<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997
-------------
OR
( ) 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 0-21389
-------
PEGASUS COMMUNICATIONS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0374669
- - ------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
c/o Pegasus Communications Management Company
5 Radnor Corporate Center, Suite 454, Radnor, PA 19087
- - ------------------------------------------------ -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (610) 341-1801
--------------
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___
Number of shares of each class of the registrant's common stock outstanding as
of July 31, 1997:
Class A, Common Stock, $0.01 par value 5,336,873
Class B, Common Stock, $0.01 par value 4,581,900
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
Form 10-Q
Table of Contents
For the Quarterly Period Ended June 30, 1997
<TABLE>
<CAPTION>
Page
----
Part I. Financial Information
<S> <C>
Item 1 Consolidated Financial Statements
Consolidated Balance Sheets
December 31, 1996 and June 30, 1997 3
Consolidated Statements of Operations
Three months ended June 30, 1996 and 1997 4
Consolidated Statements of Operations
Six months ended June 30, 1996 and 1997 5
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
Item 3 Quantitative and Qualitative Disclosures About
Market Risk 20
Part II. Other Information
Item 2 Changes in Securities 21
Item 6 Exhibits and Reports on Form 8-K 21
Signature 22
</TABLE>
2
<PAGE>
Pegasus Communications Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------- ---------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $8,582,369 $12,518,269
Restricted cash - 6,892,256
Accounts receivable, less allowance for doubtful
accounts of $243,000 and $317,000, respectively 9,155,545 10,482,468
Program rights 1,289,437 1,821,246
Inventory 697,957 720,616
Deferred taxes 1,290,397 1,290,397
Prepaid expenses and other 851,592 1,667,440
-------------- -------------
Total current assets 21,867,297 35,392,692
Property and equipment, net 24,115,138 25,499,678
Intangible assets, net 126,236,128 192,872,715
Program rights 1,294,985 1,947,621
Deposits and other 166,498 199,404
-------------- -------------
Total assets $173,680,046 $255,912,110
============== =============
LIABILITIES AND TOTAL EQUITY
Current liabilities:
Notes payable $48,610
Current portion of long-term debt 315,223 $3,884,012
Accounts payable 5,075,981 4,974,349
Accrued interest 5,592,083 5,770,521
Accrued expenses 3,803,993 5,466,649
Current portion of program rights payable 601,205 1,102,232
-------------- -------------
Total current liabilities 15,437,095 21,197,763
Long-term debt, net 115,211,610 83,060,587
Program rights payable 1,365,284 1,542,102
Deferred taxes 1,339,859 1,389,859
-------------- -------------
Total liabilities 133,353,848 107,190,311
Commitments and contingent liabilities - -
Minority interest - 3,000,000
Series A preferred stock - 105,312,500
Common stockholders' equity:
Class A common stock 46,632 52,588
Class B common stock 45,819 45,819
Additional paid-in capital 57,736,011 59,462,996
Accumulated deficit (17,502,264) (19,152,104)
-------------- -------------
Total common stockholders' equity 40,326,198 40,409,299
-------------- -------------
Total liabilities and stockholders' equity $173,680,046 $255,912,110
============== =============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
Pegasus Communications Corporation
Combined Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------
1996 1997
------------- --------------
(unaudited)
<S> <C> <C>
Revenues:
Basic and satellite service $ 3,246,409 $ 10,702,837
Premium services 494,298 1,009,904
Broadcasting revenue,
net of agency commissions 5,440,496 6,168,318
Barter programming revenue 1,407,692 1,603,500
Other 166,732 293,833
------------ ------------
Total revenues 10,755,627 19,778,392
------------ ------------
Operating expenses:
Programming 2,000,278 5,199,083
Barter programming expense 1,407,692 1,603,500
Technical and operations 812,189 903,526
Marketing and selling 1,330,367 2,507,011
General and administrative 1,239,578 2,984,004
Incentive compensation 132,881 241,155
Corporate expenses 334,961 497,214
Depreciation and amortization 2,537,507 5,955,962
------------ ------------
Income (loss) from operations 960,174 (113,063)
Interest expense (2,669,586) (2,869,286)
Interest income 50,236 243,918
Other expenses, net (36,466) (294,188)
------------ ------------
Loss before income taxes (1,695,642) (3,032,619)
Provision for income taxes 36,706 50,000
============ ============
Net loss ($ 1,732,348) ($ 3,082,619)
============ ============
Earnings per share (see Note 9):
Net loss per common share ($ 0.33) ($ 0.64)
============ ============
Weighted average shares outstanding 5,237,484 9,801,057
============ ============
</TABLE>
See accompanying notes to combined financial statements
4
<PAGE>
Pegasus Communications Corporation
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
1996 1997
----------- ------------
(unaudited)
<S> <C> <C>
Revenues:
Basic and satellite service $6,111,267 $18,588,844
Premium services 947,948 1,933,269
Broadcasting revenue,
net of agency commissions 9,326,825 11,445,422
Barter programming revenue 2,482,357 3,054,300
Other 313,842 587,729
----------- -----------
Total revenues 19,182,239 35,609,564
----------- -----------
Operating expenses:
Programming 3,664,245 9,155,913
Barter programming expense 2,482,357 3,054,300
Technical and operations 1,610,481 1,858,667
Marketing and selling 2,374,617 4,454,658
General and administrative 2,497,190 5,286,048
Incentive compensation 429,765 521,006
Corporate expenses 709,118 903,675
Depreciation and amortization 4,904,796 10,854,293
----------- -----------
Income (loss) from operations 509,670 (478,996)
Interest expense (5,570,257) (6,023,752)
Interest income 151,487 691,353
Other expenses, net (61,541) (239,765)
Gain on sale of cable system - 4,451,320
----------- -----------
Loss before income taxes (4,970,641) (1,599,840)
Provision (benefit) for income taxes (132,756) 50,000
----------- -----------
Net loss ($4,837,885) ($1,649,840)
=========== ===========
Earnings per share (see Note 9):
Net loss per common share ($0.92) ($0.71)
============ ============
Weighted average shares outstanding 5,236,655 9,773,933
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
Pegasus Communications Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------
1996 1997
--------------- -----------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 4,837,885) ($ 1,649,840)
Adjustments to reconcile net loss
to net cash provided (used) by operating activities:
Depreciation and amortization 4,904,796 10,854,293
Program rights amortization 760,929 781,125
Accretion on discount of bonds 195,926 196,872
Gain on sale of cable system -- (4,451,320)
Bad debt expense 130,713 412,284
Deferred income taxes (132,756) 50,000
Change in assets and liabilities:
Accounts receivable (2,086,735) (901,085)
Inventory 590,352 96,477
Prepaid expenses and other 50,152 (575,556)
Accounts payable and accrued expenses (942,632) 875,613
Advances payable - related party (124,422) --
Accrued interest 134,464 178,438
Deposits and other (68,611) (32,906)
------------- -------------
Net cash provided (used) by operating activities (1,425,709) 5,834,395
Cash flows from investing activities:
Acquisitions (17,107,329) (56,586,989)
Capital expenditures (2,747,890) (5,232,692)
Purchase of intangible assets (573,239) (4,887,046)
Cash acquired from acquisitions -- 164,221
Payments of programming rights (607,085) (1,287,725)
Proceeds from sale of cable system -- 6,945,270
Other (157,500) --
------------- -------------
Net cash used for investing activities (21,193,043) (60,884,961)
Cash flows from financing activities:
Proceeds from long-term debt 247,736 --
Repayments of long-term debt (53,283) (164,267)
Borrowings on revolving credit facilities 8,800,000 526,250
Repayments of revolving credit facilities -- (30,126,250)
Restricted cash 5,012,084 (6,892,256)
Capital lease repayments (163,481) (169,091)
Proceeds from issuance of Series A preferred stock -- 100,000,000
Underwriting and preferred offering costs -- (4,187,920)
------------- -------------
Net cash provided by financing activities 13,843,056 58,986,466
Net increase (decrease) in cash and cash equivalents (8,775,696) 3,935,900
Cash and cash equivalents, beginning of year 11,974,747 8,582,369
============= =============
Cash and cash equivalents, end of period $ 3,199,051 $ 12,518,269
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company:
Pegasus Communications Corporation ("Pegasus" or together with its
subsidiaries stated below, the "Company"), is a diversified media and
communications company, incorporated under the laws of the State of Delaware in
May 1996. Pegasus' subsidiaries are Pegasus Media & Communications, Inc.
("PM&C"), Pegasus Satellite Holdings, Inc. ("PSH"), Pegasus Towers, Inc.
("Towers") and Pegasus Communications Management Company ("PCMC").
PM&C is a diversified media and communications company whose
subsidiaries consist of Pegasus Broadcast Television, Inc. ("PBT"), Pegasus
Cable Television, Inc. ("PCT"), Pegasus Broadcast Associates, L.P. ("PBA"),
Pegasus Satellite Television, Inc. ("PST"), MCT Cablevision, L.P. ("MCT") and
Pegasus Cable Television of San German, Inc. ("PCT-SG"). PBT operates broadcast
television ("TV") stations affiliated with the Fox Broadcasting Company ("Fox")
and United Paramount Network ("UPN") television networks. PCT, together with its
subsidiaries, Pegasus Cable Television of Connecticut, Inc. ("PCT-CT"), MCT and
PCT-SG operate cable television ("Cable") systems that provide service to
individual and commercial subscribers in New England and Puerto Rico. PBA holds
a television station license which simulcasts programming from a station
operated by PBT. On July 9, 1997, PM&C transferred the stock of PST, which
provides direct broadcast satellite ("DBS") services to customers in the New
England area, to a newly formed subsidiary of PM&C, PST Holdings, Inc. ("PSTH"),
and PSTH transferred the PST stock to PSH (the "PST/PSH Exchange"). In exchange,
PSTH received preferred equity in PSH. This transaction has no direct effect on
the financial position of the Company or the results of its operations or its
cash flows.
PSH is a DBS holding company whose subsidiaries provide DBS services to
customers in certain rural areas, which, pro forma for the PST/PSH Exchange and
the six acquisitions which occurred in July and August 1997 (see Note 7),
encompass portions of twenty-three states.
Towers owns and operates transmitting towers located in Pennsylvania
and Tennessee.
PCMC provides certain management and accounting services.
On October 8, 1996, the Company completed an initial public offering
(the "Initial Public Offering") in which it sold 3,000,000 shares of its Class A
Common Stock to the public at a price of $14 per share, resulting in net
proceeds to the Company of $38.1 million.
On January 27, 1997, the Company completed a unit offering (the "Unit
Offering") in which it sold 100,000 shares of 12 3/4% Series A Cumulative
Exchangeable Preferred Stock (the "Series A Preferred Stock") and Warrants to
purchase 193,600 shares of Class A Common Stock at an exercise price of $15 per
share, to the public at a price of $1,000 per unit, resulting in net proceeds to
the Company of $95.8 million. The Company applied the net proceeds from the Unit
Offering as follows: (i) $30.1 million to the repayment of all outstanding
indebtedness under the PM&C Credit Facility (as defined) and expenses related
thereto and (ii) $56.5 million for the payment of the cash portion of the
purchase price for the acquisition of DBS assets from nine independent DIRECTV
providers. The remaining net proceeds were used for working capital, general
corporate purposes and to finance other acquisitions.
7
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. Summary of Significant Accounting Policies:
Basis of Presentation:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial statements include
the accounts of Pegasus and all of its subsidiaries. All intercompany
transactions and balances have been eliminated.
The unaudited consolidated financial statements reflect all adjustments
consisting of normal recurring items which are, in the opinion of management,
necessary for a fair presentation, in all material respects, of the financial
position of the Company and the results of its operations and its cash flows for
the interim period.
Use of Estimates in the Preparation of Financial Statements:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and
liabilities and the disclosure of contingencies. Actual results could differ
from those estimates. Significant estimates relate to barter transactions and
the useful lives and recoverability of intangible assets.
Inventories:
Inventories consist of equipment held for resale to customers and
installation supplies. Inventories are stated at the lower of cost or market on
a first-in, first-out basis.
Revenue:
The Company operates in two industry segments: multichannel television
(DBS and Cable) and broadcast television (TV). The Company recognizes revenue in
its multichannel operations when video and audio services are provided. The
Company recognizes revenue in its broadcast operations when advertising spots
are broadcast.
Programming:
The Company obtains a portion of its TV programming, including presold
advertisements, through its network affiliation agreements with Fox and also
through independent producers. The Company does not make any direct payments for
this programming. For running network programming, the Company receives payments
from Fox. For running independent producers' programming, the Company receives
no direct payments. Instead, the Company retains a portion of the available
advertisement spots to sell on its own account. Barter programming revenue and
the related expense are recognized when the presold advertisements are
broadcast. These amounts are presented gross as barter programming revenue and
expense in the accompanying consolidated statements of operations.
Advertising Costs:
Advertising costs are charged to operations in the period incurred.
Cash and Cash Equivalents:
Cash and cash equivalents include highly liquid investments purchased
with an initial maturity of three months or less. The Company has cash balances
in excess of the federally insured limits at various banks.
8
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. Summary of Significant Accounting Policies (continued):
Restricted Cash:
The Company has restricted cash held in escrow of $6.9 million at June
30, 1997 to collateralize outstanding letters of credit.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base, and
their dispersion across different businesses and geographic regions.
Reclassifications:
Certain amounts from the prior periods have been reclassified to
conform to the statement presentation for the current period.
3. Common Stock:
On December 30, 1996, Pegasus, through a registered exchange offer,
exchanged all of PM&C's Class B Common Stock for 191,775 shares in the aggregate
of Pegasus' Class A Common Stock.
Under the terms of the Series A Preferred Stock (see Note 4), Pegasus'
ability to pay dividends on its Common Stock is subject to certain restrictions.
At December 31, 1996, common stock consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Pegasus Class A common stock, $0.01 par value; 30.0 million shares
authorized; 4,663,229 issued and outstanding ..................... $46,632
Pegasus Class B common stock, $0.01 par value; 15.0 million shares
authorized; 4,581,900 issued and outstanding ..................... 45,819
------
Total common stock ............................................ $92,451
=======
At June 30, 1997, common stock consists of the following:
Pegasus Class A common stock, $0.01 par value; 30.0 million shares
authorized; 5,258,766 issued and outstanding..................... $52,588
Pegasus Class B common stock, $0.01 par value; 15.0 million shares
authorized; 4,581,900 issued and outstanding..................... 45,819
------
Total common stock ............................................. $98,407
=======
</TABLE>
9
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. Redeemable Preferred Stock:
As a result of the Unit Offering described in Note 1, the Company has
outstanding 100,000 shares of Series A Preferred Stock with a liquidation
preference of $1,000 per share (the "Liquidation Preference"). Cumulative
dividends, at a rate of 12 3/4% per annum of the Liquidation Preference per
share, are payable semi-annually on each January 1 and July 1, beginning July 1,
1997. Dividends may be paid, on any dividend payment date occurring on or prior
to January 1, 2002, at Pegasus' option, either in cash or by the issuance of
additional shares of Series A Preferred Stock having an aggregate Liquidation
Preference equal to the amount of such dividends. Subject to certain conditions,
the Series A Preferred Stock is exchangeable in whole, but not in part, at the
option of the Company, on any dividend payment date for Pegasus' 12 3/4% Senior
Subordinated Exchange Notes due 2007 (the "Exchange Notes"). The Exchange Notes
would contain substantially the same redemption provisions, restrictions and
other terms as the Series A Preferred Stock. Pegasus is required to redeem all
of the Series A Preferred Stock outstanding on January 1, 2007 at a redemption
price equal to the Liquidation Preference thereof, plus accrued dividends.
The carrying amount of the Series A Preferred Stock is periodically
increased by amounts representing dividends not currently declared or paid but
which will be payable under the mandatory redemption features. The increase in
carrying amount is effected by charges against retained earnings, or in the
absence of retained earnings, by charges against paid-in capital.
5. Long-Term Debt:
<TABLE>
<CAPTION>
Long-term debt consists of the following : December 31, June 30,
1996 1997
-------------- -------------
<S> <C> <C>
Series B Notes payable by PM&C, due 2005, interest at 12.5%, payable
semi-annually in arrears on January 1 and July 1, net of unamortized
discount of $3,412,222 and $3,215,350 as of December 31, 1996 and
June 30, 1997, respectively $ 81,587,778 $ 81,784,650
Senior seven-year revolving credit facility, interest at
the Company's option at either the bank's prime rate,
plus an applicable margin or LIBOR, plus an applicable
margin 29,600,000 --
Mortgage payable, due 2000, interest at 8.75% 498,468 488,292
Note payable, due 1998, interest at 10% 3,050,000 3,050,000
Sellers' notes, various maturities and interest rates 277,130 1,137,648
Capital leases and other 513,457 484,009
------------ ------------
115,526,833 86,944,599
Less current maturities 315,223 3,884,012
------------ ------------
Long-term debt $115,211,610 $ 83,060,587
============ ============
</TABLE>
In July 1995, PM&C sold 85,000 units consisting of $85.0 million in
aggregate of 12 1/2% Series A Senior Subordinated Notes due 2005 (the "Series A
Notes" and, together with the Series B Notes, the "Notes") and 8,500 shares of
Class B Common Stock of PM&C (the "Note Offering"). The PM&C Class B Shares were
subsequently exchanged for an aggregate of 191,775 shares of Pegasus' Class A
Common Stock (see Note 3). In November 1995, PM&C exchanged its Series A Notes
for the Series B Notes. The Series B Notes have substantially the same terms and
provisions as the Series A Notes. The Series B Notes are guaranteed on a full,
unconditional, senior subordinated basis, jointly and severally by a majority of
the wholly owned direct and indirect subsidiaries of PM&C. The Company's
indebtedness contains certain financial and operating covenants, including
restrictions on the Company to incur additional indebtedness, create liens and
to pay dividends.
10
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
5. Long-Term Debt (continued):
In August 1996, PM&C entered into a $50.0 million seven-year senior
revolving credit facility (the "PM&C Credit Facility"), which is collateralized
by substantially all of the assets of PM&C. Outstanding balances were repaid
from the proceeds of the Unit Offering. The PM&C Credit Facility is subject to
certain financial covenants as defined in the loan agreement, including a debt
to adjusted cash flow covenant.
On July 9, 1997, PSH entered into a $130.0 million credit facility (the
"PSH Credit Facility"), which is collateralized by substantially all of the
assets of PSH. The facility consists of a $40.0 million seven-year senior term
loan and a $90.0 million six-year senior revolving credit facility. Interest on
both the term loan and the revolving credit facility is, at the Company's
option, at either the bank's base rate, plus an applicable margin or LIBOR, plus
an applicable margin. The PSH Credit Facility is subject to certain financial
covenants as defined in the loan agreement, including a debt to adjusted cash
flow covenant. The PSH Credit Facility will be used to finance future
acquisitions, working capital, capital expenditures and for general corporate
purposes.
As of August 8, 1997, the Company has drawn $60.5 million under the PSH
Credit Facility in connection with various DBS acquisitions.
6. Commitments and Contingent Liabilities:
Legal Matters:
From time to time the Company is involved with claims that arise in the
normal course of business. In the opinion of management, the ultimate liability
with respect to these claims will not have a material adverse effect on the
consolidated operations, cash flows or financial position of the Company.
7. Acquisitions and Disposition:
Effective January 31, 1997, the Company sold substantially all the
assets of its New Hampshire cable system (the "New Hampshire Cable Sale") to
State Cable TV Corporation for approximately $6.9 million in cash, net of
certain selling costs. The Company recognized a gain on the transaction of
approximately $4.5 million.
On January 31, 1997 the Company acquired, from an independent DIRECTV
provider, the rights to provide DIRECTV programming in certain rural areas of
Indiana and the related assets in exchange for approximately $8.8 million in
cash and $5.6 million of the Company's Class A Common Stock.
On February 14, 1997 the Company acquired, from an independent DIRECTV
provider, the rights to provide DIRECTV programming in certain rural areas of
Mississippi and the related assets in exchange for approximately $14.8 million
in cash.
As of March 10, 1997 the Company acquired, from two independent DIRECTV
providers, the rights to provide DIRECTV programming in certain rural areas of
Arkansas, Virginia and West Virginia and the related assets in exchange for
approximately $10.4 million in cash, $201,000 in assumed liabilities, $3.0
million in preferred stock of a subsidiary of Pegasus and warrants to purchase a
total of 283,969 shares of the Company's Class A Common Stock. The $3.0 million
in preferred stock of a subsidiary of Pegasus has been accounted for as a
minority interest.
As of April 9, 1997 the Company acquired, from an independent DIRECTV
provider, the rights to provide DIRECTV programming in certain rural areas of
Georgia and the related assets in exchange for approximately $3.3 million in
cash, $143,000 in assumed liabilities and $500,000 of the Company's Class A
Common Stock; and a $600,000 obligation, payable over four years, for
consultancy and non-compete agreements.
11
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7. Acquisitions and Disposition (continued):
As of May 9, 1997 the Company acquired, from four independent DIRECTV
providers, the rights to provide DIRECTV programming in certain rural areas of
Colorado, Florida, Maryland, Minnesota, Nevada, New Hampshire, Oklahoma, Texas,
Virginia, Washington, Wisconsin and Wyoming and the related assets in exchange
for approximately $18.6 million in cash, $501,000 in assumed liabilities, a
$350,000 note due January 1998 and $200,000 of the Company's Class A Common
Stock; and $600,000 in cash for consultancy and non-compete agreements.
As of July 9, 1997 the Company acquired, from two independent DIRECTV
providers, the rights to provide DIRECTV programming in certain rural areas of
Ohio and Texas and the related assets in exchange for approximately $17.5
million in cash.
As of August 8, 1997 the Company acquired, from four independent
DIRECTV providers, the rights to provide DIRECTV programming in certain rural
areas of Indiana, Minnesota and South Dakota and the related assets in exchange
for approximately $15.9 million in cash and a $1.1 million note due January
1998; and $750,000 in cash for endorsement and non-compete agreements.
The following unaudited summary, prepared on a pro forma basis,
combines the results of operations as if the above DBS territories and cable
system had been acquired/sold as of the beginning of the periods presented,
after including the impact of certain adjustments, such as the Company's reduced
commission rate, payments to related parties, amortization of intangibles,
interest expense and related income tax effects. The pro forma information does
not purport to be indicative of what would have occurred had the
acquisitions/disposition been made on those dates or of results which may occur
in the future. The pro forma information does not include the six DBS
Acquisitions (two in July 1997 and four in August 1997) which occurred
subsequent to June 30, 1997.
Six Months Ended June 30,
-------------------------
(in thousands, except earnings per share) (unaudited)
1996 1997
-------- --------
Net revenues ..................................... $ 30,745 $ 38,662
======== ========
Operating loss ................................... ($ 2,947) ($ 558)
======== ========
Net loss ......................................... ($ 4,183) ($ 1,467)
Less: Preferred stock dividends .................. (6,375) (6,375)
-------- --------
Net loss available to common stockholders ........ ($10,558) ($ 7,842)
======== ========
Net loss per common share ........................ ($ 2.02) ($ 0.80)
======== ========
8. Other Events:
On June 25, 1997, the Board of Directors declared a dividend on the
Series A Preferred Stock in the aggregate of 5,490 shares of Series A Preferred
Stock, payable on July 1, 1997 to shareholders of record on June 15, 1997.
On August 1, 1997, Pegasus launched TV station WPME, which is
affiliated with UPN. WPME is in the Portland, ME Designated Market Area ("DMA")
and is being operated under a local marketing agreement ("LMA"). WPME's offices,
studio and transmission facilities are co-located with WPXT, a TV station in the
Portland market the Company has owned and operated since January 1996.
12
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9. Earnings Per Share:
Net Loss Per Common Share:
The computation of fully diluted net loss per share was antidilutive in
each of the periods presented; therefore, the amounts reported for primary and
fully diluted loss are the same. Net loss per common share was determined by
dividing net loss, as adjusted, by applicable shares outstanding. The net loss
was adjusted by the aggregate amount of dividends on the Company's Series A
Preferred Stock. The computation is as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1996 1997
---- ----
<S> <C> <C>
Net loss . . . . . . . . . . . . . . . . . . . . . . ($1,732,348) ($3,082,619)
Less: Preferred stock dividends. . . . . . . . . . . - (3,187,500)
----------- -----------
Net loss available to common stockholders . . . . . ($1,732,348) ($6,270,119)
=========== ===========
Net loss per common share . . . . . . . . . . . . . ($0.33) ($0.64)
=========== ===========
Weighted average shares outstanding . . . . . . . . 5,237,484 9,801,057
=========== ===========
Six Months Ended June 30,
-------------------------
1996 1997
---- ----
Net loss . . . . . . . . . . . . . . . . . . . . . . ($4,837,885) ($1,649,840)
Less: Preferred stock dividends. . . . . . . . . . . - (5,312,500)
----------- -----------
Net loss available to common stockholders . . . . . ($4,837,885) ($6,962,340)
=========== ===========
Net loss per common share . . . . . . . . . . . . . ($0.92) ($0.71)
=========== ===========
Weighted average shares outstanding . . . . . . . . 5,236,655 9,773,933
=========== ===========
</TABLE>
10. Other Information (unaudited):
As defined in the Certificate of Designation governing the Series A
Preferred Stock, the Company is required to provide Adjusted Operating Cash Flow
data for Pegasus and its Restricted Subsidiaries, on a consolidated basis, where
Adjusted Operating Cash Flow is defined as, "for the four most recent fiscal
quarters for which internal financial statements are available, Operating Cash
Flow of such Person and its Restricted Subsidiaries less DBS Cash Flow
(Satellite Segment Operating Cash Flow) for the most recent four-quarter period
plus DBS Cash Flow for the most recent quarterly period, multiplied by four."
Operating Cash Flow is income from operations before income taxes, depreciation
and amortization, interest expense, extraordinary items and non-cash corporate
expenses and incentive compensation. Restricted Subsidiaries carries the same
meaning as in the Certificate of Designation. Pro forma for the nine DBS
Acquisitions occurring in the first two quarters of 1997 and the disposition of
the New Hampshire cable system, as if such acquisitions/disposition occurred on
July 1, 1996, Adjusted Operating Cash Flow would have been approximately $24.7
million.
13
<PAGE>
PEGASUS COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10. Other Information (unaudited - continued):
Four Quarters
Ended
(in thousands) June 30, 1997
-----------------
Net revenues $64,356
Direct operating expenses, excluding incentive
compensation and corporate expenses 42,085
--------
Income from operations before incentive
compensation, corporate expenses and
depreciation and amortization 22,271
Corporate expenses 1,624
--------
Operating cash flow 20,647
Less DBS cash flow, last four quarters (3,597)
Plus DBS cash flow, last quarter annualized 7,684
=======
Adjusted operating cash flow $24,734
========
14
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Report contains certain forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) and
information relating to the Company that are based on the beliefs of the
management of the Company, as well as assumptions made by and information
currently available to the Company's management. When used in this Report, the
words "estimate," "project," "believe," "anticipate," "intend," "expect" and
similar expressions are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking
statements. For a discussion of such risks, see the information contained in the
section captioned "Risk Factors" (pages 14-19) of Pegasus' Prospectus dated
March 26, 1997, filed as part of Pegasus' Registration Statement in Form S-1,
File No. 333-23595 (the "Prospectus"), which section is incorporated by
reference herein. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as the date hereof. The Company
does not undertake any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
General
The Company is a diversified media and communications company operating
in two business segments: multichannel television and broadcast television.
Pegasus Multichannel Television includes DBS and cable businesses. DBS
operations consist of providing DIRECTV(R) ("DIRECTV") services in certain rural
areas of twenty-two states in which the Company holds the exclusive right to
provide such services. The Company acquired the exclusive rights for providing
DIRECTV services in fifteen of these states during the first two quarters of
1997. Its cable operations consist of systems in New England (Connecticut and
Massachusetts) and Puerto Rico. The Company sold its New Hampshire cable system
effective January 31, 1997. Pegasus Broadcast Television owns and operates five
TV stations affiliated with FOX and one affiliated with UPN. It has entered into
agreements to operate two additional TV stations which will be affiliated with
either UPN or the Warner Brothers ("WB") television networks. One of these
stations is in a market in which the Company currently owns and operates a TV
station and is to commence operations in 1998. The other station is to commence
operations in 1997.
Multichannel revenues are derived from monthly customer subscriptions,
pay-per-view services, subscriber equipment rentals, home shopping commissions,
advertising time sales and installation charges. Broadcast revenues are derived
from the sale of broadcast air time to local and national advertisers.
The Company's location operating expenses consist of (i) programming
expenses, (ii) marketing and selling costs, including advertising and promotion
expenses, local sales commissions, and ratings and research expenditures, (iii)
technical and operations costs, and (iv) general and administrative expenses.
Multichannel programming expenses consist of amounts paid to program suppliers,
DSS authorization charges and satellite control fees, each of which is paid on a
per subscriber basis, and DIRECTV royalties which are equal to 5% of DBS program
service revenues. Broadcast programming expenses include the amortization of
long-term program rights purchases, music license costs and "barter" programming
expenses which represent the value of broadcast air time provided to television
program suppliers in lieu of cash.
Location Cash Flow is defined as net revenues less location operating
expenses. Although Location Cash Flow is not a measure of performance under
generally accepted accounting principles, the Company believes that Location
Cash Flow is accepted within the Company's business segments as a generally
recognized measure of performance and is used by analysts who report publicly on
the performance of companies operating in such segments. Nevertheless, this
measure should not be considered in isolation or as a substitute for income from
operations, net income, net cash provided by operating activities or any other
measure for determining the Company's operating performance or liquidity which
is calculated in accordance with generally accepted accounting principles.
15
<PAGE>
Results of Operations
Three months ended June 30, 1997 compared to three months ended June 30, 1996
The Company's net revenues increased by approximately $9.1 million or
84% for the three months ended June 30, 1997 as compared to the same period in
1996. Multichannel Television net revenues increased $8.1 million or 212% and
Broadcast Television net revenues increased $939,000 or 14%. The net revenues
increased as a result of (i) a $6.9 million or 766% increase in DBS revenues of
which $741,000 or 11% was due to increased revenue per subscriber and the
increased number of DBS subscribers in territories owned at the beginning of
1996 and $6.2 million or 89% resulting from acquisitions made subsequent to the
third quarter of 1996, (ii) a $1.2 million or 41% increase in Cable revenues
which was the net result of a $157,000 or 6% increase in same system revenues
due primarily to rate increases and new combined service packages, a $1.4
million increase due to the system acquired effective September 1, 1996 and a
$417,000 reduction due to the sale of the Company's New Hampshire cable system
effective January 31, 1997, (iii) a $937,000 or 14% increase in TV revenues of
which $714,000 or 76% was due to ratings growth which the Company was able to
convert into higher revenues and $223,000 or 24% was the result of acquisitions
made in the first quarter of 1996, and (iv) a $2,000 increase in Tower rental
income.
The Company's total location operating expenses increased by
approximately $6.4 million or 95% for the three months ended June 30, 1997 as
compared to the same period in 1996. Multichannel Television location operating
expenses increased $5.9 million or 268% and Broadcast Television location
operating expenses increased $512,000 or 11%. The location operating expenses
increased as a result of (i) a $5.2 million or 766% increase in operating
expenses generated by the Company's DBS operations due to a same territory
increase in programming costs of $320,000, and increases in other operating
costs totaling $372,000, all generated from the increased number of DBS
subscribers in territories owned at the beginning of 1996 and a $4.5 million
increase attributable to territories acquired subsequent to the third quarter of
1996, (ii) a $700,000 or 46% increase in Cable operating expenses as the net
result of a $61,000 or 5% increase in same system direct operating expenses due
primarily to increases in programming costs associated with the new combined
service packages, a $869,000 increase attributable to the system acquired
effective September 1, 1996 and a $230,000 reduction due to the sale of the
Company's New Hampshire cable system effective January 31, 1997, (iii) a
$510,000 or 11% increase in TV operating expenses as the result of a $232,000 or
8% increase in same station direct operating expenses and a $278,000 increase
attributable to stations acquired in the first quarter of 1996, and (iv) a
$2,000 increase in Tower administrative expenses.
As a result of these factors, Location Cash Flow increased by $2.6
million or 66% for the three months ended June 30, 1997 as compared to the same
period in 1996. Multichannel Television Location Cash Flow increased $2.2
million or 136% and Broadcast Television Location Cash Flow increased $427,000
or 18%. Location Cash Flow increased as a result of (i) a $1.7 million or 765%
increase in DBS Location Cash Flow of which $49,000 or 3% was due to an increase
in same territory Location Cash Flow and $1.7 million or 97% was attributable to
territories acquired subsequent to the third quarter of 1996, (ii) a $489,000 or
35% increase in Cable Location Cash Flow which was the net result of a $96,000
or 8% increase in same system Location Cash Flow, a $580,000 increase due to the
system acquired effective September 1, 1996 and a $187,000 reduction due to the
sale of the Company's New Hampshire cable system effective January 31, 1997, and
(iii) a $427,000 or 18% increase in TV Location Cash Flow which was the net
result of a $482,000 increase in same station Location Cash Flow and a $55,000
decrease attributable to stations acquired in the first quarter of 1996.
Incentive compensation, which is calculated from increases in Pro forma
Location Cash Flow, increased by approximately $108,000 or 81% for the three
months ended June 30, 1997 as compared to the same period in 1996.
Corporate expenses increased by $163,000 or 49% for the three months
ended June 30, 1997 as compared to the same period in 1996 primarily due to
increased staffing, enhanced public relations activities and additional public
reporting requirements for the Company.
16
<PAGE>
Depreciation and amortization expense increased by approximately $3.4
million or 135% for the three months ended June 30, 1997 as compared to the same
period in 1996 as the Company increased its fixed and intangible assets as a
result of five completed acquisitions during 1996 and nine completed
acquisitions in the first two quarters of 1997.
As a result of these factors, the Company reported a loss from
operations of $113,000 for the three months ended June 30, 1997 as compared to
income from operations of $960,000 for the same period in 1996.
Interest expense increased by approximately $201,000 or 8% for the
three months ended June 30, 1997 as compared to the same period in 1996 as a
result of an increase in debt associated with the Company's acquisitions.
The Company reported a net loss of $3.1 million for the three months
ended June 30, 1997 as compared to a net loss of approximately $1.7 million for
the same period in 1996. The $1.4 million change was the net result of an
increase in the loss from operations of approximately $1.1 million, an increase
in interest expense of $201,000, an increase in the provision for income taxes
of $14,000 and an increase in other expenses of approximately $63,000.
Six months ended June 30, 1997 compared to six months ended June 30, 1996
The Company's net revenues increased by approximately $16.4 million or
86% for the six months ended June 30, 1997 as compared to the same period in
1996. Multichannel Television net revenues increased $13.7 million or 191% and
Broadcast Television net revenues increased $2.7 million or 23%. The net
revenues increased as a result of (i) a $11.2 million or 714% increase in DBS
revenues of which $1.5 million or 14% was due to increased revenue per
subscriber and the increased number of DBS subscribers in territories owned at
the beginning of 1996 and $9.7 million or 86% resulting from acquisitions made
subsequent to the third quarter of 1996, (ii) a $2.5 million or 45% increase in
Cable revenues which was the net result of a $302,000 or 6% increase in same
system revenues due primarily to rate increases and new combined service
packages, a $2.9 million increase due to the system acquired effective September
1, 1996 and a $651,000 reduction due to the sale of the Company's New Hampshire
cable system effective January 31, 1997, (iii) a $2.7 million or 23% increase in
TV revenues of which $1.4 million or 52% was due to ratings growth which the
Company was able to convert into higher revenues and $1.3 million or 48% was the
result of acquisitions made in the first quarter of 1996, and (iv) a $14,000
increase in Tower rental income.
The Company's total location operating expenses increased by
approximately $11.2 million or 89% for the six months ended June 30, 1997 as
compared to the same period in 1996. Multichannel Television location operating
expenses increased $9.8 million or 224% and Broadcast Television location
operating expenses increased $1.4 million or 17%. The location operating
expenses increased as a result of (i) a $8.5 million or 672% increase in
operating expenses generated by the Company's DBS operations due to a same
territory increase in programming costs of $659,000, and increases in other
operating costs totaling $677,000, all generated from the increased number of
DBS subscribers in territories owned at the beginning of 1996 and a $7.1 million
increase attributable to territories acquired subsequent to the third quarter of
1996, (ii) a $1.3 million or 41% increase in Cable operating expenses as the net
result of a $94,000 or 4% increase in same system direct operating expenses due
primarily to increases in programming costs associated with the new combined
service packages, a $1.6 million increase attributable to the system acquired
effective September 1, 1996 and a $368,000 reduction due to the sale of the
Company's New Hampshire cable system effective January 31, 1997, (iii) a $1.4
million or 17% increase in TV operating expenses as the result of a $301,000 or
5% increase in same station direct operating expenses and a $1.1 million
increase attributable to stations acquired in the first quarter of 1996, and
(iv) a $4,000 increase in Tower administrative expenses.
17
<PAGE>
As a result of these factors, Location Cash Flow increased by $5.2
million or 80% for the six months ended June 30, 1997 as compared to the same
period in 1996. Multichannel Television Location Cash Flow increased $4.0
million or 139% and Broadcast Television Location Cash Flow increased $1.3
million or 35%. Location Cash Flow increased as a result of (i) a $2.7 million
or 888% increase in DBS Location Cash Flow of which $194,000 or 7% was due to an
increase in same territory Location Cash Flow and $2.5 million or 93% was
attributable to territories acquired subsequent to the third quarter of 1996,
(ii) a $1.2 million or 48% increase in Cable Location Cash Flow which was the
net result of a $208,000 or 9% increase in same system Location Cash Flow, a
$1.3 million increase due to the system acquired effective September 1, 1996 and
a $283,000 reduction due to the sale of the Company's New Hampshire cable system
effective January 31, 1997, (iii) a $1.3 million or 35% increase in TV Location
Cash Flow of which $1.1 million or 86% was due to an increase in same station
Location Cash Flow and $185,000 or 14% was due to an increase attributable to
stations acquired in the first quarter of 1996, and (iv) a $10,000 increase in
Tower Location Cash Flow.
Incentive compensation, which is calculated from increases in Pro forma
Location Cash Flow, increased by approximately $91,000 or 21% for the six months
ended June 30, 1997 as compared to the same period in 1996.
Corporate expenses increased by $195,000 or 28% for the six months
ended June 30, 1997 as compared to the same period in 1996 primarily due to
increased staffing, enhanced public relations activities and additional public
reporting requirements for the Company.
Depreciation and amortization expense increased by approximately $5.9
million or 121% for the six months ended June 30, 1997 as compared to the same
period in 1996 as the Company increased its fixed and intangible assets as a
result of five completed acquisitions during 1996 and nine completed
acquisitions in the first two quarters of 1997.
As a result of these factors, the Company reported a loss from
operations of $479,000 for the six months ended June 30, 1997 as compared to
income from operations of $510,000 for the same period in 1996.
Interest expense increased by approximately $454,000 or 8% for the six
months ended June 30, 1997 as compared to the same period in 1996 as a result of
an increase in debt associated with the Company's acquisitions.
The Company reported a net loss of $1.6 million for the six months
ended June 30, 1997 as compared to a net loss of approximately $4.8 million for
the same period in 1996. The $3.2 million change was the net result of an
increase in the loss from operations of approximately $1.0 million, an increase
in interest expense of $454,000, an increase in the provision for income taxes
of $183,000, a decrease in other expenses of approximately $363,000 and a gain
on the sale of the New Hampshire cable system of approximately $4.5 million.
Liquidity and Capital Resources
The Company's primary sources of liquidity have been the net cash
provided by its TV and cable operations, credit available under its credit
facilities and proceeds from public offerings. The Company's principal uses of
its cash have been to fund acquisitions, to meet its debt service obligations,
to fund investments in its TV and cable technical facilities and fund
investments in multichannel customer premises equipment.
18
<PAGE>
During the six months ended June 30, 1997, net cash provided by
operating activities was approximately $5.8 million, which together with $8.6
million of cash on hand, $6.9 million of net proceeds from the sale of the New
Hampshire cable system and $59.0 million of net cash provided by the Company's
financing activities was used to fund other investing activities of $67.8
million. Financing activities consisted of raising $95.8 million in net proceeds
from the Unit Offering, repayment of $29.6 million indebtedness under the PM&C
Credit Facility, net repayment of approximately $333,000 of other long-term debt
and placing $6.9 million in restricted cash to collateralize letters of credit.
Investing activities, net of the proceeds from the sale of the New Hampshire
cable system, consisted of (i) the acquisition of DBS assets from an independent
DIRECTV provider on January 31, 1997 for approximately $8.8 million, (ii) the
acquisition of DBS assets from an independent DIRECTV provider on February 14,
1997 for approximately $14.8 million, (iii) the acquisition of DBS assets from
two independent DIRECTV providers effective March 10, 1997 for approximately
$10.4 million, (iv) the acquisition of DBS assets from an independent DIRECTV
provider effective April 9, 1997 for approximately $3.3 million, (v) the
acquisition of DBS assets from four independent DIRECTV providers effective May
9, 1997 for approximately $19.2 million, (vi) broadcast television transmitter,
tower and facility constructions and upgrades totaling approximately $4.1
million, (vii) the interconnection and expansion of the Puerto Rico cable
systems amounting to approximately $651,000, (viii) DBS subscriber acquisition
costs, which are being amortized over a twelve-month period, of approximately
$2.7 million, (ix) payments of programming rights amounting to $1.3 million, and
(x) maintenance and other capital expenditures and intangibles totaling
approximately $2.6 million. As of June 30, 1997, the Company's cash on hand
approximated $12.5 million.
On January 27, 1997, the Company completed the Unit Offering in which
it sold 100,000 units, resulting in net proceeds to the Company of $95.8
million. The Company applied the net proceeds from the Unit Offering to complete
various acquisitions, pay down debt totaling approximately $30.1 million and for
working capital and general corporate purposes (see Note 1). Cash on hand,
together with available borrowings under the PM&C Credit Facility and the PSH
Credit Facility will be used for working capital, general corporate purposes and
to finance future acquisitions.
The Company believes that it has adequate resources to meet its working
capital, maintenance capital expenditure and debt service obligations. The
Company believes that cash on hand, together with available borrowings under the
PM&C Credit Facility, the PSH Credit Facility and future indebtedness which may
be incurred by the Company and its subsidiaries will give the Company the
ability to fund acquisitions and other capital requirements in the future.
However, there can be no assurance that the future cash flows of the Company
will be sufficient to meet all of the Company's obligations and commitments.
The Company closely monitors conditions in the capital markets to
identify opportunities for the effective and prudent use of financial leverage.
In financing its future expansion and acquisition requirements, the Company
would expect to avail itself of such opportunities and thereby increase its
indebtedness which could result in increased debt service requirements. There
can be no assurance that such debt financing can be completed on terms
satisfactory to the Company or at all. The Company may also issue additional
equity to fund its future expansion and acquisition requirements.
Capital Expenditures
The Company's capital expenditures aggregated $6.3 million in 1996. The
Company expects recurring renewal and refurbishment capital expenditures to
total approximately $2.0 million per year. In addition to these maintenance
capital expenditures, the Company's 1997 capital projects include (i) DBS
expenditures of approximately $230 per new subscriber, (ii) cable expenditures
of approximately $1.0 million for the completion of the interconnection of the
Puerto Rico cable systems and fiber upgrades in Puerto Rico and New England, and
(iii) approximately $6.5 million to $7.5 million of TV expenditures for
broadcast television transmitter, tower and facility constructions and upgrades.
The Company launched a new TV station, WPME, on August 1, 1997 and its plans are
to commence operations of two additional stations, one in 1997 and the other in
1998. For the six month period ended June 30, 1997, the Company incurred $5.2
million in capital expenditures. There can be no assurance that the Company's
capital expenditure plans will not change in the future.
19
<PAGE>
Other
As a holding company, Pegasus' ability to pay dividends is dependent
upon the receipt of dividends from its direct and indirect subsidiaries. Under
the terms of the indenture relating to the Notes (the "Indenture"), PM&C is
prohibited from paying dividends prior to July 1, 1998. The payment of dividends
subsequent to July 1, 1998 will be subject to the satisfaction of certain
financial conditions set forth in the Indenture, and will also be subject to
lender consent under the terms of the PM&C Credit Facility. Under the terms of
the PSH Credit Facility, PSH is prohibited from paying dividends prior to July
1, 2002. The payment of dividends subsequent to July 1, 2002 will be subject to
the satisfaction of certain financial conditions set forth in the loan
agreement, and will also be subject to lender consent under the terms of the PSH
Credit Facility. In addition, Pegasus' ability to pay dividends and incur
indebtedness is subject to certain restrictions contained in the terms of the
Series A Preferred Stock.
PM&C's ability to incur additional indebtedness is limited under the
terms of the Indenture and the PM&C Credit Facility. PSH's ability to incur
additional indebtedness is limited under the terms of the PSH Credit Facility.
These limitations take the form of certain leverage ratios and are dependent
upon certain measures of operating profitability and, for PSH, DBS subscriber
levels. Under the terms of both the PM&C Credit Facility and the PSH Credit
Facility, capital expenditures and business acquisitions that do not meet
certain criteria will require lender consent.
The Company's revenues vary throughout the year. As is typical in the
broadcast television industry, the Company's first quarter generally produces
the lowest revenues for the year, and the fourth quarter generally produces the
highest revenues for the year. The Company's operating results in any period may
be affected by the incurrence of advertising and promotion expenses that do not
necessarily produce commensurate revenues in the short-term until the impact of
such advertising and promotion is realized in future periods.
The Company believes that inflation has not been a material factor
affecting the Company's business. In general, the Company's revenues and
expenses are impacted to the same extent by inflation. Substantially all of the
Company's indebtedness bear interest at a fixed rate.
The Company has reviewed the provisions of Statements of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," and SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
implementation of the above standards did not have any impact on the Company.
In March 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings Per Share." This statement establishes standards for computing and
presenting earnings per share ("EPS") and applies to entities with publicly held
common stock or potential common stock. This Statement is effective for
financial statements issued for periods ending after December 15, 1997, earlier
application is not permitted. This Statement requires restatement of all
prior-period EPS data presented. The Company is currently evaluating the impact,
if any, adoption of SFAS No. 128 will have on its financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
20
<PAGE>
Part II. Other Information
Item 2. Changes in Securities
Recent Sales of Unregistered Securities
On April 9, 1997, Pegasus issued 42,187 shares of its Class A Common
Stock as partial consideration for the acquisition of the DIRECTV rights and
related assets from Southeastern Communication Systems, Inc.
On May 9, 1997, Pegasus issued 17,971 shares of its Class A Common
Stock as partial consideration for the acquisition of the DIRECTV rights and
related assets from Lafayette County Satellite TV, Inc.
On June 16, 1997, Pegasus issued 34,000 shares of its Class A Common
Stock in a transaction to obtain the rights to construct and operate a
television station in Liveoak, FL.
In issuing securities in connection with the above three transactions,
Pegasus has relied upon the exemption from registration set forth in Section
4(2) of the Securities Act of 1933, as amended. See Note 7 to the Consolidated
Financial Statements included herein for information relating to the
acquisitions of DIRECTV rights and related assets.
Item 4. Submission of Matters to a Vote of Security Holders
The 1997 Annual Meeting of Stockholders of Pegasus was held on June 25,
1997. At this meeting, Marshall W. Pagon, James J. McEntee, III, Mary C. Metzger
and Donald W. Weber were re-elected to the Pegasus' Board of Directors. In such
election, 48,953,323 votes were cast for each director with no abstentions;
except that Ms.
Metzger received only 48,952,823 votes with 500 votes held in abstention.
At the 1997 Annual Meeting, 48,953,273 shares were voted for
ratification of the appointment of Coopers & Lybrand L.L.P. as Pegasus'
independent accountants for 1997. Proxies filed by holders of 50 shares at the
1997 Annual Meeting instructed the proxy holders to withhold authority for 50
votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 - Credit Agreement dated as of July 9, 1997 by and among
Pegasus Satellite Holdings, Inc., Canadian Imperial Bank of Commerce,
New York Agency, as Administrative Agent, and Bankers Trust Company, as
Syndication Agent.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On April 24, 1997, the Company filed a Current Report on Form 8-K
reporting under Item 5 the Company's announcement of its pending acquisition of
DIRECTV(R) distribution rights and related assets from nine independent DIRECTV
providers and the completion of one such acquisition.
21
<PAGE>
SIGNATURE
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.
Pegasus Communications Corporation
Date August 13, 1997 By /s/ Robert N. Verdecchio
---------------- --------------------------------
Robert N. Verdecchio
Senior Vice President, Chief
Financial Officer and Assistant Secretary
(Principal Accounting and Financial Officer)
22
<PAGE>
================================================================================
CREDIT AGREEMENT
among
PEGASUS SATELLITE HOLDINGS, INC.
THE SEVERAL LENDERS FROM
TIME TO TIME PARTIES HERETO
- and -
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY
as Administrative Agent
and
BANKERS TRUST COMPANY
as Syndication Agent
Dated as of July 9, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
SECTION PAGE NO.
RECITALS................................................. 1
I. GENERAL TERMS............................................ 1
1.01 Revolver Facilities........................... 1
1.02 Term Loan Facilities.......................... 3
1.03 Letters of Credit............................. 4
1.04 Interest on the Notes......................... 6
1.05 Loan Requests; Type of Loan................... 10
1.06 Loan Disbursements............................ 11
1.07 Payments, Prepayments and Termination or
Reduction of the Revolver Commitments...... 11
1.08 Revolver Commitment Fee....................... 15
1.09 Requirements of Law........................... 16
1.10 Limitations on LIBOR Loans; Illegality........ 17
1.11 Taxes......................................... 18
1.12 Indemnification............................... 19
1.13 Payments Under the Notes...................... 20
1.14 Set-Off, Etc.................................. 21
1.15 Pro Rata Treatment; Sharing................... 21
1.16 Non-Receipt of Funds by the
Administrative Agent....................... 23
1.17 Replacement of Notes.......................... 23
II. SECURITY; SUBORDINATION; USE OF PROCEEDS................. 24
2.01 Security for the Obligations;
Subordination; Etc......................... 24
2.02 Use of Proceeds............................... 25
III. CONDITIONS OF MAKING THE LOANS........................... 25
3.01 Conditions to the First Loans................. 25
3.02 Acquisition Loans............................. 28
3.03 All Loans..................................... 31
3.04 Lender Approvals.............................. 32
IV. REPRESENTATIONS AND WARRANTIES........................... 32
4.01 Financial Statements.......................... 32
4.02 Organization, Qualification, Etc.............. 32
4.03 Authorization; Compliance; Etc................ 33
4.04 Governmental and Other Consents, Etc.......... 33
4.05 Litigation.................................... 33
4.06 Compliance with Laws and Agreements........... 34
-ii-
<PAGE>
4.07 DBS Rights.................................... 34
4.08 Proprietary Rights............................ 34
4.09 Title to Properties; Condition of Properties 34
4.10 Interests in Other Businesses................. 35
4.11 Solvency...................................... 35
4.12 Full Disclosure............................... 36
4.13 Margin Stock.................................. 36
4.14 Tax Returns................................... 36
4.15 Pension Plans, Etc............................ 36
4.16 Material Agreements........................... 36
4.17 Projections................................... 36
4.18 Brokers, Etc.................................. 37
4.19 Capitalization................................ 37
4.20 Environmental Compliance...................... 37
4.21 Investment Company Act........................ 38
4.22 Labor Matters................................. 38
V. FINANCIAL COVENANTS...................................... 38
5.01 Leverage...................................... 38
5.02 Interest Coverage............................. 39
5.03 Minimum Penetration; Minimum Subscribers...... 39
5.04 Maximum Adjusted Total Funded Debt to
Paying Subscribers............................ 40
5.05 Minimum Annualized EBITDA per Average Paying
Subscribers................................... 41
5.06 Maximum Average Subscriber Acquisition Cost 42
5.07 Maintenance Capital Expenditures.............. 42
5.08 Restricted Payments........................... 42
VI. AFFIRMATIVE COVENANTS.................................... 42
6.01 Preservation of Assets; Compliance
with Laws, Etc............................. 43
6.02 Insurance..................................... 43
6.03 Taxes, Etc.................................... 44
6.04 Notice of Proceedings, Defaults,
Adverse Change, Etc....................... 44
6.05 Financial Statements and Reports.............. 45
6.06 Inspection.................................... 47
6.07 Accounting System............................. 47
6.08 Additional Assurances......................... 47
6.09 Renewal of DBS Agreements..................... 48
6.10 Compliance with Environmental Laws............ 48
6.11 Interest Rate Protection...................... 49
VII. NEGATIVE COVENANTS....................................... 50
7.01 Indebtedness.................................. 50
7.02 Liens......................................... 51
-iii-
<PAGE>
7.03 Disposition of Assets; etc.................... 52
7.04 Fundamental Changes; Acquisitions............. 52
7.05 Management.................................... 53
7.06 Sale and Leaseback............................ 53
7.07 Investments................................... 53
7.08 Change in Business............................ 53
7.09 Accounts Receivable........................... 53
7.10 Transactions with Affiliates.................. 53
7.11 Amendment of Certain Agreements, Etc.......... 53
7.12 ERISA......................................... 54
7.13 Margin Stock.................................. 54
7.14 Negative Pledges, etc......................... 54
VIII. DEFAULTS................................................. 54
IX. REMEDIES ON DEFAULT, ETC................................. 57
X. THE ADMINISTRATIVE AGENT................................. 58
10.01 Appointment, Powers and Immunities............ 58
10.02 Reliance by Administrative Agent.............. 59
10.03 Events of Default............................. 59
10.04 Rights as a Lender............................ 59
10.05 Indemnification............................... 59
10.06 Non-Reliance on Administrative Agent
and other Lenders......................... 60
10.07 Failure to Act................................ 60
10.08 Resignation of Administrative Agent........... 60
10.09 Cooperation of Lenders........................ 61
10.10 Syndication Agent............................. 61
XI. DEFINITIONS.............................................. 61
XII. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS;
SEPARATE ACTIONS BY THE LENDERS.......................... 82
XIII. BENEFIT OF AGREEMENT; ASSIGNMENTS AND
PARTICIPATIONS........................................... 84
XIV. MISCELLANEOUS............................................ 86
14.01 Survival...................................... 86
14.02 Fees and Expenses; Indemnity; Etc............. 86
14.03 Notice........................................ 87
14.04 Governing Law................................. 89
14.05 CONSENT TO JURISDICTION, WAIVER OF
JURY TRIAL.................................... 89
14.06 Severability.................................. 90
-iv-
<PAGE>
14.07 Section Headings, Etc......................... 90
14.08 Several Nature of Lenders' Obligations........ 90
14.09 Counterparts.................................. 90
14.10 Knowledge and Discovery....................... 90
14.11 Amendment of Other Agreements................. 90
14.12 Disclaimer of Reliance........................ 90
14.13 Environmental Indemnification................. 91
-v-
<PAGE>
INDEX OF SCHEDULES
Schedule 1.01(a) Allocation of Loans and Commitments
Schedule 1.01(c) Form of Reducing Revolving Credit Note
Schedule 1.02(b) Form of Term Note
Schedule 1.05(a) Loan Request
Schedule 1.05(d) Form of Interest Rate Option Notice
Schedule 1.07(b) Form of Commitment Reduction Notice
Schedule 1.07(c) Form of Prepayment Notice
Schedule 2.01(a) Exceptions to Security
Schedule 2.01(b) Form of Seller Subordination Agreement
Schedule 2.02 Sources and Uses of Proceeds
Schedule 3.01 Form of Omnibus Officer's
and Compliance Certificate
Schedule 4.01(a) Financial Statements
Schedule 4.01(b) Opening Balance Sheet
Schedule 4.01(c) Parent's Indebtedness
Schedule 4.02 Organization, Etc.
Schedule 4.04 Governmental and Other Consents
Schedule 4.05 Litigation
Schedule 4.07 DBS Agreements and Service Areas
Schedule 4.09 Existing Liens
Schedule 4.10 Interests in Other Businesses
Schedule 4.15 Pension Plans
Schedule 4.16 Material Agreements
Schedule 4.17 Projections
Schedule 4.19 Capitalization
Schedule 6.05 Compliance Report
Schedule 7.01 Permitted Indebtedness
Schedule 7.02 Permitted Liens
Schedule 11 Prior Acquisitions
Schedule 13(b) (iv) Form of Assignment and Acceptance
Schedule 13(b) (v) Form of Notice of Assignment and
Acceptance
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of July 9, 1997, by and among the financial
institutions which are now, or in accordance with Article XIII hereafter become,
parties hereto (collectively, the "Lenders" and each individually, a "Lender");
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as administrative agent for
the Lenders (in such capacity, together with its successors and assigns in such
capacity, the "Administrative Agent"); BANKERS TRUST COMPANY, as syndication
agent for the Lenders (in such capacity, together with its successors and
assigns in such capacity, the "Syndication Agent"); and PEGASUS SATELLITE
HOLDINGS, INC., a Delaware corporation (the "Borrower"), a subsidiary of Pegasus
Communications Corporation, a Delaware corporation (the "Parent"). Certain
capitalized terms used herein without definition are defined in Article XI of
this Agreement.
RECITALS
A. The Borrower's various direct and indirect Subsidiaries own the rights
to deliver direct broadcast satellite ("DBS") service in (1) portions of
Arkansas, Connecticut, Indiana, Massachusetts, Michigan, Mississippi, New
Hampshire, New York, Ohio, Texas, Virginia and West Virginia, all as acquired on
or before March 31, 1997 (such assets, together with all assets and properties
used in connection with the delivery of such services, being referred to herein
as the "Core Properties") and (2) portions of Florida, Georgia and Minnesota.
B. The Borrower desires to obtain funds (1) to repay advances made by the
Parent to the Borrower and its Subsidiaries in connection with the Prior
Acquisitions, and for working capital, as described in Section 2.02, (2) to
support the issuance of letters of credit, (3) for working capital, Capital
Expenditures and general corporate purposes and (4) subject to availability, to
finance Permitted Acquisitions.
C. The Lenders are willing to provide such funds, all subject to the
terms and conditions of this Agreement.
NOW THEREFORE, the parties hereto, intending to be legally bound, and in
consideration of the foregoing and the mutual covenants contained herein, hereby
agree as follows:
I. GENERAL TERMS
Section 1.01. Revolver Facilities.
(a) On the Closing Date, subject to the terms and conditions contained in
this Agreement, the Revolver Lenders agree to establish in favor of the Borrower
reducing revolving
<PAGE>
credit facilities (the "Revolvers") in the aggregate principal amount of
$90,000,000, allocated among the Revolver Lenders as set forth in Schedule
1.01(a) (collectively, in either case, as reduced pursuant to Section 1.01(f)
and 1.07 and subject to Section 1.01(c), the "Revolver Commitments" and, with
respect to each Revolver Lender's allocation of the Revolvers, its "Revolver
Commitment"), which shall expire on June 30, 2003 (such date, or such earlier
date as the Revolver Commitments shall expire or be terminated hereunder, being
referred to herein as the "Expiration Date").
(b) Borrowings under the Revolver Commitments shall not be available
until the Term Loans referred to below have been disbursed in full.
(c) The Revolver Lenders shall have no obligation to make any loans under
the Revolver Commitments (the "Revolving Loans") if, after giving effect to such
Revolving Loans, the sum of (A) the aggregate amount of all outstanding
Revolving Loans plus (B) the Letter of Credit Exposure plus (C) the Pioneer
Outstandings would exceed the aggregate Revolver Commitments then in effect. For
purposes of this Agreement, the term "Available Revolver Commitments" shall
mean, at any time, the aggregate amount of the Revolver Commitments then in
effect minus the Letter of Credit Exposure minus the Pioneer Outstandings.
(d) The borrowings under this Section 1.01 shall be evidenced by the
Borrower's Reducing Revolving Credit Notes, each in the form attached hereto as
Schedule 1.01(c) (together with any additional Reducing Revolving Credit Notes
issued to any assignee(s) of the Revolver Commitments under Article XIII or
otherwise issued in substitution therefor or replacement thereof, the "Revolver
Notes"). The Revolver Notes are hereby incorporated by reference herein and made
a part hereof.
(e) The aggregate principal amount of Revolving Loans made by the
Revolver Lenders as requested in any Loan Request shall be (i) at least
$1,000,000 and, if more, a multiple of $100,000 in the case of LIBOR Loans, and
$500,000, and, if more, a multiple of $100,000, in the case of Base Rate Loans
or (ii) such lesser amount as equals the then unadvanced portion of the
aggregate Available Revolver Commitments. From the Closing Date to and including
the Expiration Date and within the limits of the aggregate Available Revolver
Commitments, the Borrower may borrow, repay and reborrow under this Section
1.01.
(f) The Revolver Commitments (i) shall be automatically permanently
reduced on September 30, 1999 and each Quarterly Date thereafter, on each of
which dates the Borrower shall repay such amount of the aggregate Revolver Notes
as shall cause the outstanding principal balance thereunder to be less than or
equal to the Available Revolver Commitments, as so reduced, and (ii) shall
expire on the Expiration Date, when all outstanding principal and accrued
interest on the Revolver Notes shall be due and payable in full. Such quarterly
reductions of the Revolver Commitments shall be in the amounts set forth below,
without giving effect to any other mandatory or optional Revolver Commitment
reductions and, after giving effect to such quarterly automatic reductions, the
maximum aggregate amount of the Revolver Commitments shall not exceed the levels
set forth below:
-2-
<PAGE>
<TABLE>
<CAPTION>
Aggregate Amount of Automatic Maximum Revolver
Quarterly Date Permanent Reduction Commitments
-------------- ------------------- -----------
<S> <C> <C>
Closing Date $-0- $90,000,000
September 30, 1999 $ 1,350,000 $88,650,000
December 31, 1999 $ 1,350,000 $87,300,000
March 31, 2000 $ 1,800,000 $85,500,000
June 30, 2000 $ 1,800,000 $83,700,000
September 29, 2000 $ 1,800,000 $81,900,000
December 29, 2000 $ 1,800,000 $80,100,000
March 30, 2001 $ 4,500,000 $75,600,000
June 29, 2001 $ 4,500,000 $71,100,000
September 28, 2001 $ 4,500,000 $66,600,000
December 31, 2001 $ 4,500,000 $62,100,000
March 31, 2002 $ 7,200,000 $54,900,000
June 30, 2002 $ 7,200,000 $47,700,000
September 30, 2002 $ 7,200,000 $40,500,000
December 31, 2002 $ 7,200,000 $33,300,000
March 31, 2003 $ 9,000,000 $24,300,000
June 30, 2003 $24,300,000 -0-
</TABLE>
Section 1.02. Term Loan Facilities.
(a) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein, the Term Lenders agree to make
term loans to the Borrower in the aggregate principal amount of $40,000,000,
allocated among the Term Lenders as set forth in Schedule 1.01(a) (collectively,
the "Term Commitments" and the "Term Loans" and, with respect to each Term
Lender's allocation of the Term Loans, its "Term Commitment" and its "Term
Loan").
(b) The borrowings under this Section 1.02 shall be evidenced by the Term
Promissory Notes of the Borrower, in the form attached hereto as Schedule
1.02(b) (together with any additional Term Promissory Notes issued to any
assignee(s) of the Term Lenders under Article XIII or otherwise issued in
substitution therefor or replacement thereof, the "Term Notes" and, collectively
with the Revolver Notes, the "Notes"). The Term Notes are incorporated herein
and made a part hereof.
(c) The Term Loans shall be made in no more than two (2) installments,
the first of which shall be made on the Closing Date and the second of which
shall be made on or before September 30, 1997. Any portion of the Term Loans not
borrowed by September 30, 1997 shall no longer be available for borrowing by the
Borrower hereunder.
(d) The Term Loans shall be repaid, without setoff, deduction or
counterclaim, (i) in twenty five (25) equal quarterly installments payable on
the Quarterly Dates, commencing March 31, 1998 and ending on March 31, 2004,
each in an amount equal to one-fourth of one percent
-3-
<PAGE>
(0.25%) of the aggregate amount of the Term Loans outstanding on October 1,
1997, and (ii) in a final installment due and payable on June 30, 2004, when all
outstanding principal under the Term Notes, together with unpaid interest, fees
and expenses in respect thereof or otherwise payable under the Loan Documents,
shall be due and payable in full.
Section 1.03. Letters of Credit. From time to time during the Revolving
Credit Period and on the terms and subject to the conditions contained in this
Agreement, the Administrative Agent shall cause the Issuing Bank to issue
stand-by letters of credit for the account of the Borrower (each a "Letter of
Credit" and collectively, the "Letters of Credit") as follows:
(a) Issuance of Letters of Credit. The obligation of the Issuing Bank to
issue any Letter of Credit requested by the Borrower is subject to the following
conditions:
(i) The Issuing Bank shall not issue any Letter of Credit if,
after giving effect to the issuance thereof, (A) the sum of (1) the
aggregate outstanding Revolving Loans, (2) the Letter of Credit Exposure
and (3) the Pioneer Outstandings would exceed the aggregate Revolver
Commitments, as then in effect, (B) the aggregate NRTC Letter of Credit
Exposure would exceed $10,000,000, (C) the aggregate General Purpose
Letter of Credit Exposure would exceed $5,000,000, (D) the sum of the
aggregate General Purpose Letter of Credit Exposure plus the aggregate
Seller Letter of Credit Exposure would exceed $25,000,000 or (E) any
Default would exist.
(ii) Each Letter of Credit shall be issued (i) in favor of the
NRTC, as beneficiary, to secure obligations of the Companies under the
NRTC Member Agreements, (ii) in favor of one or more Sellers, to secure
obligations of the Companies under Permitted Seller Paper or (iii) for
such other valid business purpose of the Companies or any of them as the
Borrower shall determine.
(iii) Each Letter of Credit and any related documentation shall
be in a form and scope and upon terms acceptable to the Issuing Bank, in
its sole discretion but, in any event, in accordance with its then
customary practices (collectively with the Letters(s) of Credit issued
pursuant hereto, the "Letter of Credit Documents"). The Borrower will
furnish to the Issuing Bank on its standard written application (which
shall be received by the Issuing Bank not less than three (3) Business
Days and not more than ten (10) Business Days prior to the proposed issue
date of such Letter of Credit) such information as is required thereby,
including the following: (A) the proposed issue date (which must be a
Business Day), (B) the expiration date, which must be prior to the
Expiration Date and in any event, no later than 365 days from issuance
(subject to customary automatic annual renewal provisions), (C) the name
and address of the beneficiary, (D) the face amount of such Letter of
Credit, (E) the purpose of such Letter of Credit, which shall conform to
requirements set forth in subparagraph (ii) above, and (F) the form of
such Letter of Credit.
-4-
<PAGE>
(iv) Each Letter of Credit must expire on or prior to the
Expiration Date (or earlier, subject to customary renewal options, in
accordance with the Issuing Bank's customary practices).
(b) Letter of Credit Fees. The Borrower shall pay the Administrative
Agent, (a) for the Issuing Bank's account, a non-refundable issuance fee at the
annual rate of .125% of the face amount of each Letter of Credit, payable in
advance upon the issuance thereof and annually thereafter upon renewal thereof
(the "Issuance Fee"), and (b) for the ratable account of each Revolver Lender, a
non-refundable letter of credit fee (the "Letter of Credit Fee") which shall
accrue from the Closing Date through and including the Expiration Date and shall
be payable quarterly in arrears on each Quarterly Date, without setoff,
deduction or counterclaim, with a final payment on the Expiration Date. The
Letter of Credit Fee shall be calculated by multiplying the aggregate face
amount of all outstanding Letters of Credit by the Applicable Margin applicable
from time to time to LIBOR Loans under the Revolver Commitments. The
Administrative Agent will promptly remit to the Issuing Bank for its account the
Issuance Fee and will promptly remit to each Revolver Lender its share of all
payments received by the Issuing Bank or the Administrative Agent in respect of
the Letter of Credit Fee. Upon the issuance, or any amendment, of each Letter of
Credit, the Borrower shall also pay the Issuing Bank's customary amendment fees
for letters of credit.
(c) Obligation of Borrower to Repay Letter of Credit Disbursements, etc.
The Borrower assumes all risks in connection with the Letters of Credit and the
Borrower's obligation to repay any payments made by the Issuing Bank on a draft
presented under any Letter of Credit (each a "Letter of Credit Disbursement")
shall be absolute, unconditional and irrevocable under any and all circumstances
and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower or any other person may at any time have against the
beneficiary under any Letter of Credit, either Agent, the Issuing Bank,
any Lender or any other Person, whether in connection with this Agreement
or otherwise;
(iii) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect, unless payment by the Issuing Bank under such Letter of Credit
(A) shall have been made against presentation of drafts or documents
that, on their face, do not substantially conform to the requirements of
such Letter of Credit, or (B) shall have been the result of the gross
negligence or willful misconduct of the Issuing Bank; and
(iv) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing, provided that such circumstance or event
shall not have been the result of the gross negligence or willful
misconduct of the Issuing Bank.
-5-
<PAGE>
(d) Participation by Revolver Lenders. The Issuing Bank shall give each
Revolver Lender prompt notice of its receipt of each application for the
issuance of a Letter of Credit and the proposed face amount, beneficiary,
purpose and expiration date thereof. By the issuance of a Letter of Credit and
without any further action, the Issuing Bank hereby grants to each Revolver
Lender, and each Revolver Lender hereby agrees to acquire from the Issuing Bank,
a participation in such Letter of Credit equal to such Revolver Lender's pro
rata share of the face amount thereof, determined as provided in Section 1.15,
effective upon the date of issuance. In furtherance of the foregoing, each
Revolver Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the Issuing Bank, the amount of such
Revolver Lender's pro rata share of each Letter of Credit Disbursement. Each
Revolver Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this Section 1.03(d) is absolute and unconditional
and shall not be affected by any circumstances whatsoever, and that each payment
obligation arising from a Letter of Credit Disbursement shall be made promptly
by each Revolver Lender to the Administrative Agent without any offset,
abatement, withholding or reduction whatsoever.
(e) Payments by Revolver Lenders to Issuing Bank; Fee Sharing. Upon
notification by the Issuing Bank to the Administrative Agent that a Letter of
Credit Disbursement has been made and that the Borrower has failed to meet its
reimbursement obligations to the Issuing Bank, the Administrative Agent shall
promptly notify the Issuing Bank and each other Revolver Lender of the amount of
the Letter of Credit Disbursement and, in the case of each Revolver Lender, its
pro rata share thereof. Each Revolver Lender shall pay to the Administrative
Agent, not later than 2:00 P.M., New York time, on such date such Revolver
Lender's pro rata share of such Letter of Credit Disbursement, which the
Administrative Agent shall promptly pay to the Issuing Bank. The Administrative
Agent will promptly remit to each Revolver Lender its share of any amounts
subsequently received by the Issuing Bank or the Administrative Agent from the
Borrower in respect of all Letter of Credit Disbursements.
Section 1.04. Interest on the Notes.
(a) Interest Rate . Subject to the terms and conditions set forth in this
Section 1.04, the Borrower may elect an interest rate for the outstanding
principal balances from time to time of the Notes, or any portion thereof, based
on either the Base Rate or the applicable LIBOR Rate and determined as of any
date, as set forth in one of the two (2) Tables below, as follows:
(i) the rate for any Base Rate Loan shall be the Base Rate plus
the Applicable Margin for Base Rate Loans then in effect; and
(ii) the rate for any LIBOR Loan shall be the applicable LIBOR
Rate plus the Applicable Margin for LIBOR Loans in effect on the first
day of the applicable Interest Period.
(b) Determination of Applicable Margin for Revolving Loans.
(i) The Applicable Margin for Revolving Loans during the period
commencing
-6-
<PAGE>
on the date hereof and ending on August 14, 1997 shall be 2.00%, with
respect to Base Rate Loans, and 3.25%, with respect to LIBOR Loans.
The Applicable Margin for Revolving Loans during the Pricing Period
commencing on August 15, 1997 and ending on November 14, 1997 and
during each Pricing Period thereafter shall be determined based upon
the ratio of (A) Total Funded Debt as of the last day of the fiscal
quarter immediately preceding the first day of such Pricing Period to
(B) Annualized EBITDA for such fiscal quarter (the "Pricing Ratio"),
as indicated in the following Table:
- - -------------------------------------------------------------------------------
Applicable Margin for Revolving Loans
- - -------------------------------------------------------------------------------
Ratio of Total Funded Debt
to Annualized EBITDA Base Rate Loans LIBOR Loans
- - -------------------------------------------------------------------------------
Greater than or equal to
6.50:1.00 2.00% 3.25%
- - -------------------------------------------------------------------------------
Less than 6.50:1.00 but
greater than or equal to
6.00:1.00 1.75% 3.00%
- - -------------------------------------------------------------------------------
Less than 6.00:1.00 but
greater than or equal to
5.00:1.00 1.50% 2.75%
- - -------------------------------------------------------------------------------
Less than 5.00:1.00 but
greater than or equal to
4.00:1.00 1.25% 2.50%
- - -------------------------------------------------------------------------------
Less than 4.00:1.00 1.00 % 2.25%
- - -------------------------------------------------------------------------------
(c) Determination of Applicable Margin for Term Loans.
(i) The Applicable Margin for the Term Loans during the period
commencing on the date hereof and ending on August 14, 1997 shall be
2.25%, with respect to Base Rate Loans, and 3.50%, with respect to LIBOR
Loans. The Applicable Margin for Term Loans during the Pricing Period
commencing on August 15, 1997 and ending on November 14, 1997 and during
each Pricing Period thereafter shall be determined based upon the Pricing
Ratio, as indicated in the following Table:
-7-
<PAGE>
Applicable Margin for Term Loans
- - ------------------------------------------------------------------------------
Ratio of Total Funded Debt
to Annualized EBITDA Base Rate Loans LIBOR Loans
- - ------------------------------------------------------------------------------
Greater than or equal to
6.50:1.00
2.25% 3.50%
- - ------------------------------------------------------------------------------
Less than 6.50:1.00 but
greater than or equal to
6.00:1.00 2.00% 3.25%
- - ------------------------------------------------------------------------------
Less than 6.00:1.00 but
greater than or equal to
5.00:1.00 1.75% 3.00%
- - ------------------------------------------------------------------------------
Less than 5.00:1.00 but
greater than or equal to
4.00:1.00 1.50% 2.75%
- - ------------------------------------------------------------------------------
Less than 4.00:1.00 1.25% 2.50%
- - ------------------------------------------------------------------------------
(d) Computations, Pricing Period, Etc.
(i) Nothing in Section 1.04(b) or (c) shall be deemed to
constitute a waiver of the requirements of Section 5.01, default under
which will result in an Event of Default and the application of the
default rate of interest specified in Section 1.04(f).
(ii) As used in Section 1.04, the first "Pricing Period" shall
commence on August 15, 1997 and end on November 14, 1997 and, thereafter,
the term "Pricing Period" shall mean each period commencing on (A) the
date as of which the Borrower is required, under Section 6.05(a) or (b)
and Section 6.05(d), to deliver financial statements and a Compliance
Report indicating the applicable Pricing Ratio (in each case, a
"Compliance Report Delivery Date") and ending on (B) the next following
Compliance Report Delivery Date.
(iii) The determination of the Applicable Margin for any Pricing
Period shall be based on the quarterly financial statements and
Compliance Report required to be delivered on the first date of such
Pricing Period, as provided above. Notwithstanding the preceding
sentence, in the event of any discrepancy between the computation based
on such financial statements and Compliance Report and the related
audited financial statements furnished pursuant to Section 6.05(a) (the
"Audited Financial Statements"), the computation based upon the Audited
Financial Statements shall govern, retroactive to the first day of the
applicable Pricing Period. In the event of a retroactive correction in
the determination of the Applicable Margin in favor of the Borrower, the
amount of interest thereby refundable to the Borrower shall be applied on
the date of such retroactive correction, to prepay interest payable on
the Notes. If the retroactive correction is in favor of the Lenders, the
amount of interest due to the Lenders shall be paid in full to the
Administrative Agent within five (5) days after written notice of such
correction is provided to the Borrower.
-8-
<PAGE>
(iv) Notwithstanding the foregoing, no downward adjustment of
the Applicable Margin hereunder shall be permitted (A) unless the
Compliance Report for the relevant fiscal period delivered to the
Administrative Agent includes a request by the Borrower for such
adjustment or (B) during the existence of any Default.
(v) Interest on Base Rate Loans shall be computed on the basis
of the actual number of days elapsed over a 365 or 366-day year, as
applicable (unless such interest is based upon the Federal Funds Rate, in
which case interest shall be computed on the basis of the actual number
of days elapsed over a 360-day year). Interest on LIBOR Loans shall be
computed on the basis of the actual number of days elapsed over a 360-day
year.
(e) Interest Payment Dates. Interest on the Loans shall be payable in
arrears, without setoff, deduction or counterclaim, as follows:
(i) Interest on each Base Rate Loan shall be due and payable on
the Quarterly Dates, commencing September 30, 1997, and at maturity,
whether by reason of acceleration, prepayment, payment or otherwise,
provided that interest accrued on any Base Rate Loan which is converted
to a LIBOR Loan shall be paid on the Quarterly Date following the date of
such conversion (or, if accrued on a Base Rate Loan which is so converted
on a Quarterly Date, on such Quarterly Date). The interest rate on Base
Rate Loans shall change on the date of any change in the applicable Base
Rate.
(ii) Interest on each LIBOR Loan shall be due and payable on the
last day of the Interest Period applicable to such Loan and, if such
Interest Period exceeds three (3) months, every three (3) months after
the beginning thereof, until and at maturity, whether by reason of
acceleration, prepayment, payment or otherwise.
(f) Effect of Defaults, Etc.
(i) During the existence of any Event of Default, the
outstanding principal under the Notes and, to the extent permitted by
applicable law, overdue interest, fees or other amounts payable hereunder
or under the other Loan Documents shall bear interest, from and including
the date such Event of Default occurred until such Event of Default is
waived in writing as provided herein, at a rate per annum (computed on
the basis of the actual number of days elapsed over a 360-day year) equal
to two percent (2.00%) above (a) the interest rate or rates then
applicable to Base Rate Loans and overdue interest, fees and other
expenses, or (b) with respect to any LIBOR Loans then in effect (and only
until the end of the Interest Period applicable to such LIBOR Loans) the
interest rate or rates then applicable to such LIBOR Loans.
(ii) Nothing in this Section 1.04(f) ) shall affect the rights
of the Administrative Agent or the Lenders to exercise any rights or
remedies under the Loan Documents or applicable law arising upon the
occurrence of an Event of Default.
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Section 1.05. Loan Requests; Type of Loan.
(a) Loan Requests. Each request by the Borrower for Revolving Loans under
the Revolvers and the Borrower's request, if any, for the second installment of
the Term Loans (other than the initial Revolving Loans and Term Loans, if made
concurrently herewith) shall be made not later than (i) 11:00 A.M. (New York
time) on the Business Day prior to the proposed Borrowing Date, if such Loans
are Base Rate Loans, or (ii) 11:00 A.M. (New York time) on the third Business
Day prior to the proposed Borrowing Date, if any of such Loans are LIBOR Loans,
by a written Loan Request, in the form of Schedule 1.05(a) (each, a "Loan
Request"), signed by a duly authorized representative of the Borrower and
indicating (i) the date of such Loans, (ii) whether such Loans shall be Base
Rate Loans or LIBOR Loans or a combination of the two types of Loans and, if so,
the Interest Period for such LIBOR Loans, and (iii) the use of proceeds thereof,
to the extent any such proceeds are not being used for working capital purposes.
The Administrative Agent shall promptly notify the Lenders of such Loan Request
and the information contained therein. Such Loan Request shall be irrevocable
and binding on the Borrower.
(b) Conversion to a Different Type of Loan. The Borrower may elect from
time to time to convert any outstanding Loans to Base Rate Loans or LIBOR Loans,
as the case may be, provided that (i) with respect to any such conversion of
LIBOR Loans to Base Rate Loans, the Borrower shall provide the appropriate
Interest Rate Option Notice by 11:00 A.M. (New York time) on the date of such
proposed conversion; (ii) with respect to any such conversion of Base Rate Loans
to LIBOR Loans, the Borrower shall provide the appropriate Interest Rate Option
Notice by 11:00 A.M. (New York time ) at least three Business Days' prior to the
date of such proposed conversion; (iii) with respect to any such conversion of
LIBOR Loans into Base Rate Loans, such conversion shall only be made on the last
day of the related Interest Period; (iv) no Loans may be converted into LIBOR
Loans when any Default has occurred and is continuing; (v) the Borrower may have
no more than six (6) LIBOR Loans outstanding at any time; (vi) any conversion of
less than all of the outstanding Base Rate Loans into LIBOR Loans shall be in a
minimum aggregate principal amount of $1,000,000 and, if greater, an integral
multiple of $100,000; and (vii) any conversion of less than all of the
outstanding LIBOR Loans into Base Rate Loans shall be in a minimum aggregate
principal amount of $1,000,000 and, if greater, an integral multiple of
$100,000. The Administrative Agent shall promptly notify the Lenders of such
Interest Rate Option Notice and the information contained therein.
(c) Continuance of an Interest Rate Option. The Borrower may continue any
LIBOR Loans as such upon the expiration of the related Interest Period by
providing to the Administrative Agent (i) an Interest Rate Option Notice in
compliance with the notice provisions set forth in Section 1.05(b) or (ii)
standing written instructions authorizing the automatic continuation of such
Loans, which instructions shall be effective until notice to the Administrative
Agent by the Borrower revoking the same (such notice to take effect no sooner
than three Business Days after receipt by the Administrative Agent); provided
that no LIBOR Loans may be continued when any Default has occurred and is
continuing, but shall be automatically converted to Base Rate Loans on the last
day of the first applicable Interest Period which ends during the continuance of
such Default. Base Rate Loans shall be deemed to
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continue as such until receipt of an Interest Rate Option Notice requesting
conversion thereof to LIBOR Loans.
(d) Form of Notice. Each Interest Rate Option Notice shall be
substantially in the form of Schedule 1.05(d) and shall specify: (i) the
aggregate principal amount of Loans to be continued or converted; (ii) the
proposed date thereof; (iii) the Interest Period for such LIBOR Loans; and (iv)
whether such Loans shall be LIBOR Loans or Base Rate Loans.
Section 1.06. Loan Disbursements. The Loans shall be made by the
applicable Lenders pro rata as provided in Section 1.15. Not later than 12:00
noon (New York time), in the case of LIBOR Loans, or 2:00 P.M. (New York time),
in the case of Base Rate Loans, on the date specified for any Loans, each
applicable Lender shall make available to the Administrative Agent the portion
of the Loans to be made by it on such date, in immediately available funds, for
the account of the Borrower. The amount so received by the Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available
to the Borrower by depositing the same in immediately available funds in the
appropriate account or accounts of the Borrower and by disbursing such funds as
indicated in writing in the related Loan Request prior to the date such Loans
are proposed to be made.
Section 1.07. Payments, Prepayments and Termination or Reduction of the
Revolver Commitments.
(a) (i) All voluntary reductions of the Revolver Commitments under
Section 1.07(b), (ii) voluntary prepayments of the Term Notes under Section
1.07(c), (ii) all mandatory prepayments applicable to all of the Notes required
under Sections 1.07(e), (f) and (g) and (iv) all mandatory reductions of the
Revolver Commitments required in connection with such mandatory prepayments
shall be made on a pro rata basis such that, in each case, the ratio of (A) the
aggregate reduction of the Revolver Commitments to (B) the aggregate prepayments
of the Term Notes made concurrently therewith shall equal the ratio of (1) the
aggregate Revolver Commitments to (2) the aggregate principal amount of the Term
Notes then outstanding, in each case as of the date of such reduction and
prepayment.
(b) Voluntary Reductions of Revolver Commitments and Related Prepayments.
At any time prior to the Expiration Date, upon at least three (3) Business Days'
written notice to the Administrative Agent in the form of Schedule 1.07(b)
(each, a "Revolver Commitment Reduction Notice") signed by a duly authorized
representative of the Borrower, the Borrower may permanently terminate or
permanently reduce any of the Revolver Commitments, provided as follows:
(i) any such reduction shall be in an aggregate amount of not
less than $1,000,000 or, if greater, an integral multiple thereof;
(ii) after giving effect to any such reduction, the aggregate
unutilized portion of the Available Revolver Commitments shall equal or
exceed $10,000,000;
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(iii) concurrently with each such reduction, the Borrower shall
permanently prepay the Term Notes in the ratable amount required to
comply with Section 1.07(a) and as provided in Section 1.07(c);
(iv) any such reduction shall apply to each Revolver Lender's
Revolver Commitment pro rata as provided in Section 1.15; and
(v) simultaneously with each such reduction, the Borrower (A)
shall pay to the Administrative Agent, for the ratable account of each
Revolver Lender, any then accrued unpaid Commitment Fee on the terminated
or reduced portion of the respective Revolver Commitments, (B) shall pay
any indemnification payments due in accordance with Section 1.12 in
respect of LIBOR Loans so prepaid, and (C) shall repay such amount of the
aggregate principal amount of the Revolver Notes as shall cause the
outstanding principal balance thereunder to be less than or equal to the
aggregate Available Revolver Commitments, after giving effect to such
reduction, provided that any such prepayment shall be an aggregate amount
of not less than $1,000,000 or, if greater, an integral multiple of
$250,000, in the case of LIBOR Loans so prepaid, or $250,000 or, if
greater, integral multiples thereof, with respect to Base Rate Loans so
prepaid.
Each Revolver Commitment Reduction Notice shall specify the date fixed for such
termination or reduction, the aggregate principal amount thereof and the
aggregate principal amount of the Revolver Notes required to be repaid hereunder
on such date.
(c) Voluntary Prepayments of the Term Notes. At any time, upon at least
three (3) Business Days' written notice to the Administrative Agent in the form
of Schedule 1.07(c) (each, a "Prepayment Notice"), the Borrower may permanently
prepay the Term Notes, provided as follows:
(i) any such prepayment shall be in an aggregate amount of not
less than $1,000,000 or, if greater, an integral multiple of $250,000;
(ii) each such prepayment shall apply to each Term Lender's Term
Note pro rata as provided in Section 1.15;
(iii) concurrently with each such prepayment, the Borrower shall
permanently reduce the Revolver Commitments in the ratable amount
required to comply with Section 1.07(a) and as provided in Section
1.07(b); and
(iv) simultaneously with each such prepayment, the Borrower
shall pay any indemnification payments due in accordance with Section
1.12 in respect of LIBOR Loans so prepaid.
(d) Mandatory Reductions of the Revolver Commitments; 1998 Year End
Reduction. The aggregate Revolver Commitments shall be automatically reduced as
scheduled in Section 1.01(f). In addition, the aggregate Revolver Commitments
shall be automatically
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reduced on December 31, 1998, if and to the extent that the unutilized portion
of the Available Revolver Commitments on such date exceeds $15,000,000.
(e) Casualty Events. Within one hundred eighty (180) days following the
receipt by the Borrower or any of the Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event (or
upon such earlier date as the Borrower or any Subsidiary shall have determined
not to repair or replace the asset or property affected by such Casualty Event),
which proceeds, together with all other such proceeds therefor received in
respect of Casualty Events, exceed $500,000 in the aggregate, the Borrower shall
prepay the Notes, and the Revolver Commitments shall be automatically reduced by
an amount equal to the portion of such prepayments applied to the Revolver
Notes, as provided in Section 1.07(h), in an aggregate amount, if any, equal to
the aggregate amount of such proceeds not theretofore applied to the repair or
replacement of such asset or property under Section 6.02(b). Nothing in this
Section 1.07(e) shall be deemed (i) to limit any obligation of the Companies
pursuant to the Security Agreements to remit to the Collateral Account the
proceeds of insurance, condemnation award or other compensation received in
respect of any Casualty Event, (ii) to obligate the Administrative Agent to
release any of such proceeds from the Collateral Account to the Borrower or any
Subsidiary during the existence of any Default or (iii) to apply to temporary
prepayments of the Notes from insurance proceeds pending completion of repairs
and restoration within the one hundred eighty (180) day period referred to
above.
(f) Excess Cash Flow. On or before May 1 of each year, commencing May 1,
2000, the Borrower shall prepay the Notes, and the Revolver Commitments shall be
automatically reduced by an amount equal to the portion of such prepayments
applied to the Revolver Notes, in an aggregate amount equal to fifty percent
(50%) of Excess Cash Flow for the immediately preceding fiscal year, as provided
in Sections 1.07(h) and (i).
(g) Dispositions of Assets. Without limiting the obligation of the
Borrower under Section 7.03 to obtain the consent of the Required Lenders to any
Disposition not otherwise permitted hereunder, the Borrower agrees (i) two (2)
Business Days prior to the occurrence of any disposition of assets or properties
other than pursuant to Section 7.03(a), to deliver to the Administrative Agent
(in sufficient copies for each Lender) a statement, certified by the chief
executive officer or chief financial officer of the Borrower and in reasonable
detail, of the estimated amount of the Net Cash Proceeds of such Disposition and
(ii) that in the event such Disposition is completed, the Borrower will prepay
the Notes, and the Revolver Commitments will be subject to automatic reduction
by an amount equal to the portion of such prepayments applied to the Revolver
Notes, as follows:
(A) on the date of such Disposition, in an aggregate amount
equal to 100% of the Net Cash Proceeds of such Disposition received by
the Borrower or any of the Subsidiaries on the date of such Disposition;
and
(B) thereafter, quarterly, on the date of the delivery to the
Administrative Agent pursuant to Section 6.05 hereof of the financial
statements for each fiscal quarter or (if earlier) the date which is
forty-five (45) days after the end of such fiscal quarter, to the
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extent the Borrower or any Subsidiary shall receive Net Cash Proceeds
during such fiscal quarter under deferred payment arrangements or
investments entered into or received in connection with any
Disposition, an amount equal to 100% of the aggregate amount of such
Net Cash Proceeds, provided that if, prior to the date upon which the
Borrower would otherwise be required to make a prepayment under this
paragraph (B) with respect to any fiscal quarter, all such Net Cash
Proceeds received in cash shall aggregate an amount that will require
a prepayment of $250,000 or more under this paragraph (B) with respect
to such fiscal quarter, then the Borrower shall immediately make a
prepayment under this paragraph (B) in an amount equal to such
required prepayment.
Notwithstanding the foregoing, provided that no Default exists as of the date of
any such Disposition, the Borrower shall not be required to make a prepayment
pursuant to this Section 1.07(g) with respect to the first $20,000,000 in Net
Cash Proceeds from any such Disposition or all Dispositions in the aggregate
after the date hereof in the event that the Borrower advises the Administrative
Agent at the time the Net Cash Proceeds from such Disposition (or the last in
any such series of Dispositions) are received that it intends to reinvest such
Net Cash Proceeds in replacement assets pursuant to a Permitted Acquisition, so
long as:
(1) such Net Cash Proceeds are (x) held by the Administrative
Agent in the Collateral Account pending such reinvestment, in which event
the Administrative Agent need not release such Net Cash Proceeds except
upon presentation of evidence satisfactory to it that such Net Cash
Proceeds are to be so reinvested in compliance with the provisions of
this Agreement, (y) applied by the Borrower to the prepayment of the
Revolver Notes without permanent reduction of the Revolver Commitments in
such amount (in which event the Borrower agrees to advise the
Administrative Agent in writing at the time of such prepayment of
Revolver Notes that such prepayment is being made from the proceeds of a
Disposition) or (z) held and applied in any combination of clauses (x)
and (y) above; and
(2) the Net Cash Proceeds from any such Disposition are in fact
so reinvested prior to the earlier to occur of (x) 180 days following the
date of such Disposition, unless a definitive agreement with respect to a
Permitted Acquisition utilizing Net Cash Proceeds shall have been entered
into within such period, or (y) in such event, 270 days following such
Disposition, it being understood that, in the event Net Cash Proceeds
from more than one Disposition are paid into the Collateral Account or
applied to the prepayment of the Revolver Notes as provided in
subparagraph (1) above, such Net Cash Proceeds shall be deemed to be
released in the same order in which such Dispositions occurred.
Accordingly, any such Net Available Proceeds so held for more than the 180 or
270 day period referred to in subparagraph (2) above shall be forthwith applied
to the prepayment of the Notes and the reduction of the Revolver Commitments (by
an amount equal to the portion of such prepayments applied to the Revolver
Notes) as provided above. Nothing in this Section 1.07 shall be deemed to
obligate the Administrative Agent to release any of such proceeds from the
Collateral Account to the Borrower or any Subsidiary for purposes of
reinvestment as aforesaid during the existence of any Default.
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(h) Application of Reductions of the Revolver Commitments. Upon the
occurrence of any of the events described in the above paragraphs of this
Section 1.07, the amount of the proposed or required reduction of the Revolver
Commitments, if any, shall be applied to the reduction of the Revolver Lenders'
respective Revolver Commitments on a pro rata basis, as provided in Section
1.15. Each such reduction of the aggregate Revolver Commitments shall be applied
as follows:
(i) in the case of reductions made out of Excess Cash Flow under
Section 1.07(f), to subsequent scheduled automatic reductions of the
Revolver Commitments under Section 1.01(f) in the inverse order in which
they appear; and
(ii) in the case of all other reductions, to reduce the dollar
levels of each of the Revolver Commitments shown in the Table of
scheduled automatic reductions under Section 1.01(f) for reduction dates
occurring after the date of the applicable reduction ratably in
accordance with the dollar levels shown in such Table.
(i) Applications of Prepayments.
(i) All voluntary prepayments of the Notes under Sections
1.07(b) and (c) (A) shall be made without set-off, deduction or
counterclaim, and (B) unless otherwise specified in this Section 1.07,
shall be applied first, to overdue interest, fees and expenses hereunder,
and second, to pay principal of the Revolver Notes and the Term Notes
ratably as provided in Section 1.07(a) (in each case pro rata among the
respective Lenders as provided in Section 1.15).
(ii) All mandatory prepayments of the Notes under Section
1.07(d), (e), (f) and (g) (A) shall be made without set-off, deduction or
counterclaim, and (B) unless otherwise specified in Section 1.07, shall
be applied first, to overdue interest, fees and expenses hereunder,
second, to pay principal of the Revolver Notes and installments of
principal of the Term Notes, in the inverse order of maturity, ratably
between the Revolver Notes and the Term Notes as provided in Section
1.07(a), provided, in each case, that (A) payments of principal of the
Revolver Notes shall be applied to the Revolver Lenders' respective
Revolver Notes pro rata as provided in Section 1.15, unless otherwise
agreed to by the Revolver Lenders, (B) payments of principal of the Term
Notes shall be applied to the Term Lenders' respective Term Notes pro
rata as provided in Section 1.15, unless otherwise agreed to by the Term
Lenders and (C) applications of prepayments to principal shall be made
first to Base Rate Loans and then to LIBOR Loans.
Section 1.08. Revolver Commitment Fee. The Borrower shall pay to the
Administrative Agent, for the ratable account of each Revolver Lender, a
non-refundable fee (the "Commitment Fee") on the aggregate daily unutilized
portion of the Available Revolver Commitments from the Closing Date to and
including the earlier of the termination of the Revolver Commitments or the
Expiration Date, at the rate of one-half of one percent (1/2%) (computed on the
basis of the actual number of days elapsed over a 365-366 day year), payable
quarterly on each Quarterly
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Date, without setoff, deduction or counterclaim, with a final payment at the
maturity of the Revolver Notes, whether by payment, prepayment, acceleration or
otherwise.
Section l.09. Requirements of Law.
(a) In the event that any Regulatory Change shall:
(i) change the basis of taxation of any amounts payable to any
Lender under this Agreement or any Notes in respect of any Loans,
including without limitation LIBOR Loans (other than taxes imposed on the
overall net income of such Lender in its jurisdiction of organization or
in the jurisdiction where its lending office is located);
(ii) impose or modify any reserve, compulsory loan assessment,
special deposit or similar requirement relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of,
any office of such Lender (including any of such Loans or any deposits
referred to in the definition of "LIBOR Base Rate" in Article XI); or
(iii) impose any other conditions affecting this Agreement in
respect of Loans, including without limitation LIBOR Loans (or any of
such extensions of credit, assets, deposits or liabilities);
and the result of any of the foregoing shall be to increase such Lender's costs
of making or maintaining any Loans, including without limitation LIBOR Loans or
any Commitment, or to reduce any amount receivable by such Lender hereunder in
respect of any of its LIBOR Loans or any Commitment, in each case only to the
extent that such additional amounts are not included in the LIBOR Base Rate or
Base Rate applicable to such Loans, then the Borrower shall pay on demand to
such Lender, through the Administrative Agent, and from time to time as
specified by such Lender, such additional amounts as such Lender shall
reasonably determine are sufficient to compensate such Lender for such increased
cost or reduced amount receivable.
(b) If at any time after the date of this Agreement any Lender shall have
determined that the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Lending Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or the
adoption or implementation of any Regulatory Change regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof (whether or not having the
force of law), has or will have the effect of reducing the rate of return on
such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of the existence of its obligations hereunder to a level
below that which such Lender or its holding company could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount reasonably deemed by
such Lender to be material, then from time to time following written notice by
such Lender to the Borrower as provided in paragraph (c) of this
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Section, within fifteen (15) days after demand by such Lender, the Borrower
shall pay to such Lender, through the Administrative Agent, such additional
amount or amounts as such Lender shall reasonably determine will compensate such
Lender or such corporation, as the case may be, for such reduction, provided
that to the extent that any or all of the Borrower's liability under this
Section arises following the date of the adoption of any such Regulatory Change
(the "Effective Date"), such compensation shall be payable only with respect to
that portion of such liability arising after notice of such Regulatory Change is
given by such Lender to the Borrower (unless such notice is given within sixty
(60) days after the Effective Date, in which case such compensation shall be
payable in full).
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this Section, it shall promptly notify the Borrower of the event by
reason of which it has become so entitled. A certificate setting forth in
reasonable detail the computation of any additional amounts payable pursuant to
this Section submitted by such Lender to the Borrower shall be delivered to the
Borrower and the other Lenders promptly after the initial incurrence of such
additional amounts and shall be conclusive in the absence of manifest error. The
covenants contained in this Section shall survive for six months following the
termination of this Agreement and the payment of the outstanding Notes. No
failure on the part of any Lender to demand compensation under paragraph (a) or
(b) above on any one occasion shall constitute a waiver of its rights to demand
compensation on any other occasion. The protection of this Section shall be
available to each Lender regardless of any possible contention of the invalidity
or inapplicability of any law, regulation or other condition which shall give
rise to any demand by such Lender for compensation thereunder.
Section 1.10. Limitations on LIBOR Loans; Illegality.
(a) Anything herein to the contrary notwithstanding, if, on or prior to
the determination of an interest rate for any LIBOR Loans for any applicable
Interest Period, the Administrative Agent shall determine (which determination
shall be conclusive absent manifest error) that:
(i) by reason of any event affecting United States money markets
or the London interbank market, quotations of interest rates for the
relevant deposits are not being provided in the relevant amounts or for
the relevant maturities for purposes of determining the rate of interest
for such Loans under this Agreement; or
(ii) the rates of interest referred to in the definition of
"LIBOR Base Rate" in Article XI, on the basis of which the rate of
interest on any LIBOR Loans for such period is determined, do not
accurately reflect the cost to the Lenders of making or maintaining such
LIBOR Loans for such period; then the Administrative Agent shall give the
Borrower prompt notice thereof (and shall thereafter give the Borrower
prompt notice of the cessation, if any, of such condition), and so long
as such condition remains in effect, the Lenders shall be under no
obligation to make LIBOR Loans or to convert Base Rate Loans into LIBOR
Loans and the Borrower shall, on the last day(s) of the then current
Interest Period(s) for any outstanding LIBOR Loans, either prepay such
LIBOR Loans in
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accordance with Sections 1.01 and 1.07 or convert such
Loans into Base Rate Loans in accordance with Section 1.05.
(b) Notwithstanding any other provision herein, if for any reason a
Lender shall be unable to make or maintain LIBOR Loans as contemplated by this
Agreement, such Lender shall provide prompt written notice to the Borrower and
(i) such Lender's commitment hereunder to make LIBOR Loans, continue LIBOR Loans
as such and convert Base Rate Loans to LIBOR Loans shall thereupon terminate and
(ii) such Lender's Loans then outstanding as LIBOR Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a LIBOR Loan occurs on a
day which is not the last day of the then current Interest Period with respect
thereto, and if the reason for such Lender's inability to make or maintain LIBOR
Loans as contemplated by this Agreement is a Regulatory Change, then the
Borrower shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 1.12.
Section 1.11. Taxes.
(a) All payments made by the Borrower under this Agreement and the Notes
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority (all such
taxes, levies, imposts, duties, charges, fees, deductions and withholdings being
hereinafter called "Taxes"); provided, however, that the term "Taxes" shall not
include net income taxes, franchise taxes (imposed in lieu of net income taxes)
and general intangibles taxes (such as those imposed by the State of Florida)
imposed on the Administrative Agent or any Lender, as the case may be, as a
result of a present or former connection or nexus between the jurisdiction of
the government or taxing authority imposing such tax (or any political
subdivision or taxing authority thereof or therein) and the Administrative Agent
or such Lender other than that arising solely from the Administrative Agent or
such Lender having executed, delivered or performed its obligations or received
a payment under, or enforced, this Agreement, the Notes or any of the Security
Documents. If any Taxes are required to be withheld from any amounts payable to
the Administrative Agent or any Lender hereunder or under the Notes, the amounts
so payable to the Administrative Agent or such Lender shall be increased to the
extent necessary to yield to the Administrative Agent or such Lender (after
payment of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement and the Notes. Whenever
any Taxes are payable by the Borrower in respect of this Agreement or the Notes,
as promptly as possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. If, after any payment of
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Taxes by the Borrower under this Section, any part of any Tax paid by the
Administrative Agent or any Lender is subsequently recovered by the
Administrative Agent or such Lender, the Administrative Agent or such Lender
shall reimburse the Borrower to the extent of the amount so recovered. A
certificate of an officer of the Administrative Agent or such Lender setting
forth the amount of such recovery and the basis therefor shall, in the absence
of manifest error, be conclusive. The Administrative Agent and the Lenders shall
use reasonable efforts to notify the Borrower of their attempts, if any, to
obtain abatements of any such Taxes and the receipt by the Administrative Agent
or the Lenders of any funds in connection therewith. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) Each Lender, if any, that is not incorporated under the laws of the
United States or a state thereof agrees that prior to the date any payment is
required to be made to it hereunder it will deliver to the Borrower and the
Administrative Agent (i) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case may
be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable
form. Each such Lender also agrees to deliver to the Borrower and the
Administrative Agent two further copies of the said Form 1001 or 4224 and Form
W-8 or W-9, or successor applicable forms or other manner of certification, as
the case may be, on or before the date that any such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower, and such extensions or
renewals thereof as may reasonably be requested by the Borrower or the
Administrative Agent, unless in any such case an event (including, without
limitation, any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Such Lender shall certify (x) in the case
of a Form 1001 or 4224, that it is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes and (y) in the case of a Form W-8 or W-9, that it is entitled to an
exemption from United States backup withholding tax.
Section 1.12. Indemnification. The Borrower shall pay to the
Administrative Agent, for the account of each Lender, upon the request of such
Lender delivered to the Administrative Agent and thereafter delivered by the
Administrative Agent to the Borrower, such amount or amounts as shall compensate
such Lender for any loss, cost or expense incurred by such Lender (as reasonably
determined by such Lender) as a result of:
(a) any payment or prepayment or conversion of any LIBOR Loan held by
such Lender on a date other than the last day of the Interest Period for such
LIBOR Loan (including without limitation any such payment, prepayment or
conversion required under Section 1.05 or 1.07); or
(b) any failure by the Borrower to borrow, convert into or continue a
LIBOR Loan on the date for such borrowing specified in the relevant Loan Request
or Interest Rate Option Notice under Section 1.05 or otherwise.
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Such indemnification may include an amount equal to the excess, if any, of (i)
the amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder. The determination
by each such Lender of the amount of any such loss or expense, when set forth in
a written notice delivered to the Administrative Agent (and thereafter delivered
by the Administrative Agent to the Borrower), containing such Lender's
calculation thereof in reasonable detail, shall be conclusive in the absence of
manifest error.
Section 1.13. Payments Under the Notes. All payments and prepayments made
by the Borrower of principal of, and interest on, the Notes and other sums and
charges payable under this Agreement, including without limitation the
Commitment Fee and any payments under Sections 1.09, 1.11 and 1.12, shall be
made in immediately available funds to the Administrative Agent (as specified in
Section 14.03) for the accounts of the Lenders as provided in Section 1.15 and
otherwise herein and, with respect to fees payable to the Agents and their
affiliates, the Fee Letters, not later than 2:00 P.M. (New York Time), on the
date on which such payment shall become due. The failure by the Borrower to make
any such payment by such hour shall not constitute a Default hereunder so long
as payment is received later that day, provided that any such payment made after
2:00 P.M. (New York Time), on such due date shall be deemed to have been made on
the next Business Day for the purpose of calculating interest on amounts
outstanding on the Notes. The Borrower shall, at the time of making each payment
under this Agreement or the Notes, specify to the Administrative Agent the Notes
or amounts payable by the Borrower hereunder to which such payment is to be
applied (and in the event that it fails to so specify, or if an Event of Default
has occurred and is continuing, the Administrative Agent may distribute such
payments in such manner as the Required Lenders may direct or, absent such
direction, as it determines to be appropriate, subject to the provisions of
Section 1.15). Except as otherwise provided in the definition of "Interest
Period" with respect to LIBOR Loans, if any payment hereunder or under the Notes
shall be due and payable on a day which is not a Business Day, such payment
shall be deemed due on the next following Business Day and interest shall be
payable at the applicable rate specified herein through such extension period.
The Administrative Agent, or any Lender for whose account any such payment is
made, may (but shall not be obligated to) debit the amount of any such payment
which is not made by such time to any deposit account of the Borrower with the
Administrative Agent or such Lender, as the case may be. Each payment received
by the Administrative Agent under this Agreement or any Note for the account of
a Lender shall be paid promptly to such Lender, in immediately available funds,
for the account of such Lender for the Note in respect to which such payment is
made.
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Section 1.14. Set-Off, Etc. The Borrower agrees that, in addition to (and
without limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender (and each subsequent holder of any Note)
shall be entitled, at its option, to offset balances held by it, or by any of
its respective branches or agencies, for the account of the Borrower at any of
its or their offices, in Dollars or in any other currency, against any principal
of or interest on the Notes held by such Lender (or subsequent noteholder) or
other fees or charges owed to such Lender (or subsequent noteholder) hereunder
which are not paid when due (regardless of whether such balances are then due to
the Borrower and regardless of whether the Lenders are otherwise fully secured),
in which case it shall promptly notify the Borrower and the Administrative Agent
thereof, provided that such Lender's (or subsequent noteholder's) failure to
give such notice shall not affect the validity thereof and (as security for any
Indebtedness hereunder) the Borrower hereby grants to the Administrative Agent
and the Lenders a continuing security interest in any and all balances, credit,
deposits, accounts or moneys of the Borrower maintained with the Administrative
Agent and any Lender now or hereafter. If a Lender (or subsequent noteholder)
shall obtain payment of any principal, interest or other amounts payable under
this Agreement through the exercise of any right of set-off, banker's lien or
counterclaim or otherwise, it shall promptly purchase from the other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Note(s) held by the other Lenders in such amounts, and make
such other adjustments from time to time as shall be equitable, to the end that
all the Lenders shall share the benefit of such payment (net of any expenses
which may be incurred by such Lender in obtaining or preserving such benefit)
pro rata in accordance with the unpaid principal amounts of and interest on the
Note(s) held by each of them. To such end, the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored. The Borrower agrees
that any Lender or any other Person which purchases a participation (or direct
interest) in the Note(s) held by any or all of the Lenders (each being
hereinafter referred to as a "Participant") may exercise all rights of set-off,
bankers' lien, counterclaim or similar rights with respect to such participation
as fully as if such Participant were a direct holder of Notes in the amount of
such participation, provided that the Borrower was notified of such purchase.
Nothing contained herein shall be deemed to require any Participant to exercise
any such right or shall affect the right of any Participant to exercise, and
retain the benefits of exercising, any such right with respect to any
indebtedness or obligation of the Borrower, other than the Borrower's
indebtedness and obligations under this Agreement.
Section 1.15. Pro Rata Treatment; Sharing.
(a) Except to the extent otherwise provided herein and, with respect to
fees payable to the Agents and their affiliates, the Fee Letters, and except as
otherwise agreed by the Lenders: (i) each borrowing from the Revolver Lenders
under the Revolver Commitments shall be made from the Revolver Lenders and each
payment of the Commitment Fee under Section 1.08 shall be made to the Revolver
Lenders pro rata according to the amounts of their respective unutilized
Revolver Commitments; (ii) each borrowing from the Term Lenders of a Term Loan
shall be made from the Term Lenders pro rata according to the amounts of their
respective unutilized Term Commitments; (iii) the principal amount of LIBOR
Loans made by each Revolver Lender shall be determined on a pro rata basis in
accordance with its respective Revolver Commitment
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(when making Revolving Loans) or the outstanding principal amount of the
Revolving Loans owed to such Revolver Lender (in the case of conversions to or
continuations of Revolving Loans as LIBOR Loans); (iv) the principal amount of
LIBOR Loans made by each Term Lender shall be determined on a pro rata basis in
accordance with its Term Commitment (when making Term Loans) or the outstanding
principal amount of the Term Loans owed to such Term Lender (in the case of
conversions to or continuations of Term Loans as LIBOR Loans); (v) each Revolver
Lender's share of each Letter of Credit under Section 1.03 and of the Letter of
Credit Fee shall be determined pro rata according to the amounts of the Revolver
Lenders' respective Revolver Commitments; (vi) each payment and prepayment of
principal of the Revolver Notes and repayments of Letter of Credit Disbursements
shall be allocated to the Revolver Lenders pro rata in accordance with the
unpaid principal amounts of the respective Revolver Notes held by the Revolver
Lenders; (vii) each payment and prepayment of principal of the Term Notes shall
be allocated to the Term Lenders pro rata in accordance with the unpaid
principal amounts of the respective Term Notes held by the Term Lenders; (viii)
each payment of interest on the Revolver Notes shall be allocated to the
Revolver Lenders pro rata in accordance with the unpaid principal amounts of
their respective Revolver Loans; (ix) each payment of interest on the Term Notes
shall be allocated to the Term Lenders pro rata in accordance with the unpaid
principal amounts of their respective Term Loans; (x) each payment of any other
sums and charges payable for the Lenders' account under this Agreement (except
for the Issuance Fee which shall be retained by the Issuing Bank and the fees
payable under the Fee Letters, which are payable solely in accordance therewith)
shall be allocated to the Lenders pro rata in accordance with the respective
unpaid principal amounts of the aggregate Loans made by each of them; (xi) each
payment under Section 1.09, 1.11 or 1.12 shall be made to each Lender in the
amount required to be paid to such Lender to adequately indemnify or compensate
such Lender for losses suffered or costs incurred by such Lender as provided in
such Section; and (xii) notwithstanding the foregoing, after and during the
continuance of a Default, each distribution of cash, property, securities or
other value received by any Lender, directly or indirectly, in respect of the
Borrower's Indebtedness hereunder, whether pursuant to any attachment,
garnishment, execution or other proceedings for the collection thereof or
pursuant to any bankruptcy, reorganization, liquidation or other similar
proceeding or otherwise, after payment of collection and other expenses as
provided herein and in the Security Documents, shall be apportioned among the
Lenders pro rata based upon the respective aggregate unpaid principal amount of
all Loans owed to each of them and their respective shares of the aggregate
Letter of Credit Exposure.
(b) Notwithstanding the foregoing, if any Lender (a "Recovering Party")
shall receive any such distribution referred to in Section 1.15 (a) (xii) above
(a "Recovery") in respect thereof, such Recovering Party shall pay to the
Administrative Agent for distribution to the Lenders as set forth herein their
respective pro rata shares of such Recovery, based on the Lenders' pro rata
shares of all Loans outstanding at such time, unless the Recovering Party is
legally required to return any Recovery, in which case each party receiving a
portion of such Recovery shall return to the Recovering Party its pro rata share
of the sum required to be returned without interest. For purposes of this
Agreement, calculations of the amount of the pro rata share of each Lender shall
be rounded to the nearest whole dollar.
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(c) The Borrower acknowledges and agrees that, if any Recovering Party
shall be obligated to pay to the other Lenders a portion of any Recovery
pursuant to Section 1.17(b) and shall make such recovery payment, the Borrower
shall be deemed to have satisfied its obligations in respect of Indebtedness
held by such Recovering Party only to the extent of the Recovery actually
retained by such Recovering Party after giving effect to the pro rata payments
by such Recovering Party to the other Lenders. The obligations of the Borrower
in respect of Indebtedness held by each other Lender shall be deemed to have
been satisfied to the extent of the amount of the Recovery distributed to each
such other Lender by the Recovering Party.
Section 1.16. Non-Receipt of Funds by the Administrative Agent. Unless
the Administrative Agent shall have been notified in writing by a Lender or the
Borrower prior to the date on which such Lender or the Borrower is scheduled to
make payment to the Administrative Agent of (in the case of a Lender) the
proceeds of a Loan to be made by it hereunder or (in the case of the Borrower) a
payment to the Administrative Agent for the account of any or all of the Lenders
hereunder (such payment being herein referred to as a "Required Payment"), which
notice shall be effective upon actual receipt, that it does not intend to make
such Required Payment to the Administrative Agent, the Administrative Agent may
(but shall not be required to) assume that the Required Payment has been made
and may (but shall not be required to), in reliance upon such assumption, make
the amount thereof available to the intended recipient(s) on such date and, if
such Lender or the Borrower (as the case may be) has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, or with respect to payment received by the Borrower, within
three (3) Business Days after such receipt repay to the Administrative Agent for
the Administrative Agent's own account the amount so made available together
with interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Administrative Agent until the
date the Administrative Agent recovers such amount at a rate per annum equal to
(a) the Federal Funds Rate for such day, with respect to interest paid by such
Lender, or (b) the applicable rate provided under Section 1.04, with respect to
interest paid by the Borrower.
Section 1.17. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Borrower of the loss, theft, destruction or mutilation of
any Note and (a) in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory to the Borrower
(provided, however, that if the holder of such Note is the original holder of
such Note or a financial institution with net capital, capital surplus and
undivided profits in excess of $50,000,000 its own agreement of indemnity shall
be deemed to be satisfactory), or (b) in the case of any such mutilation, upon
the surrender of such Note for cancellation, the Borrower will execute and
deliver, in lieu of such lost, stolen, destroyed, or mutilated Note, a new Note
of like tenor.
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II. SECURITY; SUBORDINATION; USE OF PROCEEDS
Section 2.01. Security for the Obligations; Subordination; Etc.
(a) Except as specified in Schedule 2.01(a) attached hereto, the
Borrower's obligations hereunder, under the Notes and in respect of any Rate
Hedging Obligations entered into with any Hedging Lenders shall be secured at
all times by:
(i) the unconditional guaranty of each of the Subsidiaries and
the Parent (provided that the Parent's guaranty shall be non-recourse
except to the extent of the Collateral required to be provided by the
Parent under subparagraph (v) below);
(ii) a first priority perfected security interest in and lien
upon all presently owned and hereafter acquired tangible and intangible
personal property and fixtures of each of the Borrower and the
Subsidiaries, including any intercompany notes, obligations or
agreements, subject only to any prior Liens expressly permitted under
this Agreement;
(iii) first mortgages on all presently owned and hereafter
acquired real estate owned by each of the Borrower and the Subsidiaries,
subject only to any prior Liens expressly permitted under this Agreement,
together with mortgagee's title insurance policies acceptable to the
Lenders;
(iv) first priority perfected collateral assignments of or
leasehold mortgages on all real estate leases in which any of the
Borrower and the Subsidiaries now has or may in the future have an
interest and such third party consents, lien waivers, non-disturbance
agreements and estoppel certificates as the Administrative Agent shall
reasonably require, together with mortgagee's title insurance policies
acceptable to the Administrative Agent;
(v) a first priority perfected collateral assignment and/or
pledge of all of the issued and outstanding ownership interests of each
of the Borrower and the Subsidiaries (including the PST Transfer
Preferred Stock but excluding any other Permitted Preferred Stock) and
all warrants, options and other rights to purchase such ownership
interests; and
(vi) first priority perfected collateral assignments of (i) all
NRTC Member Agreements and any other satellite broadcasting distribution
agreements and (ii) all such management agreements, programming
agreements and other agreements as the Administrative Agent shall
reasonably deem necessary to protect the interests of the Lenders,
together, in each case with such third party consents, lien waivers and
estoppel certificates as the Administrative Agent shall reasonably
require, including without limitation the consents of the NRTC and
DirecTv.
(b) Subordination.
(i) All existing and hereafter arising indebtedness of the
Borrower and the Subsidiaries, if any, to Sellers which constitutes
Permitted Seller Subordinated Debt shall be
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subordinated to any Indebtedness of the Companies to the Agents or the
Lenders pursuant to subordination agreements substantially in the form
of Schedule 2.01(b) with any material changes thereto to be
satisfactory to the Required Lenders, in their sole discretion (each,
a "Seller Subordination Agreement", and collectively, the "Seller
Subordination Agreements"). Notwithstanding the foregoing, the
consent of the Administrative Agent (in its sole discretion) shall be
sufficient (without further approval by the Lenders) to approve
revisions to such form necessary (i) to permit the issuance to any
subordinated Seller of Junior Reorganization Securities and (ii) to
waive the requirement that the promissory notes evidencing such
Seller's Permitted Seller Subordinated Debt be pledged and delivered
to the Administrative Agent as security.
(ii) Without limiting the generality of Section 7.01,
all existing and hereafter arising indebtedness of the Borrower and the
Subsidiaries to the Manager and the Parent shall be subordinated to any
Indebtedness of the Companies to the Lenders pursuant to subordination
agreements satisfactory in form and substance to the Required Lenders
(each, an "Affiliate Subordination Agreement", and collectively, the
"Affiliate Subordination Agreements").
(c) Security Documents. All agreements and instruments described or
contemplated in this Section 2.01, together with any and all other agreements
and instruments heretofore or hereafter securing the Notes, the Rate Hedging
Obligations and the other Obligations or otherwise executed in connection with
this Agreement, are sometimes hereinafter referred to collectively as the
"Security Documents" and each individually as a "Security Document". The
Borrower agrees to take such action as the Lenders may reasonably request from
time to time in order to cause the Administrative Agent and the Lenders to be
secured at all times as described in this Section.
Section 2.02. Use of Proceeds. The proceeds of the Revolving Loans and
the Term Loans shall be applied (a) to repay $19,775,437 in advances previously
made to the Borrower and its Subsidiaries by the Parent in connection with the
Prior Acquisitions and for working capital (collectively, "Refinanced
Acquisition Costs"), (b) to support the issuance of Letters of Credit, (c) for
working capital, Capital Expenditures and general corporate purposes and (d)
subject to availability, to finance Permitted Acquisitions, including
Transaction Costs. Attached as Schedule 2.02 hereto is the Borrower's current
projection, as of the date hereof, of its sources and uses of proceeds as of the
Closing Date.
III. CONDITIONS OF MAKING THE LOANS
Section 3.01. Conditions to the First Loans. The obligations of the
Lenders to make Loans to the Borrower on the Closing Date are subject to the
following conditions:
(a) Representations and Warranties. The representations and warranties of
the Borrower and its Affiliates set forth in this Agreement and in the other
Loan Documents shall be true and correct in all material respects on and as of
the date hereof and on the Closing Date and
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the Borrower shall have performed all obligations which were to have been
performed by it hereunder prior to the Closing Date.
(b) Loan Documents and Organizational Documents. The Borrower shall have
executed and/or delivered to the Administrative Agent (or shall have caused to
be executed and delivered to the Administrative Agent by the appropriate
Persons), the following:
(i) The Notes;
(ii) All of the Security Documents, including without limitation
all Uniform Commercial Code Financing Statements and Termination
Statements and all mortgages, deeds of trusts and amendments thereto,
lessor consents and waivers and related title insurance policies, if any,
required by the Administrative Agent or its counsel, in connection with
the Borrower's compliance with the provisions of Section 2.01;
(iii) Certified copies (pursuant to Part A of the form attached
as Schedule 3.01) of the resolutions of the Board of Directors of each
Company and the Parent authorizing the execution and delivery of the Loan
Documents to which it is a party;
(iv) A copy of the Certificate or Articles of Incorporation of
each Company and the Parent (including the PCC Preferred Stock
Designation), with any amendments thereto, certified by the appropriate
Secretary of State and (pursuant to Part A of the form attached as
Schedule 3.01) by the Secretary or an Assistant Secretary of such
Company;
(v) For each Company, certificates of legal existence and good
standing (both as to corporation law, if applicable, and, if available,
tax matters) issued as of a reasonably recent date by such Company's
state of organization and any other state in which such Company is
authorized or qualified to transact business;
(vii) No later than three (3) Business Days prior to the Closing
Date, to the extent requested by the Administrative Agent, true and
correct copies of all NRTC Member Agreements and other DBS Agreements,
all other material governmental licenses, franchises and permits, all
material NRTC, DirecTv and other third party consents and all other
material leases, contracts, agreements, instruments and other documents
specified in Schedules 4.04, 4.07, 4.09, 4.16 and 4.19;
(viii) Such Uniform Commercial Code, Federal tax lien and
judgment searches with respect to the Companies, any Seller being paid
with the proceeds of any Loans (and the assets to be acquired under the
related Acquisition Agreement) and any other third parties as the
Administrative Agent shall require, the results thereof to be
satisfactory to the Administrative Agent;
(ix) The Opening Balance Sheet;
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(x) Certificates of insurance evidencing the insurance coverage
and policy provisions required in this Agreement; and
(xi) Such other supporting documents and certificates as the
Administrative Agent or the Lenders may reasonably request from time to
time.
(c) Subscriber Report. The Borrower shall have provided to the
Administrative Agent a report in form satisfactory to the Administrative Agent
executed on behalf of the Borrower by its chief executive officer or chief
financial officer, certifying as to the following:
(i) each of the Companies' DBS Subscriber Areas and the
respective Paying Subscriber counts therefor, as of the most recent month
end;
(ii) the Penetration Percentage and Churn for the most recently
ended month and the most recently ended period of six (6) consecutive
months for which such information is available (but in no event, with
respect to the first Loans hereunder, prior to the period ended December
31, 1996); and
(iii) with detail satisfactory to the Administrative Agent, the
ratio of (A) Adjusted Total Funded Debt as of the Closing Date to (B) the
sum of (1) Paying Subscribers as of the most recent month end plus (2)
any Paying Subscribers being acquired with the proceeds of such Loans.
Such report shall reflect a minimum of 1,350,000 homes within the DBS
Subscriber Areas and 53,000 Paying Subscribers, in each case for the Core
Properties. Such Closing Date report and each updated report delivered hereafter
in connection with subsequent Loans, which shall provide such information as of
the applicable Borrowing Date rather than as of the Closing Date, is referred to
herein as a "Subscriber Report".
(d) Officer's Certificates as to Compliance, Documents, Etc. The Borrower
shall have provided to the Administrative Agent one or more compliance and other
closing certificates, in forms satisfactory to the Administrative Agent,
executed on behalf of the Borrower by its chief executive officer or chief
financial officer, certifying as to satisfaction by the Borrower of the
conditions to lending set forth in this Section 3.01 and in Sections 3.02 and
3.03, as applicable, and, specifically, as to certain matters specified therein,
and including the certifications and attachments referred to in Sections 3.01(b)
(iii), (iv) and (v), substantially in the form of Part B of Schedule 3.01
attached hereto.
(e) Equity Financing. (i) The Parent shall have made cash equity
contributions to the Borrower (including the cash portion of the purchase price
for each of the Core Properties funded by capital contributions from the Parent)
of at least $74,200,000 in the aggregate through the Closing Date (the "Cash
Equity"), and (ii) the Borrower shall have detailed the dates and amounts of the
Cash Equity and certified thereto in the certificate referred to in paragraph
(d) above.
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(f) PST Transfer. (i) All of the issued and outstanding shares of capital
stock of Pegasus Satellite Television, Inc. (other than shares constituting
Permitted Preferred Stock), formerly a subsidiary of Pegasus Media &
Communications, Inc., which is itself a subsidiary of the Parent ("PM&C"), shall
have been transferred, directly or indirectly, to the Borrower, (ii) the
consents of PM&C's senior lenders and of any other third parties required in
connection with the intermediate transfer of such shares by PM&C to a new
subsidiary of PM&C and such subsidiary's transfer thereof to the Borrower in
exchange for Permitted Preferred Stock of the Borrower (collectively, the "PST
Transfer") shall have been obtained and (iii) the Administrative Agent shall
have received satisfactory evidence of the foregoing.
(g) No Material Adverse Change. As of the date hereof and as of the
Closing Date, and since December 31, 1996, no event or circumstance shall have
occurred which could have a Material Adverse Effect.
(h) Company Counsel Opinion. The Administrative Agent shall have received
the favorable written opinion of Drinker Biddle & Reath LLP, counsel to the
Companies and the Parent dated as of the date hereof, addressed to the Agents
and the Lenders and reasonably satisfactory to the Administrative Agent in scope
and substance;
(i) Legal and Other Fees. As of the date hereof and as of the Closing
Date, all fees owed to the Agents, the Lenders and their respective Affiliates
under the Fee Letters and all legal fees and expenses of counsel to the
Administrative Agent incurred through such date shall have been paid in full.
(j) Review by Administrative Agent's Counsel. All legal matters incident
to the transactions hereby contemplated shall be reasonably satisfactory to
counsel for the Administrative Agent.
Section 3.02. Acquisition Loans. Without in any way limiting the
discretion of the Required Lenders to approve or withhold approval (if required
hereunder) of any Acquisition or to impose additional conditions upon their
consent (if required hereunder) to such Acquisitions, the obligations of the
Lenders to make any Loans to finance any Permitted Acquisition (collectively,
"Acquisition Loans") are subject to the following conditions:
(a) Revolver Availability. After giving effect to any such Acquisition
Loans, the unutilized portion of the Available Revolver Commitment shall equal
or exceed $10,000,000.
(b) Acquisition Closings.
(i) The transactions contemplated by the applicable Acquisition
Agreement shall have been consummated (except for the payment of that
portion of the purchase price thereunder being paid with the proceeds of
Loans) substantially in accordance with the terms thereof and, in any
event, in a manner reasonably satisfactory to the Administrative Agent,
including without limitation the valid assumption by the Borrower or such
Subsidiary of all liabilities of the applicable Sellers in respect of the
assets and properties
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transferred under such Acquisition Agreement, other than liabilities
not subject to assumption under such Acquisition Agreement which are
otherwise addressed in a manner reasonably satisfactory to the
Administrative Agent.
(ii) The Administrative Agent shall have received evidence of
the receipt of all licenses, permits, approvals and consents, if any,
required with respect to such Acquisition and any other related
transaction contemplated by this Agreement (including without limitation
any required NRTC or DirecTv consents to the collateral assignment of any
related NRTC Member Agreements and any other DBS Agreements to the
Administrative Agent, on behalf of the Lenders), and any other consents
or filings of or with applicable governmental authorities or other third
parties.
(iii) The Borrower shall have obtained from the applicable
Sellers, on a best efforts basis, such Sellers' consents to the
collateral assignment to the Administrative Agent of the rights of the
Borrower or the applicable Subsidiary under the Acquisition Agreement and
any other agreements executed thereunder, as required under Section
2.01(a).
(iv) The Administrative Agent shall have received copies of the
legal opinions delivered by the Seller(s) pursuant to the applicable
Acquisition Agreement in connection with the Acquisition, and, on a best
efforts basis, a letter from each Person delivering an opinion (or
authorization within the opinion) authorizing reliance thereon by the
Administrative Agent and the Lenders.
(v) Any other conditions imposed by the Required Lenders in
giving their consent (if required hereunder) to such Permitted
Acquisition shall have been satisfied.
(c) Due Diligence. The Administrative Agent and its counsel shall have
completed their due diligence review with respect to the proposed Permitted
Acquisition, including a review of all of DBS Agreements and other material
agreements and shall be reasonably satisfied with the results of such review.
(d) Officer's Certificates as to Compliance, Documents, Etc. The Borrower
shall have provided to the Administrative Agent one or more compliance and other
closing certificates, in forms reasonably satisfactory to the Administrative
Agent, executed on behalf of the Borrower by its chief executive officer or
chief financial officer, certifying as to satisfaction by the Borrower of the
conditions to lending set forth in this Section 3.02 and in Section 3.03 and,
specifically, as to certain matters specified therein.
(e) Compliance Certificate. The Borrower shall have executed and
delivered (or caused to be executed and delivered by the appropriate
Subsidiaries) to the Administrative Agent a certificate of representations,
warranties and compliance reasonably satisfactory in form and substance to the
Administrative Agent, together with updated versions of Schedules to this
Agreement and to any applicable Security Documents, to the extent appropriate in
connection with such Permitted Acquisition.
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(f) Other Deliveries. The Companies shall have executed and/or delivered
to the Administrative Agent (or shall have caused to be executed and delivered
to the Administrative Agent by the appropriate persons), the following:
(i) With respect to the assets to be acquired pursuant to such
Acquisition, and the applicable Seller(s), all Uniform Commercial Code
Financing Statements and Termination Statements and, if reasonably
required by the Administrative Agent, all mortgages, deeds of trusts and
amendments thereto and related title insurance policies, in each case in
connection with the Borrower's compliance with the provisions of Section
2.01;
(ii) Certified copies of the resolutions of the Board of
Directors of each applicable Company authorizing such Permitted
Acquisition;
(iii) Such certificates of public officials and copies of
material consents, agreements and other documents and such other
supporting documents and information as the Administrative Agent shall
reasonably request;
(iv) If reasonably requested by the Administrative Agent,
Environmental Site Assessments, Environmental Questionnaires and other
information with respect to owned and leased real properties being
acquired, which shall be reasonably satisfactory in all respects to the
Required Lenders;
(v) Such Uniform Commercial Code, Federal tax lien and judgment
searches as the Administrative Agent shall reasonably require, the
results thereof to disclose no liens except liens permitted by this
Agreement and liens to be discharged upon completion of the Permitted
Acquisition;
(vi) A consolidated balance sheet for the Companies, giving pro
forma effect to Permitted Acquisitions and the proposed Acquisition
Loans, reflecting compliance with the provisions of Article V;
(vii) Updated Projections, giving pro forma effect to the
Permitted Acquisition and the proposed Loans;
(viii) An updated Subscriber Report as of the Borrowing Date for
such Loans;
(ix) Certificates of insurance evidencing the additional
insurance coverage and policy provisions required in this Agreement; and
(ix) Such other supporting documents and certificates as the
Administrative Agent or the Lenders may reasonably request. Such
additional documents shall include, in the event that any limited
liability company or limited partnership is formed or acquired as a
Subsidiary, such organizational and other documents as the Administrative
Agent shall reasonably request with respect thereto.
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(g) General and Local Counsel Opinions. The Administrative Agent shall
have received the favorable written opinions of (i) general counsel or regularly
employed outside counsel to the Companies and (ii) only if reasonably requested
in connection with the recording of any mortgages or similar instruments or any
material issues of state law raised in connection with such Loans or the related
Permitted Acquisition, local counsel to the Companies, in each case dated the
date of such Loans, addressed to the Agents and the Lenders and reasonably
satisfactory to the Administrative Agent in scope and substance.
(h) Legal Fees. All legal fees and expenses of counsel to the
Administrative Agent incurred through the date of such Loans shall have been
paid in full.
(i) Review by Administrative Agent's Counsel. All legal matters incident
to the transactions hereby contemplated shall be reasonably satisfactory to
counsel for the Administrative Agent.
Section 3.03. All Loans. The obligations of the Lenders to make any Loans
(including the Loans made on the Closing Date and in respect of Acquisitions
consummated thereafter) and the obligation of the Issuing Bank to issue Letters
of Credit are, in each case, subject to the following conditions:
(a) All warranties and representations set forth in this Agreement shall
be true and correct in all material respects as of the date such Loans are made
or such Letter of Credit is issued (except to the extent they expressly relate
to an earlier specified date or are affected by transactions or events occurring
after the Closing Date and permitted or not prohibited hereunder).
(b) As of the Borrowing Date of such Loans and since the Closing Date, no
event or circumstance shall have occurred which has had or could have a Material
Adverse Effect.
(c) After giving effect to such Loans or the issuance of such Letter of
Credit (both as of the proposed date thereof and, on a pro forma basis, the last
day of the most recent month for which financial statements have been delivered
to the Lenders under Section 6.05) and the use of proceeds thereof (whether for
a Permitted Acquisition or otherwise), no Default shall have occurred and be
continuing. Each telephonic or written request for Loans or for a Letter of
Credit shall constitute a representation to such effect as of the date of such
request and as of the date of such borrowing.
(d) If applicable, the Administrative Agent shall have received a
properly completed Loan Request, together with all such financial and other
information as the Administrative Agent shall require to substantiate the
current and pro forma certifications of no Default contained therein.
(e) The Administrative Agent shall have received such other supporting
documents and certificates as the Administrative Agent and the Required Lenders
may reasonably request.
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Section 3.04. Lender Approvals. For purposes of determining compliance
with the conditions precedent referred to in Sections 3.01, 3.02 and 3.03, on
the date of the first Loans hereunder, each of the Lenders shall be deemed to
have consented to, approved or accepted or be satisfied with each document or
other matter which is the subject of such Lender's consideration under any of
the provisions of such Sections, unless an officer of the Administrative Agent
responsible for the transactions contemplated by the Loan Documents shall have
received notice from such Lender prior to the first Loans hereunder specifying
its objection thereto and such Lender shall have failed to make available to the
Administrative Agent such Lender's ratable share of the first Loans.
IV. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants
to the Lenders (which representations and warranties shall give effect to the
consummation of all of the transactions, including Permitted Acquisitions and
the PST Transfer, referred to in Section 3.01 and shall survive the delivery of
the Notes and the making of the Loans and the issuance of Letters of Credit)
that:
Section 4.01. Financial Statements. The Borrower has heretofore furnished
to the Lenders:
(a) the audited and unaudited balance sheets and related statements of
operations, stockholders' equity and cash flow of the Parent, the Borrower and
its Subsidiaries described on Schedule 4.01(a) (the "Financial Statements");
and
(b) the March 31, 1997 balance sheet of the Borrower and the Subsidiaries
showing their pro forma financial condition after the consummation of any and
all transactions contemplated to have occurred as of the Closing Date, as if
they occurred on March 31, 1997, attached as Schedule 4.01(b) (the "Opening
Balance Sheet").
The Financial Statements have been prepared in accordance with GAAP.
Since December 31, 1996, there has been no material adverse change in the
assets, properties, business or condition (financial or otherwise) of the Parent
or any of the Companies and no dividends or distributions have been declared or
paid by the Parent or any of the Companies. Neither the Parent nor any of the
Companies has any contingent obligations, liabilities for taxes or unusual
forward or long-term commitments except as specified in such Financial
Statements. The Opening Balance Sheet fairly represents the pro forma financial
condition of the Companies as of its date. All financial projections submitted
to the Lenders by the Borrower (including all projections set forth in the
Budget) are believed by the Borrower to be reasonable in light of all
information presently known by the Borrower. Except as set forth on Schedule
4.01(c), as of the date of this Agreement, the Parent has no Indebtedness.
(Notwithstanding the foregoing, the representations set forth above with respect
to the Parent are made solely as of the date hereof and the Closing Date.)
Section 4.02. Organization, Qualification, Etc. Each of the Companies (a)
is a corporation duly organized, validly existing and in good standing under the
laws of its state of
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organization, all as specified in Schedule 4.02, (b) has the power and authority
to own its properties and to carry on its business as now being conducted and as
presently contemplated, (c) has the power and authority to execute and deliver,
and perform its respective obligations under, this Agreement, the Notes and the
Security Documents and all other agreements and instruments contemplated hereby
and (d) is duly qualified to transact business in the jurisdictions specified in
such Schedule 4.02 and in each other jurisdiction where the nature of its
activities requires such qualification. As of the date of this Agreement none of
the Companies has any Subsidiaries, except as described in Schedule 4.19.
Section 4.03. Authorization; Compliance; Etc. The execution and delivery
of, and performance by the Companies of their respective obligations under, this
Agreement, the Notes, the Security Documents, the Acquisition Agreements and the
other agreements and instruments relating thereto (all of the foregoing being
hereinafter referred to collectively as the "Transaction Documents") have been
duly authorized by all requisite corporate and partnership action and will not
violate any provision of law, any order, judgment or decree of any court or
other agency of government, the charter documents or by-laws of any corporate
Company, the limited partnership agreement or certificate of limited partnership
of any partnership Company, the operating agreement of any limited liability
company or any indenture, agreement or other instrument to which any Company or
the Parent is a party, or by which any Company or the Parent is bound, or be in
conflict with (including without limitation the PCC Preferred Stock Designation
and any DBS Agreement), result in a breach of, or constitute (with due notice or
lapse of time or both) a default under, or except as may be permitted under this
Agreement, result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of any
Company or the Parent pursuant to, any such indenture, agreement or instrument.
Each of the Transaction Documents constitutes the valid and binding obligation
of each of the Companies and their Affiliates party thereto, enforceable against
such party in accordance with its terms, subject, however to bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the rights and
remedies of creditors generally or the application of principles of equity,
whether in any action in law or proceeding in equity, and subject to the
availability of the remedy of specific performance or of any other equitable
remedy or relief to enforce any right under any such agreement.
Section 4.04. Governmental and Other Consents, Etc. Except for filings
and recording required under Section 2.01 and the Security Documents and except
as set forth in Schedule 4.04, none of the Companies or the Parent is required
to obtain any consent, approval or authorization from, to file any declaration
or statement with or to give any notice to, any Governmental Authority, the
NRTC, DirecTv or any other Person (including, without limitation, any notices
required under the applicable bulk sales law) in connection with or as a
condition to the execution, delivery or performance of any of the Transaction
Documents. Except as set forth in such Schedule 4.04, all consents, approvals
and authorizations described in such Schedule have been duly granted and are in
full force and effect on the date hereof and all filings described in such
Schedule have been properly and timely made.
Section 4.05. Litigation. Except as specified in Schedule 4.05, there is
no action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency
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now pending or, to the knowledge of the Borrower, threatened (nor is any basis
therefor known to the Borrower), (a) which questions the validity of any of the
Transaction Documents, or any action taken or to be taken pursuant hereto or
thereto, in a manner or to an extent which would have a Material Adverse Effect,
or (b) against or affecting any Company or the Parent which, if adversely
determined, either in any case or in the aggregate, would have a Material
Adverse Effect.
Section 4.06. Compliance with Laws and Agreements. Except as disclosed in
this Agreement, none of the Companies is a party to any agreement or instrument
or subject to any partnership or other restriction which could have a Material
Adverse Effect. None of the Companies or the Parent is in violation of any
provision of its corporate charter or by-laws, partnership agreement or
operating agreement, as the case may be, or of any material indenture, agreement
or instrument to which it is a party or by which it is bound or, to the best of
the Borrower's knowledge and belief, of any provision of law, the violation of
which could have a Material Adverse Effect, or any order, judgment or decree of
any court or other agency of government (including without limitation the
Copyright Office). Without limiting the generality of the foregoing, all of the
Obligations (a) are permitted under, and do not and will not violate, the PCC
Preferred Stock Designation and (b) constitute "Senior Debt" and "Designated
Senior Debt" under the Exchange Note Indenture (as defined in the PCC Preferred
Stock Designation).
Section 4.07. DBS Rights. Schedule 4.07 accurately and completely lists
all DBS Agreements, including without limitation all NRTC Member Agreements, to
which any Company is a party as of the Closing Date, and all areas in which any
Company distributes DIRECTV and other DBS services thereunder. The Subsidiaries
possess all such DBS Agreements and all exclusive DBS Rights and other rights
and agreements as are necessary for the operation of their DBS businesses in
accordance with the Projections, except to the extent that the absence thereof
could not reasonably be expected to have a Material Adverse Effect. Each of such
DBS Agreements and other rights and agreements is in full force and effect. The
assets of the Companies are adequate and sufficient in all material respects for
all of the current operations of their businesses.
Section 4.08. Proprietary Rights. The Companies possess or have the
rights to all trade names, trademarks, copyrights and other proprietary rights
necessary for the operation of the Companies' businesses, including the
distribution of DBS services, free and clear of any attachments, liens,
encumbrances or adverse claims (except to the extent the absence thereof could
not reasonably be expected to have a Material Adverse Effect), and neither the
present or contemplated activities or products of any of such entities infringe
any such trade names, trademarks, copyrights or other proprietary rights of
others. Each of such trade names, trademarks, copyrights and other rights is in
full force and effect and no material default has occurred and is continuing
thereunder.
Section 4.09. Title to Properties; Condition of Properties.
(a) Except as set forth on Schedule 4.09, the Companies have good title
to all of their properties and assets free and clear of all mortgages, security
interests, restrictions, liens and
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encumbrances of any kind, including without limitation liens or encumbrances in
respect of unpaid taxes (collectively, "Liens"), except liens and encumbrances
permitted under this Agreement. Such Schedule 4.09 also sets forth a description
of all real properties owned or leased by the Companies.
(b) Except as specified in such Schedule 4.09, none of the real property
owned by any Company is located within any federal, state or municipal flood
plain zone.
Section 4.10. Interests in Other Businesses. Except as reflected in
Schedule 4.10 or Schedule 4.19 hereto, neither the Borrower nor any Subsidiary
holds or owns any of the issued and outstanding capital stock, partnership
interests or similar equity interests, or any rights to acquire the same, of any
corporation, partnership, firm or entity other than as specified or permitted in
this Agreement.
Section 4.11. Solvency.
(a) The aggregate amount of the full salable value of the assets and
properties of each Company exceeds the amount that will be required to be paid
on or in respect of such Company's existing debts and other liabilities
(including contingent liabilities) as they mature.
(b) No Company's assets and properties constitute unreasonably small
capital for such Company to carry out its business as now conducted and as
proposed to be conducted, including such Company's capital needs, taking into
the account the particular capital requirements of such Company's business and
the projected capital requirements and capital availability thereof.
(c) The Companies do not intend to, nor will the Companies, incur debts
beyond their ability to pay such debts as they mature, taking into account the
timing and amounts of cash reasonably anticipated to be received by each Company
and the amounts of cash reasonably anticipated to be payable on or in respect of
each Company's obligations. The Companies' aggregate cash flow, after taking
into account all anticipated sources and uses of cash, will at all times be
sufficient to pay all such amounts on or in respect of their indebtedness when
such amounts are required to be paid.
(d) The Borrower believes that no reasonably anticipated final judgment
in a pending action or, to its knowledge, any threatened actions for money
damages will be rendered at a time when, or in an amount such that, any Company
will be unable to satisfy such judgments promptly in accordance with their terms
(taking into account the maximum reasonable amount thereof and the earliest
reasonable time at which such judgments might be rendered). The cash available
to each Company, after taking into account all other anticipated uses of cash
(including the payment of all such Company's indebtedness) is anticipated to be
sufficient to pay any such judgments promptly in accordance with their terms.
(e) No Company is contemplating either the filing of a petition by it
under any state or federal bankruptcy or insolvency laws or the liquidating of
all or a substantial portion of its
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property, and the Borrower has no knowledge of any Person contemplating the
filing of any such petition against any Company.
Section 4.12. Full Disclosure. No statement of fact made by or on behalf
of any Person other than the Lenders in this Agreement, the Security Documents
or in any certificate or schedule furnished to the Lenders pursuant hereto or
thereto contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained therein or herein not
misleading. There is no fact presently known to the Borrower which has not been
disclosed to the Lenders in writing which materially affects adversely, or, as
far as the Borrower can reasonably foresee, could have a Material Adverse
Effect, other than facts and circumstances generally known within the DBS
industry.
Section 4.13. Margin Stock. The Companies do not own or have any present
intention of acquiring any "margin stock" within the meaning of Regulation U (12
CFR Part 221), of the Board of Governors of the Federal Reserve System (herein
called "Margin Stock").
Section 4.14. Tax Returns. Each of the Companies has filed all federal,
state and local tax and information returns required to be filed, and has paid
or made adequate provision for the payment of all material federal, state and
local taxes, franchise fees, charges and assessments shown thereon.
Section 4.15. Pension Plans, Etc.
(a) Except as described in Schedule 4.15, neither the Borrower nor any
member of the Controlled Group has any pension, profit sharing or other similar
plan providing for a program of deferred compensation to any employee.
(b) Neither the Borrower nor any member of the Controlled Group has any
material liability (i) under Section 412 of the Code for failure to satisfy the
minimum funding requirements for pension plans, (ii) as the result of the
termination of a defined benefit plan under Title IV of ERISA, (iii) under
Section 4201 of ERISA for withdrawal or partial withdrawal from a multiemployer
plan, or (iv) for participation in a prohibited transaction with an employee
benefit plan as described in Section 406 of ERISA and Section 4975 of the Code.
Section 4.16. Material Agreements. Except for matters disclosed in
Schedule 4.07, Schedule 4.09 and Schedule 4.16 hereto accurately and completely
lists all agreements, if any, among the stockholders or partners of the Borrower
or any of the Subsidiaries and all material construction, engineering,
management, consulting and other agreements, if any, which are in effect on the
date hereof in connection with the conduct of the business of the Borrower and
the Subsidiaries, including without limitation the distribution of DBS services.
Section 4.17. Projections. Attached as Schedule 4.17 are projections of
the operation of the Companies' businesses through December 31, 2004 (the
"Projections").
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Section 4.18. Brokers, Etc. None of the Companies has dealt with any
broker, finder, commission agent or other similar Person in connection with the
Loans or the transactions contemplated by this Agreement or is under any
obligation to pay any broker's fee, finder's fee or commission in connection
with such transactions.
Section 4.19. Capitalization. Attached as Schedule 4.19 is a schematic
diagram of the ownership relationships among the Companies and the Parent (after
giving effect to the PST Transfer), showing, as to the Companies, accurate
ownership percentages of the stockholders of record and accompanied by a
statement of authorized and issued equity securities for each such entity as of
the date hereof. Such Schedule 4.19 also includes a narrative indicating, as of
the date hereof (a) which securities, if any, carry preemptive rights; (b) to
the best of the Borrower's knowledge whether there are any outstanding
subscriptions, warrants or options to purchase any securities; (c) whether any
Company is obligated to redeem or repurchase any of its securities, and the
details of any such committed redemption or repurchase; and (d) any other
agreement, arrangement or plan to which any Company is a party or participant or
of which any Company has knowledge which will directly or indirectly affect the
capital structure of the Companies. All such equity securities of the Companies
are validly issued and fully paid and non-assessable, and owned as set forth on
such Schedule 4.19. All such equity securities of the Companies are owned,
legally and beneficially, free of any assignment, pledge, lien, security
interest, charge, option or other encumbrance, except for liens and security
interests granted to the Administrative Agent or the Lenders or permitted under
Section 7.02 and restrictions on transfer imposed by applicable securities laws,
indicated on the certificates evidencing such shares or as may be imposed by the
FCC or local franchising authorities.
Section 4.20. Environmental Compliance.
(a) To the best of the Borrower's knowledge, all real property leased,
owned, controlled or operated by the Companies (the "Properties") and their
existing and, to the best of the Borrower's knowledge, prior uses and activities
thereon, including, but not limited to, the use, maintenance and operation of
each of the Properties and all activities in conduct of business related thereto
comply and have at all times complied in all material respects with all
Environmental Laws.
(b) None of the Companies, and to the best of the Borrower's knowledge,
no previous owner, tenant, occupant or user of any of the Properties or any
other Person, has engaged in or permitted any operations or activities upon any
of the Properties for the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, release, discharge, refining,
dumping or disposal of a material amount of any Hazardous Materials the removal
of which is required or the maintenance of which is prohibited or penalized.
(c) To the best of the Borrower's knowledge, no Hazardous Material has
been or is currently located in, on, under or about any of the Properties in a
manner which materially violates any Environmental Law or which requires cleanup
or corrective action of any kind under any Environmental Law.
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<PAGE>
(d) No notice of violation, lien, complaint, suit, order or other notice
or communication concerning any alleged violation of any Environmental Law in,
on, under or about any of the Properties has been received by any Company or, to
the best of the Borrower's knowledge, any prior owner or occupant of any of the
Properties which has not been fully satisfied and complied with in a timely
fashion so as to bring such Property into full compliance with all Environmental
Laws.
(e) The Companies have all permits and licenses required under any
Environmental Law to be issued to them by any Governmental Authority on account
of any or all of its activities on any of the Properties, except to the extent
that the absence of any such permit or license could have a Material Adverse
Effect, and are in material compliance with the terms and conditions of such
permits and licenses. To the best of the Borrower's knowledge, no change in the
facts or circumstances reported or assumed in the application for or granting of
such permits or licenses exist, and such permits and licenses are in full force
and effect.
(f) No portion of any of the Properties has been listed, designated or
identified in the National Priorities List (NPL) or the CERCLA information
system (CERCLIS), both as published by the United States Environmental
Protection Agency, or any similar list of sites published by any Federal, state
or local authority proposed for or requiring cleanup, or remedial or corrective
action under any Environmental Law.
Section 4.21. Investment Company Act. None of the Companies is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company," or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
Section 4.22. Labor Matters. No Company is experiencing any strike, labor
dispute, slow down or work stoppage due to labor disagreements which could
reasonably be expected to have a Material Adverse Effect; there is no such
strike, dispute, slow down or work stoppage threatened against any Company; none
of the Companies is subject to any collective bargaining or similar
arrangements.
V. FINANCIAL COVENANTS. The Borrower covenants and agrees that, so long
as any Lender has any obligation to extend credit to the Borrower hereunder, and
for so long thereafter as there remains outstanding any portion of the
Obligations, whether now existing or arising hereafter, the Borrower and the
Subsidiaries will (on a consolidated or combined basis, as applicable) :
Section 5.01. Leverage. At all times during each period indicated below,
maintain a ratio of (a) Adjusted Total Funded Debt to (b) Annualized EBITDA for
the most recently ended fiscal quarter of not more than the following:
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<TABLE>
<CAPTION>
Maximum Ratio of Adjusted Total
Funded Debt to Annualized EBITDA
Period for Most Recently Ended Fiscal Quarter
------ --------------------------------------
<S> <C>
September 30, 1998 through December 30, 1998 8.20:1.00
December 31, 1998 through June 29, 1999 7.75:1.00
June 30, 1999 through December 30 , 1999 6.25:1.00
December 31, 1999 through June 29, 2000 4.75:1.00
June 30, 2000 through December 30 , 2000 4.25:1.00
December 31, 2000 through June 29, 2001 3.50:1.00
June 30, 2001 through December 30 , 2001 2.50:1.00
December 31, 2001 and thereafter 2.00:1.00
</TABLE>
For purposes of this covenant, Annualized EBITDA shall be determined on a pro
forma basis after giving effect to all Acquisitions and Dispositions made by the
Companies at any time during the most recently ended fiscal quarter as if such
Acquisitions and Dispositions had occurred at the beginning of such fiscal
quarter.
Section 5.02. Interest Coverage. For each fiscal quarter ending on the
dates indicated below, maintain a ratio of EBITDA to Total Interest Expense of
at least the following:
<TABLE>
<CAPTION>
Minimum Ratio of EBITDA
Quarter End to Total Interest Expense
----------- -------------------------
<S> <C>
September 30, 1997 through September 30, 1998 1.20:1.00
December 31, 1998 1.40:1.00
March 31, 1999 through September 30, 1999 1.75:1.00
December 31, 1999 through September 30, 2000 2.00:1.00
December 31, 2000 through September 30, 2001 3.00:1.00
December 31, 2001 and each Quarterly Date 5.00:1.00
thereafter
</TABLE>
Section 5.03. Minimum Penetration; Minimum Subscribers. As of the last
day of each fiscal quarter, cause Paying Subscribers, as a percentage (the
"Penetration Percentage") of total households in all of the DBS Subscriber
Areas, to equal or exceed the following:
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<TABLE>
<CAPTION>
Minimum
Quarter End Penetration Percentage
----------- ----------------------
<S> <C>
June 30, 1997 4.00%
September 30, 1997 4.40%
December 31, 1997 5.00%
March 31, 1998 5.40%
June 30, 1998 5.80%
September 30, 1998 6.30%
December 31, 1998 and March 31, 1999 6.90%
June 30, 1999 and September 30, 1999 7.90%
December 31, 1999 and March 31, 2000 9.00%
June 30, 2000 and September 30, 2000 10.00%
December 31, 2000 and March 31, 2001 11.00%
June 30, 2001 and September 30, 2001 11.50%
December 31, 2001 and thereafter 12.00%
</TABLE>
Notwithstanding the foregoing, (a) the Borrower may elect to exclude from the
computation of the Penetration Percentage all of the Paying Subscribers and
households in any DBS Subscriber Area acquired by any of the Companies after the
Closing Date pursuant to Permitted Acquisitions, solely with respect to the
first fiscal quarter ending after the consummation of such Acquisition, and (b)
the minimum number of Paying Subscribers in the DBS Subscriber Areas for the
Core Properties shall be at least 53,000 on and after June 30, 1997, 58,600 on
and after September 30, 1997, 66,000 on and after December 31, 1997, 73,000 on
and after March 31, 1998 and 80,000 on and after June 30, 1998.
Section 5.04. Maximum Adjusted Total Funded Debt to Paying Subscribers.
As of the last day of each fiscal quarter, not permit Adjusted Total Funded Debt
divided by the aggregate Paying Subscribers on such date to exceed the
following:
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Maximum Adjusted Total
Funded Debt Divided by
Quarter End Paying Subscribers
----------- ------------------
June 30, September 30, and December 31, $1,000
1997
March 31, 1998 $950
June 30 and September 30, 1998 $925
December 31, 1998 $825
March 31, June 30 and September 30, 1999 $750
December 31, 1999 $700
March 31, June 30 and September 30, 2000 $600
December 31, 2000 $500
March 31, June 30 and September 30, 2001 $450
December 31, 2001 $400
March 31, June 30 and September 30, 2002 $350
December 31, 2002 and each quarter end $300
thereafter
Section 5.05. Minimum Annualized EBITDA per Average Paying Subscribers.
For each fiscal quarter, not permit Annualized EBITDA divided by the average
number of Paying Subscribers for the fiscal quarter ended on such date to be
less than the following:
Fiscal Quarter Ended Minimum Amount
-------------------- --------------
December 31, 1997 and March 31, 1998 $75
June 30, 1998 and September 30, 1998 $85
December 31, 1998 through September 30, 1999 $95
December 31, 1999 through September 30, 2000 $120
December 31, 2000 through September 30, 2001 $150
December 31, 2001 through September 30, 2002 $175
December 31, 2002 and thereafter $200
For purposes of this covenant, Annualized EBITDA and the average number of
Paying Subscribers shall be determined on a pro forma basis, after giving effect
to all Acquisitions and Dispositions made by the Companies during such fiscal
quarter as if such Acquisitions and Dispositions had occurred at the beginning
of such fiscal quarter.
Section 5.06. Maximum Average Subscriber Acquisition Cost. For each
period of two (2) consecutive fiscal quarters, not permit the Average Subscriber
Acquisition Cost to exceed $400.
Section 5.07. Maintenance Capital Expenditures. Not make or incur
Maintenance Capital Expenditures in any fiscal year in excess of $500,000 in the
aggregate.
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Section 5.08. Restricted Payments. Not directly or indirectly declare,
order, pay or make any Restricted Payment or set aside any sum or property
therefor except as follows:
(a) The Companies may pay monthly Management Fees to the Manager;
provided that (i) such payments shall be subject to the applicable Affiliate
Subordination Agreement and (ii) such payments shall not exceed, during any
period of twelve (12) consecutive months, the lesser of $1,000,000 or the actual
cost of providing management and administrative support services to the
Companies for such period.
(b) Subject to the provisions of the Affiliate Subordination Agreements:
(i) The Subsidiaries may pay dividends and make distributions to
the Borrower or other Subsidiaries holding equity interests in the payor.
(ii) The Subsidiaries may repay indebtedness owed to the
Borrower or to Subsidiaries.
(iii) From and after the date audited financial statements are
delivered pursuant to Section 6.05(a) for the year ended December 31,
2001 and each year thereafter, the Borrower may pay annual dividends to
the Parent solely for the purpose of financing dividends due or interest
due and payable under the PCC Preferred Stock Designation in respect of
the PCC Preferred Stock or the PCC Subordinated Notes, respectively
(collectively, the "PCC Preferred Stock Dividends"), provided that (A) no
Default shall exist as of the date of the proposed payment or after
giving effect thereto , (B) the Excess Cash Flow prepayment, if any, due
on May 1 of such fiscal year pursuant to Section 1.07(f) shall have been
paid, and (C) the aggregate amount of such dividends paid in any fiscal
year shall not exceed the lesser of (1) fifty percent (50%) of Excess
Cash Flow for the prior fiscal year or (2) fifty percent (50%) of the PCC
Preferred Stock Dividends due and payable in such fiscal year.
(iv) The Subsidiaries and the Borrower may make intercompany
loans to one another.
VI. AFFIRMATIVE COVENANTS. The Borrower hereby covenants and agrees to
and with each of the Lenders that, so long as any Lender has any obligation to
extend credit to the Borrower hereunder, and for so long thereafter as there
remains outstanding any portion of any Obligation, whether now existing or
hereafter arising, the Borrower and each of the Subsidiaries shall:
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Section 6.01. Preservation of Assets; Compliance with Laws, Etc.
(a) Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its corporate or partnership existence, as the
case may be, all material rights, licenses, permits and franchises (including
all DBS Agreements) and comply in every material respect with all laws and
regulations applicable to it and all material agreements to which it is a party,
including without limitation all DBS Agreements, and all agreements with its
stockholders or partners, as the case may be, the violation of which could have
a Material Adverse Effect;
(b) at all times maintain, preserve and protect all material trade names
and proprietary rights; and
(c) preserve all the remainder of its material property used or useful in
the conduct of its business and keep the same in good repair, working order and
condition (reasonable wear and tear and damage by fire or other casualty
excepted), and from time to time, make or cause to be made all needful and
proper repairs, renewals, replacements, betterments and improvements thereto, so
that the business carried on in connection therewith may be conducted at all
times in the ordinary course in a manner substantially consistent with past
practices.
Section 6.02. Insurance.
(a) Keep all of its insurable properties now or hereafter owned
adequately insured at all times against loss or damage by fire or other casualty
to the extent customary with respect to like properties of companies conducting
similar businesses; maintain public liability and workers' compensation
insurance insuring such Company to the extent customary with respect to
companies conducting similar businesses, all by financially sound and reputable
insurers and furnish to the Lenders satisfactory evidence of the same (including
certification by the chief executive officer or chief financial officer of the
Borrower of timely renewal of, and timely payment of all insurance premiums
payable under, all such policies, which certification shall be included in the
next succeeding Compliance Report delivered pursuant to Section 6.05(d) );
notify each of the Lenders of any material change in the insurance maintained on
its properties after the date hereof and furnish each of the Lenders
satisfactory evidence of any such change; maintain insurance with respect to its
facilities and related equipment in an amount equal to the full replacement cost
thereof; provide that each insurance policy pertaining to any of its insurable
properties shall: (i) name the Administrative Agent, on behalf of the Lenders,
as loss payee pursuant to a so-called "standard mortgagee clause" or "Lender's
loss payable endorsement", or as additional insured (as appropriate), (ii)
provide that no action of any Company shall void such policy as to the
Administrative Agent or the Lenders, and (iii) provide that the insurer(s) shall
notify the Administrative Agent of any proposed cancellation of such policy at
least thirty (30) days in advance thereof (unless such proposed cancellation
arises by reason of non-payment of insurance premiums in which case such notice
shall be given at least ten (10) days in advance thereof) and that the
Administrative Agent or the Lenders will have the opportunity to correct any
deficiencies justifying such proposed cancellation.
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(b) In the event of a casualty loss, the Lenders will deliver to such
Company the proceeds of any insurance thereon, subject to the provisions of
Section 1.07(e), provided that (i) such Company shall use such proceeds for the
restoration or replacement of the property or asset which was the subject of
such loss within 180 days after the receipt thereof, (ii) such Company shall
have demonstrated to the reasonable satisfaction of the Lenders that such
property or asset will be restored to substantially its previous condition or
will be replaced by substantially identical property or assets, and (iii) if the
Administrative Agent, on behalf of the Lenders, had a security interest in and
lien upon the property or asset which was the subject of such loss, the Lenders
shall have received, at their request, a favorable opinion from the Borrower's
counsel, in form and substance satisfactory to the Administrative Agent, as to
the perfection of the Administrative Agent's security interest in and lien upon
such restored or replaced property or asset and such evidence satisfactory to
the Administrative Agent as to the priority of such security interest and liens.
Notwithstanding the foregoing, and subject to Section 1.07(e), if a casualty
loss results in the Administrative Agent's receipt of insurance proceeds
aggregating $500,000 or more, then in lieu of delivering such proceeds to a
Company, the Lenders shall have the right to retain such proceeds for the
purpose of making disbursement thereof jointly to such Company and any
contractors, subcontractors and materialmen to whom payment is owed in
connection with such restoration.
(c) To the extent, if any, that the real property (whether owned or
leased) of the Companies is situated in a flood zone designated as type "A" or
"B" by the U.S. Department of Housing and Urban Development, obtain and maintain
flood insurance in coverage and amount satisfactory to the Required Lenders.
Section 6.03. Taxes, Etc. Pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or levies imposed
upon it or upon its income and profits or upon any of its property, real,
personal or mixed, or upon any part thereof, before the same shall become in
default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon such properties
or any part thereof; provided that no Company shall be required to pay and
discharge or cause to be paid and discharged any such tax, assessment, charge,
levy or claim so long as the validity thereof shall be contested in good faith
by appropriate proceedings and it shall have set aside on its books adequate
reserves with respect to any such tax, assessment, charge, levy or claim, so
contested; and provided, further that, in any event, payment of any such tax,
assessment, charge, levy or claim shall be made before any of its property shall
be seized or sold in satisfaction thereof.
Section 6.04. Notice of Proceedings, Defaults, Adverse Change, Etc.
Promptly (and in any event within five (5) days after the discovery by the
Borrower thereof) give written notice to each of the Lenders of (a) any
proceedings instituted or threatened against it by or in any federal, state or
local court or before any commission or other regulatory body, whether federal,
state or local which, if adversely determined, could have a Material Adverse
Effect; (b) any notices of default received by any Company (together with copies
thereof, if requested by any Lender) with respect to (i) any alleged default
under or violation of any of its material licenses, permits or franchises, any
DBS Agreement or any other material agreement to which it is a party, or (ii)
any alleged default with respect to, or redemption or acceleration or other
action under, the PCC
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Preferred Stock Designation, any Permitted Seller Paper or Permitted Seller
Subordinated Debt or any evidence of material Indebtedness of any Company or any
mortgage, indenture or other agreement relating thereto; (c) (i) any notice of
any material violation or administrative or judicial complaint or order filed or
to be filed against any Company and/or any real property owned or leased by it
alleging any violations of any law, ordinance and/or regulation or requiring it
to take any action in connection with the release and/or clean-up of any
Hazardous Materials, or (ii) any notice from any governmental body or other
Person alleging that any Company is or may be liable for costs associated with a
release or clean-up of any Hazardous Materials or any damages resulting from
such release; (d) any change in the condition, financial or otherwise, of any
Company which could have a Material Adverse Effect; or (e) the occurrence of any
Default or the occurrence of any event which, upon notice or lapse of time or
both, would constitute such a Default.
Section 6.05. Financial Statements and Reports. Furnish to the
Administrative Agent (with multiple copies for each of the Lenders, which the
Administrative Agent shall promptly provide to the respective Lenders) :
(a) Within one hundred twenty (120) days after the end of each fiscal
year, the consolidated and consolidating balance sheets and statements of
income, stockholders' or partners' equity (as applicable) and cash flows of the
Borrower and its Subsidiaries, together with supporting schedules in form and
substance satisfactory to the Lenders, audited by independent certified public
accountants selected by the Borrower and reasonably acceptable to the Required
Lenders (the "Accountants"), the form of opinion to be unqualified and otherwise
reasonably satisfactory to the Required Lenders, showing the financial condition
of the Borrower and its Subsidiaries at the close of such fiscal year and the
results of operations during such year, accompanied by a breakdown of revenues,
expenses and EBITDA for each Company and containing a statement to the effect
that the Accountants have examined the provisions of this Agreement and that, to
the best of their knowledge, no Event of Default, nor any event which upon
notice or lapse of time or both would constitute an Event of Default, has
occurred under Article V or otherwise (or, if such an event has occurred, a
statement explaining its nature and extent); provided, however, that in issuing
such statement, the Accountants shall not be required to exceed the scope of
normal auditing procedures conducted in connection with their opinion referred
to above;
(b) Within forty-five (45) days after the end of each quarter in each
fiscal year, an updated Subscriber Report as of the most recent billing cut-off
and the consolidated balance sheets and statements of income, stockholders' or
partners' equity (as applicable) and cash flows of the Borrower and its
Subsidiaries, together with supporting schedules, setting forth in each case in
comparative form the corresponding figures from the preceding fiscal period of
the same duration, prepared by the Borrower in accordance with GAAP (except for
the absence of notes) and certified by the Borrower's chief financial officer,
such balance sheets to be as of the close of such quarter, and such statements
of income, stockholders' equity and cash flow to be for the quarter then ended
and the period from the beginning of the then current fiscal year to the end of
such quarter (in each case subject to normal audit and year-end adjustments) and
to include (i) a comparison of actual results to results for the comparable
period of the preceding fiscal year (if
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available) and projected results set forth in the Budget for such period and
(ii) if and to the extent prepared by the Borrower, a breakdown of revenues,
expenses and EBITDA for each Company;
(c) Within forty-five (45) days after the end of each month, an updated
Subscriber Report as of the most recent month end and the consolidated balance
sheets and statements of income of the Borrower and its Subsidiaries, together
with supporting schedules, prepared by the Borrower in accordance with GAAP
(except for the absence of notes) and certified by an authorized representative
of the Borrower, such balance sheets to be as of the end of such month and such
income statements to be for the period from the beginning of the then current
fiscal year to the end of such month (subject to normal audit and year-end
adjustments);
(d) Concurrently with the delivery of any annual financial statements
required by Section 6.05(a) and any quarterly financial statements required by
Section 6.05(b), a certified report (hereafter, a "Compliance Report") in the
form of Schedule 6.05 attached hereto (or otherwise in a form satisfactory to
the Administrative Agent, with appropriate calculations and computations
including a detailed breakout of Subscriber Acquisition Costs, signed on behalf
of the Borrower by the chief financial officer or chief executive officer of the
Borrower, setting forth the calculations contemplated in Article V of this
Agreement and certifying as to the fact that such Person has examined the
provisions of this Agreement and that no Event of Default nor any event which
upon notice or lapse of time, or both, would constitute such an Event of
Default;
(e) (i) On or before February 15 of each fiscal year, an updated
quarterly budget approved by the Board of Directors of the Parent, including
planned Capital Expenditures and projected borrowings for such fiscal year, with
updated Projections showing financial covenant compliance (collectively, the
"Budget"), for the operation of the Companies' businesses during the current
fiscal year, setting forth in detail reasonably satisfactory to the Lenders the
projected results of operations of the Companies and stating underlying
assumptions, and (ii) within five (5) days after the effective date thereof,
notice of any material changes or modifications in the Budget (which shall not
include changes resulting from non-material adjustments to the timing of any
proposed borrowings);
(f) Promptly, and in any event within five (5) days, after the Borrower
or any member of the Controlled Group (i) is notified by the Internal Revenue
Service of its liability for the tax imposed by Section 4971 of the Code, for
failure to make required contributions to a pension, or Section 4975 of the
Code, for engaging in a prohibited transaction, (ii) notifies the PBGC of the
termination of a defined benefit pension plan, if there are or may not be
sufficient assets to convert the plan's benefit liabilities as required by
Section 4041 of ERISA, (iii) is notified by the PBGC of the institution of
pension plan termination proceedings under Section 4042 of ERISA or that it has
a material liability under Section 4063 of ERISA, or (iv) withdraws from a
multiemployer pension plan and is notified that it has withdrawal liability
under Section 4202 of ERISA which is material, copies of the notice or other
communication given or sent;
(g) Promptly upon receipt or issuance thereof, and in any event within
five (5) Business Days after such receipt, copies of all audit reports submitted
to any Company by its accountants in connection with each yearly, interim or
special audit of the books of any Company made by
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such accountants, including any material related correspondence between such
accountants and the Borrower's management;
(h) Promptly upon circulation thereof, and in any event within five (5)
Business Days after such circulation, copies of any material written reports
issued by the Borrower or any Subsidiary to any of its stockholders, partners or
material creditors relating to the Notes or any material change in any Company's
financial condition;
(i) Within ten (10) days after the receipt or filing thereof by the
Parent or any other Affiliate of the Borrower, copies of (i) any registration
statements, prospectuses and any amendments and supplements thereto, and any
regular and periodic reports (including without limitation reports on Form 10-K,
Form 10-Q or Form 8-K), if any, filed by the Parent or such Affiliate with any
securities exchange or with the United States Securities and Exchange Commission
(the "SEC"); and (ii) any letters of comment or correspondence with respect to
filings or compliance matters sent to the Parent or such Affiliate by any such
securities commission or the SEC in relation to the Parent or such Affiliate and
its respective affairs; and
(j) As soon as reasonably possible after request therefor, such other
information regarding its operations, assets, business, affairs and financial
condition or regarding any of the Companies or (to the extent available to the
Borrower without undue effort and expense) their stockholders, partners or other
Affiliates as any Lender may reasonably request, including copies of any and all
material agreements to which any Company is a party from time to time.
Section 6.06. Inspection. Permit employees, agents and representatives of
the Lenders to inspect, during normal business hours, its premises and its books
and records and to make abstracts or reproductions thereof. In connection with
any such inspections, the Lenders will use reasonable efforts to avoid an
unreasonable disruption of the Companies' businesses and, to the extent possible
or appropriate absent any Default, will give reasonable notice thereof.
Section 6.07. Accounting System. Maintain a system of accounting in
accordance with generally accepted accounting principles and maintain a fiscal
year ending December 31 for each of the Companies.
Section 6.08. Additional Assurances. From time to time hereafter:
(a) execute and deliver or cause to be executed and delivered, such
additional instruments, certificates and documents, and take all such actions,
as the Administrative Agent or the Lenders shall reasonably request for the
purpose of implementing or effectuating the provisions of this Agreement and the
other Loan Documents, including without limitation [(i) the items set forth in
Schedule 2.01 which require action after the Closing Date, as stated in such
Schedule, and (ii)] only if reasonably requested by the Administrative Agent,
the execution and delivery to the Administrative Agent of a mortgage or deed of
trust or collateral assignment of lease or leasehold mortgage in form and
substance satisfactory to the Administrative Agent (in a recordable form and in
such number of copies as the Administrative Agent shall have requested)
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covering any real property interests acquired (by ownership or lease) by the
Borrower or any of the Subsidiaries, together with any necessary consents
relating thereto;
(b) upon the exercise by the Administrative Agent or the Lenders of any
power, right, privilege or remedy pursuant to this Agreement or any other Loan
Document which requires any consent, approval, registration, qualification or
authorization of any Governmental Authority, execute and deliver all
applications, certifications, instruments and other documents and papers that
the Lenders may be so required to obtain; and
(c) use reasonable efforts to obtain any consents from any Governmental
Authorities, the NRTC and other Persons necessary to create and perfect a valid
and enforceable first priority lien on the NRTC Member Agreements and any other
applicable contract and agreement not so encumbered as of the Closing Date as
specified in Schedule 4.04, so that, to the maximum extent practicable, the lien
of the Administrative Agent and the Lenders created therein pursuant to the
Security Documents will be a valid and enforceable first priority lien on all
NRTC Member Agreements and other DBS Agreements of the Companies.
Section 6.09. Renewal of DBS Agreements. Renew the DBS Agreements in a
timely manner and in accordance with all applicable provisions thereof.
Section 6.10. Compliance with Environmental Laws.
(a) Comply, and cause all tenants or other occupants of any of the
Properties to comply in all material respects with all Environmental Laws and
not generate, store, handle, process, dispose of or otherwise use and not permit
any tenant or other occupant of any of the Properties to generate, store,
handle, process, dispose of or otherwise use Hazardous Materials in, on, under
or about the Property in a manner that could lead or potentially lead to
imposition on any Company or the Administrative Agent or any Lender or any of
the Properties of any liability or lien of any nature whatsoever under any
Environmental Law.
(b) Notify the Administrative Agent promptly in the event of any spill or
other release of any Hazardous Material in, on, under or about any of the
Properties which is required to be reported to a Governmental Authority under
any Environmental Law, promptly forward to the Administrative Agent copies of
any notices received by any Company relating to any alleged violation of any
Environmental Law and promptly pay when due any fine or assessment against the
Lenders, any Company or any of the Properties relating to any Environmental Law.
(c) If at any time it is determined that the operation or use of any of
the Properties violates any applicable Environmental Law or that there is any
Hazardous Material located in, on, under or about the Properties which under any
Environmental Law requires special handling in collection, treatment, storage or
disposal or any other form of cleanup or remedial or corrective action, then,
within thirty (30) days after receipt of notice thereof from a Governmental
Authority (or such other time period as may be specified in the notice sent by
such Governmental Authority) or from the Lenders, take, at its sole cost and
expense, such actions as may be necessary to fully comply in all respects with
all Environmental Laws, provided,
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however, that if such compliance cannot reasonably be completed within such
thirty (30) day period, the Borrower shall commence such necessary action within
such thirty (30) day period and shall thereafter diligently and expeditiously
proceed to fully comply in all respects and in a timely fashion with all
Environmental Laws. Nothing herein shall prohibit the Borrower from asserting
any good faith defenses against the government in any governmental demands.
(d) If a lien is filed against any of the Properties by any Governmental
Authority resulting from the need to expend or the actual expending of monies
arising from an action or omission, whether intentional or unintentional, of any
Company or for which any Company is responsible, resulting in the releasing,
spilling, leaking, leaching, pumping, emitting, pouring, emptying or dumping of
any Hazardous Material, then, within thirty (30) days from the date that such
Company is first given notice such lien has been placed against the Properties,
either (i) pay the claim and remove the lien or (ii) furnish a cash deposit,
bond or such other security with respect thereto as is satisfactory in all
respects to the Lenders and is sufficient to effect a complete discharge of such
lien on the Properties.
(e) At the Borrower's expense, if reasonably requested by the
Administrative Agent in connection with any Property acquired or leased by any
Company after the date hereof (whether pursuant to a Permitted Acquisition or
otherwise), (i) conduct and deliver to the Administrative Agent and the Lenders
a "Phase One" site assessment for such Property (in each case, an "Environmental
Site Assessment"), prepared by an environmental consulting firm of national
reputation satisfactory to the Lenders or (ii) prepare and deliver to the
Administrative Agent and the Lenders true and accurate responses to the
Administrative Agent's Environmental Questionnaire (each, an "Environmental
Questionnaire") as to such Property. Each Environmental Site Assessment shall
be, to the best of the Borrower's knowledge, true and accurate in all material
respects.
(f) Conduct any further diligence recommended under any Environmental
Site Assessment and perform any and all Remedial Work necessary under all
Environmental Laws applicable (now or in the future) to the Companies or their
businesses, whether as recommended under any Environmental Site Assessment or
otherwise.
Section 6.11. Interest Rate Protection.
(a) Within thirty (30) days after the date outstanding Loans first equal
or exceed $25,000,000 in aggregate principal amount, enter into, and,
thereafter, maintain in full force and effect, one or more Rate Hedging
Agreements sufficient to ensure that at least fifty percent (50%) of the
aggregate principal amount of the Loans then outstanding is protected at all
times against increases in the applicable Base Rate or LIBOR Rate for a term
extending for at least three (3) years.
(b) Thereafter, within thirty (30) days after each date as of which the
outstanding principal amount of the Loans shall have increased by an incremental
amount of $25,000,000, but only if the ratio of Total Funded Debt on any day
during such thirty (30) day period to Annualized EBITDA for the most recently
ended fiscal quarter shall equal or exceed 3.00:1.00,
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increase the Borrower's interest protection in amounts sufficient to ensure that
at least fifty percent (50%) thereof remains protected at all times against
increases in the applicable Base Rate or LIBOR Rate for a term extending for at
least three (3) years or, if shorter, through June 30, 2004.
(c) Each Rate Hedging Agreement entered into as required under Section
6.11(a) or (b) shall contain terms and conditions reasonably satisfactory to the
Administrative Agent.
(d) Deliver to the Administrative Agent copies of each such Rate Hedging
Agreement, including any and all amendments thereto and substitutions thereof,
and such other documentation relating thereto as the Administrative Agent or the
Lenders may from time to time request.
VII. NEGATIVE COVENANTS. The Borrower covenants and agrees that, so long
as any Lender has any obligation to extend credit to the Borrower hereunder, and
for so long thereafter as there remains outstanding any portion of any
Obligation, whether now existing or arising hereafter, unless the Required
Lenders shall otherwise consent in writing in accordance with the terms of
Article XII, none of the Companies will, directly or indirectly:
Section 7.01. Indebtedness. Incur, create, assume, become or be liable,
directly, indirectly or contingently, in any manner with respect to, or permit
to exist, any Indebtedness or liability, except:
(a) Indebtedness of the Borrower to the Lenders hereunder, under the
Notes and under the Letters of Credit;
(b) the guaranties of the Subsidiaries required under Section 2.01;
(c) any Rate Hedging Obligation incurred in accordance with Section 6.11;
(d) Indebtedness existing on the date hereof and described in Schedule
7.01; provided however, that the terms of such indebtedness shall not be
modified or amended in any material respect, nor shall payment thereof be
modified, without the prior written consent of the Required Lenders;
(e) Indebtedness in respect of endorsements of negotiable instruments for
collection in the ordinary course of business;
(f) Indebtedness under Capital Leases and purchase money Indebtedness
relating to the purchase price of real estate and equipment to be used in the
Companies' businesses in the aggregate principal amount (including any such
amounts set forth on Schedule 7.01 attached hereto) of not more than $2,000,000
outstanding at any time;
(g) Indebtedness among the Borrower and the Subsidiaries;
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(h) Permitted Seller Paper not exceeding $25,000,000 in the aggregate
outstanding at any time;
(i) Permitted Seller Subordinated Debt, not exceeding $10,000,000 in the
aggregate outstanding at any time;
(j) the Pioneer Seller Debt; and
(k) Unsecured Indebtedness of the Borrower and the Subsidiaries of a type
not covered by any of the other provisions of this Section 7.01 and which does
not exceed $1,000,000 in the aggregate outstanding at any time.
Section 7.02. Liens. Create, incur, assume, suffer or permit to exist any
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or ownership interests, now or hereafter owned, other than:
(a) liens securing the payment of taxes, either not yet due or the
validity of which is being contested in good faith by appropriate proceedings,
and as to which it shall have set aside on its books adequate reserves;
(b) deposits under workers' compensation, unemployment insurance and
social security laws, or to secure the performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases, or to secure
statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds arising in the ordinary course of business;
(c) liens existing on the date hereof and described on Schedule 7.02
attached hereto;
(d) liens against the Companies imposed by law, such as vendors',
carriers', lessors', warehouser's or mechanics' liens, incurred by it in good
faith in the ordinary course of business;
(e) liens arising out of a prejudgment attachment, a judgment or award
against it with respect to which it shall currently be prosecuting an appeal, a
stay of execution pending such appeal having been secured, except any such lien
arising in connection with a judgment, attachment or proceeding which gives rise
to an Event of Default under paragraph (m) or (n) of Article VIII;
(f) liens in favor of the Administrative Agent or the Lenders (and any
Hedging Lenders) securing the Notes or the other obligations of the Companies to
the Lenders hereunder or under Rate Hedging Obligations entered into with any
Lender or any Lender's Affiliate;
(g) liens against the Companies arising under or securing Capital Leases
and liens or mortgages securing purchase money Indebtedness described in Section
7.01(f), provided that the obligation secured by any such lien shall not exceed
one hundred percent (100%) of the lesser of cost or fair market value as of the
time of the acquisition of the property covered thereby and that
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each such lien or mortgage shall at all times be limited solely to the item or
items of property so acquired; and
(h) restrictions, easements and minor irregularities in title which do
not and will not interfere with the occupation, use and enjoyment by any Company
of such properties and assets in the normal course of its business as presently
conducted or materially impair the value of such properties and assets for the
purpose of such business.
Section 7.03. Disposition of Assets; etc. Sell, lease, transfer or
otherwise dispose of its properties, assets, rights, licenses and franchises to
any Person (including without limitation dispositions in exchange for similar
assets and properties and commonly referred to as "asset swaps") (all of the
foregoing being referred to herein as a "Disposition"), except for:
(a) Dispositions made in the ordinary course of business (including the
Disposition, without replacement, of equipment which is obsolete or no longer
needed by the Companies in the conduct of their businesses and the replacement
of equipment with other equipment of at least equal utility and value (provided
that the Administrative Agent's or the Lenders' lien upon such newly acquired
equipment shall have the same priority as the Administrative Agent's or the
Lenders' lien upon the replaced equipment subject to any prior liens permitted
by Sections 7.01(f) and 7.02(g)); and
(b) the Disposition of other assets having a fair market value of not
more than $20,000,000 in the aggregate for all other assets ( all of which
dispositions may be made free from the liens of the Security Documents);
provided, however, that (i) the Subsidiaries shall have received payment in cash
or cash equivalents of at least eighty-five percent (85%) of gross proceeds from
any such disposition of assets (other than like-kind exchanges under Section
1031 of the Internal Revenue Code); and (ii) the Borrower shall have complied
with the provisions of Section 1.07(g). The Companies may dispose of additional
properties made outside the ordinary course of business (free and clear of the
liens of the Security Documents) with the prior written consent of the Required
Lenders, in their sole and absolute discretion, which consent, if given, shall
in any event be contingent upon satisfaction of the threshold conditions set
forth in clauses (i) and (ii) above.
Section 7.04. Fundamental Changes; Acquisitions.
(a) (i) Form any subsidiary or otherwise change the corporate structure
or organization of the Borrower or the Subsidiaries from that set forth in
Schedule 4.19, except in connection with any Permitted Acquisition; (ii) permit
or suffer any amendment of its charter or partnership documents which could have
a Material Adverse Effect (it being expressly agreed that the inclusion in any
such charter documents of any provision similar to those set forth in Section
102(b) (2) of Title 8 of the Delaware Code is prohibited under this Section);
(iii) dissolve, liquidate, consolidate with or merge with, or otherwise acquire
any DBS Rights or all or any substantial portion of the ownership interests or
assets or properties of any corporation, partnership or other entity or any
other material assets, other than pursuant to (A) Permitted Acquisitions and
Capital Expenditures permitted hereunder and (B) purchases of inventory and
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supplies in the ordinary course of business; (iv) repurchase or redeem any
shares of capital stock, partnership interests or other ownership interest; or
(v) issue any additional shares of capital stock, partnership interests or other
ownership interest, except for securities (A) in respect of which the issuing
Company has no obligation to redeem or to pay cash distributions or dividends,
(B) the issuance of which does not result in an Event of Default and (C) which
shall have been collaterally assigned or pledged to the Administrative Agent as
required hereunder.
(b) Notwithstanding the foregoing, the Borrower and one or more
Subsidiaries may merge or consolidate with each other if the surviving or
resulting corporation is either the Borrower or a Subsidiary and if all actions
required by Section 2.01 shall have been taken.
Section 7.05. Management. Turn over the management of its properties,
assets, rights, licenses and franchises to any Person other than the Manager or
a full-time employee of the Companies.
Section 7.06. Sale and Leaseback. Enter into any arrangements, directly
or indirectly, with any Person whereby it shall sell or transfer any property,
real, personal or mixed, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property; provided,
however, that the Borrower and the Subsidiaries may engage in such transactions
to the extent structured as Capital Leases and subject to the limitations in
Section 7.01(f).
Section 7.07. Investments. Except for Permitted Investments, purchase,
invest in or otherwise acquire or hold securities, including, without
limitation, capital stock and evidences of indebtedness of, or make loans or
advances to, or enter into any arrangement for the purpose of providing funds or
credit to, any other Person.
Section 7.08. Change in Business. Engage, directly or indirectly, in any
business other than the businesses in which it is currently engaged.
Section 7.09. Accounts Receivable. Sell, assign, discount or dispose in
any way of any accounts receivable, promissory notes or trade acceptances held
by any Company, with or without recourse, except for collection (including
endorsements) in the ordinary course of business.
Section 7.10. Transactions with Affiliates. Except for the payment of
permitted Management Fees and the transactions contemplated by the PST Transfer,
enter into any transaction, including, without limitation, the purchase, sale or
exchange of property or assets or the rendering or accepting of any service with
or to any Affiliate of any Company, except in the ordinary course of business
and pursuant to the reasonable requirements of its business and upon terms not
less favorable to such Company than it could obtain in a comparable arm's-length
transaction with a third party other than such Affiliate.
Section 7.11. Amendment of Certain Agreements, Etc. Amend, modify or
terminate any DBS Agreement, any agreement or instrument evidencing Permitted
Seller Paper or
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Permitted Seller Subordinated Debt or any material agreement to which any
Company is a party, or enter into any material agreement, in each case, if the
effect thereof would be to increase materially the obligations of any Company
thereunder or to confer additional rights upon the other parties thereto which
could have a Material Adverse Effect.
Section 7.12. ERISA. (a) Fail to make contributions to pension plans
required by Section 412 of the Code, (b) fail to make payments required by Title
IV of ERISA as the result of the termination of a single employer pension plan
or withdrawal or partial withdrawal from a multiemployer pension plan, or (c)
fail to correct a prohibited transaction with an employee benefit plan with
respect to which it is liable for the tax imposed by Section 4975 of the Code.
Section 7.13. Margin Stock. Use or permit the use of any of the proceeds
of the Loans, directly or indirectly, for the purpose of purchasing or carrying,
or for the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry, any Margin Stock or for any other purpose which
might constitute the transactions contemplated hereby a "purpose credit" within
the meaning of Regulation U (12 CFR Part 221) of the Board of Governors of the
Federal Reserve System, or cause any Loan, the application of proceeds thereof
or this Agreement to violate Regulation G, Regulation U, Regulation T or
Regulation X of the Board of Governors of the Federal Reserve System or any
other regulation of such Board or the Securities Exchange Act of 1934, as
amended, or any rules or regulations promulgated under such statutes.
Section 7.14. Negative Pledges, etc. Enter into any agreement (excluding
this Agreement or any other Transaction Document) prohibiting (a) any Company
from amending or otherwise modifying this Agreement or any other Transaction
Document, or (b) the creation or assumption of any lien upon the properties,
revenues or assets of any Company, whether now owned or hereafter acquired.
VIII. DEFAULTS. In each case of happening of any of the following events
(each of which is herein sometimes called an "Event of Default"):
(a) any representation or warranty made by or on behalf of any Company or
any of its Affiliates in this Agreement or the Security Documents, or in any
report, certificate, financial statement or other instrument furnished in
connection with this Agreement, or the borrowing hereunder, shall prove to be
false or misleading in any material respect when made or reconfirmed;
(b) default in the payment or mandatory prepayment of any installment of
the principal of any Note or any payment of any installment of the principal of
any other indebtedness of any Company to the Administrative Agent or any Lender,
or any payment in respect of any Rate Hedging Obligations entered into with the
Administrative Agent or any Lender, when the same shall become due and payable,
whether at the due date thereof or at a date fixed for prepayment or by
acceleration or otherwise;
(c) default in the payment of any interest on any Note, or any premium or
fee or any other indebtedness of any Company to the Administrative Agent or any
Lender for more than
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five (5) calendar days after the date when the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment or by
acceleration or otherwise;
(d) default in the due observance or performance by, or compliance with,
any Person other than the Administrative Agent or any Lender of any covenant or
agreement contained in Article III or V, Sections 6.02, 6.03 (but only if the
same involves any seizure or property), 6.04, 6.05, 6.06, 6.07, 6.09 and 6.11 or
Article VII of this Agreement; provided, however, that a default in the delivery
of financial or other information under paragraphs (b) through (e) of Section
6.05 shall not constitute an Event of Default unless and until the same
continues unremedied for thirty (30) days after the earlier to occur of (i) the
occurrence thereof or (ii) written notice thereof from the Administrative Agent
or any Lender to the Borrower (provided that such thirty (30) day period shall
be available for the remedy of any such default only once in any period of
twelve (12) consecutive months and three (3) times during the term of this
Agreement);
(e) default in the due observance or performance of, or compliance with,
any other covenant, condition or agreement, on the part of any Person other than
the Administrative Agent or any Lender to be observed or performed pursuant to
the terms of this Agreement or pursuant to the terms of any Security Document or
any Rate Hedging Obligation entered into with the Administrative Agent or any
Lender, which default is not referred to in paragraphs (a) through (d),
inclusive, of this Article VIII and which default shall continue unremedied for
thirty (30) days after the earlier to occur of (i) the Borrower's discovery of
such default, or (ii) written notice thereof from the Administrative Agent or
any Lender to the Borrower, provided, however, that if any such default cannot
be remedied, then such default shall be deemed to be an Event of Default as of
the date of the occurrence thereof;
(f) any default with respect to any Indebtedness of any Company (other
than to the Lenders hereunder) for borrowed money, or default under any
agreement giving rise to monetary remedies, in each case which, when aggregated
with all other such defaults of the Companies, exceeds $2,000,000, if the effect
of such default is to permit the holder of such Indebtedness to accelerate the
maturity of such Indebtedness, unless such holder shall have permanently waived
the right to accelerate the maturity of such Indebtedness on account of such
default;
(g) (i) any NRTC Member Agreement or other DBS Agreement shall be
terminated, shall expire or shall be amended in a manner reasonably likely to
have a Material Adverse Effect, (ii) any DirecTv Agreement (including the HCG
Agreement) shall terminate, shall expire or shall be amended in a manner
reasonably likely to have a Material Adverse Effect or (iii) any default shall
occur under the HCG Agreement, if NRTC shall take action to terminate the HCG
Agreement;
(h) the loss, termination, suspension, revocation or amendment (in a
manner reasonably likely to have a Material Adverse Effect) of any license
issued to HCG, any Company or DirecTv or any other party by the Federal
Communications Commission in connection with the delivery of DIRECTV or other
DBS Rights under any DirecTv Agreement or any NRTC Member Agreement;
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(i) DBS services provided to any of the Subscribers shall be interrupted
or terminated, whether due to satellite damage or destruction or other
circumstances, if the same has or could have a Material Adverse Effect;
(j) any default with respect to any Funded Debt of the Parent which, when
aggregated with all other such defaults of the Parent, exceeds $15,000,000, if
the effect of such default is to permit the holder of such Indebtedness to
accelerate the maturity of such Indebtedness, unless such holder shall have
permanently waived the right to accelerate the maturity of such Indebtedness on
account of such default;
(k) any Company or group of Companies generating in the aggregate more
than five percent (5%) of Adjusted Net Income for any period shall discontinue
its or their respective business(es) or the Parent, any Company or the Manager
shall (i) apply for or consent to the appointment of a receiver, trustee,
custodian or liquidator of it or any of its property, (ii) be unable, or admit
in writing its inability, to pay its debts as they mature, (iii) make a general
assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or
insolvent or be the subject of an order for relief under Title 11 of the United
States Code or (v) file a voluntary petition in bankruptcy, or a petition or an
answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such law
or corporate action shall be taken for the purpose of effecting any of the
foregoing;
(l) there shall be filed against any Company, the Parent or the Manager
an involuntary petition seeking reorganization of such company or the
appointment of a receiver, trustee, custodian or liquidator of such company or a
substantial part of its assets, or an involuntary petition under any bankruptcy,
reorganization or insolvency law of any jurisdiction, whether now or hereafter
in effect and such involuntary petition shall not have been dismissed within
sixty (60) days thereof;
(m) final judgment for the payment of money which, when aggregated with
all other outstanding judgments against any of the Companies, exceeds $1,000,000
(exclusive of amounts covered by insurance or actually contributed in cash by
third party obligors with respect to such judgments) shall be rendered against
any Company, and the same shall remain undischarged (unless fully bonded upon
terms satisfactory to the Required Lenders) for a period of thirty (30)
consecutive days, during which execution shall not be effectively stayed;
(n) the occurrence of any attachment of any deposits or other property of
any Company in the hands or possession of the Administrative Agent or any of the
Lenders, or the occurrence of any attachment of any other property of any
Company in an amount which, when aggregated with all other attachments against
the Companies, exceeds $1,000,000 and which shall not be discharged within sixty
(60) days of the date of such attachment;
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(o) for any reason, (i) the Borrower shall cease to own directly or
indirectly all of the issued and outstanding capital stock of each of its
Subsidiaries (other than the Permitted Preferred Stock); (ii) the Parent shall
cease to own at least fifty-one percent (51%) of the aggregate economic value of
the Borrower's issued and outstanding capital stock; (iii) the Parent shall
cease to own at least eighty percent (80%) of the combined voting power of all
issued and outstanding shares of capital stock of the Borrower; or (iv) a
"Change of Control" (as defined in the PCC Preferred Stock Designation) shall
occur; or
(p) for any reason (other than the gross negligence of the Administrative
Agent or the Lenders, it being nonetheless understood and agreed that the
Borrower shall have the primary responsibility for filing continuation
statements under the Uniform Commercial Code and making other conforming
amendments to the Security Documents to reflect changed circumstances and assure
continued compliance therewith and with Section 2.01), any material Security
Document shall not be in full force and effect in all material respects or shall
not be enforceable in all material respects in accordance with its terms, or any
security interest(s) or lien(s) granted pursuant thereto which is, or are in the
aggregate, material shall fail to be perfected, or any party thereto other than
the Administrative Agent or the Lenders shall contest the validity of any
material lien(s) granted under, or shall disaffirm its obligations under, any
material Security Document;
then and upon every such Event of Default and at any time thereafter during the
continuance of such Event of Default, at the election of the Required Lenders as
provided in Article XII, the Commitments shall terminate and the Notes and any
and all other Indebtedness of the Borrower to the Lenders shall immediately
become due and payable, both as to principal and interest, without presentment,
demand, prior notice, or protest, all of which are hereby expressly waived,
anything contained herein or in the Notes or other evidence of such indebtedness
to the contrary notwithstanding (except in the case of an Event of Default under
paragraph (k) or (l) of this Article VIII which, under applicable law, would
result in the automatic acceleration of the Borrower's Indebtedness, in which
event the Commitments shall automatically terminate and such Indebtedness shall
automatically become due and payable).
IX. REMEDIES ON DEFAULT, ETC. In case any one or more Events of Default
shall occur and be continuing, the Administrative Agent and the Lenders may
proceed to protect and enforce their rights by an action at law, suit in equity
or other appropriate proceeding, whether for the specific performance of any
agreement contained in this Agreement, any Security Document or the Notes, or
for an injunction against a violation of any of the terms hereof or thereof or
in and of the exercise of any power granted hereby or thereby or by law, all
subject to the provisions of Article XII. In the event that the Administrative
Agent shall apply for the appointment of, or taking possession by, a trustee,
receiver or liquidator of the Borrower or any Subsidiary or of any other similar
official, to hold or liquidate all or any substantial part of the properties or
assets of the Borrower or such Subsidiary following the occurrence of a default
in payment of any amount owed to the Administrative Agent or any Lender
hereunder, the Borrower, for itself and on behalf of the Subsidiaries (with all
due and proper authorization of the Boards of Directors and partners, as the
case may be of the Subsidiaries), hereby jointly and severally consent to such
appointment and taking of possession and agree to execute and deliver
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any and all documents requested by the Administrative Agent relating thereto
(whether by joining in a petition for the voluntary appointment of, or entering
no contest to a petition for the appointment of, such an official or otherwise,
as appropriate under applicable law). No right conferred upon the Administrative
Agent or the Lenders hereby or by any Security Document or the Notes shall be
exclusive of any other right referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise.
X. THE ADMINISTRATIVE AGENT
Section 10.01. Appointment, Powers and Immunities. Each Lender hereby
irrevocably (subject to Section 10.08) designates and appoints Canadian Imperial
Bank of Commerce, New York Agency, which designation and appointment is coupled
with an interest, as the Administrative Agent of such Lender under this
Agreement and the other Transaction Documents, and each such Lender irrevocably
authorizes Canadian Imperial Bank of Commerce, New York Agency, as the
Administrative Agent of such Lender, to take such action on its behalf under the
provisions of this Agreement and the other Transaction Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Transaction
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in Section
10.05 and such first sentence of Section 10.06 hereof shall include reference to
its affiliates and its own and such affiliates' officers, directors, employees
and agents) shall not: (a) have any duties or responsibilities to be a trustee
for any Lender; (b) be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by either of them
under, this Agreement, or for the value, validity, effectiveness, genuineness,
enforceability, perfection or sufficiency of this Agreement, any Note, any
Security Document or any other document referred to or provided for herein or
for any failure by any Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) be required to initiate or conduct any
litigation or collection proceedings hereunder except to the extent requested by
the Required Lenders; and (d) be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith, except for its own gross
negligence or willful misconduct. The Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact it selects with reasonable care. Subject
to the foregoing, to Article XII and to the provisions of any intercreditor
agreement among the Lenders in effect from time to time, the Administrative
Agent shall, on behalf of the Lenders, (a) hold and apply any and all
Collateral, and the proceeds thereof, at any time received by it, in accordance
with the provisions of the Security Documents and this Agreement; (b) exercise
any and all rights, powers and remedies of the Lenders under this Agreement or
any of the Security Documents, including the giving of any consent or waiver or
the entering into of any amendment, subject to the provisions of Article XII;
(c) execute, deliver and file UCC Financing Statements, mortgages, deeds of
trust, lease assignments and other such agreements, and possess instruments on
behalf of any or all of the Lenders; and (d) in the event of acceleration of the
Borrower's Indebtedness hereunder, sell or otherwise liquidate or dispose
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of any portion of the Collateral held by it and otherwise exercise the rights of
the Lenders hereunder and under the Security Documents.
Section 10.02. Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any communication by telephone, telex, telegram or cable) believed by
it to be genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement, the
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with instructions signed by the
Required Lenders or the Lenders, as the case may be, and such instructions and
any action taken or failure to act pursuant thereto shall be binding on the
Lenders.
Section 10.03. Events of Default. The Administrative Agent shall not be
deemed to have knowledge of the occurrence of an Event of Default (other than
the non-payment of principal of or interest on the Notes) unless it has received
written notice from any Lender or the Borrower specifying such Event of Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of an Event of
Default, the Administrative Agent shall give prompt notice thereof to the
Lenders (and shall give each Lender prompt notice of each such non-payment). The
Administrative Agent shall (subject to Section 10.07) take such action with
respect to such Event of Default as shall be directed by the Required Lenders,
as provided under Article XII, provided that, unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action on behalf of the
Lenders, or refrain from taking such action, with respect to such Event of
Default as it shall deem advisable in the best interest of the Lenders.
Section 10.04. Rights as a Lender. With respect to its Commitments and
the Loans made by CIBC hereunder, CIBC shall have the same rights and powers
hereunder as any other Lenders and may exercise the same as though its
Affiliate, Canadian Imperial Bank of Commerce, New York Agency, were not acting
as the Administrative Agent. The Administrative Agent and its affiliates
(including CIBC) may, without having to account therefor to the Lenders and
without giving rise to any fiduciary or other similar duty to any Lender, accept
deposits from, lend money to and generally engage in any kind of banking, trust
or other business with the Borrower and any of its Affiliates as if it were not
acting as an Agent and as if CIBC were not a Lender, and the Administrative
Agent may accept fees and other consideration from any Company or the Parent for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
Section 10.05. Indemnification. The Lenders agree to indemnify each of
the Agents (to the extent not reimbursed under Section l4.02, but without
limiting the obligations of the Borrower under such Section l4.02), ratably in
accordance with the aggregate principal amount of the Notes and Commitments held
by the Lenders, for any and all liabilities, obligations, losses, damages,
penalties, action, judgments, suits, costs, expenses or disbursements of any
kind
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and nature whatsoever which may be imposed on, incurred by or asserted against
such Agent in any way relating to or arising out of this Agreement or any
Security Document or any other document contemplated by or referred to herein or
the transactions contemplated by or referred to herein or therein (including,
without limitation, the costs and expenses which the Borrower is obligated to
pay under Section 14.02) or the enforcement of any of the terms of this
Agreement or of any Security Document or of any such other documents, provided
that no Lender shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
Section 10.06. Non-Reliance on Administrative Agent and other Lenders.
Each Lender agrees that it has, independently and without reliance on either
Agent or any other Lenders, and based on such documents and information as it
has deemed appropriate, made its own credit analysis of the Companies and its
own decision to enter into this Agreement and that it will, independently and
without reliance upon either Agent or any other Lenders, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by the Companies of this Agreement
or any other document referred to or provided for herein or to inspect the
properties or books of the Companies. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, the Administrative Agent shall have no duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or businesses of the Companies (or
any of their Affiliates) which may come into the possession of the
Administrative Agent or any of its Affiliates. Notwithstanding the foregoing,
the Administrative Agent will provide to the Lenders any and all information
reasonably requested by them and reasonably available to the Administrative
Agent promptly upon such request.
Section 10.07. Failure to Act. Except for action expressly required of
the Administrative Agent hereunder, the Administrative Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action.
Section 10.08. Resignation of Administrative Agent. Canadian Imperial
Bank of Commerce, New York Agency (or any other Agent hereunder), may resign as
the Administrative Agent at any time by giving fifteen (15) days' prior written
notice thereof to the Lenders and the Borrower. Any such resignation shall take
effect at the end of such fifteen (15) day period or upon the earlier
appointment of a successor Agent by the Required Lenders as provided below. Upon
any resignation of Canadian Imperial Bank of Commerce, New York Agency (or any
other Agent hereunder), and subject to the Borrower's approval (which approval
shall not be unreasonably withheld or delayed and shall not be required with
respect to any such appointment made during the existence of any Event of
Default) the Required Lenders shall appoint a successor agent from among the
Lenders or, if such appointment is deemed inadvisable or impractical by the
Required Lenders, another financial institution with a combined capital and
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surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by such successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent. After the effective date of the resignation of an Agent
hereunder, the retiring Agent shall be discharged from its duties and
obligations hereunder, provided that the provisions of this Article X shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent. In the event
that there shall not be a duly appointed and acting Agent, the Borrower agrees
to make each payment due to the Administrative Agent hereunder and under the
Notes, if any, directly to each Lender entitled thereto, pursuant to written
instructions provided by the retiring Agent, and to provide copies of each
certificate or other document required to be furnished to the Administrative
Agent hereunder, if any, directly to each Lender.
Section 10.09. Cooperation of Lenders. Each Lender shall (a) promptly
notify the other Lenders and the Administrative Agent of any Event of Default
known to such Lender under this Agreement and not reasonably believed to have
been previously disclosed to the other Lenders; (b) provide the other Lenders
and the Administrative Agent with such information and documentation as such
other Lenders or the Administrative Agent shall reasonably request in the
performance of their respective duties hereunder, including, without limitation,
all information relative to the outstanding balance of principal, interest and
other sums owed to such Lender by the Borrower; and (c) cooperate with the
Administrative Agent with respect to any and all collections and/or foreclosure
procedures at any time commenced against the Borrower or otherwise in respect of
the Collateral by the Administrative Agent in the name and on behalf of the
Lenders.
Section 10.10. Syndication Agent. Except as expressly provided in this
Agreement, the Syndication Agent shall not have any rights or obligations under
this Agreement or any of the other Loan Documents except in its capacity as a
Lender hereunder and thereunder.
XI. DEFINITIONS
As used herein the following terms have the following respective
meanings:
Accountants. See Section 6.05.
Acquisition. The acquisition by the Borrower or any Subsidiary, whether
by way of the purchase of assets or stock, by merger or consolidation or
otherwise, of exclusive DBS Rights for the delivery of DIRECTV, including
without limitation a swap of any such existing DBS Rights for other such
DBS Rights or an equity contribution of such DBS Rights to a Subsidiary
by any Affiliate of any Company.
Acquisition Agreements. With respect to any Permitted Acquisition, the
respective acquisition, purchase or other agreement which sets forth the
terms and conditions of such acquisition.
Acquisition Loans. See Section 3.02.
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Adjusted Net Income. For any period, Net Income for such period minus
Subscriber Acquisition Costs, to the extent capitalized during such
period, plus depreciation and amortization deducted in determining Net
Income which is related to such capitalized Subscriber Acquisition Costs.
Adjusted Total Funded Debt. As of any date, Total Funded Debt as of such
date minus (a) the amount, if any, by which the aggregate face amount of
any NRTC Letters of Credit outstanding as of such date exceeds the
aggregate amount then owed to the NRTC under the NRTC Member Agreements
and (b) solely for purposes of Sections 5.01 and 5.04 (and not for
purposes of calculating the Pricing Ratio) minus the aggregate amount of
cash then on deposit in the Collateral Account under the provisions of
Section 1.07(g) (1) (x).
Administrative Agent. See the Preamble.
Affiliate(s). Any Person that directly or indirectly controls, or is
under common control with, or is controlled by, the Borrower and, if such
Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust
whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member
or trust. As used in this definition, "control", including, its
correlative meanings, "controlled by" and "under common control with",
shall mean possession, directly or indirectly, of power to direct or
cause the direction of management or policies (whether through ownership
or securities or partnership or other ownership interests, by contract or
otherwise), provided that, in any event, any Person that owns directly or
indirectly securities having ten percent (10%) or more of the voting
power for the election of directors or other governing body of a
corporation or ten percent (10%) or more of the partnership or other
ownership interests of any other Person (other than as a limited partner
of such other Person) will be deemed to control such corporation or other
Person. Notwithstanding the foregoing, no individual shall be an
Affiliate solely by reason of his or her being a director, officer or
employee of the Borrower or any Subsidiary.
Affiliate Subordination Agreements. See Section 2.01.
Agent. The Administrative Agent or the Syndication Agent.
Agents. The Administrative Agent and the Syndication Agent.
Annualized EBITDA. For any fiscal quarter, EBITDA for such fiscal
quarter, multiplied by four (4).
Applicable Margin. See Section 1.04.
Assignment and Acceptance. See Article XIII.
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Audited Financial Statements. See Section 1.04.
Available Revolver Commitments. See Section 1.01.
Average Subscriber Acquisition Cost. For any period, Subscriber
Acquisition Costs divided by Gross Subscriber Additions.
Base Rate. As of any date, the fluctuating interest rate per annum equal
to the greater of (a) the rate established by Canadian Imperial Bank of
Commerce from time to time at its office in New York City as its "Base
Rate" for commercial loans in United States Dollars, and (b) the Federal
Funds Rate plus 1.00%; in each case, including any applicable adjustments
for reserves or Federal Deposit Insurance Corporation requirements. The
Base Rate is not necessarily intended to be the lowest rate of interest
determined by Canadian Imperial Bank of Commerce in connection with
extensions of credit.
Base Rate Loans. Loans bearing interest at a rate determined on the basis
of the Base Rate.
Borrower. See the Preamble.
Borrowing Date. With respect to any Loans requested hereunder, the date
such Loans are to be made.
Budget. See Section 6.05.
Business Day. (a) For all purposes other than as provided in clause (b)
below, any day other than a Saturday, Sunday or legal holiday on which
banks in New York, New York are open for the transaction of a substantial
part of their commercial banking business; and (b) with respect to all
notices and determinations in connection with, and payments of principal
and interest on, LIBOR Loans, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in
U.S. Dollar deposits in the London interbank market.
Capital Expenditures. For any period, expenditures, (including, without
duplication, the aggregate amount of Capital Lease Obligations incurred
during such period) made by the Borrower and the Subsidiaries to acquire
or construct fixed assets, plant or equipment (including renewals,
improvements and replacements, but excluding repairs and acquisitions
permitted hereunder) during such period, computed in accordance with
GAAP.
Capital Lease. Any lease of property (real, personal or mixed) which, in
accordance with GAAP and Statement No. 13 of the Financial Accounting
Standards Board, would be permitted or required to be capitalized on the
lessee's balance sheet.
Capital Lease Obligations. All obligations of the Borrower and the
Subsidiaries to pay rent or other amounts under a lease of (or other
agreement conveying the right to use)
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property (real, personal or mixed) to the extent such obligations are
required to be classified and accounted for as a capital lease on any
such Company's balance sheet under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
Cash Equity. See Section 3.01.
Casualty Event. Any loss of, or damages to, or any condemnation or other
taking of any assets or property of the Borrower or any Subsidiary for
which the Borrower or any Subsidiary receives insurance proceeds,
proceeds of a condemnation award or other compensation.
CERCLA. The Comprehensive Environmental Response, Compensation and
Liability Act of 1989 (42 USC 9601, et. seq.).
CIBC. See the Preamble.
Churn. For any period, Subscribers as of the first day of such period
which cease to be Subscribers during such period (including Subscribers
whose service has been discontinued for non-payment, but excluding
Subscribers discontinued in connection with a Disposition) minus any
Subscribers which resubscribe to the Companies' DBS Services during such
period.
Closing Date. The date on which the first Loans are made.
Code. The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
Collateral. Collectively, any and all collateral referred to herein and
in the Security Documents.
Collateral Account. The "Collateral Account", as defined in the Security
Agreements.
Commitment Fee. See Section 1.08.
Commitments. The Revolver Commitments and the Term Commitments.
Companies. Collectively, the Borrower and the Subsidiaries.
Compliance Report. See Section 6.05.
Compliance Report Delivery Date. See Section 1.04.
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Controlled Group. All trades or businesses (whether or not incorporated)
under common control that, together with the Borrower, are treated as a
single employer under Section 414(b) or 414(c) of the Code or Section
40001 of ERISA.
Copyright Office. The United States Copyright and Trademark Office or any
other federal government agency which may hereafter perform its
functions.
Core Properties. See the Recitals.
Current Assets. On any date, all assets of the Companies on such date
which, in accordance with GAAP, would be classified on a consolidated
balance sheet of the Companies as "current assets".
Current Liabilities. On any date, all liabilities of the Companies on
such date which, in accordance with GAAP, would be classified on a
consolidated balance sheet of the Companies as "current liabilities"
(other than the current portion of long-term Indebtedness).
DBS. See the Recitals.
DBS Agreements. The NRTC Member Agreements and any and all other
agreements entered into by the Borrower or any of the Subsidiaries from
time to time (as amended from time to time with the Lenders' consent, if
required under this Agreement), to license the right to deliver DBS
Services.
DBS Rights. Any rights to market, sell, deliver and retain revenues from
direct broadcast television programming initially transmitted over
satellite frequencies, and all rights to distribute services of the type
known as "DBS Services" under the NRTC Member Agreements, including
without limitation all such rights with respect to DIRECTV and DBS under
the DirecTv Agreements or the NRTC Member Agreements.
DBS Subscriber Areas. On any date, all of the geographic areas in which
the Companies, or any of them, have the right to distribute DIRECTV and
other DBS services, as described in the NRTC Member Agreements.
Default. An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given, or both, would
constitute an Event of Default.
Defaulting Lender. Any Lender with respect to which a Lender Default is
in effect.
DirecTv. DirecTv, Inc., an affiliate of HCG, and any successor thereof.
DIRECTV. The video, audio and data services provided over satellite
frequencies by DirecTv.
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DirecTv Agreements. The HCG Agreement (as defined in the NRTC Member
Agreements) whether or not assigned to DirecTv by HCG, and any other
material agreements under which NRTC has obtained rights to distribute
DBS services covered by any of the NRTC Member Agreements or has obtained
any other DBS Rights granted to any of the Companies by NRTC.
Disposition. See Section 7.03.
Dollars and $. Lawful money of the United States of America.
EBITDA. For any period, Adjusted Net Income for such period, plus, to the
extent deducted in the determination of Adjusted Net Income and not
restored in accordance with the definition of such term, (a) Total
Interest Expense, (b) depreciation, (c) amortization, (d) taxes in
respect of income and profits expensed during such period, (e)
Transaction Costs, (f) other non-cash expenses and (g) the product of (i)
Net Subscriber Additions multiplied by (ii) the lesser of actual Average
Subscriber Acquisition Costs or $400; all determined on a consolidated
basis, after eliminating intercompany items, in accordance with GAAP.
Effective Date. See Section 1.09.
Environmental Laws. Any and all present and future Federal, state, local
and foreign laws, rules or regulations, and any orders or decrees, in
each case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or
outdoor environment, including, without limitation, ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes.
Environmental Questionnaire. See Section 6.10.
Environmental Site Assessment. See Section 6.10.
ERISA. The Employee Retirement Security Act of 1974, as amended.
Excess Cash Flow. For any period, EBITDA for such period minus (a) Net
Subscriber Additions multiplied by the lesser of actual Average
Subscriber Acquisition Costs for such period or $400, minus (b) Fixed
Charges for such period, minus (c) voluntary prepayments of the Revolver
Notes made in connection with voluntary reductions of the Revolver
Commitments during such period, as provided in Section 1.07(b), minus (d)
voluntary prepayments of the Term Notes made under Section 1.07(c), minus
(e) any increase in Working Capital during such period, measured as of
the last day of such period by comparison with Working Capital on the
first day of such period, plus (f) any decrease in
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Working Capital during such period, measured as of the last day of such
period by comparison with Working Capital on the first day of such
period.
Expiration Date. See Section 1.01.
Event of Default. See Article VIII.
Federal Funds Rate. For any period, a fluctuating interest rate per annum
(based on a 360 day year) equal for each day during such period to the
weighted average of the rates of interest charged on overnight federal
funds transactions with member banks of the Federal Reserve System
arranged by Federal funds brokers on such day, as published for any day
which is a Business Day by the Federal Reserve Bank of New York (or, in
the absence of such publication, as reasonably determined by the
Administrative Agent).
Fee Letters. The respective Fee Letters entered into as of May 16, 1997,
between the Borrower and (a) CIBC and the Administrative Agent and (b)
BTCo, individually as a Lender and in its capacity as the Syndication
Agent, as amended from time to time in accordance with the respective
terms thereof.
Financial Statements. See Section 4.01.
Fixed Charges. For any fiscal period, the sum of (a) Total Debt Service
for such period; (b) Maintenance Capital Expenditures made by the
Companies during such period; and (c) taxes paid or payable by the
Companies during such period in respect of income and profits (other than
taxes in respect of gains excluded from Net Income in the calculation of
EBITDA), including without limitation payments owed under the Tax Sharing
Agreement.
Funded Debt. Without duplication, all Indebtedness with respect to any of
the following: (a) money borrowed (whether recourse or non-recourse),
including principal and overdue interest and premiums, (b) Rate Hedging
Obligations, (c) obligations evidenced by a bond, debenture, note or
other like written obligation to pay money, (d) Capital Lease
Obligations, (e) obligations under conditional sales or other title
retention agreements or secured by any Lien, (f) any letters of credit,
bankers acceptances or similar instruments (including reimbursement
obligations with respect thereto), (g) the deferred unpaid purchase price
of property or services, except trade payables and accrued expenses
incurred in the ordinary course of business, or (h) any guaranty of any
or all of the foregoing.
GAAP. Generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
entity as may be approved by a significant segment of the accounting
profession, as in effect on December 31, 1996, applied on a basis
consistent with (a) the application of the same in prior fiscal periods,
(b) that employed by the Accountants in preparing the financial
statements referred to in Section 6.05(a) and (c) the
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accounting principles generally utilized in the direct broadcast service
industry, as the case may be.
General Purpose Letters of Credit. Any and all Letters of Credit issued
pursuant hereto, other than NRTC Letters of Credit and Seller Letters of
Credit.
General Purpose Letter of Credit Exposure. The portion of the aggregate
Letter of Credit Exposure arising from General Purpose Letters of Credit.
Governmental Authority. Any nation or government, any state or other
political subdivision thereof and any entity exercising any executive,
legislative, judicial, regulatory or administrative functions of, or
pertaining to, government.
Gross Subscriber Additions. For any period, the total amount of Paying
Subscribers for DBS services of the Companies added in the ordinary
course of operations of the Companies, excluding (a) any Subscribers
which resubscribe to the Companies' DBS services during such period, (b)
any Subscribers purchased, acquired or swapped during such period and (c)
any Subscribers sold or otherwise disposed of during such period.
Hazardous Materials. (a) any petroleum or petroleum products, flammable
materials, explosives, radioactive materials, asbestos, urea formaldehyde
foam insulation, and transformers or other equipment that contain
polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials
or substances that are now or hereafter become defined as or included in
the definition of "hazardous substances", "hazardous wasters", "hazardous
materials", "extremely hazardous wastes", "restricted Hazardous wastes",
"toxic substances", "toxic pollutants", "contaminants", "pollutants" or
words of similar import under any Environmental Law and (c) any other
chemical or other material or substance, exposure to which is now or
hereafter prohibited, limited or regulated under any Environmental Law.
HCG. Hughes Communications Galaxy, Inc. and any successor thereof.
Hedging Lender. Any Lender, or any Affiliate of any Lender, which from
time to time enters into a Rate Hedging Agreement with any Company.
Indebtedness or indebtedness. As applied to any Person, (a) all items
(except items of capital stock, capital or paid-in surplus or of retained
earnings) which, in accordance with GAAP, would be included in
determining total liabilities as shown on the liability side of a balance
sheet of such Person as at the date as of which Indebtedness is to be
determined, including Capital Lease Obligations but excluding
Indebtedness of the Companies with respect to trade obligations and other
normal accruals in the ordinary course of business not yet due and
payable or not more than ninety (90) days in arrears measured from the
date of billing; (b) all indebtedness secured by any mortgage, pledge,
lien or conditional sale or other title retention agreement to which any
property or asset owned or held by such Person is subject, whether or not
the indebtedness secured thereby shall have been
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assumed; and (c) all indebtedness of others which such Person has
directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), discounted or
sold with recourse or agreed (contingently or otherwise) to purchase or
repurchase or otherwise acquire, or in respect of which such Person has
agreed to supply or advance funds (whether by way of loan, stock or
equity purchase, capital contribution, makewell or otherwise) or
otherwise to become directly or indirectly liable.
Indemnified Liabilities. See Section 14.13.
Indemnified Parties. See Section 14.13.
Interest Expense. For any period, the aggregate amount (determined on a
consolidated basis, after eliminating intercompany items, in accordance
with GAAP) of interest, commitment fees and letter of credit fees accrued
(whether or not paid) during such period (including without limitation
the Commitment Fee, the Issuance Fee and the Letter of Credit Fee and the
interest component of Capital Lease Obligations, but excluding
non-recurring structuring and facility fees payable under the Fee
Letters) interest in respect of overdue trade payables) by the Companies
in respect of all Indebtedness for borrowed money.
Interest Period. With respect to each LIBOR Loan, the period commencing
on the date such Loan is made or converted from a Base Rate Loan, or the
last day of the immediately preceding Interest Period, as to LIBOR Loans
being continued as such, and ending one (1), two (2), three (3) or six
(6) months thereafter, as the Borrower may elect in the applicable Loan
Request or Interest Rate Option Notice, provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (d) below) that would otherwise end on a
day that is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in the next calendar month,
in which case such Interest Period shall end on the immediately preceding
Business Day;
(b) if the Borrower shall fail to give notice as provided in
Section 1.05, the Borrower shall be deemed to have requested a conversion
of the affected LIBOR Loan to a Base Rate Loan on the last day of the
then current Interest Period with respect thereto;
(c) any Interest Period relating to a LIBOR Loan that begins on
the last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (d) below, end on the last
Business Day of a calendar month;
(d) any Interest Period related to a LIBOR Loan that would
otherwise end after the final maturity date of the Loans shall end on
such final maturity date;
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(e) no Interest Period shall include a principal repayment date
for the Loans unless an aggregate principal amount of Loans at least
equal to the principal amount due on such principal repayment date shall
be Base Rate Loans or LIBOR Loans having Interest Periods ending on or
before such date; and
(f) notwithstanding clauses (d) and (e) above, no Interest
Period shall have a duration of less than one (1) month.
Interest Rate Option Notice. A notice given by the Borrower to the
Administrative Agent of the Borrower's election to convert Loans to a
different type or continue Loans as the same type, in accordance with
Section 1.05(a).
Issuance Fee. See Section 1.03(b).
Issuing Bank. CIBC Inc., any affiliate thereof designated by CIBC Inc. or
any other Lender which may serve as the "Issuing Bank" in the event that
CIBC Inc. elects to cease providing letter of credit services hereunder.
Junior Reorganization Securities. With respect to any Seller
Subordination Agreement, debt or equity securities of the Company
obligated under the applicable Permitted Seller Subordinated Debt, or of
any successor corporation provided for by a plan of reorganization, that
are subordinated at least to the same extent that such Permitted Seller
Subordinated Debt is subordinated to the payment of the Obligations then
outstanding (including all limitations on rights of action set forth in
such Seller Subordination Agreement and all other obligations and
restrictions imposed thereunder); provided that (a) if a new corporation
results from such reorganization, such corporation shall have assumed all
Obligations not paid in full in cash in connection with such
reorganization and (b) no such debt or equity securities shall be
permitted if the issuance thereof causes or could cause the applicable
Permitted Seller Subordinated Debt to be treated in any bankruptcy,
reorganization or similar proceeding as part of (i) the same class of
claims as any of the Obligations or (ii) any class of claims pari passu
with, or senior to, any of the Obligations with respect to any payment or
distribution.
Lender Default. (a) The refusal (which has not been retracted) of a
Lender to make available its portion of any Loan or, if applicable, to
fund its portion of any Letter of Credit Disbursement, or (b) a Lender
having notified the Borrower and/or the Administrative Agent in writing
that it does not intend to lend under this Agreement or comply with its
obligation, if any, with respect to any Letter of Credit Disbursement; in
the case of either (a) or (b) as a result of any takeover of such Lender
by any regulatory authority or agency and other than by reason of any
failure of the Borrower to meet any conditions precedent thereto
hereunder.
Lenders. See the Preamble.
Letter of Credit and Letters of Credit. See Section 1.03.
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Letter of Credit Disbursement. See Section 1.03.
Letter of Credit Documents. See Section 1.03.
Letter of Credit Exposure. The sum of (a) the aggregate amount of all
outstanding obligations of the Companies to repay Letter of Credit
Disbursements and (b) the aggregate undrawn amount under outstanding
Letters of Credit. The Letter of Credit Exposure of any Revolver Lender
at any time shall mean its pro rata percentage of the aggregate Letter of
Credit Exposure, based on the aggregate Revolver Commitments.
Letter of Credit Fee. See Section 1.03.
LIBOR Base Rate. With respect to each day during each Interest Period
pertaining to any LIBOR Loan, the rate per annum determined by the
Administrative Agent to be the arithmetic mean of the offered rates for
deposits in Dollars with a term comparable to such Interest Period that
appears on the Telerate British Bankers Assoc. Interest Settlement Rates
Page (as defined below) at approximately 11:00 A.M., London time, on the
second full Business Day preceding the first day of such Interest Period;
provided, however, that if there shall at any time no longer exist a
Telerate British Bankers Assoc. Interest Settlement Rates Page, the term
"LIBOR Base Rate" shall mean, with respect to each day during each
Interest Period pertaining to any LIBOR Loan, the rate per annum equal to
the rate at which the Administrative Agent is offered Dollar deposits at
or about 10:00 A.M., New York City time, two (2) Business Days prior to
the beginning of such Interest Period in the London interbank deposit
market where the eurodollar and foreign currency and exchange operations
in respect of its LIBOR Loans are then being conducted for delivery on
the first day of such Interest Period for the number of days comprised
therein and in an amount comparable to the amount of its LIBOR Loan to be
outstanding during such Interest Period. As used herein, the "Telerate
British Bankers Assoc. Interest Settlement Rates Page" means the display
designated as Page 3750 on the Telerate System Incorporated Service (or
such other page as may replace such page on such service for the purpose
of displaying the rates at which Dollar deposits are offered by leading
banks in the London interbank deposit market).
LIBOR Loans. Loans bearing interest at a rate determined on the basis of
the LIBOR Rate.
LIBOR Rate. With respect to each day during each Interest Period
pertaining to a LIBOR Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward, if necessary, to
the nearest 1/16th of 1%):
LIBOR Base Rate
---------------
1.00 - LIBOR Reserve Requirements
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LIBOR Reserve Requirements. For any day as applied to a LIBOR Loan, the
aggregate (without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including
without limitation basic, supplemental, marginal and emergency reserves)
under any regulations of the Board of Governors of the Federal Reserve
System (or other Governmental Authority having jurisdiction with respect
thereto) prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of the Federal Reserve System.
Liens. See Section 4.09.
Loan Documents. This Agreement, the Notes, the Security Documents and all
other agreements, instruments and certificates contemplated hereby and
thereby, including without limitation any Rate Hedging Agreements entered
into with any of the Lenders or their Affiliates.
Loan Request. See Section 1.05.
Loans. Collectively, the Revolving Loans and the Term Loans.
Maintenance Capital Expenditures. For any period, Capital Expenditures
incurred by the Companies during such period, excluding any portion of
Subscriber Acquisition Costs which would otherwise be capitalized in
accordance with GAAP.
Management Fees. Amounts due and payable by the Companies to the Manager
in consideration for management and administrative support services.
Manager. Pegasus Communications Management Company, a Pennsylvania
corporation.
Margin Stock. See Section 4.13.
Material Adverse Effect. Any circumstance or event which, individually or
in the aggregate with other such circumstances or events, (a) has had, or
could reasonably be expected to have, an adverse effect on the validity
or enforceability of this Agreement or the other Loan Documents in any
material respect, (b) has had, or could reasonably be expected to have,
an adverse effect on the condition (financial or other), business,
results of operations, prospects or properties of the Borrower and the
Subsidiaries, taken as a whole, in any material respect or (c) has
impaired, or could reasonably be expected to impair, the ability of the
Companies to fulfill their obligations under this Agreement or any other
Loan Document to which any Company is a party, in any material respect.
Net Cash Proceeds. With respect to any Disposition, the aggregate amount
of all cash payments received by (a) any Company or (b) any Qualified
Intermediary, as defined in the United States Treasury Regulations
promulgated under Section 1031 of the Code and as used in connection with
a like-kind exchange under such Section 1031, directly or indirectly, in
connection with such
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Disposition, whether at the time thereof or after such Disposition under
deferred payment arrangements or investments entered into or received in
connection with such Disposition, minus the aggregate amount of any
legal, accounting, regulatory, title and recording tax expenses,
commissions and other fees and expenses paid by any Company in connection
with such Disposition, and minus any income taxes payable by any Company
in connection with such Disposition.
Net Income. For any period, net income of the Companies from their
respective operations, after deducting all operating expenses, provisions
for all taxes and reserves (including reserves for deferred income taxes)
and all other proper deductions (including Interest Expense), but
excluding any extraordinary gains or losses derived from any sales of
assets made during such period, to the extent such gains or losses are
properly includable in the determination of Net Income such period, all
determined on a consolidated basis, after eliminating intercompany items,
in accordance with GAAP.
Net Subscriber Additions. For any period, Gross Subscriber Additions for
such period minus Churn during such period.
Notes. See Section 1.02.
NRTC. The National Rural Telecommunications Cooperative, a District of
Columbia corporation, and any successor thereto under the NRTC Member
Agreements.
NRTC Letter of Credit Exposure. That portion of the aggregate Letter of
Credit Exposure arising from NRTC Letters of Credit.
NRTC Letters of Credit. Any and all Letters of Credit issued in favor of
the NRTC, as beneficiary.
NRTC Member Agreements. (a) The NRTC/Member Agreements for Marketing and
Distribution of DBS Services between any Company and the NRTC listed as
such on Schedule 4.07, as amended through the date hereof (including
without limitation the amendment described on Schedule 4.07 providing for
certain letter of credit requirements in connection with the delivery of
DBS by the Subsidiaries to certain households in the DBS Subscriber
Areas), and (b) the NRTC/Member DBS Product Retail Agreements listed on
Schedule 4.07, in each case as originally executed and delivered and as
amended in accordance with Section 7.11, pursuant to which the
Subsidiaries hold the exclusive rights to provide cable programming
services and all other video, audio and data packages transmitted by
DirecTv over the DirecTv frequencies (as defined therein) to residential
and commercial subscribers in specified service areas, and any other
NRTC/Member Agreements for Marketing and Distribution of DBS Services,
NRTC/Member DBS Product Retail Agreements or other agreements between any
Company and the NRTC for the provision of DBS services in any other
specified service areas not covered by the existing NRTC Member
Agreements referred to above.
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Obligations. The Loans and the other obligations of the Companies under
this Agreement and the other Loan Documents, including without limitation
any and all future loans, advances, debts, liabilities, obligations,
covenants and duties owing by the Companies to the Administrative Agent
and the Lenders, or any of them, of any kind or nature, whether or not
evidenced by any note, mortgage or other instrument, whether arising by
reason of an extension of credit, loan, guarantee, indemnification or in
any other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing
or hereafter arising and however acquired. The term "Obligations" also
includes, without limitation, all interest, charges, expenses, fees
(including attorneys', accountants', appraisers', consultants' and other
fees) and any other sums chargeable to the Companies under this Agreement
or any other Loan Documents.
Opening Balance Sheet. See Section 4.01.
Parent. See the Preamble.
Participant. See Section 1.14.
Paying Subscriber. Any Subscriber to DBS services provided by a
Subsidiary (a) from whom such Subsidiary has received at least one
payment for programming service, (b) whose account balance is not more
than sixty (60) days past due, measured from the invoice due date
thereof, without giving effect to any extensions thereof, and (c) who
shall not have disconnected service.
PCC Preferred Stock. PCC's Series A Cumulative Exchangeable Preferred
Stock issued on January 27, 1997, on the terms and conditions set forth
in the PCC Preferred Stock Designation.
PCC Preferred Stock Designation. The Certificate of Designation,
Preferences and Relative, Participating, Optional and Other Special
Rights of Preferred Stock and Qualifications, Limitations and
Restrictions thereof of 12.75% Series A Cumulative Exchangeable Preferred
Stock of Pegasus Communications Corporation filed with the office of the
Secretary of State of the State of Delaware on January 24, 1997.
PCC Preferred Stock Dividends. See Section 5.08.
PCC Subordinated Notes. PCC's 12.75% Senior Subordinated Exchange Notes
due 2007 issuable in exchange for PCC Preferred Stock pursuant to the PCC
Preferred Stock Designation.
Penetration Percentage. See Section 5.03.
Permitted Acquisitions. An Acquisition by the Borrower or any Subsidiary,
subject to the fulfillment of the following conditions:
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(a) If any such Acquisition involves consideration in excess of
$25,000,000 in the aggregate such acquisition shall require the prior
written approval of the Required Lenders, in their sole and absolute
discretion.
(b) If such Acquisition involves the purchase of stock or other
ownership interests, the same shall be effected in such a manner as to
assure that the acquired entity becomes a direct or indirect Subsidiary
of the Borrower and that the parent of such Subsidiary shall own at least
eighty percent (80%) of all such ownership interests, including at least
eighty percent (80%) of all voting ownership interests, or such greater
percentage thereof as shall be necessary, under applicable law or
contract, to control (legally and beneficially) such Subsidiary;
(c) No later than (1) thirty (30) days (or such shorter period
as may be reasonably practicable, if approved by the Administrative
Agent) prior to the consummation of any such Acquisition or, if earlier,
ten (10) business days after the execution and delivery of the related
Acquisition Agreement, the Borrower shall have delivered to the
Administrative Agent (in sufficient copies for all the Lenders) copies of
executed counterparts of such Acquisition Agreement, together with all
Schedules thereto, the forms of any additional agreements or instruments
to be executed at the closing thereunder (to the extent available), and
all applicable financial information, including new Projections through
December 31, 2004, updated to reflect such Acquisition and any related
transactions, (2) promptly following a request therefor, copies of such
other information or documents relating to such acquisition as any Lender
shall have reasonably requested, and (3) promptly following the
consummation of such Acquisition, certified copies of the agreements,
instruments and documents referred to above to the extent the same has
been executed and delivered at the closing under such Acquisition
Agreement;
(d) The aggregate amount of all consideration payable by the
Borrower or any Subsidiary or Subsidiaries in connection with such
Acquisition (other than noncompetition and consulting agreements,
earn-outs and customary post-closing adjustments, escrows, holdbacks and
indemnities and Indebtedness permitted under Section 7.01) shall be
payable on the date of such acquisition;
(e) Neither the Borrower nor any Subsidiary shall, in connection
with any such Acquisition, assume or remain liable with respect to any
indebtedness (including any material tax or ERISA liability) of the
related Seller, except (i) to the extent permitted under Section 7.01 and
(ii) obligations of such Seller incurred in the ordinary course of
business and necessary or desirable to the continued operation of the
underlying properties, and any other such liabilities or obligations not
permitted to be assumed or otherwise supported by any of the Companies
hereunder shall be paid in full or released as to the assets being so
acquired on or before the consummation of such Acquisition;
(f) All other assets and properties acquired in connection with
any such Acquisition shall be free and clear of any liens, charges and
other encumbrances other than permitted under Section 7.02;
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(g) The Borrower shall have complied as applicable with all of
the provisions in Section 2.01, including the execution and delivery of
such additional agreements, instruments, certificates, documents,
consents, environmental site assessments, opinions and other papers as
the Administrative Agent may reasonably require;
(h) Immediately prior to any such Acquisition and after giving
effect thereto, the Available Revolver Commitment shall not be less than
$10,000,000 and no Default shall have occurred and be continuing;
(i) Without limiting the generality of the foregoing, after
giving effect to such Acquisition the Borrower shall be in compliance
with the provisions of Article V, (i) calculated on a pro forma basis as
of the end of and for the fiscal quarter most recently ended prior to the
date of such Acquisition for which financial statements are required to
be provided (and have been so delivered) under Section 6.05 and (ii)
under the Borrower's updated Projections referred to above. The Borrower
shall provide to the Administrative Agent a certificate signed on behalf
of the Borrower by its Chief Financial Officer demonstrating such
compliance in reasonable detail; and
(j) The average cash acquisition price per Paying Subscriber,
measured as of the closing date of each Acquisition occurring on or after
the Closing Date, on the date of such acquisition based on the aggregate
number of Paying Subscribers then served pursuant to all DBS Rights
purchased by or transferred to the Companies (including the Core
Properties), shall not exceed $2,100. For purposes hereof , (i) the
average cash acquisition price per Paying Subscriber for the Core
Properties shall be deemed to be $1,600 and (ii) any Permitted Seller
Paper shall be deemed to be cash.
Permitted Investments. (a) Investments in property to be used by the
Subsidiaries in the ordinary course of business; (b) current assets
arising from the sale of goods and services in the ordinary course of
business; (c) investments (of one year or less) in direct or guaranteed
obligations of the United States, or any agency thereof; (d) investments
(of 90 days or less) in certificates of deposit of the Lenders or any
other domestic commercial bank of recognized standing having capital,
surplus and undivided profits in excess of $100,000,000, membership in
the Federal Deposit Insurance Corporation ("FDIC") and senior debt rated
carrying one of the two highest ratings of Standard & Poor's Ratings
Service, A Division of McGraw Hill, Inc., or Moody's Investors Service,
Inc. (an "Approved Institution"); (e) investments (of 90 days or less) in
commercial paper given one of the two highest ratings by Standard and
Poor's Ratings Service, A Division of McGraw Hill, Inc., or by Moody's
Investors Service, Inc.; (f) investments redeemable at any time without
penalty in money market instruments placed through the Lenders or
Approved Institutions; (g) existing investments by the Companies in
Subsidiaries; (h) repurchase agreements fully collateralized by United
States government securities; (i) deposits fully insured by the FDIC; (j)
short-term loans to employees and advances to employees in the ordinary
course of business for the payment of bona fide, properly documented,
business expenses to be incurred on behalf of the Companies, provided
that
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the aggregate outstanding amount of all such loans and advances shall not
exceed $50,000 in the aggregate at any time; and (k) investments made in
connection with acquisitions permitted hereunder.
Permitted Preferred Stock. (a) The PST Transfer Preferred Stock and (b)
preferred stock of any of the Companies issued to Sellers in connection
with Permitted Acquisitions which (i) has terms and conditions
satisfactory to the Administrative Agent and (ii) without limiting the
generality of the foregoing, (A) will have no redemption or other exit
rights which arise earlier than one year after the scheduled maturity of
the Notes, (B) will not be redeemable, in any event (other than with
shares of the common stock of the Companies or securities of the Parent
issued without any resulting Event of Default), until all of the
Obligations have been paid in full in cash, (C) will not carry any
dividend rights (other than dividends paid in shares of Permitted
Preferred Stock or common stock of the Companies or the Parent issued
without any resulting Event of Default), and (D) will otherwise conform
with the meaning of "Qualified Subsidiary Stock", as such term is defined
in the PCC Preferred Stock Designation.
Permitted Seller Paper. Indebtedness of the Companies to Sellers which is
incurred in connection with Permitted Acquisitions which (a) has terms
and conditions satisfactory to the Administrative Agent, (b) is secured
by a Seller Letter of Credit and (c) is otherwise not further secured.
Permitted Seller Subordinated Debt. Indebtedness of the Companies to
Sellers which is incurred in connection with Permitted Acquisitions and
(a) is subordinated to any Indebtedness of the Companies to the Agents or
the Lenders pursuant to one or more Seller Subordination Agreements and
(b) is unsecured.
Person or person. Any individual, corporation, partnership, joint
venture, trust, business unit, unincorporated organization, or other
organization, whether or not a legal entity, or any government or any
agency or political subdivision thereof.
Pioneer Outstandings. As of any date, all principal, overdue interest and
other amounts then outstanding in respect of the Pioneer Seller Debt, but
excluding accrued interest which is not yet overdue.
Pioneer Seller Debt. Indebtedness of the Borrower or any Subsidiary to
Pioneer Services Corporation or Pioneer Electric Cooperative ("Pioneer")
in the principal amount of no more than (a) $2,300,000, issued in the
form of a promissory note, and (b) $800,000, payable under a
non-competition agreement, in each case in connection with the proposed
Acquisition from Pioneer of certain DBS territories in the State of
Alabama, provided, however, that
(a) such Acquisition qualifies as a Permitted Acquisition
hereunder;
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(b) such promissory note bears interest at a per annum rate not
exceeding eight percent (8%) and amortizes substantially in accordance
with the following schedule: $250,000 on the first anniversary of
issuance, $250,000 on the second anniversary of issuance, $800,000 on the
third anniversary of issuance and $1,000,000 on the fourth anniversary of
issuance;
(c) such non-competition agreement provides for payments
substantially in accordance with the following schedule: $400,000 on the
first anniversary of the escrow thereof and $400,000 on the second
anniversary thereof;
(d) the terms of such indebtedness are not modified or amended
in any material respect without the prior written consent of the Required
Lenders; and
(e) such indebtedness is unsecured.
PM&C. See Section 3.01.
Prepayment Notice. See Section 1.07.
Pricing Period. See Section 1.04.
Pricing Ratio. See Section 1.04.
Prior Acquisitions. The Acquisitions funded with advances made by the
Parent described on Schedule 11 attached hereto.
Projections. See Section 4.17.
Properties. See Section 4.20.
PST. Pegasus Satellite Television, Inc., a Delaware corporation.
PST Transfer. See Section 3.01.
PST Transfer Preferred Stock. 2,780 shares of the Series A Preferred
Stock, $1.00 par value, of the Borrower issued to PST Holdings, Inc., a
subsidiary of PM&C, pursuant to the PST Transfer.
Quarterly Dates. The last Business day of each March, June, September and
December of each fiscal year.
Rate Hedging Agreements. Any written agreements evidencing Rate Hedging
Obligations, including without limitation the LIBOR provisions of this
Agreement.
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Rate Hedging Obligations. Any and all obligations of the Borrower,
whether direct or indirect and whether absolute or contingent, at any
time created, arising, evidenced or acquired (including all renewals,
extensions, modifications and amendments thereof and all substitutions
therefor), in respect of: (a) any and all agreements, arrangements,
devices and instruments designed or intended to protect at least one of
the parties thereto from the fluctuations of interest rates, exchange
rates or forward rates applicable to such party's assets, liabilities or
exchange transactions, including without limitation dollar-denominated or
cross currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants and
so-called "rate swap" agreements; and (b) any and all cancellations,
buy-backs, reversals, terminations or assignments of any of the
foregoing.
Recovering Party. See Section 1.15.
Recovery. See Section 1.15.
Refinanced Acquisition Costs. See Section 2.02.
Regulation D. Regulation D of the Board of Governors of the Federal
Reserve System, as the same may be amended or supplemented from time to
time.
Regulatory Change. With respect to any Lender, any change after the date
of this Agreement in any law, rule or regulation (including without
limitation Regulation D) of the United States, any state or any other
nation or political subdivision thereof, including without limitation the
issuance of any final regulations or guidelines, or the adoption or
making after the date of this Agreement of any interpretation, directive
or request, applying to a class of banks in which such Lender is included
under any such law, rule or regulation (whether or not having the force
of law and whether or not failure to comply therewith would be unlawful)
by any court or governmental or monetary authority charged with the
interpretation thereof.
Remedial Work. All activities, including, without limitation, cleanup
design and implementation, removal activities, investigation, field and
laboratory testing and analysis, monitoring and other remedial and
response actions, taken or to be taken, arising out of or in connection
with Hazardous Materials, including without limitation all activities
included within the meaning of the terms "removal," "remedial action" or
"response," as defined in 42 U.S.C. Section 9601(23), (24) and (25).
Required Lenders. At any time, Lenders, excluding Defaulting Lenders,
holding at least two-thirds of the sum of (a) the aggregate outstanding
principal amount of the Loans, (b) the aggregate Letter of Credit
Exposure and (c) the aggregate amount of the unutilized Commitments.
Required Payment. See Section 1.16.
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Restricted Payment. Any distribution or payment of cash or property, or
both, directly or indirectly (a) in respect of any Permitted Seller
Subordinated Debt, or (b) to any partner or stockholder of any of the
Companies or of any of their respective Affiliates for any reason
whatsoever, including without limitation, salaries, loans, debt
repayment, consulting fees, Management Fees, expense reimbursements and
dividends, distributions, put, call or redemption payments and any other
payments in respect of capital stock or partnership interests; provided,
however, that Restricted Payments shall not include:
(i) reasonable Transaction Costs;
(ii) payments under the Tax Sharing Agreement;
(iii) transactions that comply with Section 7.10; and
(iv) cash dividends or other payments made to the Parent in
respect of Refinanced Acquisition Costs.
Revolver Commitments. See Section 1.01.
Revolver Commitment Reduction Notice. See Section 1.07.
Revolver Lenders. (a) On the date hereof, the Lenders having Revolver
Commitments listed on Schedule 1.01(a) hereto and (b) thereafter, the
Lenders from time to time holding Revolving Loans and Revolver
Commitments, after giving affect to any assignments thereof effected in
accordance with Article XIII.
Revolving Loans. See Section 1.01.
Revolver Notes. See Section 1.01.
Revolvers. See Section 1.01.
Revolving Credit Period. The period from the date of this Agreement to
the Expiration Date.
Scheduled Principal Payments. For any fiscal period, (a) the aggregate
principal amount of Revolving Loans outstanding on the first day of such
period minus (b) the aggregate Revolver Commitments at the close of
business on the first Business Day following the end of such period, as
reduced as provided under Section 1.01(f), but in no event less than -0-.
SEC. See Section 6.05.
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Security Agreements. The Security and Pledge Agreement signed by the
Borrower and the Guaranty and Security Agreement signed by each of the
Subsidiaries as of the Closing Date or, with respect to Subsidiaries
formed after the date hereof, in connection with their formation as
required under Section 2.01.
Security Document(s). See Section 2.01.
Seller. With respect to any acquisition permitted hereunder, the owner of
the stock (or other ownership interests) to be acquired, or the entity
the assets and properties of which are to be acquired by the related
respective Company pursuant to such acquisition.
Seller Letters of Credit. Any and all Letters of Credit issued in favor
of a Seller, as beneficiary, in connection with a Permitted Acquisition.
Seller Letter of Credit Exposure. The portion of the aggregate Letter of
Credit Exposure arising from Seller Letters of Credit.
Seller Subordination Agreements. See Section 2.01.
Subscriber. A subscriber to the DBS Services offered by the Companies.
Subscriber Acquisition Costs. For any period, those costs deducted in the
determination of Net Income which were incurred in the generation of
Gross Subscriber Additions, such as sales commissions, advertising
expenses and promotional expenses, including the amount, if any, by which
the cost of equipment sold to Subscribers (including rebates, subsidies
and the like) exceeds the revenue generated from such sale(s). To the
extent that any of the foregoing costs are capitalized for GAAP purposes,
they will be treated in the determination of Adjusted Net Income as if
they were expensed during the period incurred.
Subscriber Report. See Section 3.01.
Subsidiary. (a) Any corporation, association, joint stock company,
business trust or other similar organization of which more than 50% of
the ordinary voting power for the election of a majority of the members
of the board of directors or other governing body of such entity is held
or controlled by the Borrower or a Subsidiary of the Borrower; (b) any
other such organization the management of which is directly or indirectly
controlled by the Borrower or a Subsidiary of the Borrower through the
exercise of voting power or otherwise; or (c) any joint venture,
association, partnership or other entity in which the Borrower or a
Subsidiary of the Borrower has a 50% equity interest. All of the
Borrower's Subsidiaries as of the date hereof are listed on Schedule 4.02
and such term shall include each new Subsidiary formed after the date
hereof in compliance with the terms of the foregoing definition and this
Agreement.
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Syndication Agent. See the Preamble.
Tax Sharing Agreement. The Amended and Restated Tax Sharing Agreement
dated as of July 1, 1997 among the Parent and its Subsidiaries.
Taxes. See Section 1.11.
Term Commitment or Term Commitments. See Section 1.02.
Term Lenders. (a) On the date hereof, the Lenders having Term Commitments
listed on Schedule 1.01(a) hereto and (b) thereafter, the Lenders from
time to time holding Term Loans and Term Commitments, after giving affect
to any assignments thereof effected in accordance with by Article XIII.
Term Loan or Term Loans. See Section 1.02.
Term Notes. See Section 1.02.
Third Parties. See Section 14.02.
Total Debt Service. For any period, the aggregate amount (determined on a
consolidated basis, after eliminating intercompany items, in accordance
with GAAP) of principal and premium, if any, and cash interest,
commitment fees and agency fees and other amounts required to be paid
during such period in respect of Total Funded Debt. For purposes of this
definition, the aggregate amount of all principal required to be paid in
respect of the Revolving Loans shall be limited to Scheduled Principal
Payments.
Total Funded Debt. At any time, all outstanding Funded Debt of the
Borrower and its Subsidiaries, determined on a consolidated basis, after
eliminating intercompany items, in accordance with GAAP.
Total Interest Expense. For any period, Interest Expense for such period
which is payable, or currently paid, in cash.
Transaction Costs. For any period, nonrecurring out-of-pocket expenses
(including attorneys' fees, investment banking fees and facility fees,
but excluding recurring costs such as commitment and agency fees) accrued
by the Borrower and the Subsidiaries to Persons who are not Affiliates of
any Company during such period in connection with the closing of the
transactions under this Agreement, any Permitted Acquisition and any
other transactions occurring after the Closing Date which are consented
to by the Required Lenders.
Transaction Documents. See Section 4.03.
Working Capital. On any date, Current Assets minus Current Liabilities on
such date.
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XII. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEPARATE ACTIONS BY THE
LENDERS.
(a) This Agreement (including the Schedules hereto) and the other Loan
Documents constitute the entire agreement of the parties herein and supersede
any and all prior agreements, written or oral, as to the matters contained
herein, and no modification or waiver of any provision hereof or of the Notes or
any other Loan Document, nor consent to the departure by any Company therefrom,
shall be effective unless the same is in writing, and then such waiver or
consent shall be effective only in the specific instance, and for the purpose,
for which given. Except as hereafter provided, the consent of the Required
Lenders shall be required and sufficient (i) to amend, with the consent of the
Borrower, any term of this Agreement, the Notes or any other Loan Document or to
waive the observance of any such term (either generally or in a particular
instance or either retroactively or prospectively); (ii) to take or refrain from
taking any action under this Agreement, the Notes, any other Loan Document or
applicable law, including, without limitation, (A) the acceleration of the
payment of the Notes, (B) the termination of the Commitments, (C) the exercise
of the Administrative Agent's and the Lenders' remedies hereunder and under the
Security Documents and (D) the giving of any approvals, consents, directions or
instructions required under this Agreement or the Security Documents; provided
that no such amendment, waiver or consent shall, without the prior written
consent of each Lender (or subsequent holder of a Note) directly affected
thereby: (1) extend the final maturity or reduce the principal amount of, or
reduce the amount or extend the time of payment of any principal of, or interest
on, any Loan or Letter of Credit Disbursement (other than mandatory prepayments
of the Notes out of Excess Cash Flow required under Section 1.07(f) ), (2)
increase or extend any Commitment or extend the Expiration Date (it being
understood that waivers or modifications of conditions precedent, covenants,
Defaults or Events of Default shall not constitute any such increase or
extension), (3) release any guaranties or any Collateral, unless such release of
guarantee or Collateral is in connection with a sale of Collateral permitted
hereby or to which any required consent of the Required Lenders has been given
and substantially all of the Net Cash Proceeds of such sale are applied to the
Borrower's indebtedness to the Lenders hereunder or otherwise used in a manner
permitted hereunder, (4) change the pro rata provisions of Section 1.15 or the
percentage referred to in the definition of "Required Lenders" contained in
Article XI, (5) amend the provisions of this Article XII, or (6) amend, modify
or otherwise affect the rights and duties of either Agent or the Issuing Bank
hereunder or under any Loan Document without the prior written consent of such
Agent or the Issuing Bank, as applicable; and provided, further, that neither
notice to, nor the consent of, the Borrower shall be required for any
modification, amendment or waiver of the provisions of this Article XII
governing the number of Lenders required to consent to any act or omission under
the Loan Documents or, subject to Article XIII, of the definition of "Required
Lenders".
(b) Any amendment or waiver effected in accordance with this Article XII
shall be binding upon each holder of any Note at the time outstanding, each
future holder of any Note and the Borrower. The Lenders' failure to insist
(directly or through the Administrative Agent) upon the strict performance of
any term, condition or other provision of this Agreement, any Note, or any of
the Security Documents, or to exercise any right or remedy hereunder or
thereunder, shall not constitute a waiver by the Lenders of any such term,
condition or other provision or default
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or Event of Default in connection therewith, nor shall a single or partial
exercise of any such right or remedy preclude any other or future exercise, or
the exercise of any other right or remedy; and any waiver of any such term
condition or other provision or of any such default or Event of Default shall
not affect or alter this Agreement, any Note or any of the Security Documents,
and each and every term, condition and other provision of this Agreement, the
Notes and the Security Documents shall, in such event, continue in full force
and effect and shall be operative with respect to any other then existing or
subsequent default or Event of Default in connection therewith. An Event of
Default hereunder and a default under any Note or under any of the Security
Documents shall be deemed to be continuing unless and until cured or waived in
writing by the Required Lenders or all of the Lenders, as provided in paragraph
(a) above.
XIII. BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders and the Administrative Agent and their respective
successors and assigns, and all subsequent holders of any of the Notes or any
portion thereof.
(b) Each Lender may assign its rights and interests under this Agreement,
the Notes and the Security Documents and/or delegate its obligations hereunder
and thereunder, in whole or in part, and sell participations in the Notes and
the Security Documents as security therefor, provided as follows:
(i) No Lender shall make any assignment, other than an
assignment in whole or an assignment to a separately organized branch or
an Affiliate of the same Lender, if, after giving effect thereto, such
Lender would hold less than $5,000,000 of the then aggregate outstanding
principal amount of the Notes.
(ii) Any such assignment made other than to a separately
organized branch, or an Affiliate of, a Lender shall reflect an
assignment of such assigning Lender's Notes and Commitments which is in
an aggregate principal amount of at least $5,000,000, and if greater,
shall be an integral multiple of $1,000,000.
(iii) Notwithstanding any provision of this Agreement to the
contrary, each Lender may at any time assign all or any portion of its
rights under this Agreement and each of the other Loan Documents,
including, without limitation, the Notes held by such Lender, to a
Federal Reserve Bank (or equivalent thereof in the case of Lenders
chartered outside of the United States); provided that no such assignment
shall release a Lender from any of its obligations and liabilities under
the Loan Documents. Any Federal Reserve Bank (or equivalent thereof)
which receives such an assignment from any Lender may make further
assignments of such rights in accordance with the provisions of this
Section.
(iv) Any assignments and/or delegations made hereunder shall be
pursuant to an instrument of assignment and acceptance (the "Assignment
and Acceptance") substantially in the form of Schedule 13(b) (iv) and the
parties to each such assignment shall execute and deliver to the
Administrative Agent for its acceptance the Assignment and Acceptance
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together with any Note or Notes subject thereto. Upon such execution and
delivery, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least five (5) Business
Days after the execution thereof, (A) the assignee thereunder shall
become a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder with
applicable Commitments as set forth therein and (B) the assigning Lender
thereunder shall, to the extent provided in such assignment, be released
from its obligations under this Agreement as to that portion of its
obligation being so assigned and delegated. The Assignment and Acceptance
shall be deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of the assignee as a Lender and
the resulting adjustment of Commitments arising from the purchase by and
delegation to such assignee of all or a portion of the rights and
obligations of such assigning Lender under this Agreement.
(v) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and the assignee together with the Note or Notes
subject to such assignment and payment by the assignee to the
Administrative Agent of a registration and processing fee of $3,000, the
Administrative Agent shall accept such Assignment and Acceptance.
Promptly upon delivering such Assignment and Acceptance to the
Administrative Agent, the assigning Lender shall give notice thereof to
the Borrower pursuant to a Notice of Assignment and Acceptance
substantially in the form of Schedule 13(b) (v) and addressed to the
Borrower and the Administrative Agent. Within five (5) Business Days
after receipt of such notice, the Borrower shall execute and deliver to
the Administrative Agent in exchange for each such surrendered Note a new
Note payable to the order of such assignee in an amount equal to the
portion of the applicable Commitment(s) assumed by such assignee pursuant
to such Assignment and Acceptance and a new Note payable to the order of
the assigning Lender in an amount equal to the portion of the applicable
Commitment(s) retained by it hereunder. Such new Notes shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be
in substantially the form provided in Section 1.01. Canceled Notes shall
be returned to the Borrower upon the execution and delivery of such new
Notes.
(vi) Each Lender may sell participations in all or a portion of
its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitments and the Notes held by
it); provided, however, that, (A) each such participation shall be in a
minimum amount of $5,000,000 (B) the selling Lender shall remain
obligated under this Agreement to the extent as it would if it had not
sold such participation, (C) the selling Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (D) at no time shall the selling Lender agree with such
participant to take or refrain from taking any action hereunder or under
any other Loan Document, except that the selling Lender may agree not to
consent, without such participant's consent, to any of the actions
referred to in Article XII, to the extent that the same require the
consent of each Lender hereunder, (E) all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation and no participant shall be entitled to receive any greater
amount pursuant to this Agreement than the selling Lender would have been
entitled to receive in respect of the amount of the participation
transferred by such Lender to such participant had no such
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transfer occurred, and (F) the Borrower, the Administrative
Agent and the other Lenders shall continue to deal solely and directly
with the selling Lender in connection with such Lender's rights and
obligations under this Agreement.
(vii) Except for an assignment made to a separately organized
branch or an Affiliate of a Lender and except during the existence of a
Default, no assignment or participation referred to above shall be
permitted without the prior written consent of the Administrative Agent
and the Borrower, which consent shall not be unreasonably withheld or
delayed.
(viii) The Borrower may not assign any of its rights or delegate
any of its duties or obligations hereunder.
(ix) Any Lender may, in connection with any assignment or
participation pursuant to this Section, disclose to the assignee or
participant any information relating to the Companies furnished to such
Lender by or on behalf of the Borrower and such assignee or participant
shall treat such information as confidential.
XIV. MISCELLANEOUS
Section 14.01. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lenders of the Loans and shall
continue in full force and effect so long as any Obligation is outstanding and
unpaid or any Lender has any obligation to advance funds to the Borrower
hereunder.
Section 14.02. Fees and Expenses; Indemnity; Etc. The Borrower agrees (a)
to pay or reimburse the Administrative Agent for all its reasonable
out-of-pocket costs and expenses incurred in connection with the development,
preparation, negotiation, interpretation and execution of, and any amendment,
supplement or modification to, this Agreement, the Notes and any other Loan
Documents and the consummation and administration of the transactions
contemplated hereby, including without limitation the reasonable fees and
disbursements of (i) counsel to the Administrative Agent, and (ii) such agents
of the Administrative Agent not regularly in its employ, and accountants, other
auditing services, consultants and appraisers engaged by or on behalf of the
Administrative Agent or by the Borrower at the request of the Administrative
Agent (collectively, "Third Parties"); (b) to pay or reimburse the
Administrative Agent for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes and any other Loan Documents, including, without
limitation, the reasonable fees and disbursements of (i) counsel to the
Administrative Agent and (ii) Third Parties; (c) following the occurrence of an
Event of Default hereunder, to pay or reimburse the Lenders for the reasonable
fees and disbursements of counsel for the respective Lenders engaged for the
preservation or enforcement of such Lender's rights under this Agreement or any
other Loan Documents relating to such Event of Default; (d) to pay, indemnify,
and hold each Lender and each Agent harmless from, any and all recording and
filing fees and taxes, lien discharge fees and taxes, intangible taxes and any
and all liabilities with
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<PAGE>
respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, which may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the Notes
and any other Loan Documents; and (e) to pay, indemnify, and hold each Lender
and each Agent (and their respective directors, officers, employees, agents and
other affiliates) harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of, or any
transaction contemplated by, any Loan Document or the use or proposed use of the
proceeds of the Loans or the refinancing or restructuring of the credit
arrangement provided under this Agreement in the nature of a "work-out" or any
proceedings with respect to the bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation of any Company or any other
party other than the Lender or either Agent to any Loan Document (all the
foregoing in this clause (e), collectively, the "indemnified liabilities"),
provided, that the Borrower shall have no obligation hereunder to either Agent
or any Lender with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of such Agent or any such Lender. The
agreements in this Section shall survive repayment of the Notes and all other
amounts payable hereunder.
Section 14.03. Notice.
(a) All notices, requests, demands and other communications provided for
hereunder (including without limitation Loan Requests) shall be in writing
(including telecopied communication) and mailed or telecopied or delivered to
the applicable party at the addresses indicated below.
If to the Administrative Agent:
Canadian Imperial Bank of Commerce, New York Agency
425 Lexington Avenue
New York, New York 10017
Attention: Syndications
Telecopy No.: (212) 856-3799
If to the Syndication Agent:
Bankers Trust Company
c/o BT Securities Corporation
One Bankers Trust Plaza
New York, New York 10006
Attention: Syndications
Telecopy No.: (212) 250-7200
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<PAGE>
and if to any Lender, at the address set forth on the appropriate signature page
hereto or, with respect to any assignee of the Notes under Article IX, at the
address designated by such assignee in a written notice to the other parties
hereto.;
in each case (except for routine communications), with a copy to:
Elizabeth H. Munnell, Esquire
Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Telecopy No.: (617) 439-4170
If to the Borrower:
Mr. Marshall W. Pagon
Pegasus Communications
5 Radnor Corporate Center, Suite 454
100 Matsonford Road
Radnor, Pennsylvania 19087
Telecopy No.: (610) 341-1835
with a required copy to Ted S. Lodge, Esq. at the immediately foregoing
address
and
with a copy (except for routine communications) to:
Michael B. Jordan, Esq.
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Telecopy No.: (215) 988-2757
or, as to each party, at such other address as shall be designated by
such parties in a written notice to the other party complying as to delivery
with the terms of this Section. All such notices, requests, demands and other
communication shall be deemed given upon receipt by the party to whom such
notice is directed.
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<PAGE>
(b) The address of the Administrative Agent for payment hereunder is as
follows:
Morgan Guaranty Trust Company
60 Wall Street
New York, New York 10260
ABA: 021000238
Attention: For the Account of Canadian Imperial Bank of Commerce,
New York Agency
Account No.: 630-00-480
For further credit to Agented Loans,
Account No.: 07-09611
Re: Pegasus Satellite Holdings, Inc.
Telecopy No.: (212) 856-3799
Section 14.04. Governing Law. This Agreement and the Notes shall be
construed in accordance with and governed by the internal laws of the State of
New York.
Section 14.05. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THE BORROWER, TO THE EXTENT THAT IT MAY LAWFULLY DO SO, HEREBY
CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS
WELL AS TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM
SUCH COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF ANY OF ITS OBLIGATIONS ARISING HEREUNDER OR UNDER THE NOTES OR THE SECURITY
DOCUMENTS OR WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY
WAIVES ANY AND ALL OBJECTIONS IT MAY HAVE AS TO VENUE, INCLUDING, WITHOUT
LIMITATION, THE INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION,
TO THE EXTENT THAT IT MAY LAWFULLY DO SO, THE BORROWER CONSENTS TO THE SERVICE
OF PROCESS BY PERSONAL SERVICE OR U.S. CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO THE BORROWER AT THE ADDRESS PROVIDED HEREIN. TO
THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
(b) WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENTS AND THE
LENDERS HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES
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<PAGE>
TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE
NOTES, THE SECURITY DOCUMENTS OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION
HEREWITH.
Section 14.06. Severability. Any provision of this Agreement, the Notes
or any of the Security Documents which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 14.07. Section Headings, Etc. Any Article and Section headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 14.08. Several Nature of Lenders' Obligations. Notwithstanding
anything in this Agreement, the Notes or any of the Security Documents to the
contrary, all obligations of the Lenders hereunder shall be several and not
joint in nature, and in the event any Lender fails to perform any of its
obligations hereunder, the Borrower shall have no recourse against any other
Lender(s) who has (have) performed its (their) obligations hereunder. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement, subject to the provisions of Article XII,
and it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
Section 14.09. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute one and the same Agreement.
Section l4.10. Knowledge and Discovery. All references in this Agreement
to "knowledge" of, or "discovery" by, the Borrower shall be deemed to include,
without limitation, any such knowledge of, or discovery by, the Borrower or any
executive officer of the Borrower.
Section 14.11. Amendment of Other Agreements. All references in this
Agreement to other documents and agreements to which the Lenders are not parties
(including without limitation the Acquisition Agreements, the PCC Preferred
Stock Designation, the Management Agreement, the NRTC Member Agreements and any
other DBS Agreements) shall be deemed to refer to such documents and agreements
as presently constituted and, except for any amendments and modifications not
prohibited under Section 7.11, not as hereafter amended or modified unless the
Lenders shall have expressly consented in writing to such amendment(s) or
modification(s).
Section 14.12. Disclaimer of Reliance. The Borrower has not relied on any
oral representations concerning any of the terms or conditions of the Loans, the
Notes, this Agreement or any of the Security Documents in entering into the
same. The Borrower acknowledges and agrees that none of the officers of the
Administrative Agent or any Lender has made any representations that are
inconsistent with the terms and provisions of this Agreement,
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<PAGE>
the Notes and the Security Documents, and neither the Borrower nor any of its
Affiliates has relied on any oral promises or representations in connection
therewith.
Section 14.13. Environmental Indemnification. Without limiting the
generality of Section 14.02, in consideration of the execution and delivery of
this Agreement by the Lenders and the making of the Loans, the Borrower hereby
indemnifies, exonerates and holds the Lenders and each of their respective
officers, directors, employees and agents (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is a
party to the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them as a result
of, or arising out of, or relating to:
(a) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the release by any Company of any Hazardous
Material; or
(b) the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, discharging or releases from, any real property owned or
operated by any Company of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expense or claims asserted or arising
under any Environmental Law), regardless of whether caused by, or within the
control of, any Company; except for any such Indemnified Liabilities arising for
the account of a particular Indemnified Party by reason of the relevant
Indemnified Party's negligence or misconduct, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Borrower agrees
to make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.
Notwithstanding anything to the contrary herein contained, the obligations and
liabilities under this Section shall survive and continue in full force and
effect and shall not be terminated, discharged or released in whole or in part
irrespective of whether all the Obligations have been paid in full or the
Commitments have been terminated and irrespective of any foreclosure of any
mortgage, deed of trust or collateral assignment on any real property or
acceptance by any Lender of a deed or assignment in lieu of foreclosure.
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<PAGE>
IN WITNESS WHEREOF, the Agents, the Lenders and the Borrower have caused
this Agreement to be duly executed by their duly authorized representatives, as
a sealed instrument, all as of the day and year first above written.
BORROWER:
PEGASUS SATELLITE HOLDINGS, INC.
By: _____________________________________________
Robert N. Verdecchio, Senior Vice President
ADMINISTRATIVE AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By: _____________________________________________
Harold F. Birk, Director, CIBC Wood Gundy
Securities Corp., as agent
SYNDICATION AGENT:
BANKERS TRUST COMPANY
By: _____________________________________________
David Bell, Vice President
<PAGE>
LENDERS:
CIBC INC.
By:_______________________________________
Harold F. Birk, Director, CIBC Wood Gundy
Securities Corp., as agent
Address for Notices to CIBC Inc.:
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Telecopy: (212) 856-3558
Attention: Harold F. Birk, Director
BANKERS TRUST COMPANY
By:_______________________________
David Bell, Vice President
Address for Notice to BTCo.:
Bankers Trust Company
c/o BT Securities Corporation
One Bankers Trust Plaza
New York, New York 10006
Telecopy: (212) 250-7218
Attention: David Bell, Vice President
<PAGE>
LENDER:
BANKBOSTON, N.A.
By:____________________________
Name:_______________________
Title:______________________
Address for Notices:
BankBoston, N.A.
100 Federal Street
Mail Stop: MA BOS 01-08-08
Boston, Massachusetts 02110
Telecopier: (617) 434-3401
Telephone: (617) 434-2880
Attention: Cindy Chen, Director
<PAGE>
LENDER:
BANQUE PARIBAS
By:____________________________
Name:_______________________
Title:______________________
By:____________________________
Name:_______________________
Title:______________________
Address for Notices:
Banque Paribas
787 Seventh Avenue
New York, New York 10019
Telecopier: (212) 841-2369
Telephone: (212) 841-2595
Attention: Lynne S. Randall, Vice President
<PAGE>
LENDER:
BANK OF MONTREAL, CHICAGO BRANCH
By:________________________________
Yvonne Bos, Senior Vice President
Address for Notices:
Bank of Montreal
430 Park Avenue
New York, New York 10022
Telecopier: (212) 605-1648
Telephone: (212) 605-1529
Attention: Chris Young, Associate
<PAGE>
LENDER:
FLEET NATIONAL BANK
By:_______________________________
Name:__________________________
Title:_________________________
Address for Notices:
Fleet National Bank
One Federal Street
Mail Stop: MAOFD03D
Boston, Massachusetts 02110
Telecopier: (617) 346-4346
Telephone: (617) 346-4367
Attention: Stephen J. Healey,
Senior Vice President
<PAGE>
LENDER:
IBJ SCHRODER BANK & TRUST COMPANY
By:________________________________________
J. Christopher Mangan, Managing Director
Address for Notices:
IBJ Schroder Bank & Trust Company
One State Street Plaza - 9th Floor
New York, New York 10004
Telecopier: (212) 858-2767
Telephone: (212) 858-2602
Attention: J. Christopher Mangan, Managing Director
<PAGE>
LENDER:
STATE STREET BANK AND TRUST COMPANY
By _____________________________________
Hamilton H. Wood, Jr., Vice President
Address for Notices:
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Telecopier: (617) 654-3708
Telephone: (617) 654-3817
Attention: Hamilton H. Wood, Jr.,
Vice President
<PAGE>
LENDER:
MEESPIERSON CAPITAL CORP.
By:_______________________________
Name:__________________________
Title:_________________________
By:_______________________________
Name:__________________________
Title:_________________________
Address for Notices:
MeesPierson Capital Corp.
445 Park Avenue
New York, New York 10022
Telecopier: (212) 801-0420
Telephone: (212) 801-0445
Attention: Claudia J. Chifos, Vice President
<PAGE>
LENDER:
UNION BANK OF CALIFORNIA
By ________________________________
Christine P. Ball, Vice President
Address for Notices:
Union Bank of California
445 South Figueroa Street - 15th Floor
Los Angeles, California 90071
Telecopier: (213) 236-5747
Telephone: (213) 236-6176
Attention: Christine P. Ball, Vice President
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 12,518,269 12,518,269
<SECURITIES> 0 0
<RECEIVABLES> 10,799,468 10,779,468
<ALLOWANCES> 317,000 317,000
<INVENTORY> 720,616 720,616
<CURRENT-ASSETS> 35,392,692 35,392,692
<PP&E> 47,116,110 47,116,110
<DEPRECIATION> 21,616,432 21,616,432
<TOTAL-ASSETS> 255,912,110 255,912,110
<CURRENT-LIABILITIES> 21,197,763 21,197,763
<BONDS> 81,784,650 81,784,650
105,312,500 105,312,500
0 0
<COMMON> 98,407 98,407
<OTHER-SE> 43,310,892 43,310,892
<TOTAL-LIABILITY-AND-EQUITY> 255,912,110 255,912,110
<SALES> 19,778,392 35,609,564
<TOTAL-REVENUES> 19,778,392 35,609,564
<CGS> 0 0
<TOTAL-COSTS> 19,891,455 36,088,560
<OTHER-EXPENSES> 50,270 (4,902,908)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,869,286 6,023,752
<INCOME-PRETAX> (3,032,619) (1,599,840)
<INCOME-TAX> 50,000 50,000
<INCOME-CONTINUING> (3,082,619) (1,649,840)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,082,619) (1,649,840)
<EPS-PRIMARY> (0.64) (0.71)
<EPS-DILUTED> (0.64) (0.71)
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