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As filed with the Securities and Exchange Commission on March 26, 1999
Registration No. 333-71447
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 3
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)
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DELAWARE 51-0374669
(State or Other Jurisdiction of Incorporation of Organization) (I.R.S. Employer Identification Number)
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c/o Pegasus Communications Management Company
Suite 454, 5 Radnor Corporate Center
100 Matsonford Road
Radnor, Pennsylvania 19087
(888) 438-7488
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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Ted S. Lodge, Senior Vice President, Chief Administrative Officer,
General Counsel and Secretary
c/o Pegasus Communications Management Company
Suite 454, 5 Radnor Corporate Center
Radnor, Pennsylvania 19087
(888) 438-7488
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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Copies to:
Michael B. Jordan, Esq.
Drinker Biddle & Reath LLP
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(215) 988-2700
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. [__]
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
thereafter become effective on such date as the Commission, acting pursuant to
said Section 8(a) may determine.
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Subject to completion, dated March 26, 1999
Prospectus
March __, 1999
[PEGASUS LOGO]
Exchange of registered
9 3/4% Series B senior notes due 2006
for any and all of our unregistered outstanding
9 3/4% Series A senior notes due 2006
- --------------------------------------------------------------------------------
o We offer to exchange new registered 9 3/4% Series B senior notes due 2006 for
our outstanding unregistered 9 3/4% Series A senior notes due 2006, of which
$100 million are outstanding.
o There has been no public market for the notes before this exchange offer. We
do not intend to apply for the listing of the notes on any national securities
exchange or for quotation through the Nasdaq National Market.
o This offer expires at 5:00 p.m., New York City time on __________, 1999,
unless extended.
- --------------------------------------------------------------------------------
This investment involves risks. See Risk Factors beginning on page 8.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined
whether this prospectus is truthful or complete. Nor have they made, nor will
they make, any determination as to whether anyone should buy these securities.
Any representation to the contrary is a criminal offense.
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Prospectus Summary
This summary highlights information contained elsewhere in this
prospectus. This summary is not complete and may not contain all of the
information that you should consider before deciding to invest in our notes. We
urge you to read the entire prospectus carefully, including the SEC filings and
financial statements that we have incorporated by reference and the Risk Factors
section.
When we describe the size of our business in this summary -- for
example, the number of homes in our territories and how many subscribers we have
- -- we are assuming that we will complete the pending acquisitions described
below.
Pegasus
Pegasus Communications Corporation is:
o The largest independent distributor of DIRECTV(R) with 464,000
subscribers at January 31, 1999. We have the exclusive right to
distribute DIRECTV digital broadcast satellite services to over 4.8
million rural households in 36 states. We distribute DIRECTV through
the Pegasus retail network, a network of approximately 2,000
independent retailers.
o The owner or programmer of nine TV stations affiliated with either
Fox, UPN or the WB and the owner of a large cable system in Puerto
Rico serving approximately 50,000 subscribers.
o One of the fastest growing media companies in the United States. We
have increased our revenues at a compound growth rate of 100% per
annum since our inception in 1991.
We were incorporated in Delaware in May 1996. Our principal executive
office is at Suite 454, 5 Radnor Corporate Center, 100 Matsonford Road, Radnor,
PA 19087. Our telephone number is (888) 438-7488.
Recent Pegasus Developments
Completed Direct Broadcast Satellite Acquisitions
From January 1, 1999 to February 28, 1999, we made five acquisitions
from independent DIRECTV distributors of rights to provide DIRECTV programming
in rural areas of Colorado, Illinois, Indiana, Minnesota and Texas. These
territories include, in the aggregate, approximately 155,000 television
households, including approximately 7,700 seasonal residences and 15,500
business locations, and approximately 10,000 subscribers. The aggregate
consideration paid for these acquisitions was approximately $21.5 million in
cash and $1.3 million in promissory notes.
Completed Cable Acquisition
On March 25, 1999, we completed the purchase of a cable system serving
Aguadilla, Puerto Rico and neighboring communities for a purchase price of
approximately $42.0 million in cash. As of December 31, 1998, the Aguadilla
cable system serves approximately 21,500 subscribers and passes approximately
81,300 of the 83,300 homes in the franchise area. The Aguadilla cable system is
contiguous to our existing Puerto Rico cable system and we intend to
consolidate the Aguadilla cable system with our existing cable system.
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Pending Direct Broadcast Satellite Acquisitions
As of February 23, 1999, we have entered into letters of intent or
definitive agreements to acquire DIRECTV distribution rights in rural areas of
Colorado, Indiana, Minnesota, and Ohio. These territories include approximately
115,000, television households, including approximately 5,800 seasonal
residences and 11,600 business locations, and approximately 9,400 subscribers.
In the aggregate, the consideration for the pending direct broadcast satellite
acquisitions is $14.4 million in cash, and $3.1 million in promissory notes and
assumed liabilities. The closings of these acquisitions are subject to the
negotiation of definitive agreements, third party approvals and other customary
conditions. We cannot assure you that these conditions will be satisfied.
1999 Equity Offering
We completed a public offering on March 19, 1999 in which we sold 3.0
million shares of Class A common stock and selling shareholders sold an
additional 1,106,200 shares. On March 29, 1999, Pegasus sold an additional
615,930 shares in connection with the exercise by the underwriters of their
over-allotment option. The offering price was $22.00 and resulted in net
proceeds to us of approximately $74.9 million, after deduction of underwriting
discounts and commission and offering expenses. We applied, or intend to apply,
the proceedings from the offering to fund acquisitions, capital expenditures and
general corporate purposes.
Consent Solicitation
We are presently soliciting consents from the holders of our 9 3/4%
senior notes to approve an amendment to the note indenture. The amendment would
exclude our Series A preferred stock from the definition of disqualified stock
contained in the indenture. The purpose of excluding the Series A preferred
stock from the definition of disqualified stock is to provide Pegasus with the
flexibility to incur indebtedness for corporate purposes in the future at the
levels that were intended at the time that the indenture was entered into. We
cannot assure you that we will be able to obtain the consent of the note holders
to the amendment. If we do get the required consents from the holders of the
old notes, the amendment will be binding on the holders of the new notes.
Recent Direct Broadcast Satellite Developments
Three important events have occurred recently in the direct broadcast
satellite industry.
DIRECTV/Hughes Acquisition of United States Satellite Broadcasting. In
December 1998, Hughes Electronics Corporation, the parent company of DIRECTV,
announced an agreement with United States Satellite Broadcasting Company, Inc.
to acquire United States Satellite's business and assets. The transaction, if
completed, will enable DIRECTV to add premium networks including multichannel
HBO, Cinemax and Showtime. We are evaluating the impact of the United States
Satellite transaction on our business.
DIRECTV/Hughes Acquisition of Primestar. In January 1999, Hughes
announced an agreement with Primestar, Inc. to acquire Primestar's direct
broadcast satellite business. We estimate that there are between 200,000 and
250,000 Primestar subscribers in our DIRECTV exclusive territories. We are
analyzing the effects of the Primestar transaction on our business.
EchoStar-News Corporation-MCI Settlement. In November 1998, EchoStar
Communications Corporation, News Corporation, MCI WorldCom Inc. and others
reached an agreement for the transfer to EchoStar of a license to operate
another direct broadcast satellite business. If this transaction is completed,
we believe it will help increase the overall competitive position of direct
broadcast satellite relative to cable. However, the transaction could also
increase EchoStar's competitive position relative to DIRECTV. See Risk Factors
- -- Other Risks of Our Business -- We Face Significant Competition; the
Competitive Landscape Changes Constantly.
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The Exchange Offer
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The Old Notes........................ We issued $100.0 million in principal amount of our 9 3/4% Series A senior
notes due 2006 on November 30, 1998. Because we did not register the old
notes under the Securities Act, they are subject to restrictions on
transfer.
The New Notes........................ We offer $100.0 million in principal amount of our 9 3/4% Series B senior
notes due 2006 in this prospectus. We have registered the new notes under
the Securities Act, so that they will not be subject to restrictions on
transfer.
The Offer............................ We offer to exchange $1,000 principal amount of registered new notes for
each $1,000 principal amount of unregistered old notes. We will accept for
exchange any and all old notes properly tendered before the offer expires
and will then promptly issue the new notes.
Expiration Date...................... 5:00 p.m., New York City time, on __________, 1999, unless we extend the
exchange offer.
Accrued Interest on the
New Notes and
Old Notes............................ The new notes will bear interest from and including November 30, 1998, the
date of issuance of the old notes. If we accept your old notes for
exchange, you will waive the right to receive any interest accrued on the
old notes.
Conditions to this Offer............. Although we do not condition this exchange upon any minimum aggregate
principal amount of old notes being tendered, it is subject to certain
customary conditions which we explain below in The Exchange Offer--
Conditions.
Exchange Agent....................... First Union National Bank.
Procedures for Tendering
Old Notes............................ If you hold old notes and you wish to accept this offer you must complete a
letter of transmittal and deliver it to the exchange agent. You must
follow the instructions contained in that letter and this prospectus.
Special Procedures for
Beneficial Owners.................... If you are a beneficial owner whose old notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender your old notes, you should contact the registered holder
promptly and instruct it to tender the notes for you.
Guaranteed Delivery
Procedures........................... If you wish to tender your old notes and you cannot deliver them, the
letter of transmittal or any other required documents before this offer
expires, you must tender your old notes according to procedures we discuss
below in The Exchange Offer-- Guaranteed Delivery Procedures. You can use
this procedure only if you tender through an eligible institution as
described in The Exchange Offer-- Procedures for Tendering.
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Withdrawal Rights.................... You may withdraw your tender of old notes at any time before the exchange
offer expires. The procedure for doing this is described in The Exchange
Offer -- Withdrawal of Tenders.
Certain United States Federal
Income Tax Consequences of the
Exchange Offer....................... We discuss certain federal income tax considerations relating to the
exchange in Material United States Federal Income Tax Consequences of this
Offer.
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Summary of Terms of New Notes
The new notes will have identical terms to the old notes. A brief summary
follows. For a more detailed description, read Description of Notes.
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Total amount of notes offered........ $100.0 million in principal amount of 9 3/4% Series B senior notes due 2006.
Maturity............................. December 1, 2006.
Interest............................. Annual rate -- 9 3/4%.
Payment frequency -- every six months on June 1 and December 1. First
payment -- June 1, 1999.
Ranking.............................. The notes will rank senior to our subordinated indebtedness and will rank
equally in right of payment with our senior indebtedness. But they will
effectively rank junior to the substantial indebtedness of our
subsidiaries, even their subordinated indebtedness. We describe this in
more detail under Risk Factors-- Because of Our Holding Company Structure,
These Notes Are Effectively Subordinated To Debt of Our Subsidiaries.
Subsidiary guarantors................ None of our subsidiaries guarantee the old notes and, when issued, none of
our subsidiaries will guarantee the new notes. However, our subsidiaries
may in the future unconditionally guarantee our obligations on a senior,
unsecured basis, jointly and severally, by signing a supplemental
indenture.
Optional redemption.................. On or after December 1, 2002, we may redeem some or all of the notes at any
time at the redemption prices listed in Description of Notes-- Optional
Redemption.
Mandatory offer to repurchase........ If we sell certain assets or experience specific kinds of changes in
control, we must offer to repurchase the notes.
Basic covenants of the indenture..... We will issue the notes under an indenture. The indenture restricts our
ability and the ability of our subsidiaries to:
o sell assets;
o make certain payments, including dividends;
o incur indebtedness and liens;
o sell certain preferred securities;
o engage in certain transactions with our affiliates;
o issue certain equity; and o merge or consolidate.
These restrictions are subject to important qualifications that we
explain below in Description of Notes -- Certain Covenants.
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Market
We do not plan to list the new notes on any exchanges or with the
Nasdaq National Market. No one has made a binding agreement to make a market
for the new notes. We offer no assurance that a market for the new notes
will develop or provide meaningful liquidity for investors.
5
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The old notes are eligible for trading in the private offerings,
resales and trading through automated linkages market. Because we did not
register them under the Securities Act, they are subject to restrictions on
transfer that will not apply to the new notes. After we complete the
exchange offer, we will have no obligation to register the old notes except
under very limited circumstances.
Failure to Exchange Old Notes
If you do not tender your old notes in this exchange offer or we do not
accept them, your old notes will remain subject to existing transfer
restrictions.
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Where You Can Find More Information
We file annual, quarterly and special reports, as well as proxy
statements and other information with the SEC. You may read and copy any of the
documents we file with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 or at its Regional Offices 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. You may
obtain further information about the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the
public over the Internet at the SEC's web site at http://www.sec.gov, which
contains reports, proxy statements and other information regarding registrants
like Pegasus that file electronically with the SEC. Our Class A common stock is
quoted on the Nasdaq National Market and reports and other information about us
may be inspected at the Nasdaq National Market at 1735 K Street, NW, Washington,
DC 20007-1500.
This prospectus is part of a registration statement on Form S-4 we have
filed with the SEC. As permitted by SEC rules, this prospectus does not contain
all of the information included in the registration statement and the
accompanying exhibits filed with the SEC. You may refer to the registration
statement and its exhibits, including the indenture covering the notes which are
the subject of this offering, for more information.
The SEC allows us to incorporate by reference into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus. If we
subsequently file updating or superseding information in a document that is
incorporated by reference into this prospectus, the subsequent information will
also become part of this prospectus and will supersede the earlier information.
We are incorporating by reference the following documents that we have
filed with the SEC:
o Pegasus' Form 10-K filed with the SEC on March 10, 1999 for the
fiscal year ended December 31, 1998;
o Digital Television Services Inc.'s Form 10-K filed with the SEC on
March 23, 1998 for the fiscal year ended December 31, 1997;
o Digital Television Service, Inc.'s quarterly report on Form 10-Q for
the quarter ended September 30, 1998;
o Digital Television Service, Inc.'s quarterly report on Form 10-Q for
the quarter ended June 30, 1998;
o Digital Television Service, Inc.'s quarterly report on Form 10-Q for
the quarter ended March 31, 1998; and
o The section entitled "Pegasus Communications Corporation's pro forma
consolidated financial information", pages F-23 to F-28 of the
prospectus dated March 16, 1999 relating to Pegasus' registration
statement on Form S-3 (File No. 333-70949).
We are also incorporating by reference into this prospectus all of our
future filings with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act until this exchange offer ends.
You may obtain a copy of any of our filings which are incorporated by
reference, at no cost, by writing to or telephoning us at the following address:
Pegasus Communications Corporation
c/o Pegasus Communications Management Company
Suite 454, 5 Radnor Corporate Center
100 Matsonford Road
Radnor, Pennsylvania 19087
Attention: Director of Communications
Telephone: (888) 438-7488
To obtain timely delivery of this information you must request this
information no later than ______________, 1999 or five days after any extension
of this offer, whichever is later. You should rely only on the information
provided in this prospectus, in the accompanying letter of transmittal, or
incorporated by reference. We have not authorized anyone to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the cover page of
the prospectus. We are not making this offer of securities in any state or
country in which the offer or sale is not permitted.
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Risk Factors
You should carefully consider the risks described below before you
decide to invest. They could materially and adversely affect our financial
condition and results of operation. They could impair our ability to repay the
notes and interest on the notes, and you might lose all or part of your
investment.
Risks of Investing in these Notes
Our Substantial Indebtedness Could Adversely Affect Your Investment
We have now and, after the exchange offer, will continue to have a
significant amount of indebtedness. Our substantial indebtedness could have
important consequences to you. For example, it could:
o make it more difficult for us to satisfy our obligations under these
notes;
o increase our vulnerability to general adverse economic and industry
conditions;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, acquisitions and other activities;
o limit our flexibility in planning for, or reacting to, changes in
our business and the industries in which we operate; and
o place us at a competitive disadvantage compared to our competitors
that have less debt.
The following chart shows certain important credit statistics and is
presented with the assumption that we had completed the 1999 equity offering and
applied the proceeds from that offering and consummated the pending and
completed acquisitions described in Prospectus Summary -- Recent Pegasus
Developments.
Pro Forma
At December 31, 1998
--------------------
Total indebtedness.......................... $529,881,000
Stockholders' equity........................ $120,178,000
Debt to equity ratio........................ 4.39x
On the assumption that these events and the 1998 offering of our senior
notes had occurred on January 1, 1998, our earnings would have been inadequate
to cover our fixed charges and preferred stock dividends by $149.6 million for
the year ended December 31, 1998. Neither total indebtedness nor stockholders'
equity, as set forth above, includes the approximately $126.0 million in
outstanding Series A preferred stock or a $3 million minority interest in one of
our subsidiaries.
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We and Our Subsidiaries May Still Be Able to Incur Substantially More
Debt Which Could Exacerbate the Risks Described Above.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. If new debt is added to our and our subsidiaries'
current debt levels, the risks described above that we and they now face could
intensify. The terms of the indenture do not fully prohibit us or our
subsidiaries from doing so. Our credit facilities would permit our subsidiaries
to borrow up to $153.5 million more after completion of this offering and all of
those borrowings would be effectively senior to the notes.
We May Not Be Able To Generate Enough Cash to Service Our Debt
Our ability to make payments on and to refinance our indebtedness,
including these notes, and to fund planned capital expenditures and other
activities will depend on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control.
Accordingly, we cannot assure you that our business will generate sufficient
cash flow to service our debt.
Based on our current level of operations and anticipated cost savings
and operating improvements, we believe our cash flow from operations, available
cash and available borrowings under our credit facilities, will be adequate to
meet our future liquidity needs for at least the next few years.
We cannot assure you, however, that our business will generate
sufficient cash flow from operations. We also cannot assure you that:
o currently anticipated cost savings and operating improvements will
be realized on schedule, or
o future borrowings will be available to us under our credit
facilities in amounts sufficient to enable us to pay our
indebtedness, including these notes, or to fund our other liquidity
needs.
We may need to refinance all or a portion of our indebtedness,
including these notes, on or before maturity. We cannot assure you that we will
be able to refinance any of our indebtedness, including our credit facilities
and these notes, on commercially reasonable terms or at all.
These Notes Are Not Guaranteed which could Adversely Affect Your
Investment
Only Pegasus Communications Corporation owes payment of theses notes.
None of our subsidiaries have guaranteed them, and if our business were to be
liquidated, our subsidiaries' debt would be paid first before payment is made on
these notes.
We conduct all of our business operations through subsidiaries. Our
subsidiaries have their own debt, including $240.0 million of publicly held debt
securities and bank credit facilities under which they could borrow up to $153.5
million. If our business were to be liquidated, our subsidiaries would have to
repay all this debt, plus their other liabilities such as trade payables, before
we could get anything from them to pay these notes and our other obligations,
including $115.0 million of senior notes that we issued in 1997. Therefore,
while these notes are not subordinated to other debts of Pegasus Communications
Corporation, they effectively rank behind our subsidiaries' debts.
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We May Have Difficulty Obtaining Cash from Our Subsidiaries To Pay
These Notes Which Could Adversely Affect Your Investment
Our only source for the cash we need to pay current interest on these
notes and our other debt is the cash that our subsidiaries generate from their
operations or their borrowings. The credit facility of one of our principal
subsidiaries permits that subsidiary to distribute cash to us to pay interest on
these notes and our other senior notes, but only so long as we are not in
default under that credit facility. If we default under it, we would have no
cash to pay interest on these notes.
If a Change of Control Occurs, We May Be Unable To Refinance Our
Publicly Held Debt, Bank Debt and Preferred Stock.
If certain kinds of change of control events occur, we will be required
to offer to repurchase all outstanding notes. We must offer to redeem other
publicly held debt securities and preferred stock for approximately $485.0
million, and our bank debt of approximately $85.4 million at February 15, 1999
would also come due on a change of control. If a change of control occurs, and
we are unable to finance it, we would be in default. See Description of Notes -
Repurchase at the Option of Holders - Change of Control.
Federal and State Courts Could Void Guarantees of These Notes and
Require Noteholders To Return Payments Received From Guarantors.
None of our subsidiaries have guaranteed these notes, but they could be
required to do so in certain circumstances. If a subsidiary was found to be
insolvent, any payments made by the guarantor to noteholders could be voided.
In such a case, the noteholder would be required to return the payment.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee was insolvent. In addition, these laws could require that any
payment by the guarantor under its guarantee be voided and returned to the
guarantor, or to a fund for the benefit of the creditors of the guarantor.
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The measures of insolvency for purposes of these fraudulent transfer
laws will vary depending upon the law applied in any proceeding to determine
whether a fraudulent transfer has occurred. Generally, however, a guarantor
would be considered insolvent if the sum of its debts were greater than the
value of all of its assets or it could not pay its debts as they become due. See
Description of Notes -- Subsidiary Guarantees for a description of the
circumstances under which a subsidiary might be required to guarantee these
notes.
Risks of Our Direct Broadcast Satellite Business
Satellite and Direct Broadcast Satellite Technology Could Fail or Be
Impaired
If any of the DIRECTV satellites is damaged or stops working partially
or completely for any of a number of reasons, DIRECTV customers would lose
programming. We would in turn likely lose customers, which could materially and
adversely affect our operations, financial performance and ability to pay the
notes.
Direct broadcast satellite technology is highly complex and is still
evolving. As with any high-tech product or system, it might not function as
expected or last through the year 2007 as currently expected. One example of
this risk occurred recently. In July 1998, the primary spacecraft control
processor failed on one of the satellites that transmits DIRECTV programming. As
it was designed to do, the satellite automatically switched to the on-board
backup processor with no interruption of service to DIRECTV subscribers. If the
backup processor on the current satellite fails, other satellites presently in
orbit would continue to transmit DIRECTV programming, but the service would
experience an undetermined reduction in channel capacity. While Hughes
Electronics, which owns DIRECTV, has announced plans to launch a new satellite
in September 1999, this will not eliminate the risk.
Events at DIRECTV Could Adversely Affect Us
Because we are an intermediary for DIRECTV, events at DIRECTV that we
do not control can adversely affect us. One of the most important of these is
DIRECTV's ability to provide programming that appeals to mass audiences. DIRECTV
generally does not produce its own programming; it purchases it from third
parties. DIRECTV's success -- and therefore ours -- depends in large part on
DIRECTV's ability to make good judgments about programming sources and obtain
programming on favorable terms. We have no control or influence over this.
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Programming Costs May Increase Which Could Adversely Affect Our Direct
Broadcast Satellite Business.
After 2002, certain programmers could increase our DIRECTV rates. This
could cause us to either lose customers or revenues.
The law requires programming suppliers that are affiliated with cable
companies to provide programming to all multichannel distributors -- including
DIRECTV -- on nondiscriminatory terms. The rules implementing this law are
scheduled to expire in 2002. If they are not extended, these programmers could
increase DIRECTV's rates, and therefore ours. If we increase our rates, we may
lose customers. If we do not increase our rates, our revenues and financial
performance could be adversely affected.
We May Lose Our DIRECTV Rights After 2007
We may or may not be able to continue in the DIRECTV business after the
current DIRECTV satellites are replaced. If we can continue, we cannot predict
what it will cost us to do so.
We Cannot Retransmit the Broadcast Networks' Programming to All Our
Customers; This Could Cause Us to Lose Customers and Revenues
The direct broadcast satellite industry and the major television
networks are in a dispute about whether direct broadcast satellite services can
deliver network programming to certain subscribers. If this dispute is not
resolved in a way that is favorable to us, we will be required to shut off
network programming to some existing customers and not to offer it to some new
customers. This could result in our loss of customers and revenues.
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The dispute arises under a federal law called the Satellite Home Viewer
Act. Under this law direct broadcast satellite operators, for a fee, can provide
network programming to subscribers only in unserved areas. In recent lawsuits,
the networks have persuaded the courts to define unserved areas much more
narrowly than has been our practice and that of others in the direct broadcast
satellite industry. Under the court's order in two of these lawsuits, we are
required to cut off CBS and Fox programming to ineligible subscribers in two
stages between February 28, 1999 and April 30, 1999.
In addition, DIRECTV and the four networks have entered into a
settlement agreement that would supersede the court's orders if approved by the
court. Under the settlement agreement, certain subscribers who are ineligible to
receive network programming under guidelines recently approved by the FCC would
have Fox, CBS, NBC and ABC programming cut-off by June 30, 1999 and certain
others would have such services cut-off by December 31, 1999. We are still
evaluating whether the settlement applies to Pegasus and the impact of the
settlement on our subscriber base. However, cut-offs based on either the court's
orders, the settlement agreement or the FCC's guidelines will result in a
reduction of revenues because of the termination of network services and the
possible loss of subscribers. Since we are presently using the court's narrower
definition of unserved area to determine whether new subscribers are eligible to
receive any of the four networks, we do not know how many potential customers we
have lost or will lose because of this.
Our Inability to Carry Local Station Programming Could Cause Us to Lose
Customers and Revenues
Subscribers cannot receive their local TV stations on direct broadcast
satellite, particularly local news and sports. This will remain true for many
subscribers even if the network programming issues discussed above are resolved
in the direct broadcast satellite industry's favor. In areas served by cable
television, this puts us at a competitive disadvantage and may lose us customers
and revenues because cable systems usually carry local stations.
We May Lose Customers To Cable Because DIRECTV Equipment is Expensive
We could lose customers and revenues to cable because our equipment is
more expensive to buy and install. To receive DIRECTV, the customer must buy and
install reception equipment -- a dish and a receiver. Although the price of this
equipment has decreased significantly since DIRECTV service began in 1994, it
still costs about $149 to buy the equipment and another $129 to have it
professionally installed. We reduce the front-end cost to consumers by
subsidizing the equipment cost and providing free programming for a month or
more, which reduces our income. Even so, cable has an advantage over direct
broadcast satellite because cable customers do not have to buy equipment, and
cable companies charge lower installation fees.
We Could Lose Money Because of Signal Theft
If signal theft becomes widespread, our revenues would suffer. Signal
theft has long been a problem in the cable and direct broadcast satellite
industries. DIRECTV uses encryption technology to prevent people from receiving
programming without paying for it. The technology is not foolproof, and there
have been published reports that it has been compromised.
We Could Lose Revenues if We Have Out-of-Territory Subscribers
Just as we have exclusive DIRECTV distribution rights in our
territories, we are not allowed to have customers outside our territories. The
problem is that customers are not always truthful about where they live. If it
turns out that large numbers of our subscribers are not in our territories, we
would lose substantial revenues when we disconnect them. We could also face
legal consequences for having subscribers in Canada, where DIRECTV reception is
illegal.
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Risks of Our Broadcast Television Business
Our Broadcast Operations Could Be Adversely Affected if We Fail to
Negotiate Successfully Our Network Affiliation Agreements
The Fox, WB and UPN television networks provide substantial amounts of
our stations' programming. We are in the process of negotiating affiliation
agreements with Fox and WB. If we are not successful in these negotiations, our
broadcast operations could suffer materially.
Fox Could Cancel Our Affiliation Agreements if It Acquires a
Significant Ownership Interest in One of Our Markets.
If Fox acquires a significant ownership interest in another station in
one of our markets, it can cancel our affiliation agreement for that market
without penalty. Fox has done this in the past to other broadcasters.
Our Broadcast Operations Could Be Adversely Affected if the FCC
Prevents Our Local Marketing Agreement Strategy
One of our important strategies in broadcast television is to achieve
economies of scale by programming two stations in each of our markets. The FCC
is considering a measure that would prevent us from doing this and could force
us to stop programming some of our existing stations. This could cost us
significant revenues.
Because the FCC does not allow us to own more than one television
station in the same market, we have implemented our strategy -- as have other
broadcasters -- through arrangements known as local marketing agreements. We
currently have local marketing agreements for second stations in three of our
markets and our only station in another market is programmed through a local
marketing agreement. We expect to program a second station under such an
agreement in one more market by 2000.
If the FCC adopts the proposed change, it could prohibit us from
obtaining additional in-market stations, and it could require us to terminate
our existing agreements. We might be able to keep one or more of them for a
period of time or indefinitely under grandfathering rules, but the FCC has not
made its position clear on this point. This would affect our broadcast
operations materially and adversely.
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Antitrust Laws Could Limit Our Local Marketing Agreement Strategy
Apart from the FCC, federal agencies that administer the antitrust laws
have said they intend to review market concentrations in television, including
through local marketing agreements that the FCC permits. If so, these agencies
could limit partially or altogether our ability to program stations through
local marketing agreements. We cannot predict how this will affect us.
Our Inability To Control Licensees Under Our Local Marketing Agreements
Could Adversely Affect Our Broadcast Operations
Even if we can keep and expand our local marketing agreements, their
use carries the inherent risk that we do not control the other parties that
actually own the stations and hold the stations' FCC licenses. It is conceivable
that the licensee could pre-empt our programming. In an extreme case, the
licensee could cease to meet FCC qualifications and put its license in jeopardy,
in which case, we could lose the ability to program the station.
The Planned Industry Conversion To Digital Television Could Adversely
Affect Our Broadcast Business
All commercial television stations in the United States must start
broadcasting in digital format by May 2002 and must abandon the present analog
format by 2006, though the FCC may extend these dates.
o It will be expensive to convert from the current analog format to
digital format. We cannot now determine what that cost will be.
o The digital technology will allow us to broadcast multiple channels,
compared to only one today. We cannot predict whether or at what
cost we will be able to obtain programming for the additional
channels. Increased revenues from the additional channels may not
make up for the conversion cost and additional programming expenses.
Also, multiple channels programmed by other stations could increase
competition in our markets.
o The FCC has generally made available much higher power allocations
to digital stations that will replace stations on existing channels
2 through 13 than digital stations that will replace existing
channels 14 through 69. All of our existing stations are on channels
14 through 69. This power disparity could put us at a disadvantage
to our competitors that now operate on channels 2 through 13.
o In some cases, when we convert a station to digital television, the
signal may not be received in as large a coverage area, or it may
suffer from additional interference. Also, the technical standards
adopted by the FCC limit the power that stations may use to send the
signal. As a result, viewers using antennas located inside their
television sets may not receive a reliable signal. If viewers do not
receive a high-quality, reliable signal from our stations, they may
be encouraged to seek service from our competitors.
o The FCC is considering whether to require cable companies to carry
both the analog and the digital signals of their local broadcasters
when television stations will be broadcasting both, during the
transition period between 2002, at the latest, and 2006. If the FCC
does not require this, cable customers in our broadcast markets may
not receive our digital signal, which could affect us unfavorably.
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Risks of Our Cable Business
We Could Lose Revenues Because of Our Geographic Concentration in
Puerto Rico
All of our cable operations are in Puerto Rico, and the cable system we
have agreed to purchase is also in Puerto Rico. This geographical concentration
carries risks:
o Puerto Rico gets more hurricanes and other severe weather than many
other places. Because of Hurricane Georges, which struck Puerto Rico
in September 1998, we lost $1.4 million of revenue in the fourth
quarter of 1998 alone, and we spent about $300,000 to repair the
damage. Future hurricanes can be expected and could be even worse
for us.
o A local downturn in the Puerto Rico economy could cause us to lose
revenues from subscribers and advertisers. This would affect our
cable business more seriously than if we were more geographically
diversified.
The FCC's Digital Television Requirements May Prevent Us From Expanding
Our Cable Programming
The FCC's digital television rules may cause us to lose customers and
revenues. We mentioned above that the FCC is considering whether to require
cable companies to carry both the analog and digital signals of local television
stations during the transition to digital broadcasting. See Risks of Our
Broadcast Television Business -- The Planned Industry Conversion to Digital
Television Could Adversely Affect Our Broadcast Operations. Because we have only
so much channel capacity in our cable system, this requirement could hurt our
ability to expand our programming offerings. If we cannnot expand programming
offerings, we could lose customers and revenues.
We Could Become Subject to Rate Regulation Which Could Reduce Our Cable
Revenues
We may lose revenues if we become subject to rate regulation. The
government can regulate the rates cable companies charge for the lowest level of
their service. The government does not now regulate our rates or those of the
cable system we have agreed to purchase because the FCC has found that both
systems are subject to effective competition. This means that less than 30% of
the people that could subscribe to the systems do subscribe. But if we are
successful in significantly increasing the percentage of people that subscribe
to our service, the lowest level of cable service we offer could become subject
to rate regulation. If so, we might have to reduce our cable rates, resulting in
decreased revenues.
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Other Risks of Our Business
We Have a History of Substantial Losses; We Expect Them to Continue;
Losses Could Adversely Affect our Stock Price and Access to Capital Markets
We have never made a profit, except in 1995, when we had a $10.2
million extraordinary gain. Because of interest expense on our substantial debt
and because of high expense in amortizing goodwill from our acquisitions, we do
not expect to have net income for the foreseeable future. To the extent
investors measure our performance by net income or loss, rather than alternative
measures based on cash flow, continuing losses could adversely affect our access
to capital markets and our ability to pay the notes.
We Face Significant Competition; the Competitive Landscape Changes
Constantly
Our direct broadcast satellite business faces competition from other
current or potential multichannel programming distributors, including other
direct broadcast satellite operators, direct-to-home distributors, cable
operators, wireless cable operators, internet and local and long-distance
telephone companies, which may be able to offer more competitive packages or
pricing than we or DIRECTV can provide. In addition, the direct broadcast
satellite industry is still evolving and recent or future competitive
developments could adversely affect us. For example, on November 30, 1998,
EchoStar, which competes with us in the sale of direct broadcast satellite
programming, announced that it had entered into an agreement with News
Corporation and MCI providing for the transfer to EchoStar of the license to
operate a high-powered direct broadcast satellite business at the 110(degree)
west longitude orbital location consisting of 28 frequencies and the sale of two
satellites that are currently under construction. This could adversely affect us
in several ways. First, EchoStar could develop greater channel capacity than
DIRECTV and offer more and a wider selection of programming than offered by
DIRECTV. Second, direct broadcast satellite is limited by the copyright laws
from retransmitting television signals to local markets, and EchoStar has been
at the forefront of a legislative effort to change the laws in order to permit
EchoStar and other direct broadcast satellite providers to deliver local network
signals. The additional frequencies being acquired by EchoStar could provide it
with enough capacity to retransmit local signals in larger television markets if
the law is changed. DIRECTV does not have this capacity.
Our TV stations compete for audience share, programming and advertising
revenue with other television stations in their respective markets and with
direct broadcast satellite operators, cable operators and other advertising
media. Direct broadcast satellite and cable operators in particular are
competing more aggressively than in the past for advertising revenues in our TV
stations' markets. This competition could adversely affect our stations'
revenues and performance in the future.
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Our cable systems face competition from television stations, satellite
master antennae television systems, wireless cable systems, direct-to-home
distributors, direct broadcast satellite systems and open video systems.
In addition, the markets in which we operate are in a constant state of
change due to technological, economic and regulatory developments. We are unable
to predict what forms of competition will develop in the future, the extent of
such competition or its possible effects on our businesses.
Our Acquisition Strategy May Become Too Expensive Which Could Adversely
Affect Our Financial Performance
We may not be able to keep making acquisitions on attractive terms. If
we cannot continue to make acquisitions on attractive terms, our financial
performance and stock price could suffer.
We have grown primarily through acquisitions. We plan to continue with
our acquisition program, particularly in the direct broadcast satellite
business. We compete with others for acquisitions. This has driven acquisition
prices higher, and we expect it will continue to do so, particularly for the
most attractive direct broadcast satellite territories.
If we pay for an acquisition with our stock, the acquisition could
dilute existing stockholders, depending on its terms. If we finance an
acquisition by borrowing, this would increase our already high leverage and
interest expense.
We may not Be Able to Obtain the Consents Necessary to Implement Our
Acquisition Strategy
We have been able to get the necessary consents to make acquisitions in
the past, but this could change, or become more difficult, or require us to
incur additional costs, for reasons we cannot predict. Our acquisitions normally
require third party consents that we do not control. These include the consents
of DIRECTV and the National Rural Telecommunications Cooperative for direct
broadcast satellite acquisitions, the FCC and the television networks for
broadcast TV acquisitions, and cable franchising authorities and programmers for
cable acquisitions. Some acquisitions also require the consent of our lenders.
We May Not Be Able to Integrate Acquired Companies Successfully Which
Could Affect Our Financial Performance
We could encounter difficulties integrating any given acquired business
into our operations. These difficulties can cost money and divert management's
attention from other important matters.
The Year 2000 Problem Could Adversely Affect Us
We may be adversely affected by year 2000 computer-related
malfunctions. An issue exists for all companies that rely on computers as the
year 2000 approaches. This issue involves computer programs and applications
that were written using two digits rather than four to identify the applicable
year, and could result in system failures or miscalculations. We have undertaken
an assessment to determine the extent of any necessary remediation, and the
anticipated costs thereof, to make our material equipment, systems and
applications year 2000 compliant. Costs in connection with any modifications to
make our systems compliant are not expected to be material. However, if such
modifications are not completed successfully or are not completed in a timely
manner, the year 2000 issue may have a material adverse impact on our
operations. Exposure could arise also from the impact of non-compliance by
certain software and/or equipment vendors and others with whom we conduct
business. We cannot estimate the potential adverse impact that may result from
non-compliance with the year 2000 issue by the software and/or equipment vendors
and others with whom we conduct business.
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We May Not Be Aware of All Risks
These risks and uncertainties are not the only ones we face. Others
that we do not know about now, or that we do not now think are important, may
impair our business or our ability to pay the notes.
Forward-Looking Statements May Prove Inaccurate
This prospectus contains or incorporates by reference certain
statements and information that are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. We use words such as "anticipate," "believe,"
"estimate," "expect," "intend," "project," "should" and similar expressions to
identify forward looking statements. Those statements include, among other
things, the discussions of our business strategy and expectations concerning our
market position, future operations, margins, profitability, liquidity and
capital resources, as well as statements concerning the integration of our
acquisitions and related achievement of cost savings and other synergies. We
caution you that reliance on any forward-looking statement involves risks and
uncertainties, and that although we believe that the assumptions on which our
forward-looking statements are based are reasonable, any of those assumptions
could prove to be inaccurate, and, as a result, the forward-looking statements
based on those assumptions also could be incorrect. The uncertainties in this
regard include, but are not limited to, those identified in the risk factors
discussed above. In light of these and other uncertainties, you should not
conclude that we will necessarily achieve any plans and objectives or projected
financial results referred to in any of the forward-looking statements. We do
not undertake to release the results of any revisions of these forward-looking
statements to reflect future events or circumstances.
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Ratio of Earnings to Fixed Charges
Earnings were inadequate to cover combined fixed charges and preferred
stock dividends by approximately $4.9 million, $8.1 million, $9.8 million, $29.6
million, and $94.8 million for the years ended December 31, 1994, 1995, 1996,
1997 and 1998, respectively. Assuming the 1999 equity offering and the pending
and completed acquisitions described in Prospectus Summary -- Recent Pegasus
Developments and the 1998 offering of old notes had occurred on January 1, 1998,
our earnings would have been inadequate to cover our fixed charges and preferred
stock dividends by $149.6 million for the year ended December 31, 1998. For the
purposes of the calculation of the ratio of earnings to 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.
Use of Proceeds
We will not receive any cash proceeds from the exchange offer. We will
retire and cannot reissue the old notes that holders surrender in exchange for
new notes.
Proceeds from the sale of the old notes amounted to approximately $96.6
million, after deducting the initial purchasers' discount and estimated fees and
expenses. We used or intend to use the proceeds to:
o repay the indebtedness of our subsidiary Pegasus Media &
Communications, Inc. of approximately $64.7 under its credit
facility; and
o fund a portion of our pending acquisitions.
On November 30, 1998, when we repaid the above amount of credit
facility debt, the interest rate on the debt was approximately 7 3/4 % per year.
Our subsidiary entered into the credit facility on December 10, 1997 and used
the borrowings primarily to acquire DIRECTV territories. We can reborrow the
amount we repaid on November 30, 1998, if we meet certain conditions.
If we do not consummate any of our pending acquisitions, we intend to
use the proceeds for working capital, general corporate purposes or future
acquisitions.
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The Exchange Offer
Terms of the Exchange Offer
We will accept any and all old notes validly tendered and not
withdrawn before the offer expires. We will issue $1,000 principal amount of new
notes in exchange for each $1,000 principal amount of outstanding old notes. We
will exchange notes 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:
o the new notes will be registered under the Securities Act and so
will not bear restrictive legends; and
o holders of the new notes will not be entitled to the rights of
holders of old notes under a registration rights agreement described
below; those rights will end upon the consummation of the exchange
offer.
The new notes will evidence the same debt as the old notes. The new
notes also will be issued under the same indenture. The indenture treats both
series as a single class of debt securities.
As of ________, 1999, all $100.0 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. Only a registered holder of the old
notes or such holder's legal representative or attorney-in-fact, as reflected on
the records of First Union National Bank under the indenture, may participate in
the exchange offer. There will be no fixed record date for determining which
registered holders of the old notes may participate in the exchange offer.
We will accept validly tendered old notes by giving the exchange agent
oral or written notice. The exchange agent also will be the agent for the
tendering holders of old notes for receiving the new notes from us.
Resale of New Notes
We believe that holders of the new notes will be able to transfer the
new notes without complying with the registration and prospectus delivery
requirements of the Securities Act, provided that the holder is acquiring the
new notes in the ordinary course of business and is not participating or had an
arrangement to participate in the notes' distribution. The preceding sentence
does not apply to broker-dealers who have purchased new notes directly from us
for resale under SEC Rule 144A or to any person that is our affiliate.
Broker-dealers who acquire new notes as the result of trading activities must
acknowledge that they will deliver a prospectus in connection with any resale of
the new notes. These statements are based on interpretations of the SEC's staff
that are subject to change.
Expiration; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time on
___________, 1999 unless we extend it in our sole discretion.
To extend the exchange offer, we must notify the exchange agent and the
registered holders of the old notes by mail or other means we select before 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date.
We may also delay or end the exchange offer by notifying the exchange
agent if the conditions to the offer described below are not satisfied. We will
notify the holders by mail or other means we select of any such delay extension
or ending as promptly as practicable.
We may amend the exchange offer in our discretion. If the amendment is
material, we will promptly disclose the amendment in a prospectus supplement
that we will distribute to registered holders. We also will extend the exchange
offer for a period of five to ten business days, depending upon the significance
of the amendment.
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We will 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.
Procedures for Tendering
Only a registered holder of old notes may tender old notes in the
exchange offer. To tender, a holder must complete, sign and date the letter of
transmittal. If required by the letter of transmittal, the holder must have the
signatures on the letter of transmittal guaranteed by one of the eligible
institutions we describe below. The holder must then deliver the letter of
transmittal to the exchange agent at the address given below. In addition,
either:
o the exchange agent must receive certificates for such old notes
along with the letter of transmittal, or
o the exchange agent must receive a timely confirmation of a
book-entry transfer of such old notes into the exchange agent's
account at the Depository Trust Company, before the end of the
exchange offer, or
o the holder must comply with the guaranteed delivery procedures
described below.
Holders who do not withdraw their tenders before the exchange offer
ends will have agreed with the terms and conditions discussed in this prospectus
and in the letter of transmittal.
Holders select the method of delivery of old notes and the letter of
transmittal and all other required documents to the exchange agent at their own
risk. We recommend that holders use a properly insured overnight or hand
delivery service, instead of the mails. Holders should allow sufficient time to
assure delivery to the exchange agent before the end of the offer. Holders must
not send a letter of transmittal or old notes to Pegasus. Holders may ask their
respective brokers, dealers, commercial banks, trust companies or nominees to
complete the transaction for them.
Any beneficial owner(s) 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 their behalf. If the beneficial owner wishes to
tender on such owner's own behalf, the owner must, before completing and
executing the letter of transmittal and delivering the owner's old notes, either
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.
An eligible institution must guarantee signatures on a letter of
transmittal or a notice of withdrawal described below unless the old notes are
tendered:
o by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the letter of transmittal; or
o for the account of an eligible institution.
The following are eligible institutions:
o 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
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o an eligible guarantor institution within the meaning of SEC Rule
17Ad-15 which is a member of one of the recognized signature
guarantee programs identified in the letter of transmittal.
If a person other than the registered holder of any old notes signs the
letter of transmittal, 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 the notes.
If a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other acting in a fiduciary or representative
capacity is signing the letter of transmittal or any old notes or bond powers,
such person should so indicate when signing. Unless we waive this requirement,
such persons should submit evidence of their authority with the letter of
transmittal.
The exchange agent and the Depository Trust Company have confirmed that
any financial institution that is a participant in the Depository Trust
Company's system may tender old notes through the Depository Trust Company's
Automated Tender Offer Program.
We will determine all questions as to the validity, form, eligibility,
including time of receipt, acceptance and withdrawal of tendered old notes. Our
determination will be final and binding. We may reject any and all old notes not
properly tendered or any old notes our acceptance of which would, in the opinion
of our counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular old notes.
Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding. A holder must cure any defects or irregularities in connection with
tenders of old notes within such time as we shall determine. Although we intend
to notify holders of such defects or irregularities, no one will incur any
liability for failure to notify. A tender will not be effective until the holder
has cured or we have waived any defects or irregularities.
While we have no present plan to acquire or file a registration
statement for any old notes which holders do not tender in this exchange offer,
we reserve the right to purchase or make offers for any old notes that remain
outstanding after the offer expires or after we terminate it. We may do this in
the open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers could differ from the terms of this exchange offer.
By tendering, each holder will represent to us, among other things,
that the holder:
o is acquiring the new notes in the ordinary course of business;
o has no arrangement or understanding with any person to participate
in the distribution of new notes;
o acknowledges and agrees that any broker-dealer registered under the
Exchange Act or 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 a
secondary resale transaction of the new notes acquired by such
person and cannot rely on the position of the staff of the SEC set
forth in certain no-action letters;
o understands that a secondary resale transaction described above and
any resales of new notes it obtains in exchange for old notes it
acquires directly from us should be covered by an effective
registration statement containing the selling securityholder
information required by Item 507 or Item 508, as applicable, of SEC
Regulation S-K; and
o is not our affiliate, as defined in SEC Rule 405.
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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 admit that it is an
underwriter within the meaning of the Securities Act.
Return of Old Notes
If we reject any tendered old notes or if holders withdraw old notes or
submit them for a greater principal amount than the holders desire to exchange,
we will return old notes without expense to the tendering holder as promptly as
practicable. If the holder tenders by book-entry transfer into the exchange
agent's account at the Depository Trust Company, such old notes will be credited
to an account maintained with the Depository Trust Company.
Book-Entry Transfer
The exchange agent will request to establish an account for the old
notes at the Depository Trust Company. Any financial institution that is a
participant in the Depository Trust Company's system 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 Depository Trust Company. Although holders
may deliver old notes through book-entry transfer, holders must transmit, and
the exchange agent must receive, the letter of transmittal, with any required
signature guarantees and any other required documents at the address given below
on or before the end of this offer or under the guaranteed delivery procedures
described below.
Guaranteed Delivery Procedures
Holders 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 required documents to the exchange agent before the end
of the exchange offer, may effect a tender if:
o the holder tenders through an eligible institution.
o before the end of the exchange offer, the exchange agent receives
from such eligible institution a properly completed and duly
executed notice of guaranteed delivery substantially in the form
provided by us. This form must set forth the name and address of the
holder, the certificate number(s) of such old notes and the
principal amount of old notes tendered. This form must further state
that a tender is being made and guaranteeing that, within five
business days after the expiration of this offer, an eligible
institution will deposit the letter of transmittal 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 with the
exchange agent.
o the exchange agent receives within five business days of the end of
the offer such properly executed letter of transmittal or facsimile
thereof, and as the certificate(s) representing all tendered old
notes in proper form for transfer and all other documents required
by the letter of transmittal.
Upon request, the exchange agent will send a notice of guaranteed
delivery to holders who wish to tender their old notes according to the
guaranteed delivery procedures.
Withdrawal of Tenders
Except as this prospectus otherwise provides, holders may withdraw
tenders of old notes at any time before the exchange offer ends.
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For the withdrawal to be effective, the exchange agent must receive a
written or facsimile transmission notice of withdrawal at its address set forth
below before the ending of the offer. The notice of withdrawal must:
o specify the name of the person who deposited the old notes to be
withdrawn;
o identify the old notes to be withdrawn including the certificate
number or numbers and principal amount of such old notes; and
o 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.
We will determine all questions as to the validity, form and
eligibility, including time of receipt, of such notices. We will deem notes
withdrawn not to have been validly tendered for purposes of the exchange offer.
No new notes will be issued with respect to withdrawn tenders unless the old
notes so withdrawn are validly retendered. Properly withdrawn old notes may be
retendered by following one of the procedures described above at any time before
the offer ends.
Conditions
If the exchange offer violates applicable law, rule or regulation or an
applicable interpretation of the staff of the SEC, we will not accept for
exchange any old notes and may end the exchange offer before we accept any old
notes. If we determine that any of these violations may be present, we can
extend or amend the exchange offer and attempt to cure the problem. See
Expiration; Extensions; Amendments above for a discussion of the relevant
procedures.
Registration Rights Agreement
Exchange Offer
When we issued the old notes on November 30, 1998, we entered into a
registration rights agreement with the initial purchasers of the old notes. The
main purpose of the agreement is to require us to make and complete this
exchange offer. If we have not completed this exchange offer and issued new
notes for all tendered old notes by ___________, 1999, we will have to pay
liquidated damages as described below until we have done so.
Shelf Registration
We are making this exchange offer according to procedures that the SEC
has approved in various no action letters. Those procedures have some
exceptions, and it is possible that the SEC may change them. In certain
instances, we must file a shelf registration statement to cover resales of the
old notes by the holders who satisfy certain conditions. For example, we must
file a shelf registration if we cannot consummate this exchange offer because it
is or becomes illegal or against public policy or if any holder of transfer
restricted securities notifies us within the specified time period that:
o SEC policy or law prevents the holder from participating in the
exchange offer; or
o 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 resales; or
o that it is a broker-dealer and owns notes acquired directly from us
or our affiliate.
We are also obligated to use our best efforts to cause the SEC to
declare the shelf registration effective as promptly as possible. For this
purpose, transfer restricted securities means each old note until the earliest
to occur of:
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o 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;
o 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 before the
date of such sale a copy of this prospectus, as it may be amended or
supplemented;
o 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
o the date on which such note is distributed to the public under SEC
Rule 144.
If we must file the shelf registration statement, we will use our best
efforts to file it on or before 60 days after the filing obligation arises and
in any event by April 29, 1999, and to cause the SEC to declare the shelf
registration effective within 60 days after we are required to file it.
Liquidated Damages
The registration rights requires us to pay liquidated damages to the
holders of transfer restricted securities if any of the following happen:
o We do not complete this exchange offer by _________, 1999 unless we
are prohibited by law or SEC policy.
o If we do not file the shelf registration statement described in the
preceding section by the time required, or if it does not become
effective by the time required.
o If this prospectus or the prospectus contained in the shelf
registration statement, if we are required to file it, ceases to be
usable to sell notes during the periods specified in the
registration rights agreement.
During the first 90-day period immediately following the occurrence of
one of these events, the liquidated damages will be $.05 per week per $1,000
aggregate principal amount of transfer restricted notes. The amount of the
liquidated damages will increase by an additional $.05 per week per $1,000
aggregate principal amount of transfer restricted notes with respect to each
subsequent 90-day period until we have cured all of the events described above.
There is a maximum amount of liquidated damages of $.30 per week per $1,000
aggregate principal amount of notes.
We will require holders of notes to make certain representations to
participate in the exchange offer. We will also require the holders to deliver
information for the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement to have their old notes included in the shelf
registration statement and benefit from the provisions regarding liquidated
damages.
Termination of Registration 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 end upon consummation of the exchange offer except with
respect to our continuing obligations:
o to indemnify the holders, including any broker-dealers, and certain
parties related to the holders against certain liabilities,
including liabilities under the Securities Act;
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o to provide, upon the request of any holder of a transfer-restricted
old note, the information required by SEC Rule 144A(d)(4) to permit
resales of such old notes under SEC Rule 144A;
o to use our 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 the cover of this prospectus;
and
o 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 the cover of this prospectus.
Exchange Agent
We have appointed First Union National Bank as exchange agent.
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 First Union National Bank as follows:
<TABLE>
<CAPTION>
By Mail: By Hand/Overnight Express: By Facsimile:
<S> <C> <C>
First Union National Bank First Union National Bank (704) 590-7628
1525 West W.T. Harris Blvd., 3C3 1525 West W.T. Harris Blvd., 3C3 To confirm receipt:
Charlotte, NC 28288 Charlotte, NC 28288 (704) 590-7408
Attention: Michael Klotz Attention: Michael Klotz
</TABLE>
Fees and Expenses/ Accounting Treatment
We will bear the expenses of soliciting tenders. We are making the
principal solicitation by mail; however, we may make additional solicitation by
telegraph, telephone or in person by officers and our regular employees and our
affiliates.
We have 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. However, we will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses.
We will pay the cash expenses we incur from the exchange offer. The
expenses are estimated in the aggregate to be approximately $100,000. Such
expenses include registration fees, fees and expenses of the exchange agent and
the indenture trustee, accounting and legal fees and printing costs, among
others. We will amortize the expenses over the term of the new notes.
We will pay all transfer taxes, if any, applicable to the exchange of
old notes. If, however, a transfer tax is imposed for any reason other than the
exchange of the old note, 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 the tendering holder does not submit satisfactory evidence
of payment of such taxes or exemption therefrom with the letter of transmittal,
we will bill the taxes directly to such tendering holder.
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Material United States Federal Income Tax Consequences of the Exchange Offer
It is the opinion of Drinker Biddle & Reath LLP, counsel to Pegasus,
that the material federal income tax consequences to holders whose old notes are
exchanged for new notes in the exchange offer are as follows, subject to the
limitations and qualifications set forth below.
The new notes should not be considered to differ materially either in
kind or in extent from the old notes. Therefore, the exchange of the new notes
for the old notes should not be treated as an exchange for federal income tax
purposes under Section 1001 of the Internal Revenue 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, that 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
Internal Revenue 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 will not take a contrary view. Pegasus has not sought
and will not seek a ruling from the Internal Revenue Service. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify these statements or conclusions. 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 we have not discussed in this
prospectus. 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
You can find the definition of certain terms used in this description
under the subheading Certain Definitions. In this description, the word
"Pegasus" refers only to Pegasus Communications Corporation and not to any of
its subsidiaries.
Pegasus issued the old notes and will issue the new notes under an
indenture between itself and First Union National Bank, as trustee. The terms of
the notes include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939.
The following description is a summary of the material provisions of
the indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, define your rights as
holders of these notes. To get a copy of the indenture, refer above to the
caption Where You Can Find More Information.
Brief Description of the Notes and Possible Guarantees
The notes will rank senior in right of payment to all subordinated
indebtedness of Pegasus and will rank equally in right of payment with all
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.
On the date of issuance of the new notes, none of Pegasus' subsidiaries will
guarantee the notes. However, Pegasus' subsidiaries may be required to
unconditionally guarantee the notes on a senior unsecured basis in the cases
described below under the sub-heading Subsidiary Guarantees. If this happens,
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, including trade creditors.
Principal, Maturity and Interest
The total principal amount of the notes will be a maximum of $100
million. Pegasus will issue the notes in denominations and integral multiples of
$1,000. The notes will mature on December 1, 2006.
Interest on these notes will accrue at the rate of 9 3/4% per annum and
will be payable semi-annually in arrears on June 1 and December 1, commencing on
June 1, 1999, to holders of record on the immediately preceding May 15 and
November 15.
Interest on the notes will accrue from the most recent date to which
interest has been paid or, 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.
Methods of Receiving Payments on the Notes
If a holder gives wire instructions to Pegasus, Pegasus will wire all
principal, premium, interest and liquidated damages, if any, in accordance with
the holder's instructions. All other payments of principal, premium, interest
and liquidated damages, if any, on the notes will be payable at the office or
agency of Pegasus maintained for such purpose within the City and State of New
York. At the option of Pegasus, payment of interest and liquidated damages, if
any, may be made by check mailed to the holders of the notes. Until otherwise
designated by Pegasus, Pegasus' office or agency in New York will be the office
of First Union National Bank maintained for such purpose.
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Optional Redemption
Until December 1, 2001, Pegasus may, on any one or more occasions,
redeem up to 35% of the aggregate principal amount of the notes at a redemption
price of 109.750% of the principal amount thereof, plus accrued and unpaid
interest and liquidated damages, to the redemption date, with the net proceeds
of one or more public equity offerings. We may only do this if
o at least $65 million in aggregate principal amount of notes remain
outstanding immediately after such redemption, excluding notes held
by Pegasus and its subsidiaries; and
o each redemption occurs within 90 days of the date of closing of the
related equity offering.
Except pursuant to the preceding paragraph, the notes will not be
redeemable at Pegasus' option before December 1, 2002. After December 1, 2002,
Pegasus may redeem all of or a part of these notes upon not less than 30 nor
more than 60 days' notice at the redemption prices specified below, plus accrued
and unpaid interest and any liquidated damages, to the date of redemption. The
redemption prices listed below are effective for redemptions during the
twelve-month period beginning on December 1 of the years indicated:
Redemption Price (as
% of principal
Year amount)
2002 104.875%
2003 103.250%
2004 101.625%
2005 and thereafter 100.000%
Mandatory Redemption
Pegasus 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
If a change of control of Pegasus occurs, each holder of notes will
have the right to require Pegasus to repurchase all or any part equal to $1,000
or an integral multiple thereof of such holder's notes in connection with the
change of control offer. In a change of control offer, Pegasus will offer a
change of control payment in cash equal to 101% of the aggregate principal
amount of notes purchased plus accrued and unpaid interest and liquidated
damages, if any, thereon to the date of purchase. Within ten days following any
change of control, Pegasus will mail a notice to each holder describing the
transaction or transactions that constitute the change of control and offering
to repurchase notes under the procedures required by the indenture and described
in such notice. Pegasus will comply with the requirements of SEC Rule 14e-1 and
any other applicable securities laws and regulations in connection with the
repurchase of the notes as a result of a change of control.
On the change of control payment date, Pegasus will:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the change of control offer;
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(2) deposit with the paying agent, as defined in the indenture, 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 First Union National Bank the
notes so accepted together with an officers' certificate stating
the aggregate principal amount of notes or portions being purchased
by Pegasus.
The paying agent will promptly mail to each holder of notes so tendered
the change of control payment for such notes, and First Union National Bank 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. Pegasus 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 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 Pegasus 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 Pegasus 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, it is uncertain whether a holder of notes has
the ability to require Pegasus to repurchase such notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of Pegasus and its restricted subsidiaries taken as a whole to another person or
group.
The publicly held debt securities and bank credit facilities of
Pegasus' subsidiaries restrict them from paying dividends or making other
distributions to Pegasus. Thus, if a change of control occurs, Pegasus could
seek the consent of its subsidiaries' lenders to provide funds to Pegasus for
the purchase of the notes or could attempt to refinance the borrowings that
contain such restrictions. If Pegasus does not obtain such a consent or repay
such borrowings, it will likely not have the financial resources to purchase the
notes, and its subsidiaries will be restricted in paying dividends to Pegasus
for the purpose of such purchase. In any event, we cannot assure you that
Pegasus' 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 Pegasus becomes a party may
prohibit it from purchasing any notes before their maturity, and may also
provide that certain change of control events with respect to Pegasus would
constitute a default under these agreements. If a change of control occurs at a
time when Pegasus is prohibited from purchasing notes, it could seek the consent
of its lenders to the purchase of notes or could attempt to refinance the
borrowings that contain such prohibition. If Pegasus does not obtain such a
consent or repay such borrowings, it will remain prohibited from purchasing the
notes. If this happens, Pegasus' failure to purchase tendered notes would
constitute an event of default under the indenture.
Pegasus will not be required to make a change of control offer if a
change of control occurs if a third party makes the change of control offer
according to the requirements contained in the indenture and purchases all notes
validly tendered and not withdrawn under such change of control offer.
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Asset Sales
Pegasus will not, and will not permit any of its restricted
subsidiaries to, consummate an asset sale unless:
(1) Pegasus or the restricted subsidiary, as the case may be, receives
consideration at the time of such asset sale at least equal to the
fair market value of the assets or equity interests issued or sold
or otherwise disposed of ;
(2) the fair market value is determined by Pegasus' board of directors
and evidenced by a resolution set forth in an officers certificate;
and
(3) at least 85% of the consideration therefor received by Pegasus or
the restricted subsidiary is in the form of cash. For purpose of
this provision, each of the following shall be deemed to be cash:
(a) any liabilities as shown on Pegasus' or the restricted
subsidiary's most recent balance sheet or in the notes thereto,
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
(b) any securities, notes or other obligations received by Pegasus
or the restricted subsidiary from a transferee that are
contemporaneously converted by Pegasus or the restricted
subsidiary into cash to the extent of the cash received.
However, Pegasus and its restricted subsidiaries may engage in asset
swaps which shall not constitute asset sales for purposes of this covenant. If
Pegasus does this, immediately after giving effect to the asset swap, Pegasus
would be permitted to incur at least $1.00 of additional indebtedness under 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, Pegasus or the applicable restricted subsidiary may apply the net proceeds
to:
(1) permanently reduce indebtedness outstanding under any bank facility
and to permanently reduce the commitments thereunder by a
corresponding amount;
(2) permanently reduce indebtedness of any of Pegasus' restricted
subsidiaries; or
(3) the acquisition by Pegasus 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. However, if Pegasus or the restricted subsidiary enters
into a legally binding agreement with an entity that is not an
affiliate of Pegasus to reinvest the net proceeds in accordance
with this clause (3) within 180 days after the receipt of the
proceeds, the provisions of this covenant will be satisfied so long
as the binding agreement is consummated within one year after the
receipt of the net proceeds.
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If a legally binding agreement to reinvest the net proceeds is ended,
then Pegasus may, within 360 days of the asset sale, apply the net proceeds as
provided in clauses (1), (2) or (3) above without regard to the condition
contained in clause (3) above.
Pending the final application of any such net proceeds, Pegasus or the
applicable restricted subsidiary may temporarily reduce indebtedness under any
bank facility or otherwise invest the net proceeds in any manner that is not
prohibited by the indenture. A reduction of indebtedness under any bank facility
is not permanent for purposes of clause (1) above if an amount equal to the
amount of such reduction is reborrowed and used to make an acquisition described
in clause (3) within the time period specified in this covenant.
Any net proceeds from asset sales that are not applied or invested as
provided above will be deemed to constitute excess proceeds. Within five days of
each date on which the aggregate amount of excess proceeds exceeds $10 million,
Pegasus will be required to make an offer to all holders of notes and the
holders of the other Pegasus debt that ranks equally in right of payment to the
notes, to the extent required by the terms thereof to purchase the maximum
principal amount of notes and the other Pegasus debt that ranks equally in right
of payment to the notes that may be purchased out of the excess proceeds.
Pegasus will make this offer at a price in cash in an amount equal to 100% of
the principal amount of the notes and debt 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 applicable indenture or the
agreements governing the other Pegasus debt that ranks equally in right of
payment to the notes. However, Pegasus may only purchase the other Pegasus debt
that ranks equally in right of payment to the notes in an asset sale offer that
was issued under 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 the other Pegasus
debt that ranks equally in right of payment to the notes tendered under an asset
sale offer is less than the excess proceeds, Pegasus may use any remaining
excess proceeds for general corporate purposes. If the aggregate principal
amount of notes and the other Pegasus debt that ranks equally in right of
payment to the notes surrendered exceeds the amount of excess proceeds, First
Union National Bank shall select the notes and the other Pegasus debt that ranks
equally in right of payment to the notes to be purchased on a pro rata basis,
based upon the principal amount thereof surrendered in such asset sale offer.
Upon completion of the offer to purchase, the amount of excess proceeds shall be
reset at zero.
Selection and Notice
If less than all of the notes are to be redeemed at any time, First
Union National Bank will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are
listed; or
(2) if the notes are not so listed, on a pro rata basis, by lot or by
such method as First Union National Bank shall deem fair and
appropriate.
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 that note shall state the portion of the principal amount that
is to be redeemed. A new note in principal amount equal to the unredeemed
portion will be issued in the name of the holder 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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Certain Covenants
Restricted Payments
Pegasus will not, and will not permit any of its restricted
subsidiaries to:
(A) declare or pay any dividend or make any other payment or
distribution on account of Pegasus' equity interests, including,
without limitation, any payment in connection with any merger or
consolidation involving Pegasus;
(B) declare or pay any dividend or make any payment or distribution on
account of any qualified subsidiary stock;
(C) 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 Pegasus' 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, or additional shares of
such qualified subsidiary stock;
(D) purchase, redeem or otherwise acquire or retire for value any
equity interests of Pegasus or any direct or indirect parent of
Pegasus other than the equity interests owned by Pegasus or any of
its restricted subsidiaries;
(E) 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;
(F) forgive any loan or advance to or other obligation of any affiliate
of Pegasus other than a loan or advance to or other obligations of
a wholly-owned restricted subsidiary of Pegasus which at the time
it was made was not a restricted payment; or
(G) make any restricted investment.
The above payments and other actions described in clauses (A) through
(G) above are considered restricted payments under the indenture unless, at the
time of and immediately after the restricted payment is made:
(1) no default or event of default has occurred and is continuing or
would occur as a consequence of the action; and
(2) Pegasus would be permitted to incur $1.00 of additional
indebtedness under 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
(3) the restricted payment, together with the aggregate of all other
restricted payments made by Pegasus and its restricted subsidiaries
after the closing date, excluding restricted payments permitted by
clauses (2) and (3) below, is less than the sum of, without
duplication, an amount equal to:
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a. the cumulative operating cash flow for the period from the
beginning of the first full month commencing after the closing
date to the end of Pegasus' most recently ended fiscal quarter
for which internal financial statements are available at the
time of the restricted payment, less
b. 1.4 times Pegasus' cumulative total interest expense for this
period, plus
c. 100% of the aggregate net cash proceeds and, in the case of
proceeds consisting of assets constituting or used in a
permitted business, 100% of the fair market value of the
aggregate net proceeds other than cash, received since the
closing date by Pegasus as capital contributions to Pegasus
other than from a subsidiary or from the sale by Pegasus other
than to a subsidiary of its equity interests, other than
disqualified stock, plus
d. 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 Pegasus or a
wholly-owned restricted subsidiary upon the sale, liquidation or
repayment of such restricted investment, plus
e. to the extent that any unrestricted subsidiary is designated by
Pegasus as a restricted subsidiary, an amount equal to the fair
market value of such investment at the time of such designation,
plus
f. 100% of any cash dividends and other cash distributions received
by Pegasus from an unrestricted subsidiary, plus
g. $2.5 million.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration, if at the date of declaration the 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 Pegasus in
exchange for, or out of the net proceeds of, the substantially
concurrent sale, other than to a subsidiary of Pegasus of other
equity interests of Pegasus other than any disqualified stock. The
amount of any net proceeds that are used for any redemption,
repurchase, retirement or other acquisition of this type shall be
excluded from clause (3)(c) of the paragraph above;
(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 Pegasus of advances under the split dollar agreement
in an amount not to exceed $250,000 in any four-quarter period;
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(5) the repurchase or redemption from employees of Pegasus and its
subsidiaries, other than the principal, of capital stock of Pegasus
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 of the stock as in effect on the closing
date. However, cash dividends may not be paid on the Series A
preferred stock under this clause before July 1, 2002;
(7) the issuance of subordinated exchange notes in exchange for shares
of the Series A preferred stock, if the issuance is permitted by
the covenant described below under the caption Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock;
(8) 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 of the notes,
not to exceed $100,000 in the aggregate in any fiscal year, if
Pegasus elects to issue subordinated exchange notes in exchange for
Series A Preferred Stock; 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 Pegasus or the applicable restricted
subsidiary, net of any liabilities proposed to be assumed by the transferee and
novated under a written agreement releasing Pegasus and its subsidiaries. Not
later than the date of making any restricted payment, Pegasus shall deliver to
First Union National Bank an officers' certificate stating that the restricted
payment is permitted. The Certificate will also set forth the basis upon which
the calculations required by this covenant were computed, which calculations may
be based upon Pegasus' latest available financial statements.
The board of directors may designate any restricted subsidiary to be an
unrestricted subsidiary if the designation would not cause a default or an event
of default under the indenture. For purposes of making this determination, all
outstanding investments by Pegasus and its restricted subsidiaries in the
subsidiary so designated shall be deemed to be restricted payments at the time
of the designation valued as set forth below and shall reduce the amount
available for restricted payments under the first paragraph of this covenant.
All outstanding investments shall be deemed to constitute investments in an
amount equal to the fair market value of the investments at the time of the
designation. The designation shall only be permitted if the restricted payment
would be permitted at the time and if the restricted subsidiary would otherwise
meet the definition of an unrestricted subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
Pegasus will not, and will not permit any of its subsidiaries to
create, incur, issue, assume, guarantee or otherwise become liable, contingently
or otherwise, for any indebtedness, including acquired debt. Pegasus also 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. However, Pegasus or a restricted subsidiary may
incur indebtedness, including acquired debt, or issue shares of preferred stock
including disqualified stock if, in each case,
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o Pegasus' indebtedness to adjusted operating cash flow ratio as of
the date on which the indebtedness is incurred or the preferred
stock or disqualified stock is issued would have been 7.0 to 1 or
less, calculated 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 the calculation; and
o no default or event of default would occur as a result.
Pegasus will not, and will not permit any subsidiary guarantor to incur
any indebtedness that is contractually subordinated to any other indebtedness of
Pegasus or of the subsidiary guarantor, unless the indebtedness is also
contractually subordinated to the notes or the subsidiary guarantee of such
subsidiary guarantor, on substantially identical terms. However, no indebtedness
will be deemed to be contractually subordinated to any other indebtedness solely
by virtue of being unsecured.
The foregoing provisions do not apply to the following, which is
permitted debt:
(1) the incurrence by Pegasus' unrestricted subsidiaries of
non-recourse debt or the issuance by unrestricted subsidiaries of
preferred stock. However, if any such indebtedness of an
unrestricted subsidiary ceases to be non-recourse debt or any
preferred stock becomes preferred stock other than qualified
subsidiary stock, of a restricted subsidiary, as the case may be,
these events shall be deemed to constitute an incurrence of
indebtedness by, or an issuance of preferred stock other than
qualified subsidiary stock of a restricted subsidiary of Pegasus;
(2) Pegasus' or any of its restricted subsidiaries' incurring
indebtedness under one or more bank facilities if the aggregate
principal amount at any time outstanding incurred under this clause
does not exceed $50 million;
(3) Pegasus' and its restricted subsidiaries' incurrence of the
existing indebtedness;
(4) Pegasus' incurrence of indebtedness under the subordinated exchange
notes to pay interest on outstanding subordinated exchange notes;
(5) indebtedness under the notes and the subsidiary guarantees;
(6) Pegasus or any of its restricted subsidiaries incurring
intercompany indebtedness between or among Pegasus and any of its
wholly-owned restricted subsidiaries. However:
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(a) if Pegasus or a subsidiary guarantor is the obligor on
indebtedness, the 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 the
subsidiary guarantor; and
(b) any subsequent issuance or transfer of equity interests that
result in any indebtedness being held by a person other than
Pegasus or a wholly-owned restricted subsidiary of Pegasus
shall be deemed to constitute an incurrence of indebtedness by
Pegasus or the restricted subsidiary; and
(c) any sale or other transfer of indebtedness to a person that is
not either Pegasus or a wholly-owned restricted subsidiary of
Pegasus shall be deemed, to constitute an incurrence of such
indebtedness by Pegasus or the restricted subsidiary;
(7) Pegasus or any of its restricted subsidiaries incurring
indebtedness represented by capital lease obligations, mortgage
financings or purchase money obligations 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
Pegasus or such restricted subsidiary, in an aggregate principal
amount not to exceed $7.5 million at any time outstanding. This
includes all permitted refinancing debt incurred under clause (8)
below to refund, replace or refinance any indebtedness incurred
under this clause (7);
(8) Pegasus or any of its restricted subsidiaries incurring 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 permitted by the
indenture;
(9) Pegasus or any restricted subsidiaries incurring 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
under clause (8) above to refund, replace or refinance any
indebtedness incurred under this clause (9), not to exceed $7.5
million; and
(10) Pegasus' or any restricted subsidiary's guarantee of indebtedness
of Pegasus or a subsidiary of Pegasus that another provision of
this covenant permits.
For purposes of determining compliance with this covenant, if an item
of indebtedness meets the criteria of more than one of the categories of
permitted debt described in clauses (1) through (10) above, or if the first
paragraph of this covenant permits it to be incurred and it also meets the
criteria of one or more of the categories of permitted debt described in clauses
(1) through (10) above, Pegasus shall, in its sole discretion, classify the item
of indebtedness in any manner that complies with this covenant. It may also from
time to time reclassify the item of indebtedness in any manner in which the item
could be incurred at the time of the 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.
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Limitation of Certain Subsidiary Indebtedness and Preferred Stock
Pegasus will not, and will not permit any of its restricted
subsidiaries to incur any indebtedness other than eligible indebtedness. It will
also not permit any issuance of disqualified stock. However, any restricted
subsidiary that is a subsidiary guarantor may incur indebtedness whether or not
the indebtedness is eligible indebtedness or issue disqualified stock if it is
permitted under the covenant described above under the caption Incurrence of
Indebtedness and Issuance of Preferred Stock. However, in no event will Pegasus
permit any of its restricted subsidiaries to incur any indebtedness represented
by senior secured bonds or other senior secured securities, unless the
subsidiary is a subsidiary guarantor and its subsidiary guarantee is secured on
an equal and ratable basis with the other senior secured bonds or senior secured
securities.
Liens
Pegasus will not, and will not permit any of its restricted
subsidiaries to create, incur, assume or allow any lien on any asset now owned
or later acquired, or any income or profits from the asset, or assign or convey
any right to receive income from the asset, except liens permitted under the
indenture.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Pegasus will not, and will not permit any of its restricted
subsidiaries to create or otherwise cause or allow any encumbrance or
restriction on the ability of any restricted subsidiary to:
(1) pay dividends or make any other distributions to Pegasus or any of
its restricted subsidiaries on its capital stock or with respect to
any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to Pegasus or any of its
restricted subsidiaries;
(2) make loans or advances to Pegasus or any of its restricted
subsidiaries; or
(3) transfer any of its properties or assets to Pegasus or any of its
restricted subsidiaries.
However, the restriction in Clause 3 above will not apply to
encumbrances or restrictions existing under or by reason of:
(1) the terms of any indebtedness permitted by the indenture to be
incurred by any subsidiary of Pegasus if the indebtedness permits
the payment of cash dividends to Pegasus in an amount sufficient to
enable Pegasus to make payments of:
(a) interest required to be paid in respect of the notes;
(b) interest required to be paid in respect of the 1997 notes; and
(c) 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 of each except during the continuance
of a default or event of default under the other indebtedness;
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(2) existing indebtedness or the Pegasus Media & Communications,
Inc. credit facility, each as in effect on November 30, 1998;
(3) the indenture, the notes, the subsidiary guarantees, the 1997
indenture, the 1997 notes and the 1997 notes subsidiary
guarantees;
(4) applicable law;
(5) any instrument governing indebtedness or capital stock of a
person acquired by Pegasus or any of its restricted
subsidiaries as in effect at the time of the acquisition except
if the indebtedness was incurred in connection with or in
contemplation of the acquisition, and the encumbrance or
restriction is not applicable to any person, properties or
assets, other than the acquired person and its subsidiaries, or
their property or assets so acquired;
(6) 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
(7) 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
Pegasus will not consolidate or merge with or into, 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:
(1) Pegasus is the surviving corporation or the entity or the
person formed by or surviving the consolidation or merger, if
other than Pegasus, or to which the 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;
(2) the entity or person formed by or surviving the consolidation
or merger, if other than Pegasus, or the entity or person to
which the sale, assignment, transfer, lease, conveyance or
other disposition shall have been made assumes all the
obligations of Pegasus under the notes, the indenture and the
registration rights agreement under a supplemental indenture in
a form reasonably satisfactory to First Union National Bank;
(3) immediately after the transaction no default or event of
default exists;
(4) Pegasus will, at the time of the transaction be permitted to
incur at least $1.00 of additional indebtedness under 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. This also applies to any entity or
person formed by or surviving the consolidation or merger
or to which the sale was made; and
(5) 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.
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Transactions with Affiliates
Pegasus 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 unless:
(1) the affiliate transaction is on terms that are no less favorable to
Pegasus or the relevant restricted subsidiary than those that would
have been obtained in a comparable transaction by Pegasus or the
restricted subsidiary with an unrelated person and
(2) Pegasus delivers to First Union National Bank:
(a) with respect to the 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 (1) above and that
the 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
Pegasus or such restricted subsidiary of such affiliate
transaction from a financial point of view issued by an
investment banking firm of national standing. However, Pegasus
shall not, and shall not permit any of its restricted
subsidiary 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 Pegasus'
board of directors.
The following will not be affiliate transactions and not subject to the
restrictions just described:
o any employment agreement entered into by Pegasus or any of its
restricted subsidiaries in the ordinary course of business and
consistent with the past practice of Pegasus or the restricted
subsidiary;
o transactions between or among Pegasus and/or its restricted
subsidiaries;
o the payment of any dividend on, or the issuance of additional
subordinated exchange notes in exchange for, the Series A preferred
stock, if the dividends are paid on a pro rata basis and the
additional subordinated exchange notes are issued in accordance
with the certificate of designation; and
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o 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
Pegasus will not, and will not permit any wholly-owned restricted
subsidiary of Pegasus to, transfer, convey, sell or otherwise dispose of any
capital stock of any wholly-owned restricted subsidiary of Pegasus to any person
other than Pegasus or a wholly-owned restricted subsidiary of Pegasus, unless:
(1) the transfer, conveyance, sale, lease or other disposition is of
all the capital stock of such wholly-owned restricted subsidiary;
and
(2) the cash net proceeds from the 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.
In addition, Pegasus shall not permit any wholly-owned restricted
subsidiary of Pegasus 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 Pegasus or a wholly-owned restricted subsidiary of
Pegasus.
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Subsidiary Guarantees
Pegasus will not permit any restricted subsidiary to guarantee the
payment of any indebtedness of Pegasus or any indebtedness of any subsidiary
guarantor unless:
(1) the restricted subsidiary which is not a subsidiary guarantor
simultaneously executes and delivers a supplemental indenture
providing for a guarantee of payment of the notes by the restricted
subsidiary;
(2) if the guaranteed debt is by its express terms subordinated in
right of payment to the notes or the subsidiary guarantee of the
obligor, the guarantee of the subsidiary guarantor with respect to
the guaranteed debt shall be subordinated in right of payment to
the 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 the
obligor;
(3) the 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
Pegasus or any other restricted subsidiary as a result of any
payment by the restricted subsidiary under its subsidiary
guarantee; and
(4) the restricted subsidiary shall deliver to First Union National
Bank an opinion of counsel to the effect that:
(A) the subsidiary guarantee of the notes has been duly executed
and authorized; and
(B) the subsidiary guarantee of the notes constitutes a valid,
binding and enforceable obligation of the restricted
subsidiary, except insofar as enforcement of it may be limited
by bankruptcy, insolvency or similar laws including, all laws
relating to fraudulent transfers and except insofar as
enforcement is subject to general principles of equity.
No subsidiary guarantor may consolidate with or merge with or into
another corporation, person or entity whether or not affiliated with the
subsidiary guarantor unless:
(1) subject to the provisions of the following paragraph, the person
formed by or surviving the consolidation or merger, if other than
such subsidiary guarantor, assumes all the obligations of the
subsidiary guarantor under a supplemental indenture under the
notes, the indenture and the registration rights agreement;
(2) immediately after the transaction, no default or event of default
exists; and
(3) Pegasus would be permitted to incur $1.00 of additional
indebtedness under 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.
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If a sale or other disposition of all of the assets of any subsidiary
guarantor, by way of merger, consolidation or otherwise occurs, or there is a
sale or other disposition of all of the capital stock of any subsidiary
guarantor, then the subsidiary guarantor or the corporation acquiring the
property of the subsidiary guarantor, as applicable, will be released and
relieved of any obligation under its subsidiary guarantee.
Any subsidiary guarantor that is designated as an unrestricted
subsidiary under the indenture will be released and relieved of its obligations
under its subsidiary guarantee for so long as the subsidiary is so designated.
No Amendment to Subordination Provisions
Without the consent of each holder of notes outstanding, Pegasus will
not amend, modify or alter the subordinated exchange note indenture in any way
that will:
(1) increase the rate of or change the time for payment of interest on
any subordinated exchange notes;
(2) increase the principal of, advance the final maturity date of or
shorten the weighted average life to maturity of any subordinated
exchange notes;
(3) alter the redemption provisions or the price or terms at which
Pegasus is required to offer to purchase the subordinated exchange
notes in a manner that would be adverse to any holder of notes; or
(4) amend the provisions of Article 10 of the subordinated exchange
note indenture, which relate to subordination.
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Reports
Whether or not required by the SEC, so long as any notes are
outstanding, Pegasus will furnish to the holders of notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and
10-K if Pegasus were required to file such forms, including the
section entitled Management's Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to the annual
information only, a report thereon by Pegasus' certified
independent accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if Pegasus were required to file such reports, in each
case within the time periods specified in the SEC's rules and
regulations.
In addition, whether or not required by the SEC, Pegasus will file a
copy of this information and reports with the SEC for public availability within
the time periods set forth in the SEC's rules and regulations unless the SEC
rejects a filing. Pegasus will also make this 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 SEC Rule 1-02(aa)(1) of Regulation S-X,
showing adjusted operating cash flow for Pegasus and its restricted
subsidiaries, on a consolidated basis. Pegasus' adjusted operating cash flow
will be calculated in a manner consistent with the manner described under the
definition of adjusted operating cash flow in this prospectus. Pegasus may
include summarized financial information in the footnotes to audited
consolidated financial statements or its unaudited quarterly financial
statements. The statements will be as of the same dates and for the same periods
as the consolidated financial statements of Pegasus and its subsidiaries
required under the Exchange Act. In addition, Pegasus 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 under SEC Rule 144A(d)(4).
Events of Default and Remedies
Each of the following constitutes an event of default under the
indenture:
(1) default for 30 days in the payment of interest and liquidated
damages, if any, on the notes when due;
(2) default in payment when due of the principal of or premium, if any,
on the notes;
(3) failure by Pegasus or any subsidiary to comply with the provisions
described under the captions:
o Repurchase at the Option of Holders -- Change of Control,
o Repurchase at the Option of Holders -- Asset Sales,
o Certain Covenants -- Restricted Payments,
o Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock or
o Certain Covenants -- Merger, Consolidation or Sale of Assets;
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(4) failure by Pegasus 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 Pegasus or any of its
restricted subsidiaries or the payment of which is guaranteed by
Pegasus or any of its restricted subsidiaries, whether the
indebtedness or guarantee now exists, or shall be later created,
and the default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on the indebtedness before the expiration of the
grace period provided in the indebtedness on the date of the
default; or
(b) results in the acceleration of the indebtedness before its
express maturity and, in each case, the principal amount of the
indebtedness, together with the principal amount of any other
indebtedness under which there has been a payment default or
the maturity of which has been so accelerated, aggregates $5.0
million or more;
(6) failure by Pegasus or any restricted subsidiary that would be a
significant subsidiary to pay final judgments aggregating in excess
of $5.0 million, which are not paid, discharged or stayed for a
period of 60 days;
(7) certain events of bankruptcy or insolvency with respect to Pegasus,
or 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, First Union National
Bank 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.
However, in the case of an event of default arising from certain events
of bankruptcy or insolvency with respect to Pegasus, 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 First
Union National Bank in its exercise of any trust or power. First Union National
Bank 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 Pegasus with the
intention of avoiding payment of the premium that Pegasus would have had to pay
if it then had elected to redeem the notes under the optional redemption
provisions of the indenture, Pegasus will have to pay an equivalent premium to
the extent lawful upon the acceleration of the notes. If an event of default
occurs before December 1, 2002 by reason of any willful action or inaction taken
or not taken by or on behalf of Pegasus with the intention of avoiding the
prohibition on redemption of the notes before December 1, 2002, then the premium
specified in the indenture shall also become immediately due and payable upon
the acceleration of the notes, to the extent lawful.
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The holders of a majority in aggregate principal amount of the notes
then outstanding by notice to First Union National Bank 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. However, they may not waive a continuing
default or event of default in the payment of principal, interest or premium or
liquidated damages, if any, on the notes.
Pegasus must deliver to First Union National Bank annually a statement
regarding compliance with the indenture. As soon as it becomes aware of any
default or event of default, Pegasus must deliver to First Union National Bank a
statement specifying the default or event of default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Pegasus
or any subsidiary guarantor, shall have any liability for any obligations of
Pegasus or the subsidiary guarantors under the notes, the subsidiary guarantees
or the indenture or for any claim based on these obligations or their creation.
Each holder of notes by accepting a note waives and releases these persons from
all liability for these obligations. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
SEC that this waiver is against public policy.
Legal Defeasance and Covenant Defeasance
Pegasus 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, which is known as legal defeasance, except for:
(1) 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;
(2) Pegasus' obligations with respect to the notes, registration of the
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;
(3) the rights, powers, trusts, duties and immunities of First Union
National Bank, and Pegasus' obligations to First Union; and
(4) the legal defeasance provisions of the indenture.
In addition, Pegasus may, at its option and at any time, elect to have
its obligations and each subsidiary guarantor's obligation released with respect
to certain covenants that are described in the section of the indenture entitled
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. If
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.
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To exercise either legal defeasance or covenant defeasance:
(1) Pegasus must irrevocably deposit with First Union National Bank, in
trust, for the benefit of the holders of the notes, cash and/or
government securities, in sufficient amounts to pay the principal
of, interest and premium and liquidated damages, if any, on the
outstanding notes. Pegasus must also specify whether the notes are
being defeased to maturity or to a particular redemption date and
make payment accordingly;
(2) in the case of legal defeasance, Pegasus shall have delivered to
First Union National Bank an opinion of counsel in the United
States reasonably acceptable to First Union National Bank
confirming that:
(A) Pegasus has received from, or the Internal Revenue Service has
published 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;
(3) in the case of covenant defeasance, Pegasus shall have delivered to
First Union National Bank an opinion of counsel reasonably
acceptable to First Union National Bank 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;
(4) 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 Pegasus;
(5) the 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 Pegasus
or any of its subsidiaries is a party or by which Pegasus or any of
its subsidiaries is bound;
(6) Pegasus must have delivered to First Union National Bank an opinion
of counsel to the effect that, as of the date of such opinion, the
trust funds will not be subject to rights of holders of
indebtedness other than the notes. The opinion must state that,
assuming no intervening bankruptcy of Pegasus between the date of
deposit and the 91st day following the deposit and assuming no
holder of notes is an insider of Pegasus, 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;
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(7) Pegasus must deliver to First Union National Bank an officers'
certificate stating that the deposit was not made by Pegasus with
the intent of preferring the holders of notes over the other
creditors of Pegasus with the intent of defeating, hindering,
delaying or defrauding creditors of Pegasus or others; and
(8) Pegasus must deliver to First Union National Bank an officers'
certificate and an opinion of counsel, each stating that all
conditions precedent 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 First Union National Bank may require a holder,
among other things, to furnish appropriate endorsements and transfer documents
and Pegasus may require a holder to pay any taxes and fees required by law or
permitted by the indenture. Pegasus is not required to transfer or exchange any
note selected for redemption. Also, Pegasus 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. 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:
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) 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;
(3) reduce the rate of or change the time for payment of interest on
any note;
(4) 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;
(5) make any note payable in money other than that stated in the notes;
(6) 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;
(7) 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;
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(8) make any change in the foregoing amendment and waiver provisions;
or
(9) 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.
However, Pegasus, a subsidiary guarantor with respect to a subsidiary
guarantee or the indenture to which it is a party, and First Union National Bank
may amend or supplement the indenture, the notes or the subsidiary guarantees
without the consent of any holder of notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of Pegasus' or any subsidiary
guarantor's obligations to holders of notes in the case of a merger
or consolidation;
(4) 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
(5) to comply with requirements of the SEC to maintain the
qualification of the indenture under the Trust Indenture Act or to
allow any subsidiary guarantor to guarantee the notes.
Concerning First Union National Bank
If First Union National Bank becomes a creditor of Pegasus, the
indenture limits its right 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. First Union National Bank 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 SEC 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 First Union National Bank,
subject to certain exceptions. The indenture provides that in case an event of
default shall occur, which shall not be cured, First Union National Bank 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, First Union
National Bank 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 First Union National Bank security and indemnity
satisfactory to it against any loss, liability or expense.
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Book-Entry, Delivery and Form
Depository Procedures
The following description of the operations and procedures of the
Depository Trust Company, Euroclear and Cedel are provided solely as a matter of
convenience. These operations and procedures are solely within the control of
the respective settlement systems and are subject to changes by them from time
to time. Pegasus takes no responsibility for these operations and procedures and
urges investors to contact the system or their participants directly to discuss
these matters.
The Depository Trust Company has advised Pegasus that the Depository
Trust Company is a limited-purpose trust company created to hold securities for
its participating organizations, 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 purchasers, banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository Trust Company's system is also available to other indirect
participants such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant. Persons who are
not participants may beneficially own securities held by or on behalf of the
Depository Trust Company only through the participants or indirect participants.
The ownership interests in, and transfers of ownership interests in, each
security held by or on behalf of the Depository Trust Company are recorded on
the records of the participants and indirect participants.
The Depository Trust Company has also advised Pegasus that, under
procedures established by it:
o upon deposit of the global notes, the Depository Trust Company will
credit the accounts of participants designated by the initial
purchasers with portions of the principal amount of the global notes;
and
o ownership of the interests in the global notes will be shown on, and
the transfer of ownership thereof will be effected only through,
records maintained by the Depository Trust Company, for the
participants or by the participants and the indirect participants for
other owners of beneficial interest in the global notes.
Except as described below, owners of interest in the global notes 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 a global note registered in the name
of the Depository Trust Company or its nominee will be payable to the Depository
Trust Company in its capacity as the registered holder under the indenture.
Under the terms of the indenture, Pegasus and First Union National Bank will
treat the persons in whose names the notes, including the global notes, are
registered as the owners of the notes for the purpose of receiving these
payments and for any and all other purposes whatsoever. Consequently, neither
Pegasus, First Union National Bank nor any agent of Pegasus or First Union
National Bank has or will have any responsibility or liability for :
o any aspect of the Depository Trust Company'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 notes, or for maintaining, supervising or reviewing any of
depository trust company's records or any participant's or indirect
participant's records relating to the beneficial ownership interests
in the global notes; or
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o any other matter relating to the actions and practices of the
Depository Trust Company or any of its participants or indirect
participants. The Depository Trust Company has advised Pegasus 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 the Depository Trust
Company unless Depository Trust Company 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. Payments will not be the responsibility of the Depository
Trust Company, First Union National Bank or Pegasus. Neither Pegasus nor First
Union National Bank will be liable for any delay by the Depository Trust Company
or any of its participants in identifying the beneficial owners of the notes.
Pegasus and First Union National Bank may conclusively rely on and will be
protected in relying on instructions from the Depository Trust Company or its
nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants,
interests in the global notes are expected to be eligible to trade in the
Depository Trust Company's Same-Day Funds Settlement System. Therefore,
secondary market trading activity in such interests will settle in immediately
available funds, subject in all cases to the rules and procedures of the
Depository Trust Company and its participants. See Same Day Settlement and
Payment.
Subject to the transfer restrictions set forth under Notice to
Investors, transfers between participants in the Depository Trust Company will
be made in accordance with the Depository Trust Company's procedures, and will
be settled in same day funds. Transfers between participants in Euroclear and
Cedel will be made in the ordinary way in accordance with their respective rules
and operating procedures.
Cross-market transfers between the participants in the Depository Trust
Company, on the one hand, and Euroclear or Cedel participants, on the other
hand, will be made through the Depository Trust Company in accordance with its
rules on behalf of Euroclear or Cedel, as the case may be. However, these
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in the system in accordance with
the rules and procedures and within the established deadlines, according to
Brussels time, of the system. Euroclear or Cedel, as the case may be, will,
deliver instructions to its respective depositary to take action to make final
settlement on its behalf by delivering or receiving interests in the relevant
global note in the Depository Trust Company. Payment will be made or received in
accordance with normal procedures for same-day funds settlement applicable to
the Depository Trust Company. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
The Depository Trust Company has advised Pegasus 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 the Depository Trust Company has credited
the interests in the global notes. Moreover, the Depository Trust Company will
take action only in respect of the portion of the aggregate principal amount of
the notes as to which the participant has given direction. However, if there is
an event of default under the notes, the Depository Trust Company reserves the
right to exchange the global notes for legended notes in certificated form, and
to distribute such notes to its participants.
The Depository Trust Company, Euroclear and Cedel have agreed to the
foregoing procedures to facilitate transfers of interests in the global notes
among participants in the Depository Trust Company, Euroclear and Cedel.
However, they are under no obligation to perform or to continue to perform these
procedures, and they may be discontinued at any time. Neither Pegasus nor First
Union National Bank nor any of their respective agents will have any
responsibility for the performance by the Depository Trust Company, Euroclear or
Cedel or their participants or indirect participants of their obligations under
the rules and procedures governing their operations.
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Exchange of Book-Entry Notes for Certificated Notes
A global note is exchangeable for certificated notes if:
(1) The Depository Trust Company notifies Pegasus that it is unwilling
or unable to continue as depositary for the global notes and
Pegasus thereupon fails to appoint a successor depositary, or
(2) The Depository Trust Company has ceased to be a clearing agency
registered under the Exchange Act;
(3) Pegasus, at its option, notifies First Union National Bank in
writing that it elects to cause the issuance of the certificated
notes, or
(4) there shall have occurred and be continuing a default or event of
default with respect to the notes.
In addition, beneficial interests in a global note may be exchanged for
certificated notes upon request but only upon prior written notice given to
First Union National Bank by or on behalf of the Depository Trust Company in
accordance with the indenture. In all cases, certificated notes delivered in
exchange for any 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 and will
bear the applicable restrictive legend referred to in Notice to Investors,
unless Pegasus determines otherwise in compliance with applicable law.
Exchange of Certificated Notes for Book-Entry Notes
Notes issued in certificated form may not be exchanged for beneficial
interests in any global note unless the transferor first delivers to First Union
National Bank a written certificate, in the form provided in the indenture, to
the effect that such transfer will comply with the appropriate transfer
restrictions applicable to such notes. See Notice to Investors.
Same Day Settlement and Payment
Payments in respect of the notes represented by the global notes,
including principal, premium, if any, interest and liquidated damages, if any,
will 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,
Pegasus 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 notes are expected to trade on the Depository
Trust Company's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in the notes will, therefore, be required by the
depositary to be settled in immediately available funds. Pegasus expects that
secondary trading in any certificated notes will also be settled in immediately
available funds.
Because of time zone differences, the securities account of a Euroclear
or Cedel participant purchasing an interest in a global note from a participant
in the Depository Trust Company will be credited, and any such crediting will be
reported to the relevant Euroclear or Cedel participant, during the securities
settlement processing day immediately following the settlement date of the
Depository Trust Company. The Depository Trust Company has advised Pegasus that
cash received in Euroclear or Cedel as a result of sales of interests in a
global note by or through a Euroclear or Cedel participant to a participant in
the Depository Trust Company will be received with value on the settlement date
of the Depository Trust Company but will be available in the relevant Euroclear
or Cedel cash account only as of the business day for Euroclear or Cedel
following the Depository Trust Company's settlement date.
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Certain Definitions
Set forth below are certain defined terms used in the indenture and in
the section Description of Notes. You should consult the indenture for a full
disclosure of all these terms.
1997 Indenture means the indenture, dated as of October 21, 1997,
between Pegasus and First Union National Bank, as trustee, governing the terms
of the 1997 notes.
1997 Notes means Pegasus' 9 5/8% senior notes due 2005.
1997 Notes Subsidiary Guarantees means the guarantees of Pegasus'
payment obligations under the 1997 indenture and the 1997 notes, if and when
executed by the subsidiaries of Pegasus under the provisions of the 1997
indenture.
Acquired Debt means, with respect to any specified person:
(1) 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
(2) 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 the person and its restricted subsidiaries less direct broadcast
satellite cash flow for the most recent four-quarter period plus direct
broadcast satellite cash flow for the most recent quarterly period, multiplied
by four.
Affiliate of any specified person means any other person controlling or
controlled by or under common control with the specified person. For purposes of
this definition, control, including the correlative 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.
However, beneficial ownership of 10% or more of the voting securities of a
person shall be deemed to be control.
Asset Sale means:
(1) the sale, lease, conveyance or other disposition of any assets
other than in the ordinary course of business consistent with past
practices. However, the sale, lease, conveyance or other
disposition of all or substantially all of the assets of Pegasus
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
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(2) the issue or sale by Pegasus or any of its restricted subsidiaries
of equity interests of any of Pegasus' restricted subsidiaries, in
the case of either clause (1) or (2), whether in a single
transaction or a series of related transactions that have a fair
market value in excess of $1.0 million or for net proceeds in
excess of $1.0 million.
The following transactions will not be deemed to be asset sales:
(1) a transfer of assets by Pegasus to a wholly owned restricted
subsidiary of Pegasus or by a wholly-owned restricted subsidiary
of Pegasus to Pegasus or to another wholly owned restricted
subsidiary of Pegasus;
(2) an issuance of equity interests by a wholly-owned restricted
subsidiary of Pegasus to Pegasus or to another wholly-owned
restricted subsidiary of Pegasus; and
(3) 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 Pegasus or a restricted
subsidiary of Pegasus for:
(1) one or more permitted businesses;
(2) a controlling equity interest in any person whose assets consist
primarily of one or more permitted businesses; and/or
(3) long-term assets that are used in a permitted business in a
like-kind exchange under Section 1031 of the Internal Revenue Code
or any similar or successor provision of the Internal Revenue Code.
Bank Facilities means, with respect to Pegasus 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 generally accepted accounting principles.
Capital Stock means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents,
however designated, of corporate stock;
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(3) in the case of a partnership or limited liability company,
partnership or membership interests whether general or limited; and
(4) any other interest or participation that confers on a person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing person.
Cash Equivalents means:
(1) United States dollars;
(2) 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;
(3) 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;
(4) repurchase obligations with a term of not more than seven days or
on demand for underlying securities of the types described in
clauses (2) and (3) above entered into with any financial
institution meeting the qualifications specified in clause (3)
above;
(5) 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
(6) money market funds at least 95% of the assets of which constitute
cash equivalents of the kinds described in clauses (1) through (5)
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.
Change of Control means the occurrence of any of the following:
(1) 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
Pegasus and its restricted subsidiaries taken as a whole to any
person as that term is used in Section 13(d)(3) of the Exchange Act
other than the principal or his related parties;
(2) the adoption of a plan relating to the liquidation or dissolution
of Pegasus;
(3) the consummation of any transaction, including, without limitation,
any merger or consolidation the result of which is that:
(A) any person, as defined below, becomes the beneficial owner, as
that term is defined in SEC Rules 13d-3 and 13d-5, of more of
the voting stock of Pegasus, measured by voting power rather
than number of shares, than is at the time beneficially owned
by Marshall W. Pagon and his related parties in the aggregate.
For purposes of this definition, a person is deemed to own all
securities that the person has a right to acquire, whether
immediately or at some later date or upon the happening of
an event;
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(B) Marshall W. Pagon and his related parties collectively cease to
beneficially own, as defined above, voting stock of Pegasus
having at least 30% of the combined voting power of all classes
of voting stock of Pegasus then outstanding; or
(C) Marshall W. Pagon 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
(D) the first day on which a majority of the members of the board
of directors of Pegasus are not continuing directors.
Closing Date means November 30, 1998, the original date of issuance of
the notes.
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 generally accepted accounting principles, provided that:
(1) 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;
(2) the net income of any person acquired in a pooling of interests
transaction for any period before the date of such acquisition
shall be excluded;
(3) the cumulative effect of a change in accounting principles shall be
excluded; and
(4) the net income of any unrestricted subsidiary shall be excluded,
whether or not distributed to Pegasus or one of its subsidiaries.
Continuing Directors means, as of any date of determination, any member
of the board of directors of Pegasus who was a member of the board of directors
on the closing date or was nominated for election or elected to the board of
directors with the approval of a majority of the continuing directors who were
members of the board at the time of the nomination or election.
Cumulative Operating Cash Flow means, as of any date of determination,
operating cash flow for Pegasus 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 the date of
determination, plus all cash dividends received by Pegasus or a wholly-owned
restricted subsidiary of Pegasus from any unrestricted subsidiary of Pegasus or
wholly-owned restricted subsidiary of Pegasus to the extent that such dividends
are not included in the calculation of permitted restricted payments under
subparagraph (3) of the second paragraph of the covenant described under the
caption Certain Covenants -- Restricted Payments by virtue of clause (3) of such
subparagraph.
Cumulative Total Interest Expense means, with respect to Pegasus 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.
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Digital Television Services Credit Facility means the Second Amended
and Restated Credit Agreement, dated as of July 30, 1997, by and among Digital
Television Services, LLC, CIBC Oppenheimer Corp., as arranger, Morgan Guaranty
Trust Company of New York, as syndication agent, Fleet National Bank, as
documentation agent, and Canadian Imperial Bank of Commerce, as administrative
agent, as amended through the closing date.
Direct Broadcast Satellite 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 Pegasus'
consolidated audited financial statements.
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, under a sinking fund obligation or otherwise, or is redeemable at
the option of the holder thereof, in whole or in part, on or before 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.
Pegasus is currently soliciting the consents of the holders of these
notes to amend the definition of disqualified stock in the indenture. The
amendment would exclude Pegasus' Series A preferred stock from the definition of
disqualified stock.
Eligible Indebtedness means any indebtedness other than indebtedness in
the form of, or represented by, bonds or other securities or any guarantee
thereof and 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 under
SEC Rule 144A.
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 Credit Facilities means the Digital Television Services credit
facility and the Pegasus Media & Communications, Inc. credit facility.
Existing Indebtedness means all indebtedness of Pegasus and its
subsidiaries other than indebtedness under the existing credit facilities in
existence on the closing date, until such amounts are repaid.
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 Pegasus 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.
However, the fair market value of the assets purchased in an
arm's-length transaction by an affiliate of Pegasus, other than a subsidiary,
from a third party that is not also an affiliate of Pegasus or such purchaser
and contributed to Pegasus within five business days of the consummation of the
acquisition of the assets by the affiliate shall be deemed to be the aggregate
consideration paid by the 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.
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Global Notes means one or more notes in registered, global form without
interest coupons representing the notes that are being exchanged in their
offering, and which have been registered with the Depository Trust Company or
its nominee.
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 interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements and 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:
o in respect of borrowed money; or
o evidenced by bonds, notes, debentures or similar instruments, or
letters of credit or reimbursement agreements in respect of these
instruments; or
o representing any capital lease obligations or the balance deferred
and unpaid of the purchase price of any property; or
o representing any hedging obligations.
However, indebtedness does not include any 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 the person prepared in accordance with
generally accepted accounting principles. It also does not include indebtedness
of others secured by a lien on any asset of the person whether or not the
indebtedness is assumed by the person and, to the extent not otherwise included,
the guarantee by the 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. However, the amount outstanding at
any time of any indebtedness issued with original issue discount is the full
amount of the indebtedness less the remaining unamortized portion of the
original issue discount of such indebtedness at the time as determined in
conformity with generally accepted accounting principles. The amount of any
indebtedness outstanding as of any date shall be:
o the accreted value thereof, in the case of any indebtedness issued
with original issue discount; and
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o 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 as of the date on a consolidated
basis, plus the aggregate liquidation preference of all outstanding preferred
stock of the restricted subsidiaries of the person as of the date excluding
qualified subsidiary stock and any such preferred stock held by the person or a
wholly-owned restricted subsidiary of the person, plus the aggregate liquidation
preference or redemption amount of all disqualified stock of the person
excluding any disqualified stock held by the person or a wholly-owned restricted
subsidiary of the person as of the date of determination to
(b) adjusted operating cash flow of the 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, disregarding clause (3)
of the definition of "consolidated net income," including, without limitation,
asset swaps made by the person and its restricted subsidiaries since the
beginning of such four-quarter period through the date of determination as if
the acquisitions and dispositions had occurred at the beginning of the
four-quarter period.
Independent Director means a member of the board of directors who is
neither an officer nor an employee of Pegasus or any of its affiliates.
Investments means, with respect to any person, all investments by the
person in other persons and their affiliates in the forms of
o direct or indirect loans, including guarantees of indebtedness or
other obligations,
o advances or capital contributions, excluding commission, travel and
similar advances to officers and employees made in the ordinary
course of business,
o purchases or other acquisitions for consideration of indebtedness,
o equity interests or other securities, and
o all other items that are or would be classified as investments on a
balance sheet prepared in accordance with generally accepted
accounting principles.
However, an acquisition of assets, equity interests or other securities
by Pegasus for consideration consisting of common equity securities, or
preferred stock which is not disqualified stock, of Pegasus 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 the asset,
whether or not filed, recorded or otherwise perfected under applicable law. It
also means any conditional sale or other title retention agreement, any lease in
the nature of such a sale or agreement, 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 or loss of
the person, determined in accordance with generally accepted accounting
principles and before any reduction in respect of preferred stock dividends,
excluding, however:
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(1) any gain, but not loss, together with any related provision for
taxes on the gain, but not loss, realized in connection with any
asset sale, including, without limitation, dispositions under sale
and leaseback transactions, or the disposition of any securities by
the person or any of its restricted subsidiaries or the
extinguishment of any indebtedness of the person or any of its
restricted subsidiaries; and
(2) 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 Pegasus 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 the asset sale. Direct costs include without limitation,
o legal, accounting, investment banking fees, and sales commissions and
any relocation expenses incurred as a result thereof,
o taxes paid or payable as a result thereof after taking into account
any available tax credits or deductions and any tax sharing
arrangements,
o amounts required to be applied to the repayment of indebtedness in
connection with the asset sale, and
o any reserve for adjustment in respect of the sale price of the asset
or assets established in accordance with generally accepted
accounting principles.
Non-Cash Incentive Compensation means incentive compensation paid to
any officer of Pegasus or any of its subsidiaries in the form of Class A common
stock of Pegasus or options to purchase Class A common stock of Pegasus under
the Pegasus restricted stock plan and the Pegasus 1996 stock option plan.
Non-Recourse Debt means indebtedness:
(1) as to which neither Pegasus 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 liable, as a guarantor or otherwise; or
(c) constitutes the lender; and
(2) no default with respect to which, including any rights that the
holders of the indebtedness 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 Pegasus or
any of its restricted subsidiaries to declare a default on the
other indebtedness or cause the payment thereof to be accelerated
or payable before its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of Pegasus or any
of its restricted subsidiaries.
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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 the person for such period, plus:
(1) extraordinary net losses and net losses on sales of assets outside
the ordinary course of business during the period, to the extent
the losses were deducted in computing such consolidated net income,
plus
(2) 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 used in computing the net
losses under clause (1) above, plus
(3) consolidated interest expense of the person and its subsidiaries
for the period, whether paid or accrued and whether or not
capitalized, including, without limitation
o amortization of original issue discount,
o non-cash interest payments,
o the interest component of any deferred payment obligations,
o the interest component of all payments associated with capital
lease obligations,
o commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings,
and
o net payments if any under hedging obligations, to the extent that
any expense was deducted in computing the consolidated net
income, plus
(4) 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 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 the person and its subsidiaries for the period to
the extent that the depreciation, amortization and other non-cash
charges were deducted in computing the consolidated net income,
plus
(5) non-cash incentive compensation to the extent the compensation
expense was deducted in computing the consolidated net income and
to the extent not included in clause (4) of this definition; and
less all non-cash income for the period, excluding any 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.
Other Debt That Ranks Equally in Right of Payment to the Notes means
senior indebtedness of Pegasus or any subsidiary guarantor permitted by the
covenant described under the caption Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock, which is equal in right of payment
with the notes or any subsidiary guarantee.
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Pegasus Media & Communications, Inc. Credit Facility means the credit
agreement, dated as of December 10, 1997, by and among Pegasus Media &
Communications, Inc., the several lenders from time to time party thereto and
Bankers Trust Company, as agent for the lenders, as amended through November 30,
1998.
Pegasus Media & Communications, Inc. Notes means Pegasus Media &
Communications, Inc.'s 12 1/2% Series B senior subordinated notes due 2005.
Pegasus Satellite Television of Virginia, Inc. Preferred Stock means
the Series A preferred stock, par value $1 per share, of Pegasus Satellite
Television of Virginia, Inc.
Permitted Businesses means:
(1) 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
(2) any business reasonably related or ancillary to any of the
foregoing businesses.
Permitted Investments means:
(1) any investments in Pegasus or in a wholly-owned restricted
subsidiary of Pegasus;
(2) any investments in cash equivalents;
(3) Investments by Pegasus or any restricted subsidiary of Pegasus in a
person, if as a result of the investment:
o the person becomes a wholly-owned restricted subsidiary of
Pegasus or
o such person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, Pegasus or a wholly-owned restricted subsidiary
of Pegasus;
(4) Investments made as a result of the receipt of non-cash
consideration from an asset sale that was made under and in
compliance with the provisions of the covenant described under the
caption Repurchase at the Option of Holders -- Asset Sales; and
(5) 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:
(1) Liens securing term loans, revolving borrowings, letters of credit
or other obligations under any bank facility;
(2) Liens securing eligible indebtedness of a subsidiary that was
permitted to be incurred under the indenture;
(3) Liens on property of a person existing at the time the person is
merged into or consolidated with Pegasus or any subsidiary of
Pegasus, if such liens were not created in contemplation of the
merger or consolidation and do not extend to any assets other than
those of the person merged into or consolidated with Pegasus or
any restricted subsidiary of Pegasus;
(4) Liens on property existing at the time of acquisition thereof by
Pegasus or any subsidiary of Pegasus, if the liens were not
created in contemplation of the acquisition;
(5) 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;
(6) Liens existing on the closing date;
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(7) Liens to secure indebtedness represented by capital lease
obligations, mortgage financings or purchase money obligations
permitted by clause (7) 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;
(8) 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
generally accepted accounting principles shall have been made
therefor;
(9) Liens incurred in the ordinary course of business of Pegasus or
any subsidiary of Pegasus with respect to obligations that do not
exceed $1.5 million at any one time outstanding;
(10) Liens on deposits or cash equivalents made under 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, if the assets to be acquired or the capital stock of
persons owning the assets will be owned by Pegasus or a restricted
subsidiary of Pegasus upon consummation of the contemplated
acquisition;
(11) Liens encumbering deposits or cash equivalents made to secure
obligations of Pegasus to repurchase capital stock of Pegasus
pledged to secure obligations of employees of Pegasus in an
aggregate amount not to exceed $5.0 million at any time
outstanding; and
(12) 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 Pegasus 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 Pegasus or any of its restricted subsidiaries, if:
(1) the principal amount or accreted value, if applicable, of such
permitted refinancing debt does not exceed the principal amount of
or accreted value, if applicable; plus
o accrued interest on, the indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded; plus
o the amount of reasonable expenses incurred in connection
therewith; and
o the amount of any premium required to be paid in connection
with the refinancing under the terms of the refinancing or
deemed by Pegasus or the restricted subsidiary necessary to be
paid to effectuate the refinancing;
(2) the 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;
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(3) if the indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the
notes, the 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;
(4) the indebtedness is incurred either by Pegasus or by the restricted
subsidiary who is the obligor on the indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(5) if the permitted refinancing debt is incurred by a restricted
subsidiary that is not a subsidiary guarantor, such permitted
refinancing debt constitutes eligible indebtedness.
Qualified Subsidiary Stock means capital stock of a subsidiary of
Pegasus which by its terms:
(1) does not mature, or is not mandatorily redeemable, under a sinking
fund obligation or otherwise, and is not redeemable at the option
of a holder, in whole or in part, before December 1, 2007, 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;
(2) is automatically exchangeable into shares of capital stock of
Pegasus that is not disqualified stock on the earlier to occur of
(a) the date of an event of default and (b) December 1, 2005;
(3) has no voting or remedial rights; and
(4) does not permit the payment of cash dividends before December 1,
2006, unless 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. However, for all purposes under
the indenture, qualified subsidiary stock shall be deemed to
include the Pegasus Satellite Television of Virginia, Inc.
preferred stock.
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Related Party with respect to Marshall W. Pagon means:
(A) any immediate family member of Marshall W. Pagon or
(B) any trust, corporation, partnership or other entity, more than
50% of the voting equity interests of which are owned and
controlled by Marshall W. Pagon and/or other persons referred
to above in clause (A).
For purposes of this definition:
(1) Control has the meaning specified in the definition of "affiliate"
contained under the caption Certain Definitions. In addition,
Marshall W. Pagon's estate shall be deemed to be a related party
until such time as the estate is distributed in accordance with
Marshall W. Pagon's will or applicable state law.
(2) Immediate Family Member means spouse, parent, step-parent, child,
sibling or step-sibling; and
Restricted Investment means an investment other than a permitted
investment.
Restricted Subsidiary of a person means any subsidiary of the 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 this business held by Pegasus and its restricted subsidiaries on
the closing date, plus all other assets acquired by Pegasus or any of its
restricted subsidiaries that are directly related to this business. Satellite
segment does not include the terrestrial television broadcasting business and
related assets and the cable television business and related assets. However,
any assets acquired by Pegasus or any of its restricted subsidiaries after the
closing date that are not directly related to the Satellite segment, as
described above, shall not be included for purposes of this definition.
Series A Preferred Stock means Pegasus' 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,
under the Securities Act, as such regulation is in effect on the closing date.
Split Dollar Agreement means the split dollar agreement between Pegasus
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 the payment of interest or principal
was scheduled to be paid in the original documentation governing the
indebtedness, and shall not include any contingent obligations to repay, redeem
or repurchase any interest or principal before the date originally scheduled for
the payment thereof.
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Subordinated Exchange Note Indenture means the indenture filed as an
exhibit to the certificate of designation 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 of the indenture.
Subordinated Exchange Notes means Pegasus' 12 3/4% senior subordinated
exchange notes due 2007 issuable under the subordinated exchange note indenture
in exchange for Pegasus' Series A preferred stock.
Subsidiary means, with respect to any person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of capital stock
entitled to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled by the person or one or
more of the other subsidiaries of that person or a combination
thereof; and
(2) 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, under a supplemental indenture and the requirements of 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 equal or senior to all indebtedness of such restricted
subsidiary.
Total Interest Expense means, with respect to any person for any
period, the sum of:
(1) the consolidated interest expense of the person and its restricted
subsidiaries for the 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, under
hedging obligations; and
(2) the consolidated interest expense of such person and its restricted
subsidiaries that was capitalized during the period, to the extent
such amounts are not included in clause (1) of this definition; and
(3) any interest expense for such period on indebtedness of another
person that is guaranteed by the person or one of its restricted
subsidiaries or secured by a lien on assets other than equity
interests in unrestricted subsidiaries securing indebtedness of
unrestricted subsidiaries of the person or one of its restricted
subsidiaries whether or not the guarantee or lien is called upon;
and
(4) all cash dividend payments during such period on any series of
preferred stock of a restricted subsidiary of the person.
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Unrestricted Subsidiary means any subsidiary that is designated by the
board of directors as an unrestricted subsidiary under a board resolution, but
only if the subsidiary:
(1) has no indebtedness other than non-recourse debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Pegasus or any restricted subsidiary of Pegasus
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Pegasus or such restricted
subsidiary than those that might be obtained at the time from
persons who are not affiliates of Pegasus;
(3) is a person with respect to which neither Pegasus nor any of its
restricted subsidiaries has any direct or indirect obligation:
o to subscribe for additional equity interests or
o to maintain or preserve such person's financial condition or to
cause such person to achieve any specified levels of operating
results;
(4) has not guaranteed or otherwise provided credit support for any
indebtedness of Pegasus or any of its restricted subsidiaries; and
(5) has at least one executive officer that is not a director or
executive officer of Pegasus or any of its restricted subsidiaries.
Pegasus shall evidence any such designation made by the board of
directors at a time when any notes are outstanding by filing with
First Union National Bank a certified copy of the board resolution
giving effect to the designation and an officers' certificate
certifying that the 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 the subsidiary shall be deemed to be incurred by a restricted
subsidiary of Pegasus as of that date. If the indebtedness is not permitted to
be incurred as of that date under the provisions of the covenant described under
the caption Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock. Pegasus shall be in default of the covenant. If an unrestricted
subsidiary ceases to meet the requirement set forth in clause (5) of this
definition, the unrestricted subsidiary shall have 60 days to meet the
requirement before the unrestricted subsidiary shall cease to be an unrestricted
subsidiary.
The board of directors of Pegasus may at any time designate any
unrestricted subsidiary to be a restricted subsidiary. However, the designation
shall be deemed to be an incurrence of indebtedness by a restricted subsidiary
of Pegasus of any outstanding indebtedness of the unrestricted subsidiary and
the designation shall be permitted only if:
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o the indebtedness is permitted under the covenant described under
the caption Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock; and
o no default or event of default would be in existence following
the 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 the person.
Weighted Average Life to Maturity means, when applied to any
indebtedness at any date, the number of years obtained by dividing:
(1) 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, by
(b) the number of years calculated to the nearest one-twelfth that
will elapse between that date and the making of the payment, by
(2) 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 other than
directors' qualifying shares shall at the time be owned by the person and/or by
one or more wholly-owned restricted subsidiaries of the person.
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Material United States Federal Income Tax Consequences
The following is a general discussion of the material U.S. federal
income and estate tax consequences of the acquisition, ownership and disposition
of notes by an initial beneficial owner of notes that, for U.S. federal income
tax purposes, is not a U.S. person. 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 notes
may vary depending upon their particular situations. U.S. persons acquiring the
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 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 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,
1999, subject to certain transition rules. Accordingly, payments made on or
before December 31, 1999 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 we pay to a Non-U.S. holder will not be subject to U.S.
federal income or withholding tax if the 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:
(a) does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock
of Pegasus;
(b) is not a controlled foreign corporation with respect to
which Pegasus is a related person within the meaning of
the Internal Revenue Code; and
(c) certifies, under penalties of perjury, that the owner is
not a U.S. person and provides the owner's name and
address. The current regulations provide that the
statement must be received no later than the calendar
year in which the payment is made. The new withholding
regulations require the statement to be made on Form W-8
or approved substitute before payment. For a non-U.S.
holder who is claiming the benefits of a tax treaty, the
new withholding regulations may require the 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.
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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 note
unless:
(a) the gain is effectively connected with the conduct of a
trade or business within the U.S. by the non-U.S. holder
or
(b) in the case of a non-U.S. holder who is a nonresident
alien individual and holds the 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
If interest on the notes is exempt from withholding of U.S. federal
income tax under the rules described above, the 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, 1999, we will, where
required, report to the holders of notes and the Internal Revenue Service the
amount of any interest paid on the 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, 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, if neither we nor our 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 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 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 the
broker has documentary evidence in its file that the owner of the notes is not a
U.S. person, and the 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 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 the 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, it 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 under
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. A broker-dealer may use this
prospectus, as it may be amended or supplemented, in connection with the resales
of new notes received in exchange for old notes where the old notes were
acquired as a result of market-making activities or other trading activities. We
have agreed that for a period of one year after the date on the cover of this
prospectus, we 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.
New notes received by broker-dealers for their own account under 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 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 new notes. Any broker-dealer that resells new notes that were
received by it for its own account under the exchange offer and any broker or
dealer that participates in a distribution of new notes may be deemed to be an
underwriter within the meaning of the Securities Act and any profit on any
resale of new notes and any commissions or concessions received by any 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.
We have agreed to pay expenses incurred with the exchange offer and the
performance of our other obligations under a registration rights agreement. We
have also agreed to indemnify the holders, including any broker-dealers, and
certain parties related to the holders against certain liabilities, including
liabilities under the Securities Act.
By accepting this exchange offer, each broker-dealer that receives the
new notes under the exchange offer agrees that, after receiving notice from us
of any event that makes any statement in this prospectus untrue in any material
respect or which requires us to make any change in this prospectus to make the
statements therein not misleading, the broker will not use this prospectus until
we have amended or supplemented it to correct the misstatement or omission and
have furnished copies of the amended or supplemented prospectus to the
broker-dealer.
72
<PAGE>
Legal Matters
Drinker Biddle & Reath LLP, counsel for Pegasus has passed upon the
validity of the new notes. Michael B. Jordan, a partner of Drinker Biddle &
Reath LLP, is an Assistant Secretary of Pegasus.
Experts
Pegasus' consolidated balance sheets as of December 31, 1997 and 1998
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, 1998, incorporated by reference in this registration
statement, have been incorporated herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The consolidated financial statements of Digital Television Services,
Inc. and Subsidiaries for the period from inception, January 30, 1996, through
December 31, 1996 and for the year ended December 31, 1997, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto and are incorporated by reference in this
registration statement in reliance upon the authority of that firm as experts in
accounting and auditing in giving said reports.
73
<PAGE>
===============================================================================
We have not authorized any dealer, salesperson or any other person to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information. This prospectus does not offer to sell or
buy any votes in any jurisdiction where it is unlawful.
Table of Contents
Prospectus Summary..................................1
Where You Can Find More
Information ......................................7
Risk Factors........................................8
Ratio of Earnings to Fixed Charges.................20
Use of Proceeds....................................20
The Exchange Offer.................................21
Material United States Federal Income Tax
Consequences of Exchange Offer...................28
Description of Notes...............................29
Material United States Federal Income
Tax Consequences.................................70
Plan of Distribution...............................72
Legal Matters......................................73
Experts............................................73
================================================================================
================================================================================
[LOGO]
Pegasus Communications Corporation
Exchange of registered
9 3/4% Series B senior notes due 2006
for any and all of our unregistered outstanding
9 3/4% Series A senior notes due 2006
__________________________
PROSPECTUS
__________________________
____________, 1999
================================================================================
<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.
Pegasus has entered into an Underwriting Agreement, which provides that
the underwriters are obligated, under certain circumstances, to indemnify
directors, officers and controlling persons of the Registrant against certain
liabilities under the Securities Act of 1933, as amended. Reference is made to
Section 7 of the form of Underwriting Agreement which is filed as Exhibit 1.1
to Pegasus' Registration Statement on Form S-3 (File No. 333-70949).
The Registrant maintains directors' and officers' liability insurance.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
Number Description of Document
- ------- -----------------------
4.1 Indenture, dated as of November 30, 1998, by and between Pegasus and
First Union National Bank, as Trustee, relating to the 9 3/4% Senior
Notes due 2006, (which is incorporated by reference herein to Exhibit
4.6 to Pegasus' Registration Statement on Form S-3 (File No.
333-70949)).
4.2 Form of Note (included in Exhibit 4.1 above).
5.1 Opinion of Drinker Biddle & Reath LLP (which is incorporated by
reference herein to Exhibit 5.1 to Pegasus' Registration Statement on
Form S-4 (File No. 333-71447)).
8.1 Opinion of Drinker Biddle & Reath LLP concerning tax matters (which is
incorporated by reference herein to Exhibit 8.1 to Pegasus' Registration
Statement on Form S-4 (File No. 333-71447)).
II-1
<PAGE>
10.1 Registration Rights Agreement, dated as of November 30, 1998, among
Pegasus Communications Corporation, CIBC Oppenheimer Corp and Alex.
Brown Incorporated (which is incorporated herein by reference herein to
Exhibit 10.11 to Pegasus' Registration Statement on Form S-4 (File No.
333-71447)).
23.1 Consent of Drinker Biddle & Reath LLP (included in Exhibits 5.1 and
8.1).
23.2* Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included on Signatures and Powers of Attorney)
(which is incorporated herein by reference herein to Exhibit 24.1 to
Pegasus' Registration Statement on Form S-4 (File No. 333-71447)).
25.1 Form T-1, Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of First Union National Bank, as Trustee (which is
incorporated by reference herein to Exhibit 25.1 to Pegasus'
Registration Statement on Form S-4 (File No. 333-71447)).
99.1 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer (which is incorporated by reference
herein to Exhibit 99.1 to Pegasus' Registration Statement on Form S-4
(File No. 333-71447)).
- ----------------
* Filed herewith.
Item 22. Undertakings.
The Registrant undertakes that:
(1) 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 after the effective date of the registration statement through the date of
responding to the request.
II-2
<PAGE>
(2) 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.
(3) 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
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities and 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.
(4) 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 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 Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Radnor, Commonwealth of Pennsylvania, on March 26,
1999.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Ted S. Lodge
------------------------------
Ted S. Lodge
Senior Vice President
Date: March 26, 1999
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President, Chief Executive Officer, March 26, 1999
- ------------------------------------- Chairman of the Board and Director
Marshall W. Pagon
(Principal Executive Officer)
* Senior Vice President, Chief Financial March 26, 1999
- ------------------------------------- Officer, Assistant Secretary and Director
Robert N. Verdecchio
(Principal Financial and
Accounting Officer)
* Director March 26, 1999
- ------------------------------------
James J. McEntee, III
* Director March 26, 1999
- ------------------------------------
Mary C. Metzger
* Director March 26, 1999
- ------------------------------------
Donald W. Weber
* Director March 26, 1999
- ------------------------------------
Michael C. Brooks
* Director March 26, 1999
- ------------------------------------
Harry F. Hopper, III
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
* Director March 26, 1999
- ------------------------------------
William P. Phoenix
* Director March 26, 1999
- ------------------------------------
Riordon B. Smith
By: /s/ Ted S. Lodge
--------------------------------
Ted S. Lodge
Attorney-In-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------ -----------------------
4.1 Indenture, dated as of November 30, 1998, by and between Pegasus and
First Union National Bank, as Trustee, relating to the 9 3/4% Senior
Notes due 2006, (which is incorporated by reference herein to Exhibit
4.6 to Pegasus' Registration Statement on Form S-3 (File No.
333-70949)).
4.2 Form of Note (included in Exhibit 4.1 above).
5.1 Opinion of Drinker Biddle & Reath LLP (which is incorporated by
reference herein to Exhibit 5.1 to Pegasus' Registration Statement on
Form S-4 (File No. 333-71447)).
8.1 Opinion of Drinker Biddle & Reath LLP concerning tax matters (which is
incorporated by reference herein to Exhibit 8.1 to Pegasus' Registration
Statement on Form S-4 (File No. 333-71447)).
10.1 Registration Rights Agreement, dated as of November 30, 1998, among
Pegasus Communications Corporation, CIBC Oppenheimer Corp and Alex.
Brown Incorporated (which is incorporated herein by reference herein to
Exhibit 10.11 to Pegasus' Registration Statement on Form S-4 (File No.
333-71447)).
23.1 Consent of Drinker Biddle & Reath LLP (included in Exhibits 5.1 and
8.1).
23.2* Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included on Signatures and Powers of Attorney)
(which is incorporated herein by reference herein to Exhibit 24.1 to
Pegasus' Registration Statement on Form S-4 (File No. 333-71447)).
25.1 Form T-1, Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of First Union National Bank, as Trustee (which is
incorporated by reference herein to Exhibit 25.1 to Pegasus'
Registration Statement on Form S-4 (File No. 333-71447)).
99.1 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer (which is incorporated by reference
herein to Exhibit 99.1 to Pegasus' Registration Statement on Form S-4
(File No. 333-71447)).
- ----------------
* Filed herewith.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this registration statement of
Pegasus Communications Corporation on Form S-4 (File no. 333-71447) of our
report dated February 12, 1999, on our audits of the consolidated financial
statements of Pegasus Communications Corporation as of December 31, 1998 We also
consent to the reference to our firm under the captions "Experts."
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 23, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated February 18, 1998
included in Digital Television Services Form 10-K for the year ended December
31, 1997, and to all references to our Firm included in or made a part of this
Registration Statement.
/s/ Arthur Andersen LLP
- -----------------------
Atlanta, Georgia
March 23, 1999
