<PAGE>
As filed with the Securities and Exchange Commission on January 13, 1998
Registration No. 333-40205
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
PEGASUS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
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4833
--------------------------------------------------------
(Primary Standard Industrial Classification Code Number)
DELAWARE 51-0374669
- ------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification Number)
c/o Pegasus Communications Management Company
Suite 454, 5 Radnor Corporate Center
100 Matsonford Road
Radnor, Pennsylvania 19087
(610) 341-1801
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
------------------
Marshall W. Pagon, President and Chief Executive Officer
c/o Pegasus Communications Management Company
Suite 454, 5 Radnor Corporate Center
Radnor, Pennsylvania 19087
(610) 341-1801
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------
Copies to:
<TABLE>
<CAPTION>
<S> <C>
Ted S. Lodge, Esq. Michael B. Jordan, Esq.
Pegasus Communications Corporation Scott A. Blank, Esq.
c/o Pegasus Communications Management Company Drinker Biddle & Reath LLP
Suite 454, 5 Radnor Corporate Center 1100 Philadelphia National Bank Building
100 Matsonford Road 1345 Chestnut Street
Radnor, Pennsylvania 19087 Philadelphia, Pennsylvania 19107-3496
(610) 341-1801 (215) 988-2700
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
----------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]_________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]___________
<PAGE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
January 15, 1998
[GRAPHIC OMITTED]
PEGASUS COMMUNICATIONS CORPORATION
Offer to Exchange its
9 5/8% Series B Senior Notes due 2005
which have been registered under the Securities Act of 1933, as amended,
for any and all of its outstanding
9 5/8% Series A Senior Notes due 2005
The Exchange Offer will expire at 5:00 p.m, New York City time on
February 25, 1998, unless extended.
Pegasus Communications Corporation, a Delaware corporation ("Pegasus"
or, together with its subsidiaries, the "Company"), hereby offers (the "Exchange
Offer"), upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 9 5/8% Series B Senior
Notes due 2005 (the "New Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
registration statement of which this Prospectus is a part (the "Registration
Statement"), for each $1,000 principal amount of its outstanding 9 5/8% Series A
Senior Notes due 2005 (the "Old Notes"), of which $115.0 million in aggregate
principal amount are outstanding as of the date hereof. The form and terms of
the New Notes are the same as the form and terms of the Old Notes except that
(i) the New Notes have been registered under the Securities Act, and hence the
New Notes will not bear legends restricting the transfer thereof, and (ii)
holders of the New Notes (with certain exceptions for broker-dealers or holders
of the New Notes who cannot use this Prospectus) will cease to have rights under
the Registration Rights Agreement (as defined herein), which rights will
terminate upon the consummation of the Exchange Offer. The New Notes will
evidence the same debt as the Old Notes (which they replace) and will be
entitled to the benefits of the Indenture (as defined herein). The Old Notes and
the New Notes are sometimes referred to herein collectively as the "Notes." See
"The Exchange Offer" and "Description of Notes."
The Company will accept for exchange any and all validly tendered Old
Notes not withdrawn prior to 5:00 p.m., New York City time, on February 25,
1998, unless the Exchange Offer is extended by Pegasus, in its sole discretion
(the "Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior
to the Expiration Date. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. However, the Exchange
Offer is subject to certain customary conditions. See "The Exchange Offer --
Conditions." Old Notes may be tendered only in integral multiples of $1,000.
The New Notes will bear interest at the same rate and on the same terms
as the Old Notes. Consequently, the New Notes will bear interest at the rate of
9 5/8% per annum and the interest will be payable semi-annually on April 15 and
October 15 of each year commencing on April 15, 1998. The New Notes will bear
interest from and including the date of issuance of the Old Notes (October 21,
1997). Holders whose Old Notes are accepted for exchange will be deemed to have
waived the right to receive any interest accrued on the Old Notes.
The Notes will rank senior in right of payment to all existing and
future subordinated Indebtedness (as defined herein) of Pegasus and will rank
pari passu in right of payment with all existing and future senior Indebtedness
of Pegasus. Substantially all operations of Pegasus are conducted through its
subsidiaries and, therefore, Pegasus is dependent upon the cash flow of its
subsidiaries to meet its obligations, including its obligations under the Notes.
None of Pegasus' subsidiaries guarantee the Old Notes and on the date of
issuance of the New Notes, none of Pegasus' subsidiaries will guarantee the New
Notes. However, Pegasus' obligations under the Notes may be unconditionally
guaranteed (the "Subsidiary Guarantees") on a senior, unsecured basis, jointly
and severally, by each subsidiary of Pegasus that executes and delivers a
supplemental indenture to the Indenture pursuant to the terms of the covenant
described under the caption "Description of Notes -- Certain Covenants --
Subsidiary Guarantees." Any right of Pegasus to receive assets of any of its
subsidiaries that do not guarantee the Notes will be effectively subordinated to
the claims of that subsidiary's creditors. On a pro forma basis, as of September
30, 1997, after giving effect to the Transactions (as defined herein), other
than the DTS
<PAGE>
Acquisition, the aggregate amount of Indebtedness and other obligations of
Pegasus' subsidiaries (including capital lease obligations and the PM&C Notes
(as defined herein)), that would effectively rank senior in right of payment to
the obligations of Pegasus under the Notes would have been approximately $103.6
million. See "Risk Factors -- Substantial Indebtedness and High Degree of
Leverage" and "Risk Factors -- Holding Company Structure; Dependence Upon
Operations of Subsidiaries."
The Notes may be redeemed, in whole or in part, at the option of
Pegasus on or after October 15, 2001, at the redemption prices specified herein,
plus accrued and unpaid interest and Liquidated Damages (as defined herein), if
any, thereon to the date of redemption. In addition, at any time on or prior to
October 15, 2000, Pegasus may, on any one or more occasions, use the net
proceeds of one or more offerings of its Capital Stock (as defined herein) to
redeem up to 35% of the aggregate principal amount of the Notes at a redemption
price of 109.625% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of redemption; provided
that, after any such redemption, the aggregate principal amount of the Notes
outstanding must equal at least $75.0 million; and provided further, that any
such redemption shall occur within 90 days of the date of closing of such
offering of Capital Stock of Pegasus. Upon a Change of Control (as defined
herein), Pegasus is required, subject to certain conditions, to offer to
purchase all of the Notes at a price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase. See "Description of Notes --
Repurchase at the Option of Holders -- Change of Control."
For information concerning certain factors that should be considered in
connection with the Exchange Offer and an investment in the New Notes offered
hereby, see "Risk Factors" on page 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission" or "SEC" set forth in no-action letters issued to
third parties, the Company believes that the New Notes issued pursuant to this
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a holder thereof (other than (i) a broker-dealer who
purchases such New Notes directly from Pegasus to resell pursuant to Rule 144A
or any other available exemption under the Securities Act or (ii) a person that
is an affiliate of Pegasus within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is acquiring the New
Notes in the ordinary course of its business and is not participating, and had
no arrangement or understanding with any person to participate, in the
distribution of the New Notes. Holders of Old Notes wishing to accept the
Exchange Offer must represent to Pegasus, as required by the Registration Rights
Agreement, that such conditions have been met. Each broker-dealer that receives
the New Notes for its own account in exchange for the Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. Pegasus believes
that none of the registered holders of the Old Notes is an affiliate (as such
term is defined in Rule 405 under the Securities Act) of Pegasus.
Prior to this Exchange Offer, there has been no public market for the
Notes. Pegasus does not intend to apply for listing of the Notes on any national
securities exchange or for quotation of the Notes through the Nasdaq National
Market. There can be no assurance that an active market for the Notes will
develop. To the extent that a market for the Notes does develop, the market
value of the Notes will depend on market conditions (such as yields on
alternative investments), general economic conditions, the Company's financial
condition and other conditions. Such conditions might cause the Notes, to the
extent that they are actively traded, to trade at a significant discount from
face value. See "Risk Factors -- Absence of Public Trading Market for the
Notes."
Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. Pegasus has agreed to make this Prospectus (as it may be amended or
supplemented) available to any broker-dealer for use in connection with any such
resale for a period of one year, subject to certain exceptions, from the date
that the Registration Statement to which this Prospectus relates became
effective. See "Plan of Distribution."
Pegasus will not receive any proceeds from this Exchange Offer. Pegasus
has agreed to bear the expenses of this Exchange Offer. No underwriter is being
used in connection with this Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL PEGASUS ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
No person is authorized in connection with any offering made hereby to
give any information or to make any representation not contained in this
Prospectus or the accompanying Letter of Transmittal, and, if given or made,
such information or representation must not be relied upon as having been
authorized by Pegasus. Neither the delivery of this Prospectus or the
accompanying Letter of Transmittal, nor any exchange made hereunder shall under
any circumstances create any implication that the information contained herein
is correct as of any date subsequent to the date hereof.
The New Notes issued pursuant to this Exchange Offer will be issued in
the form of one or more fully registered global notes which will be deposited
with, or on behalf of, the Depositary (as defined) and registered in its name or
in the name of Cede & Co., its nominee, or in certificated form in accordance
with the Indenture. Beneficial interests in the global note representing the New
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by the Depositary and its participants. See "Description of
Notes -- Book Entry, Delivery and Form."
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<PAGE>
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Commission. Any reports, proxy statements and other information filed under
the Exchange Act may be inspected at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such materials may be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a web site
at http://www.sec.gov that contains reports, proxy information statements and
other information regarding registrants, like Pegasus, that file electronically
with the Commission. The Company's Class A Common Stock is quoted on the Nasdaq
National Market, and reports and other information concerning the Company may be
inspected at the National Association of Securities Dealers, Inc. at 1735 K
Street, N.W., Washington, D.C. 20006-1500.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-4 (the "Registration Statement") of which this
Prospectus is a part, including exhibits relating thereto, which has been filed
with the Commission. Statements made in this Prospectus as to the contents of
any referenced contract, agreement or other document are not necessarily
complete, and each such statement shall be deemed qualified in its entirety by
reference thereto. Copies of the Registration Statement and the exhibits and
schedules, if any, thereto may be obtained, upon payment of the fee prescribed
by the Commission, or may be examined without charge, at the office of the
Commission or at the Commission's web site.
Pursuant to the Indenture, Pegasus has agreed to furnish to registered
holders of the Notes, without cost to such registered holders, copies of all
reports and other information that would be required to be filed by Pegasus with
the Commission under the Exchange Act, whether or not Pegasus is then required
to file reports with the Commission. In the event that Pegasus ceases to be
subject to the informational requirements of the Exchange Act, Pegasus has
agreed that, so long as any Notes remain outstanding, it will file with the
Commission (but only if the Commission at such time is accepting such voluntary
filings) and distribute to holders of the Notes copies of the financial
information that would have been contained in such annual reports and quarterly
reports, including management's discussion and analysis of financial condition
and results of operations, that would have been required to be filed with the
Commission pursuant to the Exchange Act. Pegasus will also furnish such other
reports as it may determine or as may be required by law.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996; (ii) the
Company's Quarterly Reports on Form 10-Q for the quarterly periods ended March
31, 1997, June 30, 1997 and September 30, 1997; and (iii) the Company's Current
Reports on Form 8-K dated January 31, 1997, April 16, 1997, September 8, 1997
(as amended by Form 8-K/A filed October 31, 1997), November 5, 1997 and December
10, 1997. Additionally, all documents filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents.
Any statement contained herein, or any document, all or a portion of
which is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of the Registration Statement or this Prospectus. All
information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. These documents (other than exhibits to
such documents which are not specifically incorporated by reference into such
documents) are available without charge, upon written or oral request by any
person to whom this Prospectus has been delivered by telephone to (610) 341-1801
or in writing to Pegasus Communications Corporation c/o Pegasus Communications
Management Company, Suite 454, 5 Radnor Corporate Center, 100 Matsonford Road,
Radnor, Pennsylvania 19087, Attention: Chief Financial Officer. In order to
ensure timely delivery of the documents, any request should be made by date five
business days prior to the date on which final investment decision must be made.
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<PAGE>
PROSPECTUS SUMMARY
This Prospectus contains or incorporates by reference certain
statements of a forward-looking nature relating to future events or the future
financial performance of the Company. Prospective purchasers of the New Notes
are cautioned that such statements are only predictions and that actual events
or results could differ materially. In evaluating such statements, prospective
purchasers of the New Notes should specifically consider the various factors
identified in this Prospectus, including the matters set forth under the caption
"Risk Factors," as well as those discussed elsewhere in this Prospectus, and in
the documents incorporated by reference herein. Unless otherwise indicated, the
discussion below refers to and the information in this Prospectus gives effect
to certain Transactions, including the Notes Offering, the Subsidiaries
Combination, the closing of the New Credit Facility, the Pending DBS
Acquisitions, the DTS Acquisition, and the New England Cable Sale, which if not
already completed are anticipated to occur in 1998. See "Glossary of Defined
Terms," which begins on page G-1 of this Prospectus for definitions of certain
terms used in this Prospectus including "Transactions," "Notes Offering,"
"Subsidiaries Combination," "New Credit Facility," "Pending DBS Acquisitions,"
"DTS Acquisition" and "New England Cable Sale."
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus and other information
incorporated by reference herein, including the Company's consolidated financial
statements and notes thereto.
The Company
Pegasus is a diversified company that operates in growing segments of
the media and communications industries. The Company owns and operates five TV
stations affiliated with the Fox Broadcasting Company ("Fox") and has or plans
to enter into local marketing agreements ("LMAs") to operate three television
stations, two of which are to be affiliated with The WB Television Network
("WB") and one affiliated with United Paramount Network ("UPN"). The Company is
the largest independent provider of DIRECTV(R) ("DIRECTV"). Giving effect to the
Pending DBS Acquisitions and the DTS Acquisition, the Company will have the
exclusive right to provide DIRECTV services to approximately 4.2 million U.S.
television households in rural areas of 33 states serving a subscriber base of
approximately 266,000 DBS customers, as of November 7, 1997. The Company also
provides cable service to approximately 27,600 subscribers in Puerto Rico and
approximately 15,200 subscribers in New England. The Company has entered into a
letter of intent to sell its New England cable operations (the "New England
Cable Sale").
Pegasus was incorporated under the laws of the State of Delaware in May
1996. Management's principal executive offices are located at Suite 454, 5
Radnor Corporate Center, 100 Matsonford Road, Radnor, Pennsylvania 19087.
Its telephone number is (610) 341-1801.
The Exchange Offer
The Exchange Offer........... Pegasus is offering to exchange $1,000 principal
amount of New Notes for each $1,000 principal
amount of Old Notes that are properly tendered
and accepted. Pegasus will issue New Notes on or
promptly after the Expiration Date. There is
$115.0 million aggregate principal amount of Old
Notes outstanding. See "The Exchange Offer."
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<PAGE>
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, Pegasus believes that
the New Notes issued pursuant to this Exchange
Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by
a holder thereof (other than (i) a broker-dealer
who purchases such New Notes directly from
Pegasus to resell pursuant to Rule 144A or any
other available exemption under the Securities
Act or (ii) a person that is an affiliate of
Pegasus within the meaning of Rule 405 under the
Securities Act), without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that the holder
is acquiring the New Notes in the ordinary
course of its business and is not participating,
and had no arrangement or understanding with any
person to participate, in the distribution of
the New Notes. Each broker-dealer that receives
the New Notes for its own account in exchange
for the Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes.
Registration Rights
Agreement.................... The Old Notes were sold by Pegasus on October
21, 1997 to CIBC Wood Gundy Securities Corp.
(the "Initial Purchaser") pursuant to a Purchase
Agreement dated October 10, 1997 between Pegasus
and the Initial Purchaser (the "Purchase
Agreement"). Pursuant to the Purchase Agreement,
Pegasus and the Initial Purchaser entered into a
Registration Rights Agreement dated as of
October 21, 1997 (the "Registration Rights
Agreement") which grants the Holders of the Old
Notes certain exchange and registration rights.
See "The Exchange Offer -- Termination of
Certain Rights." This Exchange Offer is intended
to satisfy such rights, which terminate upon the
consummation of the Exchange Offer. The Holders
of the New Notes are not entitled to any
exchange or registration rights with respect to
the New Notes.
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on February 25, 1998, unless the
Exchange Offer is extended by Pegasus in its
sole discretion, in which case the term
"Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
Accrued Interest on the
New Notes and
Old Notes.................... The New Notes will bear interest from and
including the date of issuance of the Old Notes
(October 21, 1997). Holders whose Old Notes are
accepted for exchange will be deemed to have
waived the right to receive any interest accrued
on the Old Notes.
Conditions to the Exchange
Offer........................ The Exchange Offer is subject to certain
customary conditions, which may be waived by
Pegasus. See "The Exchange Offer -- Conditions."
The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered for exchange.
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<PAGE>
Procedures for Tendering
Old Notes.................... Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with such Old Notes and any
other required documentation to First Union
National Bank, as Exchange Agent, at the address
set forth herein. By executing the Letter of
Transmittal, each holder will represent to
Pegasus that, among other things, (i) the New
Notes to be acquired by the Holder of the Old
Notes in connection with the Exchange Offer are
being acquired by the Holder in the ordinary
course of business of the Holder, (ii) the
Holder has no arrangement or understanding with
any person to participate in the distribution of
New Notes, (iii) the Holder acknowledges and
agrees that any person who is a broker-dealer
registered under the Exchange Act or is
participating in the Exchange Offer for the
purposes of distributing the New Notes must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with a secondary resale transaction
of the New Notes acquired by such person and
cannot rely on the position of the staff of the
Commission set forth in no-action letters (see
"The Exchange Offer -- Resale of the New
Notes"), (iv) the Holder understands that a
secondary resale transaction described in clause
(iii) above and any resales of New Notes
obtained by such Holder in exchange for Old
Notes acquired by such Holder directly from
Pegasus should be covered by an effective
registration statement containing the selling
securityholder information required by Item 507
or Item 508, as applicable, of Regulation S-K of
the Commission and (v) the Holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of Pegasus. If the Holder is a
broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that
were acquired as a result of market-making
activities or other trading activities, the
Holder is required to acknowledge in the Letter
of Transmittal that it will deliver a prospectus
in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a
prospectus, the Holder will not deemed to admit
that it is an "underwriter" within the meaning
of the Securities Act. See "The Exchange Offer
-- Procedures for Tendering."
Special Procedures for
Beneficial Owners............ Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Old Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. See "The Exchange Offer -- Procedures
for Tendering." If such beneficial owner wishes
to tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering his or her
Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer
of registered ownership may take considerable
time and may not be able to be completed prior
to the Expiration Date.
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<PAGE>
Guaranteed Delivery
Procedures................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to First Union National Bank, as
Exchange Agent, prior to the Expiration Date,
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery
Procedures."
Acceptance of the Old Notes and
Delivery of the Series B
Notes........................ Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, Pegasus will
accept for exchange any and all Old Notes which
are properly tendered in the Exchange Offer
prior to the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be
delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Withdrawal Rights............ Tenders of Old Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders."
Certain United States Federal
Income Tax Consequences of the
Exchange Offer............... For a discussion of certain federal income tax
considerations relating to the exchange of the
New Notes for the Old Notes, see "Certain United
States Federal Income Tax Consequences of the
Exchange Offer."
Exchange Agent............... First Union National Bank is serving as the
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer.
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<PAGE>
Summary of Terms of New Notes
The Exchange Offer applies to $115.0 million aggregate principal amount
of the Old Notes. The form and terms of the New Notes are the same as the form
and terms of the Old Notes except that (i) the New Notes will have been
registered under the Securities Act and, therefore, the New Notes will not bear
legends restricting their transfer pursuant to the Securities Act, and (ii)
holders of the New Notes (with certain exceptions for broker-dealers or holders
of the New Notes who cannot use this Prospectus) will cease to have rights under
the Registration Rights Agreement, which rights will terminate upon consummation
of the Exchange Offer. The New Notes will evidence the same debt as the Old
Notes (which they replace) and will be issued under, and be entitled to the
benefits of, the Indenture. See "Description of Notes" for further information
and for definitions of certain capitalized terms used below.
Maturity .................... October 15, 2005.
Interest..................... The New Notes will bear interest at the rate of
95/8% per annum. Interest is payable
semi-annually on April 15 and October 15 of each
year, commencing on April 15, 1998.
Optional Redemption.......... The Notes may be redeemed, in whole or in part,
at the option of Pegasus on or after October 15,
2001, at the redemption prices specified herein,
plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of
redemption. In addition, at any time on or prior
to October 15, 2000, Pegasus may, on any one or
more occasions, use the net proceeds of one or
more offerings of its Capital Stock to redeem up
to 35% of the aggregate principal amount of the
Notes at a redemption price of 109.625% of the
principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any,
to the date of redemption; provided that, after
any such redemption, the aggregate principal
amount of the Notes outstanding must equal at
least $75.0 million; and provided further, that
any such redemption shall occur within 90 days
of the date of closing of such offering of
Capital Stock of Pegasus.
Change of Control............ Upon a Change of Control, Pegasus is required,
subject to certain conditions, to offer to
purchase all of the Notes at a price in cash
equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date
of purchase. See "Description of Notes --
Repurchase at the Option of Holders -- Change of
Control."
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Ranking...................... The Notes will rank senior in right of payment
to all existing and future subordinated
Indebtedness of Pegasus and will rank pari passu
in right of payment with all existing and future
senior Indebtedness of Pegasus. Substantially
all operations of Pegasus are conducted through
its subsidiaries and, therefore, Pegasus is
dependent upon the cash flow of its subsidiaries
to meet its obligations, including its
obligations under the Notes. None of Pegasus'
subsidiaries guaranteed the Old Notes and on the
date of issuance of the New Notes, none of
Pegasus' subsidiaries will guarantee the New
Notes. However, Pegasus' obligations under the
Notes may be unconditionally guaranteed on a
senior, unsecured basis, jointly and severally,
by each subsidiary of Pegasus that executes and
delivers a supplemental indenture to the
Indenture pursuant to the terms of the covenant
described under the caption "Description of
Notes -- Certain Covenants -- Subsidiary
Guarantees." Any right of Pegasus to receive
assets of any of its subsidiaries that do not
guarantee the Notes will be effectively
subordinated to the claims of that subsidiary's
creditors. On a pro forma basis, as of September
30, 1997, after giving effect to the
Transactions, other than the DTS Acquisition,
the aggregate amount of Indebtedness and other
obligations of Pegasus' subsidiaries (including
capital lease obligations and the PM&C Notes),
that would effectively rank senior in right of
payment to the obligations of Pegasus under the
Notes would have been approximately $103.6
million. See "Risk Factors -- Substantial
Indebtedness and High Degree of Leverage" and
"Risk Factors -- Holding Company Structure;
Dependence Upon Operations of Subsidiaries."
Restrictive Covenants........ The Indenture contains certain restrictive
covenants with respect to Pegasus and its
subsidiaries, including limitations on (a) the
sale of assets, including the equity interests
of Pegasus' subsidiaries, (b) the payment of
Restricted Payments (as defined), (c) the
incurrence of Indebtedness and issuance of
certain preferred securities by Pegasus and its
subsidiaries, (d) the issuance of Equity
Interests (as defined) by Pegasus' subsidiaries,
(e) certain transactions with affiliates, (f)
liens and (g) certain consolidations and
mergers. All of these limitations, however, are
subject to a number of important qualifications.
See "Description of Notes -- Certain Covenants."
Market
The New Notes are new securities for which there currently is no
market. Although the Initial Purchaser has informed Pegasus that it currently
intends to make a market in the Notes, it is not obligated to do so and any such
market-making may be discontinued at any time without notice. Accordingly, there
can be no assurance as to the development or liquidity of any market for the New
Notes. The Old Notes are eligible for trading in the Private Offerings, Resale
and Trading through Automatic Linkages (PORTAL) market. Pegasus does not intend
to apply for listing of either the New Notes or the Old Notes on any national
securities exchange or for quotation through the Nasdaq National Market. In
addition, the Old Notes have not been registered under the Securities Act or any
other applicable securities law, and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act or any other applicable securities law, or pursuant to an
exemption therefrom, and in accordance with certain other restrictions. Pegasus
currently has no intention to file a registration statement with respect to the
Old Notes nor is it obligated to do so except under certain circumstances. See
"Description of Notes -- Registration Rights; Liquidated Damages."
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Failure to Exchange Old Notes
The New Notes will be issued in exchange for Old Notes only after
timely receipt by the Exchange Agent of such Old Notes, a properly completed and
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of Old Notes desiring to tender such Old Notes in exchange for New Notes
should allow sufficient time to ensure timely delivery. Neither the Exchange
Agent nor Pegasus is under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes for exchange. Old Notes that
are not tendered or are tendered but not accepted will, following consummation
of the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof. In addition, any holder of Old Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the New
Notes will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or any other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution." To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected. See "The Exchange Offer."
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RISK FACTORS
Prospective investors should consider carefully the following risk
factors, in addition to the other information contained in this Prospectus
concerning the Company and its business, before purchasing the Notes offered
hereby.
Risks Relating to Forward-Looking Statements
Certain statements contained in this Prospectus and incorporated herein
by reference including, without limitation, statements containing the words
"anticipates," "believes," "intends," "estimates," "expects" and "projects" and
words of similar import constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions, both nationally, internationally and
in the regions in which the Company operates; demographic change; existing
government regulations and changes in, or the failure to comply with, government
regulations; competition; the loss of any significant numbers of subscribers or
viewers; changes in business strategy or development plans; technological
developments; the ability to attract and retain qualified personnel; the
significant indebtedness of the Company; the availability and terms of capital
to fund the expansion of the Company's business; and other factors referenced in
this Prospectus. Certain of these factors are discussed in more detail below and
elsewhere in this Prospectus including, without limitation, under the caption
"Prospectus Summary." Given these uncertainties, prospective investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligations to update any such factors or publicly
announce the result of any revisions to any developments.
Substantial Indebtedness and High Degree of Leverage
The Company is highly leveraged. As of September 30, 1997, on a pro
forma basis after giving effect to the Transactions, other than the DTS
Acquisition, the Company would have had indebtedness of $218.6 million, total
common stockholders' equity of $63.0 million, Preferred Stock of $108.7 million
and, assuming certain conditions are met, $180.0 million available under the New
Credit Facility. For the year ended December 31, 1996 and the nine months ended
September 30, 1997, on a pro forma basis after giving effect to the
Transactions, other than the DTS Acquisition, the Company's earnings would have
been inadequate to cover its combined fixed charges and dividends on Series A
Preferred Stock by approximately $44.3 million and $32.4 million, respectively.
The Company is not required under the terms of the Series A Preferred Stock and
is restricted under the terms of the Indenture from paying its dividends in cash
prior to July 1, 2002. The ability of the Company to repay its existing
indebtedness, including the Notes, will depend upon future operating
performance, which is subject to the success of the Company's business strategy,
prevailing economic conditions, regulatory matters, levels of interest rates and
financial, business and other factors, many of which are beyond the Company's
control. There can be no assurance that the Company's growth strategy will be
successful in generating the substantial increases in cash flow from operations
that will be necessary for the Company to meet its obligations on the Notes. The
current and future leverage of the Company could have important consequences,
including the following: (i) the ability of the Company to obtain additional
financing for future working capital needs or financing for possible future
acquisitions or other purposes may be limited, (ii) a substantial portion of the
Company's cash flow from operations will be dedicated to payment of the
principal and interest on its indebtedness, including the Notes, thereby
reducing funds available for other purposes, and (iii) the Company may be more
vulnerable to adverse economic conditions than some of its competitors and,
thus, may be limited in its ability to withstand competitive pressures. The
agreements with respect to the Company's indebtedness, including the Indenture,
the PM&C Indenture, the Certificate of Designation and the Exchange Note
Indenture contain numerous financial and operating covenants, including, among
others, restrictions on the ability of the Company to incur additional
indebtedness, to create liens or other encumbrances, to pay dividends and to
make certain other payments and investments, and to sell or otherwise dispose of
assets or merge or consolidate with
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another entity. A failure to comply with the obligations contained in any
agreement with respect to any indebtedness could result in events of default
which could permit acceleration of such indebtedness and acceleration of
indebtedness under the debt agreements that may contain cross-acceleration or
cross-default provisions. See "Description of Notes."
Holding Company Structure; Dependence Upon Operations of Subsidiaries
On a pro forma basis, as of September 30, 1997, after giving effect to
the Transactions, other than the DTS Acquisition, the aggregate amount of
Indebtedness and other obligations of Pegasus' subsidiaries (including capital
lease obligations and the PM&C Notes), that would effectively rank senior in
right of payment to the obligations of Pegasus under the Notes would have been
approximately $103.6 million. The Notes will be effectively subordinated to all
Indebtedness of Pegasus's subsidiaries, including any Indebtedness incurred
under the New Credit Facility.
Substantially all of the tangible assets of the Company are held by
Pegasus' subsidiaries, and all of the Company's operating revenues are derived
from operations of Pegasus' subsidiaries. Therefore, Pegasus' ability to pay
interest and principal when due to holders of the Notes is dependent upon the
receipt of sufficient funds from its direct and indirect subsidiaries.
The New Credit Facility restricts the payment of dividends by PM&C
pursuant to its terms. Under the terms of the PM&C 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 PM&C Indenture and under the New Credit Facility. On
a pro forma basis as of September 30, 1997, after giving effect to the
Transactions, other than the DTS Acquisition, PM&C would have had the ability to
pay dividends or other restricted payments under the PM&C Indenture of
approximately $185.0 million and the New Credit Facility would have specifically
permitted distributions to the Company equal to, and coincident with, Pegasus'
interest obligations under the Notes. The ability of PM&C and its subsidiaries
to comply with such conditions in the PM&C Indenture may be affected by events
that are beyond the Company's control. The breach of any such conditions could
result in a default under the PM&C Indenture and/or the New Credit Facility. In
the event of any such default, the holders of the PM&C Notes or the lenders
under the New Credit Facility could elect, respectively, to accelerate the
maturity of all the PM&C Notes or the loans under such facility. If the maturity
of the PM&C Notes or the loans under the New Credit Facility were to be
accelerated, all such outstanding indebtedness would be required to be paid in
full before PM&C or its subsidiaries would be permitted to distribute any assets
or cash to Pegasus. There can be no assurance that the assets of the Company
would be sufficient to repay all such outstanding indebtedness and to meet its
obligations under the Notes, the PM&C Notes or the Series A Preferred Stock or
the Exchange Notes, as the case may be. Future borrowings by Pegasus or its
subsidiaries can be expected to contain restrictions or prohibitions on the
payment of dividends by such subsidiaries to Pegasus.
None of Pegasus' subsidiaries guaranteed the Old Notes and on the date
of issuance of the New Notes, none of Pegasus' subsidiaries will guarantee the
New Notes. In the future, the Notes will be unconditionally guaranteed on a
senior, unsecured basis, jointly and severally, by each Restricted Subsidiary
(as defined) that guarantees payment of any Indebtedness of Pegasus or any
Indebtedness of any Subsidiary Guarantor and that executes and delivers a
supplemental indenture to the Indenture pursuant to the terms of the covenant
described in "Description of Notes -- Certain Covenants -- Subsidiary
Guarantees." To the extent that a court were to find that (i) a Subsidiary
Guarantee was incurred by a Subsidiary Guarantor with intent to hinder, delay or
defraud any present or future creditor or the Subsidiary Guarantor contemplated
insolvency with a design to prefer one or more creditors to the exclusion in
whole or in part of others or (ii) such Subsidiary Guarantor did not receive
fair consideration or reasonably equivalent value for issuing its Subsidiary
Guarantee and such Subsidiary Guarantor (a) was insolvent, (b) was rendered
insolvent by reason of the issuance of such Subsidiary Guarantee, (c) was
engaged or about to engage in a business or transaction for which the remaining
assets of such Subsidiary Guarantor constituted unreasonably small capital to
carry on its business or (d) intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they matured, the court could
avoid or subordinate such Subsidiary Guarantee
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in favor of the Subsidiary Guarantor's other creditors. Among other things, a
legal challenge of a Subsidiary Guarantee on fraudulent conveyance grounds may
focus on the benefits, if any, realized by the Subsidiary Guarantor as a result
of the issuance by Pegasus of the Notes. To the extent any Subsidiary Guarantee
were to be avoided as a fraudulent conveyance or held unenforceable for any
other reason, holders of the Notes would cease to have any claim in respect of
such Subsidiary Guarantor and would be creditors solely of Pegasus and any
Subsidiary Guarantor whose Subsidiary Guarantee was not avoided or held
unenforceable. In such event, the claims of the holders of the Notes against the
issuer of an invalid Subsidiary Guarantee would be subject to the prior payment
of all liabilities of such Subsidiary Guarantor. There can be no assurance that,
after providing for all prior claims, there would be sufficient assets to
satisfy the claims of the holders of the Notes relating to any voided Subsidiary
Guarantee.
Dependence on Network Affiliations
Certain of the Company's TV stations are affiliated with the Fox
network, which provides the stations with up to 40 hours of programming time per
week, including 15 hours of prime time programming, in return for the
broadcasting of Fox-inserted commercials by the stations during such
programming. The Company programs, or intends to program, pursuant to LMAs,
other TV stations as affiliates of UPN or WB. As a result, the successful
operation of the Company's TV stations is highly dependent on the Company's
relationship with its broadcast networks and upon the success of such broadcast
networks. All of the Company's affiliation agreements with Fox expire on October
31, 1998 with the exception of the affiliation agreement with respect to TV
station WTLH, which expires on December 31, 2000. Thereafter, the affiliation
agreements may be extended for additional two-year terms by Fox in its sole
discretion. Fox has, in the past, changed affiliates in certain markets where it
acquired a significant ownership position in a station in such market. In the
event that Fox, directly or indirectly, acquires any significant ownership
and/or controlling interest in any TV station licensed to any community within
the Company's TV markets, Fox has the right to terminate the affiliation
agreement of the Company's TV station serving that market. As a consequence,
there is no assurance that Fox could not enter into such an arrangement in one
of the Company's markets. Although the Company's affiliation agreement with UPN
expires on January 15, 2001, the affiliation agreement may be terminated earlier
under certain circumstances. The Company has entered into commitments to program
TV stations WOLF and WGFL as affiliates of WB and is currently in the process of
negotiating agreements with respect to these stations, although there can be no
assurance that a definitive affiliation agreement will result. There can also be
no assurance that Fox, UPN or WB programming will continue to be as successful
as in the past or that such networks will continue to provide programming to
their respective affiliates on the same basis as they currently do, all of which
matters are beyond the Company's control. The non-renewal or termination of the
affiliation of one or more of the Company's stations could have a material
adverse effect on the Company's operations.
Reliance on DBS Technology and DIRECTV
The Company's DBS business is a new business with unproven potential.
There are numerous risks associated with DBS technology, in general, and
DIRECTV, in particular. DBS technology is highly complex and requires the
manufacture and integration of diverse and advanced components that may not
function as expected. Although the DIRECTV satellites are estimated to have
orbital lives at least through the year 2007, there can be no assurance as to
the longevity of the satellites or that loss, damage or changes in the
satellites as a result of acts of war, anti-satellite devices, electrostatic
storms or collisions with space debris will not occur and have a material
adverse effect on DIRECTV and the Company's DBS business. Furthermore, the
digital compression technology used by DBS providers is not standardized and is
undergoing rapid change. Since the Company serves as an intermediary for
DIRECTV, the Company would be adversely affected by material adverse changes in
DIRECTV's financial condition, programming, technological capabilities or
services, and such effect could be material to the Company's prospects. There
can also be no assurance that there will be sufficient demand for DIRECTV
services since such demand depends upon consumer acceptance of DBS, the
availability of equipment and related components required to access DIRECTV
services and the competitive pricing of such equipment.
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The National Rural Telecommunications Cooperative (the "NRTC") is a
cooperative organization whose members and affiliate members are engaged in the
distribution of telecommunications and other services in predominantly rural
areas of the U.S. Pursuant to agreements between Hughes Electronics Corporation
or one of its subsidiaries ("Hughes") and the NRTC (the "NRTC Agreement") and
between the NRTC and participating NRTC members and affiliate members (the
"Member Agreement" and, together with the NRTC Agreement, the "DBS Agreements"),
participating NRTC members and affiliate members acquired the exclusive right to
provide DIRECTV programming services to residential and commercial subscribers
in certain service areas. The DBS Agreements authorize the NRTC and
participating NRTC members and affiliate members to provide all commercial
services offered by DIRECTV that are transmitted from the frequencies that the
Federal Communications Commission (the "FCC") has authorized for DIRECTV's use
at its present orbital location for a term running through the life of the
current satellites. The NRTC has advised the Company that the NRTC Agreement
also provides the NRTC a right of first refusal to acquire comparable rights in
the event that DIRECTV elects to launch successor satellites upon the removal of
the present satellites from active service. The financial terms of any such
purchase are likely to be the subject of negotiations. Any exercise of such
right is uncertain and will depend, in part, on DIRECTV's costs of constructing,
launching and placing in service such successor satellites. The Company is,
therefore, unable to predict whether substantial additional expenditures by the
NRTC and its members and affiliate members, including the Company, will be
required in connection with the exercise of such right of first refusal.
Competition in the TV, DBS and Cable Businesses
Each of the markets in which the Company operates is highly
competitive. Many of the Company's competitors have substantially greater
resources than the Company and may be able to compete more effectively than the
Company in the Company's markets. In addition, the markets in which the Company
operates are in a constant state of change due to technological, economic and
regulatory developments. The Company is unable to predict what forms of
competition will develop in the future, the extent of such competition or its
possible effects on the Company's businesses. The Company's TV stations compete
for audience share, programming and advertising revenue with other television
stations in their respective markets and with other direct to home ("DTH")
providers including DBS operators, cable operators and wireless-cable operators,
and compete for advertising revenue with other advertising media, such as
newspapers, radio, magazines, outdoor advertising, transit advertising, yellow
page directories, direct mail and local cable systems. The Company's DBS
business faces competition from other current or potential multichannel
programming distributors, including other DBS operators, other DTH providers,
cable operators, wireless cable operators and local exchange and long-distance
telephone companies, which may be able to offer more competitive packages or
pricing than the Company or DIRECTV. The Company's cable systems face
competition from television stations, SMATV systems, wireless cable systems, DTH
and DBS systems.
Risks Attendant to Acquisition Strategy
The Company regularly considers the acquisition of media and
communications properties and, at any given time, is in various stages of
considering such opportunities. Since January 1, 1997, the Company has acquired
or entered into agreements or letters of intent to acquire a number of
properties, including the Pending DBS Acquisitions and the DTS Acquisition. Each
of the Pending DBS Acquisitions and the DTS Acquisition are subject to the
negotiation of a definitive agreement, if not already entered into, and, among
other conditions, the prior approval of Hughes and the NRTC. In addition to
these conditions, each of the Pending DBS Acquisitions and the DTS Acquisition
are expected to be subject to conditions typical in acquisitions of this nature,
certain of which conditions, like the Hughes and NRTC consents, may be beyond
the Company's control. There can be no assurance that definitive agreements will
be entered into with respect to all of the Pending DBS Acquisitions or the DTS
Acquisition, or, if entered into, that all or any of the Pending DBS
Acquisitions or the DTS Acquisition will be completed. The Company sometimes
structures its acquisitions to qualify for tax-free treatment. There is no
assurance that such treatment will be respected by the Internal Revenue Service.
There can also be no assurance that the anticipated benefits of any of the
acquisitions described herein or future acquisitions will be realized. The
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process of integrating acquired operations into the Company's operations may
result in unforeseen operating difficulties, could absorb significant management
attention and may require significant financial resources that would otherwise
be available for the ongoing development or expansion of the Company's existing
operations. The Company's acquisition strategy may be unsuccessful since the
Company may be unable to identify acquisitions in the future or, if identified,
to arrive at prices and terms comparable to past acquisitions, especially in
light of the competition the Company faces from other well-financed
organizations. The competition has resulted and is expected to further result in
increased acquisition prices for such acquisitions. The successful completion of
an acquisition may depend on consents from third parties, including federal,
state and local regulatory authorities or private parties such as Fox, UPN, WB,
the NRTC, DIRECTV and, in certain circumstances, lenders under the New Credit
Facility, all of whose consents are beyond the Company's control. Possible
future acquisitions by the Company could result in dilutive issuances of equity
securities, the incurrence of additional debt and contingent liabilities, and
additional amortization expenses related to goodwill and other intangible
assets, which could materially adversely affect the Company's financial
condition and operating results.
Offer to Purchase DTS Notes
The DTS Acquisition will constitute a "Change of Control" of DTS within the
meaning of the indenture (the "DTS Indenture") governing DTS' Series A 12 1/2%
Senior Subordinated Notes due 2007 (the "DTS Notes"). This will require DTS to
make an offer to the holders of the DTS Notes to purchase the DTS Notes (the
"Offer to Purchase") for 101% of their principal amount (approximately $155.0
million) plus accrued interest. Pegasus intends to arrange for a stand-by
commitment to purchase DTS Notes tendered in response to the Offer to Purchase,
or otherwise to arrange to finance the Offer to Purchase, but there is no
assurance this can be done on satisfactory economic terms, or at all. If DTS is
unable to purchase DTS Notes tendered in response to the Offer to Purchase,
substantially all of DTS' indebtedness will be in default.
Uncertainties Relating to Integration of Operations from the DTS Acquisition
The anticipated benefits of the DTS Acquisition may not be achieved unless
the operations of DTS are combined successfully with those of the Company in a
coordinated, timely and efficient manner, and there can be no assurance that
this will occur. Even if the two companies' operations were integrated
successfully, there can be no assurance that the benefits anticipated by the DTS
Acquisition will be achieved. The transition to a combined company will require
substantial attention from management. The diversion of the attention of
management and any difficulties encountered in the transition process could have
an adverse impact on the revenues and operating results of the combined
companies. These difficulties will be increased by the fact that Pegasus and DTS
will have separate and independent sources of debt financing and will be subject
to separate financial covenants and operating restrictions, each of which will
require that transactions between Pegasus and DTS be carried out on an
arm's-length basis and with a greater degree of formality than is normally the
case for companies and their wholly-owned subsidiaries. These difficulties may
also be increased by the necessity of integrating personnel with disparate
business backgrounds and combining two different corporate cultures. In
addition, the process of combining the two organizations could cause the
interruption of, or a loss of momentum in, the activities of either or both of
the companies' businesses, which could have an adverse effect on their combined
operations. The uncertainties associated with such integration may result in the
loss of key management and other employees. Failure to achieve the anticipated
benefits of the DTS Acquisition or to integrate successfully the operations of
the companies could have a material adverse effect upon the business, operating
results and financial condition of the Company after the DTS Acquisition. Even
if the benefits of the DTS Acquisition are achieved and the two companies'
operations are integrated successfully, there can be no assurance that the
operating results and financial condition of the Company after the DTS
Acquisition will not be materially and adversely affected by any number of
economic, market or other factors that are not related to the DTS Acquisition.
<PAGE>
Consequences Under Debt Agreements and Preferred Stock Terms
Pegasus intends to designate DTS and its subsidiaries as "Unrestricted
Subsidiaries" under the Senior Notes Indenture relating to the Senior Notes and
under the Certificate of Designation relating to its Series A Preferred Stock.
The consequences of this are, among other things, that DTS and its subsidiaries
will not be subject to compliance with many of the covenants and operating
restrictions imposed by the Senior Notes Indenture and the Certificate of
Designation; that neither their indebtedness nor the results of their
operations will enter into the determination of Pegasus' ability to incur
indebtedness or make dividends, investments and other restricted payments; that
Pegasus and its "Restricted Subsidiaries" may not make loans to or guarantee
indebtedness of DTS and its subsidiaries; that neither DTS nor any of its
subsidiaries may make loans to or guarantee indebtedness of Pegasus or any of
its Restricted Subsidiaries; and that all transactions between Pegasus and its
Restricted Subsidiaries, on the one hand, and DTS and its subsidiaries, on the
other hand, must be carried out on arm's-length terms and, in certain cases,
must be supported by a fairness opinion from an investment banking firm of
national standing.
Pegasus' existing DBS business is conducted by Restricted Subsidiaries of
PM&C, a first-tier subsidiary of Pegasus. The PM&C Indenture requires that
transactions between PM&C and its subsidiaries, on the one hand, and affiliates
of PM&C, such as DTS will be after the closing of the DTS Acquisition, on the
other hand, must be carried out on arm's-length terms and, in certain cases,
must be supported by a fairness opinion from an investment banking firm of
national standing. Tbe DTS Indenture contains similar provisions that will
affect transactions between DTS and PM&C's subsidiaries. The Now Credit Facility
contains similar requirements regarding arm's-length treatment.
Because of these provisions, dealings between DTS' DBS business and
Pegasus' other DBS businesses will need to be carried out with a greater degree
of formality than is normally the case among wholly-owned subsidiaries of a
common parent, and Pegasus will not have the same degree of flexibility to
finance DTS' continuing operations as a parent company not subject to these
provisions would have. This may adversely affect the ability of the Company to
fully integrate DTS' business with the Company's other DBS businesses and may
limit the advantages of the DTS Acquisition.
Inability to Manage Growth Effectively
The Company has experienced a period of rapid growth primarily as a
result of its acquisition strategy. In order to achieve its business objectives,
the Company expects to continue to expand largely through acquisitions, which
could place a significant strain on its management, operating procedures,
financial resources, employees and other resources. The Company's ability to
manage its growth may require it to continue to improve its operational,
financial and management information systems, and to motivate and effectively
manage its employees. If the Company's management is unable to manage growth
effectively, the Company's results of operations could be materially adversely
affected.
<PAGE>
Dependence on Key Personnel
The Company's future success may depend to a significant extent upon
the performance of a number of the Company's key personnel, including Marshall
W. Pagon, Pegasus' President and Chief Executive Officer. The loss of Mr. Pagon
or other key management personnel or the failure to recruit and retain personnel
could have a material adverse effect on the Company's business. The Company does
not maintain "key-man" insurance and has not entered into employment agreements
with respect to any such individuals.
Discretion of Management Concerning Funds
A portion of the net proceeds of the Notes Offering was or will be
contributed to current or future subsidiaries of Pegasus to fund acquisitions,
such as the Pending DBS Acquisitions. Pending such use, such proceeds will be
invested in certain short-term investments. Such funds, together with the
Company's existing working capital and funds available to the Company under the
New Credit Facility, represent a significant amount of funds over which
management will have substantial discretion as to their application. There can
be no assurance the Company will deploy such funds in a manner that will enhance
the financial condition of the Company.
Government Legislation, Regulation, Licenses and Franchises
The Company's businesses are subject to extensive and changing laws and
regulations, including those of the FCC and local regulatory bodies. Many of the
Company's operations are subject to licensing and franchising requirements of
federal, state and local law and are, therefore, subject to the risk that
material licenses and franchises will not be obtained or renewed in the future.
The U.S. Congress and the FCC have in the past, and may in the future, adopt new
laws, regulations and policies regarding a wide variety of matters, including
rulemakings arising as a result of the Telecommunications Act of 1996 (the "1996
Act"), that could, directly or indirectly, affect the operations of the
Company's businesses. The business prospects of the Company could be materially
adversely affected by the application of current FCC rules or policies in a
manner leading to the denial of pending applications
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<PAGE>
by the Company, by the adoption of new laws, policies and regulations, or
changes in existing laws, policies and regulations, including changes to their
interpretations or applications, that modify the present regulatory environment
or by the failure of certain rules or policies to change in the manner
anticipated by the Company.
To the extent that the Company expects to program stations through the
use of LMAs, there can be no assurance that the licensees of such stations will
not exercise rights to preempt the programming of the Company, in a fashion
which interferes with the Company's business objectives, or that the licensees
of such stations will continue to maintain the transmission facilities of the
stations in a manner sufficient to broadcast a high quality signal over the
station. As the licensees must also maintain all of the qualifications necessary
to be a licensee of the FCC, and as the principals of the licensees are not
under the control of the Company, there can be no assurance that these licenses
will be maintained by the entities which currently hold them. There can also be
no assurance that any LMAs entered into by the Company, whether or not in
conjunction with the sale of a TV station by the Company or the acquisition of
an LMA by the Company with an option to purchase the underlying station, will
not be questioned by the FCC as being attributable to the Company due to the
relationship between the Company and the holder or proposed holder of the
license. In such an instance, the FCC may force the Company to terminate the LMA
or other arrangements entered into in connection with the operation or
programming of such station.
Pursuant to the 1996 Act, the continued performance of then existing
LMAs was generally grandfathered. The LMA for TV station WPME (the "Portland
LMA") was entered into prior to the adoption of the 1996 Act but the Company did
not begin programming the station until August 1997 upon completion of
construction of the station. The FCC suggested in a recent rulemaking proposal
that LMAs entered into after November 6, 1996 will not be grandfathered. The
Company cannot predict if the Portland LMA will be grandfathered. Currently,
television LMAs are not considered attributable interests under the FCC's
multiple ownership rules. However, the FCC is considering proposals which would
make such LMAs attributable, as they generally are in the radio broadcasting
industry. If the FCC were to adopt a rule that makes such interests
attributable, without modifying its current prohibitions against the ownership
of more than one television station in a market, the Company could be prohibited
from entering into such arrangements with other stations in markets in which it
owns television stations and could be required to modify any then existing LMAs.
The LMAs entered into with respect to TV stations WFXU and WOLF could also be
barred by any new rule adopted by the FCC which makes LMAs attributable without
changing the multiple ownership rules.
Additionally, irrespective of the FCC rules, the Department of Justice
and the Federal Trade Commission (the "Antitrust Agencies") have the authority
to determine that a particular transaction presents antitrust concerns. The
Antitrust Agencies have recently increased their scrutiny of the television and
radio industry, and have indicated their intention to review matters related to
the concentration of ownership within markets (including through LMAs) even when
the ownership or LMA in question is permitted under the regulations of the FCC.
There can be no assurance that future policy and rulemaking activities of the
Antitrust Agencies will not affect the Company's operations (including existing
stations or markets) or expansion strategy.
The FCC has recently adopted orders requiring that television stations
begin operating digital television stations on new channels by May 1, 2002, and
cease operating their current analog channels by 2006. The costs of this
conversion is currently unknown. As digital television allows a single station
to broadcast multiple channels of programming, the impact of this conversion on
audience share, advertising revenues, and program availability is unknown.
Also, the FCC's orders allotted television stations which currently
operate on VHF channels substantially higher power levels for their digital
operations than were permitted for stations which currently operate on the UHF
band. As the Company's stations all operate on the UHF band, this power
disparity, if not reconsidered by the FCC, could have an adverse impact on the
competitive posture of the Company's TV stations after the digital conversion
takes place.
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Change of Control
Upon a Change of Control, Pegasus will be required to offer to purchase
all of the Notes then outstanding at 101% of the aggregate principal amount,
plus accrued and unpaid interest and Liquidated Damages, if any. The repurchase
price is payable in cash. There can be no assurance that, were a Change of
Control to occur, Pegasus would have sufficient funds to pay the purchase price
for all the Notes which Pegasus might be required to purchase. There can also be
no assurance that the subsidiaries of Pegasus would be permitted by the terms of
their outstanding indebtedness, including pursuant to the PM&C Indenture and the
New Credit Facility, to pay dividends to Pegasus to permit Pegasus to purchase
Notes. Any such dividends are currently prohibited until July 1, 1998 under the
PM&C Indenture. In addition, any such Change of Control transaction may also be
a change of control under the New Credit Facility and the PM&C Indenture, which
would require PM&C to prepay all amounts owing under the New Credit Facility and
to reduce the commitments thereunder to zero and to offer to purchase all
outstanding PM&C Notes at a price of 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon to the date of purchase. In
the event Pegasus does not have sufficient funds to pay the purchase price of
the Notes, upon a Change of Control, Pegasus could be required to seek third
party financing to the extent it did not have sufficient funds available to meet
its purchase obligations, and there can be no assurance that Pegasus would be
able to obtain such financing on favorable terms, if at all. See "Description of
Notes -- Repurchase at the Option of Holders -- Change of Control." In addition,
any Change of Control would be subject to the prior approval of the FCC.
Absence of Public Trading Market for the Notes
There is no public market for the Old Notes and the Company does not
intend to apply for listing of the Old Notes or the New Notes on any national
securities exchange or for quotation of the Notes through the Nasdaq National
Market. The Company has been advised by the Initial Purchaser that the Initial
Purchaser currently intends to make a market in the Notes; however, the Initial
Purchaser is under no obligation to do so and may discontinue any market-making
activities at any time without notice. No assurance can be given as to the
liquidity of the trading market for the New Notes or that an active public
market will develop or, if developed, will continue. If an active public market
does not develop or is not maintained, the market price and liquidity of the
Notes may be adversely affected.
Fraudulent Conveyance
Various fraudulent conveyance laws have been enacted for the protection
of creditors and may be utilized by a court to subordinate or avoid the Notes in
favor of other existing or future creditors of Pegasus. If a court in a lawsuit
on behalf of any unpaid creditor of Pegasus or a representative of Pegasus'
creditors were to find that, at the time Pegasus issued the Notes, Pegasus (x)
intended to hinder, delay or defraud any existing or future creditor or
contemplated insolvency with a design to prefer one or more creditors to the
exclusion in whole or in part of others or (y) did not receive fair
consideration or reasonably equivalent value for issuing the Notes and Pegasus
(i) was insolvent, (ii) was rendered insolvent by reason of such issuance, (iii)
was engaged or about to engage in a business or transaction for which its
remaining assets constituted unreasonably small capital to carry on its business
or (iv) intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, such court could void Pegasus'
obligations under the Notes and void such transactions. Alternatively, in such
event, claims of the holders of the Notes could be subordinated to claims of the
other creditors of Pegasus. Based upon financial and other information currently
available to it, Pegasus believes that the Notes were incurred for proper
purposes and in good faith and that Pegasus was solvent and will continue to be
solvent after issuing the Notes, had and will have sufficient capital for
carrying on its business after such issuance and will be able to pay its debts
as they had and mature.
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<PAGE>
Effect of Failure to Properly Tender Old Notes
The New Notes will be issued in exchange of Old Notes only after timely
receipt by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of Old Notes desiring to tender such Old Notes in exchange for New Notes
should allow sufficient time to ensure timely delivery. Neither the Exchange
Agent nor Pegasus is under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes for exchange. Old Notes that
are not tendered or are tendered but not accepted will, following consummation
of the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and lose, with certain exceptions, the benefits of the
Registration Rights Agreement. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Old Notes could be adversely affected. See "The Exchange Offer."
Prospectus Delivery Requirements of Holders of New Notes
Any holder of Old Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receive New Notes for its own account in exchange for Old Notes, where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution."
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<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
Pegasus' Ratio of Earnings to Fixed Charges for each of the periods
indicated was as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended September 30,
- ---------------------------------------------------------------------------------------------------------------------------------
Pro Pro
Forma Forma
1992 1993 1994 1995 1996 1996 1996 1997 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-- -- -- -- -- -- -- -- --
</TABLE>
For purposes of this calculation, earnings are defined as net income
(loss) before income taxes and extraordinary items and fixed charges. Fixed
charges consist of interest expense, amortization of deferred financing costs
and the component of operating lease expense which management believes
represents an appropriate interest factor. Earnings were inadequate to cover
combined fixed charges and preferred stock dividends by approximately $1.7
million, $4.8 million, $4.9 million, $8.1 million, $9.8 million, $8.9 million
and $20.4 million, for the years ended December 31, 1992, 1993, 1994, 1995 and
1996 and for the nine months ended September 30, 1996 and 1997, respectively. On
a pro forma basis, earnings were insufficient to cover combined fixed charges
and preferred stock dividends by approximately $44.3 million and $32.4 million
for the year ended December 31, 1996, and the nine months ended September 30,
1997, respectively. Pro forma data for the year ended December 31, 1996 and the
six months ended June 30, 1997 give effect to the Transactions, other than the
DTS Acquisition, as if such events had occurred in the beginning of such
periods.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of Pegasus'
obligations under the Purchase Agreement and the Registration Rights Agreement.
Pegasus will not receive any cash proceeds from the issuance of the New Notes
offered hereby. In consideration for issuing the New Notes as contemplated in
this Prospectus, Pegasus will receive in exchange an equal aggregate principal
amount of Old Notes, the form and terms of which are the same as the form and
terms of the New Notes, except as otherwise described herein under "The Exchange
Offer."
The Old Notes surrendered in exchange for the New Notes will be retired
and cancelled and cannot be reissued. Proceeds from the sale of the Old Notes in
the Notes Offering amounted to approximately $110.8 million, after deducting the
Initial Purchaser's discount and estimated fees and expenses. The Company used
or intends to use (i) approximately $94.2 million of the net proceeds of the
Notes Offering to repay indebtedness under the PSH Credit Facility, and (ii)
approximately $16.6 million for the cash portion of certain of the Pending DBS
Acquisitions. The remaining net proceeds, if any, together with cash on hand
will be used for the payment of interest on the Notes and the remaining cash
portion of the Pending DBS Acquisitions. Cash on hand and available borrowings
under the New Credit Facility will be used for working capital, general
corporate purposes and pending and future acquisitions.
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<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The Old Notes were sold by Pegasus on October 21, 1997 (the "Closing
Date") to the Initial Purchaser pursuant to the Purchase Agreement. The Initial
Purchaser subsequently resold the Old Notes (i) to "qualified institutional
buyers" as defined in Rule 144A under the Securities Act and (ii) outside the
U.S. in compliance with Regulation S under the Securities Act. As a condition to
the sale of the Old Notes, Pegasus and the Initial Purchaser entered into the
Registration Rights Agreement on October 21, 1997. Pursuant to the Registration
Rights Agreement, the Company agreed that, unless the Exchange Offer is not
permitted by applicable law or Commission policy, it would (i) file with the
Commission a Registration Statement under the Securities Act with respect to the
New Notes within 30 days after the Closing Date, (ii) use its best efforts to
cause such Registration Statement to become effective under the Securities Act
within 90 days after the Closing Date and (iii) upon effectiveness of the
Registration Statement, to commence the Exchange Offer, maintain the
effectiveness of the Registration Statement for at least 20 business days (or a
longer period if required by law) and deliver to the Exchange Agent New Notes in
the same aggregate principal amount as the Old Notes that were tendered by
holders thereof pursuant to the Exchange Offer. The Registration Statement of
which this Prospectus is a part is intended to satisfy certain of Pegasus'
obligations under the Registration Rights Agreement and the Purchase Agreement.
Resale of the New Notes
With respect to the New Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, Pegasus believes that a holder (other than (i) a broker-dealer who
purchases such New Notes directly from Pegasus to resell pursuant to Rule 144A
or any other available exemption under the Securities Act or (ii) any such
holder which is an "affiliate" of Pegasus within the meaning of Rule 405 under
the Securities Act) who exchanges the Old Notes for the New Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement with any person to participate, in the
distribution of the New Notes, will be allowed to resell the New Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the New Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires the New Notes in the Exchange Offer for the purpose of distributing or
participating in the distribution of the New Notes or is a broker-dealer, such
holder cannot rely on the position of the staff of the Commission enumerated in
certain no-action letters issued to third parties and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making or other trading activities. Pursuant to the
Registration Rights Agreement, Pegasus has agreed to make this Prospectus, as it
may be amended or supplemented from time to time, available to broker-dealers
for use in connection with any resale for a period of one year, subject to
certain exceptions, from the date that the Registration Statement to which this
Prospectus relates becomes effective. See "Plan of Distribution."
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, Pegasus will accept any and all Old
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of New Notes in exchange for each
$1,000 principal amount of
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outstanding Old Notes surrendered pursuant to the Exchange Offer. Old Notes may
be tendered only in integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms
of the Old Notes except that (i) the New Notes will be registered under the
Securities Act and hence the New Notes will not bear legends restricting their
transfer and (ii) holders of the New Notes will not be entitled to the certain
rights of holders of Old Notes under the Registration Rights Agreement, which
rights will terminate upon the consummation of the Exchange Offer. The New Notes
will evidence the same debt as the Old Notes (which they replace) and will be
issued under, and be entitled to the benefits of, the Indenture, which also
authorized the issuance of the Old Notes, such that both series will be treated
as a single class of debt securities under the Indenture.
As of December 31, 1997, all $115.0 million aggregate principal amount
of the Old Notes were outstanding and registered in the name of Cede & Co., as
nominee for the Depository Trust Company (the "Depositary" or "DTC"). Only a
registered holder of the Old Notes (or such holder's legal representative or
attorney-in-fact) as reflected on the records of the Trustee under the Indenture
may participate in the Exchange Offer. There will be no fixed record date for
determining registered holders of the Old Notes entitled to participate in the
Exchange Offer.
Holders of the Old Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. Pegasus
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
Pegasus shall be deemed to have accepted validly tendered Old Notes
when, as and if Pegasus has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of Old
Notes for the purposes of receiving the New Notes from Pegasus.
Holders who tender Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. Pegasus will pay all charges and expenses, other
than certain applicable taxes described below, in connection with the Exchange
Offer. See "The Exchange Offer -- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
February 25, 1998 unless Pegasus, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, Pegasus will notify the Exchange
Agent of any extension by oral or written notice and mail to the registered
holders of the Old Notes an announcement thereof, each prior to 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
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<PAGE>
Pegasus reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "The Exchange Offer -- Conditions" shall not
have been satisfied, to terminate the Exchange Offer by giving oral or written
notice of such delay, extension or termination to the Exchange Agent. Any such
delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by oral or written notice thereof to the registered
holders. If the Exchange Offer is amended in a manner determined by Pegasus to
constitute a material change, Pegasus will promptly disclose such amendment by
means of a prospectus supplement that will be distributed to the registered
holders, and Pegasus will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
Without limiting the manner in which Pegasus may choose to make a
public announcement of any delay, extension, amendment or termination of the
Exchange Offer, Pegasus shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
Interest on the New Notes
The New Notes bear interest at a rate equal to 95/8% per annum.
Interest on the New Notes is payable semi-annually on each April 15 and October
15, commencing on the first such date following their date of issuance. Holders
of New Notes will receive interest on April 15, 1998, from the date of initial
issuance of the New Notes, plus an amount equal to the accrued interest on the
Old Notes from the date of initial delivery to the date of exchange thereof for
New Notes. Holders of Old Notes that are accepted for exchange will be deemed to
have waived the right to receive any interest accrued on the Old Notes.
Procedures for Tendering
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or facsimile thereof, have the signatures
thereon guaranteed if required by the Letter of Transmittal, and mail or
otherwise deliver such Letter of Transmittal or such facsimile to the Exchange
Agent at the address set forth below under "The Exchange Offer - - Exchange
Agent" for receipt prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below.
The tender by a holder which is not withdrawn prior to the Expiration
Date will constitute an agreement between such holder and Pegasus in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO PEGASUS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
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<PAGE>
Any beneficial owner(s) of the Old Notes whose Old Notes are registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact the registered holder promptly and
instruct such registered holder to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such owner's own behalf, such owner
must, prior to completing and executing the Letter of Transmittal and delivering
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal
described below (see "The Exchange Offer -- Withdrawal of Tenders"), as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is
a member of one of the recognized signature guarantee programs identified in the
Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Pegasus, evidence
satisfactory to Pegasus of their authority to so act must be submitted with the
Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
Pegasus in its sole discretion, which determination will be final and binding.
Pegasus reserves the absolute right to reject any and all Old Notes not properly
tendered or any Old Notes Pegasus' acceptance of which would, in the opinion of
counsel for Pegasus, be unlawful. Pegasus also reserves the right to waive any
defects, irregularities or conditions of tender as to particular Old Notes.
Pegasus' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as Pegasus
shall determine. Although Pegasus intends to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither Pegasus, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Old Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived.
While Pegasus has no present plan to acquire any Old Notes which are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Old Notes which are not tendered pursuant to the Exchange Offer,
Pegasus reserves the right in its sole discretion to purchase or make offers for
any Old Notes that remain outstanding subsequent to the Expiration Date or, as
set forth below under "--Conditions," to terminate the Exchange Offer and, to
the extent permitted by applicable law, purchase Old Notes in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
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<PAGE>
By tendering, each holder will represent to the Company that, among
other things, (i) the New Notes to be acquired by the holder of the Old Notes in
connection with the Exchange Offer are being acquired by the holder in the
ordinary course of business of the holder, (ii) the holder has no arrangement or
understanding with any person to participate in the distribution of New Notes,
(iii) the holder acknowledges and agrees that any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer for
the purposes of distributing the New Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the staff of the Commission set forth in certain
no-action letters, (iv) the holder understands that a secondary resale
transaction described in clause (iii) above and any resales of New Notes
obtained by such holder in exchange for Old Notes acquired by such holder
directly from Pegasus should be covered by an effective registration statement
containing the selling securityholder information required by Item 507 or Item
508, as applicable, of Regulation S-K of the Commission and (v) the holder is
not an "affiliate," as defined in Rule 405 of the Securities Act, of Pegasus. If
the holder is a broker-dealer that will receive New Notes for its own account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, the holder is required to acknowledge in
the Letter of Transmittal that it will deliver a prospectus in connection with
any resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, the holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
Return of Old Notes
If any tendered Old Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Old Notes are withdrawn or
are submitted for a greater principal amount than the holders desire to
exchange, such unaccepted, withdrawn or non-exchanged Old Notes will be returned
without expense to the tendering holder thereof (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Depositary pursuant to the book-entry transfer procedures described below, such
Old Notes will be credited to an account maintained with the Depositary) as
promptly as practicable.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with
respect to the Old Notes at the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make
book-entry delivery of Old Notes by causing the Depositary to transfer such Old
Notes into the Exchange Agent's account at the Depositary in accordance with the
Depositary's procedures for transfer. However, although delivery of Old Notes
may be effected through book-entry transfer at the Depositary, the Letter of
Transmittal or facsimile thereof, with any required signature guarantees and any
other required documents, must, in any case, be transmitted to and received by
the Exchange Agent at the address set forth below under "The Exchange Offer --
Exchange Agent" on or prior to the Expiration Date or pursuant to the guaranteed
delivery procedures described below.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available or (ii) who cannot deliver their Old Notes, the Letter
of Transmittal or any other required documents to the Exchange Agent prior to
the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by Pegasus (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of such Old Notes and the principal amount of
Old Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within five business days after the Expiration Date, the
Letter of Transmittal (or a
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facsimile thereof) together with the certificate(s) representing the Old Notes
in proper form for transfer or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of Transmittal will be deposited
by the Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Old Notes in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Old Notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to
be withdrawn (including the certificate number or numbers and principal amount
of such Old Notes) and (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees). All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by Pegasus in its sole discretion, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under "The Exchange Offer -- Procedures
for Tendering" at any time prior to the Expiration Date.
Conditions
Notwithstanding any other term of the Exchange Offer, Pegasus shall not
be required to accept for exchange, or exchange the New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of such Old Notes, if the Exchange Offer violates applicable law,
rule or regulation or an applicable interpretation of the staff of the
Commission.
If Pegasus determines in its sole discretion that any of these
conditions are not satisfied, Pegasus may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering holders, (ii) extend the Exchange
Offer and retain all Old Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Old Notes
(see "The Exchange Offer -- Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, Pegasus will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Old Notes, and Pegasus will extend
the Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
If (i) Pegasus is not permitted to consummate this Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any Holder of Transfer Restricted Securities notifies Pegasus
within the specified time period that (A) it is prohibited by law or Commission
policy from participating in the Exchange Offer or (B) that it may not resell
the New Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and this Prospectus is not legally available for such
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resales or (C) that it is a broker- dealer and owns Notes acquired directly from
Pegasus or an affiliate of Pegasus, Pegasus is obligated to file with the
Commission a Shelf Registration Statement to cover resales of the Notes by the
Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. Pegasus is also
obligated to use its best efforts to cause the Shelf Registration Statement to
be declared effective as promptly as possible by the Commission. For purposes of
the foregoing, "Transfer Restricted Securities" means each Note until the
earliest to occur of (i) the date on which such Note has been exchanged by a
person other than a broker-dealer for a New Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of an Old Note
for a New Note, the date on which such New Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
this Prospectus, as it may be amended or supplemented, (iii) the date on which
such Note has been effectively registered under the Securities Act and disposed
of in accordance with the Shelf Registration Statement or (iv) the date on which
such Note is distributed to the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) Pegasus will use
its best efforts to have the Registration Statement declared effective by the
Commission on or prior to 90 days after the Closing Date, (ii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
Pegasus will commence the Exchange Offer and use its reasonable best efforts to
issue on or prior to 30 business days after the date on which the Registration
Statement was declared effective by the Commission, New Notes in exchange for
all Old Notes tendered prior thereto in the Exchange Offer and (iii) if
obligated to file the Shelf Registration Statement, Pegasus will use its best
efforts to file the Shelf Registration Statement with the Commission on or prior
to 60 days after such filing obligation arises (and in any event within 120 days
of the Closing Date) and to cause the Shelf Registration to be declared
effective by the Commission on or prior to 90 days after such obligation arises.
If (a) Pegasus fails to file any of the Registration Statements required by the
Registration Rights Agreement on or before the date specified for such filing,
(b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) Pegasus fails to consummate the Exchange Offer
within 30 business days of the Effectiveness Target Date with respect to this
Registration Statement or (d) the Shelf Registration Statement or the
Registration Statement of which this Prospectus is a part is declared effective
but thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then Pegasus will pay Liquidated Damages to each Holder
of Notes which constitute Transfer Restricted Securities, with respect to the
first 90-day period immediately following the occurrence of such Registration
Default in an amount equal to $.05 per week per $1,000 aggregate principal
amount of Notes held by such Holder. The amount of the Liquidated Damages will
increased by an additional $.05 per week per $1,000 aggregate principal amount
of Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $.30
per week per $1,000 aggregate principal amount of Notes. All accrued Liquidated
Damages will be paid by Pegasus on each Damages Payment Date to the Global Note
Holder by wire transfer to the amounts specified. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to
Pegasus (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
Termination of Certain Rights
All rights under the Registration Rights Agreement (including
registration rights) of holders of the Old Notes eligible to participate in the
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to Pegasus' continuing obligations (i) to indemnify the holders
(including any broker-dealers) and certain parties related to the holders
against certain liabilities (including liabilities under the Securities Act),
(ii) to
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provide, upon the request of any holder of a transfer-restricted Old Note, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Old Notes pursuant to Rule 144A, (iii) to use its best
efforts to keep this Registration Statement effective to the extent necessary to
ensure that it is available for resales of transfer-restricted Old Notes by
broker-dealers for a period of one year from the date on which this Registration
Statement is declared effective and (iv) to provide copies of the latest version
of the Prospectus to broker-dealers upon their request for a period of one year
from the date on which this Registration Statement is declared effective.
Exchange Agent
First Union National Bank has been appointed as Exchange Agent of the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
By Mail:
First Union National Bank
1525 West W.T. Harris Blvd., 3C3
Charlotte, NC 28288
Attention: Michael Klotz
By Hand/Overnight Express:
First Union National Bank
1525 West W.T. Harris Blvd., 3C3
Charlotte, NC 28288
Attention: Michael Klotz
By Facsimile:
(704) 590-7628
To confirm receipt:
(704) 590-7408
Fees and Expenses
The expenses of soliciting tenders will be borne by Pegasus. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of Pegasus and its affiliates.
Pegasus has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. Pegasus, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The expenses to be incurred in connection with the Exchange Offer will
be borne by Pegasus. Such expenses include registration fees, fees and expenses
of the Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
Pegasus will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
Consequence of Failures to Exchange
Participation in the Exchange Offer is voluntary. Holders of the Old
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Old Notes which are not exchanged for the New Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to a person whom the seller reasonably
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believes is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, (ii) in
a transaction meeting the requirements of Rule 144 under the Securities Act,
(iii) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the
Company, (vi) to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) or (vii)
pursuant to an effective registration statement and, in each case, in accordance
with any applicable securities laws of any state of the United States or any
other applicable jurisdiction.
Accounting Treatment
For accounting purposes, the Company will recognize no gain or loss as
a result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the New Notes.
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CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE EXCHANGE OFFER
It is the opinion of Drinker Biddle & Reath LLP, counsel to the
Company, that the material federal income tax consequences to holders whose Old
Notes are exchanged for New Notes in the Exchange Offer are as described herein,
subject to the limitations and qualifications set forth below. Because the New
Notes should not be considered to differ materially either in kind or in extent
from the Old Notes, the exchange of the New Notes for the Old Notes pursuant to
the Exchange Offer should not be treated as an "exchange" for federal income tax
purposes pursuant to Section 1001 of the Internal Revenue Code of 1986, as
amended (the "Code") and Treasury Regulation Section 1.1001-3. As a result, no
material federal income tax consequences should result to holders exchanging Old
Notes for New Notes. If, however, the exchange of Old Notes for New Notes were
treated as a taxable event, such transaction should constitute a
recapitalization for federal income tax purposes and holders would not recognize
any gain or loss upon such exchange.
The foregoing opinion is based upon the current provisions of the Code,
applicable existing and proposed Treasury Regulations promulgated thereunder,
judicial authority and current administrative rulings and practice. There can be
no assurance that the final Treasury Regulations will not differ materially from
those which are presently proposed nor that the Internal Revenue Service (the
"IRS") will not take a contrary view. No ruling from the IRS has been or will be
sought. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements or conclusions set
forth herein. Any such changes or interpretations may or may not be retroactive
and could affect the tax consequences to holders. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and individuals who are not citizens or
residents of the United States) may be subject to special rules not discussed
herein. AS A RESULT, EACH HOLDER OF OLD NOTES SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING HIS OR HER
OLD NOTES FOR NEW NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL,
STATE, LOCAL AND FOREIGN TAX LAWS.
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DESCRIPTION OF NOTES
General
The Old Notes were issued and the New Notes will be issued pursuant to
an Indenture dated October 21, 1997 (the "Indenture"), between the Company and
First Union National Bank, as trustee (the "Trustee"). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. A copy
of each of the Indenture and the Registration Rights Agreement have been filed
with the Commission. The definitions of certain terms used in the following
summary are set forth below under "--Certain Definitions." For purposes of this
"Description of Notes," the term "Company" refers only to Pegasus Communications
Corporation and not to any of its Subsidiaries.
The Indenture authorizes a maximum principal amount of $115.0 million
of the Old Notes and $115.0 million of the New Notes. The New Notes will be
issued solely in exchange for an equal principal amount of outstanding Old Notes
pursuant to the Exchange Offer. The terms of the New Notes will be substantially
identical to the Old Notes, except for the unrestricted tradeability of the New
Notes (provided that the holder is not an affiliate of the Company). All
references in this section to the Notes shall be deemed to be references to the
Old Notes and/or the New Notes, whichever are outstanding.
The Notes will rank senior in right of payment to all existing and
future subordinated Indebtedness of the Company and will rank pari passu in
right of payment with all existing and future senior Indebtedness of the
Company.
Substantially all operations of the Company are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the Notes.
On the date of issuance of the New Notes, none of the Company's Subsidiaries
will guarantee the Notes. However, the Company's obligations under the Notes may
be unconditionally guaranteed on a senior, unsecured basis, jointly and
severally, by each Subsidiary of the Company that executes and delivers a
supplemental indenture to the Indenture pursuant to the terms of the covenant
described under the caption entitled "--Certain Covenants--Subsidiary
Guarantees." Any right of the Company to receive assets of any of its
Subsidiaries that do not guarantee the Notes will be effectively subordinated to
the claims of that Subsidiary's creditors. On a pro forma basis, as of September
30, 1997, after giving effect to the Transactions, other than the DTS
Acquisition, the aggregate amount of Indebtedness and other obligations of the
Company's Subsidiaries (including Capital Lease Obligations and the PM&C Notes),
that would effectively rank senior in right of payment to the obligations of the
Company under the Notes would have been approximately $103.6 million. See "Risk
Factors--Substantial Indebtedness and High Degree of Leverage" and "Risk
Factors--Holding Company Structure; Dependence Upon Operations of Subsidiaries."
All of the Company's Subsidiaries will be Restricted Subsidiaries.
However, under certain circumstances, the Company will be able to designate
current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants set forth
in the Indenture.
Principal, Maturity and Interest
The Notes will be limited in aggregate principal amount to $115.0
million and will mature on October 15, 2005. Interest on the Notes will accrue
at the rate of 9 5/8% per annum and will be payable semi-annually in arrears on
April 15 and October 15, commencing on April 15, 1998, to Holders of record on
the immediately preceding April 1 and October 1. Interest on the Notes will
accrue from the most recent date to which interest
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has been paid, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal of and interest and premium and Liquidated Damages, if
any, on the Notes will be payable at the office or agency of the Company
maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest and Liquidated Damages, if any, may
be made by check mailed to the Holders of the Notes at their respective
addresses set forth in the register of Holders of Notes; provided that all
payments of principal, premium, interest and Liquidated Damages, if any, with
respect to Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Notes will be
issued in denominations of $1,000 and integral multiples thereof.
Optional Redemption
The Notes will not be redeemable at the Company's option prior to
October 15, 2001. The Notes may be redeemed, in whole or in part, at the option
of the Company on or after October 15, 2001, at the redemption prices specified
below (expressed as percentages of the principal amount thereof), in each case,
together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption, upon not less than 30 nor more than 60 days'
notice, if redeemed during the twelve-month period beginning on October 15 of
the years indicated below:
Redemption
Year Price
---- ----------
2001..............................................104.813%
2002..............................................102.407%
2003 and thereafter...............................100.000%
Notwithstanding the foregoing, on or prior to October 15, 2000, the
Company may, on any one or more occasions, use the net proceeds of one or more
offerings of its Capital Stock to redeem up to 35% of the aggregate principal
amount of the Notes at a redemption price of 109.625% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of redemption; provided that, after any such redemption, the aggregate
principal amount of the Notes outstanding (excluding Notes held by the Company
and its Subsidiaries) must equal at least $75.0 million; and provided further,
that any such redemption shall occur within 90 days of the date of closing of
such offering of Capital Stock of the Company.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection
of Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
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Mandatory Redemption
The Company is not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (but not, in
the case of any Holder requiring the Company to purchase less than all of the
Notes held by such Holder, any Note in principal amount less than $1,000) of
such Holder's Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase (the "Change of Control
Payment"). Within ten days following any Change of Control, the Company will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes pursuant to
the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Restricted Subsidiaries taken as a
whole. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to another Person or group may
be uncertain.
The PM&C Notes and the New Credit Facility restrict PM&C and its
Subsidiaries from paying dividends or making other distributions to the Company.
Thus, in the event a Change of Control occurs, the Company could seek the
consent of its Subsidiaries' lenders to provide funds to the Company for the
purchase of the Notes or could attempt to refinance the borrowings that contain
such restrictions. If the Company does not obtain such a consent or repay such
borrowings, the Company will likely not have the financial resources to purchase
the Notes and such Subsidiaries will be restricted in paying dividends to the
Company for the purpose of such purchase. In any event, there can be no
assurance that the Company's
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Subsidiaries will have the resources available to make any such dividend or
distribution. In addition, any future credit agreements or other agreements
relating to Indebtedness to which the Company becomes a party may prohibit the
Company from purchasing any Notes prior to their maturity, and may also provide
that certain change of control events with respect to the Company would
constitute a default thereunder. In the event a Change of Control occurs at a
time when the Company is prohibited from purchasing Notes, the Company could
seek the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the
Indenture. See "Risk Factors--Change of Control."
The Company will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Asset Sales
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair value
(evidenced by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 85% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
cash; provided that the amount of (x) any liabilities (as shown on the Company's
or such Restricted Subsidiary's most recent balance sheet or in the notes
thereto), of the Company or any Restricted Subsidiary (other than liabilities
that are by their terms subordinated to the Notes or any guarantee thereof) that
are assumed by the transferee of any such assets and (y) any securities, notes
or other obligations received by the Company or any such Restricted Subsidiary
from such transferee that are contemporaneously (subject to ordinary settlement
periods) converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision. Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may engage in Asset Swaps (which shall not be deemed to be Asset
Sales for purposes of this covenant); provided that, immediately after giving
effect to such Asset Swap, the Company would be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Indebtedness to Adjusted
Operating Cash Flow Ratio set forth in the first paragraph of the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock."
Within 180 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or the applicable Restricted Subsidiary may, at its option,
apply such Net Proceeds (a) to permanently reduce Indebtedness outstanding
pursuant to any Bank Facility (and to permanently reduce the commitments
thereunder by a corresponding amount), (b) to permanently reduce Indebtedness of
any of the Company's Restricted Subsidiaries or (c) to the acquisition by the
Company or any of its Restricted Subsidiaries of another business, the making of
a capital expenditure or the acquisition of other long-term assets, in each
case, in a Permitted Business; provided, however, that if the Company or any
Restricted Subsidiary enters into a legally binding agreement with an entity
that is not an Affiliate of the Company to reinvest such Net Proceeds in
accordance with this clause (c) within 180 days after the receipt thereof, the
provisions of this covenant will be satisfied so long as such binding agreement
is consummated within one year after the receipt of such Net Proceeds. If any
such legally binding agreement to reinvest such Net Proceeds is terminated, then
the Company may, within 360 days of such Asset Sale, apply such Net Proceeds as
provided in clauses (a), (b) or (c) above (without regard to the proviso
contained in clause (c) above). Pending the final application of any such Net
Proceeds, the Company or the applicable Restricted Subsidiary may temporarily
reduce Indebtedness pursuant to any Bank Facility or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. A reduction of
Indebtedness pursuant to any Bank Facility is not "permanent" for purposes of
clause (a) of this paragraph if an amount equal to the amount of such reduction
is reborrowed and used to make an acquisition described in clause
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(c) of this paragraph within the time period specified in this covenant. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
Within five days of each date on which the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Notes and the holders of Pari Passu Debt, to the extent required by
the terms thereof (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and Pari Passu Debt that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus, in each case, accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture or the agreements governing Pari Passu Debt, as
applicable; provided, however, that the Company may only purchase Pari Passu
Debt in an Asset Sale Offer that was issued pursuant to an indenture having a
provision substantially similar to the Asset Sale Offer provision contained in
the Indenture. To the extent that the aggregate amount of Notes and Pari Passu
Debt tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds,
the Company may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes and Pari Passu Debt
surrendered exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes and Pari Passu Debt to be purchased on a pro rata basis, based upon the
principal amount thereof surrendered in such Asset Sale Offer. Upon completion
of such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Certain Covenants
Restricted Payments
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, (i) declare or
pay any dividend or make any other payment or distribution on account of the
Company's Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or on account
of any Qualified Subsidiary Stock or make any payment or distribution (other
than compensation paid to, or reimbursement of expenses of, employees in the
ordinary course of business) to or for the benefit of the direct or indirect
holders of the Company's Equity Interests or the direct or indirect holders of
any Qualified Subsidiary Stock in their capacities as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or additional shares of such Qualified Subsidiary Stock); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Company or any direct or indirect parent of the Company (other than any
such Equity Interests owned by the Company or any of its Restricted
Subsidiaries); (iii) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes, except a payment of interest or principal at
Stated Maturity; (iv) forgive any loan or advance to or other obligation of any
Affiliate of the Company (other than a loan or advance to or other obligations
of a Wholly Owned Restricted Subsidiary of the Company) which at the time it was
made was not a Restricted Payment; or (v) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (v) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
immediately after giving effect to such Restricted Payment:
(A) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(B) the Company would be permitted to incur $1.00 of additional
Indebtedness pursuant to the Indebtedness to Adjusted Operating Cash
Flow Ratio described in the first paragraph of the covenant described
under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(C) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Closing Date (excluding Restricted Payments permitted by
clauses (2) and (3) (of the next succeeding paragraph), is less than
the sum of, without
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duplication, (i) an amount equal to the Cumulative Operating Cash Flow
for the period (taken as one accounting period) from the beginning of
the first full month commencing after the Closing Date to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (the "Basket Period") less 1.4 times the Company's Cumulative
Total Interest Expense for the Basket Period, plus (ii) 100% of the
aggregate net cash proceeds and, in the case of proceeds consisting of
assets constituting or used in a Permitted Business, plus (iii) 100% of
the fair market value of the aggregate net proceeds other than cash
received since the Closing Date (1) by the Company as capital
contributions to the Company (other than from a Subsidiary) or (2) from
the sale by the Company (other than to a Subsidiary) of its Equity
Interests (other than Disqualified Stock), plus (iv) to the extent that
any Restricted Investment that was made after the Closing Date is sold
for cash or otherwise liquidated or repaid for cash, the Net Proceeds
received by the Company or a Wholly Owned Restricted Subsidiary of the
Company upon the sale, liquidation or repayment of such Restricted
Investment, plus (v) to the extent that any Unrestricted Subsidiary is
designated by the Company as a Restricted Subsidiary, an amount equal
to the fair market value of such Investment at the time of such
designation, plus (vi) 100% of any cash dividends and other cash
distributions received by the Company from an Unrestricted Subsidiary,
plus (vii) $2.5 million.
The foregoing provisions shall not prohibit (1) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (2) the redemption, repurchase, retirement or other acquisition of
any Equity Interests or subordinated Indebtedness of the Company in exchange
for, or out of the net proceeds of, the substantially concurrent sale (other
than to a Subsidiary of the Company) of other Equity Interests of the Company
(other than any Disqualified Stock); provided that the amount of any such net
proceeds that are utilized for any such redemption, repurchase, retirement or
other acquisition shall be excluded from clause (C)(ii) of the preceding
paragraph; (3) the defeasance, redemption or repurchase of Indebtedness with the
proceeds of a substantially concurrent issuance of Permitted Refinancing Debt in
accordance with the provisions of the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock;" (4) the payment by the Company of advances under the Split Dollar
Agreement in an amount not to exceed $250,000 in any four-quarter period; (5)
the repurchase or redemption from employees of the Company and its Subsidiaries
(other than the Principal) of Capital Stock of the Company in an amount not to
exceed an aggregate of $5.0 million since the date of the Indenture; (6) the
payment of dividends on the Series A Preferred Stock in accordance with the
terms thereof as in effect on the Closing Date; provided, however, that cash
dividends may not be paid on the Series A Preferred Stock pursuant to this
clause (6) prior to July 1, 2002; (7) the issuance of Subordinated Exchange
Notes in exchange for shares of the Series A Preferred Stock; provided that such
issuance is permitted by the covenant described below under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock;" (8) in the event that the Company elects to issue Subordinated Exchange
Notes in exchange for Series A Preferred Stock, cash payments made in lieu of
the issuance of Subordinated Exchange Notes having a face amount less than
$1,000 and any cash payments representing accrued and unpaid dividends in
respect thereof, not to exceed $100,000 in the aggregate in any fiscal year; and
(9) cash payments made in lieu of the issuance of additional Subordinated
Exchange Notes having a face amount less than $1,000 and any cash payments
representing accrued and unpaid interest in respect thereof, not to exceed
$100,000 in the aggregate in any fiscal year.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or the applicable
Restricted Subsidiary, as the case may be, net of any liabilities proposed to be
assumed by the transferee and novated pursuant to a written agreement releasing
the Company and its Subsidiaries. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this covenant were computed,
which calculations may be based upon the Company's latest available financial
statements.
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The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries in the Subsidiary so
designated shall be deemed to be Restricted Payments at the time of such
designation (valued as set forth below) and shall reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments shall be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation shall only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary would
otherwise meet the definition of an Unrestricted Subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company may not, and may not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and shall not, and shall not permit any Subsidiary Guarantor to,
issue any Disqualified Stock and shall not permit any of its Restricted
Subsidiaries that are not Subsidiary Guarantors to issue any shares of preferred
stock (other than Qualified Subsidiary Stock); provided, however, that the
Company or any Restricted Subsidiary may incur Indebtedness (including Acquired
Debt) or issue shares of preferred stock (including Disqualified Stock) if, in
each case, (a) the Company's Indebtedness to Adjusted Operating Cash Flow Ratio
as of the date on which such Indebtedness is incurred or such preferred stock or
Disqualified Stock is issued would have been 7.0 to 1 or less, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or preferred stock had been issued, as the case may be, as of
the date of such calculation and (b) no Default or Event of Default would occur
as a consequence thereof.
The Indenture also provides that the Company will not, and will not
permit any Subsidiary Guarantor to, incur any Indebtedness that is contractually
subordinated to any other Indebtedness of the Company or of such Subsidiary
Guarantor, as the case may be, unless such Indebtedness is also contractually
subordinated to the Notes or the Subsidiary Guarantee of such Subsidiary
Guarantor, as the case may be, on substantially identical terms; provided,
however, that no Indebtedness shall be deemed to be contractually subordinated
to any other Indebtedness solely by virtue of being unsecured.
The foregoing provisions shall not apply to (collectively, "Permitted
Debt"):
(i) the incurrence by the Company's Unrestricted Subsidiaries
of Non-Recourse Debt or the issuance by such Unrestricted Subsidiaries
of preferred stock; provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary or any
such preferred stock becomes preferred stock (other than Qualified
Subsidiary Stock) of a Restricted Subsidiary, as the case may be, such
event shall be deemed to constitute an incurrence of Indebtedness by,
or an issuance of preferred stock (other than Qualified Subsidiary
Stock) of, as the case may be, a Restricted Subsidiary of the Company;
(ii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness pursuant to one or more Bank Facilities if
the aggregate principal amount at any time outstanding incurred
pursuant to this clause (ii) does not exceed $50.0 million;
(iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness under the
Subordinated Exchange Notes to pay interest on outstanding Subordinated
Exchange Notes;
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(v) Indebtedness under the Notes and the Subsidiary
Guarantees;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Wholly Owned Restricted Subsidiaries; provided, however,
that (1) if the Company or a Subsidiary Guarantor is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all obligations with respect to the
Notes or the Subsidiary Guarantee of such Subsidiary Guarantor, as the
case may be, and (2)(A) any subsequent issuance or transfer of Equity
Interests that result in any such Indebtedness being held by a Person
other than the Company or a Wholly Owned Restricted Subsidiary of the
Company and (B) any sale or other transfer of such Indebtedness to a
Person that is not either the Company or a Wholly Owned Restricted
Subsidiary of the Company shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $7.5 million at any time outstanding,
including all Permitted Refinancing Debt incurred pursuant to clause
(viii) below to refund, replace or refinance any Indebtedness incurred
pursuant to this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Debt in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace,
defease or refund, Indebtedness (other than intercompany Indebtedness)
that was permitted by the Indenture to be incurred;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by
any other clause of this paragraph) in an aggregate principal amount at
any time outstanding, including all Permitted Refinancing Debt incurred
pursuant to clause (viii) above to refund, replace or refinance any
Indebtedness incurred pursuant to this clause (ix), not to exceed $7.5
million; and
(x) the guarantee by the Company or any Restricted Subsidiary
of the Company of Indebtedness of the Company or a Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant. For purposes of determining compliance with this covenant, in
the event that an item of Indebtedness meets the criteria of more than
one of the categories of Permitted Debt described in clauses (i)
through (x) above or is permitted to be incurred pursuant to the first
paragraph of this covenant and also meets the criteria of one or more
of the categories of Permitted Debt described in clauses (i) through
(x) above, the Company shall, in its sole discretion, classify such
item of Indebtedness in any manner that complies with this covenant and
may from time to time reclassify such item of Indebtedness in any
manner in which such item could be incurred at the time of such
reclassification. For purposes of this paragraph, "Indebtedness"
includes Disqualified Stock and preferred stock of Subsidiaries.
Accrual of interest and the accretion of accreted value will not be
deemed to be an incurrence of Indebtedness for purposes of this
covenant.
Limitation of Certain Subsidiary Indebtedness and Preferred Stock
The Indenture provides that, notwithstanding any other provision of the
Indenture to the contrary, the Company will not permit any of its Restricted
Subsidiaries to incur any Indebtedness (other than Eligible Indebtedness) or to
issue any Disqualified Stock; provided that any Restricted Subsidiary that is a
Subsidiary Guarantor may incur Indebtedness (whether or not such Indebtedness is
Eligible Indebtedness) or issue
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Disqualified Stock if such incurrence or issuance is permitted under the
covenant described above under the caption "-Incurrence of Indebtedness and
Issuance of Preferred Stock," provided further that, notwithstanding the
immediately preceding proviso, in no event shall the Company permit any of its
Restricted Subsidiaries to incur any Indebtedness represented by senior secured
bonds or other senior secured securities, unless such Subsidiary is a Subsidiary
Guarantor and its Subsidiary Guarantee is secured on an equal and ratable basis
with such other senior secured bonds or senior secured securities.
Liens
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly create, incur,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired,
or any income or profits therefrom, or assign or convey any right to receive
income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (a) the terms of any Indebtedness permitted by the Indenture to be
incurred by any Subsidiary of the Company; provided, that, any such Indebtedness
permits the payment of cash dividends to the Company in an amount sufficient to
enable the Company to make payments of (A) interest required to be paid in
respect of the Notes and (B) after July 1, 2002, dividends required to be paid
in respect of the Series A Preferred Stock and interest required to be paid in
respect of the Exchange Notes, if issued, in each case, in accordance with the
terms thereof (except during the continuance of a default or event of default
under such other Indebtedness), (b) Existing Indebtedness as in effect on the
Closing Date, (c) the Indenture, the Notes and the Subsidiary Guarantees, (d)
applicable law, (e) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person and its Subsidiaries, or the
property or assets of the Person and its Subsidiaries, so acquired, (f) by
reason of customary non-assignment provisions in leases and other contracts
entered into in the ordinary course of business and consistent with past
practices or (g) any agreement for the sale of any Subsidiary or its assets that
restricts distributions by that Subsidiary pending its sale.
Merger, Consolidation or Sale of Assets
The Indenture provides that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the Obligations of the
Company under the Notes, the Indenture and the Registration Rights Agreement
pursuant to a supplemental indenture in a
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form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; (iv) the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Indebtedness to
Adjusted Operating Cash Flow Ratio set forth in the first paragraph of the
covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" and (v) each Subsidiary Guarantor,
if any, unless it is the other party to the transactions described above, shall
have by supplemental indenture confirmed that its Subsidiary Guarantee shall
apply to such Person's obligations under the Indenture and the Notes.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make any contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each of the
foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable transaction
by the Company or such Restricted Subsidiary with an unrelated Person and (ii)
the Company delivers to the Holders (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and a majority of the Independent Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Company or such Restricted Subsidiary of such Affiliate Transaction from
a financial point of view issued by an investment banking firm of national
standing; provided that the Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in any Affiliate Transaction involving
aggregate consideration in excess of $1.0 million at any time that there is not
at least one Independent Director on the Company's Board of Directors; and
provided further that (w) any employment agreement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary,
(x) transactions between or among the Company and/or its Restricted
Subsidiaries, (y) the payment of any dividend on, or the issuance of additional
Subordinated Exchange Notes in exchange for, the Series A Preferred Stock,
provided that such dividends are paid on a pro rata basis and the additional
Subordinated Exchange Notes are issued in accordance with the Certificate of
Designation, and (z) transactions permitted by the provisions of the covenant
described under the caption "--Certain Covenants--Restricted Payments," in each
case, shall not be deemed Affiliate Transactions.
Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Restricted Subsidiaries
The Indenture provides that the Company (i) will not, and will not
permit any Wholly Owned Restricted Subsidiary of the Company to, transfer,
convey, sell or otherwise dispose of any Capital Stock of any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described under the caption "--Repurchase at the Option of
Holders--Asset Sales," and (ii) shall not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
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Subsidiary Guarantees
The Indenture provides that the Company will not permit any Restricted
Subsidiary to guarantee the payment of any Indebtedness of the Company or any
Indebtedness of any Subsidiary Guarantor (in each case, the "Guaranteed Debt;"
the Company or the Subsidiary Guarantor that is primarily liable on the
Guaranteed Debt being the "Obligor") unless (i) if such Restricted Subsidiary is
not a Subsidiary Guarantor, such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture in form and substance
reasonably satisfactory to the Trustee providing for a guarantee (a "Subsidiary
Guarantee") of payment of the Notes by such Restricted Subsidiary, (ii) if the
Guaranteed Debt is by its express terms subordinated in right of payment to the
Notes or the Subsidiary Guarantee of such Obligor, any such guarantee of such
Subsidiary Guarantor with respect to the Guaranteed Debt shall be subordinated
in right of payment to such Subsidiary Guarantor's Subsidiary Guarantee with
respect to the Notes substantially to the same extent as the Guaranteed Debt is
subordinated to the Notes or the Subsidiary Guarantee of such Obligor, (iii)
such Restricted Subsidiary waives and will not in any manner whatsoever claim or
take the benefit or advantage of, any rights of reimbursement indemnity or
subrogation or any other rights against the Company or any other Restricted
Subsidiary as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee and (iv) such Restricted Subsidiary shall deliver to the
Trustee an opinion of counsel to the effect that (A) such Subsidiary Guarantee
of the Notes has been duly executed and authorized and (B) such Subsidiary
Guarantee of the Notes constitutes a valid, binding and enforceable obligation
of such Restricted Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including, without
limitation, all laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity.
The Indenture provides that no Subsidiary Guarantor may consolidate
with or merge with or into (whether or not such Subsidiary Guarantor is the
surviving Person), another corporation, Person or entity whether or not
affiliated with such Subsidiary Guarantor unless (i) subject to the provisions
of the following paragraph, the Person formed by or surviving any such
consolidation or merger (if other than such Subsidiary Guarantor) assumes all
the obligations of such Subsidiary Guarantor pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
the Notes, the Indenture and the Registration Rights Agreement; (ii) immediately
after giving effect to such transaction no Default or Event of Default exists;
and (iii) the Company would be permitted to incur $1.00 of additional
Indebtedness pursuant to the Indebtedness to Adjusted Operating Cash Flow Ratio
described in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition
of all of the assets of any Subsidiary Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any Subsidiary Guarantor, then such Subsidiary Guarantor (in the event
of a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all the capital stock of such Subsidiary Guarantor or the
corporation acquiring the property (in the event of a sale or other disposition
of all of the assets of such Subsidiary Guarantor) will be released and relieved
of any obligation under its Subsidiary Guarantee; provided that the Net Proceeds
of such sale or other "--Repurchase at Option of Holders--Asset Sales."
Any Subsidiary Guarantor that is designated as an Unrestricted
Subsidiary in accordance with the terms of the Indenture will be released and
relieved of its obligations under its Subsidiary Guarantee for so long as such
Subsidiary is so designated.
No Amendment to Subordination Provisions
The Indenture provides that, without the consent of each Holder of
Notes outstanding, the Company will not amend, modify or alter the Subordinated
Exchange Note Indenture in any way that will (i) increase the rate of or change
the time for payment of interest on any Subordinated Exchange Notes, (ii)
increase the principal of, advance the final maturity date of or shorten the
Weighted Average Life to Maturity of any Subordinated
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Exchange Notes, (iii) alter the redemption provisions or the price or terms at
which the Company is required to offer to purchase such Subordinated Exchange
Notes in a manner that would be adverse to any Holder of Notes or (iv) amend the
provisions of Article 10 of the Subordinated Exchange Note Indenture (which
relate to subordination).
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods specified in the Commission's rules and regulations. In addition,
following consummation of the Exchange Offer, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability within
the time periods set forth in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition to the
financial information required by the Exchange Act, each such quarterly and
annual report shall be required to contain "summarized financial information"
(as defined in Rule 1-02(aa)(1) of Regulation S-X under the Exchange Act)
showing Adjusted Operating Cash Flow for the Company and its Restricted
Subsidiaries, on a consolidated basis, where Adjusted Operating Cash Flow for
the Company is calculated in a manner consistent with the manner described under
the definition of "Adjusted Operating Cash Flow" contained herein. The
summarized financial information required pursuant to the preceding sentence
may, at the election of the Company, be included in the footnotes to audited
consolidated financial statements or unaudited quarterly financial statements of
the Company and shall be as of the same dates and for the same periods as the
consolidated financial statements of the Company and its Subsidiaries required
pursuant to the Exchange Act. In addition, the Company has agreed that, for so
long as any Notes remain outstanding, it will furnish to the holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event
of Default: (1) default by the Company in the payment of interest and Liquidated
Damages, if any, on the Notes when the same becomes due and payable and the
Default continues for a period of 30 days; (2) default by the Company in the
payment of the principal of or premium, if any, on the Notes when the same
becomes due and payable at maturity, upon redemption or otherwise; (3) failure
by the Company or any Subsidiary to comply with the provisions described under
the captions "--Repurchase at the Option of Holders--Change of Control,"
"--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments, "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock" or "--Certain Covenants--Merger, Consolidation
or Sale of Assets;" (4) failure by the Company or any Subsidiary for 60 days
after notice to comply with any of its other agreements in the Indenture or the
Notes; (5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries), whether such Indebtedness or guarantee now exists, or shall be
created hereafter, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated,
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aggregates $5.0 million or more; (6) a final judgment or final judgments for the
payment of money are entered by a court or courts of competent jurisdiction
against the Company or any Restricted Subsidiary that would be a Significant
Subsidiary and such judgment or judgments remain unpaid, undischarged or
unstayed for a period of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $5.0 million; (7) certain events of bankruptcy or
insolvency with respect to the Company, any Restricted Subsidiary that would
constitute a Significant Subsidiary or any group of Restricted Subsidiaries
that, taken together, would constitute a Significant Subsidiary and (8) the
termination of any Subsidiary Guarantee for any reason not permitted by the
Indenture, or the denial by any Subsidiary Guarantor or any Person acting on
behalf of any Subsidiary Guarantor of such Subsidiary Guarantor's obligations
under its respective Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon such declaration,
the principal of, premium, if any, and accrued and unpaid interest and
Liquidated Damages, if any, on the Notes shall be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, any
Restricted Subsidiary that would constitute a Significant Subsidiary or any
group of Restricted Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest or Liquidated Damages, if any) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
October 15, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to October 15, 2001, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of principal, interest or premium or Liquidated Damages, if any, on the
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company or the Subsidiary Guarantors under the Notes, the
Subsidiary Guarantees or the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
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Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes and have each
Subsidiary Guarantor's obligation discharged with respect to its Subsidiary
Guarantee ("Legal Defeasance") except for (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Notes concerning issuing temporary Notes,
registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and to hold money for security
payments held in trust, (iii) the rights, powers, trusts, duties and immunities
of the Trustee, and the Company's obligations in connection therewith and (iv)
the Legal Defeasance provisions of the Indenture. In addition, the Company may,
at its option and at any time, elect to have the obligations of the Company and
each Subsidiary Guarantor released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in United States Dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, interest and premium and Liquidated
Damages, if any, on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit (or greater period of
time in which any such deposit of trust funds may remain subject to bankruptcy
or insolvency laws insofar as those apply to the deposit by the Company); (v)
such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or instrument
(other than the Indenture) to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company must have delivered to the Trustee an opinion of counsel to the effect
that, as of the date of such opinion, (A) the trust funds will not be subject to
rights of holders of Indebtedness other than the Notes and (B) assuming no
intervening bankruptcy of the Company between the date of deposit and the 91st
day following the deposit and assuming no Holder of Notes is an insider of the
Company, after the 91st day following the deposit, the trust funds will not be
subject to the effects of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally under any applicable
United States or state law; (vii) the Company must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors
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of the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture, the Notes or the Subsidiary Guarantees may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or compliance with any provision of the Indenture or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or interest or premium or Liquidated
Damages, if any, on the Notes (except a rescission of acceleration of the Notes
by the Holders of a majority in aggregate principal amount of the Notes and a
waiver of the payment default that resulted from such acceleration), (v) make
any Note payable in money other than that stated in the Notes, (vi) make any
change in the provisions of the Indenture relating to waivers of past Defaults
or the rights of Holders of Notes to receive payments of principal of or
interest or premium or Liquidated Damages, if any, on the Notes, (vii) waive a
redemption payment with respect to any Note (other than a payment required by
one of the covenants described above under the caption "--Repurchase at the
Option of Holders") or (viii) make any change in the foregoing amendment and
waiver provisions or (ix) except as provided under the caption "--Legal
Defeasance and Covenant Defeasance" or in accordance with the terms of the
Indenture or any Subsidiary Guarantee, release a Subsidiary Guarantor from its
obligations under its Subsidiary Guarantee or make any change in a Subsidiary
Guarantee that would adversely affect the Holders of the Notes.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Company, a Subsidiary Guarantor (with respect to a Subsidiary
Guarantee or the Indenture to which it is a party) and the Trustee may amend or
supplement the Indenture, the Notes or the Subsidiary Guarantees to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's or any Subsidiary Guarantor's obligations to Holders of Notes in
the case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
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with requirements of the Commission in order to maintain the qualification of
the Indenture under the Trust Indenture Act or to allow any Subsidiary Guarantor
to guarantee the Notes.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
Book-Entry, Delivery and Form
The Notes have been, and will continue to be issued in fully
registered, global form without coupons in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof. Except as set forth below, the
Notes have been, and will continue to be, deposited with, or on behalf of, DTC
and registered in the name of Cede & Co., as nominee of DTC (such nominee being
referred to herein as the "Global Note Holder"). The New Notes will be so
deposited and registered in the form of a Global Note (the "Global Note").
Except as set forth below, the Global Note may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Note for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global Note
will not be entitled to receive physical delivery of Certificated Notes (as
defined below).
Initially, the Trustee will act as Paying Agent and Registrar. The
Notes may be presented for registration of transfer and exchange at the offices
of the Registrar.
Depository Procedures
The following description of the operations and procedures of DTC is
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes by DTC from time to
time. The Company takes no responsibility for these operations and procedures
and urges investors to contact the system or their participants directly to
discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or
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the Indirect Participants. The ownership interests in, and transfers of
ownership interests in, each security held by or on behalf of DTC are recorded
on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Note, DTC will credit the
accounts of Participants with portions of the principal amount of the Global
Note and (ii) ownership of such interests in the Global Note will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants and
the Indirect Participants (with respect to other owners of beneficial interest
in the Global Note).
All interests in the Global Note may be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own. Consequently,
the ability to transfer beneficial interests in the Global Note to such persons
will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in the Global Note to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interest in the Global Note will
not have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
"Holders" thereof under the Indenture for any purpose.
Payments in respect of the principal of, and premium, if any,
Liquidated Damages, if any, and interest on the Global Note will be payable to
DTC in its capacity as the registered Holder under the Indenture. Under the
terms of the Indenture, the Company and the Trustee will treat the persons in
whose names the Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments and for any and all other
purposes whatsoever. Consequently, neither the Company, the Trustee nor any
agent of the Company or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Note, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Global Note or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Company that its
current practice, upon receipt of any payment in respect of securities such as
the Notes (including principal and interest), is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in the principal amount of beneficial
interest in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the Global Note are expected to be eligible to trade in
DTC's Same-Day Funds Settlement System and secondary market trading activity in
such interests will, therefore, settle in immediately available funds, subject
in all cases to the rules and procedures of DTC and its Participants. See
"--Same Day Settlement and Payment." Transfers between Participants in DTC will
be effected in accordance with DTC's procedures, and will be settled in same day
funds.
DTC has advised the Company that it will take any action permitted to
be taken by a Holder of Notes only at the direction of one or more Participants
to whose account DTC has credited the interests in the Global Note and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the
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Notes, DTC reserves the right to exchange the Global Notes for legended Note in
certificated form, and to distribute such Notes to its Participants.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the Global Note among Participants in DTC it is under
no obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
nor any of their respective agents will have any responsibility for the
performance by DTC or its participants or indirect participants of its
obligations under the rules and procedures governing its operations.
Exchange of Book-Entry Note for Certificated Notes
The Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies the Company
that it is unwilling or unable to continue as depositary for the Global Note and
the Company thereupon fails to appoint a successor depositary or (y) has ceased
to be a clearing agency registered under the Exchange Act, (ii) the Company, at
its option, notifies the Trustee in writing that it elects to cause the issuance
of the Certificated Notes or (iii) there shall have occurred and be continuing a
Default or Event of Default with respect to the Notes. In addition, beneficial
interests in the Global Note may be exchanged for Certificated Notes upon
request but only upon prior written notice given to the Trustee by or on behalf
of DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for the Global Note or beneficial interests therein will
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the depositary (in accordance with its customary procedures).
Same Day Settlement and Payment
The Indenture will require that payments in respect of the Notes
represented by the Global Note (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. With
respect to Notes in certificated form, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof or, if no such account is specified, by mailing a check to each such
Holder's registered address. The Notes represented by the Global Note are
expected to be eligible to trade in the Depositary's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Notes will,
therefore, be required by the Depositary to be settled in immediately available
funds. The Company expects that secondary trading in any certificated Notes will
also be settled in immediately available funds.
Registration Rights; Liquidated Damages
Upon the effectiveness of the Registration Statement of which this
prospectus is a part (the "Exchange Offer Registration Statement"), the Company
will offer to the Holders of Transfer Restricted Securities pursuant to the
Exchange Offer who are able to make certain representations the opportunity to
exchange their Transfer Restricted Securities for New Notes. If (i) the Company
is not required to file the Exchange Offer Registration Statement or permitted
to consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities notifies the Company prior to the 20th day following consummation of
the Exchange Offer that (A) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) that it may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (C) that it is a
broker-dealer and owns Notes acquired directly from the Company or an affiliate
of the Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Notes by the Holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. The Company will use its best efforts to cause
the applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer Restricted
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Securities" means each Note until the earliest to occur of (i) the date on which
such Note has been exchanged by a person other than a broker-dealer for a New
Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in
the Exchange Offer of a Note for a New Note, the date on which such New Note is
sold to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Securities Act.
The Registration Rights Agreement provides that (i) the Company will
file an Exchange Offer Registration Statement with the Commission on or prior to
30 days after the Closing Date, (ii) the Company will use its best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 90 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue
on or prior to 30 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, New Notes in
exchange for all Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on or
prior to 60 days after such filing obligation arises (and any event within 120
days of the Closing Date) and to cause the Shelf Registration to be declared
effective by the Commission on or prior to 90 days after such obligation arises.
If (a) the Company fails to file any of the Registration Statements required by
the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), or (c) the Company fails to consummate the
Exchange Offer within 30 business days of the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement, or (d) the Shelf
Registration Statement or the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), then the Company will pay
Liquidated Damages to each Holder of Notes, with respect to the first 90-day
period immediately following the occurrence of the first Registration Default in
an amount equal to $.05 per week per $1,000 principal amount of Notes held by
such Holder. The amount of the Liquidated Damages will increase by an additional
$.05 per week per $1,000 principal amount of Notes with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages of $.30 per week per $1,000 principal
amount of Notes. All accrued Liquidated Damages will be paid by the Company on
each Damages Payment Date to the Global Note Holder by wire transfer of
immediately available funds or by federal funds check and to the Holders of
Certificated Securities by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to
the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
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"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Adjusted Operating Cash Flow" means, 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 for the
most recent four-quarter period plus DBS Cash Flow for the most recent quarterly
period, multiplied by four.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
of any assets (including, without limitation, by way of a sale and leaseback)
other than in the ordinary course of business consistent with past practices
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole will be governed by the provisions described above under the caption
"--Repurchase at the Option of Holders--Change of Control" and/or the provisions
described above under the caption "--Certain Covenants--Merger, Consolidation or
Sale of Assets" and not by the provision of the Asset Sale covenant) and (ii)
the issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Restricted Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $1.0 million or (b)
for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the
following transactions will not be deemed to be Asset Sales: (i) a transfer of
assets by the Company to a Wholly Owned Restricted Subsidiary of the Company or
by a Wholly Owned Restricted Subsidiary of the Company to the Company or to
another Wholly Owned Restricted Subsidiary of the Company, (ii) an issuance of
Equity Interests by a Wholly Owned Restricted Subsidiary of the Company to the
Company or to another Wholly Owned Restricted Subsidiary of the Company and
(iii) a Restricted Payment that is permitted by the provisions of the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"Asset Swap" means an exchange of assets by the Company or a Restricted
Subsidiary of the Company for (i) one or more Permitted Businesses, (ii) a
controlling equity interest in any Person whose assets consist primarily of one
or more Permitted Businesses and/or (iii) long-term assets that are used in a
Permitted Business in a like-kind exchange pursuant to Section 1031 of the Code
or any similar or successor provision of the Code.
"Bank Facilities" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
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"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500.0 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days or on demand for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution meeting
the qualifications specified in clause (iii) above, (v) commercial paper having
the highest rating at acquisition obtainable from Moody's Investors Service,
Inc. or Standard & Poor's Corporation and in each case maturing within six
months after the date of acquisition and (vi) money market funds at least 95% of
the assets of which constitute Cash Equivalents of the kinds described in
clauses (i) through (v) of this definition.
"Certificate of Designation" means the Certificate of Designation,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions Thereof of 12
3/4% Series A Cumulative Exchangeable Preferred Stock of Pegasus Communications
Corporation.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principal or his Related Parties, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that (A) any "person" (as
defined above) becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time, upon the happening of an event or otherwise), directly or
indirectly, of more of the Voting Stock of the Company (measured by voting power
rather than number of shares) than is at the time beneficially owned (as defined
above) by the Principal and his Related Parties in the aggregate, (B) the
Principal and his Related Parties collectively cease to beneficially own (as
defined above) Voting Stock of the Company having at least 30% of the combined
voting power of all classes of Voting Stock of the Company then outstanding or
(C) the Principal and his Affiliates acquire, in the aggregate, beneficial
ownership (as defined above) of more than 66 2/3% of the shares of Class A
Common Stock at the time outstanding or (iv) the first day on which a majority
of the members of the Board of Directors of the Company are not Continuing
Directors. "Closing Date" means the original date of issuance of the Notes.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary
thereof, (ii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date
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of such acquisition shall be excluded, (iii) the cumulative effect of a change
in accounting principles shall be excluded and (iv) the Net Income of any
Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Closing Date or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow for the Company and its Restricted
Subsidiaries for the period (taken as one accounting period) from the beginning
of the first full month commencing after the Closing Date to the end of the most
recently ended fiscal quarter for which internal financial statements are
available at such date of determination, plus all cash dividends received by the
Company or a Wholly Owned Restricted Subsidiary of the Company from any
Unrestricted Subsidiary of the Company or Wholly Owned Restricted Subsidiary of
the Company to the extent that such dividends are not included in the
calculation of permitted Restricted Payments under paragraph (C) of the covenant
described under the caption "--Certain Covenants--Restricted Payments" by virtue
of clause (iii) of such paragraph.
"Cumulative Total Interest Expense" means, with respect to the Company
and its Restricted Subsidiaries, as of any date of determination, Total Interest
Expense for the period (taken as one accounting period) from the beginning of
the first full fiscal month commencing after the Closing Date to the end of the
most recently ended fiscal quarter for which internal financial statements are
available at such date of determination.
"DBS Cash Flow" means income from operations (before depreciation,
amortization and Non-Cash Incentive Compensation to the extent deducted in
arriving at income from operations) for the Satellite Segment determined on a
basis consistent with the segment data contained in the Company's consolidated
audited financial statements.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature unless, in any
such case, the issuer's obligation to pay, purchase or redeem such Capital Stock
is expressly conditioned on its ability to do so in compliance with the
provisions of the covenant described under the caption "--Certain
Covenants--Restricted Payments."
"Eligible Indebtedness" means any Indebtedness other than (i)
Indebtedness in the form of, or represented by, bonds or other securities or any
guarantee thereof and (ii) Indebtedness which is, or may be, quoted, listed or
ordinarily purchased and sold on any stock exchange, automated trading system or
over-the-counter or other securities market (including, without prejudice to the
generality of the foregoing, the market for securities eligible for resale
pursuant to Rule 144A under the Securities Act).
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means all Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Agreement) in
existence on the Closing Date, until such amounts are repaid.
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"fair market value" means, with respect to assets or aggregate net
proceeds having a fair market value (a) of less than $5.0 million, the fair
market value of such assets or proceeds determined in good faith by the Board of
Directors of the Company (including a majority of the Independent Directors
thereof) and evidenced by a board resolution and (b) equal to or in excess of
$5.0 million, the fair market value of such assets or proceeds as determined by
an investment banking firm of national standing; provided that the fair market
value of the assets purchased in an arm's-length transaction by an Affiliate of
the Company (other than a Subsidiary) from a third party that is not also an
Affiliate of the Company or such purchaser and contributed to the Company within
five Business Days of the consummation of the acquisition of such assets by such
Affiliate shall be deemed to be the aggregate consideration paid by such
Affiliate (which may include the fair market value of any non-cash consideration
to the extent that the valuation requirements of this definition are complied
with as to any such non-cash consideration).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Closing Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States for the payment of which guarantee or
obligations the full faith and credit of the United States is pledged.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, co-borrowing
arrangements, letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing any Capital Lease Obligations or the balance deferred and unpaid
of the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any indebtedness of any other Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the full amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP. The amount of any Indebtedness outstanding as of any
date shall be (i) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"Indebtedness to Adjusted Operating Cash Flow Ratio" means, as of any
date of determination, the ratio of (a) the aggregate principal amount of all
outstanding Indebtedness of a Person and its Restricted Subsidiaries
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as of such date on a consolidated basis, plus the aggregate liquidation
preference of all outstanding preferred stock of the Restricted Subsidiaries of
such Person as of such date (excluding Qualified Subsidiary Stock and any such
preferred stock held by such Person or a Wholly Owned Restricted Subsidiary of
such Person), plus the aggregate liquidation preference or redemption amount of
all Disqualified Stock of such Person (excluding any Disqualified Stock held by
such Person or a Wholly Owned Restricted Subsidiary of such Person) as of such
date to (b) Adjusted Operating Cash Flow of such Person and its Restricted
Subsidiaries for the most recent four-quarter period for which internal
financial statements are available determined on a pro forma basis after giving
effect to all acquisitions and dispositions of assets (notwithstanding clause
(iii) of the definition of "Consolidated Net Income") (including, without
limitation, Asset Swaps) made by such Person and its Restricted Subsidiaries
since the beginning of such four-quarter period through such date as if such
acquisitions and dispositions had occurred at the beginning of such four-quarter
period.
"Independent Director" means a member of the Board of Directors who is
neither an officer nor an employee of the Company or any of its Affiliates.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities, or
preferred stock which is not Disqualified Stock, of the Company shall not be
deemed to be an Investment.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting, investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness in connection with such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"New Credit Facility" means that certain credit facility to be entered
into by and among the lenders thereunder, PM&C and certain of PM&C's
subsidiaries, providing for up to $180.0 million of revolving credit borrowings.
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"Non-Cash Incentive Compensation" means incentive compensation paid to
any officer of the Company or any of its Subsidiaries in the form of Class A
Common Stock of the Company or options to purchase Class A Common Stock of the
Company pursuant to the Pegasus Restricted Stock Plan and the Pegasus 1996 Stock
Option Plan.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise) or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Operating Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period, (A) plus (i)
extraordinary net losses and net losses on sales of assets outside the ordinary
course of business during such period, to the extent such losses were deducted
in computing such Consolidated Net Income, plus (ii) provision for taxes based
on income or profits, to the extent such provision for taxes was included in
computing such Consolidated Net Income, and any provision for taxes utilized in
computing the net losses under clause (i) hereof, plus (iii) consolidated
interest expense of such Person and its Subsidiaries for such period, whether
paid or accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income, plus (v) Non-Cash Incentive Compensation to the extent such compensation
expense was deducted in computing such Consolidated Net Income and to the extent
not included in clause (iv) of this definition and (B) less all non-cash income
for such period (excluding any such non-cash income to the extent it represents
an accrual of cash income in any future period or amortization of cash income
received in a prior period).
"Pari Passu Debt" means senior Indebtedness of the Company or any
Subsidiary Guarantor permitted by the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," which is pari passu in right of payment with the Notes or any Subsidiary
Guarantee.
"Permitted Businesses" means (i) any media or communications business,
including but not limited to, any broadcast television station, cable franchise
or other business in the television broadcasting, cable or direct-to-home
satellite television industries and (ii) any business reasonably related or
ancillary to any of the foregoing businesses.
"Permitted Investments" means (a) any Investments in the Company or in
a Wholly Owned Restricted Subsidiary of the Company; (b) any Investments in Cash
Equivalents; (c) Investments by the Company or any
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Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company or (ii) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Wholly Owned Restricted Subsidiary of the Company; (d)
Investments made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the provisions of
the covenant described under the caption "--Repurchase at the Option of
Holders--Asset Sales;" and (e) other Investments made since the date of the
Indenture (measured as of the time made and without giving effect to subsequent
changes in value) that do not exceed an amount equal to $15.0 million plus, to
the extent any such Investments are sold for cash or are otherwise liquidated or
repaid for cash, any gains less any losses realized on the disposition of such
Investments.
"Permitted Liens" means (i) Liens securing term loans, revolving
borrowings, letters of credit or other Obligations under any Bank Facility; (ii)
Liens securing Eligible Indebtedness of a Subsidiary that was permitted to be
incurred under the Indenture; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company; provided that such Liens were not created in
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company or
any Restricted Subsidiary of the Company; (iv) Liens on property existing at the
time of acquisition thereof by the Company or any Subsidiary of the Company;
provided that such Liens were not created in contemplation of such acquisition;
(v) Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens existing on the Closing Date; (vii)
Liens to secure Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations permitted by clause (vii) of the third
paragraph of the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock," covering
only the assets acquired with such Indebtedness; (viii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens incurred in the ordinary course of business of
the Company or any Subsidiary of the Company with respect to obligations that do
not exceed $1.5 million at any one time outstanding; (x) Liens on deposits or
Cash Equivalents made pursuant to legally binding agreements or non-binding
letters of intent to acquire assets (or the Capital Stock of Persons owning such
assets), in an amount not to exceed 10% of the purchase price of such assets or
Capital Stock; provided that the assets to be acquired (or the Capital Stock of
Persons owning such assets) will be owned by the Company or a Restricted
Subsidiary of the Company upon consummation of the contemplated acquisition;
(xi) Liens encumbering deposits or Cash Equivalents made to secure obligations
of the Company to repurchase Capital Stock of the Company pledged to secure
obligations of employees of the Company in an aggregate amount not to exceed
$5.0 million at any time outstanding and (xii) Liens on assets of or Equity
Interests in Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries.
"Permitted Refinancing Debt" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; provided that
(i) the principal amount of (or accreted value, if applicable) such Permitted
Refinancing Debt does not exceed the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus (a) the amount of reasonable
expenses incurred in connection therewith and (b) the amount of any premium
required to be paid in connection with such refinancing pursuant to the terms of
such refinancing or deemed by the Company or such Restricted Subsidiary
necessary to be paid in order to effectuate such refinancing); (ii) such
Permitted Refinancing Debt has a final maturity date not earlier than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
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refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Debt has a final maturity date later than the final maturity date of
the Notes, and is subordinated in right of payment to the Notes on terms at
least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and (v) if
such Permitted Refinancing Debt is incurred by a Restricted Subsidiary that is
not a Subsidiary Guarantor, such Permitted Refinancing Debt constitutes Eligible
Indebtedness.
"PM&C" means Pegasus Media & Communications, Inc., a Delaware
corporation and a direct Subsidiary of the Company.
"PM&C Notes" means PM&C's 12 1/2% Series B Senior Subordinated Notes
due 2005.
"Principal" means Marshall W. Pagon.
"PSTV Preferred Stock" means the Series A Preferred Stock, par value
$1.00 per share, of Pegasus Satellite Television of Virginia, Inc.
"Qualified Subsidiary Stock" means Capital Stock of a Subsidiary of the
Company which by its terms (a) does not mature, or is not mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, and is not
redeemable at the option of the Holder thereof, in whole or in part, prior to
October 15, 2006 (in each case, whether automatically or upon the happening of
any event) (unless, in any such case, the issuer's obligation to pay, purchase
or redeem such Capital Stock is expressly conditioned on its ability to do so in
compliance with the provisions of the covenant described under the caption
"--Certain Covenants--Restricted Payments"), (b) is automatically exchangeable
into shares of Capital Stock of the Company that is not Disqualified Stock upon
the earlier to occur of (i) the occurrence of an Event of Default and (ii)
October 15, 2004, (c) has no voting or remedial rights and (d) does not permit
the payment of cash dividends prior to October 15, 2005 (unless, in the case of
this clause (d), the issuer's ability to pay cash dividends is expressly
conditioned on its ability to do so in compliance with the provisions of the
covenant described under the caption "--Certain Covenants--Restricted
Payments"). Notwithstanding the foregoing, for all purposes under the Indenture,
"Qualified Subsidiary Stock" shall be deemed to include the PSTV Preferred
Stock.
"Related Party" with respect to the Principal means (A) any immediate
family member of the Principal or (B) any trust, corporation, partnership or
other entity, more than 50% of the voting equity interests of which are owned
directly or indirectly by, and which is controlled by, the Principal and/or such
other Persons referred to in the immediately preceding clause (A). For purposes
of this definition, (i) "immediate family member" means spouse, parent,
step-parent, child, sibling or step-sibling and (ii) "control" has the meaning
specified in the definition of "Affiliate" contained under the caption
"--Certain Definitions." In addition, the Principal's estate shall be deemed to
be a Related Party until such time as such estate is distributed in accordance
with the Principal's will or applicable state law.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Satellite Segment" means the business involved in the marketing of
video and audio programming and data information services through transmission
media consisting of space-based satellite broadcasting services, the assets
related to the conduct of such business held by the Company and its Restricted
Subsidiaries on the Closing Date, plus all other assets acquired by the Company
or any of its Restricted Subsidiaries that are directly related to such business
(excluding, without limitation, the terrestrial television broadcasting business
and the assets
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related thereto and the cable television business and the assets related
thereto); provided that any assets acquired by the Company or any of its
Restricted Subsidiaries after the Closing Date that are not directly related to
such business shall not be included for purposes of this definition.
"Series A Preferred Stock" means the Company's 12 3/4% Series A
Cumulative Exchangeable Preferred Stock.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Closing Date.
"Split Dollar Agreement" means the Split Dollar Agreement between the
Company and Nicholas A. Pagon, Holly T. Pagon and Michael B. Jordan, as trustees
of an insurance trust established by Marshall W. Pagon, as in effect on the
Closing Date.
"Stated Maturity" means, with respect to any interest or principal on
any series of Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation governing such
Indebtedness, and shall not include any contingent obligations to repay, redeem
or repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Subordinated Exchange Note Indenture" means the Indenture filed as an
exhibit to the Certificate of Designations which would govern the Subordinated
Exchange Notes, if issued, as the same may be amended, but without giving effect
to any amendment that materially alters the economic terms thereof.
"Subordinated Exchange Notes" means the Company's 12 3/4% Senior
Subordinated Exchange Notes due 2007 issuable pursuant to the Subordinated
Exchange Note Indenture in exchange for the Company's Series A Preferred Stock.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantor" means any Restricted Subsidiary that shall have
guaranteed, pursuant to a supplemental indenture and the requirements therefor
set forth in the Indenture, the payment of all principal of, and interest and
premium, if any, on, the Notes and all other amounts payable under the Notes or
the Indenture, which guarantee shall be pari passu with or senior to all
Indebtedness of such Restricted Subsidiary.
"Total Interest Expense" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
to the extent such amounts are not included in clause (i) of this definition,
and (iii) any interest expense for such period on Indebtedness of another Person
that is guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets (other than Equity Interests in Unrestricted
Subsidiaries securing
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Indebtedness of Unrestricted Subsidiaries) of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) all cash dividend payments during such period on any series of
preferred stock of a Restricted Subsidiary of such Person.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation made by the Board of
Directors at a time when any Notes are outstanding shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions and was permitted by the
provisions of the covenant described under the caption "--Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the
provisions of the covenant described under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" (treating
such Subsidiary as a Restricted Subsidiary for such purpose for the period
relevant to such covenant), the Company shall be in default of such covenant);
provided, however, that in the event an Unrestricted Subsidiary ceases to meet
the requirement set forth in clause (e) of this definition, such Unrestricted
Subsidiary shall have 60 days to meet such requirement before such Unrestricted
Subsidiary shall cease to be an Unrestricted Subsidiary. The Board of Directors
of the Company may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall be permitted only if (i) such Indebtedness is permitted under the covenant
described under the provisions of the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock" (treating such Subsidiary as a Restricted Subsidiary for such purpose for
the period relevant to such covenant) and (ii) no Default or Event of Default
would be in existence following such designation.
"Voting Stock" means with respect to any specified Person, Capital
Stock with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock (other than
Qualified Subsidiary Stock) or other ownership interests of which
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(other than directors' qualifying shares) shall at the time be owned by such
Person and/or by one or more Wholly Owned Restricted Subsidiaries of such
Person.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the acquisition, ownership and disposition of Senior
Notes by an initial beneficial owner of Senior Notes that, for U.S. federal
income tax purposes, is not a "U.S. person" (a "Non-U.S. Holder"). This
discussion is based upon the U.S. federal tax law now in effect, which is
subject to change, possibly retroactively. For purposes of this discussion, a
"U.S. person" means a citizen or resident of the U.S., a corporation,
partnership or other entity created or organized in the U.S. or under the laws
of the U.S. or of any political subdivision thereof, an estate whose income is
includible in gross income for U.S. federal income tax purposes regardless of
its source or a trust, if a U.S. court is able to exercise primary supervision
over the administration of the trust and one or more U.S. fiduciaries have the
authority to control all substantial decisions of the trust. The tax treatment
of the owners of the Senior Notes may vary depending upon their particular
situations. U.S. persons acquiring the Senior Notes are subject to different
rules from those discussed below. In addition, certain other holders (including
insurance companies, tax exempt organizations, financial institutions and
broker-dealers) may be subject to special rules not discussed below. Prospective
investors are urged to consult their tax advisors regarding the U.S. federal tax
consequences of acquiring, holding and disposing of Senior Notes, as well as any
tax consequences that may arise under the laws of any foreign, state, local or
other taxing jurisdiction. New final regulations dealing with withholding tax on
income paid to foreign persons and related matters (the "New Withholding
Regulations") were recently issued by the Treasury Department. In general, the
New Withholding Regulations do not significantly alter the substantive
withholding and information reporting requirements, but unify current
certification procedures and forms and clarify reliance standards. The New
Withholding Regulations will generally be effective for payments made after
December 31, 1998, subject to certain transition rules. Accordingly, payments
made on or before December 31, 1998 will continue to be subject to the
regulations that existed before the New Withholding Regulations were issued. THE
NEW WITHHOLDING REGULATIONS ARE QUITE COMPLEX. NON-U.S. HOLDERS ARE STRONGLY
URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE NEW WITHHOLDING
REGULATIONS.
Interest
Interest paid by the Company to a Non-U.S. Holder will not be subject
to U.S. federal income or withholding tax if such interest is not effectively
connected with the conduct of a trade or business within the U.S. by such
Non-U.S. Holder and the Non-U.S. Holder (i) does not actually or constructively
own 10% or more of the total combined voting power of all classes of stock of
the Company; (ii) is not a controlled foreign corporation with respect to which
the Company is a "related person" within the meaning of the U.S. Internal
Revenue Code of 1986 (the "Code") and (iii) certifies, under penalties of
perjury, that such owner is not a U.S. person and provides such owner's name and
address. Under the New Withholding Regulations, the statement is required to be
made on Form W-8 and provided prior to payment. For a Non-U.S. Holder who is
claiming the benefits of a tax treaty, the New Withholding Regulations may
require such holder to obtain a U.S. taxpayer identification number and to
provide certain documentary evidence issued by foreign governmental authorities
to prove residence in the foreign country. Certain special procedures are
provided in the New Withholding Regulations for payments through qualified
intermediaries.
Gain on Disposition
A Non-U.S. Holder will generally not be subject to U.S. federal income
tax on gain recognized on a sale, redemption or other disposition of a Senior
Note unless (i) the gain is effectively connected with the conduct of a trade or
business within the U.S. by the Non-U.S. Holder or (ii) in the case of a
Non-U.S. Holder who is a nonresident alien individual and holds the Senior Note
as a capital asset, such holder is present in the U.S. for 183 or more days in
the taxable year and certain other requirements are met.
Federal Estate Taxes
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If interest on the Senior Notes is exempt from withholding of U.S.
federal income tax under the rules described above, the Senior Notes will not be
included in the estate of a deceased Non-U.S. Holder for U.S.
federal estate tax purposes.
Information Reporting and Backup Withholding
For payments made on or before December 31, 1998, the Company will,
where required, report to the holders of Senior Notes and the Internal Revenue
Service the amount of any interest paid on the Senior Notes in each calendar
year and the amounts of tax withheld, if any, with respect to such payments.
In the case of payments of interest to Non-U.S. Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or an
exemption has otherwise been established; provided that neither the Company nor
its payment agent has actual knowledge that the owner is a U.S. person or that
the conditions of any other exemption are not in fact satisfied. Similarly,
information reporting and backup withholding requirements will apply to the
gross proceeds paid to a Non-U.S. Holder on the disposition of the Senior Notes
by or through a U.S. office of a U.S. or foreign broker, unless the owner
certifies to the broker under penalties of perjury as to his name, address and
status as a foreign person or the owner otherwise establishes an exemption.
Information reporting requirements, but not backup withholding, will also apply
to a payment of the proceeds of a disposition of the Senior Notes by or through
a foreign office of a U.S. broker or foreign brokers with certain types of
relationships to the U.S. unless such broker has documentary evidence in its
file that the owner of the Senior Notes is not a U.S. person, and such broker
has no actual knowledge to the contrary, or the owner establishes an exception.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds of a disposition of the Senior Notes by or through a
foreign office of a foreign broker not subject to the preceding sentence.
The New Withholding Regulations provide that to the extent a Non-U.S.
Holder certifies on Form W-8 (or a permitted substitute form) as to such
holder's status as a foreign person, the backup withholding provisions and the
information reporting provisions will generally not apply. If a Non-U.S. Holder
fails to provide such certification, such holder may be subject to certain
information reporting and the 31% backup withholding tax.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be refunded or credited against the Non-U.S.
Holder's U.S. federal income tax liability, provided that the required
information is furnished to the Internal Revenue Service.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with the resales of New Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making activities or
other trading activities. Pegasus has agreed that for a period of one year after
the date on which the Registration Statement is declared effective, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer that
requests such documents in the Letter of Transmittal for use in connection with
any such resale.
Pegasus will not receive any proceeds from any sale of New Notes by
broker-dealers or any other persons. New Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
Pegasus has agreed to pay all expenses incident to its performance of,
or compliance with, the Registration Rights Agreement and will indemnify the
holders (including any broker-dealers) and certain parties related to the
holders against certain liabilities, including liabilities under the Securities
Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
the New Notes pursuant to the Exchange Offer agrees that, upon receipt of notice
from Pegasus of the happening of any event that makes any statement in this
Prospectus untrue in any material respect or which requires the making of any
changes in this Prospectus in order to make the statements therein not
misleading (which notice Pegasus agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of this Prospectus until
Pegasus has amended or supplemented the Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented Prospectus
to such broker-dealer.
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LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon by
Drinker Biddle & Reath LLP, counsel for the Company. Michael B. Jordan, a
partner of Drinker Biddle & Reath LLP, is an Assistant Secretary of the Company.
EXPERTS
The Company's consolidated balance sheets as of December 31, 1995 and
1996 and the related consolidated statements of operations, statements of
changes in total equity and statements of cash flows for each of the three years
in the period ended December 31, 1996 incorporated by reference in this
Registration Statement, have been incorporated herein in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The balance sheet of Clearvision, Inc. as of January 16, 1997, and the
related statement of operations, statement of stockholders' equity and statement
of cash flows for the fiscal year ended January 16, 1997, incorporated by
reference in this Prospectus, have been included herein in reliance on the
report of Poole Cunningham & Reitano, P.A., independent accountants.
The statement of net assets to be sold of Southeastern Communication
Systems, Inc. as of December 31, 1996, and the related statement of operations
of assets to be sold and the statement of cash flows for the year ended December
31, 1996, incorporated by reference in this Prospectus, have been included
herein in reliance on the report of Greenway, Smith & Haisten, P.C., independent
accountants.
The balance sheet of Northern Electric Service Corporation as of
December 31, 1996, and the related statement of operations and accumulated
deficit and statement of cash flows for the year ended December 31, 1996,
incorporated by reference in this Prospectus, have been included herein in
reliance on the report of Larson, Allen, Weishair & Co., LLP, independent
accountants.
The financial statements of Direct Broadcast Satellites at December 31,
1996, and for the year then ended appearing in Pegasus Communications
Corporation's Form 8-K/A dated September 8, 1997 have been audited by Ernst &
Young, LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
The balance sheet of Suwannee Valley Satellite, Inc. as of December 31,
1996, and the related statement of income and retained earnings and statement of
cash flows for the year ended December 31, 1996, incorporated by reference in
this Prospectus, have been included herein in reliance on the report of
Bolinger, Segars, Gilbert & Moss, L.L.P., independent accountants.
The balance sheet of ViewStar Entertainment Services, Inc. as of
December 31, 1996, and the related statement of operations, statement of
stockholders' equity and statement of cash flows for the year ended December 31,
1996, incorporated by reference in this Prospectus, have been included herein in
reliance on the report of Arthur Andersen LLP, independent accountants.
The statement of net assets to be sold of Midwest Minnesota DBS, LLC as
of December 31, 1996, and the related statement of operations of assets to be
sold and statement of cash flows for the year ended December 31, 1996,
incorporated by reference in this Prospectus, have been included herein in
reliance on the report of Bradley R. Helmeke, Ltd., independent accountants.
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The statement of net assets to be sold of the DBS Operations of
Turner-Vision, Inc. as of December 31, 1996, and the related statement of
operations and statement of cash flows for the year ended December 31, 1996,
incorporated by reference in this Prospectus, have been included herein in
reliance on the report of Grigoraci, Trainer, Wright & Paterno, independent
accountants.
The balance sheet of the DBS Operations of Pioneer Services Corporation
as of September 30, 1997, and the related statement of operations and division
deficiency and statement of cash flows for the fiscal year ended September 30,
1997, incorporated by reference in this Prospectus, have been included herein in
reliance on the report of Jackson, Thornton & Co., P.C., independent
accountants.
The (i) consolidated financial statements of Digital Television Services,
LLC and its subsidiaries for the period from inception (January 30, 1996)
through December 31, 1996, (ii) financial statements of WEP Intermediate Corp.
for the period from inception (January 28, 1997) through September 30, 1997,
(iii) financial statements of Direct Programming Services Limited Partnership
for the years ended December 31, 1994, December 31, 1995 and December 31, 1996,
(iv) financial statements of Kansas DBS, L.L.C. for the years ended December 31,
1995 and December 31, 1996, (v) financial statements of the DBS Operations of
NRTC System No. 0422 for the years ended December 31, 1995 and December 31,
1996, (vi) financial statments of the DBS Operations of NRTC System No. 0073 for
the year ended December 31, 1996, (vii) financial statements of Northeast DBS
Enterprises, L.P. for the year ended December 31, 1996, (viii) financial
statements of the DBS Operations of NRTC System No. 0001 for the year ended
December 31, 1995 and for the period from January 1, 1996 through November 26,
1996, (ix) financial statements of the DBS Operations of NRTC System No. 1025
for the period from March 10, 1995 (inception) through December 31, 1995 and the
period from January 1, 1996 through August 28, 1996 and (x) financial statements
of Ocmulgee Communications, Inc. for the year ended December 31, 1996,
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent accountants and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
The financial statements of Northeast DBS Enterprises, L.P. for the years
ended December 31, 1994 and December 31, 1995 incorporated by reference in this
Prospectus have been audited by Fishbein & Company, P.C., independent auditors
and are included herein in reliance upon the authority of said firm as experts
in giving said reports.
The financial statements of Satellite Television Services, Inc.
incorporated in this prospectus by reference from Pegasus Communications
Corporation's Current Report on Form 8-K dated December 10, 1997 (and filed
January 12, 1998) have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated by reference, and has
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
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GLOSSARY OF DEFINED TERMS
Certificate of Designation The Certificate of Designation,
Preferences and Relative, Participating,
Optional and Other Special Rights of
Preferred Stock and Qualifications,
Limitations and Restrictions Thereof,
which sets forth the terms of the Series A
Preferred Stock.
Class A Common Stock Pegasus' Class A Common Stock, par value
$.01 per share.
Class B Common Stock Pegasus' Class B Common Stock, par value
$.01 per share.
Common Stock The Class A Common Stock and the Class B
Common Stock.
Company Pegasus and its direct and indirect
subsidiaries.
Completed DBS Acquisitions The acquisition of DBS territories and
related assets from 25 independent
providers of DIRECTV services, which were
all acquired from January 1, 1997 to an
effective date as of November 7, 1997.
Completed Transactions The Completed DBS Acquisitions, the New
Hampshire Cable Sale, the Unit Offering
and the Notes Offering.
DBS Direct broadcast satellite television.
DBS Acquisitions The Completed DBS Acquisitions and the
Pending DBS Acquisitions.
DIRECTV The video, audio and data services
provided via satellite by DIRECTV
Enterprises, Inc., or the entity, as
applicable.
DTS Acquisition The acquisition of the stock of Digital
Television Services, Inc., the second
largest independent provider of DIRECTV
services, for approximately 5.5 million
shares of Pegasus' Class A Common Stock.
Exchange Note Indenture The indenture between Pegasus and First
Union National Bank, as trustee, governing
the Exchange Notes.
Exchange Notes Pegasus' 12 3/4% Senior Subordinated
Exchange Notes due 2007, which are
issuable at Pegasus' option upon exchange
of the Series A Preferred Stock.
FCC Federal Communications Commission.
Fox Fox Broadcasting Company.
Hughes Hughes Electronics Corporation or one of
its subsidiaries, including DIRECTV
Enterprises, Inc., as applicable.
Indenture The indenture between Pegasus and First
Union National Bank, as trustee, governing
the Notes.
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LMAs Local marketing agreements, program
service agreements or time brokerage
agreements between broadcasters and
television station licensees pursuant to
which broadcasters provide programming to
and retain the advertising revenues of
such stations in exchange for fees paid to
television station licensees.
New Credit Facility PM&C's $180.0 million credit facility,
which was entered into as of December 10,
1997.
New England Cable Sale The proposed sale of the Company's New
England cable systems.
New Hampshire Cable Sale The sale of the
Company's New Hampshire cable system which
took place effective January 31, 1997.
Notes Pegasus' 9 5/8% Series A Senior Notes due
2005 issued in an aggregate principal
amount of $115.0 million or Pegasus'
9 5/8% Series B Senior Notes due 2005,
which are issuable upon exchange of the Old
Notes and which have terms substantially
similar to the Series A notes, as
applicable.
Notes Offering Pegasus' offering of the 9 5/8% Series A
Senior Notes due 2005 issued in an
aggregate principal amount of $115.0
million.
NRTC The National Rural Telecommunications
Cooperative, the only entity authorized to
provide DIRECTV services that is
independent of DIRECTV Enterprises, Inc.
Approximately 200 NRTC members and
affiliate members are authorized to
provide DIRECTV services in exclusive
territories granted to the NRTC by DIRECTV
Enterprises, Inc.
Pegasus Pegasus Communications Corporation, the
issuer of the New Notes offered hereby.
Pending DBS Acquisitions The acquisition of DBS territories and
related assets from seven independent
providers of DIRECTV services, without
giving effect to any letters of intent
entered into after November 24, 1997.
PM&C Pegasus Media & Communications, Inc., a
wholly-owned subsidiary of Pegasus.
PM&C Indenture The indenture dated July 7, 1995 by and
among PM&C, certain of its subsidiaries
and First Union National Bank, as trustee,
relating to the PM&C Notes.
PM&C Notes PM&C's 12 1/2% Series B Senior
Subordinated Notes due 2005 issued in an
aggregate principal amount of $85.0
million.
PSH Pegasus Satellite Holdings, Inc., a
wholly-owned subsidiary of Pegasus, which
concurrently with the consummation of the
Notes Offering sold all of its assets to
PM&C in connection with the Subsidiaries
Combination.
PSH Credit Facility PSH's $130.0 million credit facility,
which was terminated upon the consummation
of the Notes Offering.
G-2
<PAGE>
Series A Preferred Stock The 12 3/4% Series A Cumulative
Exchangeable Preferred Stock, which was
offered in connection with the Unit
Offering.
Subsidiaries Combination The acquisitions of the assets of PSH by
PM&C, which occurred concurrently with the
consummation of the Notes Offering.
Transactions The Completed Transactions, the Pending
DBS Acquisitions, the Notes Offering, the
New Credit Facility, the Subsidiaries
Combination, the DTS Acquisition and the
New England Cable Sale.
Unit Offering Pegasus' public offering of 100,000 Units
consisting of 100,000 shares of Series A
Preferred Stock and 100,000 Warrants,
which was completed on January 27, 1997.
Units The units consisting of Series A Preferred
Stock and Warrants offered in the Unit
Offering.
UPN United Paramount Network.
WB The WB Television Network.
G-3
<PAGE>
================================================================================
No dealer, salesperson, or other person has been authorized to give any
representations in connection with the offer contained herein other than those
contained in this Prospectus, and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any other person. This Prospectus does not constitute an offer to sell or the
solicitation of any offer to buy any security other than those to which it
relates, nor does it constitute an offer to sell, or the solicitation of an
offer to buy, to any person in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or that the information contained herein is correct as of any time
subsequent to the date hereof.
----------
TABLE OF CONTENTS
Page
----
Additional Information............................................... ii
Incorporation of Certain Documents by Reference...................... iii
Prospectus Summary................................................... 1
Risk Factors......................................................... 8
Ratio of Earnings to Fixed Charges................................... 16
Use of Proceeds...................................................... 16
The Exchange Offer................................................... 17
Certain United States Federal Income Tax
Consequences of Exchange Offer..................................... 26
Description of Notes................................................. 27
Certain United States Federal Income
Tax Consequences................................................... 57
Plan of Distribution................................................. 59
Legal Matters........................................................ 60
Experts.............................................................. 60
Glossary............................................................. G-1
================================================================================
<PAGE>
[GRAPHIC OMITTED]
Pegasus Communications Corporation
Offer to Exchange its
9 5/8% Series B Senior Notes due 2005
which have been registered under the
Securities Act of 1933, as amended, for
any and all of its outstanding
9 5/8% Series A Senior Notes due 2005
--------------------------
PROSPECTUS
--------------------------
January 15, 1998
================================================================================
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Registrant's Amended and Restated Certificate of Incorporation
provides that a director of the Registrant shall have no personal liability to
the Registrant or to its stockholders for monetary damages for breach of
fiduciary duty as a director except to the extent that Section 102(b)(7) (or any
successor provision) of the Delaware General Corporation Law, as amended from
time to time, expressly provides that the liability of a director may not be
eliminated or limited.
Article 6 of the Registrant's By-Laws provides that any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director or
officer of the Registrant, or is or was serving while a director of officer of
the Registrant at the request of the Registrant as a director, officer,
employee, agent, fiduciary or other representative of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
shall be indemnified by the Registrant against expenses (including attorneys'
fees), judgments, fines, excise taxes and amounts paid in settlement actually
and reasonably incurred by such person in connection with such action, suit or
proceeding to the full extent permissible under Delaware law. Article 6 also
provides that any person who is claiming indemnification under the Registrant's
By-Laws is entitled to advances from the Registrant for the payment of expenses
incurred by such person in the manner and to the full extent permitted under
Delaware law.
The Registrant has obtained directors' and officers' liability
insurance.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
Number Description of Document
- ------ -----------------------
4.1 Indenture, dated as of October 21, 1997, by and between Pegasus and
First Union National Bank, as Trustee, relating to the 9 5/8% Senior
Notes due 2005, which is incorporated by reference to Exhibit 4.1
to Pegasus' Form 8-K/A dated September 8, 1997 and filed with the
Commission on October 31, 1997.
4.2 Registration Rights Agreement, dated as of October 21, 1997, by and
between Pegasus and CIBC Wood Gundy Securities Corp., which is
incorporated by reference to Exhibit 4.2 to Pegasus' Form 8-K/A
dated September 8, 1997 and filed with the Commission on October
31, 1997.
5.1+ Opinion of Drinker Biddle & Reath LLP.
23.1+ Consent of Drinker Biddle & Reath LLP (included in their opinion
filed as Exhibit 5.1).
23.2* Consent of Coopers & Lybrand L.L.P.
23.3* Consent of Poole Cunningham & Reitano, P.A.
23.4* Consent of Greenway, Smith & Haisten, P.C.
23.5* Consent of Larson, Allen, Weishair & Co., LLP.
23.6* Consent of Ernst & Young, LLP.
23.7* Consent of Bolinger, Segars, Gilbert & Moss, LLP.
23.8* Consent of Arthur Andersen LLP.
23.9* Consent of Bradley R. Helmeke, Ltd.
23.10* Consent of Grigoraci, Trainer, Wright & Paterno.
23.11* Consent of Jackson Thornton & Co., P.C.
23.12* Consent of Arthur Andersen LLP.
23.13* Consent of Fishbein & Company, P.C.
23.14* Consent of Deloitte & Touche LLP.
24.1* Powers of Attorney (included on Signatures and Powers of Attorney)
25.1+ Form T-1, Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of First Union National Bank, as
Trustee.
99.1+ Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
- ----------------
* Filed herewith.
+ Previously filed.
Item 22. Undertakings.
The undersigned registrant hereby undertakes that:
II-1
<PAGE>
(1) During any period in which offers or sales are being made, a
post-effective amendment to this registration statement will be filed:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered ) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) It will remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(6) It will respond to requests for information that is incorporated by
reference into the prospectus within one business day of receipt of such
request, and it will send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(7) It will supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-2
<PAGE>
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, hereunto duly authorized in the city of
Radnor, Commonwealth of Pennsylvania, on the 13th day of January, 1998.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Marshall W. Pagon
----------------------------------------------
Name: Marshall W. Pagon
Title: Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated. Each person whose signature appears
below hereby constitutes and appoints Marshall W. Pagon, Robert N. Verdecchio
and Ted S. Lodge as his or her attorneys-in-fact and agents, with full power of
substitution for him or her in any and all capacities, to sign any or all
amendments or post-effective amendments to the Registration Statement, or any
Registration Statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to
file the same, with exhibits thereto and other documents in connection therewith
or in connection with the registration of the Notes under the Securities
Exchange Act of 1934, as amended, with the Securities and Exchange Commission,
granting unto each of such attorneys-in-fact the agents full power and authority
to do and perform each and every act and thing requisite and necessary in
connection with such matters and hereby ratifying and confirming all that each
of such attorneys-in-fact and agents or his or her substitutes may do or cause
to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marshall W. Pagon President, Chief Executive Officer January 13, 1998
- ------------------------------------ and Chairman of the Board
Marshall W. Pagon
(Principal Executive Officer)
/s/ Robert N. Verdecchio Senior Vice President, Chief January 13, 1998
- ------------------------------------ Financial Officer, Assistant
Robert N. Verdecchio Secretary and Director
(Principal Financial
and Accounting Officer)
/s/ James J. McEntee, III Director January 13, 1998
- ------------------------------------
James J. McEntee, III
/s/ Mary C. Metzger Director January 13, 1998
- ------------------------------------
Mary C. Metzger
/s/ Donald W. Weber Director January 13, 1998
- ------------------------------------
Donald W. Weber
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------ -----------------------
4.1 Indenture, dated as of October 21, 1997, by and between Pegasus and
First Union National Bank, as Trustee, relating to the 9 5/8% Senior
Notes due 2005, which is incorporated by reference to Exhibit 4.1 to
Pegasus' Form 8-K/A dated September 8, 1997 and filed with the
Commission on October 31, 1997.
4.2 Registration Rights Agreement, dated as of October 21, 1997, by and
between Pegasus and CIBC Wood Gundy Securities Corp., which is
incorporated by reference to Exhibit 4.2 to Pegasus' Form 8-K/A
dated September 8, 1997 and filed with the Commission on October 31,
1997.
5.1+ Opinion of Drinker Biddle & Reath LLP.
23.1+ Consent of Drinker Biddle & Reath LLP (included in their opinion
filed as Exhibit 5.1).
23.2* Consent of Coopers & Lybrand L.L.P.
23.3* Consent of Poole Cunningham & Reitano, P.A.
23.4* Consent of Greenway, Smith & Haisten, P.C.
23.5* Consent of Larson, Allen, Weishair & Co., LLP.
23.6* Consent of Ernst & Young, LLP.
23.7* Consent of Bolinger, Segars, Gilbert & Moss, LLP.
23.8* Consent of Arthur Andersen LLP.
23.9* Consent of Bradley R. Helmeke, Ltd.
23.10* Consent of Grigoraci, Trainer, Wright & Paterno.
23.11* Consent of Jackson Thornton & Co., P.C.
23.12* Consent of Arthur Andersen LLP.
23.13* Consent of Fishbein & Company, P.C.
23.14* Consent of Deloitte & Touche LLP.
24.1* Powers of Attorney (included on Signatures and Powers of Attorney)
25.1+ Form T-1, Statement of Eligibility and Qualification under the
Trust Indenture Act of 1939 of First Union National Bank, as
Trustee.
99.1+ Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
- ----------------
* Filed herewith.
+ Previously filed.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Pegasus Communications Corporation on Form S-4 of our report dated March 14,
1997 except as to note 14 for which the date is February 21, 1997, on our audits
of the consolidated financial statements and financial statement schedule of
Pegasus Communications Corporation. We also consent to the reference to our firm
under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
January 12, 1998
<PAGE>
Exhibit 23.3
[POOLE CUNNINGHAM & REITANO, P.A. LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Pegasus Communications Corporation on Form S-4 (file
no. 333-40205) of our financial statements of ClearVision, Inc. as of January
16, 1997 and the related statements of operations and cash flows for the year
then ended which appears in the Current Report on Form 8-K/A of Pegasus
Communications Corporation dated September 8, 1997 (and filed October 31, 1997).
We also consent to the reference to us under the heading "Experts" in the
Prospectus, which is part of the Registration Statement.
POOLE CUNNINGHAM & REITANO, P.A.
/s/ Poole Cunningham & Reitano, P.A.
-------------------------------------
Jackson, Mississippi
January 12, 1998
<PAGE>
Exhibit 23.4
[GREENWAY, SMITH & HAISTEN, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Pegasus Communications Corporation on Form S-4 (file
no. 333-40205) of our report relating to the Statement of net assets to be sold
of Southeastern Communication Systems, Inc. as of December 31, 1996 and the
related statements of operations and cash flows for the year then ended which
appears in the Current Report on Form 8-K/A of Pegasus Communications
Corporation dated September 8, 1997 (and filed October 31, 1997). We also
consent to the reference to us under the heading "Experts" in the Prospectus,
which is part of the Registration Statement.
/s/ Greenway, Smith & Haisten, P.C.
-----------------------------------
Greenway, Smith & Haisten, P.C.
Griffin, Georgia
January 12, 1998
<PAGE>
[LARSON, ALLEN, WEISHAIR & CO., LLP LETTERHEAD]
Exhibit 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Pegasus Communications Corporation on Form S-4 (file
no. 333-40205) of our report relating to the balance sheet of Northern Electric
Service Corporation DBA: Northern Horizons as of December 31, 1996, and the
related statement of operations and accumulated deficit and statement of cash
flows for the year then ended, which appears in the Current Report on Form 8-K/A
of Pegasus Communications Corporation dated September 8, 1997 (and filed October
31, 1997). We also consent to the reference to us under the heading "Experts" in
the Prospectus, which is part of the Registration Statement.
/s/ LARSON, ALLEN, WEISHAIR & CO., LLP
--------------------------------------
LARSON, ALLEN, WEISHAIR & CO., LLP
Brainerd, Minnesota
January 12, 1998
<PAGE>
Exhibit 23.6
[ERNST & YOUNG LLP LETTERHEAD]
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Amendment No. 1 to Registration Statement (Form S-4 No. 333-40205) and related
Prospectus of Pegasus Communications Corporation ("Pegasus") for the
registration of $115,000,000 of its 9 5/8% Series B Senior Notes due 2005 and to
the incorporation by reference therein of our report dated July 16, 1997, with
respect to the financial statements of Direct Broadcast Satellites for the year
ended December 31, 1996, included in Pegasus' Current Report on Form 8-K/A dated
September 8, 1997 filed with the Securities and Exchange Commission on October
31, 1997.
/s/ Ernst & Young, LLP
January 12, 1998
<PAGE>
Exhibit 23.7
[BOLINGER, SEGARS, GILBERT & MOSS, L.L.P. LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Pegasus Communications Corporation on Form S-4 (file
no. 333-40205) of our report relating to the balance sheet of Suwannee Valley
Satellite, Inc. as of December 31, 1996, and the related statements of income
and retained earnings and cash flows for the year then ended, which appears in
the Current Report on Form 8-K/A of Pegasus Communications Corporation dated
September 8, 1997 (and filed on October 31, 1997). We also consent to the
reference to us under the heading "Experts" in the Prospectus, which is part of
the Registration Statement.
/s/ Bolinger, Segars, Gilbert & Moss, L.L.P.
--------------------------------------------
BOLINGER, SEGARS, GILBERT & MOSS, L.L.P.
Lubbock, Texas
January 12, 1998
<PAGE>
Exhibit 23.8
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report on the financial statements for the year ended December
31, 1996 of ViewStar Entertainment Services, Inc. dated April 18, 1997 (except
with respect to Note 10, as to which the date is September 15, 1997), which is
included in the Current Report on Form 8-K/A of Pegasus Communications
Corporation dated September 8, 1997 (and filed October 31, 1997), in this
Amendment No. 1 to Registration Statement (File No. 333-40205) of Pegasus
Communications Corporation on Form S-4. We also consent to the reference to us
under the heading "Experts" in the Prospectus, which is part of the Registration
Statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
January 12, 1998
<PAGE>
Exhibit 23.9
[BRADLEY R. HELMEKE, LTD. LETTERHEAD]
INDEPENDENT AUDITOR'S CONSENT
I consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Pegasus Communications Corporation on Form S-4 (file
no. 333-40205) of my report relating to the audited statement of net assets to
be sold for the year ended December 31, 1996 of Midwest Minnesota DBS, LLC for
the year ended December 31, 1996, and the related statements of operations of
assets to be sold and cash flows for the year ended December 31, 1996, which
appear on the Current Report on Form 8-K/A of Pegasus Communications Corporation
dated September 8, 1997 (and filed October 31, 1997). I also consent to the
reference to me under the heading "Experts" in the Prospectus, which is part of
the Registration Statement.
/s/ Bradley R. Helmeke, Ltd.
Bradley R. Helmeke, Ltd.
Perham, Minnesota
January 12, 1998
<PAGE>
Exhibit 23.10
[GRIGORACI, TRAINER, WRIGHT & PATERNO LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Pegasus Communications Corporation on Form S-4 (file
no. 333-40205) of our report relating to the statement of net assets sold as of
December 31, 1996 and the related statements of operations and cash flows for
the year ended of Turner-Vision, Inc. (an S-corporation) DBS Operations, which
appears in the Current Report on Form 8-K/A of Pegasus Communications
Corporation dated September 8, 1997 (and filed October 31, 1997). We also
consent to the reference to us under the heading "Experts" in the Prospectus,
which is part of the Registration Statement.
/s/ Grigoraci, Trainer, Wright & Paterno
Charleston, West Virginia
January 12, 1998
<PAGE>
Exhibit 23.11
[JACKSON THORNTON & CO. LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Pegasus Communications Corporation on Form S-4 (file
no. 333-40205) of our report relating to the September 30, 1997 audited
financial statements of the DBS Operations of Pioneer Services Corporation,
which appears in the Current Report on Form 8-K of Pegasus Communications
Corporation dated December 10, 1997 (and filed January 12, 1998). We also
consent to the reference to us under the heading "Experts" in the Prospectus,
which is part of the Registration Statement.
/s/ Terry Mitchell
JACKSON, THORNTON & CO., P.C.
Montgomery, Alabama
January 12, 1998
<PAGE>
Exhibit 23.12
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Amendment No. 1 to Registration Statement of Pegasus
Communications Corporation on Form S-4 (file No. 333-40205) of our report
relating to the consolidated balance sheet of Digital Television Services, LLC
and Subsidiaries as of December 31, 1996 and the related consolidated statements
of operations, members equity, and cash flows for the period from inception
(January 30, 1996) through December 31, 1996 dated February 29, 1997 (except
with respect to the matters discussed in Note 10 as to which the date is
November 6, 1997), our report relating to the balance sheet of WEP Intermediate
Corp. as of September 30, 1997 and the related statement of cash flows for the
period from inception (January 28, 1997) to September 30, 1997 dated October 10,
1997, our report relating to the balance sheets of Direct Programming Services
Limited Partnership as of December 31, 1995 and 1996 and the related statements
of operations, changes in partners' capital, and cash flows for the years ended
December 31, 1994, 1995 and 1996 dated February 21, 1997, our report relating to
the balance sheets of Kansas DBS, L.L.C. as of December 31, 1995 and 1996 and
the related statements of operations, changes in accumulated deficit, and cash
flows for the years ended December 31, 1995 and 1996 dated February 21, 1997,
our report relating to the statements of assets and liabilities and accumulated
deficit of the DBS Operations of NRTC System No. 0422 as of December 31, 1995
and 1996 and the related statements of expenses over revenues and changes in
accumulated deficit and cash flows for the years ended December 31, 1995 and
1996 dated February 21, 1997, our report relating to the statement of assets and
liabilities and accumulated earnings of the DBS Operations of NRTC System No.
0073 as of December 31, 1996 and the related statements of revenues over
expenses and changes in accumulated earnings and cash flows for the year ended
December 31, 1996 dated February 21, 1997, our report relating to the balance
sheet of Northeast DBS Enterprises, L.P. as of December 31, 1996, and the
related statements of operations, changes in partners' capital and cash flows
for the year ended December 31, 1996 dated February 21, 1997, our report
relating to the statements of assets and liabilities and accumulated deficit of
the DBS Operations of NRTC System No. 0001 as of December 31, 1995 and November
26, 1996 and the related statements of expenses over revenues and changes in
accumulated deficit and cash flows for the year ended December 31, 1995 and for
the period from January 1, 1996 through November 26, 1996 dated March 4, 1997,
our report relating to the statements of assets and liabilities and accumulated
deficit of the DBS Operations of NRTC System No. 1025 as of December 31, 1995
and August 28, 1996 and the related statements of expenses over revenues and
changes in accumulated deficit and cash flows for the period from March 10, 1995
(inception) through December 31, 1995 and the period from January 1, 1996
through August 28, 1996 dated March 4, 1997, and our report relating to the
balance sheet of Ocmulgee Communications, Inc. as of December 31, 1996 and the
related statements of operations, stockholder's deficit, and cash flows for the
year ended December 31, 1996 dated December 11, 1997, all of which appear in the
Current Report on Form 8-K of Pegasus Communications Corporation dated December
10, 1997 (and filed January 12, 1998). We also consent to the reference to us
under the heading "Experts" in the Prospectus' which is a part of the
Registration Statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
January 12, 1998
<PAGE>
Exhibit 23.13
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Pegasus Communications Corporation on Form S-4 (file
no. 333-40205) of our report dated February 23, 1996 relating to the December
31, 1994 and December 31, 1995 audited financial statements of the Northeast DBS
Enterprises, L.P., which appears in the Current Report on Form 8-K of Pegasus
Communications Corporation dated December 10, 1997 (and filed January 12, 1998).
We also consent to the reference to us under the heading "Experts" in the
Prospectus, which is part of the Registration Statement.
/s/ Fishbein & Company, P.C.
-----------------------------
FISHBEIN & COMPANY, P.C.
Elkins Park, Pennsylvania
January 12, 1998
<PAGE>
Exhibit 23.14
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-40205 of Pegasus Communications Corporation on
Form S-4 of our reports dated November 10, 1997 on the financial statements of
Satellite Television Services, Inc., appearing in the Current Report on Form 8-K
of Pegasus Communications Corporation dated December 10, 1997 (and filed January
12, 1998), and to the reference to us under the heading "Experts" in the
Prospectus, which is part of the Registration Statement.
/s/ Deloitte & Touche LLP
- --------------------------
Deloitte & Touche LLP
Indianapolis, Indiana
January 12, 1998
