in amformity with ganaally aeqtai accounting principles rogt&s managanent to make estimates and assumptionsthataffeatherrportedmaDuntsofarwts~tiabilitiesaaddirlosureofcon~trssctsandliabilitiaatthedateofthef~c~
stataaentsandthcrrportedamountsofrrvenucsmd~~tbcrrportingpaiodActualrrsultscoulddiffa~thoscwtimatcs.
Comprehensive Ixor.ne (Loss)
Comprrhcnsiveincomeis~tobe~whcPacompanyhasitcmsofothercomprebensiwinccrne~thepaiodsprescntedInl999, otha comprehensive inoome con&al of net umtaiitsd gains on available-for-sale saw&its. Items of other wmpr&a&ve income are excluded from net loss and are included in arriving at camgcheariw income (loss).
Recent Accounting s
Statement of Financial Accounting Standarda (“SFAS”) No. 133, “Accounting for Derivative mstnmmnta and Hedging Activities,” establishes aceountingandqortingstandardsfordeiivative iasumeats aad for hedging aetivitia. It requires that an entity reco@.e all derivatives as eitha
assets or liabilitia in the statcmatt of fin&d position and mclu~rr those imitruments at fair value. Managanau of the Company has not completed its evaluation oftbe impact of SFAS No. 133 on tire Companys consolidated EnanciaI statements. In July 1999, SFAS No. 137 wns issued to delay thee&tivedateofSFASNo. 133toGsoalqumtersoffiscalyearsbeginn&a&rJune lS.2000. _
At its January 2000 meeting, the Emerging Issues Task Force (“EITF”) reached cdmcams with rapeet to issues related to EITF 98-3, “DeMmming whetha a Transaction is an Exchange of Similar Productive Assets or a Business Combination.” As a result of this uxmmsua, Adelpbia will be required to account for cable system swaps as a pumhaae and a disposition of a business at fair value. Management of the Company will monitor the - , uapact of EITF 98-3 as it relates to future transactions of the Company.
Reclassifications
Certain March 3 1, 1998 and Decemba 3 1, 1998 amounts have been reclassified to conform with the December 3 l , 1999 presentation.
2. Related Pany Investments and Receivables:
A Related party receivables+ represent advances to managed partnerships (Note 1 l), John J. Rigas and certain members of his hediate far& (collectively, the “Riges my”). hAding entities they own or control (the “Managed Partnerships”). No related party advances are collateraltied.
As described in Note 1, effective OctOk 1. 1999, Adelphia’s ownership interest in Olymp~, increased to 100%. The information below is as of and for the year ended hxr~~bcr 3 1, 1998, when Adelphia accounted for Olympus under the e@ty method. Investment 111 and amounts due Gem Olympus is comprised of the following:
Dccember31,
1998
Cumulative pity in lou over investment in Olympus (102,888) 294.296
The major caqxments of the financial position of Ol~pu~ as of December 3 1, 1998 and its results of operations for the years ended December 3 1,
1997 and 1998 were as follows:
Decankr31, 1998
-sheaDetE
~.plud~drquipnwat-~ Tadaaas
Subsi~ debt
Puem debt
Tctd liabihtia
w-i-- oend pamed equity (deficiency)
SW.470 1.011.999
5 19,443
200,000
1.147.946
570.298
(706.245)
Docmber31.
L991
-ofopaatiam~
Ei=-
5176,363 s21s.642 34392 38,944 WW (16.074)
N~lordgQdCOdlillitdpftWS
alkpriaityratmt (9J69J) (105.J30) OnOctobar6, 1993.AdelphirplrchruedthcprrZarrdClassBLimitcdPareaaship~~inS~L.P.,amanaBed~p,forapriceof 518,338 hm Robin Media Group. TIE Class B Limited Pw Interest had a prefaxd return armually which was payable on a current basis at theoptianofS~L.P.,Imd~smiorinpri~tytotbe~pintaesuoftheRigas~y~TCI.PrrfarcdrrnanantheClassBLimited P~IntaestinS~L.P.totrrledS3.75Oands2,O17srdisincludedinmmuesfortheyearcndcduarch31.1998andtheninemonthsended Decenhr31,1998.rupectively.OnSeptanber3O. 1998,theClasaBLimitedPartncrIntercstwurakmcd(Note 1).
3. Debt SubridiyDCbt
NOtUtCbdSMdidMiWI
submary public debt
outadcbt
DocaIh31.
s1300,970 53.088.4n
410.784 3.337.376
al% 87.960
slua#A 56.513.813
.
Notes to Banks and Institutions I.
The amount of bot’rowings available to Adelphia under its revolving credit agreements is generally based upon the subsidiaries achievtng certam levels of operating performance. Adelphia had an aggregate of S1,456.620 in unused credit lines with banks, part of which is subject to achieving
certain levels of operating performance, at December 3 1, 1999 which expire through December 3 1.2007. Adelphia pays commitment fees of up to
0.5% of unused principal.
Borrowings under most of these credit ammgements of subsidiaries are collateralized by a pledge of the stock m their respective subsidiaries, and, m
some cases, by other assets. These agreaxnts limit, among other things, additional borrowings, i~~ubnents. transactions with afIiliates and other
subsidiaries, and the payment of dividends and fees by the subsidiaries. The sgreements also require maintenance of certain financial ratios by the subsidiaries. Several of the subsidiaries’ agreements, along with the notes of the parent company, contain cross default provtsions. At December 3 1, 1999, approximately S 1,262,472 of the net assets of subsidiaries would be permitted to be transferred to the parent company in the form of dividends, priority return and loans without the prior approval of the lenders baaed upon the results of operations of such subsidiaries for the quarter ended
December 3 1,1999. The subsidiaries are permitted to pay management fees to the parent company or other subsidiaries. Such fees sre limited to a percentage of the subsidiaries’ revenues.
Certain subsidiaries of Adelphia are co-borrowers with Managed Partnerships under credit facilities for borrowings of up to S1.025,OOO. Each of the
c&otrowers is liable for all borrowings under the credit agmements, although the lenders have no recourse against Adelphia other than against
Adelphia’s interest in such subsidiaries,
Notes to banks and institutions mature at various dates through 2007. Bank debt intereat rates are based upon one or more of the following rates at the
option of Adelphix prime rate plus 0% to 1.5%; w&ate of deposit rate plus 1.25% to 2.75%; of LJBOR plus .625% to 2.5%. Total bank debt wtth interest rates under these options was approximately SlJ73320 and 53.073.102 at December 31,1998 and 1999, respectively. At December 31, 1998 and 1999, tire weighted average interest rate on notes payable to banks and institutions was 7.89% and 7.720/o, respectively. At December 31, 1998 and 1999, the rates on 35.9% and 26.2%, respectively, of Adelphia’s notes payable to banks and institutions wre Gxed for at least one year throughthetamsofthenotesorinta#tratcswap,caporcollar~~.
During the nine months ended Deccmk 31. 1998 and the year ended Decanber 31.1999. Adelpbia radmned Sl37.200 and 537,815 aggregate principal amount of subsidiary notes to banks and institutions. As a resnlt of these tnwactions. Adelpbia mcognkd an exnwrdky loss on early retirement of debt of S 1,970 and S2,44 1, mspectivcly.
Subsidiaty Public Debt
- lnterrstonsubddiarypublic~isducscmiannually.Thesubsidiarypublicdebtiseffectivelysubordinatcdtoallliabilitiesofsubsidiruynotcsto
banksandim&utionsandisseniortotheparcntdebt.lItesnbsidiatypublicdebt agmanentswntahrutrictionson,amongothathings,the incumnceofindcbtedness,~~~saleof~,catrinrrstrictedpaymmts,~~~inafiit;rtrr~catainothaafliliatetransactions. The agreements also require -0fcatainGMncialratios.
Ibcfoiiowiog~c- thesluhrypublic&
Subaidiny
ABU ABU ABlz
Olympu FrontiaViaion
FroabrViaion FrontisViaioa ‘&Jhm
Anllwr ArJbwJ
AnhOVJ ArJhwJ Arehow
AdlWJ
AnhWJ
hJhWJ
saw z
13.ooow wlsl96
12250% OSf27l97 lZmo% 03mu99 10.625% 11/13196 ll.aO% lQm2B6 ll.a75% ow1w97 I i.nssc lM298 9.500% OUW92 9.75Q% 02ou92 i!4roeoqoo 04mu93 9.sOo% 03mms r.mn ol/17/97 8.?so% 09n3m
8.375% 1uofFn 8.37S% 12m4l97 Discma
mmQmks
329NO
=woo 3OOpoo
z$i 237$50 91191 150,000
2wwJ
2i 2SOb
Pjm 1w,ooo 100,000
Chmtt@rd -31, Doc5ba31,
Js8
sp0.m s233.860
250.000 2S0,OOO 3OO$JOO
203637 212,541
m5979 78,522 i4a.m 201.172 311234 250,8J2 242,542 216,105
94~ 94,106
Q&-
ouism3
091011M i imim7
11/15m6 lo/15106 w15m7 09mm7 0u15mO omm2 03mm3 03m ims ovism7 10mim7 11/15i17 iz45m7
FhtChU
r&a
oui5mi o9mimi 1 im 1103
wismi iwlsmi 09mmi
wismi
Et
N/A N/A N/A NIA N/A la.4
u
Fii CJll
B&E
106.500% 106.125% 106.000% 105.313% 105.sOO%
107.917% 107.9.l7% N/A
N/A
N/A
N/A
N/A
N/A
N/A N/A
N!A
(a) Amounts outstanding include discounts or premiums reconkd as a result ofpwchase account& as applicable.
other subsidiaty Debt
As of December 31, 1998 and 1999, other debt umsists primarily of capital leases incurred in connection with the acqmsition of, and are ,.“-. collateral&d by, certain equipment. The interest rate on such debt is based on the Fedeml Funds rate plus 1.4% or the U.S. Treasury rate plus 2.8%
parent Debt
hterest on the Parent Debt is due semi-annually. The Parent Debt is effectively subordinated to all liabilities of the subsidiaries and the agreements
contain restrictions on, among other things, the incwrence of indebtedness, mergers and sale of assets. certain reshicted payments by Adelphla. investmenb in aflliates and certain other tiliate transactions. The agreemeab fur?her requim that Adelphia maintain a ratio of debt to annualized operating cash flow not greater than 8.75 to 1.00, based on the latest fiscal qunrter. Net pmcceds from the issuance of notes during the nine months
ended December 3 1,1998 and the year ended Decrmkr 3 1.1999 were used to reduce amounts outst&@ on Adelphia’s subsidiaries’ notes payable to banks and to purchase, redeem or otherwise retire all or a portion of the 9 ll2% Senior Notea Paid-In-Kind due 2004 and 11 7/8% Semor
Debentures due 2004.
10 l/4%
9 114%
9 11% (J) 10 l/2%
11 7ffJ%@)
9 t/8%
9 7m
8 3m . 8 3/a%
8 l/E%
7 In%
7 314%
7 7l8%
!!a%
Dete
07ml93
o!z25/91 020394 07m7m7
Owl0192
03/11l93
02224191 01R1l9a 1 l/12/98 0710298
01113199
01113l99
YEZ’
f 110,ooo
32S.000 1~0,ooo
150@0 125.000
13o.ooo
Domnbcr31, Decanba31. 1998 1999
S99,6S3 s99.872
325.000 325,000
186347 31,847 150,ooo 150,000 124,613 128.53 1 128.711
341.586 34l.791 03mlrn7
149.197 149259 OMYW 150.000 150.000 1493a5 149,419
l@WO 300,ooo
35opoo
=
DJte- 0711mO iomimz OYlm4
07115m4 WlS10)
03mim5
OMllOI
07mm3 01115104
0111m9 OS/OM)9
Fira Call Lkte NCMJll N&i YlQ99 NOO-Cdl 905199 Nobull
Fii call
RJIe NIA
N/A 103.56%
N/A 104.SO%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
t?a
.C (a) Thae Sakr Notes are Pay-in-Kind with respect to inkrut pqncnb at tbe oplia~ of Adelphia On February 15, 1999, Adelphia rebmed S154JOO aggmgak principal amount of notea at 103.56% of principal. As a result Adelphia reco@zd an extraorditwy loss on early mtiratmt of debt of 56.676.
(b) &l December 15,1999, Adelpllia rcdeu& 3125,000 a8gegak @ncipal amount of 11 7/8% S&or lM&tues at 104.5% of principal. As a resul~AdelphiamcQglkdan~loasmearly rethnent of debt of 57,302.
Maturities of Debt
.- The following table seb forth the mandatory reductions in principal under all debt agreemenb for ench of the n+ five years based on amounts oubtding at December 3 1.1999:
YkaraldingLkcember31:
zoo0 3390.746
2001 285,401
2002 886,571
2003 1,341.190 2004 919.147
Adelphia intends to fund ib mq uirrments for maturities of debt tbmugh borrowings under new and existing credit atnuqemenb and internally generated funds. Changing conditions in the fmancial markets may have an impact on how Adelphia will refinance ib debt in the future.
Interest Rate Swaps, Caps and Collar Agmemenb
Adelphia has entered into interest mte swaps, caps and collar agmanenb with ha&, Olympus (prior to October 1,1999) and Managed Partnerships ~otel1)torcducctheimpactofchaagesinintarstnrtcsonibdebt.SevaalofAdelphiasctedit amngenmb include provisions which require interest mte protection for a portion of ib debt Adelphia enters into pay-fued agmemenb to effectively umvat a portion of ib variable-rate debt to fixed-mte debt ta reduce the risk of incur@ higher interest costs due to rising intaest rates. Ad4pbia enters intO receive-fured agmemenb to effectively convert a portion of ib fixed-mte debt to variable-rate debt which is indexed to LIBOR to r&cc the risk of incuing higher interest costs inpaiodsoffallingintaestmtes.Intaestratccapandcollaragrermentsarrusedtoreducethe~of inaeases in interest mtcs on variable-rate debt. Adelphia is exposed to market risk in the event of nonperformance bythcbanksorbythcManagedPsrtacnhips.Adelphiadoesnotexpectany suchncmpuf-.
The following table ~thenotionalamountsouwmdingandweightedavaageintaestratedata,bssedonvariablemeSineffectat Decexkr31,1998and 1999,fortheseswaps,capsandcollaragreements,whichacpirrthrough2008.
-31.
BY Fbd SW
Naiaul aumd %SO.WO El IJ.ooo zc Avaa&ofoaiHrrtr 5.33% 6.24%
AVPY- 6.JS% 6.68%
l&COiWFii!hpB: Naticnd emwr# s4J.ooo ~.~ AVUSgOfWiVrnto 5.98% 6.3SW
AvcmlePW- 3.32% 5.86%
hfWR#tCCS$lC: Notiad MUM s140,ooo 5400,~ A=Wap- 7.g2% 6.88%
llammRalccdLn: Natiod amad c s200,ooo A~UpMtdfkantr 6.13% 6.64% 4.8ow
.Y-
on scptemher 17,1999, a substdiary of Adelphia term&ted a $400,00() interest rate swap &mnt with a financial institutron. which resulted in a
$15,200 gain that has heen deferred and included in accrued interest and other liabilities in the accompanying 1999 consolidated balance sheet, The amorttmtion of the deferred gain, which amounted to 5558 in 1999, iS being recognised as an adjustment to mterest expense over the term of the
- related debt.
4. Redeemable Preferred Stock:
12 7/S% Adelphia Business Solutions Redeemable Exchangeable Preferred Stock I.
on October 9, 1997, Adelphia Business Solutions issued S200,OOO aggregate liquidation preference of 12 7/8% Senior Exchangeable Redeemable Preferred Stock due October 15.2007. Dividends are payable quarterly commencmg January 15, 1998 at 12 7/8% of the liqutdation preference of oubtanding preferred stock. Through October 15,2002, dividends are payable m cash or additional shares of preferred stock at Adelphia Busmess
Solutions’ option, Subsequent to October 15, 2002, dividends are payable m cash. The preferred stock ranks junior in right of payment to all
ir&btedness of Adelphia Bus&as Solutions, ib Subsidiaries and Joint Ventures. On or befke October 15,2000, and subject to certam restrictions,
Adelphia Business Solutions may redeem, at it option, up to 35% of the ixutial aggregate liquidation preference of the preferred stock originally issued with the net cash pmceeds of one or more Qualified Equity offerings (as defined in the Certificate of Designation) at a redemption price equal to 112.875% of the liquidation prrfercnce per share of the preferred stock, plus, without duplication, accumulated and unpaid dividends to the date of
redemption; provided thaf after any such redemption there are r emaining outsbnding shares of prefared stock having sn aggregate liquidatron
p&rence of at least 65O/b of the initial aggregate liquidation preference of the preferred stock originally issued. On or tier October 15.2002,
Adelphia Business Solntions may redeem, at ib option, all or a portion of the preferred stock at 106.438% of the liquidation preference thereof declining to 100% of the liquidation preference in 2005. Adelphia Business Solutions is required to redeem all of the shares of preferred stock
outstand@ on October 15.2007 at a raier@on price equal to 100% of the liquidation preference thereof, plus, without duplication, accumulated and unpaid dividends to the date of redanption. Prefand stock contains restrictions and covenanb similar to subsidiary public debt.
Adelphia Business Solutions may, at ib option, on any dividend payment date, exchange in whole, but not in part, the then oubbndmg shares of preferred stock for 12 7/S% Senior Subordinated Debentures due Cktoher IS, 2007 which have provisions wnsistent with the provisions of the preferred stock Adelphia Business Solutiorls may sati@, at&has to date sarisfiak the dividmrd r@remenb on this preferred stock by issuing additiollal shares.
13% Redemnable Exchang&le Refer& Stock
On July 7.1997, Ado&&a issued S150,OOO aggmgab liquidation preference of 13% Cumuiative Bx&ngeable Prefd Stock due July 15,2009. Dividendsarepayablesemi4lmalally~ January 15.1998 at 13% of the liquidation preference of outstanding preferred stock. Dividends arepayableinca&withany ~anpaiddividcndsbearineintaatat13Yopa~~Thepaefarrdstockranksjuniorinrightofpaymcnt - to all inde&dnas of Adalpbir On or befibre Jnly 15,200O. Adelphia may redeem, at ib option, up to 33% of the mitral aggregate liqutdation prrf~OftheprrfarcdstockarieinallYisruedwiththenacashprocecdsOfoaearrnarecomman equity offkrings at a redemption price equal to 113% of the liqnidation pr&mnce per share of the preferred stock, plus, without dnpfication, atmmubd and unpaid dividends to the date of rrdcmption;proVided~aftalUt~SUChndanptioathUCthae~ outstanding shares of preferred stock having an aggregate liquidation prrfaarceof~tleast6Noofthcinitial~~~~prrf~ofthcpefarrdstock~yissued~oraftaJuly15,2002,A&lphia mayrrdccm,atiboptiaS~aa~~oftheprfarrdst#katl06.~oftheliquidationprrfaartethaeofd&liningto100%ofthe liquidation preference in 2008. Adelphia ia required to rubun all of the sham of prrferrod stock outstanding on July 15,2009 at a redemption price equal to 100% of the liquidation pref- thereof, plus, without duplication, accumulated and unpsid dividends to the date of redemption. The prefarrd stock contains rcatrictions and covabnb similar to Adelphia’s parent debt.
Adelphia may, at ib option, on any dividend payment data, exchange in whole or in part (subject to certain restrictions), the then oubtanding shares of preferred stock fa 13% Sarior Subadinrtcd &change Debentures 6uc July 15.2009 which have provisions consistent with the provisions of the ~farrdstocl.Adelphiapaid~di~~~thisprefarrddockofS10.183,S9,750sndS19,500~the~cndcdMarch31.1998,the~e
monthsendadDecanber31,1998andtbtywraxledDecembcr31, 1999,respectiveiy.
No~~~rrdanptiansofred&mablepdarrdstockofAdelphiaarrnquirrdforthenextfiwyeanasofDecemba31, 1999.
5. Commitmatb and Cont@axies:
Adelphia rents offkz and studio space, towa sibs, and space on utility poles under leases with terms which are gaterally less than one year or under agreemenb that are generally cat&able on short notice. Total rental expense under all operating leases aggregated 57.420, S8,054 and 527,713 for theycarendedMarch31,199g,thenincmonthsendedDecemher31. 199UandtheyearendedDecemher31. 1999,respectively. .
In ~ormdon with certain obligations under W agreunnts, AdelNa obtains surety bonds guaranbeing performance to municipalities and public utilities. Payment is required only in the event of nonperformance. Management believes Adelphia has fulfilled all of ib obligations such that nopaY’nenbundersuretyhondshavebeenreqnired.
As ofDecember 31.1999, Adelphia has purchase commitments for certain digital convertors aggrrgatinB SlOS,OOO.
Adelphia Business Solutions has entered into a series of agreemenb with several local and long-haul fiher optic network providers that will allow .-- Adeiphia Business Solutions to accelerate ib nationaJ expansion. These agreemenb, totaling approximately 5288,867, provide Adelpfua Business sOlUti011~ with o~ership or an JRU to over 25,000 route milts of local and long-&l f&r optic cable. Through December 31, 1999, Adelphia
Busmess Solutions has paid 5108,903 of the total due under the agreements, which was included in pmperty, plant and equipment. Management of Adelphia Business Solutions believes this will allow it to expand its business strategy to include on-net pvislo&g of regiond, local and long
distance, intemet and data WttUUUtliWbOllS and to wst-effeftively further interconnect most of its 53 existing markets and to enter and interconnect approximately 150 new markas by the end of 2001,
The estimated obligations under these arrangemenb as of Decer&er 3 1, 1999 are approximately:
PeriodendingDecernher31. 2ooo 5149.911
2001 16,039
2002 453
2003 453
2004 453
Themafter 12,655 The cable television industry and Adelphia are subject to extensive regulanon at the federal, state and local levels. Pursuant to the 1992 Cable Act, which sign&antly expanded the scope of regulation of wrbin subscriber mtes and a number of other matters in the cable industry the FCC adopted mte regulations that establish, on a system-by-system hasis, maximum allowable rates for (i) basic and cable progmmming seniws (other than progmmming offered on a perchannel or per-progmm basis), based upon a benchmark methodology, or, in the alternative, a cost of setvice showing, and (ii) associated equipment and installation services based upon cost plus a reasonable profit. Under the FCC rules, franchising authorities are authorizd to regulate mtes for basic services and associated equipment and insbflation services, and the FCC will regulate rates for regulated cable progrnmmi~~ services in response to complaints filed with the agency. The original rate regulations hecame effective on September 1,1993. Several atnendmenb to the mte mgulations have snbsaprently been added.
The FCC has adopted regulations implementing all of the quimmcnb of the 1992 Cable Act ‘The FCC is also likely to wntinue to modify, clarify
or refme the rate regulations. The TeLecomtn tications Act of 1996 (the ” 19% Act”) deregulated the mtes for cable programming setvices on March 3 1.1999. Adelphia cannot predict the effect or outcome of the future rulemaking e changes to the mte regulations, or litigation.
In February 2000, the Company settled all disputes and claims arising out of a summons and complaint Sled in the United States District Court for the Noxthem District of New York. Case Number 994X-268, against the Company by Hype&n Solutions Corporation (“Solutions”), which is described in the complaint as a company in the husinem of developing, market& and sqmting compmhatsive computer sofh+are tools. executive infonnatianJystanssndapplicatiauthatcompaniuwtoimprovetheir~paformance. The complaint ali& among other matters, that
theC~~suseofthenraac”Hypaion”inibbusinessinfiringeduponvasious ?n&mrks and savice marks of Solutions in violation of fedeml @adana& laws and violated various New York busineu practices, adwrtisiq and busineu rcpubtion laws. tvhagamt of the Company believes thatthecompanyhadmaitoriousdcfcnsestothccolnplaintaadhasvigorouslydefendcdthislawsuitincludingfilingacwntaclaimegsinst Solutions. As part of the settlanent, Solutions’ unnphtint d the Conqmny’s wuntuclaim were d&&ted with prejudice and both the Company and Solutions entered into mntual releaws regard@ the complaint and counterclaim Mmagement believes that this matter will not have a material adverse effect upon the Compauy.
onorabouth4Jrclt10. 1999,RobertLowinga,onbebalfofhimsclfandallothnsimilatlysitnatcd(the~~)commenced nnactionbyftlinga Class’Action Complaint (the “Complaint”) in the Snperior Court of Connwticnt, Judicial District of SbmfordINorwalk against Century, all of ib
dimctom, and Adclphia Cmnrntnricatimts Coqmmtion (“Adelphia”). The Plaintiff. claiming that he owns shams of Class A Common Stock of Century, alleged that in umncction with the propwed mager of Century with Adelphia, holders of Class B Common Stock of Certtuty (which has supaiavotingrightstothcClrusACommarStockofCmtury)willrrctive~daatioafortheirsharesthatmcadsby54.00pasharrthe wnsidemtion to be paid to Cartt@s Class A shnmholdcrs resulting in the Catttq+s Clam B shareholders receiving approximately S170,OOO mom than if they held the equivalart nnmher of the Cent@s Class A shares. The Plaintiff claimed that the individual defendants breached their fiduciary duties of loyalty, good tith, and due cam to Cesrws Class A shareholti by approving the higher payment to Century’s Class B shareholders and thatCcnturyMdAdelphiaridedcmdabcttcdtbcscrlleged~offi~duty.ThePlaintiffsecLscatificationofaclassofCen~sClassA
shercholdersandsscksrecowryonbehlfofhimstlfardtheclassofrmspecifieddamapcr,pfOfib,~speeialknefitsallegedtohavebcen wronsfullyobtainedby~dtfeadmtr,uwell~S~,cxpcnsesand~fees.~Octokr21, 1999,AdclphiaandCenturyfiledmotionsto striketheComplainfand~oftbciadi~defendantsmovedtodismiss~wrmuintheC~~tagainstthrmfarlaekofpasonal jurisdiction over each of than m Jannmy 3.2000, th court dismis& all wtmb in the Complaint as to two of the individual defendanb. On January13,2ooO,thecaurtgrantrddtf~~mDtianstoseilre~~Plaintifpswmplaintinibentirrtyforfailurrtostateaclaimupon which relief wn he gmnted, TIE court cntcrsd jtx@nmt on February 16.2ooO. To the Company+ knowledge the Plaintiff has not filed an appeaJ in thisactionwithinthetime~~byloerlcolntrulafathetilingof~appeal.
On May 26, 1999, the Company axmoumd that it had agreed to swap cetbin cable systems with Comcast Corporation (“Corncast”) and Jones
Intercable. Inc. (“Jones”) in a geogmphic ratiomdimtion of the companies’ respective markets. Adelphia will add approximately 440.000 suhscrihers in the Los Angeles, CA area and the West Palm/Port P&w, FL area In exchange, Comcast and Jones will receive systems cutmntly owned or
managed sewing approximately 464.000 &scribers in &urban Phih&Jphi& PA, Ocean County, NJ, Ft. Myers. FL, Michigan, New Mexico and Indiana.AUsystemsinvolvedinthetranractiauwillkvalucdby agmanent between the parties or, following a failure to reach agreement, by indcpauknt appraisals, with any diffkram in relative value to be funded with cash or additional cable systans. The systan swaps arc subject to customary closing wnditions and regwoly approvals and are expected to close by m&2000.
.--
In Decenther 1999, the Company entered into definitive agreemenb under which Cablevision Systems Cotpomtion will sell ib cable systems in the greater Cleveland metropolitan area to Adelphia for approximately S1,530,000 in cash and securities. As of Decunher 3 1.1999, these systems served approximately 307,350 basic s&scribers. The transaction is subject to customary closing conditions and regulatoty approval and is expected to close by mid-2000.
Adelphia expects to close ib October 1, 1999 direct pl acement of 2,500,OOO shares of Adelphia Class B wmmon stock with Highland Holdings, a general partnership controlled by the Rigas family, by mid-2ooO. The offertng price is S55 per share, plus an tnterest factor,
Adelphia and CCdXl SubsidiariCs are defendants in several putative subscriber &US action suits in state courts in Vermont, Pennsylvania and Mississippi imtiated during 1999. The suits ail challenge the propriety of late fees charged by the subsidiarms to customers who fat1 to pay for
.- ~&ces in a timely n’tatmer. The suits seek injunctive relief and various formulations of damages under various claimed causes of action under various bodies of State law. These actions are in various stages of defense and in one case, the Company was required to refund the late fees,
however, Adelphia has appealed this decision. All of these actions are being defended vigorously. The outcome of these matters cannot be predicted at this time.
During July 1999, Adelphia Business Solutions purchased the naming rights to the NPL Football Temwssee Titans stadium in Nashville, Tennessee. The term of the naming rights contract is for 15 years and reqtures Adelphia Busmess Solutions to pay S2,OOO per year.
There are no other material pending legal proceedings, other than routine litigation incidental to the busmess, to which Adelphia is a part of or which any of its property is subject.
6. Conve&ble Preferred Stock Common Stock and Other Stockholders E4mity (Deficiency):
Series C Convertible Prefaced Stock
On July 7,1997, Adelpltia issued 100,000 shares of 8 l/8% 8eries C Cumulative Convertible P&rred Stock with a par value of SO1 per sham and an aggregate liquidation preference of S100.000 of which S80,OOO was sold to a Rigas ftiy affil&e and the rem&der was sold to Telesat. The
preferred stock accrues dividends at the rate of 8 118% of the liquidation preference per atma and is convertible at 38.48 per share into an aggregate of 11.792.450 shares of Class A common stock of Adelphia. The preferred stock is redeem&le at the option of Adelphia on or a&r August
1.2000 at 104% of the liquidation preference decliuing to 100% of the liquidation preference in 2002. Adelphia paid cash dividends on this preferred stockof54,605,36,093andS6,500duringtheyearcndedUarch31,1998,theninemonthscndedDcccmba31,1998andtheytarendedDecemkr 3 1.1999, respcctiveiy. On January 29,1999, Adelphia purchased fi-om Telesat the 20,000 shares of Series C cumulative convertible prefmed stock.
Series D Couvertible Preferred Stock
On April 30. 1999, and, in a related trmmcbn cm May 14, 1999, Adelphia sold an aggnlFate 2.875.000 shares of 5 l/2% 8eries D couvertible prrfaredstockwithaliquidationprrfamccofSZOOpersharr.Tbtprcfarrdstod;scaueJ dividends at Sl 1 per share annually and is coovertible at
581.45 per share into an aggmpte of 7.059.546 shams of Class A commou stockofAdelphia.Thepreferrcdstockistedccmableattlmoptionof ~~anaraAaMay1,2002rt103%oftheliquidatian~~.Netproccedr~theum~b~~faredstockof’firingwerr
approximately s557,oOO after dedu&g lmdawritu discounts aud wmmisaionsMdoff~expensa.Adelphia&thenetprwcedstorepay
aIpccmmgapatimofwhichthtCompany~~tofrmdtbe~ti~whichclosedonOctokr1.
Adelphiacommon sbckIssuai
OnJtme20, 1997,Adelp&aisaued3,571,428shareaofClaasAceunmon stockincormecuonwithanacquisition(-Note1).
OnMarch6,1998,Adelphiai.ssued341~0&aresofClassA carrmonstoclcincormectionwithexacisingitsoptionto~therrmaining15% of its No&east Cable, Inc. system (Note 1).
OnAugust 18,1998,A~lphiaisawd8,190,3lSshrrsofCLassAcommon stockto~publicandtothe~~y.Ofthis~,4.100,000sharcs wacsoldtothepiblicata~aofS32.00pasbarr,withrurundcrwriterdiscolmtofS1.44pa~.Therrmaining 4.090.3 15 shams were sold to entities controlled by the Rigas hmily at tk public offking price less the uudawritas discotmt. In a related transactioa on 8eptemba 14.1998, the Company issued and sold 615.000 shares of Class A commat stock at the offering price of 532.00, with an uuduwriter discouut of S1.44 per share
pursuant to the tmduwritad ov~~otmatt opt& Adelphia malized aggregate net pmceeds of 5267,926 atIer deducting Menvriter and other fees.
On September 30.1998, Adelphia issued 2,2SO.000 shares of Class A common stock in commction with the acquisition ofAT&T interests in SHHH, L.P. (-Note 1).
On January 14, 1999. Adelphia completed off&ngs Waling 8,600,000 shares of its Class A common stock. In those offerings, Adelphia sold 4.600,OQO newly issued &area of Class A cammoll stock to GoIdman, Sachs & Co. at 543.25 per share and it also sold 4.000,000 shares of its Class A common stmk at 543.25 pa ahare to attities controlled by the Rigas family. Adelphta used the prrxeds of approximately S372,OOO from these
offerings to repay subsidiary bauk W
On January 2 1, 1999, Adelphia issued 2.56 1,024 shares of Class A common stock in commction with the acquisition of Verto (Note 1).
On April 28,1999. Adelpbia sold 8,000,000 shares of its Class A common stock to the public. Net pmceeds of the offering, after deducting offering ~~reeapproximately 5485,500. +i+ia used the net pmceeds to repay bammings under subsidiary credit qreements. a portion of which bonowedtofuudtheaqulslttotL9whtchclosedonoctobrs 1.1999.
On Octokr 1.1999, Adelphia issued 47,800,000,1 ,SSO.OOO and 7,OOO.OOO shares of Class A cutmton stock m commction with the acquisitions of .- C~tury,thefmIin.@ 50% of the CittzenKentury Joint Venture and FrontierVision, mspectively. (Note 1).
Gt Octokr 6.1999, Adelphia sold 6,000,OOO shares of its Class A common stock. Net proceeds of the offering, affa deducting offering expenses,
were aFFJXimately s330.000. Adelphia initially invested the net proceeds in cash equivalents and advanced or contributed a portion ofthe remaming net prcceeds to certain subsidiaries to repay borrowings under subsidiary credit agreements.
The Ctificate of horporation of Adelphia author&s two classes of commou stock, Class A and Class B. Holders of Class A common stock and Class B common stock vote as a smgle 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 S~WC of Class B CO~IIIOII stock entitled to ten votes, except (i) for the election of directors and (ii) as othenvise 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. In addition, each share of Class B cotmnon stock is automatically convertible into a share of Class A common stock upon transfer, subject
to certain limited exceptitms. In the event a cash dividend is paid, the holders of Class A common stock will be paid lOSo-% of the amount payable per share for each share of Class B common stock.
Upon liquidation, dissolution or winding up of Adelphia, the holders of Class A common stock are entitled to a preference of S 1 .OO per share. A&r such amount is paid, holders of Class B common stock are entitled to receive Sl .OO per share. Any remain@ amount would then be shared ratably
by both classes.
Treastuy Stock
On January 29, 1999, Adelphia purchased from Telesat shares of Adelphia’s stock, owued by Telesat, for a price of S149.213. in the transactron. Adelphia purchased 1.091.524 shares of Class A common stock and 20.000 shares of Series C cmmWive convertible preferred stock which sre convertible into an additional 2,358,490 shares of Class A common stock. These shares repmutt 3.450.014 shares of common stock on a fully converted besis.
Adelphia Business Solutions Common Stock Issued
On May 8, 1998, Adelphia Business Solutions completed an PO of its Class A common stock (“ABE Stock”). As part of the offer&, Adelphia purchased an incnznental3,324.001 shares of ABIZ Stock for 549,900 and converted indebtedness owed to the Company by Adelphia Business
Solutions into 3642.666 shares of ABIZ Stock. In addition, Adelphia pmchased v+mvants issued by Adelphia Business Solutions to MCI Metro
AccessTrarlstG sion services, Inc., and pu&ased shares of Adelphia Business !3olutions Class B coiumon stock from certain executive officers of Adelphia Business Solutions for a total purchase price of approximately 512.580 and S3.000. respecuvely. Additiouai net pmceeds of S 19 1,411 to AdelphiaBusineas Solutiosw were received as a result of the sale of 12,500,000 shares of ABIZ Stock to the public. In a related transaction on June 5, 1998, Adelphia Business Solutions issued and sold 350.000 shares of its Class A common stockattheS16.OOPOpricepumuanttothetutder&ters’ over allotment option in the PO. As a result of the PO, Adelphia’s additional paid-in capital &reased approximately Sl47,OOO and minority in- irlmead approximately S45,OOO.
On Novemkr 30.1999, Adelphia Business Solutious issued and sold 8,750,OOO shsres of Class A common stock at a price to the public of 530.00 pershare. S~~~ywithtbeclosingofthis~~AdelphiaBusincssSolutionsi~~aold5,181,350sharrsofitsClassBcomman stocLtoAdelphiaatapice~tothtprblicoffairrgpricelesstbt~~dircounffatbeClurAcommcarstock(collectively”the - ~O~).Th~Oflaing~netproceedsof~y5403,000to~~~thearpsnsionofAdelphiaBusinws Solutiond existiq markets and to build new mark&. At December 31, 1999, Adelphia owned approx&tely 60% of the Adelphia Business solutiott$ outstanding - stockmd~ly88Wofthetotat~powa.Asaresultofthe~Off~Adelphia’sadditional paid-iinqital kreaaed appolcimately SlO!J,OlS and minority interesta &raised apndmely Sl44.000.
7. En~ployee Benefit Plans:
Savings Plan -
Adelphia has a 401(k) and stock value p@ (the “Plan”) which provides that eligible full-time employees may contribute from 2% to 16% of their pre-tax compensation subject to certain hmirations. The Plan also provides for certain stock incentive awards on an annual basis. Adelphia makes matching contributions not exceed& 1.5% of each participant’s pm-tax compensation. Adelphia’s contributions amounted to 5687,360s and S 1,732 fortheyearendedMarch 1998,theninemonthsendedDecember31, 1998,andtheyearendedDecember31,1999,respective1y.
Adelphia Long-Term Incentive COIQWII&OII Plan
On October 6,1998, Adelphia adopted its 1998 Long-Term Incentive Compensation Plan (the “I 998 Plan”). The 1998 Plan provides for the 8rarrting of(i) optious which qualify as “incentive stock options” within the meaning of Sectmn 422 of the Internal Revenue Code of 1986, as smended, (ii) options which do not so qualify. (iii) share awards (with or without restnctmns on vesting), (iv) stock appreciation rights and(v) stock equivalent or ’ phantom units. The number of shares of Adelphia Class A common stock available for issuance under the 1998 Plan is 3,500,000. Options, awards and units may be 8rattted tmder the 1998 Plan to dimctom, ofliccr~, employees and consultants of Adelphia. The 1998 Plan provides that incentive stock options must be granted with an exercise price of not less than the fair market vahte of the underlying Adelphia common stock on the date of the grant. Options outstanding under the Plan may be exercised by payin the exercise price per share through various alternative settlement methods. During 1999, Adelphia granted phantom units to certain management anplo~eej which reprrsent compensation bommes based on Adelphia Class A common stock performance. Such awards vest over three years from the date of grant Dur& the year atded December 3 1,1999. Adelphia recorded compensation expense of 32.62 1 related to these grants.
The following table smmarhs Adelphia stock option activity as a result of the Century aquisiCiorx
Wcightd Numberof slumsubjoct cxmkpricc
s!zaiQa
.Y- llte following table ~informatioaaboytthcAdelphiassockoptionroutslandiag~aracisableatDecanba31,1999:
woighmdmwage wc’&htalavunga NUllba remhing cxwcisaprioc of&ares UmMlifa P=*
ss.15 - s31.99 259.980 6.49 Sll.58
A&lpha Business Solutions Long-Term hmentive Compensation Plan
.- on October 3, 1996. the Board of Directors and stockholders of Adelphia Business Solutions approved its 1996 Long-Term Incentive Compensation
plan (the “1996 Plan”). The 19% Plan provides for the grant of(i) options which qualify as “incentive stock options” wtthin the meaning of Secuon 422 of the Internal Revenue Code of 1986. as ame&d, (ii) options which do not so qualify, (iii) share awards (with or without restnctions on vest&g), (iv) stock appreciation rights and (v) stock equivalent or phantom units. The number of shares of Adelphia Business Soluuons Class A common stock available for issuamz initially was 5,687,500. Such m&er is to increase each year by 1% of outsumding shares of all classes of
A&lpba Business Solutious’ common stock, up to a maximum of 8,125,OOO shares. Options, awards and units may be granted under the 1996 Plan to d&mrs. offkers, employees and consultants. The 19% Plan provides the incentive stock options must be granted with an exercise price of not less than the fair market value of the underlying common stock on the date of grant, Options outstanding under the Plan may be exercised by paying the exercise price per share through Various altemative settlement methods.
In August 1999, Adelphia Business Solutions issued under the 19% Plan to each of John J. Rigas. Michael J. Rigas. Timothy J. Rigas and James P.
Rigas (i) stock options (the “Rigas Options”) covering 100,008 shares of Adelphia Business Solutions Class A common stock, which options will
vest in equal one-third amounts 011 the third, fourth and fifth year anniversanes of grant (vesting conditioned on continued service as an employee or director)andwhichshaUbe exc&sable at 516.00 per share and (ii) stock awards (the “Rigas Grants”) covering 100,000 shares of Adelphia Business
Solutions’ Class A common stock which stock awards will vest in equal one-thud amounts on the third, fourth and fifth year anmversanes of grant (vesting conditioned on continued setvice as at employee or director).
III addition to the Rigas Options, certain employees have been granted options to purchase shares of ABIZ Class A common stock at prices equal to the fair market value of the shares on the date the option was granted. Options are exercisable beginning from immediately after gmntmg and have a maxiiuumtermoftenyears...
The following table summmhs stock option activity mder Adelphia Business SOlUtiOIlS:
Weighted Number of l vense sbma subject exerrirepricc to optioas psrh Ouodaading Dccuabor 31.1998
$00.4; I&
- The following table suamm+s infbrmation about Adelphia Business Solutions’ stock options outstam@ and exe&sable at December 3 1, 1999:
opim- opior- Wrigrod- w&m - w-Nay WOighld
NW =-iw ox6cioopriw fcoM* ‘-(lc ofh CceAculliik P=* c&z -Iif aelciu 0 (yan) priccpr
SlZl2s - S16.00 600,417 5.2 513.13 200.417 6.3 513.38 SFAS No. 123, “Accounting far Stock-Bard Compen&on,” (“SFAS 123”) mquires the Company to disclose pro fotma iuformation regarding
option grants made to its employees. SFAS 123 specifies certain valuation techniques that produce estim&d compensation charges that are included
intheproformarrsultsbelow.ThnelrmwntshavcnotbecnrrncdcdintheC~~s stateumt of operations, because Adeiphia applies the provisions of APB 25, “Accotmtiug fcu Stock Luued to Employees,” which specifies that no wrnpaistion charge arises when the exercise price of theemployees’stockoptionscqualsaexcesdsthcmrrkctvalucofthelmdcrlyingstockatthegrantdate,asinthecaseofoptionsgrantedto Adelphia employees.
SFAS 123 pro fonaa muubers are as follows:
YWElldOd
-31,
1999
NUlOU-UrOpft8d S(282.493)
Net low-Pro forma applying SFAS 123 (284,827)
Basicanddilutadne(louperaoanaoo &m-urepomdunderABP2J (3.88)
E&c and diluted net IOU per commas &ma-pm forma unda SFAS 123 (3.91)
Under SFAS 123, the fair value of each option grant is estimated on the date of the grant using the Black&holes option pricing model with the following weighted average assumptions:
mw= slakoptioM r
YcpEDdOd
-31.
1999
Expected dividend yield 0%
Risk-bee inlcrcst nxe 6.93%
Expectkd volatility 50% Expected life (in yun) 5.2
,-- The Black-&holes option vhatior~ model was cJcv&pal for use in estimating the fair value of traded options that have no vesting restrictions and are fully transfexable. In addition, option valuation models require the input of highly subjective assumptions including the eqtected stock pnce volatility. Because Adelphia Business Solutions’ employee stock options have chamcteristh significantly different fhm those of traded options. and because changes in the subjective input assumptions can materially afYect the fair value estimate, in mauagement’s opinion the existuq models do not newwarily provide a reliable single measure of the fair value of Adelphia Business Solutions’ options.
In addition to the stock options and Rigas Grants, Adelpbia Business Solutions issued 58.500 shares of Adelphia Business 8olutions’ Class A common stock to certain employees for both the year w March 3 1.1998 and the nine months ended December 3 1,1998 resulting m the recognition of 527 and 3761 of wmpensation expense. respectively.
8. TaxescmIncome:
Adelphia and its corporate subsidiaries file federal income tax Mums, which include their share of the subsidiary partnerships and joint venture par&r&p results of operations. At December 31.1999, Adelphia and its corporate subsidiaries had net ope&q loss canyfowards for federal income tax purposes of approximately 32.000.000 expiring through 2019. Depreciation and (MoTtizBtion expauc differs for tax and financial statement purposes due to the use of prescribed periods rather than useful lives for tax purposes und also as a result of differences between tax basis and book basis of certain aquisiti~.
The tax effects of siguiflcant items compGng Adelphi& net deferred tax liability are as follows:
-31,
=. I222
D&raltu-
D” ~bmkaldtAxba#i8of
-
Ddmmdtexu1o: TUcndirr&&WW m24n 23,911
!a8 .. * ma 42.Lm
~8w60 879388
B u53.6451
newtchmlgeinthevahlatioslallowance 6umopcratiaasfortheninemtmthaendaiDocanber31. 1998andtheyearendedDeccmber31.1999was an increwe of 53 1,220 aad 571 ,133. rqectively. Ikre was also a deuease in the valuation allowunce of 5256,768 due to acquisitions during the periodaldedDecenlber31,1999.
-
Income tax benefit is as follows:
. 9.
Nine Matths
YUrEOdd YcUhdd
Yarch31. Dcambcr31. Daxmber31.
izzd qg’ YL930, gg ” &44J
A reconciliation of the statutory federal income tax rate and Adelphiak effective income tax rate is as follows:
Nine Mdn YCUElldd E&d YUrElKkd
Much 31. Decmba31, -31. 1998 1998 1999
!3uMoryfsdrrrlincomerurme 35% 35% 35%
chmpin fedmd +ahuriaa dowmce (30) (26) (23) Prcfemdstockdividd8ofsubs~ (3) (‘3 (9 smetua.Iletoffedudbmefit (2) 1
Goodwiu . . (2) 1 i 1
22 aa Ii&
9. Disclosures about Fair Value of Financial hmtnmmnts:
Included in Adelphia’s fkmncial msbument portfolio are cash, U.S. government securities, investments in makerable securities.fixed andvariable ratenotcspayabletobanLsaadinstitutions,deknturrs,redecmableprrfcmdrtocL~intcrrstratcswrps,capsandw~.Thecarryingvaluesof variableratenotespayabletohanksaadinstitutionsandinvestmen tsinmarWahlesecuritiesappmxunatetheirfhirvaluesatDecember31. 1998and 1999.ThecMyingvalucofthcfixsdnttnotespayableto~andinstitutionspubliclytraded~dtkntraes~redeanablepnfemdstockat
Decrmba31,1998and1999wen32.657,861~%,604,376,~tivc1y.AtDecankr31,1998aod1999,the~valueexceededthecarrying
value by S139.970 and S21,03S, rupeetively. At Deccmkr 31,1998,Adelphiawouldhavekennquirrdtopay~~lys27~7to~eits ~~rateswapandcspagrraaenu,npresentinethcexcessofcarryingcostova~valueofthest agreuumts. At December 31,1999, Adelphia would have received approximately 56,603 to settle its interest rate swap, cap and collar sgnaaents,. vting the excess of fair value over carrymgvahlesofthese ~~.ThefrirvaluesofthcdcbfredeemableprcferrrdJtockand~~rateswaps,capsandwllsnwaebasedupon quotedmarketpricesofsimilarlnstMnentsa~ratesavailabietoAdelphiafa~~ofthesame lvmakg maturities.
10. Businus%gmentInformatiotu
RefertoItem6ofthisArmualRepatonFam10-KforinfarmationrrgardinebusiaessIr#mcntsssof~fwtheyearendedMarch31,1998,asof
andfbrtheninemonthsatdaiDecunber31, 1998andasofandfortheyearendedDecember31.1999.
11. OtherReiatedPartyTmtns&ioscx
Adelphia currently managea cable tekviaion systems which are pkipally oti by limited par&&rips in which certain of Adelphia’s principal shareholders wile are executive officus have equity intuuts.
Adelphia has agreancntswithO~mdtheMansged~~which~~~fortht~toffastoAdclphia.’Ihcaggregatefec revemms kom Olympus and the Managed Mpe amounti to 53,960. S2.022 and S5.033 for the year aukI March 3 1.1998. the nine months endedDecemkr31.1998andtkyearendedDecember31. l999,rrspeaiwly.kradditiasA&lphiamurrimbuncdbyOlympusandtheManaged Partnerships for allo&ed wrpomte coats of S&436,37,548 and 57,785 for the year ended March 31, 1998, the nine months ended December 31, 1998andtheyearendedDccemkr31. 1999,respectively,whichhavebecnrecordedasareductionofselling,gcnaal~administrativeexpmses. After October 1.1999, any fees received &nn Olympus eliminate in Adelphia’s wnsolidation.
herest expmx - net mChKkS interest income from mates for long term borrowings of 57,129, SS.22 1 and &%I, 148 for the year ended &h 3 1, 1998, the nine months ended DeKmbcr 3 1, 1998 and the year ended December 3 1, 1999, respectively, and for short term borrowmgs of $9,340, S9.339 and Sl5,571 for the year ended March 31, 1998, the rune months ended December 31, 1998 and the year ended December 31, 1999, - respectively.
At March 3 I, 1998, Adelphia had interest rate swaps with affiliates for a notional amount of S175.000, which expired during the nine months ended December31, 1998.Theneteffectofthescintacstratc~pswastomcruwintmstexpaucbyS128and~,049fortheyearendedM~~31,
1998 and the nine months ended December 3 1, 1998. respectively.
~gtheyearsendedMarch31,1998,theninemonthsendedDecember31, 1998andtheyear&edDecember31, 1999.AdelphiapaidS2.485, $3,422 and S 11,227, respectively, to entities owed by certain shareholders of Adelphia prtmarily for property, plant and equipment and services that management of the Company believes are at market rates.
12. Qtuwrly Financial Data (Unaudited):
The following tables ~thefinanciairrsultsofAdelphiaforeachofthequaRasinthtniwmonthsmdedDecember31, 1998andtheyear ended Ikcemlxr 31,1999. III the opinion of management, such financial results reflect all adjustments (consisting only of normal and recun-& adjustments) neceswy to fairly present the data for such interim period.
Nine Madtrr Eded Duunher 31.1998:
RCWlUCS
opmtingexpaaa: Dileuopeminguld v??P~ Se~8am.imdv'
DelxedionduvxtiMica
abuilrome(expam):
- Priaityillv- ~fiWtlOlymgor
haerutexpume-net Quityinlo8sofoiympwuldotkjoilnwmuIs gquity~hmofMolphia6iuilmn-jeidvemwI Miuaityimawtiulcaeeofadmidirio
AdoiphBuriwn8ohaiompnfamdrtoct-
olhiaO0rm
Lprrbefatincoautaxeamdo~ban income tax balefit(expmue)
Loukfav~llm EXlWdhyklSIOllOdy-OfdObt
Net lose Dividuldr~lppliablolopNfared~
Net IOU appliabte to conmum iockbdbr
BUiCMddilUtdlC#lpsWi@dWUV#B~dCUUDf#lrrodr before exrnordii IOU
weighted avenge duru of common stodc o@Amdllg(in thalamlds)
s141.791
48,738 56,593
29.111 33.043
f69.772.I
(41379) 06.163)
Y1.W
5165.922 $188.301
62.630
45,095
24bla
mJfJo 1%~
(59.892) W.820)
(14,803) (15.772) 0.614) (3.776)
1543 11.769
ClJW c1.424)
u2 =
163.7791 164.0231
(33.S78) (39,628)
(37,388)
=
(37.588)
S(l.16) Y1.06)
=
YearEndedDecember31.1999:
Revenues
opaaing-: Direct OpmtinS end -8 Sellin& gm& end NhiOiStratiVe Dqxecirtion end emort&im Merger end inte@im coet~
.
operalingincomc
other incom (expense):
P&city investment im?ome &om OlyrqW Interest expense - net
Equity in loss of Olympu and other joint wutures
ym*2 loen of Adelphie Buinen Solutima joint
Mioority intaea in loeeee of suhsidimies
Adelphia Busineu Solutiona prefered d& dkidmde
other
ToCrl
Las befcre income uxu end extra- lorr
Income t4x (expenoe) bandit
lJJ8a befae exuwdimq la8
Extnudkqloomeuly Iebraaaof~nuofincane
turn
NU loss
Divi&ndreqknm&eppliabletoprefdrtodt
.- NU loss eppliable to camwo aockholdm
BuicUBIdi@dl~~mi~e~rbrndoOWWl
dock befae em loa
Buicmddilutednetlomperti&edavoagedmmof
common dook
wei#Itedwaa8eahaNmofcmmnm elookotlmmhg(m
h0-W
13. Subsequent Events:
Much 31
f201.604
67,295
49.111
56,815
”
12.000 (67,464)
(14.861)
(3.803 12.914 (7,619)
zlu4
i5si?B
W.@W
2m
(35.199)
W,~W
4oJm
(O.l’T)
-31
S232.MJ sa35.273
72,635 79,623 213.059
61,616 75303 154,549
63,736 65,639 184,646
= Z im
L91.9gl 22cn%? 556.990
20.799 l.lm I&zH,z
12.000
(52215) (23.074)
(3391) 13.146
O.=O
=
(40.495)
Lid2
09l346I
wJ.fM)
4o.w
w-w
lZ@M (51.961)
(22JO5)
(2W 12.755 ww
=
fxlw
(46.125)
(42T545)
=
(42545)
LlAA32l
40.95)
(187.9;) (378)
(418) (116) (8,586)
fail
-
(119.649)
Lf!E
(112,782)
(113.413)
S(l.05)
The Company has entered into a d&dive yt under which Prestige Communications of NC, Inc. will sell its cable systems in Virgin& North Carolina and Maryland to Adelphia fa appmmm&y S700.000. These systems aem approximately 120,000 basic subscribers. ‘This transaction is
subject to custommy closiq conditions and quiatay approval and is expected to close by mid-2000.
Subwqucnt to tkanbcr 31.1999, cainin !&akbiea and &tes of Adelpbhave received commitmenta and subscriptions for a new S2,5OO,OOQ bankmditfacility.Thit~creditfrcilitywiuurauistofbotharcducingmolvingcreditportionandatermlolmportionandisexpcctedtoclosc in April 2000.
On January 2 1.2000, Adelpbia closed the April 9.1999 direct placement of S375,OOO of Adelpbia Class B wmmon stock with Highland Holdings, a general pamemhip contfulkd by the Rigas hlily.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTikTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
/I NOlIe.
PART m
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth above in Part I uder the caption “Executive Officers of the Registrant” is incorporated herein by reference. The other information required by this item is incorporated herein by reference to the information set forth under the caption “Election of Directors - Description of Board of Directors”; the information set fbrth under the caption “Election of Directors - Nominee for Election by Holders of Class A
Common Stock”; the information set forth under the caption “Election of Directors - Nominees for Election by Holders of Class A Common Stock and Class B Common Stock”; and the infb~~~tior~ if any, under the caption “Section 16(a) Beneficial Ownership Reporting Compliance,” in the Compan~s detinitiv~ proxy statement for the 2000 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A of the Secunties
Exchange Act of 1934, as amended, or by refaarce to a tiIing amending this Armual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incapwa ted herein by refamce to the information set forth under the caption “Executive Compensation” in
the Compan~s definitive proxy statement for the 2000 Annual Meaing of Stockholders to be f&d pursuant to Regulation 14A of the Securities Exchange Act of 1934. as amaded, or by refaencc to a fiIing amending this Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSEIIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information requin~3 by this item is iwcqurated herein by reference to the information set forth under the caption “Principal Stcckholdm” in the Compaq+ definitive proxy dataant for the 2000 Annual Meetiq of Stockholders to be filed pumaat to Regulation 14A of the Securities ExchangeActof1934.aslunaulnlcrrbyrrfaracctoa~clmendingthisAMualRepartanFarm10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Theinfannationrequirrdbythisitcmis~hacinbyrrfaencetothtinfarmationsctforthundathecaption”CatainTransaaions”inthe Compan~s definitive proxy statenmt for tbt 2000 Annual h4eUing of Stockholders to be filed pursuant to Regulation 14A of the Securities ,- ErchnnncActof1934.asammde4abyrefamcetoafilinBaraendingthisAMualRcpartaaFonn10-K.
PART IV
ITEM 14. EXFIIBITS, FINANCIAL STATEMENT SCHEDDLES AND REPORTS ON FORM 8-K
(a)(1)Alistingofthecunsolidated6MnciaIdatrmcnts,ndrsand indqa<audi~reportre@raiiuItern8arelistedin theit&xinItem8ofthisRepmtanFotm 10-K.
(2) Financial statan& schalula: lk folIowiq arc included in this Report: Schedule I - Co&rued Financial Information of the F@istmntScheddelI-Vd~dQuaiifyineAccormts
( 3) Exhibits
Exhibit No.
.-- 2.01
2.02
2.03
2.04
2.05
3.01
3.02
4.01
4.02
4.03
4.04
.--
4.05
DeSCliptiOll
ASreemant and Plan of Merger by and among A&lpba Communications
Corporation, Adelphia Acquisition Subsidiary, htc., and Century communiutions Corp., dated as of March $1999 (Incopmted herain by refaence is Exhibit 2.01 to the Reg&snrs Current Report on Form 8-K for the event dated February 22.1999.) (File No. o-16014).
Purchase Apement, dated as of February 22,1999, among FrontierVision Partners, L. P., FVP GP, L. P.. and cenam &ect and indirect Limited Partners of FrontierVision Partners, L. P., as sellers, and Adelphia Communications Corporation, as buyer (w harem by referance is Exhibit 2.02 to the Registrant’s Current Report on Form 8-K for the event dated February 22,1999.) (File No. O-16014).
Stock Purchase Agtwnent dated April 9,1999 between Adelphia Comrnuni~tions Corpomtion and the shareholders of Barron Communications Corp. (Inwrpomted herein by reference is Exhibit
2.0 1 to the Rag&rant’s Currant Raport on Form 8-K for the event dated April 9.1999.) (File No. O-16014).
FirstAme&nenttoAgcemantandPlanofMcrgerdatedasof July 12.1999 with respct to merger with Century Communications Corp. @copmaW herain by refcrance is Exhibit 2.01 to the Regis&ant’s Curratt Repat on Form 8-K for the event datad July
12. 1999.) (File No. O-16014).
SecondAmmdmantoASmwlmltandPlanofMcrgcrdatiasof
July29,1999withrapacttomagcrwithCattutyCommunications ~.cIncarpontedhesainbyr&nbcaisExhibit2.02tothe Rc@mnt’sCurrnntRapastonFonn8-Kfatheavcntdata.lJuly
12,1999.) (FileNo. o-16014).
certiaate of Itwpmtian of Uphia Canmunicntinns
C~O&M-(Iacorparted hdnbyrlkalceis
Exhibit3.01tothe~rss~RcportFFarm10Qfor the quarter aukd September 30.1999.) (File No. o-16014).
Bylaws of Adelphia Communications &rpnmt@ as atwntkd (Incapaatedhc&tbyref-isExhibit3.02tothe Rq@nmt’sQuar&rlyReportonFonn1O-Qforthaqmutarendcd
Scptaba 30,1999.) (File No. O-16014).
CutiBcateofDeaignatiansfa13%SaiasAandSaicsB cumulative Ia%anpdIe Prcfud stock (containai in Exhibit 3.01 totheRqgi&&sCurrcnt~atFam8-KdataiJuly24.1997. which is kqmated krein by refkase.) (File No. O-16014).
Cdfkate O~~QIS fa 5krias C Convartible Preferred stock(cauainadinExhitit3.01tothe~CunmtRcpart onFor1n8-KdatadJuly24,1997,whichisincarporatedharcinby rcfarence.) (File No. O-16014).
FormofIn&ntnm,tithRspecttotha~t’s 13KSenior su-~Dahentureadue2009,bctwecnthe~ and the Bank ofMontreal Trust Company (Containad in Exhibit 3.01 asAnnexAtoRegistmnrsCntrcntRqnxtonFormS-KdatadJuly
24.1997, which is itwpmmd herein by reference.) (File No. o-16014).
Form of CertiEcate for 13% Cumulative Exchangeable Prafarrd
Stctck(~hcrcinby referrnccisExhibit4Mtothe Registrant’s Currant Report on Form 8-K dated July 24, 1997.) (File No. o-16014).
Form of Certificate for Series C Convertible Preferred Stock (hwuporated herein by reference is Exhibit 4.07 to the
Registraut’s Current Report on Form 8-K datai July 24, 1997.) (File No. o-16014).
4.06 Indenture, dated as of January 13,1999, with respect to the Regis&ant’s 7-l/2% senior Notes due 2004 and 7-3/4% Senior Notes
due 2009. ktwa~ the Regkant and the Bank of Montreal Trust Company (Iawrpomted by reference herein is Exhibit 4.03 to the Registratttk Current Report on Form 8-K filed on January 28.1999.) (File No. o-16014).
4.07 Registration Rights Agreement between Adelphia Communications
Corpomion and the Initial F’mcham, dated January 13,1999. regarding the Regktraut’s 7-l/2% Senior Notes due 2004 and 7-3/4%
a Senior Notes due 2009 (Incorporated by referatce herein is Exhibit
4.04 to the Regis&ant’s Current Report on Form 8-K, tiled on January28, 1999.)(FileNo. O-16014).
4.08
4.09
4.10
Form of 7-l/2% senior Note due 2004 (Containai in Exhibit 4.07).
Form of 7-3/4% Senior Note due 2009 (Contained in Exhibit 4.07).
Indenture dated as of March 2.1999, with respect to Hypcrion Telecommunications, Inc. 12% Senior Subordinated Notes due 2007, behwa~ Hyp&m and the Bank of Montreal Trust Company (Itroorparatcd by rcfaencc herein is Exhibit 4.01 to the Regismnt’s Curratt Report on Form 8-K filed on March 10.1999.) (We No. o-16014).
4.11 Form of 12% !kniw Sm Notea due 2007 (Coatained in
Exhibit 4.10).
4.12
F
XdtIt Apeanant behwm Hypaioa Tel~ations.
Fwhasas,dakdMarch2,1999,re@iag
H&on% 12% Sakr Sukdiwal Notea &a 2007 (Incorpaated by rcf~haeiuiaExhibit 10.04tothaR@&IursCurmtt Report on Fosm 8-K 6lal aa March 10.1999.) (File No. O-16014).
4.13 Basehtdawe.daraiasofApril28.1999,withnxpccttotha R@StIdSsmia~ bemculthaReg,immandTht BankofMoaaalTnutCompmty (Iocapantsdbyrcfc?aKzhcrcirlis Exhibit4.01 totkRe@ra&CtmmtReportcutFonn&KfW on April 28.1999.) (FileNo. o-16014).
4.14 FirstSupplanaUIndmtuw,datedasofApril28,l999,toAprit 28,1999BaseI&attqwithrespecttothaReg&int’s7-7/8%
SeniccNotesduc2009,b&vaenthcRegistwandlkBaakof
MOIttf&Tnrdcampary~ byrefimcehereinisExhibit
4.02totheRc&antkCutxeatRepatonForm&KtiledonApril 28.1999.) (FiIe No. O-16014).
4.15
4.16
Form of 7-7/I% Satiar Note due 2009 (Con&cd in Exhibit 4.14).
Second Suppkmantal JndaWe, dated M of November 16.1999, to Apil28,1999Butlndamxe,withrcqwtotheRegistmnt’s
9-3/S% SatkNota due 2009, batweu~ Harris Trust Company and the
RM (Filed bacwith).
4.17 Form of g-3/8% Senior Nota due 2009 (Contakai in Exhibit 4.16.).
4.18 cdia~0fDesiIplatiautithrrspectt0th~~r~ 5 l/2% Series D Convertible Prcfarai Stock (iwrporatcd by reference herein is Exhibit 3.01 to the Cutrent Report on Fomt 8-K of the Registrant for the evat dated April 28,1999.) (File No. .-- o-16014).
10.01 Class B Common Stockholders Agreement (korpomted herein by reference is Exhibit 10.01 to Registration Statement No. 336974 on Form S-l.).
10.02 Joinder to Class B Common Stockhohicrs @emtent (lmorprated .herein by reference is Exhibit 10.02 to Registrant’s &utual Report
.- onForm lO-KforthefkalyearcndedMarch31,1994.)(FileNo. o-16014).
10.03 Regismtion Rights Agecment and Am&em to Registratim Rights Agmment (Imxpomted herein by referaxe are Exhibit 10.02 to Registration Statement No. 334974 on Form S-l and Exhibit 10.35 to Registration Statement No. 33-25121 on Form S-l.).
10.04 Form of Management Agreement for Managed Companies (Incorporated
herein by reference is Exhibit 10.04 to the Registrant’s Annual ReportonFormlO-KfortiscalyarendedMarch3l.l9%.)(File No. o-16014).
10.05 Management Agreement - Montgomery Cablevision Associates, L.P (Incorporated herein by reference is Exhibit 10.08 to Regstration Statemmt No. 33.6974 on Fom s-l.).
10.06 Management Apeancnt - Adclphia Cabkviaion Associates of Radnor. L.P. (Incorporated herein by referaxe is Exhibit 10.09 to Registration Statement No. 336974 on Form Sl.).
10.07 BusinessoppomusityA,pemcnt(lnco~tedhcrcinbyrcf-is Exhibit 10.13 to Re&tmtion Statement No. 33-3674 on Farm S-l .).
10.08’ Employment Agreaent between the Company and John J. Rigas rJtmqmdhrrinbyreferenceisExhibit 10.14toRegistration Statunau No. 33-6974 on Form S-l .).
10.09* EmploytmtAgreumtbctwmtheCompanyandTimothyJ.Rigas (Incaporated hmin by rafawxe is Exhibit 10.16 to Rqistration S-t No. 33-6974 on Fom S-l .).
r‘ 10.10’ EmploymeatAgmmeatbdweenthecZmpanyandMichaalJ.~ ~hereinbyderenceisExhibit 10.17toRegismion Statanat No. 33-6974 on Form S-l.).
10.11* EmplojmuttAgmnentbchvecntheCampauyandJamcaP.Rigas (IncarparatedhacinbyrefercnceisExhibit 10.18toR@tmtion
Statana No. 334974 on Form S-1 .).
10.12 Olympus coannunicatiaol. L.P. (“Olympus”) second AmaIded aad RestatcdLimitalPtmmmhip~ dated as of February 28. 199s(InqmkdhacinbynfaawisExhibit 10.32tothe
Rcgistrant’sAnuul~atFamlO-Kfixthefiscitlymaukd IvIa& 31,1995.)FikNo. o-16014).
10.13 Revolving Cmdit FacUy amatg Adclplk Cable Pamers, L.P.. southwestFlai&cab~rnc., watBaaAcquisitionLimital PartnerahipandTorcmwDominian(Tcxas),Irrc., asAdministrative JAgen& datai May 12.1995 (kqomadbcrrinbyrrfamceis Exhibit 10.03 to the Reg&mt’s Currmt Rqxut an Form 8-K dated June 30.1995.) (File No. O-16014).
10.14 credit Agreement, dated as of April 12.1996, among Chelsea Communications, inc., Kiaanning Cabkvision Inc., Robinson/Plum Cablevision L.P.. the sevaal banks and financial institutions parties thereto, and Toronto Dominion (Texas), Inc. as Administrative Agent (hkoqxxated herein by rcfaence is Exhibit 10.36 to Rcgistmt’s Cumutt Report on Form 8-K dated June 3, 1996.) (File No. O-16014).
.-+- 10.15 WanantAgrcamtdakdasofAprillS. 19%,byandamongHypekn
Telecommunications, Inc. (“Hyperim,” now known as Adelphia Business Solutions, Inc.) and Bank of Momeal Ttust Company (Iwxporatai by reference is Exhibit 10.13 to Re8ishation Statarwt No. 333-06957 on Form W for Hypaion Telecornrnunica~ons, Inc.).
10.16
10.17’
10.18
10.19
10.20
10.21
-
10.22
10.23
10.24
10.25 .
10.26
warrant Regim=ion Rights Agreement dated as of April 15,1996, by and amon Hypaion Telecommumcations, inc. and the Jnitia~ P~hasen (Incorporated by reference is Exhibit 10.14 to Registration Stateman Yo. 333-06957 on Form W for Hyperion
Telecomntunicationa, Inc.).
Hyperion Telecommunications, Inc. 19% Long-Term incentive Compensation Plan (Incorporated herein by reference is Exhibit
10.17 to Hyperion Telecrnnmunications. k’s Registration Statement No. 333-13663 on Form S-l.).
Registration Rights Agreawnt among Charles R Dnmning. Paul D. Fajcrski. Randolph S. Fowler, Adelphia Communicatmns Corporation and Hyperion Telecommutncarions, Inc. (Incqwrated herein by reference is Exhibit 10.18 to Hyperion Telcwmrmmications, Inc’s Registration Statement No. 333-13663 on Form S-l.).
Registration Rights &recment between Adclphia (kmumuications Corporation and Hypcrian Telecommunications, Inc. (lnwporati hereinbyreferatccisExhibit 10.19toHypekm Tekcommunications, k’s Registration Statement No. 333-13663 on
Form S-l.).
First AmenQlent to the Olympus Communications, L.P. Second Amended andRestamdLimitaIParmcmhipAgncmenfdatcdScptanber 1.1995
(Inwqxmued haein by ref- is Exhibit 10.33 to the Regimaat’sAnnuidRcpatoaFomlO-K/Afaathefhcalyatrendal
March 31,1996.) (FileNo. O-16014).
First-ttothcOlympus-ona,L.P.Sceaod- andRatatcdLimi~~pAgrtQal~datcdMalch29.1996 (IncapaatcdhereinbytefamceisEldlibit 10.34tothe Rq@&ant’sAtmualReportonFamlO-K/Afathefiscalyaarcedcd March 31.1996.) (File No. o-16014).
sacorld-ttothe01yrnpuscamnum ‘fxtions, L.P. Saxmd Axncn&d and-LimitaiPac&&ipAgmne&datedJtma27,19%
(lmqomdhrrinbyrefaarccisExbibit10.35totha Re@mt’sAmwalFkportonFomlO-K/Afarthefiscalycarended March 31.1996.) (File No&16014).
ExtahonAgrunmtda&dasofJanmy8,1997,aumgHyperion Telecotmn~ Inc., Adelphia Commtmicdtions Caqmmtio~ Charles R Dram&g, Paul D. Fajerski, Randolph S. Fowler, and six T~IlMUGdthkIt tJwqomMharinbynfaar#isExbibit 10.04 to Adclphia Ccmtmtmicatim Corpctratiaa’s Clarart Report on
Fom 8-K dated May 1.1997.) (File No. o-16014).
RegharioltRighbAgtttLlumQg~communications CorpontiasHighlrmd~rmdTeluatCdblevisi~lnc..datad July 7,1997 (kqmm&d hatin by refcrutce is Exhibit 10.04 to
theRegisU&sCummReportonFotm8-KdatcdJuly24,1997.) (File No. o-16014).
Saia C Prefurai Stock Pmchasa &cement among Adelphia
Communications colporatiaa Hi&land Holdings and Telesat Cablevision, Inc., datai June 22.1997 (hqmmcd herein by reference is Exhibit 10.06 to tba Registmt’s Cwatt Report on Farm 8-K dated July 24.1997.) (File No. O-16014).
Pledge &reanatt betma~ Hypcrion and the Bank of Montreal Trust
Company as CoUataal Agent, dated as of August 2781997 @caporated by rchence herein is Exhibit 4.03 to Hypexion’s
Cwratt Report cm Fotm 8-K dati August 27,1997.) (File No.
O-21605).
Pledge. Escmw and Disbursemen tA8mement,bewecnHyperionandth Bank of Montreal Trust Company dated as of August 27.1997
10.27
10.28
10.29’
10.30
10.31
10.32
10.33 -
10.34
10.35
10.36
10.37
10.38
‘-
10.39
(kxporated by refaence herein to Exhibit 4.05 to Hyperion’s
Current Report on Form 8-K dated August 27.1997.) (File No. O-21605).
Purchase Ageancnt among Adelphia Communications Corporation and Salonton Brothers Inc. dated Jimmy 15,1998 (Imqmted by reference herein is Exhibit 10.01 to the Registrant’s Current
Report on Farm 8-K dated Januq 21.1998.) (File No. O-16014).
Management Services Agreement dated as of April IO, 1998, between the Registrant and Hyperion Tekcommunications, Inc. (Incorporated herein by reference is Exhibit 10.23 to Registration Statement No. 33348209 on Form S-l filed by Hypaion Telecommunxauons, inc.).
Letter Agnement dated April 10,1998. amon Hypuion Telecommunications. Inc., the Registrant and MClmetro Access Transmission Services, Inc. (Inwrpomted herein by reference is Exhibit 10.24 to Registration Stat-t No. 33348209 on Form S-l filed by Hyperion Telewmm unications, Inc.).
Amendment to Registration Rights Agreemerit dated as of April 15.1998, between Hyperion Telecomm unications, Inc. and the Registrant (korporated herein by reference is Exhibit 10.25 to Registration Statement No. 33348209 on Form S-l filed by Hype+ Telecommunications, Inc.).
Letter Agreemat dated as of April 9.1998, behvaen Hyperion Telaxtnmunicationa, k. and the Rqistnmt rc@iq the purchase of Hypezion’s Class A Conunon StOCk(hCOpIUtCdhaeinby refaence is Exhibit 10.26 to Rc&&ation S-t No. 33348209 on Fam S-l filed by Hypaion Telecommunicatiorts, Jnc.).
U.S. Undawiting Agreut& dated May 4.1998 atnq Hypaion T&#XltIlUlli&Xti~IllC.lKidthCReprrsntrrtiveSnamcdtkt&
huciu by referaxe is Exhibit 10.01 to Hypaion
s IIMZ’S C-t Report on Farm 8-K dated June 24.1998.) (File No. o-21605).
International Undmvritiq Agraemmt &ad May 4,199s atwq Hypcrion Taloxnnmnui~ons, inc. and the RqasenMvcs named
E~mlrpmted kein by rcfamec is Exhibit 10.02 to eamummicationa, k’s Current Report ai Form 8-K dated June 24.1998.) (File No. O-21605).
Warrant issuai by Hypcricm Telccomtttunic&ms. inc. to MCI dated herein by refarau is Exhibit 10.03 to ~~o!?I~~ kc’s Cumnt Report on Form 8-K dated June 24.1998.) (File No. C&X5).
Watrant iaawd by Hypaiaa Teknttmunications. Inc. to the R-t &al June 5.1998 (Iacaparted hcrcinbyreferaIceis
Exhibit 10.04 to Hypaian Telecomm unications, lnc.‘s C-t Report on Form 8-K dated Juna 24,1998.) (File No. O-2160s).
RuchascAgncmmtamongAdelphiacommunicationsCarporatianand Barclays Capital, Inc. dataI June 29.1998 (Iwqorated herein by referatce is Exhibit 10.01 to the Regktnmt’s Current Repott on Farm 8-K dataI July 23.1998.).
U.S. Utulcrwiting Agnemmt betwen the Registrant and the Repracntativa of the U.S. Undawriters namal there& dated
Aqust 12.1998 (Inwrpomted herein by reference is Exhibit 10.01
to the Fom~ 8-K of the Registraut for the event dated August 18.
1998.) (File No. o-16014).
lntanational Undawriting went ktwcar the Registrant and theLeadMaMgasofthc~~namedthacin,datedAugust12, 1998 (Incorporated herein by reference is Exhibit 10.02 to the Form 8-K of the Registrant for the event dated August 18, 1998.) (File
No. o-16014).
Direct k&se Agreement between the Regiseant and Highland
Communications, L.L.C., dated August 12, 1998 (Incorporated herein by reference is Exhibit 10.03 to the Form 8-K of the RegWant for
theeventdatedAugust 18. 1998.)(FileNo. O-16014).
Adalphia Communications Corporation 1998 Long-Tam Incentive Compensation Plan (Inunporated herein by referawe is Exhibit A to the Registrant’s Proxy Statement for the Annual Meeting of Stockholders on October 6, 1998.) (File No. o-16014).
Distribution Agnment datal as of August 3 1.1998 amon Syracuse
Hilton Head Holdings, L.P., Adclphia Communications Corpuration and SH.HH Acquisition Carp. (Incorporated herein by reference is Exhibit
10.05 to the Form 10-Q of the Regis&ant for the quartrr ended Septcmk 30,199s.) (File No. O-16014).
Second Amednunt to Credit Agcema~t, dated as of April 12.19%. among Chelsea Commtitiona. Inc., Kittaun@ Cablevision Inc., Robinson/Plum Cablevision L. P.. the several tmuks and fkncial
institutions parties thereto, and Toronto Dominim (Texas), Inc. as
Admtnutratl ~veAgcnt(Incorparatedhercinby&rcnccisExhibit 10.06tothcFannl0QofthRcgirerantforthequartacaded
September 30.1998.) (File No. O-16014).
PvchaaeAgreancntamongAdelphiacommuni&onacorporationand
Bdays capita& Inc. (the “Initial Pttnhsd) dated Novaak 6,
1998 @wpwed by ref- berein is Exhibit 10.01 to the Reg&marsCunuttReportonFo1m~K,filedJauu1uy28,1999.) (File No. W6014).
FbchaaeAgJenmtamatgMelphiacanmunications~aland Salomat Smith Barney, Inc., Credit Suiaw First Boatat Cupomtim GOldmaUSlchskCO.,rrhmmBrothar,IllC.ardNatiWlaB8Dk MontgomayseclIritiesLLc(tttewtial -“) dated Jauuary 6,1999(IncapartedbyrcfcrcncchcreinisExhibit 10.02totbe RQJ.&&s Cutratt Report on Form 8-K. fikl January 28.1999.) (File No. O-16014).
Credit Agmano& daW as of Ikank 30.1998, among Panwaos, L.P.asthcBannwr,varifnlsfiIwkllinstitutiotlaastk LCtX@tbCBMkOfNoVaSCOh~tbe-~Agmt, Nationsb&NAastheDocumattatiatAgent,andTD~ties (USA)Iuc.astkSyndicatiatAgatt~byrcfamcc kcinisExhibit 10.03&tkRcgi&aarsCumntRcporioIlFcnn S-K, filed Jamwry 28.1999.) (File No. o-16014).
RegiamionRieqts~~Aeclphircolnmunications
zy,pHdQnw LJ- “d~~~mT+*-d (lnqmmdbyref~haremwExhtblt 10.04 totbeRe&nWurrcnt~mFonn8-IQWJan~28, 1999.) (File No. o-16014).
U-tingAgwneat~Janwyll,l999betweu1tbe RegisuantaadGoldman,Sachs&Co.@aqmratalbyrcfarence hereinisExhibit 1.01 totkRc&n&sCurratRcpoetonForm 8-K. filed Jlrnuary 13.1999.) (File No. O-16014).
-Agnaaentbetweulthe~tand~HoIdingslI datedJanuary 11,1999(Incarporatcd byrcfcrc!ncehainisExhibit 10.01 to the Registrants C-t Report on Form 8-K, tiled January 13.1999.) (File No. o-16014).
Stock Pmchasc wt dated Janwy 28,1999 -ted herein by teferance is Exhibit 13 to AmcndmcntNo. 3toSchaWe l3D tiled Febrwy 8,1999 on bcbalf of FPL Group, Inc.).
Class B Voting Agreement, dated 85 of March 5.1999, amott AQlphia
10.40
10.41.
10.42
10.43
10.44
10.45
-
10.46
10.47
10.48
10.49
..- 10.50
10.51
,----
10.52
10.53
10.54
10.55
10.56
/-
10.57
10.58
10.59
10.60
c-
10.61
CommurUcati~ Carporation, Leonard Tow, The Claire Tow Inut, and the Trust Created by Claire Tow under date of December IO, 1979
(Incorporated herein by reference is Exhibit 10.01 to the Registrant’s Current Repott on Form 8-K for the event dated February 22,1999.) (File No. O-16014).
Rigas Class B Voting Agreement , dated as of March 5,1999, among Century Communications Corp.. John Rigas, Michael Rigas. Timothy
Rigas and James Rigas (Incmporated herein by reftrence is Exhibit
10.02 to the Registrmt’s Current Repm on Fom 8-K for the event dated February 22. 1999.) (File No. o-16014).
Purchase ttgeement between Hyperion Telecmmunications, Jnc. and theInitialPmhuersnamedtherein,datedasofFebrwy25, 1999, regard@ Hyperion’s 12% Senior Subordinated Notes due 2007 (lncoxpotated hcreiu by refaence is Exhibit 10.03 to the Registrant’s Current Report on Form 8-K for the event dapd Febrwy 22, 1999.) (File No. O-16014).
Purchase Agrument between Hypaion Tekzommtica~~, I& and Highland Holdings, dated as of February 25.1999, qarding Hypezion’s 12% Senior Subordinated Notes due 2007 (Incorparated herein by reference is Exhibit 10.05 to the Regismnt’s Current
Report on Form 8-K for +e event dated February 22,1999.) (File
No. o-16014).
ClnssBCommm stockPurchaxLeaa~tdatedAplil9.1999
betwaAdelphiaCommuni~onsCorpolationandHighlandHoldings (w haGa by referam is Exhibit 10.01 to the
Regi~rs~t~oaFarm8-KforthecventdatcdApril 9.1999.) (File No. o-16014).
ClassACmnnar stoku-tingAgramentamongAdelphia
coInm~~ons~~salomonsmithBmneyInc.andtheothK
wimvTitKsnmlKdtharin,asuprumtativesoftheundawritas,
datedApd23.1999 ~byrefermcehKeinisExhibit 1.01 totheCurmtRcpottonFasm&KoftheR@mntfocthe event dated April 28,1999.) (File No. O-16014).
7-7/8% Senior Notes Undnwriting &reutmt among Adelphia commtmicatioQscorparatiar8ndc~.securitiuInc.,as
repru~~tative ofthe Undcnvtitus, dated April 23.1999
(IncarpaatedbyrefKencehKeinisExllibit 1.02tothecuITutt
Report on Fmm 8-K of the Rcgismmt for the event dated April 28. 1999.) (File No. O-16014).
S-l/2% Series D Convatible Prcfemd Stock Undcnwiting Apatent amongAdelphiacunmunicationscapaationandsalomonsmithBamey rqmaative of the Uadawtiters, dataI April 26,1999
EG0-d byrefKencehKcilliaExhibit 1.03totheCurrent ReportmFam&KoftbcResisrrmtfortbccvcntdatcdApril28, 1999.) (File No. o-16014).
Indenture, dated as of February 26,1997, betwen the Registzaut
andBanLof~lTnutcompanYwitbrrspecttotheRegisaantls
9- i/8% Senior Notes Due 2007 ~hcreinbyrcferenceis Exhibit 4.01 to the llqishmrs Cumnt Report on Form 8-K dad May 1.1997.) (File No. o-16014).
Indenture, dated as ofApril 15,19%, between Hypezion Telaammunications, Inc. and Bank of Montreal Trust Compnny
(Inmporated by reference is Exhibit 4.1 to Registration Smanent No. 33346957 on Fm s filed for Hypaitm Tel ecommnications, IllC.).
First Supplancntal Indenture, dated as of Septanber I I, 19%. between Hyperion TekcommunwLions. Inc. and Bank of Montreal Trust Company (Incorporated herein be reference is Exhibit 4.2 to Hyperim Telecommuniations, inc.‘s Regmation Statement No.
333-12619 on Form S-3. formerly on Form s-1.).
Indenture, dated as of Nowmber 12,l996, between 01ympus
Communicative, L.P., O~YIIQUS Capital Corporation and Bank of Montreal Trust Company (Incorporated herein by reference is Exhibit 10.02 to the Re@ant’s C-t Report on Form 8-K dated December 16.1996.) (File No. O-16014). *
Inder~ture, dated es of August 27,1997, with respect to Hypekm Telewmmunications. Inc. (“Hyperion”) 12-l/4% senior Secured Notes due 2004, between Hyperion and the Bank of Montreal Trust Company (Incorporated herein by reference to Exhibit 4.01 to Hypenon’s Current Report on Form 8-K dated August 27, 1997.) (File No.
O-2 1605).
.- 10.62
10.63
10.64
10.65
10.66
- 10.67
10.68
10.69
10.70
10.71
10.72
Second Supplema~tal Indenture, dated as of August 27,1997, between HypekmandtheBankofMoatrealTrustCompauy,rrgarding Hypetion’s 13% !kniw Discount Notes doe 2003 (Incorporated by
reference herein to Exhibit 4.06 to Hyperion’s Current Report on Form 8-K dated August 27,1997.) (File No. O-2 1605).
Indenture, dated as of Scptembez 25.1997, with respect to the Regimes 9-l/4% Senior Notes due 2002. between the Registrant andiheBankofMontnxlTrustCompany(Incorporatedhereinby referenw is Exhibit 4.01 to the -t’s Curratt Report on Form 8-K dated Sepmtb~ 25,1997.) (File No. O-16014).
Indaure,datedasofJatmaty21,1998,withrespecttothe RegktrWs &3/8% Senior Nom due 2008, bemem the Regismnt audtheBa&ofMontrealTtustCompauy~bymf~ kreinisExhibit4.01 totheRegWa&CurrentReportonFonn 8-K dated January 21.1998.) (File No. O-16014).
First Supplemental I&nture, dated M of November 12.1998. to Januryl998InkturewithrespecttotheR@uant’s&3/8% SeniorNotes&e2oO8,~theRegishwandtheBankof Mott~TNstcampmy(Iacorpoarted byreferatcehereinisExhibit 4.01 totkR~#?~&aCumtRepataaFcm&Kfila.ia~ Jammty 28.1999.) (File No. O-16014).
RcqJiseoQRi$lta~betwetnAdeIphiacoatmuni~ons
Corpoution and the hitid Purcham, dated NOVK&K 12.1998, regard& the Rq@mut’a 8-3/8% Smior Notes tim 2008 (IwnpowdbyrefermcebarinisExhibit4.02tothe Re&tranVs Curratt Repat on Form 8-K f&d on January 28.1999.) (File No. O-16014).
R@QationRi&tsAgwnattdatedasofJuly12,1999,among
AdelphktheCenturyCtrsBH&asandMs.ClaircTow
~hKcinby-LExhibit 10.01 tothe Regi~~currentRepataaFam&KfortbecoentdatcdJuly 12.1999.) (File No. O-16014).
Tag-AlongRights~&teduofJulyl2,1999,among
Adelphia, the Catttny Clarr B Holders, Ms. Claire Tow aud the
holdas of Adelphia Class B Cunmat Stock named therein (ln~hezeinbyr&renccisExhibit 10.02tothe Registnmt’s C-t Rcpopt m Fosm 8-K for the event dated July 12.1999.) (File No. O-16014).
FWhaseAgnementdatedasofJuly 12,1999,betweenAdelphiaaud Citizens Cable Company (korporated herein by reference is Exhibit 10.03 to the Regis&&s Cunmt Report on Fotm 8-K for the event dated July 12,1999.) (File No. O-16014).
UndawritingAgreemcntdatedOctobcrl, 1999rrgardingthesaleof 6,000,OOO sham of Class A common stock of Adelphia (Incorporated herem by reference is Exhibit 1 .O 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30,1999.)
(File NO. o-16014).
10.73
10.74
10.75 ’
10.76
10.77
F-
10.78
10.79
10.80
10.81
10.82
10.83 M--
Stock Purchase A&eCtntnt dated October 1.1999 between Adelphia Communicatiot~S bporation and Highland Holdin8s (Incorporated herein by reference is Exhibit 10.01 to the Registranrs Quarterly Repat on Fom 10-Q fa the quarter ended September 30.1999.) (File No. O-16014).
Bank Credit Facility dated May 6,1999 among the Registrant, other borrowas and the lend.ers named therein (Incorpomted herein by reference to Exhibit 10.0 1 to Current Report on Form 8-K fa the event dated September 16,1999 filed by Adelphia Communicat~oos Corporation.) (File No. O-16014).
llird Amendment to the Olympus Communications, L.P. Second Amended and Restated Limited Pmmhip Agrmnenc dated October 1, I 999 (Incmpomed herein by ref- is Exhibit 3.8 to Form 10-K of OlympusfafiscalycarmdedDecunber3l,l999.)(FileNo. 333-19327).
faended credit Apemen dated as of March 29.1996, amon Highland Video Associates L.P.. T&sat Acquisition Limited Pamwhip, Global Acquisition Pamurs, L.P.. the various fmcial institutions as parties thaw, Bank of Montreal as syndication agmL Chcmiul Bank as documentation agent and the
BankofNovaScotiaas rdminishative agent (Incorparatcd herein by
rcfauxc is Exhibit 10.37 to Adelphia Communiatioas Corpomion’s Current Repat on Fom 8-K datai June 19.1996.) (FiIe No&16014).
FirstAma&ncn~datedasofJuly31,1998fatheAnmdedmd RestatalCreditAgrecnmtdatedofaaMarch29,1996(kupamd hacittbyref-isExhibit lO.2toOlympus’Fam8-Kdatai
Apil2,
1999.) (File No. 333-l 9327).
Redaptial &amKtt betww01ymplx C~UIliMtiOtU, Cable GP, Inc., dated as of Octoba 1,1999 &capon& by
rcf- herrin ia Exhibit 10.6 to Fam 10-K of Olympu fa fkal
yuy-- 31,1999.) (File No. 333-19327).
UndemitingAgnxnmdataiasofNovemba23,1999mmgAdelphia
Busincas Soltioas, Inc.. Salatm Smith Bmey Inc. and the several 0thKundawritasnamedthKein @mxpomdhcreinbyreferatcc is Exhibit 1 .O 1 to Adclphia Business Sohtticms’ Foam 8-K fa the event daW Novunber23.1999.) (File No. O-21605).
StockPurchmeA@tenmtdiataiNovaaher23,1999~A&lp&ia Bushas Solutions, Inc. 8BdAdelpu Communiatioas capon&m (Incarpartsdhauinby~ermceisExhibit 10.01 toAdelphia Busincas Solutiau’ Fosm 8-K fa the cvat dated Novemk 23, 1999.) (File No. O-21605).
ArnendedBanLCnditFacility(kxpomtedbyrefercocehcreinis Exhibit 10.1 to FmntiaVii opaatine Partners, L.P.‘s and FrontierVision Capital Corpomka’s Regkwation Stamt on Form S-l, RcgisWion No. 333-9535.).
AmendmentNo. ltoAmcndedBonkCraiitFacility(Incapowedby ref- herein is Exhibit 10.14 to FrontiaVision opmting Partners, L.P.‘s and FrorttiaVisim Capital Corpaation’s Registration S-t on Form S-l, R@tration No. 333-9535.).
c-t and Ammdmmt No. 2 to Amended Bank Credit Facility (~~bynferencchereinisExhibit lO.lSto FrontierVision Operating Pattners. L.P.‘s and Front&Vision Capital Corporation’s Quarterly Rp on Form IO-Q, File No. 333-9535 for the quarter ended September 30. 1996.).
Lpand
10.84
10.85
10.86
10.87
10.88
10.89
10.90
10.91
10.92
10.93
10.94
Amended Credit Facility (Incmpora~ by refme herein is Exhibit IO. 18 to FrontierVision Hold@, L.P.‘s d FrontierVision Holdinss Capital Corporation’s Annual Repott on Form IO-K, File No. 333-36519 for the year ended &ber 31, 1997.).
hdmttu’C dated as of odobcr 7,19%, among Front&Vision Operating Parma~. L.P., FrontierVision Capital Corporation and Colorado National Bank, as Trustee (Incorporated by reference herein is Exhibit 4.1 to FrontierVision Operatin Partners, L.P.‘s and FrontierVision Capital Corporation’s Quarterly Report on Form IO-Q, File No. 333-9535 for the quarter ended September 30, IS%.).
Inkture dated as of September 19,1997, among FrontierVision Holdings, L.P., FrontierVision Holdings Capital Corporation and U.S. Bank National Association dWa Colorado National Bank, as Trustee (Incorporated by refacnce herein is Exhibit 4.2 to FrontierVision Holdings, L.P.‘s and Front&Vision Holdings Capital Coxpaation’s Registration Statement on Form s4. Registration No. 333-36519.).
Indenture dated as of December 9,199s. among FrontierVision Holdings, L.P., FrontierVision Holdings Capital II Corpomtion and
U.S. Bank National Association, as Trustee (Incorporated by refacnce herein is Exhibit 4.5 to FronticrVision Holdings, L.P.‘s and FnmticrVision Holdings Capital II Corpomtion‘s Registration Statement on Form S-4, -on No. 333-75567.).
Pur&aaeAgncmmtdakdasofDecunber2,1998,byand FrontierVision Holdings, L.P.. FrontierViaion Holdings Capital II z;~~ui J.P. Morgan Securitim Inc. and Chase Seaxitia Rtrcbrscrs~by~aarcchKeinis E&bit 4.6 to FrontierViaiat Holdings, L.P.‘s and FrwntkVision Holdings CapitaI II Capcmtiods Regismion Sutement on Form
S4, Ragimth No. 333-75567.).
Re@ratiottRightsAgnxmentdataiasofDectnk 9,1998, by and atnmg Frontier Visia~ Holding. L.P., FroatkrViai~ Holdings Capital II Coqxmion and J.P. Morgan Secaitia Inc., aad Chase seculi~rnc.,asblitiaI-~byref- haein is Exhibit 4.7 to Front&Vision Holdinga, L.P.b and Froati~Vision Holdings Capital II Corpo&ca~‘s Regist&oa Statauatt on Form s4, R&at&m No. 333-75567.).
Jndmtae. dated as ofNovember 15.1988. by and between Centmy communicatialscocp.(“cKltuIy,“nowhlownasAnbooa Communications, Inc.) and the Bank of Monweal Tnut Company, as Intake (Filed as Exhibit 4(l) to AmmdmentNo. 7toCattu@s fttgiSMOflS tatmmtt on Form Sl (File No. 33-21394), which is mcoqmmd lIKein by refkaoe.).
Indatttxe$d8tedaaofoctoberl5.l99l,byandbetwalcatturyaud the Bank of Montreal Trust Company, as Trustee (Filed as Exhibit 4.2toAmcndmentNo.2toCen~sRteirmtionS~tonForm S-3 (File No. 33-33787). which is &xpomkd herein by referaw.).
FirstSupplemcntalIndenture,daWiasofOctoberl5.l99l,byaad bewenCenturyandtheBankofMorwdTrwtCompany,aaTtustee (Filed as Exhibit 7(2) to Centu#s mt report on Form 8-K, datedOctober 17.1991 andincorporatcdhereinbyr&rence.)(File
No. o-16899).
indenture. datedasofFebury 15,1992, by and betweenCentury and the Bank of America National Trust and Savings Association, as Trustee (Filed as Exhibit 4.3 to Amendment No. 2 to Cent@ Registration Statement on Form S-3 (File No. 33-33787). which is incorporated herein by reference.).
First Supplemental Indenture, dated as of February 15, 1992, by and
10.95
10.96
10.97
10.98
10.99
10.100
10.101
10.102
10.103*
/” 10.104.
between Century and the Bank ofAmerica National Trust and Savings Association, as Trustee (Filed as Exhibit 4(t) to Century’s Annual ReportonFormlO-KforthefiscalyearendedMay3l,l992and incaporated herein by reference.) (File No. O-16899).
Second Sqqkmeatal Indenture, dated as of August 15.1992, by and betwwt Centuxy and Bank of Amcnca National Trust and Savings Association, as Trustee (Filed as Exhibit 4(u) to Centq+s Annual
RcportonFormlO-KforthefixalycarcndcdMay3l,l992and
in-ted herein by reference.) (File No. o-16899).
Third Supplemental Indatture, datedas of&i1 1.1993, by and betwen Ccnttuy and Bank of America National Trust and Savmgs Association, as Trustee (Filed as Exhibit 4(v) to Cenmry’t Annual RepartonForml0-Kforthefi~yearendedMay31,1993and in-ted herein by referawe.) (File No. O-16899).
Fourth Supplauenral Indenture, dated as of March 6.1995, by and
between Centuty and Bauk of America National Trust and Savings Associatmn, as Trustee (Filed as Exhibit 4(w) to Centur@ Annual RwonForm lO-KforthefiscalycarcndcdMay31.1995,and in-ted herein by reference.) (File No. O-16899).
Fifth Supplemental indenture, dated as of January 23,1997, by and betwear Century and First Trust of California, National Associati0& stlaasa uus&etoBankofAmericnNa.tionalTrust and Savings Association, as Trustee (Filed aa Exhibit 4.10 to
Cenaay’sAnnualReportanFormlO-Kfatbc~yearendedMay 3 1,1997. and kqomtcd herein by rcfkaxz.) (File No. O-16899).
sixthsupp~In&n~datedasofseptKnbK29,1997, betweenCu~turymdFiratTrustofCalifornia,Natitmal Asaociatia swccsmr~toBankofAmcricaNationalTtust andSavingsAmm&ion,aaTtustee(FikdasExhibit103to Century’sQuatt&yRcpartonF~lO-Qfathcquart&ypaiod c~dedAugwt31,1997,andkqxatedhknbyrefcreace.)(File No. o-16899).
SewnthSupplementalIndentumdatedasofNovanberl3,l997
behvcm Cmtury and First Trust of California, Natioaal
Asaociatia oyTI*yI @ustcetoBaukofAmsiaNatMnrlTtust andSwings&sociati~aaTnutec(‘FilaIasExhibit4.lto Cath@sQwkrlyRcpatanFormlO-QfccthequaMypaiod a~kdN0vemher30,1997,udiwrpx&dbaeinbyrcfcrence.) (File No. o-16899).
Eighth Supplemental Mmtwe dated u of Dcccnkr 10.1997 ktween Cenhuy and First Trust of California, Natiana) &so&ion, as Trustee(kupomWbyrckraxehercinisExhibit4.l3toFotm lO-KofCenturyfafiacalyear&edMay31,1999.)(FileNo. O-16899).
Indcnture,dataiasofJanuaty15,1998bctwenCentu1y~dFirst Trust of catifaaia, National Awciation, as Trus& (Filed (IS Exhibit 4 to C~M.U@S R@traticm Statancnt on Form S-4 (File Nc. 33347161). which is kqonual hazin by refamce.) (File No. 0-l 6899).
Employment Ageunent, dated as of January 1.1997, hehvccn Century and Scott N. Schneider (Filed as Exhibit 10.4 to Centu@s &mual R~onFormlO-KforthefucalyearawlcdMay31.1997,and incapaated herein by reference.) (File No. O-16899).
1994 Stock Option Plan of Century (Filed as Exhibit 10(v)(3) to
Centuq+s Annual Report on Form 10-K for the fiscal year ended May 31, 1995, and incorporated haein by reference.) (File No.
o-16899).
,..-^
10.105 Amendment No. 1 to Mmuqment mt and Joint Venture Agreement (Century ML Vmture), dated September 21,1987, between Century Texas and ML Media Partners, L.P., a Delaware limited parumhip (Filed as Exhibit IO(w) to Century% Annual Report on Form 10-K for
thcfiscalyearendedMsy31.1989andincorporatcdherrinby refemce.) (File No. O-16899).
10.106 Management Agreement and Joint Venture Agrearmt (Century-ML Radio Venture). dated as of Februaty 15.1989, between Century Texas and ML Media Partners. L.P.. a Delaware limited partm&ip (Filed as Exhibit IO(x) to Centu#s Annual Report on Form 10-K for the
fiscalycarendcdMay31,1989mdkmpo&edhereinby
refkrence.) (File No. O-16899).
10.107 Credit Agreement data! as of April IS.1997 among Citizens Century Cable Television Venture, Bank of Amaica, National Trust and Savings Associario~ as Syndicatian Age& and Societe Gam& as
Aem& corrstates Ba& N.A.. The First National Bank of Boston, LTCB Trust Company, and F’NC Be& National Association, as Co-Agents, and each of the bank parties thereto (Filed as Exhibit lO.4ltoCentu~+sAnnualRcportonFotmlO-Kfortheftscalyear endedMay31,1997,andincmpcmtedhercinbyrcference.)(File No. o-16899).
10.108’ Emplaymcnt Agrcenmc dated as of January 1,1997, between Camty andBe.mmdP. G&ghcr(FiledasExhibit 10.1 toCcntu~‘s
~~~~~F--Qfpr~~~pfiod~Augusl
0-i 6899). mapaakdhemnby&ram.)(FlleNo.
10.109* ModiWtiatAgmmen&datedasofJunel.1998,bchmnCcamy and Scott N. scbneida (Filed as Exhibit 10.44 to Camry’s Armual Rcp1ntaaFamlO-Kfartkhm1lyawaxbdMay3l, 1998md - incapad by refaaree.) (File No. O-16899).
10.110* It4odGcationAgncmenf dated as of June 1.1998, - Cemy
alldEknMdP.Gauagkr(FilalaaExhiitlo.45toCaltu@ hmalRcportoaFom IO-Kfortbcfiacal~cndaIMay31.1998 and incgpaated by refkrae.) (File No. O-16899).
10.111* mwl-- dataiasofJuly 1,1997,behwenCa1turyand Leonard Tow (Filed a~ Exhibit 10.48 to Chtu@s Anuual Report on Forml0-Kfathfiscal~endedMay31,1998and~ by rcf-.) (File No. O-16899).
10.112 i@ematt and PIan of Mager, dated as of July 2.1998, betweu~
cKttmniaIceIl~cap. alKlccwAquiaitiMcoIpcapiledas Exhibit 10.49 to Ca@@ Annual Rqmrt an Fom 10-K la tbc fimlycarendedMay31,1998aldinmpamwby~f-.) (File No. O-16899).
10.113 NinthSuppkmaWInckmz,datedasofOctobcrl,l999~ kahova Comnnmiationa, Inc. (“Arahova”) and U.S. Bank Trust NationaI haocihn (the %ustee”), - tnlsteetoBaukof knaicaNatiamlTrustmdSavingaAs&ation,totheIndatture, dntcdasofFekmmy 15,1992betweutCenturyCommuuiatioosCorp. andtlleTrurtec @cupamWbercinbyrefcralc.eisExhibit4.01 to Form 10-Q for Amhova for the quarter ended Novanbcr 30,1999.) (File No. O-16899).
10.114 FirstSupplunentalIndamrc,datedmofOctobcr 1.1999- Arahova Communiations, Inc. and U.S. Bauk Trust National Association (the “Trustee”). to the Indenture, dated as of Januay - 15.1998 between Centuy Communications Corp. and the Trustee (Incarporated berein by reference is Exhibit 4.02 to Form l&Q for Amhova for the quarter ended November 30. 1999.) (File No. o-16899).
IO.115 Agreement of Limited Partnership of Century-ICI California
,- 10.116
10.117
10.118
10.119
IO. 120
10.121
rc
21.01
23.01.
27.01
99.01
Communications. L.P.. dated as of December 7, 1999 (Filed herewith.).
Credit Agreement dated as of December 3.1999 among Century-ICI Califiornis L.P., Certain Lznders, Societe Generale and DeUtsche
Bank Securities Inc., as Co-Syndiation Agents, Salomon Smith
Barney Inc. as Lad Arrange and Sole Book Manager, Mellon Bank, N.A. as Documentation Agent and Citibank, N.A. as Administrative
Agent (Filed herewith.).
Agreement and Plan of Reorganktion dated as of December 8,1999, by and among Cablevision of the Midwest, Inc., Cablevision of the Midwest Holding Co., Inc. Adelphia General Holdings II, Inc. and
the Regdmt. (Filed herewith).
AssetPtxchaseAgreementdatedasofDecember8,1999,byandamong Telerama, Inc.. Cablevision of Cleveland, L.P. and the Rwstrant
(Filed herewith)
Revolving Credit and Term Luan Agreement dated as of October 5, 1999. among Harron Communications Corp, the Subsidiary G-tors named therein, and the Agents and Lenders named therein (Filed
haewith.).
Underwriting Agrwnent dated as of November 10.1999, among the UnderwtitersandReprwcntativanamedthereinandtheRegistmnt, m)the 9-3/S% Senia Notes due 2009 d the Regis&ant (F&d
Ammdment No. 2 to Amended Credit Facility of FrcmticrVisioa Open&g Paams, L.P., dated as of July 15.1999 @copwed hadn by rdrmce is Exhibit 10.21 to Form 10-K of FrontkVisi~ Holdinga, L.P. fa the ytar a&d Dacember 3 1.1999) (File No. 333-36519).
subsidimies of the Regiswmt (Filed herewith.).
Consmt of Deloitte & Towhe LL+P (Filed herewith.).
FikciaI K&a S&&k (Filed hawith).
Mataialiacapaatrdbyref~iIltothiaAMlUal~CKtFotlD 10-K of the Olympus Cmnnuniaticns, L.P. and Olympus Capital CaporationFam IO-KfatkprendaiDecunber31,1998.
l Dalotcs~t-8ndcompcnsUoayplrrnsaad~ts required to be idattifiazl by Item 14(a)(3).
‘IheRegistrantwillfurnithtotbc~~Ppaa~copicsof~~notfiledbacwitbwhichautharizttheissuance of lox@erm obligationsofRcgirtranttiitrS~~~notinexccgofl~of~~rstotrrlassetsonacansotidatedbaris.
(b) The RegWattt tiled Fam &IO rhtai September 30. October 1 (4 sepamte filings), October 25, November 23 and December 8, 1999,
whichnparredinfamrtioalmdaltems2,5snd7thaeof.NofinsacialstatanmtswlaefiledwithsuchFom,S-Kreports,exceptthat ftnancialsra~~faafguirrdcompmieswerrfiledrmdaItcm7inoneattheForm8-KreportsdatedOctokr I.1999
(c) The Company he&y Na as exhibits to this Annual Reprt on Form 10-K the exhibits set forth in Item .14(a)(3) hereof which are not incoqmtcd by reference.
(d) The Company hereby files as Gnancial statement schedules to this Annual Report on Form 10-K the financial statement schedules set forth in Item 14(a)(2) hereof.
:-
SCHEDULE I (Page 1 of 4) ADE!B!U COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Cmbsed tnfdcn u to the Fburrial Position of the Regismm
(Dcll8rs in thourradr) -31.
1998 1999
ASSETS:
InvutrMfainMdnetedvanoatoceblelelevisicm subsidiarir and related @es Property end equipment - net Cash and cub equivalenB othauous-net
.
LIABILITIES AND STOCKHOLDERS’ EQWIY (DEFICIENCY):
Luusemddishbutianinexcasofhnartmarrindndadvencu to cable television subsidiuia Parent dek otbadebt
Acaued imaea and orhcr liabilities
S201.636
1.810.212
zz
S544,983 2.777.919 1,707
84.298
Total Militia 2.093J 10 3.408907
stockho~equily(dchciolry)-ne * cudl&tdfiweLl
stmanaltsillcblded~for&tails
Sl,lZ3.61J %,878,819 28,889 26,854 10s 106 6E,M m
14sJ91 148,363
3.f21.181.
:-
SCHEDULE I (pw 2 of 4) ADELPHIA CO~~MUNICATIONS CORPORATION AND SUBSIDIARIES
C-InformuioautotiOpaationroftheRegimrnt
(Dollm in tllouds)
YUrEf&d Much31, 1998
$i6u@
EXPENSES:
Operating cxpenea end fea to subsidiuics
Dcpmchtionu~d-on
Interat expense to subsiditia utd lfhliata
Interat cJpnse to otha
LQabefiJregeillollulcof~equityin
net loa of subidkia md extnmihuy itmu
Oain on sale of inwtments
Equity in net IOU of mhidkia
LAxn bcfom adlradiavy la8
~lonmarly -of&& (net of inoomc taxa of $7300 in 1999)
Net IOU
Dividendrequimmemm applicableto prefured atook
Net Ion applicable to ootmnoa uoddlddm
salauto caarhrd6MKdel-dtlm
-
2,144 316 2,037
7,408 4.106 11,480
16,831 12,902 24,389
134.984 .iQu!fE 1%2111
220.027
(95998)
1.927 168.483)
(162.W)
111.3251
(l%m f18.850)
Nine Months
(58.122)
(32.671,
(110.793)
(4.33’2)
(llS.130)
f.zul
YearEnded
Decunbcr31, 1999
5139.265
(90,762)
2,354
L!iliw
(229,872)
(240,530)
141.963)
SCHEDULE I (Pqe 3 of41 ADELPHIA COMMUNICATIONS CORPORATION AND SUESIDSARIES
C-M~allutothchcFlowsoftbe~
(Dolh in tllouad)
YCUEd8d MudI31.
1998
cub &WS &om opmthg ectivitia:
Net low S(l73.879 Adjurmwatrtorccudenctl~t0IWtarb(uudfa) providedbyopemingecIi*
Equity in net IOU of subeidiaia 68,483
oain on sele of invcrrmcatr (1.927)
EXtl%ordinuylOSSOtldebtdfe!lled 11.325
lIepciaiioo~d-m 7,408
N-b it~ereu expense 9589
ClWlgCiIlOphOgUSCtSdlbbilik
mlaaaue 1,661
Acawdiaaaualdotlmrliebilitia 2.814
Nacmh(wdfce)providodbyopIlthudvitia f74.7m
cabflowe%aninvaiugectivih
IavramomLeuledveacato~
minbtedptb8-tlu (S39.459) /“-- ~fapmpy.pMad~ cnv Ihoeedl6ullnbofiwlllrmpm 12.678
Nltcmhwedfainwdmg~vhim
Pfooedeandeta
pPv&Jya redamble exdmgonbb pmfarmdrtod issuase of cawmtibie pfumd M
lsmmcaofAdelpbi&~SohdiamClu8Aummmrtafk
IuummofClmAcomrnoD~
hmceofSariasDcatwiblc@arodltodr
~ymsntr~~trrrvy~ CousanocimdwithiwaacaofChmA-Mo&
Pmfemdalodcdivkbadspid
Premium paid oo early W of 6bl
Debtfhriugocste
Netcuhprovidcdbyfhnciqdvitim
InavueinaellMdoah~~
Cab and ash tqhakm, be~hutia~ of pried
Cuhmdcuhapivaleau&endofpwiod
624.142 (232.421) 147376
6
SuppbncawdbOl-OfUdlflOWrtivay-
Cdpyukausfahaau
Nine Months
n1, YeUEdd -31,
1999
S(llJ.130) S(240.530)
52.671
4337
4,106
545
141.464
(2.354)
10.6J8
11.480
(2,792)
15,554 95,068
22062 9,858
0X4.629)
WS)
(2ml.~)
2.400
299,232
vww
1.250.m
(279991)
205.SS9
275.880
262.413
1,2lS,999
357,649
(149.401)
c2Ogsl) (41.898) (5.603) (11.622)
SCHEDULE I (l?qJe 4 of 4) ‘( ,
-ELPEILi COhl.MUNICATlONS CORPORATION AND !Si.BsID~s Notes to Condensed Financial Infotmation of the Registrant (Dollars in thousands)
1. Amotmts advanced between Adelphia and related parties:
Adelphia Communications Coxporation (“Adelphia”) has periodically advanced to and bormwcd funds kom subsidiaries and affiliates. Adelphia and its subsidiaries and affliates charge i&rest on such amounts at rates ranging fkom 3% to 16% with principal due upon demand Gve years &a December 31,1999.
2. Reclassifications:
certain prior peliod amotmts have beal reclassified to conform with the cullult period preselttation.
.-
YcJrEadmlMmh31.1998
Allowuse for do&Ubl accumb
vJllulioJ rllowJnce fa defmmd uJI asaI
NiiramthsEadulDoccmkr31.1998
Allomnoc for dollbell accala
vJluJtial rlloarooJ fa dcdnrrrd tax Jmeb
Yar Ended Dwembcr31.1999
Allowmoe for doubtful amunh
VhuIioa alloarocc for deikmd tax umb
AD- COMMUNICATIONS CORpoRATlON AND SuBm-s VALUATlON AND QUALRXNG ACCOUNTS (DouJniotbotmJnds)
BJbocc Jt CW@ ErlmcJ ElegimlinQ COStJJd Deddotts- rt End
!asi!?d writc-ofh dPniod
01.345 S8.6QJ s&Q64 s- S1.166
f E
SIGNATURES
~u,~~~ofsraim13orl5(d)ofthc~cr
ExchuyleAclofl934,theregirtrunhuduiycuucdthL~~krignedm - itJbelulfbytheut%kmignedthemumodu*y-
. ADELPHIA COMMUNICATIONS CORFOIUTION
Much 30.2000 By: Is/ John I. Rigu
John J. Rip,
Cm Prrsidan and ChiefExecutive O&a
PumuMtothemquiranmtl of the Secwitia Exchange Ad of 1934. this
repon ha been siped below by the following panam m beiulfofthe
regiJtmmendintbeapJcitiadonthcdua~
Mud130.2000 .
Much 30.2000
Mudt 30.2000
hiadt 30.2000
Mach 30.2000
MIicb 30.2000
,--
Mudl30,2000
Madt 30.2000
Mu& 30,200o
Much 30.2000
N Jolm J. Rigu
Jdm J. Rilpl.
Dimua
is’ Ti J. Rinu
Tii J: Rig
Executive Vii Prkdal ChiefFii Officer.
chief Accourairy oflka. Trururor JttdDireck
/JMi&WlJ.Rigr
Midmel J. Rigas,
ExadvevioePraidtmtopmtianJadDimcta
1dJuwP.w
JemaP.Rign, EBaaireViCURolideQ~ptminsJttd
NPUUL vaah
PctaLVule6&
Dimua
/JDCUlhP.&yb
DumieP.Coyl&
Ddta
hlPueJ.Maor
PueJ.Mdnn,
D&ta
hlpoyS.PdtUUMt
parys. pllrrros Dimow
NhlieJ.Gdbu
LUkJ.odbr. Direa
DesaiptiOtl
Agreement end Plan of hkqer by and among Adelphia Communications
COrporati~ Adelphia Acquisition subsidiary, Inc., and century commtmicdtions Corp.. dated as of March $1999 (Incotpomted herein by refa-ence is Exhibit 2.01 to the Regismn~s Current Report on Form 8-K for the event dated February 22, 1999.) (File
No. o-16014).
PurchascAgreammt,datedasofFebruary22,1999,among FrontierVision Partners, L. P., FVP GP. L. P., and certain direct
and hdirect Limiti Partners of FrontierVision Partners, L. P., as sellers. and Adelphia Cmunications Corpomtia as buyer (Incorpanrtcd herein by rcfaace is Exhibit 2.02 to the Registmnt’s Cunat Rqm on Fotm 8-K for the cvmt dated Febnuuy 22.1999.) (File No. o-16014).
Stock Pwchase Apanent dated April 9,1999 ktwrcn Adelphia CommlmicationsCorpmtimandthcsharcholdecsofHarron commullications Corp. (Incolponuedhercinbyrcf~ceisExhibit
2.01 to the Registrmt’s Clnrart Report m Form 8-K for the event dated &nil 9,1999.) (File No. o-16014).
FirstAmahenttoAgnaeentardPhofMagerdataiasof. July 12.1999 with respect to merger with Cattuty Communications Cop (hapomdhrrinbyrrfaaaceisExhibit2.01 tothe Regiemt’s Cumnt Repart on Form 8-K for the event dated July
12.1999.) (File No. o-16014).
secaad-ttoAgrsanartandPlmlofMcrgadrtedasof
JuIy29.1999withnapecttomcrgawithCatuyCommtmicati~ cafp.f$aqawdbacinby~-isExhibit2.02totbc Rcgi&Wac\maptRcpatoaFmn8-Kfbrthtevent~July 12.1999.) (File No. O-16014).
ccrtifi~of~ofAdelphiaCuumlmicati~
Corpartiaa,U- (-Jaqmwbacinby-is Exhibit3.01 tothc~Qumt@RcportanFam10Qfa the quatter aded tkpkmha 30.1999.) (File No. O-16014).
ByiawsofAdcl~-Capmtiaa,asamcndcd (Irrcospantcdhrrinby~-iaExhibit3.02tothe Rq+tra&sQur?&yRcpatatFam1oQforthequ&raxkd Scptahr 30.1999.) (File No. O-16014).
C&ficakoflk&mtioasfa13%SaiesAandSaiesB cumulative Exchm@k MM stock (combed ill Exhiit 3.01
tothcRcgi~m&Can~entRepoatmFarm&Kd&dJuly24,1997, which is imqmtal berein by referem.) (File No. o-16014).
Cdute of Derigvtionr fa S&a C Cumatible Prefand stock (htainal in Exhibit 3.01 to the Regismars curratt Report
onFom&Kd~tcdJuly24,1997,whichisixmqmatalhcreinby refemlce.) (File No. o-16014).
Farm of Indame, with rerpect to tk Regismnrs 13% Etior SubordiMtal Exchge Debalttlm due 2009. hetweal the Registnmt and the Bank of Monarl Trust cofnpauy (Contained in Exhibit 3.01 asAmcxAtoRegima&sCumntReportonFo~m&K&tedJuly 24.1997, which is w harin by rrfaerrce.) (File No. o-16014).
Fm of Ccrtiftatc fur 13% Cumulatk Exchangeable Prefand Stock (Incorporated herein by referaxe is Exhibit 4.06 to the
Registrant’s Cumnt Report on F~IIII 8-K dated July 24, 1997.) (File No. o-16014).
Exhibit No.
,4-- 2.01
2.02
2.03
2.04
2.05
3.01
3.02
4.01
4.02
4.03
,a-- 4.04
4.05
4.06
4.07
4.08
4.09
4.10
4.11
*- 4.12
4.13
4.14
4.15
4.16
4.17
4.18
Form of Certificate for Sties C Convertible Preferred Stack
(Incotpated herein by reference is Exhibit 4.07 to the Registrant’s Current Report on Form 8-K dated July 24,1997.) (File No. O-16014).
Indenture, dated as of January 13.1999. with respect to the
Registrant’s 7-l/2% senior Notes due 2004 and 7-314% Senior Notes due 2009, between the Rcgismmt and the Bank of Montreal Trust Company (Incorporated by reference herein is Exhibit 4.03 to the
Registraut’s Current Report on Form 8-K filed on January 28.1999.)
(File No. o-16014).
Registration Rights Agreancnt between Adelphia Commumcations
corporation and the Initial Purchwr, dated January 13. 1999, regarding the Registnnrs 7-1l2O% senior Notes due 2004 and 7-314% Senior Notes due 2009 (Incqwated by reference herein is Exhibit
4.04 to the Registmnt’s Gwent Report on Form 8-K filed on January 28, 1999.) (File No. o-16014).
Form of 7-l/2% Senior Note due 2004 (Contained in Exhibit 4.07).
Form of 7-3/4% Senior Note due 2009 (Contained in Exhibit 4.07).
hidenture dated as of March 2,1999, with tespcct to Hmon Tdtcommuni~tions, Inc. 12% Senior Subordinated Notes due 2007, between Hypckn and the Bank of Montteal Trust Company (IncqmmtedbyrefcratcchereinisExhibit4.01 tothe Regis&ant’s Current Repart oa Farm 8-K filed on March 10.1999.) (File No. O-16014).
Form of 12% Senior Sukdkted Notes due 2007 (Contained in Exhibit 4.10).
ealmmullicatiofls, ~~~tsAgrcaDartbctwaenHypai~Tcl purchasas,patedMafch2,1999,qardiq H+on’s 12% Senior Subardrnated Notes due 2007 (Incorpaatcd by rafa hacin is Exhibit 10.04 to tk Rcgiimm ctttm Report on Form 8-K filed OII March 10.1999.) (File No. o-16014).
BaacIndatturc,datcdasofApril28,1999,withreq=ttothe
RCigismnrsSatiscniaInde~~thc~lmdThc BaukofMontrcalTnut&npany(InaqnW byrefeuuhaeinis Exhibit4.01 totbeR@raat’sCwentRcportonForm8-Kfilai on &nil 28,1999.) (File No. O-16014).
First Suppkmental Indatturc, dated u of April 28.1999, to April 28,1999BaseIndenmqwithrcspecttothe~7-7/8% SeniorNotesduc2009,bchwentbcRe@drantandTheBaukof Monaal Trust Compmy (Incapaatcd byreferalcebercillisExhibit
4.02tothcRq@au~sCwrentRepatonForm8-KfilaionApril
28.1999.) (File No. O-16014).
Form of 7-7/8% Sakx Note due 2009 (Ca&ain& in Exhibit 4.14).
!hwnd Supplanattal Iadmturc, datad as of Novanber 16.1999, to April28,1999BaseI&z1tmc,with1wpccttotheRe&nmt’s
g-3/8% Senior Notes due 2009, betweat Harris Trurt Company and the Registrant (Filed hcrckth).
Form of g-3/8% Senior Nose due 2009 (Contained in Exhibit 4.16.).
Certificate of Dcsignatians with respect to the Rc&tmnt’s
5 ll2% S&es D Convatible Prcfawd Stock (inwporati by referaxe herein is Exhibit 3.01 to the Cutrent Report on Fotm 8-K of the Regknant for the event dated April 28.1999.) (File No. O-16014).
Class B Common stockholders Ag=ment (Incmporated hetein by referents is Exhibit 10.01 to Registration Statement No. 33-6974 on
10.01
Form S-l .),
10.02 Joinder to Class Ei Common Stockholders Agrranent (~caporatal
herein by reference is Exhibit 10.02 to Registrant’s Annual Report onFotm1O-KforthcfmalyearendedIvlarch31,l994.)(FileNo.
o-16014).
10.03 Rcgishation Rights Agrcanent and Amendment to Registmion Rights Agrcancnt (Incorporated herein by reference are Exhibit 10.02 to Registration Statement No. 33-6974 on Form S-l and Exhibit 10.35 to Registration Statement No. 33-25121 on Form S-l.).
10.04 Form of Managanent Agrcancnt for Managed Compnnies (Incorporated
herrin by ref- is Exhibit 10.04 to the Rcgisuantk Annual
* RepottonFotm lO-KforfiscalyearendcdMarch31,19%.)(File No. o-16014).
10.05 Management Agrement - Montgomery Cablevision Associates, L.P. (kaporatal herein by refw is Exhibit 10.08 to Registration Statanuit No. 33-6974 on Form s-1 .).
10.06 Managanent Agreement - kielphia Cabkvisical Associates of
Radllor, L.P. (Incorporated herein by reference is Exhibit 10.09 to Registnuion Sratcmutt No. 33-6974 on Form S-l.).
10.07 BusincssC@orhmityAgeanent@nporataihcrcinbydcrenccis Exhibit 10.13 to -on Statand No. 33-3674 on Fam S-l.).
10.08. EmploymcntAgcanentbchvecntheCotqnyandJohnJ.Rigeu
@uqmratcdhcrcinbyrcfcrcnceisExhibit10.14toR~tm
Statawa No. 33-6974 on Fotxn S-l.).
10.09* EmploymattAgrscment~theCoqmyandTimothyJ.Rigu (IaeapmtedhrrinbyreferenceirExhibit lO.l6toRq@atkm Stamt No. 33-6974 011 Fotm S-l a).
10.10* Employmatt~khrnecntbeCanpanyandMichaelJ.R@ (lflqmdhaeinbyd~isExhibit 10.17toRcgiaaion
Sbtanatt No. 33-6974 at Form S-1 .).
10.11+ Employmaa~betwathcCcanpauyaudJamesP.Rig~~ (Incaporatedbatinby~~isExhibit 10.18toRc@da11 Statunmt No. 33-6974 QL Fam S-1 .).
10.12 Olympus Communiati~ L.P. (“01)7npus”) Scalnd AnKdal and RmtatdLimitaipartnarhipAgrremmf dual u of Fetmmry 28, 199s(koqr@dbaeinbyref~i8Exhitit10.32tothc Rcgi~sAmumlRepatcaForm1O-Kforthetlscal~adai March 31.1995.) File No. &16014).
10.13 Revolv& Credit Facility QMIQ Addphia Cable Par@as, L.P.. soltthwwt Flaidn c&k. Inc., west Boca llfpisition Limited P8aenhipdTalwlt&~(T~~ioc..as~vc
AgacdaedM8y 12,199s (IlmpmMhereiIlbyrefa-enceis
Exhibit 10.03 to tbc Registranrs Curma Report OQ Form 8-K dated June 30.1995.) (File No. o-16014). ’
.-
10.14
10.15
credit dqpeum& datai as of April 12.1996. amoq chcka Comunmicatiaas, Inc., Kittaming Cablevish Inc., RobinsodPlua~ Cablevision L.P.. the sevaal hanks d kncial institutions parties thereto, and Toronto Dominion (Texas), Inc. u . Admuudve Agent (Inuqmrated herein by rcfaeacc is Exhibit 10.36 to Re@trant’s Cutxnt Rcpoa on Form 8-K dated June 3. 19%.) (File No. o-16014).
WanantAgcemattdatdasofAprill5,19%,byandamongHypaion Teleammunicdtions, Inc. (“Hyperion,” now known as Adelphia Business Solutions, Inc.) and Bank of Montreal Trust Company (Incoxporated by refmce is Exhibit 10.13 to Registration
Statanatt No. 333-06957 on Form S-4 for Hypcrion Telecommunications, Inc.).
.- 10.16
10.17.
10.18
10.19
10.20
10.21
10.22.
10.23
10.24
10.25
10.26
*c-..
Warrant Registration Rights Agreement dated as of April 15, 1996, by and among Hypaion Tel ecmmunications, Inc. and the Initial Pm&uers (Incorporated by reference is Exhibit 10.14 to R~@w&xI Statanent No. 333-06957 on Form S4 for Hyperion Tel-uaications. Inc.).
Hypaion Telecommunications. Inc. 19% Long-T= Incentive
Compensation Plan (Imnporated herein by reference is Exhibit
10.17toHypaionTel az.ommunications, Inc.‘s Registration Statement
No. 333-13663 on Form S-l .).
Registration Rights Agreement among Charles R. Drenning, Paul D. Fajerski, Randolph S. Fowla, Adelphia Communications Corporation and Hypekn Tclccomm unications, Inc. (Incorporated herem by reference is Exhibit 10.18 to Hyperion Telecommunications, Inc.‘s Registmion Statement No. 333-13663 on Form $1.).
Registration Rights Agrcawt between Adelphia Communications
Corpomtion and Hypaion Tel ecommtxlkatiotls, Inc. (Itmpomted hcrcinbyrefcrarceisExhibit 10.19toHyperion
Telecommunications, Inc.‘s Regis&km Statrmcnt No. 333-13663 on
Form S-l.).
First mt to the Olympus Communications, L.P. second Ama&d andRest&dLimitalPatw&ipAgncmcnt,datedseptemkrl, 1995 (Incorpomted herein by rcfaarce is Exhibit 10.33 to the
R@rnmt’s&mualRcpatmFormlO-K/Aforthehscalyearcaded
March 31.1996.) (File No. o-16014).
First Amendment to the Olympu Communications, L.P. secand Amu&d alldRatataiLimitedPwMahip~datalMarch29.19% (Incorpontedhcreinbyd-ismbit 10.34tothe Registmnt’sAnnualRqottonFormlO-K/Afbrthetlscalycarc&d
March 31,1996.) (File No. o-16014).
SccondAm&mautotheol~caallm~~L.P.secoadAm~ andRcs~edLimitaiPwncmhipAgmema1~datedJtmc27.1996 ~hcreinbyrefacnceisExhibit 10.35totk
Rqis&ant’sAanualRepartonFormlO-K/AfortheGcalyearatdcd March31,19%.)(FileNo.O-16014).
Extensiaa AsreaneDj dated as of January 8.1997, among Hmon
Telecummmications, inc.. Adelphia Cammunkrions Corpmatia~
Charla R kaming, Paul D. Fajcrski, Randow S. Fowler. and six Trustsnamdtbcnia @cqomkdkreinbynfaawrisExhibit 10.04 to Adelphia commuoialions coQomtio!lk Curralt Repart on Form 8-K dated MAY 1.1997.) (File No. o-16014).
Rcgis&ationRightsAgrcuwntamongAdclphirCommuaicaticns Cotpomtia~, Highland Holdings and T&w Cablcvisian, Inc., dated July 7.1997 (kqwuai haein by rcfkawe is Exhibit 10.04 to
the Re@trant’s Ctmatt Report on Form 8-K dated Judy 24.1997.) (File No. O-16014).
Series C Prcfarsd Stack Fkchasc Agrrt amoagA&lphia Communicakms Coqomtian, Hi&land Holdings and Telesat Cablevision, Inc., datal Jw 22.1997 (Incarparated huein by reference is Exhibit 10.06 to the Rcgistmrs Currau Report on Form 8-K dated July 24.1997.) (File No. O-16014).
Pledge Agrwment baween Hypcrion and the Bauk of Montreal Trust Company as Collateral Agent, dated as of August 27, 1997 (korpomted by refw hcrrin is Exhibit 4.03 to Hyperion’s Current Report on Fotm 8-K dated August 27.1997.) (File No. o-21605).
10.27
10.28
IO.298
.
10.30
10.31
10.32
.-- 10.33
10.34
10.35
10.36
10.37 .
10.38
Pledge. Escrow and Disbmemas ~gmment, betvun Hyp&m and th
Bank of Monacal -frust campany dated as of August 27.1997
(Incorporated by referma haein to Exhibit 4.05 to Hypaion’s cured Report OII Form 8-K dated August 27,1997.) (File NO. o-2 1605).
Purchme Ageamt amoag Adclphia Communications Corporation and Salomon Brothers Inc. datal January IS,1998 (Incorporated by reference herein is Exhibit 10.01 to the Rcgismut’s Current
RcportonFonn8-KdatedJanuuy21,1998.)(FileNo. o-16014).
Manqan~tSmicesAgreemmtdatedasofApril 10. 1998,ktwm
the Registrant nnd Hypaion Telecomm lmi~tions. Inc. (Incorporated
herein by refaence is Exhibit 10.23 to Rcgktmtion Statancnt No. 33348209 on Form S-l filed by Hypaion Telecommrrmcauons. Inc.).
LettcrApanentdatedApd 10,1998,amongHypaion Tel-uaicatiions, Inc., the Registrant and MCInmro Access Trtmsmkion !Savices. Inc. (haporated herein by reference is Exhibit 10.24 to Rqistmtion S-t No. 333-48209 on Form S-l filed by Hypkon Telaxxnm uni~ons. Inc.).
Axrmxhmt to Rqimation Rights Agamt dated w ofApril 15,1998, behvccn Hypmion Telecomm lmications. Inc. Md the Rcgistnmt @caporated herein by rcf- is Exhibit 10.25 to Rqishation S-t No. 33348209 on Form S-l filed by Hype&n T&canmmi&~, Inc.).
LetterAgrcmentdatednsofApril9,1998,betwaHyperion Teleararmunications,Inc.andthe~rrgardinethcplrchasc of Hypakn’s Clam A Common Stock (-kqomd herein by
refaaaEe is Exhibit 10.26 to Rcg&ation Statmat No. 33348209
on Form S-l f&d by Hypekm T-Mm. Inc.).
U.S. UMting Agemalt datd May 4.1998 among Hypmicm TCleCOImakUti~IDC.UUdtbe~ivalUlMlth&ll (hmqmedhcreinby~acnceisExhibit 10.01 toHypaiaa Tekamnmiatioaa, k’s Cumat Rqmt on Form 8-K datal June 24, 1998.) (-File No. O-21605).
IntaIlatiaMlulldawritblgAgremrmtdatedMay4,1998~ Hypcriaa’ Inc. a~ItheRcprwmivesmned
thcrein(kwrpmtedhereiabyrcf-isExhibit 10.02to Hypezion Tcleammiiutims, k’s CIlrrmt Report aa Fom 8-K dated Jlme 24.1998.) (File No. O-2 1605).
Warrant issuai by Hype&n Teleannm~ Inc. to MCI &ted
fp$~yp-=?+ kreinbyrehnccisExhibit 10.03to aiommmcahw Inc.‘s CUTIUU Report on Fam 8-K datd June 24.1998.) (File No. O-21605).
Wamat isswl by Hypeion Telecamticatiiolls. Inc. to the Re@nmt&taiJune5,1998 (Irrearpmtsdhercinby-is Exhibit 10.04 to Hypaica Tel -lluications, Im.‘s currult Report on Form 8-K dated Jum 24. 1998.) (File No. o-21605).
pllrchsAgnemcntsmungAdel~commuoicatiotlsCorporatioaand Barclays Capital, Inc. dad June 29,1998 (kapoad bmiu by rcfcralce is Exhibit 10.01 to the Regiaanrs curfalt Report on Fom 8-K dated July 23.1998.).
U.S.Ux&mitingAgrcanentbctwca~theR~t~the Represamtives of the U.S. Undawritcrs named &rein, &ted August 12. 1998 CInoorporatcd haein by refcmcc is Exhibit 10.01 tothcFomr8-KoftheRceistrantfort&eventdatcdAueurt18, 1998.) (File No. O-16014).
Intematiooal Undenwiting Agreamt betwhen the Regismmt and the Lead Ivlanqcrs of the Managers named therm, dated August 12,
10.39
1998 (Incorporated herein by refw is Exhibit 10.02 to the Fom 8-K of the R-t for the event dataI August 18. 1998.) (File No. o-16014).
,- 10.40 Direct Purcl~~~ Agreanent between the Regis&ant and Highland Conunuuications, L.L.C., dated August 12, 1998 (hmrporatcd herein by reference is Exhibit 10.03 to the Form 8-K of the Registrant for the ewnt dated August 18,1998.) (File No. o-16014).
10.415 Adelphia Communications Corporaion 1998 Long-T- Incentive Combtion Plan (In& herein by nf&ce is Exhibit A to the Rcgiswant’s Proxy Sraancnt for the Annual Meeting of Stockholders on October 6, 1998.) (File No. o-16014).
10.42
10.43
10.44
- 10.45
10.46
10.47
10.48
10.49
---
10.50
Distribution Agreement dated as of August 3 1,199s among Syracuse Hilton Head Holdings, L.P.. Adelphia Communications Corporation and SHHH Acquisition Corp. (Incorporated herein by reference IS Exhibit 10.05totheForm 1O-QoftheRegistnmtforthequartera&d September 30,199s.) (File No. o-16014).
samnd Amendment to credit AgleaImL dared as of April 12,19%. among Chelsea Communi~ons, Inc., Kim Cablevision Inc., RobiwonIPlum Cablevision L. P.. the several b&s and furancial
institutions psrtia thereto. and Toronto Dominion (Texas), Inc. as
Admiktrativc Agent (Incorporated haGlbyrcfcrcaceisExhibit
10.06totheForm 1O-QofthcRcgiaantfortbequarterendai September 30.1998.) (File No. o-16014).
plxchwAgranalt~Adelphiacommunica!iollscorpotationand Barclllys capiu Iuc. (the “Initial -)datedNovanbcr6. 1998(Ineapansedbynfcrmceh+ainiaExhibit 10.01 tothe I@istnmt’s Currmt Rep& on Fasm 8-K. filed January 28.1999.) (File No. o-16014).
-Agt-tMlongAdelphia-~onMd Sdanc~ Smith Barney, Iuc., C&lit Sub First Boston Capomtio~ GOklIMllS&ThS&CO..L&MllBrothas,~.MdNlltiMSBMk Montgoaq-LLC(tbe”IniW -“) datai January
6,1999&uxpomWbyr&encehaciniaExhibit 10.02totk
Rcgistnmti Currat Repart on FVIIII 8-K, filal Januay 28.1999.)
(File No. O-16014).
craiitAg!anu&dataiuofDa#nkr W1998. maw-. L.P.asthe~w!r,variousfkwialinsritutions~tbc Lcnckrs,theBankofNovaSaxiaasthcAdmi&aiveAgcnt, NationrbanL.NAathe-onAgent,andTDWtia (usA)Inc.athesyndiatioaAgent~by~- herein is Exhibit 10.03 to th Regis&&s Curra RcpQt on Form 8-y filed January 28,1999.) (‘File No. O-16014).
Ite@mialRightsAgrqemmtMwgAeelphiaccMmuni~ons c$Rnl$~l~ &ldlng& L.P. and H@land holdings II dotal (IlcqmdbyrefauicehereulisExhibit 10.04 tothc~~clnrrnt~anF~8-K,filedJan~28.
1999.) (File No. o-16014).
UnderwitingAgreawa&taiJanwtry 11,1999ktwsarthe RegistmntandGolduum.Sacha&cO.(kaporatedbyrefuaux hacinisExhibit 1.01 totheRegi&ant’sCurrentRcportonForm S-K, filed January 13.1999.) (File No. o-16014).
-AgranaltbchvcentheRQjsmmtandH@hlandHo1dingsII
datedJanwuy 11,1999(InwpomtedbyrefcrcncehcreinisExhibit 10.01 to the Registrant’s Cunutt Report on Form 8-K, filed January 13. 1999.) (File No. o-16014).
Stock Purchae Ageanent dated Januaxy 28,1999 (Incorporated herein by reference is Exhibit 13 to Amcnduunt No. 3 to Schedule l3D filed February 8.1999 on behalf of FPL Group, Inc.).
.
10.51
10.52
10.53
10.54
10.55
.- 10.56
10.57
10.58 5-l~%SaicaDCaavertiiRefemdSt&U&nvritingAgnancnt CCMllhdOM~UlMdSBl~SmithBaray iII%g2L ‘veoftbcUn&rwri~datedApril26,1999 (IrApodbyd-hueinisExhibit 1.03totheCumat RepatonFma~KoftbeRe@tnmtfortbecventdatedApril28, 1999.) (File No. o-16014).
10.59
10.60
,-
10.61
Class B Voting Agreema& dated as of March 5,1999, among Adclphia
Con.ununications corporation, Leonard Tow, The Claire Tow Trust, and
the Trust Created by Claire Tow under data of Decmnber 10.1979 (bcorparated her& by mference is Exhibit 10.01 to the Registrant’s C-t Report on Form 8-K fm tbc event dated Febnwy22.1999.) (File No. o-16014).
RigasClassBVotingAgreenmt,datedasofMarch5,1999,among
Century Commtitions Corp., John Rigas. Michael Rigas, Timothy Rigas and James Rigas (Irmrporated berein by referen= is Exhibit 10.02 to tha Regis&ant’s Cumnt Report on Form 8-K for the ewnt
dated February 22,1999.) (File No. o-16014).
Purchase Agreement between Hypekn Telecomm unications. Inc. and the Initial Pmhasas named therein, dated as of Februmy 25, 1999. reearding Hypuion’s 12% Sada Wmiinwd Notes dw 2007 (Imqmtal buein by rafercnce is Exhibit 10.03 to tbc Registmt’s Cumait Report on Form 8-K for the event datai February 22.1999.) (File No. O-16014).
Pudase Agrrit between Hype+ Telmunications, Inc. and Ilighhd Holdings, &tad as of February 25.1999, ngardkg
Hypaion’s 12% SaGor Subordimti Notes due 2007 (kqomed
hacin by r&ram is Exhibit 10.05 to the Registmrs Current ReportoaFarm&Kf~theevmtdatedFebruary22,1999.)(Fiie No. O-16014).
ClassBC- stockPurchMeLetter~datedApril9,1999
bCtWCUIA&lpbiaklttlUkti0fIscapaatianaadHigbk3HOldkgs ~baeimbyfefnisExhibit 10.01 totk RegismbCheatRepatonFamS-Kfa&eevmtdadApd
9.1999.) (File No. O-16014).
ClamACammnStockUfdawritine~aumg~ conummi~capaatloqsalomoIlsmithBarneyInc,dtbeotber -~thacioas~vesoftkundenvTi~ datedApril23.1999 (lacapaatcdbyd--isExhibit
1.01 totbcCumntRqnrtanForm&ICoftbeRegismtfortbe
evmt dated April 28.1999.) (File No. o-16014).
7-7f8% Senior Nota Undcmiting Agmmnt among Meiphia -OM~MdChaKSeanitigbC..M repmalultiveoftkulldmvri~datedApril23,l999 -by-hereinisExhibit 1.02totkCurmlt
RepartanFmn&KoftbeRceistrantforthe~tdatalApril28, 1999.) (File No. M6014).
Indenture, dated M of Febmmy 26.1997, batwm~ the Registrant andBanLofMoatrralTrust~titbrrspccttotheRagismtk 9-7/S% Semior Nota Due 2007 (lnwpmwhereinbyreferenceis Exhibit 4.01 to the Rqgimant’s Currat Report on Form 8-K dated May 1.1997.) (File No. O-16014).
Indcnture,datedaaofAprill5,1996,khwnHypezion Tekcanmuai~tioas. Inc. and Bmk of Montd Truss Company (Irmporated by ret-&au is Exhibit 4.1 to Rcgimtion Statanatt No. 33346957 on Fom SA filed for Hypaion Tclaxmm lulications. Inc.).
FintSupplanentalIndennue.datcdasofSeptaaba11.1996, between Hyperim Telecommunications, Inc. and Bank of Montreal
,F- 10.62
IO.63
10.64
10.65
10.66
f---
10.67
10.68
10.69
10.70
10.71
Trust Company (Incorporated herein be referau is Exhibit 4.2 to Hypmion~~lecommuIucations,h~.'~ ~egiJtrati~nstatemcnt~~. 333-12619 on Form S-3, formerly on Form S-l.).
Indenture, dated as of November 12,19%, between Olympus CommuniCations. L.P.. Olympus Capital Coqnxation and Bank of Mont14 Trust Company (Incorporated hereio by reference is Exhibit
IO.02 to the Regi~rs Current Report on Form 8-K dated December 16. 1996.) (File No. O-16014).
Indenture, dated as of August 27,1997, with respezt to Hyperion Telecommunications, Inc. (“Hyperion”) 12-l/4% Senior Secured Nota
due 2004, between Hyperion and the Bank of Montreal Trust Company
(Incoqrated herein by reference to Exhibit 4.01 to Hyperion’s Currmt Report on Form 8-K dated August 27, 1997.) (File No.
o-21605).
Second Suppkmental Indenture, dated M of August 27,1997, between Hyperion and the Bank of Montreal Trost Company, regarding Hypexion’s 13% Senior Discount Notes due 2003 (Incorporated by reference herein to Exhibit 4.06 to Hyperion’s Cutxnt Report on
Form 8-K dated August 27,1997.) (File No. O-2 1605).
rndwlKe,datedasofSeptember25,1997,withreapecttothe Reg.&ma’s 9-l/4% Satiix Notes due 2002, between the Re@rant and the Bauk of Montreal Trust Company (hcorpomted hetin by reference is Exhibit 4.01 to the Regis@anrs ClllIent Report on Foxm 8-K dated September 25.1997.) (File No. o-16014).
Inda1ture,datedasofJaunary21,1998,withrespecttothe mrs 8-3&n Salk Notes due 2008, krwren the R@tzant
andtheBaukofMonwealTrustCompany(Jncqomtedbyrefkrence haeinisExhibit4.01tothe~rsclrrrrntRcpoetaaFonn 8-K dated Janumy 21.1998.) (File No. o-16014).
First Supplemental Indentwe, dated as ofNovember 12,1998, to Jamuxy 1998IndenturewithrespecttotbeRe@stnmrs8-3/8% SeniorNotesdue2008,bewentheRe&aautandtheBankof Momad TnutCcqany(Iacorpaated byref~hereinisE%hibit 4.01 totheReg&WsCurrentRepatonForm8-Khledm January 28.1999.) (Fiie No. o-16014).
Re@rationRightsAgrsmwatb&weaAdeQhiaCommuuications Corpodon ad the Initial Purcham, datai Novak 12.1998, rega&ngrheRe@&m1rs&3/8%SeaiorNotudue2008 ~byrefamcehcreiaisExbi~t4.02totbe Ftegistnm~s C-t Rcpat on Fcam 8-K filed on January 28,1999.) (File No. O-16014).
Itegimhon Rights Agmumt dated as of July 12.1999, ammg ~delphia, the Century Class B Holdas and Ms. Claire Tow (Inqmmd hain by ref- is Exhibit 10.01 to the Registrant’s C-t Report aa Form 8-K fa the event dated July 12,1999.) (FileNo. o-16014).
Te;-AIong Rights Agreemmt dated as of July 12.1999, among AdelphistheCenhlryClusBHoldas,Ms.CLainTowsndthe holders of Adeiphia Class B Comuwn Stock named therein (Imxxpomted herein by reference is Exhibit 10.02 to the Registrant’s Current Rcpart on Farm 8-K for the event dated July 12, 1999.) (File No. O-16014).
PurchaseAgreemcntdatedasofJuiy12.1999,beweeoAdelphiaand Citizens Cable Company (korpomted herein by refw is Exhibit 10.03 to the Registrant’s Current Report on Farm 8-K for the event dated July 12, 1999.) (File No. O-16014).
Underwriting A8reernent dated October 1.1999 regard@ be sale of 6,000,OOO shares of Class A common stock of Adelphia (Incorporated
10.72
herein by reference is Exhibit I .Ol to the Registmrs Quartaly Report on Form 1 O-Q for the quam ended Scptemkr 30.1999.) (File No. o-16014).
10.73
10.74
10.75
10.76
10.77
r--
10.78
10.79
10.80
10.81
10.82
10.83
Stock Pmhasc A@=fmt dated October 1,1999 between Adelphia Commuuications Corporation and Highland Holdings (Incorporated
herein by reference is Exhibit 10.01 to the Ragismmt’s Quarterly Report on Form IO-Q for the quarter a&d September 30,1999.)
(File No. O-16014).
Bank Credit Facility dated May 6,1999 among the Regismw other borrowers and the lenders named t&rein (Incorporated herein by
reference to Exhibit 10.01 to Current Report on Form 8-K for the evmt dated September 16.1999 filed by Adclphia Communicatiom Coporation) (File No. O-16014).
Third Anldmalt to the Olympus cornmuni~lms, L.P. Samnd Amended and Restated Limited Parhmhip Agrcana& datal Gctobcr I, 1999 (lncmpomted h&n by refermcc is Exhibit 3.8 to Form IO-K of OlympusforfiscaiyearcndedDecember31,1999.)(FileNo. 333-19327).
Amulded credit AgEmalt dated as of March 29,19%, among Hi&land Video Associates L.P.. Telesat Acquisitiou Limited
Pmtnaship, Global Aquisitian Partnas, L.P., th various fhncialinstitutjansaspartiathercto,B8nkof~as Liyldiu4tion agent, chaniul Bulk as documentation aga& and the BankofNovaScotiaasadmi&mk~&cmpomdhenainby refaulce is Exhibit 10.37 to Adelphia canmunications coIpomtio!l’s Cumnt Report on Form 8-K dated June 19.19%.) (File No&16014).
FirstAma&mt,datedasofJuly31.1998fortheAumdedawi FmatalcraMAgwmaltdataiofasMarch29,1996(Incaponted hercinbyr&mceisExhibit 103toOlympus’Fom8-Kdatcd
Aprila
1999.) (File No. 333-19327).
Ihkmption Agtwmlt batwal01ympus communida LPand CableGP,Inc.,datedasofCktoberl, 1999&mrpmaiby rcf- h&n is Exhibit 10.6 to Form 10-K of Olympus for fwcal
year-- 31,1999.) (File No. 333-19327).
UndenwitingAgreumtdatedasofNova&er23,1999amongAdelphia BuainessSoluiicms,lnc.,SalanonSmithfI~~.andtbesevccal OtkUndawritasMUX!dtkCiD (lmapwdhaeinbyrefbramx isExbibit 1.01 toA&lpbiaBusimsSci1utio&Fam&Kfortk watt dated Novanb~ 23.1999.) (File No. o-21605).
StockPumh~eAlpsemerrtdrtsdNovunbcr23.1999batweenAdelphia BusiwsSohkam,k~~.mdAMpbiaCammunicatiioasCorpaaciaa (Incoapaated hadn by ref- is Exhibit 10.01 to Adelpbia Business Solutio& Focm 8-K for tba evmt datedNovember 23. 1999.) (File No. &21605).
Ama&dBankCrcditFa&y@mporatedbyrefawehcrcinis Exhibit 10.1 to FronticrVisicm Opaming Pm, L.P.‘s and FrontierVision Capital corpmtion’s R@@ation Strtmrart on Form S-l, Rcgimuim No. 333-9535.).
AmauhcntNo. 1 toAmaxkdBmkCrrditFacility@corpomtcdby nferaw herein is Exhibit 10.14 to FrontierVision Opaating Partners. L.P.‘s and FrontierVision Capital Corporation’s Registmtion StatemMt on Form S-l, Rcgismion No. 333-9535.).
consent and Arnadumt No. 2 to Amended Bank Credit Facility (Inmpomted by referaxe herein is Exhibit 10.15 to FrontierVision Operating Partnas. L.P.‘s and FrontierVision Capital Coqmation’s Quarterly Report on Form 1OQ File No.
333-9535 for the quarter ended Septank 30,19%.).
Am~ded Credit Facility (Incorporated by reference herein is Exhibit 10. I8 to FmntieAkion Holdings, L.P.‘s and FrontierVision Holdings Capital Coxporation’s Annual Report on Form 10-K, File
No. 333-36519 fix the year ended December 31,1997.).
Indenture dated as of October 7.1996, among Front&Vision Operating Partners. L.P.. FrontierVision Capital Corporation and Colorado National Ba& as Tmstee (Inuxpomed by reference herein is Exhibit 4.1 to FrontierVision Opeming Partners, L.P.‘s and FrontierVision Capital Corpomtion’s Quaxterly Report on Form 10-Q. File No. 333-9535 for the quarter ended September 30, IS%.).
Indenture dated as of Septanber 19,1997, among FrontierVision
Holdings, L.P., FrontierVision Holdings Capital Corpomion and
U.S. Bank National Association d/b/a Colorado Natioml Bank, as Trostee (lmqmmed by refamce herein is Exhibit 4.2 to FrontierVision Holdings, L.P.‘s and FrontierVision Holdings Capital
Corpomtion’s Ibqismim Statemau on Fom S-4. Registration No. 333-36519.).
Indmture dated as of December 9.1998, amoog FrontierVision Holdings, L.P., FrontierVision Holdings Capital II Corporation and U.S. Bank National Amciatim, as Tnmee (Incorparated by
reference ha-ein is Exhibit 4.5 to Fmnti~Viaion Holdings, L.P.‘s and Fronti~Vision Holdings Capital II Cmpomtion’s Ragkmion Statanmt on Fom S-4, Regimtion No. 333-75567.).
PurchwA@!mentdatedasofDeumbu 2.1998, by and
FrontimViion Holdings, L-P., FmnticrViion Holdings Capiul II Corpartion d J.P. Mmgaa Sam&s, Inc. md Chasa Secutitia Inc.,asInitiaIpurcbucn (Inqmabyrrfamcehaminis Exhibit 4.6 to FrontieViia~ Holdings, L.P.‘s ami Fmntidhion Holdings Capital II Wpomtion’a Regismion S-t an Farm !3-4. Rcgistratiaa No. 333-75567.).
RegimtkRightsAgremmtdateduofDawber 9,1998,byrmd antang Front& Vii Holdings, L.P., FronticzVisia~ Holdings
CapitdJICapmtimmdJ.P.McugmSecuitiaInc.,dChac
seculiti~IIlc.,asbitial-~byrrfaaw;c herein is Exhibit 4.7 to FrantkVision Holdinga, L.P.‘s and
FnmtkVish Holdinga Cqiul II caporation’s Rqismion
Sbtarmt on Fom !+I. Rq@ratiom No. 333-75567.).
indentm,datedasofNovembar15,1988,byandbdwxaCumy communicatioascap.(“century;nowknoultassva Comrntia~~, Inc.) and tk Bank of Mantreal Tmst Coupmy, (w Trustee(FikdasExhibit4(l)to- No. 7toCa1t1q’s
Registmim S- m Fam S-l (File No. 33-21394), which is
illaqmdbaeinbyrefaurc.).
Inden~dateduofcktober 15,1991,byaudlzctwencenturyand theBankofMoatralT~Compny,MTnrrtec(FiledasExhibit
4.2 to Amadmatt No. 2 to Crntq’s Itegismtion Statement on Form
S-3 (FileNo.33-33787),whichisincqmted hereinby reference.).
FintSupplanentrl~datoda?ofOctokr15,1991,byand ~Cenarryazrdthe~ofM~~TnutCam~y,ksTnutcc (Filed as Exhibit 7(2) to Centu@s current report oo Fom 8-K datedoctober17,1991 andinumpomtaihereinbyreference.)(File No. O-16899).
10.84
10.85
10.86
10.87
10.88
10.89
10.90
10.91
10.92
10.93 Indenture, dated as of February 15.1992, by and betwu~ Centmy
and the Bank of Amaica National Tnut and Savings Association, as Trustee (Filed as Exhibit 4.3 to AmcndmentNo.2toC~s
Registration Statemat on Form S-3 (File No. 33-33787). which is incorporated herein by reference.).
10.94
,-
10.95
10.96
10.97
10.98
10.99 .-’
10.100
10.101
10.102
10.103’
.---
10.104’
,
” ‘First Supplcnmtal Indamrc. dated as of February IS. 1992, by and ktwaen Century and the Bank of Anmica National Trust and Savings Associrti~n, as Trustee (Filed as Exhibit 4(t) to C-Q@ Annual RepmtonFom 10-Kforthcfiscalyearaulcdh4ay31,1992and
incarpaated herein by r&ram.) (File No. o-16899).
Second Supplemental Indame, dated as of August 15,1992, by and between Century ad Bank of America National Trust and Savings AsociatiaR as -hstec (Filed 8s Exhibit 4(u) to calturys Annual RcportonFom IO-Kforthcfiscalyeara&dMay31,1992and
incorporated kein by rcf-.) (File No. O-16899).
ThirdSupplanamlIndame,datalasofApril1,l993,byand bctwaco Centuy and Bank of Amaica National Trust and Sav@s Association. as Trustee (‘Filed as Exhibit 4(v) to Centla)/s bual RcportonFom10-Kfortkfiscalycara&dMay31,1993and
imrporatal herein by ref-.) (File No. o-16899).
Fourth Suppkmental Indame, dated as of March 6.1995, by aud bctweenCentwymdBankofAmaicaNathnlTmstaudSavings Association, as Trustee (Filed as Exhibit 4(w) to Centi@ Annual
RcportonFarm10-Kfarthc~yearcndedMay31.1995,and
ixmpmad herein by rcf-acnce.) (Fila No. 046899).
Fifth Supplcumtal Indamrc, dated as of January 23.1997, by and bctwam Gamy and First Trust of Cal&G, National Associatia - tmstcctoBenkofAmuicaNatiooaiTrust andSavingaAmciation,asTmstee(FiledasExhibit4.10to Camqk~mlRq.mtmFom10-KfartbcfiacalycarawkdMay 31,1997,andix~qmkdbaeinbyrrfaaw;t.)(FileNo. O-16899).
sixthsupphxatd~datcdrrofseptankr29.1997. bchveenCamymdFirstTmtofCaM~Ntiorml Asuciatia - ttusetoBnnkofAmaicaNationalTmst
and!WingsAsaiati~nsTrustce(Fi&dasExhibit 10.2to Camq’sQuatdyRqxataaFomlO-Qfcrtkqumdypcriod adaiAugust31,1997,mdiacqa&dhaeinby~~.)(File No. o-16899).
SeventhSupplamtal-datedasofNovanbcr13.1997 bdweenC!uWymdFimtTmstofCalif~Natid . Assocratlassucccmrtnutecto~ofAmricaNtidTrust
andSaviagsAmo&i~rlTNnet(FiledasExhibit4.1 to
CcntWsQuataIyRejmmFarm1O-Qforthequmtedyperiod cmkl Novank 30.1997, and imqmtad hain by rcfaunx.) (File No. o-16899).
Eigbtb Supphmaml In&me dared u of lkcmk 10.1997 betarccn Century and First Tmat ofCdifam@ Natianal Association, u Trustee@tmponWbyr&mcehaeiniaExhibit4.13toForm 10-KofCentnryfa6mlycarcndalMay31,1999.)(FileNo. o-16899).
In&nture,datedasofJmurylS, 1998behvwCamrymdFirst Trust of Cdifomia, Nationd Asmciuioo, as Tnutec (Fild as Exhibit 4 to Catu@ Rqistmtim Statmmt on Fam W! (File No. 33347161). which is imqmtad herein by rcfbmce.) (File No. O-16899).
Employment Apeanent, dated as of January 1,1997. - Gamy
and Scott N. Schneider (Filed as Exhibit 10.4 to Cent Annual RcportonFom1O-Kfortbefiscalycarc&dMay31,1997,and incorporakd bein by refaarce.) (File No. O-16899).
1994 Stock Option Plan of Gamy (Filed as Exhibit 10(v)(3) to Cmha)rsAnnualRepo~onF~10-KfortheGscalyear~~ay 3 1, 1995, and ti~vti herrin by mfmce.) (File No.
I
10.105
_c
10.106
10.107
i
10.108*
10.109.
10.110*
5
10.111*
10.112
10.113
1: 10.114
o-16899).
Amadmmt No. 1 to Management Agrremmt and Joint Venture Agreement (Century ML Venture), dated September 2 1.1987, between Century Texas and ML Media Partnas, L.P., a Delaware limited psrtncrship (Filed as Exhibit lo(w) to Cam@ Annual Report on Form 10-K for
thcfkalycaendaiMay31.1989sndincqmratedheretiby ref-.) (File No. O-l 6899).
hhagamt Agreanent and Joint Vcature Agreement (Century-ML Radio
Venture), dated as of Fcbmary 15, 1989, between Century Texas and
h4L Media Partna-s. L.P.. a D&ware limited partnership (Filed as Exhibit 10(x) to Ccntuq’s Annual Report on Foxm 10-K for the kcalycarendedMay31.1989andincoqxmtedhemnby refcrencc.) (File No. O-16899).
Credit Agrcanent dated as of April 15.1997 amoxq Citizens Century Cable Television Venture, Bank of Amaica, National Trust and Savings Associatioq as Syndication Agenf and Scciete Gamsl. as
Asenf c- Bank, N.A., The Fimt National Bauk of Boston, LTCB Trust Company, and PNC BanL National Auociati~ as Co-Agents, and each of the bank parties thereto (Filed (u Exhibit 10.4ltoCm~sAnnualR~onForm10-Kforttsetiscalyear mdedh4ay31,1997,andimqoratedhcrcinbyrcfermce.)(File
No. o-16899).
JZmploymcnt Apement, dated as of January 1.1997. ktwccll Century sndBcmardP. GallagM(FiledasExhibit 10.1 toCaltl@s
QuartarlyRqmrtonForm1O-QfartbequarMypexiodendcdAugust
31,1997,andkqomkdhcrcinbyref-.)(FileNo.
O-16899).
M&cdtiaaAgaunul~datadu0fJuna1,1998*bammcmtury andScottN.Schruida(FilaiasExhibit10.44to~rAunusl RcpoctonForm1O-Kfoatkfkalyeara&dIvlay31,1998and umqmmed by ds-mce.) (File No. 046899).
Mod&atiaaAgraamt,datcdasofJuae1,1998,bchwmCentury and Banard P. mlagbar (Filed as Exhibit 10.45 to Cam@ AmualRqortonFom lo-Kfatbefiscalyaarat&dMay331.1998 ad inwpon@ by reference.) (File No. O-16899).
EmploynmtAgnanenfdatedasofJuly 1,1997,~Centuryand LumardTow(FiladasExhibit 10.48toCamq’sAmalRqarta~
Fcmn 10-KforthafiscalyaaraxkdMay31.1998andi1xqmW by reference.) (File No. Gl6899).
Agremmt and Ph of Merger, datai M of July 2,1998, bctuecn caltalnial cellular Corp. and ccw Afapiaiticm carp (Filed as Exhibit 10.49 to Centn@i Annual F&port on Form 10-K for the flscalycarauiedMay31,1998andiImrpmtadbyrrfaence.) (File No. o-16899).
NinthSupplanmtalIndame,dateduofOctobcrl, 1999betwcen
hahova Caprrmnicatiaaa inc. (“Arahova”) ad U.S. Bank Tmst National A.ao&tim (the “Trustee”), B trustcetoBankof
Amtica National Tmst and Savings -on, to the Indame. 0 da&edasofFebmy 15,1992bamcnCamyCommmi~onscOp. andthCTlUS@ @mqmaM haein by referam is Exhibit 4.0 1 toForm 1O-QforkahovaforthcqutcrendedNovcmber30,1999.) (File No. O-16899).
FintSupplaemtal~~,drtedasofOdokrl,l999~ Arahova Commuaicationu. inc. and U.S. Bank Trust National Associatioo (the “Tmstee=), to the Lodame, dated as of January 15.1998 bctwun Century Communimtim Corp. and the Tmstee (Incorporated herein by refermu is Exhibit 4.02 to Form 10-Q for Arahova for the quarta arded November 30, 1999.) (File No. O-l 6899).
IO.115
.-
10.116
10.117
10.118
10.119
10.120
10.121
I-
21.01
23.01
27.01
99.01
Agrcement of Limited Partna&ip of Ceatury-fCI Califomia
communications, L.P., dated 8s of December 7, 1999 (Filed herewith.).
Credit Agrmmt dated as of December 3.1999 among Cemry-TCI Califi~ L.P., Cut&l Lender& societe Gumak aud Deutsche
Bank ScMities Inc., as Co-Syndication Agents, Salomon Smith Barney Inc. M Lead Amanger ad Sole Book Manager, Mellon Bank, N.A. as Bon Agent and Citibank N.A. as Administrative Agent (Filed ham&h.).
Agreement and Plan of Reopeaniprian dated as of December 8.1999,
by and among Cabkviaia~ oftbe Midwst, Inc., Cabievmion of rbc
Midwest Holding Co., Inc. Adelphia Gamal Holdings II, Inc. and ’ the Regismm (Filed herewith).
AssetPwchaseAgmamtdatedasofDecunber8,1999,byandamaq Telemma, Inc., Cablevisim of Clevclmd, L.P. and the Regismnt (Filed hawith) ’
Revolving Credit awI Tam Lum Agmarmt d&al as of October 5, 1999, among HaIml Comlnrmicatims Corp. the subsidiary Guamltm namdtlluei&alsdtheAgelltsaMlLmdusnamedtherein(Filed
haewib).
UndenwitiugAgrsancntdated~ofNovembqIO, 1999,amongthc U&UWlbSaad~vCSIl8I&thC&lasdthCRCgi&aU~ regardinethe9-3@%SabNotesdne2009ofthcRe&tmt(Filed~ IUMitlL).
Ammdmmt No. 2 to - Credit Facility of FmntkViskm opaatingParmaqL.P.,datedasofJuly15,1999(Tmqmed hereinbyrrf~ir~1031toFam10-KofFrmtiaVisioa
Holdings, L.P. fa the yarr ahd Decunk 31.1999) (PileNo. 33346519).
Consmt of Ddoitta k Tarwbe LLP (-F&d herewith).
Mati~by-iI&OthiSAlllllb8lRCpOIto1F~ 1 O-K of tk Olympus Cammbtia~~, L.P. and Olympw Capital CoqmtionFam lo-KfatheyurexkdDawber31.1998.
Denotesmanagemaitalatraetaald
:equired to be identified by Itan 14(aX3). =m=-Yplmr~laraneanenu
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<SEC-D0CUMENT>/in/edgar/work/0000796486-00-000016/0000796486-00-000016.txt : 2000081 <SEC-HEADER>0000796486-00-000016.hdr.sgml : 20000815 ACCESSION NUMBER: 0000796486-00-000016
CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630
FILED AS OF DATE: 20000814
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ADELPHIA COMMUNICATIONS CORP
CENTRAL INDEX KEY: 0000796486 STANDARD INDUSTRIAL CLASSIFICATION: [4841
1 IRS NUMBER:
STATE OF INCORPORATION: FISCAL YEAR END: </COMPANY-DATA>
FILING VALUES: FORM TYPE:
Y' SEC ACT:
SEC FILE NUMBER: FILM NUMBER: </FILING-VALUES>
</BUSINESS-ADDRESS>
BUSINESS ADDRESS: STREET 1:
CITY: STATE:
ZIP:
BUSINESS PHONE:
232417713
DE 1231
10-Q
000-16014
700134
1 NORTH MAIN STREET
COUDERSPORT PA
16915
8142749830
MAIL ADDRESS:
STREET 1: ONE NORTH MAIN STREE CITY: COUDERSPORT
STATE: PA ZIP: 16915
</MAIL-ADDRESS> </FILER>
</SEC-HEADER> <DOCUMENT>
<TYPE>lO-Q <SEQUENCE>1
<FILENAME>OOOl.txt <TEXT>
,.*I.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 2000
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from to
, Commission File Number: o-16014
ADELPHIA COMMUNICATIONS
CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2417713
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One North Main Street Coudersport, PA
(Address of principal executive offices)
16915-1141
(Zip code)
814-274-9830 (Registrant's telephone number including area code)
,e Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
At August 14, 2000, 121,561,056 shares of Class A Common Stock, par value $.Ol per share, and 19,235,998 shares of Class B Common Stock, par value $.Ol per
share, of the registrant were outstanding.
<PAGE>
<TABLE>
<CAPTION>
ADELPHIA COMMUNICATIONS COPPORATION
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Ic- Item 1. Financial Statements
<s>
Condensed Consolidated Balance Sheets - December 31, 1999 and
June 30, 2000...............................................................
Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 1999 and 2000......................................................
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1999 and 2000......................................................
Notes to Condensed Consolidated Financial Statements.........................
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................................................
Item 3. Quantitative and Qualitative Disclosures about Market Risk .................
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ..........................................................
Item 2. Changes in Securities and Use of Proceeds ..................................
Item 3. Defaults Upon Senior Securities ............................................
Item 4. Submission of Matters to a Vote of Security Holders ........................
Item 5. Other Information ..........................................................
Item 6. Exhibits and Reports on Form 8-K ...........................................
SIGNATURES..........................................................................
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except share amounts)
ASSETS:
<s> Property, plant and equipment - net
Intangible assets - net Cash and cash equivalents Restricted cash
U.S. government securities - pledged
Investments
Subscriber receivables - net
Prepaid expenses and other assets - net Related party receivables - net
Total
LIABILITIES, PREFERRED STOCK, COMMON STOCK AND :- OTHER STOCKHOLDERS' EQUITY:
Subsidiary debt
Parent debt Accounts payable
Subscriber advance payments and deposits
Accrued interest and other liabilities
Deferred income taxes
Total liabilities
Minority interests
Adelphia Business Solutions redeemable exchangeable preferred stock
13% Series B cumulative redeemable exchangeable preferred stock
Commitments and contingencies (Note 8)
Convertible preferred stock, common stock and other stockholders' equity:
8 l/8% Series C convertible preferred stock ($100,000 liquidation preference) 5 l/2% Series D convertible preferred stock ($575,000 liquidation preference)
Class A common stock, $.Ol par value, 1,200,000,000 shares authorized,
113,051,118 and 113,218,618 shares issued, respectively
Class B common stock, $.Ol par value, 300,000,000 shares authorized,
10,834,476 and 16,735,998 shares issued and outstanding, respectively Additional paid-in capital
Accumulated deficit Accumulated other comprehensive income (loss)
Treasury stock, at cost, 1,091,524 shares of Class A common stock and 20,000 shares of 8 l/8 % Series C convertible preferred stock, respectively
Convertible preferred stock, common stock and
other stockholders' equity
Total
See notes to condensed consolidated financial statemen
</TABLE>
<PAGE>
<TABLE> <CAPTION>
ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARI
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UnaU
(Dollars in thousands, except per share amounts)
Three Months Ende June 30, _---__---------_~--_~~~-
1999 20 --------------- --------
<s> /-. Revenues
<c> <c>
$ 218,786 $ 70
Operating expenses:
Direct operating and programming Selling, general and administrative
Depreciation and amortization Merger and integration costs
Total
72,635 26
61,616 17 63,736 21
_-_____-__----- --------
197,987 64 --------------- --------
Operating income 20,799 .------- ------ 6 -- --------
Other income (expense): Interest expense - net
Equity in loss of Olympus and other joint ventures Equity in loss of Adelphia Business Solutions
joint ventures
Minority interest in net losses of subsidiaries Adelphia Business Solutions preferred stock dividends
Priority investment income from Olympus Gain on asset swap
Other
(52,215) (20 (23,074) (
(3,291) 13,146 3
(7,860) ( .12,000
3
---__---___---_ ---__---
Total (61,294) (14 --------------- ---__---
..- Loss before income taxes and extraordinary loss (40,495) (8 Income tax benefit 1,149 1 --------------- --------
Loss before extraordinary loss
Extraordinary loss on early retirement of debt
(39,346) (7
(1,438) ---_----__----_ ---____-
Net loss
Dividend requirements applicable to preferred stock ------
(40,784
(6,500 ,-------
Net loss applicable to common stockholders (47,284
Other comprehensive loss - unrealized loss on available-for-sale securities (net of income tax
benefit of $12,100 and $16,079)
(7
(1 - --------
(8
Comprehensive loss $ (47,284) $ (10 --------------- -------- --------------- --------
Basic and diluted net loss per weighted average share of
common stock before extraordinary loss $ (0.79) $ Basic and diluted extraordinary loss on early retirement of
debt per weighted average share of common stock (0.02) ---_----_------ ---_----
Basic and diluted net loss per weighted average share
,-- of common stock $ (0.81) $ --------_------ ---_----------- --------
Weighted average shares of common stock
outstanding (in thousands) 58,141 12
See notes to condensed consolidated financial statem
</TABLE> <PAGE> <TABLE>
<CAPTION>
ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaud
(Dollars in thousands)
Cash flows from operating activities:
<s> Net loss
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation and amortization
Noncash interest expense
Noncash dividends
Equity in loss of Olympus and other joint ventures
Equity in loss of Adelphia Business Solutions joint ventures
Gain on asset swap and other Minority interest in losses of subsidiaries
Extraordinary loss on early retirement of debt
Decrease in deferred income taxes
Changes in operating assets and liabilities, net of effect. of acquisitions:
Subscriber receivables
Prepaid expenses and other assets
Accounts payable Subscriber advance payments and deposits
Accrued interest and other liabilities
Net cash provided by (used for) operating activities
Cash flows from investing activities:
Acquisitions
Expenditures for property, plant and equipment Adelphia Business Solutions investments in joint ventures and other
Investments in other joint ventures
Sale of U.S. government securities - pledged Investments in restricted cash
Amounts invested in and adv,lnced to related parties Other
Net cash used for investing activities
Cash flows from financing activities:
.- Proceeds from debt
Repayments of debt Costs associated with financings Premium paid on early retirement of debt
Net proceeds from issuance of convertible preferred stock
Net proceeds from issuance of Class A common stock Net proceeds from issuance of Class B common stock ,- Payments to acquire treasury stock
Preferred stock dividends paid
Net cash provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
See notes to condensed consolidated financial stateme
</TABLE>
<PAGE>
ADELPHIA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except per share amounts)
The accompanying unaudited condensed consolidated financial statements
of Adelphia Communications Corporation and its majority owned subsidiaries ("Adelphia" or the "Company") have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission.
In the opinion of management, all adjustments, consisting of only
normal recurring accruals necessary for a fair presentation of the financial position of Adelphia at June 30, 2000, and the results of operations for the
three and six months ended June 30, 1999 and 2000, have been included. These condensed consolidated financial statements should be read in conjunction with
Adelphia's consolidated financial statements included in its Annual Report on
Form 10-K for the year ended December 31, 1999. The results of operations for
the three and six months ended June 30,. 2000 are not necessarily indicative of
the results to be expected for the year ending December 31, 2000.
1. Significant Events and Items Subsequent to December 31, 1999:
On January 10, 2000, Adelphia Business Solutions, a majority-owned
subsidiary of Adelphia, entered into an agreement with Williams Communications, Inc. ("Williams") to purchase an indefeasible right of use ("IRU") for a total
of 4,543 route miles of fiber in the western United States at a cost of approximately $23,000.
On January 21, 2000, Adelphia closed the previously announced direct
placement of 5,901,522 shares of Adelphia Class B common stock with Highland
2000, L.P., a limited partnership owned by the Rigas family. Adelphia used a portion of the proceeds of approximately $375,000 from this direct placement to
repay borrowings under revolving credit facilities of its subsidiaries, which .--- may be reborrowed and used for general corporate purposes.
During January 2000, Adelphia Business Solutions entered into an IRU
agreement with Level 3 Communications ("Level 3") for approximately 3,100 long-haul route miles throughout much of the western United States. In addition,
Adelphia Business Solutions entered into an agreement with Level 3 to acquire
access to approximately 750 miles of metro duct in the following central -c business districts: Chicago, Cincinnati, Dallas, Denver, Detroit, Los Angeles,
Orlando, Phoenix, San Diego, San Francisco, San Jose and Seattle. The total cost of the agreement is approximately $54,600.
During April 2000, Adelphia Business Solutions was the SUCCeSSfUl bidder, in the Federal Communications Commission ("FCC") auction, for 177
licenses in the'39 Ghz spectrum covering approximately 164,000,OOO Points of
Presence ("POPS"). Adelphia Business Solutions has deposited $15,000 of the
total $77,605 purchase price with the remaining balance due at the time the
licenses are granted. On July 31, 2000, a petition to deny was filed against Adelphia Business Solutions. This petition does not seek to deny the grant of
the licenses to Adelphia Business Solutions, but instead, seeks only to make such grant subject to petitioners' previously dismissed applications seeking
spectrum covered by Adelphia Business Solutions licenses. Adelphia Business Solutions believes the petition is without merit and intends to vigorously
oppose it and Adelphia Business Solutions currently believes its licenses will be granted during the third or fourth quarter of 2000.
On April 14, 2000, Adelphia closed on a $2,250,000 bank credit
facility on behalf of certain subsidiaries and affiliates. The credit facility
consists of a $1,500,000 8 3/4 year reducing revolving credit loan and
a $750,000 9 year term loan.
<PAGE>
On May 1, 2000, Adelphia and AT&T completed a swap of cable systems
serving approximately 13,000 basic subscribers. As a result of this transaction,
the Company recorded a gain of approximately $37,600.
On May 3, 2000, Adelphia Business Solutions entered into a contract to
/c- build an advanced technology infrastructure and to provide communication
services to the Commonwealth of Pennsylvania state government. As part of the
contract Adelphia Business Solutions was required to place $75,785 into a
restricted account to be used for completion of the technology infrastructure.
On June 13, 2000, Adelphia announced that it had entered into
agreements regarding the acquisition of cable systems, including GS Communications, Inc., which will add approximately 155,000 basic subscribers to
its Virginia cluster for an aggregate purchase price of $836,000. It is currently anticipated that these transactions, which are subject to customary
closing conditions and the receipt of regulatory approvals, will close in the first quarter of 2001.
On July 3, 2000, Adelphia closed the previously announced direct
placement of 2,500,OOO shares of Adelphia Class B common stock with Highland
2000, L.P., a limited partnership owned by the Rigas family. Adelphia used a
portion of the proceeds of approximately $145,000 from this direct placement to repay borrowings under revolving credit facilities of its subsidiaries, which
may be reborrowed and used for general corporate purposes.
On July 5, 2000, Adelphia acquired Prestige Communications of NC, Inc. These systems served approximately 118,250 subscribers in North Carolina,
Virginia and Maryland at the date of acquisition and were purchased for an aggregate price of approximately $700,000. The acquisition was accounted for under the purchase method of accounting. Accordingly, the financial results of
the acquired systems will be included in the consolidated results of Adelphia effective from the date acquired.
During July 2000, Adelphia Business Solutions consummated a purchase
+- agreement with a subsidiary of Allegheny Energy, Inc. ("Allegheny") to acquire interests in a jointly owned network located in State College, Pennsylvania.
Consideration paid to Allegheny was 330,000 shares of Adelphia Business Solutions' Class A common stock. The purchase increased Adelphia Business
Solutions' ownership in this network to 100%. The acquisition will be accounted
for under the purchase method of accounting. Accordingly, the financial results
of the acquired network will be included in the consolidated results of Adelphia .- Business Solutions effective from the date acquired.
On August 2, 2000, 80,000 shares of Series C convertible preferred stock held by Highland Holdings, a general partnership owned by the Rigas
family, were converted into 9,433,962 shares of Adelphia Class A common stock.
In addition to the acquisitions mentioned above, prior to
August 14, 2000, Adelphia completed certain other cable system acquisitions.
These acquisitions served approximately 16,000 basic subscribers at the date of
acquisitions primarily in Colorado, New York and Maine and were purchased for an
aggregate price of approximately $70,000, comprised of Adelphia Class A common
stock and cash. These acquisitions will be accounted for under the purchase method of accounting. Accordingly, the financial results of the acquired systems
will be included in the consolidated results of Adelphia effective from the date acquired.
Adelphia completed several significant acquisitions during the quarter
ended December 31, 1999. Reference is made to Note 1 to the consolidated
financial statements contained in the Annual Report on Form 10-K for the year ended December 31, 1999 for additional information regarding these acquisitions.
<PAGE>
The following unaudited pro forma financial information assumes that
the acquisitions that were consummated during the quarter ended December 31, 1999 had occurred on January 1, 1999. -
<TABLE>
<CAPTION>
Three Months
Ended
June 30,
1999 _______----------
<s>
</TABLE>
Revenues
Loss before extraordinary loss
Net loss Basic and diluted net loss per weighted average
share of common stock
<c>
$ 614,710
(110,366)
(118,250)
(1.03)
The above financial information excludes the gain on the sale of
discontinued operations of Centennial Cellular and the Australian operations of
Arahova Communications, Inc., of approximately $314,000 recognized by the acquired business, during the six months ended June 30, 1999.
2. Debt:
Debt is summarized as follows: <TABLE>
<CAPTION>
- Subsidiary Debt:
D
http://www.sec.gov/Archives/edgar/data/796486/0000796486-00-0000 16.txt
<s> <c
Notes to banks and institutions
13% Senior Discount Notes of Adelphia Business
Solutions due 2003
$
12 l/4% Senior Secured Notes of Adelphia Business
Solutions due 2004
12% Senior Subordinated Notes of Adelphia Business
Solutions due 2007
10 5/8% Senior Notes of Olympus due 2006 11% Senior Subordinated Notes of FrontierVision
Due 2006 11 7/8% Senior Discount Notes Series A of
FrontierVision due 2007
11 7/B% Senior Discount Notes Series B of FrontierVision due 2007
9 l/2% Senior Notes of Arahova due 2000 9 3/4% Senior Notes of Arahova due 2002
Zero Coupon Senior Discount Notes of Arahova due 2003
9 l/2% Senior Notes of Arahova due 2005 8 7/8% Senior Notes of Arahova due 2007
8 3/4% Senior Notes of Arahova due 2007 8 3/8% Senior Notes of Arahova due 2007
8 3/8% Senior Notes of Arahova due 2017 Senior Discount Notes of Arahova due 2008
Other subsidiary debt
Total subsidiary debt $ ==
</TABLE> <PAGE> .+--
The following information updates to June 30, 2000, unless otherwise
noted, certain disclosures included in Note 3 to Adelphia's consolidated financial statements contained in the Annual Report on Form 10-K for the year
ended December 31, 1999.
<TABLE>
<s>
Weighted average interest rate payable by subsidiaries
under credit agreements with banks and institutions
Percentage of total indebtedness that bears interest at fixed rates for at least one year
</TABLE>
<TABLE>
<CAPTION>
Parent Debt:
Dece
<s>
10 l/4% Senior Notes due 2000 9 l/4% Senior Notes due 2002
8 l/8% Senior Notes due 2003 10 l/2% Senior Notes due 2004
,- 7 l/2% Senior Notes due 2004
9 7/8% Senior Notes due 2007 8 318% Senior Notes due 2008 7 3/4% Senior Notes due 2009
7 7/8% Senior Notes due 2009
<c>
$
9 3/8% Senior Notes due 2009 9 7/8% Senior Debentures due 2005
9 l/2% Pay-In-Kind Notes due 2004
Total parent debt $ -_----- _------
</TABLE>
<PAGE>
3. Investments:
<TABLE>
<CAPTION>
Adelphia's nonconsolidated investments are as follows:
Dece
-------
Investments accounted for using the equity method: --------------------------------------------------
Gross investment: <s>
Adelphia Business Solutions' joint ventures
Mobile communications
Media venture Other
<c> $
-------
Total
Investments accounted for using the cost method:
Niagara Frontier Hockey, L.P. Benbow PCS Ventures, Inc.
Convertible preferred stock
Interactive ventures
Other
Total
Investments accounted for as available-for-sale securities:
Common stock warrants
Common stock
Total investments before cumulative equity in net losses Cumulative equity in net losses
Total investments
</TABLE>
-------
$ =======
In July 2000, certain members of the Rigas family closed on their *- agreement to acquire all the voting interests of Niagara Frontier Hockey, L.P.
("NFHLP") . All necessary third party approvals of the agreement have been
received.
4. Related Party Receivables - Net:
.- Related party receivables - net represent advances to and management fees and other fees from managed-partnerships, the Rigas family and Rigas family
controlled entities. No related party advances are collateralized.
5. Net Loss Per Weighted Average Share of Common Stock:
Basic net loss per weighted average share of common stock is computed
based on the weighted average number of common shares outstanding after giving effect to dividend requirements on the Company's preferred stock. Diluted net
loss per common share is equal to basic net loss per common share because the
Company's convertible preferred stock and outstanding stock options had an antidilutive effect for the periods presented; however, the convertible
preferred stock and outstanding stock options could have a dilutive effect on earnings per share in future periods.
<PAGE>
6. Supplemental Financial Information:
Cash payments for interest were $130,298 and $337,197 for the six
months ended June 30, 1999 and 2000, respectively. Accumulated depreciation of
property, plant and equipment amounted to $1,138,407 and $1,362,680 at December
31, 1999 and June 30, 2000, respectively. Accumulated amortization of intangible assets amounted to $615,772 and $716,223 at December 31, 1999 and June 30, 2000,
respectively. Interest expense - net includes interest income of $35,449 and $5,845 for the three months ended June 30, 1999 and 2000 and $48,117 and $10,792 for the six months ended June 30, 1999 and 2000, respectively. Interest income includes interest income from affiliates on long-term loans and for
reimbursement of interest expense on revolving credit agreements related to short-term borrowings by such affiliates. i-
7. Income Taxes:
Income tax benefit for the three and six months ended June 30, 1999 and
2000 was substantially comprised of deferred tax.
8. Commitments and Contingencies:
Reference is made to Note 1 and to Management's Discussion and Analysis of Financial Condition and Results of Operations and Legal Proceedings
for a discussion of material commitments and contingencies.
9. Reclassifications:
Certain prior period amounts have been reclassified to conform with
current period presentation.
10. Recent Accounting Pronouncements:
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. In June 2000, SFAS No. 138 was issued which amends
the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities. Management of the Company has not
completed its evaluation of the impact of SFAS No. 133 on the Company's
consolidated financial statements. The Company will be required to adopt such
,- standards effective January 1, 2001.
11. Business Segment Information:
Refer to Part I, Item 2 of this Quarterly Report on Form 10-Q for
information 'regarding business segments as of December 31, 1999 and June 30, 2000 and for the three and six months ended June 30, 1999 and 2000. ,,--
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands)
Results of Operations
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Quarterly Report on Form 10-Q, including Management's Discussion and Analysis of Financial Condition and Results of Operations, is forward-looking, such as information relating to the effects of future regulation, future capital commitments and the effects of competition. Such forward-looking information involves important risks and uncertainties that could significantly affect expected results in the future from those expressed in any forward-looking statements made by, or on behalf of, the Company. These "forward looking statements" can be identified by the use of forward-looking terminology such as "believes", "expects," "may," "will," "should," "intends" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions, acquisitions and divestitures, the availability and cost of .,c - capital, government and regulatory policies, the pricing and availability of equipment, materials, inventories and programming, product acceptance, reliance on vendors, technological developments and changes in the competitive environment in which the Company operates. Persons reading this Quarterly Report on Form 10-Q are cautioned that forward-looking statements herein are only predictions, -that no assurance can be given that the future results will be achieved, and that actual events or results may differ materially as a result of the risks and uncertainties facing the Company. For further information regarding these risks and uncertainties and their potential impact on the Company, see the prospectus and most recent prospectus supplement filed under Registration Statement No. 333-78027, under the caption "Risk Factors." The Company does not undertake to update any forward-looking statements in this report or with respect to matters described herein.
Adelphia Communications Corporation and its subsidiaries ("Adelphia' or the "Company') operate primarily in two lines of business within the telecommunications industry: cable television and related investments ("Adelphia, excluding Adelphia Business Solutions" or "Cable and Other Segment") and competitive local exchange carrier ("CLEC') telephony ('Adelphia Business Solutions" or "CLEC Segment"). The balance sheet data as of December 31, 1999 and June 30, 2000, and the other data for the three and six months ended June 30, 1999 and 2000, of Adelphia Business Solutions presented below hi-ve been derived from the consolidated financial statements of Adelphia Business Solutions not included herein.
A majority owned subsidiary of the Company, Adelphia Business Solutions, together with its subsidiaries owns CLEC networks and investments in CLEC joint ventures and manages those networks and joint ventures. Adelphia Business Solutions is an unrestricted subsidiary for purposes of the Company's *-. indentures. For further information regarding Adelphia Business Solutions, which also files reports pursuant to the Securities Exchange Act of 1934, see Adelphia Business Solutions' Form 10-Q for the quarterly period ended June 30, 2000.
h~://~.~c.gov/Archives/edgar/data/7000 16.txt
<PAGE>
.-
Summarized unaudited financial information of Adelphia Consolidated, Adelphia Business Solutions and Adelphia, excluding Adelphia Business Solutions is as follows: '
<TABLE> <CAPTION>
Balance Sheet Data:
Adelphia Consolidated
<s> Total assets Total debt Cash and cash equivalents Restricted cash Investments (a) Redeemable preferred stock Convertible preferred stock (liquidation preference)
Adelphia Business Solutions
Total assets (b) Total debt Cash and cash equivalents Restricted cash Investments (a) Redeemable preferred stock
Adelphia, excluding Adelphia Business Solutions
Total assets Total debt Cash and cash equivalents Investments (a) Redeemable preferred stock Convertible preferred stock (liquidation preference) </TABLE>
<PAGE>
<TABLE> <CAPTION>
Other Data:
Adelphia Consolidated
- <s> Revenues Priority investment income from Olympus Operating expenses (c) Depreciation and amortization expense
December 3 1999 ______----_----
<c>
$ 17,267, 9,291, 186,
308, 409, 675,
$ 1,171, 845,
2,
61, 260,
$ 16,096, 8,446, 184, 246, 148, 675,
Three Months Ended June 30, ____--__------------~~~---
1999 2000 __------------ ___--------
<c> <c>
$ 218,780 $ 704,125 12,000 134,251 431,374 63,736 210,327
Operating income 20,799 61,729 Interest expense - net (52,215) (206,978 .- Preferred stock dividends (14,360) (23,315 Capital expenditures 145,234 361,086 Cash paid for acquisitions 70,893 10,135 Cash used for investments 11,019 10,723
Adelphia Business Solutions
Revenues $ 34,215 Operating expenses (c) 44,308 Depreciation and amortization expense 13,586 Operating loss (23,679) Interest expense - net (d) (4,246) Preferred stock dividends (7,860) Capital expenditures 92,147 Cash paid for acquisitions 36,518 Cash used for investments 6,100
Adelphia, excluding Adelphia Business Solutions
Revenues Priority investment income from Olympus Operating expenses (c) Depreciation and amortization expense Operating income Interest expense - net (e) Preferred stock dividends Capital expenditures Cash paid for acquisitions Cash used for investments -
<FN>
$ 184,571 $ 12,000 89,943 50,150 44,478 (47,969)
(6,500) 53,087 34,375 4,919
80,214 105,009 26,689 (51,484 (12,985 (8,909 123,191
5,750
623,911
326,365 183,638 113,213 (193,993 (14,406 237,895 10,135 4,973
(a) (b) (c) (d) (el
Represents total investments before cumulative equity in net losses. Amounts exclude receivables from Adelphia of $392,629 as of December 31, 19 Amounts exclude depreciation, amortization and merger and integration costs Amounts include interest income from Adelphia of $2,779, $1,259, $5,607 and Amounts include interest expense to Adelphia Business Solutions of $2,779, periods.
</FN> </TABLE>
<PAGE>
Adelphia earned substantially all of its revenues in the three and six months ended June 30, 1999 and 2000 from monthly subscriber fees for basic, satellite, ;>remium and ancillary services (such as installations and equipment rentals), C;EC telecommunications services, local and national advertising sales, high speed data services and pay-per-view programming.
The changes in Adelphia's operating results for the three and six months ended June 30, 2000 compared to the same period of the prior year, were primarily the result of acquisitions, rate increases and expansion of existing operations.
,- The high level of depreciation and amortization associated with the significant number of acquisitions in recent years, the continued upgrade and expansion of systems and interest costs associated with financing activities will continue to have a negative impact on the reported results of operations.
Adelphia expects to report net losses for the next several years.
,- Adelphia completed numerous acquisitions during the year ended December 31, 1999. The Company completed the acquisition of Olympus Communications, L.P. ("Olympus") partnerships interests held by FPL Group, Inc. and the acquisitions of FrontierVision Partners, L.P. ("FrontierVision") , Harron Communication Corp., and Arahova Communications, Inc. ("Arahova") (formerly Century Communications Corp.). These acquisitions occurred on October 1, 1999 and are collectively referred to as the Acquisitions. Reference is made to Note 1 of the consolidated financial statements contained in Adelphia's Annual Report on Form 10-K for the year ended December 31, 1999 for additional information regarding these acquisitions.
The following tables set forth certain cable television system data at the dates indicated for Company Owned and Managed Systems. The "Managed Systems" are affiliated systems managed by Adelphia.
<TABLE> <CAPTION>
June 30 _____----_-____----_~~
1999 _-__----__-__----_ --
Homes Passed by Cable
<s> Company Owned Systems Managed Systems
.- Total Systems
cc> 3,224,314 178,615 ______------------ --
3,402,929 ===========i====== ==
Basic Subscribers
Company Owned Systems Managed Systems
Total Systems
</TABLE>
2,269,329 134,264 _-------___---_~~~ --
2,403,593 ___--------------- == ___---------------
Data for the Olympus systems (which became wholly owned and consolidated on October 1, 1999) is included under Company Owned Systems for all periods presented.
<PAGE>
The followi'ng table is derived from Adelphia's Condensed Consolidated Statements of Operations that qre included in this Form 10-Q and sets forth the historical percentage relation.,hip to revenues of the components of operating income contained in such financial statements for the periods indicated.
<TABLE> <CAPTION>
<s>
Three Months Ended June 30, _--------_-------~__
1999 2000 --------- --------
<c> <CT>
Revenues 100.0% 100.0%
.--
Operating expenses: Direct operating and programming 33.2% 37.0% Selling, general and administrative 28.2% 24.3% Depreciation and amortization 29.1% 29.9%
Merger and integration costs 0.1% --------- --------
Operating income 9.5% 8.7% ========= _------- _-------
</TABLE>
Cable and Other Segment
Revenues. The primary revenue sources reflected as a percentage of total revenues were as follows:
<TABLE> <CAPTION>
<s> Cable service and equipment Premium programming Advertising sales and other services </TABLE>
Revenues increased approximately 238.0% and 236.5% for the three and six months ended June 30, 2000, respectively, compared with the same periods of the prior year. The increases are attributable to the following:
<TABLE> <CAPTION>
<s> Acquisitions Basic subscriber growth Cable rate increases Premium programming Advertising sales and other services </TABLE>
Three Mon Ende June 3 2000 ------L---
<c> 97% 1% 4%
(8%) 6%
During the previous twelve months, certain rate increases related to cable services were implemented in the majority 0.' the Company's systems. Advertising revenues and revenues derived from other strategic service offerings such as high-speed data services, long distance services and paging also had a positive impact on revenues for the three and six months ended June 30, 2000.
Direct Operating and Programming Expenses. Direct operating and programming expenses, which are mainly basic and premium programming costs and ,. - . technical expenses, increased 258.8% and 255.7% to $218,710 and $425,974 for the
<PAGE>
three and six months ended June 30, 2000, respectively, from $60,964 and
$119,755 for the same periods of 1999. .Acquisitions accounted for substantially all of the increase for the quarter ended June 30, 2000, while being partially ..-- offset by operational efficiencies recognized in connection with the acquisitions.
Selling, General and Administrative Expenses. These expenses, which are mainly comprised of costs related to system offices, customer service representatives and sales and administrative employees, increased 271.5% and 282.3% to $107,655 and $218,197 for the three and six months ended June 30, 2000, respectively, from $28,979 and $57,081 for the same periods of 1999. Acquisitions accounted for 95.4% and 92.6% of the increase for the three and six months ended June 30, 2000, respectively. The remaining increase was due primarily to subscriber growth, new services, and an increase in administrative employees due to the recently completed acquisitions.
Depreciation and Amortization. Depreciation and amortization increased 266.2% and 290.3% to $183,638 and $364,679 for the three and six months ended June 30, 2000, respectively, from $50,150 and $93,430 for the same periods of 1999. Acquisitions accounted for substantially all of the increase for the quarter ended June 30, 2000.
Priority Investment Income. Priority investment income is comprised of payments received from Olympus of accrued priority return on the Company's investment in 16.5% preferred limited partner ("PLP") interests in Olympus prior to the consolidation of Olympus effective October 1, 1999.
Interest Expense - Net. Interest expense - net increased 304.4% and 267.5% to $193,993 and $384,882 for the three and six months ended June 30, 2000, respectively, from $47,969 and $104,726 for the same periods of 1999. Acquisitions accounted for 99.7 % and 92.0% of the increase for the three and six months ended June 30, 2000, respectively. The remaining increase was primarily - due to an increase in average debt outstanding and higher interest rates.
Equity in Loss of Olympus and Other Joint Ventures. The equity in loss of Olympus and other joint ventures represents primarily (i) the, Company's pro-rata share of Olympus' losses and the accretion requirements of Olympus' PLP interests, and (ii) Adelphia's pro-rata share of its less than majority owned partnerships'- operating losses. Equity in loss of joint ventures decreased in the three months ended June 30, 2000, compared to the same period in 1999, primarily due to the consolidation of Olympus effective October 1, 1999.
Preferred Stock Dividends. Preferred stock dividends increased 121.6% to $14,406 and $28,812 for the three and six months ended June 30, 2000, respectively, from $6,500 and $13,000 for the same periods of 1999. The increase is due to the dividends on the Series D convertible preferred stock issued in April 1999.
Minority Interest in Net Losses of Subsidiaries. Minority interest in net losses of subsidiaries increased 159.0% and 103.2% to $34,045 and $52,956 for the three and six months ended June 30, 2000, respectively, from $13,146 and $26,060 for the same periods for 1999. The increase was primarily due to increased net losses of less than wholly-owned subsidiaries attributable to minority interests, offset partially by net income of certain less t:ian wholly-owned subsidiaries of the Acquisitions.
Gain on Asset Swap. On May 1, 2000, Adelphia swapped certain cable systems for certain cable systems owned by AT&T. The result of this transaction was a gain of $37,552 for the three and six months ended June 30, 2000.
.--- <PAGE>
CLEC Segment
Revenues. Revenues increased 134% and 169% to $80,214 and $149,515 for /- the three and six months ended June 30, 2000, respectively, from $34,215 and $55,653 for the same periods in the prior year.
<TABLE> <CAPTION>
Three Months Ended June 30, 2000 -------------------
The change is attributable to the following:
<s>
</TABLE>
Growth in original markets Acquisition of local partner interests New markets Management fees
<c>
$ 27,198 4,225 14,471 105
The primary sources of revenues, reflected as a percentage of total revenues were as follows:
<TABLE> <CAPTION>
/-
Three Months Ended June 30, ------------------------ -------
1999 2000 19 ------------- ---------- --------
<s> <c> <c> -cc> Local service 68.0% 70.9% 66 Dedicated access 27.7% 9.9% 26 Management fees 3.0% 1.4% 4 Enhanced services 1.0% 9.7% 0 Long distance and other 0.3% 8.1% 2 </TABLE>
Direct Operating and Programming. Direct operating and programming increased 257% and 274% to $41,661 and $75,393 for the three and six months ended June 30, 2000, respectively, from $11,671 and $20,175 for the same periods in the prior year.
<TABLE> <CAPTION>
Three Months Ended June 30, 2000 ---------------
The increase is attributable to the following:
r <s> Growth in original markets
Acquisition of local partner interests New markets Network Operations Control Center ("NOCC")
<c>
$ 9,80 2,55 17,54 9
</TABLE>
.- The increase in direct operating and programming expense was due to start up costs in Adelphia Business Solutions' new markets as regional switches and network rings were activated, combined with start up costs in Adelphia Business Solutions' original markets associated with Adelphia Business
<PAGE>
Solutions' data and internet access products. The increased number and size of the operations of the networks resulted in increased employee related costs, equipment maintenance costs and expansion costs.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 94% and 128% to $63,348 and $122,194 for the three and six months ended June 30, 2000, respectively, from $32,637 and $53,646 for the same periods in the prior year, primarily reflecting expansion of the original and new markets.
<TABLE> <CAPTION>
Three Months Ended June 30, 2000 _---__---------
The increase is attributable to the following:
<s>
</TABLE>
Growth in original markets Acquisition of local partner interests New markets Sales and marketing activities Corporate overhead charges Bell Atlantic settlement charges Non-cash stock compensation
<c>
$ 12,63 1,82 9,57 48 5,78
42
Depreciation and Amortization. Depreciation and amortization expense increased 96% and 70% to $26,689 and $46,127 during the three and six months ended June 30, 2000, respectively, from $13,586 and $27,121 for the same periods in the prior year primarily as a result of increased depreciation resulting from the higher depreciable asset base at the NOCC and the networks, amortization of deferred financing costs and the acquisition of local partner interests.
Interest Expense - Net. Interest expense - net increased 206% and 37% to $12,985 and $20,488 during the three and six months ended June 30, 2000, respectively, from $4,246 and $14,953 for the same period in the prior year. The increase was primarily attributable to a decrease in interest income.
Equity in Net Loss of Joint Ventures. Equity in net loss of joint ventures decreased 90% and 94% to $346 and $451 during the three and six months ended June 30, 2000, respectively, from $3,291 and $7,094 for the same periods in the prior year as a result of the consolidation of several joint ventures resulting from the purchase of the local partners' interests, and the maturing of the remaining joint venture networks.
The number of joint ventures paying management fees to Adelphia H Business Solutions decreased from seven at June 30, 1999 to four at June 30, 2000 due to Adelphia Business Solutions' increased ownership in several joint ventures. These non-consolidated joint ventures and networks under construction paid management and monitoring fees to Adelphia Business Solutions, which are included in revenues, aggregating approximately $1,136 and $2,236 for the three
h~p:iiwww.sec.gov/Archivesied~ar/datai796~86!0000796~86-00-0000 16.txt
and six months ended June 30, 2000, as compared with $1,032 and $2,609 for the same periods in the prior fiscal year. The nonconsolidated joint ventures' net losses, including networks under construction, for the three months ended June 30, 1999 and 2000, aggregated approximately $2,491 and $564, respectively and for the six months ended June 30, 1999 and 2000 aggregated approximately $4,712 and $1,200, respectively. <PAGE>
Adelphla Business Solutions' Preferred Stock Dividends. Preferred stock dividends increased by 13% to $8,909 and $17,545 for the three and six months ended June 30, 2000 from $7,860 and $15,479 for the same periods in the prior year. The increase was due to a higher outstanding preferred stock base resulting from the payments of dividends in additional shares of preferred stock.
Liquidity and Capital Resources
The cable television and other telecommunication businesses are capital intensive and typically require continual financing for the construction, modernization, maintenance, expansion and acquisition of cable and other telecommunication systems. The Company historically has committed significant capital resources for these purposes and for investments in affiliates and other entities. These expenditures were funded through long-term borrowings, the sale of common and preferred stock and, to a lesser extent, internally generated funds. The Company's ability to generate cash to meet its future needs will depend generally on its results of operations and the continued availability of external financing.
For the six months ended June 30, 1999, cash provided by operating activities totaled $28,421 and for the six months ended June 30, 2000, cash used for operating activities totaled $38,843; for the six months ended June 30, 1999 and 2000, cash used for investing activities totaled $1,038,390 and $940,634, respectively and cash provided by financing activities totaled $1,414,026 and $931,842, respectively. See Note 1 to the condensed consolidated financial statements, in Part I, Item 1 for a summary of significant transactions affecting liquidity and capital resources subsequent to December 31, 1999, which is incorporated by reference herein.
Capital Expenditures
Cable and Other Segment
Capital expenditures for the six months ended June 30, 1999 and 2000 were $94,955 and $454,568, respectively. This increase was primarily due to acquisitions and cable plant rebuilds and upgrades to expand services. The Company expects that capital expenditures for the Cable and Other Segment for the year ending December 31, 2000 will be in a range of approximately $700,000 to $900,000.
CLEC Segment
Capital expenditures for the six months ended June 30, 1999 and 2000 were $131,831 and $290,900, respectively. This increase was primarily due to expenditures necessary to devrxlop its markets, as well as the fiber purchases to interconnect the networks. Adelphia Business Solutions estimates that a total of approximately $350,000 will be required to fund Adelphia Business Solutions capital expenditures, working capital requirements, operating losses and pro rata investments in the joint ventures through the year ending December 31, 2000.
Financing Activities
The Company's financing strategy has been to maintain its public long-term debt at the parent holding company level while the Company's consolidated subsidiaries have their own senior and subordinated credit
arrangements with banks and insurance companies or, for Adelphia Business Solutions, Olympus, FrontierVision and Arahova, their own public debt and/or ..- equity. The Company generally has funded its acquisitions, working capital requirements, capital expenditures and investments in affiliates and other entities through long-term borrowings, primarily from banks and insurance. companies, short-term borrowings, internally generated funds and the issuance of public debt or equity. The Company generally has funded the principal and interest obligations on its long-term borrowings from banks and insurance
<PAGE>
,
companies by refinancing the principal with new loans or through the issuance of parent and subsidiary company debt or equity securities, and by paying the interest out of internally generated funds. Adelphia has funded the interest obligations on its public borrowings from internally generated funds.
The Company's public indentures and subsidiary credit agreements contain covenants that, among other things, require the maintenance of certain financial ratios (including compliance with certain debt to cash flow ratios in order to incur additional indebtedness); place limitations on borrowings, investments, affiliate transactions, dividends and distributions; and contain certain cross default provisions relating to Adelphia or its subsidiaries.
At June 30, 2000, the Company's total outstanding debt aggregated $9,978,775, which included $2,778,572 of parent debt, $967,100 of Adelphia Business Solutions debt, $203,278 of Olympus public debt, $509,985 of FrontierVision public debt, $1,869,970 of Arahova public debt and $3,649,870 of other subsidiary debt. The Company also had total redeemable preferred stock of $426,842 outstanding as of June 30, 2000. As of June 30, 2000, Adelphia's subsidiaries had an aggregate of $2,396,752 in unused credit lines and cash and cash equivalents, which includes $547,363 also available to affiliates, part of r- which is subject to achieving certain levels of operating performance.
On April 14, 2000, Adelphia closed on a $2,250,000 bank credit facility on behalf of certain subsidiaries and affiliates.. The credit facility consists of a $1,500,000 8 314 year reducing revolving credit loan and a $750,000 9 year
term loan. Proceeds from this credit facility were used to complete the July 5, 2000 acquisition of Prestige Communications of NC, Inc.
The Company's weighted average interest rate on notes payable to banks and institutions was approximately 8.78% at June 30, 1999 compared to 8.37% at June 30, 2000. Approximately 71% of the Company's total indebtedness was at fixed interest rates as of June 30, 2000, after giving effect to certain interest rate swaps, caps and collars.
The following table sets forth the mandatory reductions in principal under all debt agreements for each of the next four years and six months based on amounts outstanding at June 30, 2000:
<TABLE>
<s> <c> Six months ending December 31, 2000 $ 316 Year ending December 31, 2031 204 Year ending December 31, 2002 888 Year ending December 31, 2003 1,326 Year ending December 31, 2004 853 </TABLE>
Resources r"
The Company plans to continue to explore and consider new commitments, arrangements or transactions to refinance existing debt, increase the Company's liquidity or decrease the Company's leverage. These could include, among other things, the future issuance by Adelphia, or its subsidiaries, of public or
http://www.sec.gov/Archtves~edgar~daw796386~0000796~Xb-UU-iiOOO lb.&t
private equity or debt and the negotiation of new or amended credit facilities. These could also include entering into acquisitions, joint ventures or other ,- investment or financing activities, although no assurance can be given that any such transactions will be consummated. The Company's ability to borrow under current credit facilities and to enter into refinancings and new financings is limited by covenants contained in Adelphia's indentures and its subsidiaries' credit agreements, including covenants under which the ability to incur indebtedness is, in part, a function of applicable ratios of total debt to cash flow. <PAGE>
The Company believes that cash and cash equivalents, internally generated funds, borrowings under the existing credit facilities, and future financing sources will be sufficient to meet its short-term and long-term li'quidity and capital requirements. Although in the past the Company has been able to refinance its indebtedness or obtain new financing, there can be no assurance that the Company will be able to do so in the future or that the terms of such financings would be favorable.
Management believes that the telecommunications industry, including the cable television and telephone industries, continues to be in a period of consolidation characterized by mergers, joint ventures, acquisitions, sales of all or part of cable or telephone companies or their assets, and other
partnering and investment transactions of various structures and sizes involving cable or other telecommunications companies. The Company continues to evaluate new opportunities that allow for the expansion of its business through the, acquisition of additional cable television systems in geographic proximity to its existing regional markets or in locations that can serve as a basis for new market areas. The Company, like other cable television companies, has participated from time to time and is participating in preliminary discussions with third parties regarding a variety of potential transactions, and the ,- Company has considered and expects to continue to consider and explore potential transactions of various types with other cable and telecommunications companies. However, no assurances can be given as to whether any such transaction may be consummated or, if so, when, or that additional competition from this industry consolidation wili not have an adverse effect on the Company.
Regulatory and Competitive Matters
The cable television operations of the Company may be adversely affected by changes and developments in governmental regulation, competitive forces and technology. The cable television industry and the Company are subject to extensive regulation at the federal, state and local levels. The 1992 Cable Act significantly expanded the scope of regulation of certain subscriber rates and a number of other matters in the cable industry, such as mandatory carriage of local broadcast stations and retransmission consent, and increased the administrative costs of complying with such regulations. The FCC adopted rate regulations that establish, on a system-by-system basis, maximum allowable rates for (i) basic and cable programming services (other than programming offered on a per-channel or per-program basis), based upon a benchmark methodology, and (ii) associated equipment and installation services based upon cost plus a reasonable profit. Under the FCC rules, franchising authorities are authorized to regulate rates for basic services and associated equipment and installation services, and the FCC will regulate rates for regulated cable prograrming services in response to complaints filed with the agency. The Teleconmunications Act of 1996 (the "1996 Act") ended FCC regulation of cable programming service tier rates on March 31, 1999.
Rates for basic and certain cable programming services are set pursuant to a benchmark formula. Alternatively, a cable operator may elect to use a - cost-of-service methodology to show that rates for basic and cable programming services are reasonable. Refunds with interest will be required to be paid by cable operators who are required to reduce regulated rates. The FCC has reserved the right to reduce or increase the benchmarks it has established. The rate regulations also limit increases in regulated rates to an inflation indexed
htrp://www.sec.gov/Archivesledgaridata/796486/0000796486-00-0000 16.W
amount plus increases in certain costs such as taxes, franchise fees, costs associated with specific franchise requirements and increased programming costs. .C Cost-based adjustments to these capped rates can also be made in the event a cable operator adds or deletes channels or completes a significant system rebuild or upgrade. Because of the limitation on rate increases for regulated services, future revenue growth from cable services will rely to a much greater extent than has been true in the past on increased revenues from unregulated services and new subscribers than from increases in previously unregulated rates. ,
<PAGE>
The FCC has adopted regulations implementing all of the requirements of the 1992 Cable Act. The FCC is also likely to continue to modify, clarify or refine the rate regulations. Adelphia cannot predict the effect of the 1996 Act or future legislative or rulemaking proceedings or changes to the rate regulations.
Cable television companies operate under franchises granted by local authorities which are subject to renewal and renegotiation from time to time. Because such franchises are generally non-exclusive, there is a potential for competition with the systems from other operators of cable television systems, including public systems operated by municipal franchising authorities themselves, and from other distribution systems capable of delivering television programming to homes. The 1992 Cable Act and the 1996 Act contain provisions which encourage competition from such other sources. The Company cannot predict the extent to which competition will materialize from other cable television operators, local telephone companies, other distribution systems for delivering television programming to the home, or other potential competitors, or, if such competition materializes, the extent of its effect on the Company.
.C The 1996 Act repealed the prohibition on CLECs from providing video programming directly to customers within their local exchange areas other than in rural areas or by specific waiver of FCC rules. The 1996 Act also authorized CLECs to operate "open video systems" ("OVS") without obtaining a local cable franchise, although CLECs operating such a system can be required to make payments to local governmental bodies in lieu of cable franchise fees. Where demand exceeds capacity, up to two-thirds of the channels on an OVS must be available to programmers unaffiliated with the CLEC. The statute states that the OVS scheme supplants the FCC's "video dialtone" rules. The FCC has promulgated rules to implement the OVS concept, and New Jersey Bell Telephone Company has been granted permission to convert its video dialtone authorization in Dover Township, New Jersey to an OVS authorization. New Jersey Bell Telephone Company terminated its OVS operation in Dover Township, New Jersey at the end of 1998. Recently, RCN Telecom Services, Inc. has been granted permission to convert its video dialtone authorization in the Philadelphia Region to an OVS authorization.
The Company believes that the provision of video programming or other services by telephone companies in competition with the Company's existing operations could have an adverse effect on the Company's financial condition and results of operations. At this time, the impact of any such effect is not known or estimable.
The Company also competes with direct broadcast satellite ("DBS") service providers. DBS has been available to consumers since 1994. A single DBS satellite can provide more than 100 channels of programming. DBS service can be received virtually anywhere in the United States through the installation of a small outdoor antenna. DBS service is being heavily marketed on a nationwide
basis by several service providers. Congress passed the.Satellite Home Viewer Act in 1999 which allows DBS providers to begin offering local broadcast channels. DBS companies have since added a limited number of local channels in - some regions, a trend that will continue, thus lessening the distinction between cable television and DBS service. Although the impact to date has not been material, any future impact of DBS competition on the Company's future results is not known or estimable.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company uses fixed and variable rate debt to fund its working capital requirements, capital expenditures and acquisitions. These debt arrangements expose the Company to market risk related to changes in interest rates. The Company enters into pay-fixed agreements to effectively convert a portion of its variable-rate debt to fixed-rate debt to reduce the risk of incurring higher interest costs due to rising interest rates. As of June 30,
2000, the Company had interest rate swap agreements covering notional principal of $90,000 that expire through 2008 and that fix the interest rate at an average of 6.12%. The Company also enters into receive-fixed agreements to effectively convert a portion of its fixed-rate debt to a variable-rate debt which is indexed to LIBOR to reduce the risk of incurring higher interest costs in periods of falling interest rates. As of June 30, 2000, the Company had interest rate swap agreements covering notional principal of $80,000 that expire through 2003 and that have a variable rate at an average of 6.74%. The Company enters into interest rate cap agreements to reduce the risk of incurring higher interest costs due to rising interest rates. As of June 30, 2000, the Company had interest rate cap agreements covering a notional amount of $400,000, which expire in 2002 and cap rates at an average rate of 7.25%. As of June 30, 2000, the Company had interest rate collar agreements covering a notional amount of $200,000, with $100,000 expiring in each of 2001 and 2002. The interest rate collar agreements have average floor rates of 5.95 % and 6.30% and average cap rates of 5.95% and 6.30%, respectively. These agreements also have maximum cap rates of 6.64% and minimum floor rates of 4.65% and 4.959, respectively. The _c- Company does not enter into any interest rate swap, cap or collar agreements for trading purposes. The Company is exposed to market risk in the event of non-performance by the banks. No such non-performance is expected. The table below summarizes the fair values and contract terms of the Company's financial instruments subject to interest rate risk as of June 30, 2000.
<TABLE> <CAPTION>
Expected Maturity
Debt and Redeemable Preferred Stock:
<s> <c> <c> <c> <c> Fixed Rate S 282,375 $ 23,000 $ 545,000 $ 897,840 Average Interest Rate 9.87% 9.87% 9.88% 9.88%
Variable R;te 33,954 181,642 343,192 428,976 Average Interest Rate 8.39% 8.37% 8.38% 8.35%
Interest Rate Swaps, Caps and Collars:
Variable to Fixed Average Pay Rate ,...-. Average Receive Rate
Fixed to Variable Average Pay Rate Average Receive Rate
---------------------------------------------------
2000 2001 2002 2003 ------------ ---------- ----------- ------------ --
$ 15,000 $ - $ - $
6.12% - - -
6.78% -
- 35,000 45,000
6.74% 6.74% - - 7.20% 7.21%
2 ---
<c>
$ 531,
9.
321,
8.
s
Interest Rate Caps Average Cap Rate
Interest Rate Collars Maximum Cap Rates Average Cap and Floor Rate Minimum Floor Rate </TABLE> ,
400,000
7.25%
100,000 100,000
6.64% 6.64%
5.95% 6.30%
4.65% 4.95%
<PAGE>
Interest rates on variable debt are estimated by us using the average implied forward London Interbank Offer Rate ("LIBOR") rates for the year of maturity based on the yield curve in effect at June 30, 2000, plus the borrowing margin in effect at June 30, 2000. Average receive rates on the variable to fixed swaps are estimated by us using the average implied forward LIBOR rates for the year of maturity based on the yield curve in effect at June 30, 2000.
<PAGE>
PART II - OTHER INFORMATION
.*- Item 1. Legal Proceedings
On or about March 24, 2000, ML Media Partners, L.P. ("ML Media") commenced an action by filing a Verified Complaint (the "Complaint") in the Supreme Court of the State of New York, New York County, against Arahova Communications, Inc. ("Arohova"), Century Communications Corp., a Texas subsidiary of Arahova ("Century"), and Adelphia. In the nine count Complaint, ML Media alleges that it entered into a joint venture agreement (the "Agreement') with Century which, as subsequently modified, governed the ownership, operation and disposition of cable television systems in Puerto Rico (the "Joint Venture"). The Complaint alleges that Adelphia and its affiliates took over Century's interest in the Joint Venture on or around October 1, 1999, and have, according to the Complaint, breached their fiduciary obligations to the Joint Venture and violated certain provisions of the Agreement. The Complaint further alleges that ML Media gave Century notice that ML Media was exercising its rights under the Agreement to require that Century elect to (A) purchase ML Media's interest in the Joint Venture at an appraised fair value, or (B) seek to sell the cable systems to one or more third parties. Century, according to the Complaint, elected to pursue the sale of the cable systems and indicated that it was evaluating whether it or an affiliate thereof would make an offer for the
cable systems. The Complaint alleges that Century or its affiliates' potential participation in the sale process is improper. The Complaint asks for, among other things, the dissolution of the Joint Venture and the appointment of a receiver to effect a prompt sale of the Joint Venture. The parties completed discovery in the action and each filed motions for partial summary judgment. On July 10, 2000, Justice Gammerman granted ML Media's motion for partial summary judgment on the fourth cause of action and declared that neither Century nor any of its affiliates may bid on or attempt to purchase the assets and business of the Joint Venture. Justice Gammerman also dismissed the fourth count of the )c counterclaim and required Century to proceed diligently with ML Media in locating one or more third parties to complete the sale and prohibited any defendant from interfering with the sale. On July 26, 2000, the Justice also ordered that the sale may be a sale of either the assets of the Joint Venture or the partnership interests in the Joint Venture. The Justice did not address
other issues concerning the motion for summary judgment and did not schedule a full hearing on the merits. On August 7, 2000, Arahova and the other defendants .- filed a notice of appeal with respect to the above described orders and judgment of the Court. The management of Adelphia and Arahova intend to vigorously defend this action. Management believes that this matter will not have a material adverse effect on the Company.
In November, 1999, Arahova, a subsidiary of Adelphia, has been sued in a class-action case, Galley vs. American Telephone & Telegraph Corp. et al., where the plaintiffs allege, that by requiring customers to purchase the @Home service, rather than offering the option of access alone, Arahova and the other defendant MSO's are illegally "tying" internet content to internet access, thereby violating both the federal antitrust laws and California unfair trade practice statutes. The plaintiffs also allege that the defendants have entered into an illegal conspiracy to require all MSO's providing, or desiring to provide, the @Home service to enter into contracts precluding them from offering any competing internet service. The plaintiffs have recently filed an amended complaint alleging that the violations are national in scope (rather than merely local). Arahova is vigorously defending this case. Due to the preliminary nature of the litigation, the outcome cannot be predicted.
Adelphia and certain subsidiaries are defendants in several putative subscriber class action suits in state courts in Pennsylvania and Mississippi initiated during 1999. The suits all challenge the propriety of late fees charged by the subsidiaries to customers who fail to pay for services in a timely manner. The suits seek injunctive relief and various formulations of damages under various claimed causes of action under various bodies of state law. These actions are in various stages of defense and are being defended vigorously. The outcome of these matters cannot be predicted at this time. In
<PAGE>
z- May 2000, Adelphia settled similar litigation in the state courts of Vermont. The settlement of this matter did not have a material adverse effect.
There are no other material pending legal proceedings, other than routine litigation incidental to the business, to which the Company is a part of or which any of its property is subject.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
,- 27.01 Financial Data Schedule (supplied for the information of the Commission).
*-
(b) Reports on Form 8-K:
A Form 8-K was filed for the event dated June 13, 2000, which reported
information under item 5.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADELPHIA COMMUNICATIONS CORPORATION
(Registrant)
Date: August 14, 2000 By: /s/ Timothy J. Rigas -__-_-----------__~~~~
Timothy J. Rigas
Executive Vice President (authorized officer), Chief
Financial Officer, Chief Accounting Officer and Treasurer
</TEXT>
</DOCUMENT> <DOCUMENT>
<TYPE>EX-27.01 <SEQUENCE>2
<FILENAME>0002.txt
<TEXT>
<TABLE> <S> <C>
<ARTICLE> 5 <LEGEND> FINANCIAL DATA SCHEDULE FOR ADELPHIA COMMUNICATIONS CORP. FOR THE SIX MONTHS
ENDED JUNE 30, 2000 </LEGEND>
<CIK> 0000796486 <NAME> ADELPHIA COMMUNICATIONS CORP.
.- <MULTIPLIER> 1,000
<s> -cc>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-2000
http:iiwww.sec.gov/Archivesiedgaridata/796486/0000796486-00-0000 16.txt
<PERIOD-END>
<CASH>
f- <SECURITIES>
<RECEIVABLES> <ALLOWANCES>
<INVENTORY>
<CURRENT-ASSETS>
<PP&E> <DEPRECIATION> '
<TOTAL-ASSETS>
<CURRENT-LIABILITIES>
<BONDS> <PREFERRED-MANDATORY>
<PREFERRED>
<COMMON> <OTHER-SE>
<TOTAL-LIABILITY-AND-EQUITY> <SALES>
<TOTAL-REVENUES> <CGS>
<TOTAL-COSTS>
<OTHER-EXPENSES>
<LOSS-PROVISION>
<INTEREST-EXPENSE> <INCOME-PRETAX>
<INCOME-TAX> <INCOME-CONTINUING>
<DISCONTINUED> <EXTRAORDINARY>
<CHANGES>
<NET-INCOME>
r <EPS-BASIC>
<EPS-DILUTED>
<FN>
<Fl>RECEIVABLES NET OF ALLOWANCE
<F2>PP&E NET OF DEPRECIATION
</FN>
JUN-30-2000
139,239
0 232,389<F1> O<Fl>
0
0 16,541,416<F2> O<F2>
17,973,443
0
9,978,775 0
0 1,299
3,868,769 17,973,443
0
1,376,844 0
1,254,477
0
0
405,370
(217,792) (45,388)
(172,404) 0 0
0 (201,216)
(1.57) (1.57)
</TABLE> </TEXT> -</DOCUMENT>
</SEC-DOCUMENT> -----END PRIVACY-ENHANCED MESSAGE-----
Exhibit 7
Highland expects to retain the existing management and operating personnel at the
system. Supervisory management and services will be supplied by Adelphia pursuant to a
management agreement which will be executed simultaneously with the consummation of the
transaction. The most recent Form 10-K of Adelphia Communications Corporation is attached to
Exhibit 6. This contains an extensive description of Adelphia’s technical qualifications,
experience and expertise. Adelphia has been in the cable television business since 1952 and is
now the fifth largest cable company in the country.
H:\CLIENnGR4MOS\0262SSO12\consents\exhibits - Highland.WPD/Page 7