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As filed with the Securities and Exchange Commission on January 29, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PEGASUS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
4833
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(Primary Standard Industrial Classification Code Number)
DELAWARE 51-0374669
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation of Organization) Identification Number)
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)
Marshall W. Pagon, President and Chief Executive Officer
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)
Copies to:
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Michael B. Jordan, Esq. Ted S. Lodge, Esq.
Drinker Biddle & Reath LLP Pegasus Communications Corporation
1100 Philadelphia National Bank Building c/o Pegasus Communications Management Company
1345 Chestnut Street Suite 454, 5 Radnor Corporate Center
Philadelphia, Pennsylvania 19107-3496 100 Matsonford Road
(215) 988-2700 Radnor, Pennsylvania 19087
(888) 438-7488
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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. [ ] ___________
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CALCULATION OF REGISTRATION FEE
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Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
to be To be Offering Price Aggregate Registration
Registered Registered Per Note(1) Offering Price(1) Fee(2)
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9 3/4% Series B Senior $100,000,000 100% $100,000,000 $27,800
Notes due 2006
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(1) Calculated in accordance with Rule 457 solely for the purpose of
determining the registration fee.
(2) Paid by wire transfer.
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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The information in this Prospectus is not complete and may be changed. We may
not offer these securities until the registration statement is effective. This
Prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
Subject to completion, dated January 29, 1999
Prospectus
_______________, 1999
[Pegasus Logo Appears Here]
Offer to exchange 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
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We offer to exchange new 9 3/4% Series B Senior Notes due 2006 for our
outstanding 9 3/4% Series A Senior Notes due 2006, of which $100 million are
outstanding.
The new notes will:
o be registered under the Securities Act;
o evidence the same debt as the old notes;
o be entitled to the benefits of the same indenture;
o bear interest from and including November 30, 1998;
o rank senior to our subordinated indebtedness; and
o rank equally with our senior indebtedness.
We will only exchange notes in multiples of $1,000. If you tender your
old notes and we accept them for exchange, you will waive the right to receive
any interest accrued on the old notes.
We are dependent upon our subsidiaries' cash flows to meet our
obligations. However, when issued, none of our subsidiaries will guarantee the
new notes. Our subsidiaries may later guarantee the new notes by signing a
supplemental indenture.
We may redeem the notes at any time after December 1, 2002. Before
December 1, 2001, we may redeem up to 35% of the notes with the proceeds of
certain types of public offerings of equity in our company. If we sell certain
assets or experience certain kinds of changes in control, we must offer to
repurchase the notes.
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 NASDAQ.
We will not receive any proceeds from this exchange offer. We are not
using an underwriter.
This offer expires at 5:00 p.m., New York City time on __________,
1999, unless extended.
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This investment involves risks.
See the Risk Factors section beginning on page 8.
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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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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 NASDAQ and reports and other information about us may be inspected at
NASDAQ 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 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/A filed on April 20, 1998 for the fiscal year
ended December 31, 1997;
o Pegasus' Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998;
o Pegasus' Quarterly Report on Form 10-Q for the quarter ended June
30, 1998;
o Pegasus' Quarterly Report on Form 10-Q for the quarter ended March
31, 1998;
o Pegasus' Forms 8-K dated December 10, 1997 and filed on January 12,
1998; dated January 16, 1998 and filed on March 3, 1998; and dated
April 27, 1998 and filed with the SEC on May 11, 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; and
o The section entitled "Pegasus Communication Corporation Pro Forma
Consolidated Financial Information" beginning at page F-154 of
the Proxy Statement and Prospectus contained in Pegasus'
Registration Statement on Form S-4 (File No. 333-44929).
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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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.
Information in this summary gives effect to the pending acquisitions
described below.
Pegasus
Pegasus Communications Corporation is:
o The largest independent provider of DIRECTV(R) with 455,000
subscribers at December 31, 1998. We have the exclusive right to
distribute DIRECTV digital broadcast satellite services to over
4.83 million rural households in 36 states. We distribute DIRECTV
through the Pegasus retail network, a network of approximately
2,000 independent retailers. DIRECTV is a direct broadcast
satellite service. The indusry uses the abbreviation DBS to
describe these services.
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 Developments
Completed DBS Acquisitions
During the fourth quarter of 1998 and the first quarter of 1999, we
made ten acquisitions from independent DIRECTV providers of rights to provide
DIRECTV programming in rural areas of New Mexico, Oklahoma, South Dakota, West
Virginia, Colorado, Illinois, Minnesota and Texas. These territories include, in
the aggregate, approximately 149,000 television households (including
approximately 6,800 seasonal residences and 13,000 business locations), and
approximately 14,250 subscribers. The aggregate consideration paid for these
acquisitions was approximately $26.8 million in cash and $1.25 million in
promissory notes.
Pending DBS Acquisitions
As of the date of this prospectus 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 264,000 television households (including approximately 11,500
seasonal residences and 23,000 business locations) and approximately 15,350
subscribers. In the aggregate, the consideration for the pending DBS
acquisitions is $28.9 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 believe, but cannot assure you, that these conditions will be
satisfied. See "Risk Factors - Other Risks of Our Business - Our Acquisition
Strategy Creates a Variety of Risks."
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Pending Cable Acquisition
We have entered into an agreement to purchase 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, upon completion of the
purchase, we intend to consolidate the Aguadilla cable system with our existing
cable system. The closing of this acquisition is subject to third party
approvals and other customary conditions. One of these conditions is that the
Puerto Rico franchising authority will not impose greater burdens on us than it
imposes on the present owner. We expect we will have to negotiate terms with the
Puerto Rico authority. While we believe we will reach a satisfactory agreement,
we cannot be sure. If we do, and the other conditions are met, we expect to
close the acquisition in the first quarter of 1999. See "Risk Factors - Other
Risks of Our Business - Our Acquisition Strategy Creates a Variety of Risks."
Fox Affiliation Agreements
Our network affiliation agreements with Fox Broadcasting Company will
expire on January 30, 1999 (other than the affiliation agreement for television
station WTLH, which is scheduled to expire on December 31, 2000). We have been
informed by Fox that it is revising its form affiliation agreement. Pending
completion of its revised form agreement, Fox has proposed entering into new
agreements based on its current form with a 90 day rolling term. We believe that
we will enter into new affiliation agreements on satisfactory terms, either
before the existing agreements expire or during an agreed-upon extension. If we
are mistaken in this belief, the loss of the ability to carry Fox programming
could have a material and adverse effect on us. See "Risk Factors - Risks of Our
Broadcast Television Business - We Depend on our Network Affiliations For
Programming."
Hurricane Georges
In September 1998, Hurricane Georges struck the island of Puerto Rico
and interrupted service to our cable subscribers. We suffered modest damage to
our headend and approximately 3% of our 780 miles of cable plant. We
substantially completed repairs by December 1, 1998. DBS subscriber acquisition
costs are anticipated to be modestly higher, per new customer, during the
quarter ended December 31, 1998 as compared to the quarter ended September 30,
1998.
Recent DBS Developments
Three important events have occurred recently in the DBS industry.
DIRECTV/Hughes Acquisition of USSB.
In December 1998, Hughes Electronics Corporation, the parent company of
DIRECTV, announced that it had reached an agreement with United States Satellite
Broadcasting Company, Inc. to acquire USSB's business and assets for
approximately $1.3 billion in cash and stock. The transaction will enable
DIRECTV to add such premium networks as multichannel HBO, Cinemax and Showtime.
It is subject to review and approval by the Department of Justice and the
Federal Communications Commission and other conditions.
DIRECTV/Hughes Acquisition of Primestar.
In January 1999, Hughes announced that it reached agreement with
Primestar, Inc. to acquire Primestar's DBS business in two transactions valued
at approximately $1.82 billion. DIRECTV has stated that it intends to operate
Primestar's medium power business for approximately two years, during which time
it will transition Primestar's approximately 2.3 million subscribers to the high
power DIRECTV service. The Primestar transactions are subject to approval of the
Federal Communications Commission and antitrust agencies and other conditions.
We estimate that there are between 200,000 and 250,000 Primestar subscribers in
our DIRECTV exclusive territories. (Our estimate is based on DIRECTV's estimate
of the proportion of Primestar subscribers in the exclusive territories of
DIRECTV rural affiliates and our proportionate ownership of those territories.)
We are still evaluating the effects of the Primestar transactions on our
business.
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EchoStar-News Corporation-MCI Settlement.
In November 1998, EchoStar Communications Corporation, News
Corporation, MCI and certain other parties reached an agreement for the transfer
to EchoStar of a license to operate a high-power DBS business at the 110
(degree) west longitude orbital location and certain other DBS assets in
exchange for shares of EchoStar. The agreement with News Corporation and MCI has
been approved by the Department of Justice and is pending approval of the
Federal Communications Commission. This transaction could increase EchoStar's
competitive position relative to DIRECTV. See "Risk Factors -- Other Risks of
Our Business -- We Face Significant Competition: the Competition Landscape
Changes Constantly." We believe that the ExchoStar/News Corporation/MCI
settlement will be positive for the DBS industry and will help increase DBS'
competitive position vis-a-vis cable.
Legal and Other Proceedings
FCC Matters
In connection with the pending license renewal application of
television station WDBD, we have learned that there were a substantial number of
violations at that station of the FCC's rule establishing limits on the amount
of commercial material in programs directed to children. The FCC has options
available to address violations of its rules ranging from a letter of
admonishment to the revocation of a station license. We expect that the
violations at television station WDBD will result in a monetary fine but not in
revocation or nonrenewal of the station license. The FCC has not yet completed
its review of the matter, however, so the outcome cannot be assured.
DBS Late Fee Litigation
In November 1998, we were sued in Indiana for allegedly charging DBS
subscribers excessive fees for late payments. The plaintiffs, who claim to
represent a class consisting of residential DIRECTV customers in Indiana, seek
unspecified damages for the purported class and modification of our late-fee
policy. We are in the process of evaluating our response and are unable to
estimate the amount involved or to determine whether this suit is material to
our Company. Similar suits have been brought against DIRECTV and various cable
operators in other parts of the United States.
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The Exchange Offer
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The Old Notes........................ We issued $100 million in principal amount of our 9 3/4% Series A Senior
Notes due 2006 on November 30, 1998. We call them the "old notes" in this
prospectus. Because we did not register the old notes under the Securities
Act, they are subject to restrictions on transfer.
The New Notes........................ We use "new notes" to refer to the $100 million in principal amount of our
9 3/4% Series B Senior Notes due 2006 that we offer 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 "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 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 - Our Holding Company Structure Means that 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 the section "Description of Notes,"
under the heading "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.
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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 (for our subsidiaries) 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 Nasdaq.
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.
The old notes are eligible for trading in the PORTAL 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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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 pay the
notes, and you might lose all or part of your investment.
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.
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 and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). We use words such as
"anticipate," "believe," "estimate," "expect," "intend," "project" 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 described below. 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.
Risks of Investing in these Notes
Substantial Leverage - Our substantial indebtedness could adversely
affect our financial health and prevent us from fulfilling our
obligations under these notes.
We have now and, after the exchange offer, will continue to have a
significant amount of indebtedness. The following chart shows certain important
credit statistics and is presented assuming we had completed the pending and
completed acquisitions described in this "Prospectus Summary -- Recent
Developments," and the 1998 offering of the old notes, as of the date shown:
Pro Forma
At September 30, 1998
Total indebtedness $ 553,925,000
Stockholders' equity $ 99,605,000
Debt to equity ratio 5.56x
On the assumption that these things had occurred on January 1, 1998,
our earnings would have been inadequate to cover our fixed charges and preferred
stock dividends by $138.0 million for the year ended December 31, 1997, and by
$108.3 million for the nine months ended September 30, 1998. Neither "total
indebtedness" nor "stockholders' equity," as set forth above, includes the
approximately $122.0 million in outstanding Series A Preferred Stock or a $3
million minority interest in one of our subsidiaries.
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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.
Additional Borrowings Available -- Despite current indebtedness levels,
we and our subsidiaries may still be able to incur substantially more
debt. This could further exacerbate the risks described above.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. 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 $175.5 million more after completion of this
offering and all of those borrowings would be effectively senior to the notes.
If new debt is added to our and our subsidiaries' current debt levels, the
related risks that we and they now face could intensify.
Ability to Service Debt -- To service our indebtedness, we will require
a significant amount of cash; our ability to generate cash depends on
many factors beyond our control
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.
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, that currently anticipated cost savings
and operating improvements will be realized on schedule or that 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.
Our Holding Company Structure Means that these Notes are Effectively
Subordinated to Debt of Our Subsidiaries
Only Pegasus Communications Corporation owes payment of theses notes.
None of our subsidiaries have guaranteed them. But we conduct all of our
business operations through subsidiaries. Our subsidiaries have their own debt,
including $240 million of publicly held debt securities and bank credit
facilities under which they could borrow up to $175.5 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 million
of senior notes that we issued in 1997.
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Therefore, while these notes are not subordinated to other debts of
Pegasus Communications Corporation, they effectively rank behind our
subsidiaries' debts.
Our Holding Company Structure Restricts Our Ability to Get Cash from
Our Subsidiaries to Pay These Notes
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.
Financing Change of Control Offer -- We may not have the ability to
raise the funds necessary to finance the change of control offer
required by the indenture.
Upon the occurrence of certain specific kinds of change of control
events, we will be required to offer to repurchase all outstanding notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to make the required repurchase of notes or that
restrictions in our credit facilities will not allow such repurchases. In
addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, would not
constitute a "Change of Control" under the indenture. See "Description of
Notes--Repurchase at the Option of Holders."
In addition, our other publicly held debt and preferred stock, and the
publicly held debt of our subsidiaries, contain change of control provisions
similar to those in these notes. A change of control would require us to offer
to redeem approximately $485 million of securities and could result in early
maturity of all of our bank debt if specific kinds of change of control events
occur.
Fraudulent Conveyance Matters -- Federal and state statutes allow
courts, under specific circumstances, to void guarantees 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. These are described under
"Description of Notes - Subsidiary Guarantees." If our subsidiaries ever
guarantee these notes, the law may limit the value of those guarantees.
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:
o received less than reasonably equivalent value or fair
consideration for the incurrence of such guarantee; or
o was insolvent or rendered insolvent by reason of such incurrence;
or
o was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
o intended to incur, or believed that it would incur, debts beyond
its ability to pay such debts as they mature.
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In addition, any payment by that guarantor pursuant to its guarantee could be
voided and required to be returned to the guarantor, or to a fund for the
benefit of the creditors of the guarantor.
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:
o the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of all of its assets; or
o if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature; or
o it could not pay its debts as they become due.
Risks of Our DBS Business
Satellite and DBS Technology Could Fail or Be Impaired
DBS technology is highly complex and is still evolving. As with any
"high-tech" product or system, it might not function as 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
from the 101(degree) west longitudinal orbital slot. As it was designed to do,
the satellite automatically switched to the on-board backup processor with no
interruption of service to DIRECTV subscribers. Hughes Electronics, which made
the satellite and owns DIRECTV, has announced that it plans to launch a new
satellite in September 1999 to expand DIRECTV channel capacity and provide
additional backup. If the backup processor on the current satellite fails before
the new satellite is operational, other Hughes satellites presently operating at
the 101(degree) west longitudinal orbital slot would continue to transmit
DIRECTV programming, but the service would experience an undetermined reduction
in channel capacity. This could materially adversely affect our operations and
financial performance.
The DIRECTV satellites are supposed to last at least through the year
2007, but any of a number of things could shorten their lives, such as:
o technical failure,
o year 2000 computer problems,
o anti-satellite devices,
o electrostatic storms,
o collision with space debris, and
o acts of war.
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We Depend on DIRECTV and Third Party Programmers for Programming
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.
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.
Future financial reverses at DIRECTV could also affect us.
There Is Some Uncertainty About Our DIRECTV Rights After 2007
Our rights to provide DIRECTV programming do not come directly from
DIRECTV but through an organization called the NRTC -- the National Rural
Telecommunications Cooperative. The NRTC is a cooperative organization whose
members are predominantly rural telephone and utility companies. We are an
"associate" of the NRTC.
The NRTC has an agreement with DIRECTV that allows it to grant
exclusive DIRECTV distribution rights to NRTC members and associates in
designated rural areas of the United States. The NRTC, in turn, has separate
agreements with us and its other members and associates. The NRTC's agreements
with DIRECTV and with us last for the life of the current DIRECTV satellites,
which is expected to be at least through 2007.
The NRTC has told us that its agreement with DIRECTV gives the NRTC a
right of first refusal to get comparable rights if DIRECTV launches new
satellites to replace the existing ones. The NRTC has not told us the details of
this right of first refusal. We expect that its financial terms will have to be
negotiated at the time any new satellites are to be launched. The cost of
obtaining these rights will likely depend on DIRECTV's costs of launching
replacement satellites and on other factors that are difficult to anticipate.
For this reason, we are unable to predict whether, or at what cost, we will be
able to continue in the DIRECTV business after the current satellites are
removed from service.
We Cannot Retransmit the Broadcast Networks' Programming to All Our
Customers
The DBS industry and the major television networks are in a serious
dispute about whether DIRECTV and the other DBS services can carry network
programming. If they cannot, DIRECTV could lose some of its consumer appeal;
this could affect us adversely.
The dispute arises under a federal law called the Satellite Home Viewer
Act. This law allows DBS operators, for a statutory fee, to provide network
programming to subscribers in "unserved areas" but not elsewhere. The concept of
"unserved area" has to do with how well people in the area can receive
over-the-air broadcasts of local network-affiliated stations. The problem is
that there are technical issues and ambiguities in the way the law defines these
areas. This is important to us because our subscribers are predominantly in
rural areas where regular television reception is weak.
In two 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 DBS industry. Other lawsuits have been filed but not decided.
Under the court's order in one of the decided cases, DIRECTV will have to cut
off CBS and Fox programming to ineligible subscribers between February 28, 1999
and April 30, 1999. We do not know how many of these subscribers will cancel
their service entirely as a result. These disconnections will have an adverse
effect on us.
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In addition, we are not providing programming from any of the four
major networks to new customers unless they live in areas that meet the court's
narrow definition of "unserved area." We do not know how many potential new
customers we have lost and will lose because of this.
More court proceedings and appeals are likely. Meanwhile, the FCC has
started a proceeding to clarify the issue by regulation. The FCC may act as
early as February 1, 1999. Whatever the FCC does could also be appealed to the
courts.
We cannot predict how these issues will be resolved, how long it will
take to resolve them, or how seriously they will affect us.
In addition, the Satellite Home Viewer Act is scheduled to expire on
December 31, 1999. If Congress does not renew it, DIRECTV will not be able to
provide network programming even to unserved areas without the consent of the
owners of the programming.
DIRECTV Has Drawbacks to Consumers
DBS has two main drawbacks to consumers.
o Subscribers cannot receive their local TV stations on DBS,
particularly local news and sports. (This will remain true for many
subscribers even if the network programming issues discussed above
are resolved in the DBS industry's favor.) In areas served by cable
television, this puts us at a competitive disadvantage because
cable systems usually carry local stations.
o To receive DBS 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 DBS because cable customers do
not have to buy equipment and cable companies charge lower
installation fees.
There is a Risk of Signal Theft
Signal theft has long been a problem in the cable and DBS 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. If this becomes widespread, our
revenues would suffer.
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
We Depend on Our Network Affiliations For Programming
The television stations that we now own or program are affiliated with
the Fox, WB and UPN television networks. The networks provide substantial
amounts of our stations' programming. Our broadcast operations could suffer
materially if the network programming does not appeal to viewers, or if we lose
our affiliations with these networks for any of a variety of reasons. In that
connection:
o We are in the process of negotiating renewals of the Fox
affiliation agreements for four of our six television markets,
which are currently scheduled to expire on January 30, 1999.
o While WB is permitting us to air its programming on two of the
stations we program, we are still negotiating affiliation
agreements for those stations.
o 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.
If we lose or do not obtain these network affiliations, we could not continue to
carry the network programming. This could affect us materially and adversely.
Also, since WB and UPN are relatively new networks, their long-term
stability is uncertain. If these networks were to stop operating or cut back on
their programming, we would have to acquire new programming for these stations
which could be more expensive to us or less attractive to viewers.
The FCC May Prevent 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
Federal Communications Commission is considering a measure that would prevent us
from doing this.
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 four of our
markets and expect to program a second station under such an agreement in one
more market by 2000.
Our typical local marketing agreement is an agreement with the owner of
a station in which we get the right to sell all advertising time on the station
and keep all advertising revenue in exchange for supplying all programming for
the station and making agreed-upon payments to the station owner. We also have
the option to purchase the station if it becomes legal under FCC rules for us to
do so.
The FCC currently has under consideration a change in its regulations
that would prohibit this practice by treating local marketing agreements such as
ours as if we owned the station. If the proposed change is adopted, 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 us
materially and adversely.
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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. We cannot predict how
this will affect us.
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 Creates a Number
of Uncertainties
All 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. While this should be
positive, 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 We could use the additional channel capacity for ancillary and
supplemental services -- such as delivery of subscription
programming, data services and paging services -- rather than our
current free programming. But if we do this we would have to pay 5%
of our gross revenues from these services to the federal
government.
o The FCC has generally made available much higher power allocations
to digital stations that will replace existing VHF stations
(channels 2 through 13) than digital stations that will replace
existing UHF stations (channels 14 through 69). All of our existing
stations are UHF. This power disparity could put us at a
disadvantage to our VHF competitors.
o Stations using digital television will transmit a better quality
signal compared to conventional stations. In some cases, however,
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, and this could affect us
unfavorably.
o A digital television set will cost the consumer several thousand
dollars, at least initially. We have no way of knowing when these
prices will decrease significantly or when consumers will buy the
new sets. As a result, we do not know when there will be a
significant audience for digital broadcasters.
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Television is a Heavily Regulated Business
Our television business is regulated by the FCC. We need the FCC's
approval to obtain, transfer and renew our broadcast television licenses. We
need these licenses in order to operate our stations. For violations of the
FCC's rules, a station can be fined and, in the case of severe or repeated
violations, a station's license could be taken away by the FCC. These rules also
restrict the ability to sell stock in our company or to sell our television
stations, by limiting the purchase by those who are not U.S. citizens or who
have had certain types of legal problems in the past.
The FCC rules and federal legislation dealing with television
broadcasting are continually under review and change often, as new rules are
adopted, or as existing rules are modified. Some rules, including rules
requiring the broadcast of certain amounts of educational programming directed
to children, can impose costs on our operation of television stations. The FCC
is considering other rules and rule changes which could impose other costs on
the operation of our television stations, including limits on advertising time
and requiring the broadcast of a certain amount of public interest programming.
We cannot be certain of how the FCC will act on any of these matters. Further
changes in the FCC's rules could have an adverse effect on our operation.
Risks of Our Cable Business
We Are Concentrated 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. We decided to sell our New
England cable systems and expand in Puerto Rico because we believe this strategy
has better opportunity for growth. But this geographical concentration also
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 We could be more seriously affected by economic, regulatory and
political events specific to Puerto Rico than if we were more
geographically diversified.
Digital Television
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 Creates a Number of Uncertainties.") Because we have only so much
channel capacity in our cable system, this requirement could hurt our ability to
expand our programming offerings.
We Could 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.
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Cable Is a Heavily Regulated Business
The cable television industry and the provision of local telephone
exchange services are subject to extensive regulation, and the cable and
telecommunications industries are heavily regulated at the federal, state and
local levels. Many aspects of this regulation are currently the subject of
judicial proceedings and administrative or legislative proposals.
Other Risks of Our Business
We Have a History of Substantial Losses; We Expect Them to Continue
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.
We Face Significant Competition; the Competitive Landscape Changes
Constantly
Each of the markets in which we operate is highly competitive. Many of
our competitors have substantially greater resources than we do and may be able
to compete more effectively than we can in our markets. 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.
The Company's DBS business faces competition from other current or
potential multichannel programming distributors, including other DBS operators,
direct to home providers, cable operators, wireless cable operators, internet
and local exchange and long-distance companies, which may be able to offer more
competitive packages or pricing than we or DIRECTV can provide. In addition, the
DBS industry is still evolving and recent or future competitive developments
could adversely affect us. For example, on November 30, 1998, EchoStar
Communications Corporation, a competitor of the Company in the sale of DBS
programming, announced that it had entered into an agreement with The News
Corporation Limited and MCI Telecommunications Corporation/WorldCom providing
for the transfer to EchoStar of the license to operate a high-powered DBS
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, DBS 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 DBS 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.
The Company's TV stations compete for audience share, programming and
advertising revenue with other television stations in their respective markets
and with direct to home providers, including DBS operators, cable operators and
wireless cable operators. They also compete for advertising revenue with other
advertising media, such as newspapers, radio, magazines, outdoor advertising,
transit advertising, yellow page directories, direct mail, internet and local
cable systems.
The Company's cable systems face competition from television stations,
satellite master antennae television systems, wireless cable systems,
direct-to-home providers, DBS systems and open video systems.
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Our Acquisition Strategy Creates a Variety of Risks
We have grown primarily through acquisitions. We plan to continue with
our acquisition program, particularly in the DBS business. Some of the risks in
this strategy are:
o We may not be able to keep making acquisitions on attractive terms.
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 DBS territories.
o Our acquisitions normally require third party consents that we do
not control. These include the consents of DIRECTV and the NRTC for
DBS 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 have been able to get these consents in the
past, but this could change, or become more difficult, or require
us to incur additional costs, for reasons we cannot predict.
o 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.
o If we pay for an acquisition with our stock, the acquisition could
dilute existing stockholders, depending on its terms.
o If we finance an acquisition by borrowing, this would increase our
already high leverage and interest expense.
We May Be Adversely Affected By the Year 2000 Problem
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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RATIO OF EARNINGS TO FIXED CHARGES
Earnings were inadequate to cover combined fixed charges and preferred
stock dividends by approximately $4.8 million, $4.9 million, $8.1 million, $9.8
million, $29.6 million, $15.9 million and $49.3 million for the years ended
December 31, 1993, 1994, 1995, 1996 and 1997 and for the nine months ended
September 30, 1997 and 1998, respectively. Assuming the pending and completed
acquisitions described in "Prospectus Summary -- Recent 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
$138.0 million for the year ended December 31, 1997, and by $108.3 million for
the nine months ended September 30, 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 purchaser's 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 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 the trustee 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 Rule 144A of the SEC, 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.
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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.
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 DTC, 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
o an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act which is a member of one of the
recognized signature guarantee programs identified in the letter of
transmittal.
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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 DTC have confirmed that any financial
institution that is a participant in DTC's system may tender old notes through
DTC'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
Regulation S-K of the SEC; and
o is not our "affiliate," as defined in Rule 405 of the SEC.
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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 DTC, such old notes will be credited to an account maintained
with DTC.
Book-Entry Transfer
The exchange agent will request to establish an account for the old
notes at DTC. Any financial institution that is a participant in DTC'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 DTC. 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.
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Withdrawal of Tenders
Except as this prospectus otherwise provides, holders may withdraw
tenders of old notes at any time before the exchange offer ends.
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 offers 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 any of these things may be there, 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. Accordingly, 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;
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we are obligated to file with the SEC a shelf registration statement to cover
resales of the old notes by the holders thereof who satisfy certain conditions.
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:
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 Rule
144 under the Act.
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.
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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);
o to provide, upon the request of any holder of a transfer-restricted
old note, the information required by Rule 144A(d)(4) under the
Securities Act to permit resales of such old notes under 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 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 of 1986, as amended,
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 IRS. 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
"Company" refers only to Pegasus Communications Corporation and not to any of
its Subsidiaries.
The Company issued the old notes and will issue the new notes under an
Indenture (the "Indenture") between itself and First Union National Bank, as
trustee (the "Trustee"). The terms of the notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939.
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 the Company and will rank equally in right of payment with all
senior Indebtedness of the Company.
Substantially all operations of the Company are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the notes.
On the date of issuance of the new notes, none of the Company's Subsidiaries
will guarantee the notes. However, the Company's 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 the Company to receive assets of any of its Subsidiaries that do
not guarantee the notes will be effectively subordinated to the claims of that
Subsidiary's creditors, including trade creditors.
Principal, Maturity and Interest
The total principal amount of the notes will be a maximum of $100
million. The Company 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 the Company, the Company 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 the Company maintained for such purpose within the
City and State of New York. At the option of the Company, payment of interest
and Liquidated Damages, if any, may be made by check mailed to the Holders of
the notes. Until otherwise designated by the Company, the Company's office or
agency in New York will be the office of the Trustee maintained for such
purpose.
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Optional Redemption
Until November 30, 2001, the Company 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; provided that
o at least $65 million in aggregate principal amount of notes remains
outstanding immediately after the occurrence of such redemption,
excluding notes held by the Company and its Subsidiaries; and
o each redemption must occur 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 the Company's option before December 1, 2002. After December 1,
2002, the Company may redeem all of as a part of these notes upon not less than
30 nor more than 60 days' notice at the redemption prices specified below
(expressed as percentages of the principal amount), plus accrued and unpaid
interest and any Liquidated Damages, to the date of redemption, if redeemed
during the twelve-month period beginning on December 1 of the years indicated
below:
Year Redemption Price
---- ----------------
2002 104.875%
2003 103.250%
2004 101.625%
2005 and thereafter 100.000%
Mandatory Redemption
The Company is not required to make mandatory redemption or sinking
fund payments with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of notes will have the right
to require the Company to repurchase all or any part equal to $1,000 or an
integral multiple thereof of such Holder's notes pursuant to the "Change of
Control Offer." In a Change of Control Offer the Company 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, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase notes under the procedures required by the Indenture and described
in such notice. The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control.
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On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent (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 the Trustee the notes so
accepted together with an Officers' Certificate stating the
aggregate principal amount of notes or portions being purchased by
the Company.
The Paying Agent will promptly mail to each Holder of notes so tendered
the Change of Control Payment for such notes, and the Trustee will promptly
authenticate and mail or cause to be transferred by book entry to each Holder a
new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The provisions described above will be applicable whether or not any
other provisions of the Indenture are applicable. Except as described above with
respect to a Change of Control, the Indenture does not contain provisions that
permit the Holders of the notes to require that the Company repurchase or redeem
the notes in the event of a takeover, recapitalization or similar transaction.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Restricted Subsidiaries taken as a
whole. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of notes to require
the Company to repurchase such notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to another Person or group may
be uncertain.
The publicly held debt securities and bank credit facilities of the
Company's Subsidiaries restrict the Company's Subsidiaries from paying dividends
or making other distributions to the Company. Thus, in the event a Change of
Control occurs, the Company could seek the consent of its Subsidiaries' lenders
to provide funds to the Company for the purchase of the notes or could attempt
to refinance the borrowings that contain such restrictions. If the Company does
not obtain such a consent or repay such borrowings, the Company will likely not
have the financial resources to purchase the notes and such Subsidiaries will be
restricted in paying dividends to the Company for the purpose of such purchase.
In any event, there can be no assurance that the Company's Subsidiaries will
have the resources available to make any such dividend or distribution. In
addition, any future credit agreements or other agreements relating to
Indebtedness to which the Company becomes a party may prohibit the Company from
purchasing any notes before their maturity, and may also provide that certain
change of control events with respect to the Company would constitute a default
thereunder. In the event a Change of Control occurs at a time when the Company
is prohibited from purchasing notes, the Company could seek the consent of its
lenders to the purchase of notes or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from purchasing notes.
In such case, the Company's failure to purchase tendered notes would constitute
an Event of Default under the Indenture.
The Company will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
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Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or Equity Interests
issued or sold or otherwise disposed of;
(2) such fair market value is determined by the Company's 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 the Company
or such 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 the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes
thereto), of the Company or any Restricted Subsidiary (other
than liabilities that are by their terms subordinated to the
notes or any guarantee thereof) that are assumed by the
transferee of any such assets; and
(b) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee
that are contemporaneously (subject to ordinary settlement
periods) converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received).
Notwithstanding the above, the Company and its Restricted Subsidiaries
may engage in Asset Swaps which shall not constitute Asset Sales for purposes of
this covenant; provided that, immediately after giving effect to such Asset
Swap, the Company would be permitted to incur at least $1 of additional
Indebtedness pursuant to the Indebtedness to Adjusted Operating Cash Flow Ratio
set forth in the first paragraph of the covenant described under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock."
Within 180 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or the applicable Restricted Subsidiary may apply such Net
Proceeds:
(1) to permanently reduce Indebtedness outstanding pursuant to any
Bank Facility (and to permanently reduce the commitments
thereunder by a corresponding amount);
(2) to permanently reduce Indebtedness of any of the Company's
Restricted Subsidiaries; or
(3) to the acquisition by the Company or any of its Restricted
Subsidiaries of another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each
case, in a Permitted Business; provided, however, that if the
Company or any Restricted Subsidiary enters into a legally binding
agreement with an entity that is not an Affiliate of the Company
to reinvest such Net Proceeds in accordance with this clause (3)
within 180 days after the receipt thereof, the provisions of this
covenant will be satisfied so long as such binding agreement is
consummated within one year after the receipt of such Net
Proceeds.
If any such legally binding agreement to reinvest such Net Proceeds is
ended, then the Company may, within 360 days of such Asset Sale, apply such Net
Proceeds as provided in clauses (1), (2) or (3) above (without regard to the
proviso contained in clause (3) above).
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Pending the final application of any such Net Proceeds, the Company or
the applicable Restricted Subsidiary may temporarily reduce Indebtedness
pursuant to any Bank Facility or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. A reduction of Indebtedness
pursuant to any Bank Facility is not "permanent" for purposes of clause (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, the Company will be required to make an offer to all Holders of notes
and the Holders of Pari Passu Debt, to the extent required by the terms thereof
to purchase the maximum principal amount of notes and Pari Passu Debt that may
be purchased out of the excess proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus, in each case, accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture or the agreements
governing Pari Passu Debt, as applicable; provided, however, that the Company
may only purchase Pari Passu Debt in an Asset Sale Offer that was issued
pursuant to an indenture having a provision substantially similar to the Asset
Sale Offer provision contained in the Indenture.
To the extent that the aggregate amount of notes and Pari Passu Debt
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining excess proceeds for general corporate purposes. If
the aggregate principal amount of notes and Pari Passu Debt surrendered exceeds
the amount of Excess Proceeds, the Trustee shall select the notes and Pari Passu
Debt to be purchased on a pro rata basis, based upon the principal amount
thereof surrendered in such Asset Sale Offer. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the
Trustee 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 the Trustee 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 thereof will be issued in the name of the Holder thereof upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on notes or portions of them called for redemption.
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Certain Covenants
Restricted Payments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly,
(A) declare or pay any dividend or make any other payment or
distribution on account of the Company's Equity Interests
(including, without limitation, any payment in connection with any
merger or consolidation involving the Company) or on account of
any Qualified Subsidiary Stock or make any payment or distribution
(other than compensation paid to, or reimbursement of expenses of,
employees in the ordinary course of business) to or for the
benefit of the direct or indirect holders of the Company's Equity
Interests or the direct or indirect holders of any Qualified
Subsidiary Stock in their capacities as such (other than dividends
or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or additional shares of such
Qualified Subsidiary Stock);
(B) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent
of the Company (other than any such Equity Interests owned by the
Company or any of its Restricted Subsidiaries);
(C) 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;
(D) forgive any loan or advance to or other obligation of any
Affiliate of the Company (other than a loan or advance to or other
obligations of a Wholly Owned Restricted Subsidiary of the
Company) which at the time it was made was not a Restricted
Payment; or
(E) make any Restricted Investment
(all such payments and other actions set forth in clauses (A) through (E) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and immediately after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would be permitted to incur $1 of additional
Indebtedness pursuant to the Indebtedness to Adjusted Operating
Cash Flow Ratio described in the first paragraph of the covenant
described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock;" and
(3) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted
Subsidiaries after the Closing Date (excluding Restricted Payments
permitted by clauses (2) and (3) of the next succeeding
paragraph), is less than the sum of, without duplication:
(a) an amount equal to the Cumulative Operating Cash Flow for the
period (taken as one accounting period) from the beginning of
the first full month commencing after the Closing Date to the
end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time
of such Restricted Payment (the "Basket Period") less 1.4
times the Company's Cumulative Total Interest Expense for the
Basket Period, plus
(b) 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 (1) by the Company as capital contributions to
the Company (other than from a Subsidiary) or (2) from the
sale by the Company (other than to a Subsidiary) of its Equity
Interests (other than Disqualified Stock), plus
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(c) to the extent that any Restricted Investment that was made
after the Closing Date is sold for cash or otherwise
liquidated or repaid for cash, the Net Proceeds received by
the Company or a Wholly Owned Restricted Subsidiary of the
Company upon the sale, liquidation or repayment of such
Restricted Investment, plus
(d) to the extent that any Unrestricted Subsidiary is designated
by the Company as a Restricted Subsidiary, an amount equal to
the fair market value of such Investment at the time of such
designation, plus
(e) 100% of any cash dividends and other cash distributions
received by the Company from an Unrestricted Subsidiary, plus
(f) $2.5 million.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement or other acquisition of any
Equity Interests or subordinated Indebtedness of the Company in
exchange for, or out of the net proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net proceeds that are
used for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (3)(b) of the preceding
paragraph;
(3) the defeasance, redemption or repurchase of Indebtedness with the
proceeds of a substantially concurrent issuance of Permitted
Refinancing Debt in accordance with the provisions of the covenant
described under the caption "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock;"
(4) the payment by the Company of advances under the Split Dollar
Agreement in an amount not to exceed $250,000 in any four-quarter
period;
(5) the repurchase or redemption from employees of the Company and its
Subsidiaries (other than the Principal) of Capital Stock of the
Company in an amount not to exceed an aggregate of $5.0 million
since the date of the Indenture;
(6) the payment of dividends on the Series A Preferred Stock in
accordance with the terms thereof as in effect on the Closing
Date; provided, however, that cash dividends may not be paid on
the Series A Preferred Stock pursuant to this clause before July
1, 2002;
(7) the issuance of Subordinated Exchange Notes in exchange for shares
of the Series A Preferred Stock; provided that such issuance is
permitted by the covenant described below under the caption "--
Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock";
(8) If the Company elects to issue Subordinated Exchange Notes in
exchange for Series A Preferred Stock, cash payments made in lieu
of the issuance of Subordinated Exchange Notes having a face
amount less than $1,000 and any cash payments representing accrued
and unpaid dividends in respect thereof, not to exceed $100,000 in
the aggregate in any fiscal year; and
(9) cash payments made in lieu of the issuance of additional
Subordinated Exchange Notes having a face amount less than $1,000
and any cash payments representing accrued and unpaid interest in
respect thereof, not to exceed $100,000 in the aggregate in any
fiscal year.
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The amount of all Restricted Payments other than cash shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or the applicable Restricted
Subsidiary, net of any liabilities proposed to be assumed by the transferee and
novated pursuant to a written agreement releasing the Company and its
Subsidiaries. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed, which calculations may be
based upon the Company's latest available financial statements.
The Board of Directors may designate any Restricted Subsidiary an
Unrestricted Subsidiary if such designation would not cause a Default or an
Event of Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries in the Subsidiary so
designated shall be deemed to be Restricted Payments at the time of such
designation valued as set forth below and shall reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments shall be deemed to constitute Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation shall only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary would
otherwise meet the definition of an Unrestricted Subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and shall
not, and shall not permit any Subsidiary Guarantor to, issue any Disqualified
Stock and shall not permit any of its Restricted Subsidiaries that are not
Subsidiary Guarantors to issue any shares of preferred stock (other than
Qualified Subsidiary Stock); provided, however, that the Company or any
Restricted Subsidiary may incur Indebtedness (including Acquired Debt) or issue
shares of preferred stock (including Disqualified Stock) if, in each case, (a)
the Company's Indebtedness to Adjusted Operating Cash Flow Ratio as of the date
on which such Indebtedness is incurred or such preferred stock or Disqualified
Stock is issued would have been 7.0 to 1 or less, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, as of the date of such
calculation and (b) no Default or Event of Default would occur as a consequence
thereof.
The Company will not, and will not permit any Subsidiary Guarantor to,
incur any Indebtedness that is contractually subordinated to any other
Indebtedness of the Company or of such Subsidiary Guarantor, unless such
Indebtedness is also contractually subordinated to the notes or the Subsidiary
Guarantee of such Subsidiary Guarantor, on substantially identical terms;
provided, however, that no Indebtedness shall be deemed to be contractually
subordinated to any other Indebtedness solely by virtue of being unsecured.
The foregoing provisions shall not apply to (collectively, "Permitted
Debt"):
(1) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt or the issuance by such Unrestricted
Subsidiaries of preferred stock; provided, however, that if any
such Indebtedness ceases to be Non-Recourse Debt of an
Unrestricted Subsidiary or any such preferred stock becomes
preferred stock (other than Qualified Subsidiary Stock) of a
Restricted Subsidiary, as the case may be, such event shall be
deemed to constitute an incurrence of Indebtedness by, or an
issuance of preferred stock (other than Qualified Subsidiary
Stock) of, a Restricted Subsidiary of the Company;
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(2) the Company's or any of its Restricted Subsidiaries' incurring
Indebtedness under one or more Bank Facilities if the aggregate
principal amount at any time outstanding incurred pursuant to this
clause does not exceed $50 million;
(3) the Company's and its Restricted Subsidiaries' incurrence of the
Existing Indebtedness;
(4) the Company's 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) the Company or any of its Restricted Subsidiaries incurring
intercompany Indebtedness between or among the Company and any of
its Wholly Owned Restricted Subsidiaries; provided, however, that:
(a) if the Company or a Subsidiary Guarantor is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated
to the prior payment in full in cash of all obligations with
respect to the notes or the Subsidiary Guarantee of such
Subsidiary Guarantor; and
(b) any subsequent issuance or transfer of Equity Interests that
result in any such Indebtedness being held by a Person other
than the Company or a Wholly Owned Restricted Subsidiary of
the Company shall be deemed, to constitute an incurrence of
such Indebtedness by the Company or such Restricted
Subsidiary; and
(c) any sale or other transfer of such Indebtedness to a Person
that is not either the Company or a Wholly Owned Restricted
Subsidiary of the Company shall be deemed, to constitute an
incurrence of such Indebtedness by the Company or such
Restricted Subsidiary;
(7) the Company 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
the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $7.5 million at any time
outstanding, including all Permitted Refinancing Debt incurred
pursuant to clause (8) below to refund, replace or refinance any
Indebtedness incurred pursuant to this clause (7);
(8) the Company 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) the
Indenture permitted;
(9) the Company or any of its 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 pursuant to clause (8) above to refund, replace or
refinance any Indebtedness incurred pursuant to this clause (9),
not to exceed $7.5 million; and
(10) the Company or any Restricted Subsidiary Guarantee of Indebtedness
of the Company or a Subsidiary of the Company that another
provision of this covenant permits.
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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, the Company shall, in its sole discretion, classify such
item of Indebtedness in any manner that complies with this covenant and may from
time to time reclassify such item of Indebtedness in any manner in which such
item could be incurred at the time of such reclassification. For purposes of
this paragraph, "Indebtedness" includes Disqualified Stock and preferred stock
of Subsidiaries. Accrual of interest and the accretion of accreted value will
not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
Limitation of Certain Subsidiary Indebtedness and Preferred Stock
The Company will not, and will not permit any of its Restricted
Subsidiaries to incur any Indebtedness (other than Eligible Indebtedness) or to
issue any Disqualified Stock; provided that any Restricted Subsidiary that is a
Subsidiary Guarantor may incur Indebtedness (whether or not such Indebtedness is
Eligible Indebtedness) or issue Disqualified Stock if such incurrence or
issuance is permitted under the covenant described above under the caption
"-Incurrence of Indebtedness and Issuance of Preferred Stock," provided further
that, notwithstanding the immediately preceding sentence, in no event shall the
Company permit any of its Restricted Subsidiaries to incur any Indebtedness
represented by senior secured bonds or other senior secured securities, unless
such Subsidiary is a Subsidiary Guarantor and its Subsidiary Guarantee is
secured on an equal and ratable basis with such other senior secured bonds or
senior secured securities.
Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired, or any income or profits
therefrom, or assign or convey any right to receive income therefrom, except
Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions to the Company 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 the Company or any of
its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
However, the preceding restriction 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 the Company; provided, that, any
such Indebtedness permits the payment of cash dividends to the
Company in an amount sufficient to enable the Company to make
payments of:
(A) interest required to be paid in respect of the notes;
(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 thereof (except during the
continuance of a default or event of default under such other
Indebtedness);
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(2) Existing Indebtedness or the PM&C Credit Facility, each as in
effect on the Closing Date;
(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 the Company or any of its Restricted Subsidiaries as
in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person and its Subsidiaries,
or the property or assets of the Person and its Subsidiaries, so
acquired;
(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
The Company will not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless:
(1) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if
other than the Company) or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation
or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the Obligations of
the Company under the notes, the Indenture and the Registration
Rights Agreement pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) the Company or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will, at the time of such
transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Indebtedness to Adjusted
Operating Cash Flow Ratio set forth in the first paragraph of the
covenant described under the caption "-- Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(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
The Company will not, and will not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (1) above and that
such Affiliate Transaction has been approved by a majority of
the disinterested members of the Board of Directors and a
majority of the Independent Directors and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $5.0 million, an opinion as to the fairness to the
Company or such Restricted Subsidiary of such Affiliate
Transaction from a financial point of view issued by an
investment banking firm of national standing; provided that
the Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in any Affiliate
Transaction involving aggregate consideration in excess of
$1.0 million at any time that there is not at least one
Independent Director on the Company's Board of Directors.
The following will not be Affiliate Transactions and not subject to the
restrictions just described:
o any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such
Restricted Subsidiary;
o transactions between or among the Company 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, provided that such dividends are paid on a pro
rata basis and the additional Subordinated Exchange Notes are
issued in accordance with the Certificate of Designation; and
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.
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Limitation on Issuances and Sales of Capital Stock of Wholly Owned
Restricted Subsidiaries
The Company will not, and will not permit any Wholly Owned Restricted
Subsidiary of the Company to, transfer, convey, sell or otherwise dispose of any
Capital Stock of any Wholly Owned Restricted Subsidiary of the Company to any
Person (other than the Company or a Wholly Owned Restricted Subsidiary of the
Company), unless:
(1) such 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 such transfer, conveyance, sale, lease
or other disposition are applied in accordance with the covenant
described under the caption "-- Repurchase at the Option of
Holders -- Asset Sales."
In addition, the Company shall not permit any Wholly Owned Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Restricted
Subsidiary of the Company.
Subsidiary Guarantees
The Company will not permit any Restricted Subsidiary to guarantee the
payment of any Indebtedness of the Company or any Indebtedness of any Subsidiary
Guarantor (in each case, the "Guaranteed Debt;" the Company or the Subsidiary
Guarantor that is primarily liable on the Guaranteed Debt being the "Obligor")
unless:
(1) if such Restricted Subsidiary is not a Subsidiary Guarantor, such
Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture in form and substance
reasonably satisfactory to the Trustee providing for a guarantee
(a "Subsidiary Guarantee") of payment of the notes by such
Restricted Subsidiary;
(2) if the Guaranteed Debt is by its express terms subordinated in
right of payment to the notes or the Subsidiary Guarantee of such
Obligor, any such guarantee of such Subsidiary Guarantor with
respect to the Guaranteed Debt shall be subordinated in right of
payment to such Subsidiary Guarantor's Subsidiary Guarantee with
respect to the notes substantially to the same extent as the
Guaranteed Debt is subordinated to the notes or the Subsidiary
Guarantee of such Obligor;
(3) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Subsidiary as a result
of any payment by such Restricted Subsidiary under its Subsidiary
Guarantee; and
(4) such Restricted Subsidiary shall deliver to the Trustee an opinion
of counsel to the effect that:
(A) such Subsidiary Guarantee of the notes has been duly executed
and authorized; and
(B) such Subsidiary Guarantee of the notes constitutes a valid,
binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including,
without limitation, all laws relating to fraudulent transfers)
and except insofar as enforcement thereof is subject to
general principles of equity.
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No Subsidiary Guarantor may consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Subsidiary
Guarantor unless:
(1) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other
than such Subsidiary Guarantor) assumes all the obligations of
such Subsidiary Guarantor pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the Trustee, under
the notes, the Indenture and the Registration Rights Agreement;
(2) immediately after giving effect to such transaction no Default or
Event of Default exists; and
(3) the Company would be permitted to incur $1.00 of additional
Indebtedness pursuant to the Indebtedness to Adjusted Operating
Cash Flow Ratio described in the first paragraph of the covenant
described above under the caption "-Incurrence of Indebtedness and
Issuance of Preferred Stock."
In the event of a sale or other disposition of all of the assets of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or
other disposition of all of the capital stock of any Subsidiary Guarantor, then
such Subsidiary Guarantor (in the event of a sale or other disposition, by way
of such a merger, consolidation or otherwise, of all the capital stock of such
Subsidiary Guarantor or the corporation acquiring the property (in the event of
a sale or other disposition of all of the assets of such Subsidiary Guarantor)
will be released and relieved of any obligation under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other "-- Repurchase at Option of
Holders -- Asset Sales."
Any Subsidiary Guarantor that is designated as an Unrestricted
Subsidiary in accordance with the terms of the Indenture will be released and
relieved of its obligations under its Subsidiary Guarantee for so long as such
Subsidiary is so designated.
No Amendment to Subordination Provisions
Without the consent of each Holder of notes outstanding, the Company
will not amend, modify or alter the Subordinated Exchange Note Indenture in any
way that will:
(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 the
Company is required to offer to purchase such Subordinated
Exchange Notes in a manner that would be adverse to any Holder of
notes; or
(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, the Company 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 the Company were required to file such Forms,
including "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by the Company's
certified independent accountants; and
(2) all current reports that would be required to be filed with the
SEC on Form 8-K if the Company 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, the Company will file
a copy of all such 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 such a filing) and make such information available to securities
analysts and prospective investors upon request.
In addition to the financial information required by the Exchange Act,
each such quarterly and annual report shall be required to contain "summarized
financial information" (as defined in Rule 1-02(aa)(1) of Regulation S-X under
the Exchange Act) showing Adjusted Operating Cash Flow for the Company and its
Restricted Subsidiaries, on a consolidated basis, where Adjusted Operating Cash
Flow for the Company is calculated in a manner consistent with the manner
described under the definition of "Adjusted Operating Cash Flow" contained
herein. The summarized financial information required pursuant to the preceding
sentence may, at the election of the Company, be included in the footnotes to
audited consolidated financial statements or unaudited quarterly financial
statements of the Company and will be as of the same dates and for the same
periods as the consolidated financial statements of the Company and its
Subsidiaries required pursuant to the Exchange Act. In addition, the Company has
agreed that, for so long as any notes remain outstanding, it will furnish to the
holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Events of Default and Remedies
Each of the following constitutes an Event of Default:
(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 the Company or any Subsidiary to comply with the
provisions described under the captions "-- Repurchase at the
Option of Holders -- Change of Control," "-- Repurchase at the
Option of Holders -- Asset Sales," "-- Certain Covenants --
Restricted Payments, "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock" or "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets;"
(4) failure by the Company or any Subsidiary for 60 days after notice
to comply with any of its other agreements in the Indenture or the
notes;
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(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries), whether such
Indebtedness or guarantee now exists, or shall be created
hereafter, which default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness before the expiration of the
grace period provided in such Indebtedness on the date of such
default (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness before its
express maturity and, in each case, the principal amount of
such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(6) failure by the Company 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 the
Company, any Restricted Subsidiary that would constitute a
Significant Subsidiary or any group of Restricted Subsidiaries
that, taken together, would constitute a Significant Subsidiary;
and
(8) the termination of any Subsidiary Guarantee for any reason not
permitted by the Indenture, or the denial by any Subsidiary
Guarantor or any Person acting on behalf of any Subsidiary
Guarantor of such Subsidiary Guarantor's obligations under its
respective Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding notes may
declare all the notes to be due and payable immediately. Upon such declaration,
the principal of, premium, if any, and accrued and unpaid interest and
Liquidated Damages, if any, on the notes shall be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, any Restricted Subsidiary that would constitute a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding notes will become due and
payable without further action or notice. Holders of the notes may not enforce
the Indenture or the notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest or Liquidated Damages, if any) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the notes. If an Event of Default occurs before December 1, 2002
by reason of any willful action or inaction taken or not taken by or on behalf
of the Company with the intention of avoiding the prohibition on redemption of
the notes 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 the law permits.
The Holders of a majority in aggregate principal amount of the notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of principal, interest or premium or Liquidated Damages, if any, on the
notes.
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The Company must deliver to the Trustee annually a statement regarding
compliance with the Indenture. Upon becoming aware of any Default or Event of
Default, the Company must deliver to the Trustee a statement specifying such
Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company or the Subsidiary Guarantors under the notes, the
Subsidiary Guarantees or the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of notes by
accepting a note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the SEC that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding notes and have each
Subsidiary Guarantor's obligation discharged with respect to its Subsidiary
Guarantee ("Legal Defeasance") except for:
(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) the Company's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated,
destroyed, lost or stolen notes and the maintenance of an office
or agency for payment and to hold money for security payments held
in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company and each Subsidiary Guarantor released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the notes.
To exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the notes, cash in United States
Dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to
pay the principal of, interest and premium and Liquidated Damages,
if any, on the outstanding notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company
must specify whether the notes are being defeased to maturity or
to a particular redemption date;
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(2) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that:
(A) the Company has received from, or 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, the Company shall have
delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding notes will not recognize income, gain
or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred;
(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 the Company);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(6) the Company must have delivered to the Trustee 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 and assuming no intervening
bankruptcy of the Company between the date of deposit and the 91st
day following the deposit and assuming no Holder of notes is an
insider of the Company, after the 91st day following the deposit,
the trust funds will not be subject to the effects of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally under any applicable United
States or state law;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the
intent of preferring the Holders of notes over the other creditors
of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any note selected for redemption. Also, the Company is not required to transfer
or exchange any note for a period of 15 days before a selection of notes to be
redeemed.
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The registered Holder of a note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture, the notes or the Subsidiary Guarantees may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes),
and any existing default or compliance with any provision of the Indenture or
the notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding notes (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any notes held by a non-consenting Holder):
(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");
(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.
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Notwithstanding the preceding, without the consent of any Holder of
notes, the Company, a Subsidiary Guarantor (with respect to a Subsidiary
Guarantee or the Indenture to which it is a party) and the Trustee may amend or
supplement the Indenture, the notes or the Subsidiary Guarantees:
(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 the Company's 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 the Trustee
If the Trustee becomes a creditor of the Company, 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. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the 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 the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
Book-Entry, Delivery and Form
Depository Procedures
The following description of the operations and procedures of DTC,
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. The
Company takes no responsibility for these operations and procedures and urges
investors to contact the system or their participants directly to discuss these
matters.
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
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DTC has also advised the Company that, pursuant to procedures
established by it:
o upon deposit of the Global Notes, DTC 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 such interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interest in the Global
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 DTC or its nominee will be payable to DTC in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently,
neither the Company, the Trustee nor any agent of the Company or the Trustee has
or will have any responsibility or liability for:
o any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Notes; or
o any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants. DTC has advised
the Company that its current practice, upon receipt of any payment
in respect of securities such as the notes (including principal
and interest), is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in the principal amount
of beneficial interest in the relevant security as shown on the
records of DTC unless DTC has reason to believe it will not
receive payment on such payment date.
Payments by the Participants and the Indirect Participants to the
beneficial owners of notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Trustee or
the Company. Neither the Company nor the Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the
notes, and the Company and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants,
interest in the Global Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will, therefore, settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its Participants. See "-- Same Day
Settlement and Payment."
Subject to the transfer restrictions set forth under "Notice to
Investors," transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same day funds, and transfers
between participants in Euroclear and Cedel will be effected in the ordinary way
in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes described herein, cross-market transfers between the Participants in DTC,
on the one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
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DTC has advised the Company that it will take any action permitted to
be taken by a Holder of notes only at the direction of one or more Participants
to whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the notes, DTC reserves the right
to exchange the Global Notes for legended notes in certificated form, and to
distribute such notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Notes among
Participants in DTC, Euroclear and Cedel, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee nor any of their
respective agents will have any responsibility for the performance by DTC,
Euroclear or Cedel or their respective participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) DTC notifies the Company that it is unwilling or unable to
continue as depositary for the Global Notes and the Company
thereupon fails to appoint a successor depositary, or
(2) DTC has ceased to be a clearing agency registered under the
Exchange Act;
(3) the Company, at its option, notifies the Trustee 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 the
Trustee by or on behalf of DTC 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 the Company
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 the Trustee
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)
be made by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. With respect to notes in certificated form,
the Company will make all payments of principal, premium, if any, interest and
Liquidated Damages, if any, by wire transfer of immediately available funds to
the accounts specified by the Holders thereof or, if no such account is
specified, by mailing a check to each such Holder's registered address. The
notes represented by the Global Notes are expected to trade DTC's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
notes will, therefore, be required by the Depositary to be settled in
immediately available funds. The Company expects that secondary trading in any
certificated notes will also be settled in immediately available funds.
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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 DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Company 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 DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"1997 Indenture" means the indenture, dated as of October 21, 1997,
between the Company and First Union National Bank, as trustee, governing the
terms of the 1997 Notes.
"1997 Notes" means the Company's 9 5/8% Senior Notes due 2005.
"1997 Notes Subsidiary Guarantees" means the guarantees of the
Company's payment obligations under the 1997 Indenture and the 1997 Notes, if
and when executed by the Subsidiaries of the Company pursuant to 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 such Person and its Restricted Subsidiaries less DBS Cash Flow for the
most recent four-quarter period plus DBS Cash Flow for the most recent quarterly
period, multiplied by four.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
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"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets
(including, without limitation, by way of a sale and leaseback)
other than in the ordinary course of business consistent with past
practices (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole will be governed by
the provisions described above under the caption "-- Repurchase at
the Option of Holders -- Change of Control" and/or the provisions
described above under the caption "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets" and not by the provision of the
Asset Sale covenant); and
(2) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's
Restricted Subsidiaries, in the case of either clause (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.
Notwithstanding the foregoing, the following transactions will not be
deemed to be Asset Sales:
(1) a transfer of assets by the Company to a Wholly Owned Restricted
Subsidiary of the Company or by a Wholly Owned Restricted
Subsidiary of the Company to the Company or to another Wholly
Owned Restricted Subsidiary of the Company;
(2) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary of the Company to the Company or to another Wholly
Owned Restricted Subsidiary of the Company; and
(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 the Company or a Restricted
Subsidiary of the Company 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 pursuant to Section 1031 of the Code or any
similar or successor provision of the Code.
"Bank Facilities" means, with respect to the Company or any of its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the sale of
receivables to such lenders or to special purpose entities formed to borrow from
such lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
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"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited);
and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"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 Communications
Corporation.
"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
the Company and its Restricted Subsidiaries taken as a whole to
any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principal or his Related Parties;
(2) the adoption of a plan relating to the liquidation or dissolution
of the Company;
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(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is
that:
(A) any "person" (as defined above) becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the
happening of an event or otherwise), directly or indirectly,
of more of the Voting Stock of the Company (measured by voting
power rather than number of shares) than is at the time
beneficially owned (as defined above) by the Principal and his
Related Parties in the aggregate;
(B) the Principal and his Related Parties collectively cease to
beneficially own (as defined above) Voting Stock of the
Company having at least 30% of the combined voting power of
all classes of Voting Stock of the Company then outstanding;
or
(C) the Principal and his Affiliates acquire, in the aggregate,
beneficial ownership (as defined above) of more than 66 2/3%
of the shares of Class A Common Stock at the time outstanding
or (iv) the first day on which a majority of the members of
the Board of Directors of the Company are not Continuing
Directors.
"Closing Date" means 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 GAAP; 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 the Company or one of its
Subsidiaries.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who was a member of such Board
of Directors on the Closing Date or was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"Cumulative Operating Cash Flow" means, as of any date of
determination, Operating Cash Flow for the Company and its Restricted
Subsidiaries for the period (taken as one accounting period) from the beginning
of the first full month commencing after the Closing Date to the end of the most
recently ended fiscal quarter for which internal financial statements are
available at such date of determination, plus all cash dividends received by the
Company or a Wholly Owned Restricted Subsidiary of the Company from any
Unrestricted Subsidiary of the Company or Wholly Owned Restricted Subsidiary of
the Company to the extent that such dividends are not included in the
calculation of permitted Restricted Payments under 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 the Company
and its Restricted Subsidiaries, as of any date of determination, Total Interest
Expense for the period (taken as one accounting period) from the beginning of
the first full fiscal month commencing after the Closing Date to the end of the
most recently ended fiscal quarter for which internal financial statements are
available at such date of determination.
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"DBS Cash Flow" means income from operations (before depreciation,
amortization and Non-Cash Incentive Compensation to the extent deducted in
arriving at income from operations) for the Satellite Segment determined on a
basis consistent with the segment data contained in the Company's consolidated
audited financial statements.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the Holder thereof, in whole or in part, on or 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."
"DTS 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.
"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
pursuant to Rule 144A under the Securities Act).
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Credit Facilities" means the DTS Credit Facility and the PM&C
Credit Facility.
"Existing Indebtedness" means all Indebtedness of the Company 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 the Company (including a majority of the Independent Directors
thereof) and evidenced by a board resolution and (b) equal to or in excess of
$5.0 million, the fair market value of such assets or proceeds as determined by
an investment banking firm of national standing; provided that the fair market
value of the assets purchased in an arm's-length transaction by an Affiliate of
the Company (other than a Subsidiary) from a third party that is not also an
Affiliate of the Company or such purchaser and contributed to the Company within
five Business Days of the consummation of the acquisition of such assets by such
Affiliate shall be deemed to be the aggregate consideration paid by such
Affiliate (which may include the fair market value of any non-cash consideration
to the extent that the valuation requirements of this definition are complied
with as to any such non-cash consideration).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Closing Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States for the payment of which guarantee or
obligations the full faith and credit of the United States is pledged.
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"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, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing any Capital Lease Obligations or the balance deferred and unpaid
of the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any indebtedness of any other Person.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date; provided that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the full amount of such Indebtedness less the remaining unamortized portion
of the original issue discount of such Indebtedness at such time as determined
in conformity with GAAP. The amount of any Indebtedness outstanding as of any
date shall be:
o the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
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 such
date on a consolidated basis, plus the aggregate liquidation preference of all
outstanding preferred stock of the Restricted Subsidiaries of such Person as of
such date (excluding Qualified Subsidiary Stock and any such preferred stock
held by such Person or a Wholly Owned Restricted Subsidiary of such Person),
plus the aggregate liquidation preference or redemption amount of all
Disqualified Stock of such Person (excluding any Disqualified Stock held by such
Person or a Wholly Owned Restricted Subsidiary of such Person) as of such date
to (b) Adjusted Operating Cash Flow of such Person and its Restricted
Subsidiaries for the most recent four-quarter period for which internal
financial statements are available determined on a pro forma basis after giving
effect to all acquisitions and dispositions of assets (notwithstanding clause
(3) of the definition of "Consolidated Net Income") (including, without
limitation, Asset Swaps) made by such Person and its Restricted Subsidiaries
since the beginning of such four-quarter period through such date as if such
acquisitions and dispositions had occurred at the beginning of such four-quarter
period.
"Independent Director" means a member of the Board of Directors who is
neither an officer nor an employee of the Company or any of its Affiliates.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities, or
preferred stock which is not Disqualified Stock, of the Company shall not be
deemed to be an Investment.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with any
Asset Sale (including, without limitation, dispositions pursuant
to sale and leaseback transactions); or the disposition of any
securities by such Person or any of its Restricted Subsidiaries or
the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries; and
(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 the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting, investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness in connection with such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Non-Cash Incentive Compensation" means incentive compensation paid to
any officer of the Company or any of its Subsidiaries in the form of Class A
Common Stock of the Company or options to purchase Class A Common Stock of the
Company pursuant to the Pegasus Restricted Stock Plan and the Pegasus 1996 Stock
Option Plan.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries:
(a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute
Indebtedness);
(b) is directly or indirectly liable (as a guarantor or
otherwise); or
(c) constitutes the lender; and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time
or both) any holder of any other Indebtedness of the Company or
any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated
or payable before its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any
recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
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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 such Person for such period, plus:
(1) extraordinary net losses and net losses on sales of assets outside
the ordinary course of business during such period, to the extent
such losses were deducted in computing such Consolidated Net
Income, plus
(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) hereof, plus
(3) consolidated interest expense of such Person and its Subsidiaries
for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of
original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus
(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 such non-cash charge to the extent that it
represents an accrual of or reserve for cash charges in any future
period or amortization of a prepaid cash expense that was paid in
a prior period) of such Person and its Subsidiaries for such
period to the extent that such depreciation, amortization and
other non-cash charges were deducted in computing such
Consolidated Net Income, plus
(5) Non-Cash Incentive Compensation to the extent such compensation
expense was deducted in computing such Consolidated Net Income and
to the extent not included in clause (4) of this definition; and
less all non-cash income for such period (excluding any such non-cash income to
the extent it represents an accrual of cash income in any future period or
amortization of cash income received in a prior period).
"Pari Passu Debt" means senior Indebtedness of the Company or any
Subsidiary Guarantor permitted by the covenant described under the caption "--
Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," which is pari passu in right of payment with the notes or any Subsidiary
Guarantee.
"Permitted Businesses" means:
(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.
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"Permitted Investments" means:
(1) any Investments in the Company or in a Wholly Owned Restricted
Subsidiary of the Company;
(2) any Investments in Cash Equivalents;
(3) Investments by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment (a) such
Person becomes a Wholly Owned Restricted Subsidiary of the Company
or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to,
or is liquidated into, the Company or a Wholly Owned Restricted
Subsidiary of the Company;
(4) Investments made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the provisions of the covenant described under the
caption "-- Repurchase at the Option of Holders -- Asset Sales;"
and
(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 such Person is
merged into or consolidated with the Company or any Subsidiary of
the Company; provided that such Liens were not created in
contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or
consolidated with the Company or any Restricted Subsidiary of the
Company;
(4) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company; provided that such
Liens were not created in contemplation of such acquisition;
(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;
(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 GAAP
shall have been made therefor;
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(9) Liens incurred in the ordinary course of business of the Company
or any Subsidiary of the Company with respect to obligations that
do not exceed $1.5 million at any one time outstanding;
(10) Liens on deposits or Cash Equivalents made pursuant to legally
binding agreements or non-binding letters of intent to acquire
assets (or the Capital Stock of Persons owning such assets), in an
amount not to exceed 10% of the purchase price of such assets or
Capital Stock; provided that the assets to be acquired (or the
Capital Stock of Persons owning such assets) will be owned by the
Company or a Restricted Subsidiary of the Company upon
consummation of the contemplated acquisition;
(11) Liens encumbering deposits or Cash Equivalents made to secure
obligations of the Company to repurchase Capital Stock of the
Company pledged to secure obligations of employees of the Company
in an aggregate amount not to exceed $5.0 million at any time
outstanding; and
(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 the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; provided
that:
(1) the principal amount of (or accreted value, if applicable) such
Permitted Refinancing Debt does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased
or refunded (plus (a) the amount of reasonable expenses incurred
in connection therewith and (b) the amount of any premium required
to be paid in connection with such refinancing pursuant to the
terms of such refinancing or deemed by the Company or such
Restricted Subsidiary necessary to be paid to effectuate such
refinancing);
(2) such Permitted Refinancing Debt has a final maturity date not
earlier than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the
notes, such Permitted Refinancing Debt has a final maturity date
later than the final maturity date of the notes, and is
subordinated in right of payment to the notes on terms at least as
favorable to the Holders of notes as those contained in the
documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and
(5) if such Permitted Refinancing Debt is incurred by a Restricted
Subsidiary that is not a Subsidiary Guarantor, such Permitted
Refinancing Debt constitutes Eligible Indebtedness.
"PM&C" means Pegasus Media & Communications, Inc., a Delaware
corporation and a direct Subsidiary of the Company.
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"PM&C Credit Facility" means the Credit Agreement, dated as of December
10, 1997, by and among PM&C, the several lenders from time to time party thereto
and Bankers Trust Company, as agent for such lenders, as amended through the
Closing Date.
"PM&C Notes" means PM&C's 12 1/2% Series B Senior Subordinated Notes
due 2005.
"Principal" means Marshall W. Pagon.
"PSTV Preferred Stock" means the Series A Preferred Stock, par value $1
per share, of Pegasus Satellite Television of Virginia, Inc.
"Qualified Subsidiary Stock" means Capital Stock of a Subsidiary of the
Company which by its terms:
(1) does not mature, or is not mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, and is not redeemable at the
option of the Holder thereof, in whole or in part, 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 the
Company that is not Disqualified Stock upon the earlier to occur
of (a) the occurrence 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, in the case of this clause (4), the issuer's ability
to pay cash dividends is expressly conditioned on its ability to
do so in compliance with the provisions of the covenant described
under the caption "-- Certain Covenants -- Restricted Payments").
Notwithstanding the foregoing, for all purposes under the
Indenture, "Qualified Subsidiary Stock" shall be deemed to include
the PSTV Preferred Stock.
"Related Party" with respect to the Principal means:
(A) any immediate family member of the Principal or
(B) any trust, corporation, partnership or other entity, more than
50% of the voting equity interests of which are owned directly
or indirectly by, and which is controlled by, the Principal
and/or such other Persons referred to in the immediately
preceding clause (A).
For purposes of this definition:
(1) "immediate family member" means spouse, parent, step-parent,
child, sibling or step-sibling; and
(2) "control" has the meaning specified in the definition of
"Affiliate" contained under the caption "-- Certain Definitions."
In addition, the Principal's estate shall be deemed to be a
Related Party until such time as such estate is distributed in
accordance with the Principal's will or applicable state law.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
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"Satellite Segment" means the business involved in the marketing of
video and audio programming and data information services through transmission
media consisting of space-based satellite broadcasting services, the assets
related to the conduct of such business held by the Company and its Restricted
Subsidiaries on the Closing Date, plus all other assets acquired by the Company
or any of its Restricted Subsidiaries that are directly related to such business
(excluding, without limitation, the terrestrial television broadcasting business
and the assets related thereto and the cable television business and the assets
related thereto); provided that any assets acquired by the Company or any of its
Restricted Subsidiaries after the Closing Date that are not directly related to
such business shall not be included for purposes of this definition.
"Series A Preferred Stock" means the Company's 12 3/4% Series A
Cumulative Exchangeable Preferred Stock.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Closing Date.
"Split Dollar Agreement" means the Split Dollar Agreement between the
Company and Nicholas A. Pagon, Holly T. Pagon and Michael B. Jordan, as trustees
of an insurance trust established by Marshall W. Pagon, as in effect on the
Closing Date.
"Stated Maturity" means, with respect to any interest or principal on
any series of Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation governing such
Indebtedness, and shall not include any contingent obligations to repay, redeem
or repurchase any such interest or principal before the date originally
scheduled for the payment thereof.
"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 thereof.
"Subordinated Exchange Notes" means the Company's 12 3/4% Senior
Subordinated Exchange Notes due 2007 issuable pursuant to the Subordinated
Exchange Note Indenture in exchange for the Company's Series A Preferred Stock.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is
at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or
a combination thereof); and
(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, pursuant to a supplemental indenture and the requirements therefor
set forth in the Indenture, the payment of all principal of, and interest and
premium, if any, on, the notes and all other amounts payable under the notes or
the Indenture, which guarantee shall be pari passu with or senior to all
Indebtedness of such Restricted Subsidiary.
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"Total Interest Expense" means, with respect to any Person for any
period, the sum of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if
any) pursuant to Hedging Obligations); and
(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period,
to the extent such amounts are not included in clause (1) of this
definition; and
(3) any interest expense for such period on Indebtedness of another
Person that is guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets (other than Equity
Interests in Unrestricted Subsidiaries securing Indebtedness of
Unrestricted Subsidiaries) of such Person or one of its Restricted
Subsidiaries (whether or not such 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 such Person.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the
Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company
or such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation
(x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries; and
(5) has at least one executive officer that is not a director or
executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation made by the Board of Directors
at a time when any notes are outstanding shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the provisions of the
covenant described under the caption "- Certain Covenants -
Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the provisions of the covenant
described under the caption "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Preferred Stock" (treating such Subsidiary as a Restricted
Subsidiary for such purpose for the period relevant to such covenant), the
Company shall be in default of such covenant); provided, however, that in the
event an Unrestricted Subsidiary ceases to meet the requirement set forth in
clause (5) of this definition, such Unrestricted Subsidiary shall have 60 days
to meet such requirement before such Unrestricted Subsidiary shall cease to be
an Unrestricted Subsidiary.
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<PAGE>
The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall be permitted only if:
o such Indebtedness is permitted under the covenant described under
the provisions of the covenant described under the caption "--
Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock" (treating such Subsidiary as a Restricted
Subsidiary for such purpose for the period relevant to such
covenant); and
o no Default or Event of Default would be in existence following
such designation.
"Voting Stock" means with respect to any specified Person, Capital
Stock with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(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, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by
(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 such Person and/or
by one or more Wholly Owned Restricted Subsidiaries of such 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 such interest is not effectively connected
with the conduct of a trade or business within the U.S. by such Non-U.S. Holder
and the Non-U.S. Holder (a) does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of the Company; (b)
is not a controlled foreign corporation with respect to which the Company is a
"related person" within the meaning of the U.S. Internal Revenue Code; and (c)
certifies, under penalties of perjury, that such owner is not a U.S. person and
provides such 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 such holder to obtain a U.S. taxpayer identification number and to
provide certain documentary evidence issued by foreign governmental authorities
to prove residence in the foreign country. Certain special procedures are
provided in the new withholding regulations for payments through qualified
intermediaries.
Gain on Disposition
A Non-U.S. Holder will generally not be subject to U.S. federal income
tax on gain recognized on a sale, redemption or other disposition of a 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 senior notes will not be
included in the estate of a deceased Non-U.S. Holder for U.S. federal estate tax
purposes.
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Information Reporting and Backup Withholding
For payments made on or before December 31, 1999, we will, where
required, report to the Holders of senior notes and the IRS the amount of any
interest paid on the senior notes in each calendar year and the amounts of tax
withheld, if any, with respect to such payments.
In the case of payments of interest to Non-U.S. Holders, Treasury
regulations provide that the 31% backup withholding tax and certain information
reporting will not apply to such payments with respect to which either the
requisite certification, as described above, has been received or an exemption
has otherwise been established; provided that neither 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 such
broker has documentary evidence in its file that the owner of the notes is not a
U.S. person, and such broker has no actual knowledge to the contrary, or the
owner establishes an exception. Neither information reporting nor backup
withholding generally will apply to a payment of the proceeds of a disposition
of the notes by or through a foreign office of a foreign broker not subject to
the preceding sentence.
The new withholding regulations provide that to the extent a Non-U.S.
Holder certifies on Form W-8 (or a permitted substitute form) as to such
holder's status as a foreign person, the backup withholding provisions and the
information reporting provisions will generally not apply. If a Non-U.S. Holder
fails to provide such certification, such holder may be subject to certain
information reporting and the 31% backup withholding tax.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be refunded or credited against the Non-U.S.
Holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS.
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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 such 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 such 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 such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any such new notes. Any broker-dealer that resells new notes that
were received by it for its own account under the exchange offer and any broker
or dealer that participates in a distribution of such new notes may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of new notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
We have agreed to pay expenses incurred with the exchange offer and the
performance of our other obligations under the 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, such broker will not use this prospectus
until we have amended or supplemented it to correct such misstatement or
omission and have furnished copies of the amended or supplemented prospectus to
such broker-dealer.
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LEGAL MATTERS
Drinker Biddle & Reath LLP, counsel for the Company has passed upon the
validity of the new notes. Michael B. Jordan, a partner of Drinker Biddle &
Reath LLP, is an Assistant Secretary of the Company.
EXPERTS
The Company's consolidated balance sheets as of December 31, 1996 and
1997 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, 1997, 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.
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================================================================================
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
Where You Can Find More Information.......................... Inside front cover
Prospectus Summary........................................... 1
Risk Factors................................................. 8
Ratio of Earnings to Fixed Charges........................... 19
Use of Proceeds.............................................. 19
The Exchange Offer........................................... 20
Material United States Federal Income Tax
Consequences of Exchange Offer............................. 27
Description of Notes......................................... 28
Material United States Federal Income
Tax Consequences........................................... 64
Plan of Distribution......................................... 66
Legal Matters................................................ 67
Experts...................................................... 67
[LOGO]
PEGASUS COMMUNICATIONS CORPORATION
Offer to Exchange our
9 3/4% Series B senior notes due 2006
which have been registered under the
Securities Act of 1933, for
any and all of our 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.
The Registrant has obtained directors' and officers' liability
insurance.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
Number Description of Document
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2.1 Agreement and Plan of Merger dated January 8, 1998 among Pegasus
Communications Corporation and certain of its shareholders, Pegasus DTS
Merger Sub, Inc., and Digital Television Services Inc. and certain of
its shareholders, including forms of Registration Rights Agreement and
Voting Agreement as exhibits (which is incorporated by reference herein
to Exhibit 2.1 to Pegasus' Form 8-K dated December 10, 1997).
2.2 Asset Purchase Agreement dated as of January 16, 1998 between Avalon
Cable of New England, LLC and Pegasus Cable Television Inc. and Pegasus
Cable Television of Connecticut, Inc. (which is incorporated by
reference to Pegasus' Form 8-K dated January 16, 1998).
2.3 Asset Purchase Agreement dated as of July 23, 1998 among Pegasus Cable
Television Inc., Cable Systems USA, Partners, J&J Cable Partners, Inc.
and PS&G Cable Partners, Inc. (which is incorporated by reference to
Pegasus' Form 10-Q dated August 13, 1998).
3.1 Certificate of Incorporation of Pegasus, as amended (which is
incorporated by reference to Exhibit 3.1 to Pegasus' Registration
Statement on form S-1 (file No. 333-05057)).
3.2 By-Laws of Pegasus (which is incorporated by reference to Exhibit 3.2 to
Pegasus' Registration Statement on Form S-3 (File No. 333-70949)).
3.3 Certificate of Designations, Preferences and Relative, Participating ,
Optional and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof which is incorporated by reference
to Exhibit 3.3 to Pegasus' Registration Statement on form S-1 (File No.
333-23595).
4.1 Indenture, dated as of July 7, 1995, by and among Pegasus Media &
Communications, Inc. the Guarantors (as this term is defined in the
indenture) and First Fidelity Bank, National Association, as Trustee,
relating to the 12 1/2 % Series B Senior Subordinated Notes due 2005
(including the form of Notes and Subsidiary Guarantee) (which is
incorporated herein by reference to Exhibit 4.1 to Pegasus Media &
Communications, Inc.'s Registration Statement on Form S-4 (File Number
333-95042)).
4.2 Form of 12 1/2% Series B Senior Subordinated Notes due 2005 (included
in Exhibit 4.1 above).
4.3 Form of Subsidiary Guarantee with respect to the 12 1/2 % Series B
Senior Subordinated Notes due 2005 (included in Exhibit 4.1 above).
4.4. Indenture by and between Pegasus Communications Corporation and First
Union National Bank as trustee relating to the Exchange Notes (included
in Exhibit 3.3 above).
4.5 Indenture, dated as of October 21, 1997 by and between Pegasus
Communications Corporation and First Union National Bank as trustee,
relating to the 1998 Senior Notes (which is incorporated by reference
herein to Exhibit 4.1 to Amendment No. 1 to Pegasus' Form 8-K dated
September 8, 1997).
II-1
<PAGE>
4.6 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 to Exhibit 4.5 to
Pegasus' Registration Statement on Form S-3 (File No. 333-70949)).
4.7 Indenture, dated as of July 30, 1997 among Digital Television Services,
Inc., certain of its subsidiaries, and The Bank of New York, as trustee
(the "DTS Indenture") (which is incorporated by reference to Exhibit 4.1
of Digital Television Services' Registration Statement on Form S-4.
(File Number 333-36217)).
4.8 Supplemental Indenture to the DTS Indenture, dated October 10, 1997,
(which is incorporated by reference to Exhibit 4.6 of Digital Television
Services' Registration Statement on Form S-4. (File Number 333-36217)).
5.1* Opinion of Drinker Biddle & Reath LLP.
8.1* Opinion of Drinker Biddle & Reath LLP concerning tax matters.
10.1 Credit Agreement dated as of December 9, 1997 by and among Pegasus Media
& Communications, Inc., the lenders thereto, and Bankers Trust Company,
as agent for the lenders (which is incorporated by reference herein to
Exhibit 10.1 to Pegasus' Form 8-k dated December 10, 1997).
10.2 Pegasus' Restricted Stock Plan (which is incorporated by reference to
Exhibit 10.28 to Pegasus' Registration Statement on Form S-1) (File No.
333-05057)).
10.3 Option Agreement for Donald W. Webber (which is incorporated by
reference to Exhibit 10.29 to Pegasus' Registration Statement on Form
S-1) (File No. 333-05057)).
10.4 Pegasus' 1996 Stock Option Plan (which is incorporated by reference to
Exhibit 10.30 to Pegasus' Registration Statement on Form S-1) (File No.
333-05057)).
10.5 Amendment to Option Agreement for Donald W. Webber, dated December 19,
1996 (which is incorporated by reference to Exhibit 10.31 to Pegasus'
Registration Statement on Form S-1) (File No. 333-05057)).
10.6 Warrant Agreement between Pegasus and First Union National Bank, as
warrant agent relating to the Warrants (which is incorporated by
reference to Exhibit 10.32 to Pegasus' Registration Statement on Form
S-1)( File No. 333-2395)).
10.7 Amendment to Credit Agreement executed as of August 3, 1998 by and among
Pegasus Media & Communications, Inc., the lenders thereto and Bankers
Trust Company, as agent for the lender (incorporated by reference to
Exhibit 10.21 to Pegasus' Registration Statement on Form S-4) (File No.
333044929).
10.8 Second Amendment to Credit Agreement executed as of August 3, 1998, by
and among Pegasus Media & Communications, Inc., the lenders thereto and
Bankers Trust Company, as agent for the lender (incorporated by
reference to Exhibit 10.22 to Pegasus' Registration Statement on Form
S-3) (File No. 333-70949)).
10.9 Third Amendment to Credit Agreement executed as of December 31 1998 by
and among Pegasus Media & Communications, Inc., the lenders thereto and
Bankers Trust Company, as agent for the lender (incorporated by
reference to Exhibit 10.23 to Pegasus' Registration Statement on Form
S-3) (File No. 333-70949)).
10.10 Second Amended and Restated Credit Agreement dated as of July 30, 1997
among Digital Television Services, LLC and several lenders, CIBC Wood
Gundy, as arranger, Morgan Guarantee Trust Company of New York, Fleet
National Bank, and Canadian Imperial Bank of Commerce (which is
incorporated by reference to Exhibit 10.1 of Digital Television
Services' Registration Statement on Form S-4 (File No. 333-44929)).
10.11* Registration Rights Agreement, dated as of November 30, 1998, among
Pegasus Communications Corporation, CIBC Oppenheimer Corp and Alex.
Brown Incorporated.
23.1 Consent of Drinker Biddle & Reath LLP (included in their opinions filed
as 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)
25.1* Form T-1, Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of First Union National Bank, as Trustee.
99.1* Form of Letter of Transmittal and related documents to be used in
conjunction with the exchange offer.
- ----------------
* Filed herewith.
Item 22. Undertakings.
<PAGE>
The undersigned registrant hereby undertakes that:
(1) During any period in which offers or sales are being made, a
post-effective amendment to this registration statement will be filed:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered ) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the SEC under Rule
424(b) if, in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement;
II-2
<PAGE>
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) It will remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report under Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant under the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(6) It will respond to requests for information that is incorporated by
reference into the prospectus within one business day of receipt of such
request, and it will send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed after the effective date of the registration statement through the date of
responding to the request.
(7) It will supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
II-3
<PAGE>
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized in the city of Radnor,
Commonwealth of Pennsylvania, on the 29th day of January, 1999.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Marshall W. Pagon
----------------------------
Name: Marshall W. Pagon
Title: Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated. Each person whose signature appears
below hereby constitutes and appoints Marshall W. Pagon, Robert N. Verdecchio
and Ted S. Lodge as his or her attorneys-in-fact and agents, with full power of
substitution for him or her in any and all capacities, to sign any or all
amendments or post-effective amendments to the Registration Statement, or any
Registration Statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to
file the same, with exhibits thereto and other documents in connection therewith
or in connection with the registration of the Notes under the Securities
Exchange Act of 1934, as amended, with the Securities and Exchange Commission,
granting unto each of such attorneys-in-fact the agents full power and authority
to do and perform each and every act and thing requisite and necessary in
connection with such matters and hereby ratifying and confirming all that each
of such attorneys-in-fact and agents or his or her substitutes may do or cause
to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------------- ------------ --------
<S> <C> <C>
/s/ Marshall W. Pagon President, Chief Executive Officer January 29, 1999
- ------------------------------------ and Chairman of the Board
Marshall W. Pagon
(Principal Executive Officer)
/s/ Robert N. Verdecchio Senior Vice President, Chief January 29, 1999
- ------------------------------------ Financial Officer, Assistant
Robert N. Verdecchio Secretary and Director
(Principal Financial
and Accounting Officer)
/s/ James J. McEntee, III Director January 29, 1999
- ------------------------------------
James J. McEntee, III
/s/ Mary C. Metzger Director January 29, 1999
- ------------------------------------
Mary C. Metzger
/s/ Donald W. Weber Director January 29, 1999
- ------------------------------------
Donald W. Weber
/s/ Michael C. Brooks Director January 29, 1999
- ------------------------------------
Michael C. Brooks
/s/ Harry F. Hopper, III Director January 29, 1999
- -----------------------------
Harry F. Hopper, III
- ----------------------------------- Director January 29, 1999
William P. Phoenix
/s/ Riordon B. Smith Director January 29, 1999
- -----------------------------------
Riordon B. Smith
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description of Document
- ------- -----------------------
2.1 Agreement and Plan of Merger dated January 8, 1998 among Pegasus
Communications Corporation and certain of its shareholders, Pegasus DTS
Merger Sub, Inc., and Digital Television Services Inc. and certain of
its shareholders, including forms of Registration Rights Agreement and
Voting Agreement as exhibits (which is incorporated by reference herein
to Exhibit 2.1 to Pegasus' Form 8-K dated December 10, 1997).
2.2 Asset Purchase Agreement dated as of January 16, 1998 between Avalon
Cable of New England, LLC and Pegasus Cable Television Inc. and Pegasus
Cable Television of Connecticut, Inc. (which is incorporated by
reference to Pegasus' Form 8-K dated January 16, 1998).
2.3 Asset Purchase Agreement dated as of July 23, 1998 among Pegasus Cable
Television Inc., Cable Systems USA, Partners, J&J Cable Partners, Inc.
and PS&G Cable Partners, Inc. (which is incorporated by reference to
Pegasus' Form 10-Q dated August 13, 1998).
3.1 Certificate of Incorporation of Pegasus, as amended (which is
incorporated by reference to Exhibit 3.1 to Pegasus' Registration
Statement on form S-1 (file No. 333-05057)).
3.2 By-Laws of Pegasus (which is incorporated by reference to Exhibit 3.2 to
Pegasus' Registration Statement on Form S-3 (File No. 333-70949)).
3.3 Certificate of Designations, Preferences and Relative, Participating ,
Optional and Other Special Rights of Preferred Stock and Qualifications,
Limitations and Restrictions Thereof which is incorporated by reference
to Exhibit 3.3 to Pegasus' Registration Statement on form S-1 (File No.
333-23595).
4.1 Indenture, dated as of July 7, 1995, by and among Pegasus Media &
Communications, Inc. the Guarantors (as this term is defined in the
indenture) and First Fidelity Bank, National Association, as Trustee,
relating to the 12 1/2 % Series B Senior Subordinated Notes due 2005
(including the form of Notes and Subsidiary Guarantee) (which is
incorporated herein by reference to Exhibit 4.1 to Pegasus Media &
Communications, Inc.'s Registration Statement on Form S-4 (File Number
333-95042)).
4.2 Form of 12 1/2 % Series B Senior Subordinated Notes due 2005 (included
in Exhibit 4.1 above).
4.3 Form of Subsidiary Guarantee with respect to the 12 1/2 % Series
Senior Subordinated Notes due 2005 (included in Exhibit 4.1 above).
4.4. Indenture by and between Pegasus Communications Corporation and First
Union National Bank as trustee relating to the Exchange Notes (included
in Exhibit 3.3 above).
4.5 Indenture, dated as of October 21, 1997 by and between Pegasus
Communications Corporation and First Union National Bank as trustee,
relating to the 1998 Senior Notes (which is incorporated by reference
herein to Exhibit 4.1 to Amendment No. 1 to Pegasus' Form 8-K dated
September 8, 1997).
4.6 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 to Exhibit 4.5 to
Pegasus' Registration Statement on Form S-3 (File No. 333-70949)).
4.7 Indenture, dated as of July 30, 1997 among Digital Television Services,
Inc., certain of its subsidiaries, and The Bank of New York, as trustee
(the "DTS Indenture") (which is incorporated by reference to Exhibit 4.1
of Digital Television Services' Registration Statement on Form S-4.
(File Number 333-36217)).
4.8 Supplemental Indenture to the DTS Indenture, dated October 10, 1997,
(which is incorporated by reference to Exhibit 4.6 of Digital Television
Services' Registration Statement on Form S-4. (File Number 333-36217)).
5.1* Opinion of Drinker Biddle & Reath LLP.
8.1* Opinion of Drinker Biddle & Reath LLP concerning tax matters.
10.1 Credit Agreement dated as of December 9, 1997 by and among Pegasus Media
& Communications, Inc., the lenders thereto, and Bankers Trust
Company, as agent for the lenders (which is incorporated by reference
herein to Exhibit 10.1 to Pegasus' Form 8-k dated December 10, 1997).
10.2 Pegasus' Restricted Stock Plan (which is incorporated by reference to
Exhibit 10.28 to Pegasus' Registration Statement on Form S-1) (File No.
333-05057)).
10.3 Option Agreement for Donald W. Webber (which is incorporated by
reference to Exhibit 10.29 to Pegasus' Registration Statement on Form
S-1) (File No. 333-05057)).
<PAGE>
10.4 Pegasus' 1996 Stock Option Plan (which is incorporated by reference to
Exhibit 10.30 to Pegasus' Registration Statement on Form S-1) (File No.
333-05057)).
10.5 Amendment to Option Agreement for Donald W. Webber, dated December 19,
1996 (which is incorporated by reference to Exhibit 10.31 to Pegasus'
Registration Statement on Form S-1) (File No. 333-05057)).
10.6 Warrant Agreement between Pegasus and First Union National Bank, as
warrant agent relating to the Warrants (which is incorporated by
reference to Exhibit 10.32 to Pegasus' Registration Statement on Form
S-1)( File No. 333-2395)).
10.7 Amendment to Credit Agreement executed as of August 3, 1998 by and among
Pegasus Media & Communications, Inc., the lenders thereto and Bankers
Trust Company, as agent for the lender (incorporated by reference to
Exhibit 10.21 to Pegasus' Registration Statement on Form S-4) (File No.
333044929).
10.8 Second Amendment to Credit Agreement executed as of August 3, 1998, by
and among Pegasus Media & Communications, Inc., the lenders thereto and
Bankers Trust Company, as agent for the lender (incorporated by
reference to Exhibit 10.22 to Pegasus' Registration Statement on Form
S-3) (File No. 333-70949)).
10.9 Third Amendment to Credit Agreement executed as of December 31 1998 by
and among Pegasus Media & Communications, Inc., the lenders thereto and
Bankers Trust Company, as agent for the lender (incorporated by
reference to Exhibit 10.23 to Pegasus' Registration Statement on Form
S-3) (File No. 333-70949)).
10.10 Second Amended and Restated Credit Agreement dated as of July 30, 1997
among Digital Television Services, LLC and several lenders, CIBC Wood
Gundy, as arranger, Morgan Guarantee Trust Company of New York, Fleet
National Bank, and Canadian Imperial Bank of Commerce (which is
incorporated by reference to Exhibit 10.1 of Digital Television
Services' Registration Statement on Form S-4 (File No. 333-44929)).
10.11* Registration Rights Agreement, dated as of November 30, 1998, among
Pegasus Communications Corporation, CIBC Oppenheimer Corp and Alex.
Brown Incorporated.
23.1 Consent of Drinker Biddle & Reath LLP (included in their opinions filed
as 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)
25.1* Form T-1, Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939 of First Union National Bank, as Trustee.
99.1* Form of Letter of Transmittal and related documents to be used in
conjunction with the exchange offer.
- ----------------
* Filed herewith.
<PAGE>
DRINKER BIDDLE & REATH LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
January 29, 1999
Pegasus Communications Corporation
c/o Pegasus Communications Management Company
100 Matsonford Road
Suite 454, 5 Radnor Corporate Center
Radnor, Pennsylvania 19087
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
As counsel to Pegasus Communications Corporation, a Delaware
corporation (the "Company"), we have assisted in the preparation and filing of
the Company's Registration Statement on Form S-4 (the "Registration Statement"),
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Securities Act"), relating to $100,000,000 principal
amount of the Company's 9 3/4% Series B Senior Notes due 2006 (the "New Notes"),
to be issued by the Company in exchange for $100,000,000 principal amount of the
Company's 9 3/4% Series A Senior Notes due 2006 (the "Old Notes"). The New Notes
will be issued pursuant to the Indenture dated as of November 30, 1998, between
the Company and First Union National Bank, as Trustee, which has been
incorporated by reference into the Registration Statement.
In this connection, we have examined the originals or copies,
certified or otherwise identified to our satisfaction, of the Certificate of
Incorporation and By-laws of the Company, as amended, minutes and resolutions of
the Company's Board of Directors and such other documents and corporate records
relating to the Company and the issuance of the New Notes as we have deemed
appropriate. We express no opinion concerning the laws of any jurisdiction other
than the federal law of the United States and the Delaware General Corporation
Law.
In all examinations of documents, instruments and other
papers, we have assumed the genuineness of all signatures on original and
certified documents and the conformity with original and certified documents of
all copies submitted to us as conformed, photostatic or other copies. As to
matters of fact which have not been independently established, we have relied
upon representations of officers of the Company.
On the basis of the foregoing, it is our opinion that the New
Notes have been validly authorized for issuance and, upon execution of the New
Notes by the Company, authentication of the New Notes by the Trustee and
issuance and delivery of the New Notes in the manner provided in the Indenture
and the Registration Statement (including the exchange of the Old Notes for the
New Notes as set forth in the Registration Statement), the New Notes will be
legally issued and constitute binding obligations of the Company, subject to
applicable bankruptcy,
<PAGE>
Pegasus Communications Corporation
January 29, 1999
Page 2
insolvency, reorganization, moratorium and other laws affecting the rights of
creditors generally and subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
We hereby consent to the reference to our firm under the
caption "Legal Matters" in the Prospectus included in the Registration Statement
and to the filing of this opinion as an exhibit to the Registration Statement.
This does not constitute a consent under Section 7 of the Securities Act as we
have not certified any part of the Registration Statement and do not otherwise
come within the categories of persons whose consent is required under Section 7
or the rules and regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH LLP
<PAGE>
DRINKER BIDDLE & REATH LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
January 29, 1999
Pegasus Communications Corporation
c/o Pegasus Communications Management Company
100 Matsonford Road
Suite 454, 5 Radnor Corporate Center
Radnor, Pennsylvania 19087
Ladies and Gentlemen:
As counsel to Pegasus Communications Corporation, a Delaware
corporation (the "Company"), we have assisted in the preparation and filing of
the Company's Registration Statement on Form S-4 (the "Registration Statement"),
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, relating to $100,000,000 principal amount of the Company's 9
3/4% Series B Senior Notes due 2006.
In our opinion, the statements in the Prospectus contained in the
Registration Statement (the "Prospectus") under the captions "Material United
States Federal Income Tax Consequences of the Exchange Offer" and "Material
United States Federal Income Tax Consequences," to the extent they constitute
matters of law or legal conclusions, are accurate in all material respects.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and we consent to the reference of our name under the
captions "Material United States Federal Income Tax Consequences of the Exchange
Offer" and "Legal Matters" in the Prospectus.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH LLP
<PAGE>
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of November 30, 1998
between
PEGASUS COMMUNICATIONS CORPORATION
and
CIBC OPPENHEIMER CORP.
BT ALEX. BROWN INCORPORATED
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of November 30, 1998 between Pegasus Communications Corporation,
a Delaware corporation (the "Company"), and CIBC Oppenheimer Corp. and BT Alex.
Brown Incorporated (the "Initial Purchasers"), who have agreed to purchase
$100,000,000 in aggregate principal amount of 9 3/4% Senior Notes due 2006 (the
"Series A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
November 24, 1998 (the "Purchase Agreement"), by and among the Company, certain
of its subsidiaries and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Series A Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 5 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
Terms used but not defined herein shall have the meaning given to
such terms in the Indenture. As used in this Agreement, the following
capitalized terms shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Series B Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
1
<PAGE>
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, and to certain persons
outside the United States in offshore transactions in reliance on Regulation S
under the Act.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of November 30, 1998, between the
Company and First Union National Bank, as trustee (the "Trustee"), pursuant to
which the Notes are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms thereof.
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating to
Notes, each Person who is a Holder of Notes on the record date with respect to
the Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Series B Notes: The Company's 9 3/4% Series B Senior Notes due 2006
to be issued pursuant to the Indenture in the Exchange Offer.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
2
<PAGE>
Transfer Restricted Securities: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged by a person other than a
Broker-Dealer for a Series B Note in the Exchange Offer, (b) following the
exchange by a Broker-Dealer in the Exchange Offer of a Series A Note for a
Series B Note, the date on which such Series B Note is sold to a purchaser who
receives from such Broker-Dealer on or prior to the date of such sale a copy of
the Prospectus contained in the Exchange Offer Registration Statement, (c) the
date on which such Note has been effectively registered under the Act and
disposed of in accordance with a Shelf Registration Statement or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) The Company shall (i) cause to be filed with the Commission as
soon as practicable after the Closing Date, but in no event later than 60 days
after the Closing Date, a Registration Statement under the Act relating to the
Series B Notes and the Exchange Offer, (ii) use its reasonable best efforts to
cause such Registration Statement to become effective at the earliest possible
time, but in no event later than 120 days after the Closing Date, (iii) in
connection with the foregoing, file (A) all pre-effective amendments to such
Registration Statement as may be necessary in order to cause such Registration
Statement to become effective and (B) if applicable, a post-effective amendment
to such Registration Statement pursuant to Rule 430A under the Act, (iv) cause
all necessary filings in connection with the registration and qualification of
the Series B Notes to be made under the Blue Sky laws of such jurisdictions
within the United States as are necessary to permit Consummation of the Exchange
Offer and (v) unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), commence the Exchange Offer and use its
reasonable best efforts to issue on or prior to 30 business days after the date
on which the Exchange Offer Registration Statement was declared effective by the
Commission, Series B Notes in exchange for all Series A Notes properly tendered
prior thereto in accordance with the terms of the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting registration of the Series B
Notes to be offered in exchange for the Transfer Restricted Securities and to
permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c)
below.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a period
of not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the Notes shall be included in the Exchange Offer
Registration Statement.
3
<PAGE>
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may
be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Series B Notes received by such Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer
or disclose the amount of Notes held by any such Broker-Dealer except to the
extent required by the Commission as a result of a change in policy after the
date of this Agreement.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of one year from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time, subject to
Section 6(c)(i) hereof, during such one-year period in order to facilitate such
resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities notifies the
Company within 20 business days after the Consummation of the Exchange Offer (A)
that such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
Series B Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not legally available for such resales by such Holder
or (C) that such Holder is a Broker-Dealer and owns Series A Notes acquired
directly from the Company or an affiliate of the Company, then the Company
shall:
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement") on or prior to the earliest to occur of (1) the 60th day after
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement, (2) the 60th day after the date
on which the Company receives notice from a Holder of Transfer Restricted
Securities as contemplated by clause (ii) above, and (3) the 120th day
after the Closing Date (such earliest date being the "Shelf Filing
Deadline"), which Shelf Registration Statement shall provide for resales
of all Transfer Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(b) hereof; and
(y) use its reasonable best efforts to cause such Shelf
Registration Statement to be declared effective by the Commission on or
before the 60th day after the Shelf Filing Deadline.
4
<PAGE>
The Company shall use its best efforts to keep such Shelf Registration Statement
continuously effective, supplemented and amended as required by the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for resales of Notes by the Holders of Transfer Restricted Securities
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least three years (as extended pursuant to Section 6(c)(i)) following the
Closing Date or such shorter period that will terminate when all Transfer
Restricted Securities covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to liquidated damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration Statement
is being effected agrees to furnish promptly to the Company all information
required to be disclosed in order to make the information previously furnished
to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) subject to the provisions of Section 6(c)(i) below, the Shelf
Registration Statement or the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective or legally available for use in
connection with resales of Transfer Restricted Securities during the periods
specified in this Agreement without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company agrees to
pay liquidated damages to each Holder of Transfer Restricted Securities with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 of
aggregate principal amount of Series A Notes held by such Holder for each week
or portion thereof that the Registration Default continues. The amount of the
liquidated damages shall increase by an additional $.05 per week per $1,000 of
aggregate principal amount of Series A Notes with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of liquidated damages of $.30 per week per $1,000 of aggregate principal
amount of Series A Notes. All accrued liquidated damages shall be paid by the
Company on each Damages Payment Date to the holder of the Global Notes by wire
transfer of immediately available funds or by federal funds check and to holders
of Certificated Notes by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified. Following the cure of all Registration Defaults relating to any
particular Transfer Restricted Securities, the accrual of liquidated damages
with respect to such Transfer Restricted Securities will cease.
All obligations of the Company set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Security shall have
been satisfied in full.
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SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply with all of the provisions of Section
6(c) below, shall use its best efforts to effect such exchange and to permit the
sale of Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and shall comply with all of
the following provisions:
(i) If in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by applicable
law, the Company hereby agrees to seek a no-action letter or other
favorable decision from the Commission allowing the Company to Consummate
an Exchange Offer for such Series A Notes. The Company hereby agrees to
pursue the issuance of such a decision to the Commission staff level but
shall not be required to take commercially unreasonable action to effect a
change of Commission policy. The Company hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary
course of business. In addition, all such Holders of Transfer Restricted
Securities shall otherwise cooperate in the Company's preparations for the
Exchange Offer. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to participate
in a distribution of the securities to be acquired in the Exchange Offer
(1) could not under Commission policy as in effect on the date of this
Agreement rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters (including any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of Series B Notes obtained by such Holder in exchange
for Series A Notes acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co.,
Inc. (available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above and (B) including a representation
that the Company has not entered into any arrangement or understanding
with any Person to distribute the Series B Notes to be received in the
Exchange Offer and that, to the best of the Company's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement
or understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer.
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(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof, and pursuant
thereto the Company will as expeditiously as possible prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Exchange
Offer Registration Statement and the related Prospectus to the extent that the
same are required to permit resales of Notes by Broker-Dealers), the Company
shall:
(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation
thereunder, financial statements of any of its subsidiaries) for the
period specified in Section 3 or 4 of this Agreement, as applicable; upon
the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and legally available
for use in connection with the resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly an appropriate amendment to such Registration Statement, in the
case of clause (A), correcting any such misstatement or omission, and, in
the case of either clause (A) or (B), use its reasonable best efforts to
cause such amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter. Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good
faith that it is in the best interests of the Company not to disclose the
existence of or facts surrounding any proposed or pending material
corporate transaction involving the Company, the Company may allow the
Shelf Registration Statement or the Exchange Offer Registration Statement
to fail to be effective and usable as a result of such nondisclosure for
up to 90 days during the three year period of effectiveness required by
Section 4 hereof, but in no event for any period in excess of 45
consecutive days, provided, that in the event the Exchange Offer is
Consummated, the Company shall not allow the Exchange Offer Registration
Statement to fail to be effective and usable for a period in excess of 30
days during the one year period of effectiveness required by Section 3(c)
hereof;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
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(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading,
including, without limitation, under circumstances described in Section
6(c)(i) above. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company shall use its reasonable best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial
filing of such Registration Statement), which documents will be subject to
the review of such Holders and underwriter(s), if any, for a period of at
least five business days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which selling Holders holding at least 20%
in the aggregate principal amount of the outstanding Transfer Restricted
Securities covered by such Registration Statement or the underwriter(s),
if any, shall reasonably object within five business days after the
receipt thereof. A selling Holder or underwriter, if any, shall be deemed
to have reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission;
(v) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
each of its subsidiaries and cause the Company's and each of its
subsidiary's officers, directors and employees to supply all information
reasonably requested by any such Holder, underwriter, attorney or
accountant in connection with such Registration Statement subsequent to
the filing thereof and prior to its effectiveness;
(vi) if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment;
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(vii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal amount
of Notes covered thereby or the underwriter(s), if any;
(viii) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference), subject to any confidentiality agreements;
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company hereby
consents to the use of the Prospectus and any amendment or supplement
thereto by each of the selling Holders and each of the underwriter(s), if
any, in connection with the offering and the sale of the Transfer
Restricted Securities covered by the Prospectus or any amendment or
supplement thereto;
(x) enter into, and cause each of its subsidiaries to enter
into, such agreements (including an underwriting agreement), and make, and
cause each of its subsidiaries to make, such representations and
warranties, and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any Registration Statement contemplated by this
Agreement, all to such extent as may be reasonably requested by any Holder
of Transfer Restricted Securities or underwriter in connection with any
sale or resale pursuant to any Registration Statement contemplated by this
Agreement; and whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration, the
Company shall use its best efforts to:
(A) furnish to each selling Holder and each underwriter, if any,
in such substance and scope as they may request and as are
customarily made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the Exchange Offer
and, if applicable, the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of the Company and each of its subsidiaries,
confirming, as of the date thereof, the matters set forth in
paragraphs (i)(i), (ii), (iii) and (iv) of Section 8 of the
Purchase Agreement and such other matters as such parties may
reasonably request;
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(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company, covering the matters set forth in paragraph (a) of
Section 8 of the Purchase Agreement and such other matter as
such parties may reasonably request, and in any event including
a statement to the effect that such counsel has participated in
conferences with officers and other representatives of the
Company and representatives of the independent public
accountants for the Company in connection with the preparation
of such Registration Statement and the related Prospectus and
have considered the matters required to be stated therein and
the statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the
basis of the foregoing (relying as to materiality to a large
extent upon facts provided to such counsel by officers and other
representatives of the Company and without independent check or
verification), such counsel does not believe that the applicable
Registration Statement, at the time such Registration Statement
or any post-effective amendment thereto became effective, and,
in the case of the Exchange Offer Registration Statement, as of
the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further
that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness
of the financial and statistical statements, notes and schedules
and other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from
the Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 8(h) of the Purchase
Agreement, without exception, provided, however, that if such
registration is not an Underwritten Registration and the
customary comfort letter referred to above cannot be delivered,
the Company shall use its reasonable best efforts to cause its
independent accountants to deliver the highest level of comfort
permitted to be given by such accountants under the then
applicable standards of the American Institute of Certified
Public Accountants with respect to such registration statement;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company or
any of its subsidiaries contemplated in clause (A)(1) above cease to be
true and correct, the Company shall so advise the Initial Purchasers and
the underwriter(s), if any, and each selling Holder promptly and, if
requested by such Persons, shall confirm such advice in writing;
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(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause each of its subsidiaries to
cooperate with, the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities under the securities or Blue Sky
laws of such jurisdictions as the selling Holders or underwriter(s) may
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided, however,
that neither the Company nor any of its subsidiaries shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is
not now so subject;
(xii) shall issue, upon the request of any Holder of Series A
Notes covered by the Shelf Registration Statement, Series B Notes, having
an aggregate principal amount equal to the aggregate principal amount of
Series A Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Series B Notes to be
registered in the name of such Holder or in the name of the purchaser(s)
of such Notes, as the case may be; in return, the Series A Notes held by
such Holder shall be surrendered to the Company for cancellation;
(xiii) cooperate with, and cause each of its subsidiaries to
cooperate with, the selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to
any sale of Transfer Restricted Securities made by such underwriter(s);
(xiv) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xv) subject to Section 6(c)(i), if any fact or event
contemplated by clause (c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
misleading;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for
deposit with the Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that
is required to be retained in accordance with the rules and regulations of
the NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
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(xviii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of the Registration Statement;
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate with the
Trustee and the Holders of Notes to effect such changes to the Indenture
as may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its reasonable best efforts
to cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be filed
with the Commission to enable such Indenture to be so qualified in a
timely manner;
(xx) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by
the Holders of a majority in aggregate principal amount of Series A Notes
or the managing underwriter(s), if any; and
(xxi) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or any of its subsidiary's
performance of or compliance with this Agreement will be borne by the Company
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by the Initial Purchasers or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter" and
its counsel that may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, its subsidiaries and,
subject to Section 7(b) below, the Holders of Transfer Restricted Securities;
(v) all application and filing fees in connection with listing Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and its subsidiaries (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
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The Company will, in any event, bear its and each of its
subsidiaries' internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
(b) In connection with any Shelf Registration Statement required by
this Agreement, the Company will reimburse the Holders of Transfer Restricted
Securities being registered pursuant to the Shelf Registration Statement for the
reasonable fees and disbursements of not more than one counsel chosen by the
Holders of a majority in principal amount of the Transfer Restricted Securities;
provided, however, that in no event shall the aggregate amount payable by the
Company pursuant to this Section 7(b) exceed $25,000.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless (i) each
Holder, (ii) each person, if any, who controls any Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"),
against any losses, claims, damages or liabilities to which such Underwriter or
such controlling person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as any such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(1) any untrue statement or alleged untrue statement of any material
fact contained in (A) the Registration Statement or the Prospectus or any
amendment or supplement thereto or (B) any application or other document,
or any amendment or supplement thereto, executed by the Company or based
upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Securities under the securities
or "Blue Sky" laws thereof or filed with the Commission or any securities
association or securities exchange (each an "Application"); or
(2) the omission or alleged omission to state in (A) the Registration
Statement or any amendment thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading or (B) in any Prospectus or any amendment or supplement
thereto, a material fact required to be stated therein or necessary to
make the statement therein, in the light of the circumstances under which
they were made, not misleading;
and will reimburse, as incurred, each Indemnified Holder for any legal or other
expenses reasonably incurred by such Indemnified Holder in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to an Indemnified
Holder to the extent that any such loss, claim, damage or liability arises out
of or is based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in the Registration Statement or any amendment thereto,
any Prospectus or any amendment or supplement thereto, or any Application in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Indemnified Holder specifically for use therein.
13
<PAGE>
This indemnity agreement will be in addition to any liability that the
Company may otherwise have to the Indemnified Holders. The Company will not,
without the prior written consent of the Indemnified Holders, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification by the
Indemnified Holders may be sought hereunder (whether or not any Indemnified
Holder is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release of all
Indemnified Holders from all liability arising out of such claim, action, suit
or proceeding.
(b) Each Holder of Transfer Restricted Securities will severally and
not jointly indemnify and hold harmless the Company, its directors, officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling person may become subject
under the Securities Act, the Exchange Act, or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment thereto,
any Prospectus or any amendment or supplement thereto or any Application, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement was made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Holders of
Transfer Restricted Securities specifically for use therein; and, subject to the
limitation set forth immediately preceding this clause, will reimburse, as
incurred, any legal or other expenses reasonably incurred by the Company or any
such director, officer or controlling person in connection with investigating or
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability that the Holders of Transfer
Restricted Securities may otherwise have to the indemnified parties. The Holders
of Transfer Restricted Securities will not, without the prior written consent of
the Company, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification by the Company may be sought hereunder (whether or not the
Company or any person who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of the Company and each such
controlling person from all liability arising out of such claim, action, suit or
proceeding or otherwise with the consent of the Company.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party except to the extent that
such omission results in the forfeiture by the indemnifying party of substantial
rights and defenses. In case any such action is brought against any indemnified
party, and such indemnified party notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the named
parties in any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties that are different from or additional to
those available to any such indemnifying party, then the indemnifying parties
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses, other than reasonable and documented
out-of-pocket costs of investigation, subsequently incurred by such indemnified
party in connection with the defense thereof, unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to the
immediately preceding sentence (it being understood, however, that in connection
with such action the indemnifying party shall
14
<PAGE>
not be liable for the expenses of more than one separate counsel (in addition to
local counsel) in any one action or separate but substantially similar actions
in the same jurisdiction arising out of the same general allegations or
circumstances, designated by the Indemnified Holders in the case of paragraph
(a) of this Section 8 or the Company in the case of paragraph (b) of this
Section 8, representing the indemnified parties under such paragraph (a) or
paragraph (b), as the case may be, who are parties to such action or actions);
(ii) the indemnifying party has authorized in writing the employment of counsel
for the indemnified party at the expense of the indemnifying parties; or (iii)
the indemnifying party shall have failed to assume the defense or retain counsel
reasonably satisfactory to the indemnified party. After such notice from the
indemnifying parties to such indemnified party (so long as the indemnified party
shall have informed the indemnifying parties of such action in accordance with
this Section 8 on a timely basis prior to the indemnified party seeking
indemnification hereunder), the indemnifying parties will not be liable under
this Section 8 for the costs and expenses of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party, unless such indemnified party waived its rights under this Section 8, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and the Holders from their sale of Transfer Restricted Securities on
the other or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Company on the one hand and the Holders on the other in
connection with the actions, statements or omissions or alleged actions,
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand, or the Holders on the other, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Holders agree that it would not be equitable
if the amount of such contribution were determined by pro rata or per capita
allocation (even if the Company on the one hand and the Holders on the other
hand were treated as one entity for such purpose) or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), the Holders shall not be obligated to make
contributions hereunder that in the aggregate exceed the dollar amount of
proceeds received by such Holder upon sale of Transfer Restricted Securities
under this Agreement, less the aggregate amount of any damages that the Holders
have otherwise been required to pay by reason of the untrue or alleged untrue
statements, and no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls any of the Holders within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as the Holders, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls any
of the Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, shall have the same rights to contribution as the
Company.
15
<PAGE>
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
The Company shall not be required to participate in an Underwritten
Registration unless Holders of at least $10,000,000 in aggregate principal
amount of Transfer Restricted Securities so request, nor shall the Company be
required to participate in more than two Underwritten Registrations; provided
that, this paragraph in no way alters the Company's other obligations with
respect to this Agreement.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, however, that such investment bankers and managers must
be reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company agrees that monetary damages (including the
liquidated damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
16
<PAGE>
(c) Adjustments Affecting the Notes. The Company will not take any
action, or permit any change to occur, with respect to the Notes that would
materially and adversely affect the ability of the Holders to Consummate any
Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given, unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Pegasus Communications Corporation
5 Radnor Corporate Center, Suite 454
100 Matsonford Road
Radnor, Pennsylvania 19087
Telecopier No.: (610) 341-1835
Attention: Ted S. Lodge, Esq.
With a copy to:
Drinker Biddle & Reath LLP
PNB Building, 11th Floor
1345 Chestnut Street
Philadelphia, PA 19107
Telecopier No.: (215) 988-2757
Attention: Michael B. Jordan, Esq.
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when receipt acknowledged, if telecopied; and on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
17
<PAGE>
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Marshall W. Pagon
----------------------------------
Name: Marshall W. Pagon
Title: President
CIBC OPPENHEIMER CORP.
BT ALEX. BROWN INCORPORATED
By: CIBC Oppenheimer Corp.
By:/s/ William Phoenix
---------------------------
Name: William Phoenix
Title: Managing Director
19
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this registration statement of
Pegasus Communications Corporation on Form S-4 of our report dated February 26,
1998, on our audits of the consolidated financial statements of Pegasus
Communications Corporation as of December 31, 1997. We also consent to the
reference to our firm under the captions "Experts."
/s/ PricewaterhouseCoopers LLP
-------------------------------
PRICEWATERHOUSECOOPERS LLP
Philadelphia, Pennsylvania
January 29, 1999
<PAGE>
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
on the consolidated balance sheets of Digital Television Services, Inc. and
Subsidiaries as of December 31, 1996 and 1997 and the related consolidated
statements of operations, members'/stockholders' equity, and cash flows for the
period from inception (January 30, 1996) through December 31, 1996 and 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
-------------------------
ARTHUR ANDERSEN LLP
Atlanta, Georgia
January 27, 1999
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
FIRST UNION NATIONAL BANK
(Exact Name of Trustee as Specified in its Charter)
22-1147033
(I.R.S. Employer Identification No.)
301 SOUTH COLLEGE STREET, CHARLOTTE, NORTH CAROLINA
(Address of Principal Executive Offices)
28288-0630
(Zip Code)
FIRST UNION NATIONAL BANK
123 SOUTH BROAD STREET
PHILADELPHIA, PA 19109
ATTENTION: CORPORATE TRUST ADMINISTRATION
(215) 985-6000
(Name, address and telephone number of Agent for Service)
PEGASUS COMMUNICATIONS CORPORATION
(Exact Name of Obligor as Specified in its Charter)
DELAWARE
(State or other jurisdiction of Incorporation or Organization)
51-0374669
(I.R.S. Employer Identification No.)
5 RADNOR CORPORATE CENTER - SUITE 454, 100 MATSONFORD ROAD,
RADNOR, PA
(Address of Principal Executive Offices)
19087
(Zip Code)
9-3/4% SERIES B SENIOR NOTES DUE 2006
(Title of Indenture Securities)
<PAGE>
1. General information.
Furnish the following information as to the trustee:
a) Name and address of each examining or supervisory authority to which it
is subject:
Comptroller of the Currency
United States Department of the Treasury
Washington, D.C. 20219
Federal Reserve Bank
Richmond, Virginia 23219
Federal Deposit Insurance Corporation
Washington, D.C. 20429
b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3. Voting securities of the trustee.
Furnish the following information as to each class of voting securities
of the trustee:
Not applicable - see answer to Item 13.
4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, furnish the following information:
Not applicable - see answer to Item 13.
5. Interlocking directorates and similar relationships with the obligor or
underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or representative
of the obligor or of any underwriter for the obligor, identify each such person
having any such connection and state the nature of each such connection.
Not applicable - see answer to Item 13.
-1-
<PAGE>
6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner, and
executive officer of the obligor:
Not applicable - see answer to Item 13.
7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, and executive officer of each such underwriter:
Not applicable - see answer to Item 13.
8. Securities of the obligor owned or held by the trustee.
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default by the
trustee:
Not applicable - see answer to Item 13.
9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the obligor, furnish
the following information as to each class of securities of such underwriter any
of which are so owned or held by the trustee:
Not applicable - see answer to Item 13.
10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the knowledge of
the trustee (1) owns 10 percent or more of the voting stock of the obligor or
(2) is an affiliate, other than a subsidiary, of the obligor, furnish the
following information as to the voting securities of such person:
Not applicable - see answer to Item 13.
-2-
<PAGE>
11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge of the
trustee, owns 50 percent or more of the voting securities of the obligor,
furnish the following information as to each class of securities of such person
any of which are so owned or held by the trustee:
Not applicable - see answer to Item 13.
12. Indebtedness of the obligor to the trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
Not applicable - see answer to Item 13.
13. Defaults by the obligor.
(a) State whether there is or has been a default with respect to the
securities under this indenture. Explain the nature of any such default.
None.
(b) If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
None
14. Affiliations with the underwriters.
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not applicable - see answer to Item 13.
15. Foreign trustee.
Identify the order or rule pursuant to which the trustee is authorized
to act as sole trustee under indentures qualified or to be qualified under the
Act.
Not applicable - trustee is a national banking association organized
under the laws of the United States.
-3-
<PAGE>
16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
_____ 1. Copy of Articles of Association of the trustee as now
in effect.*
_____ 2. Copy of the Certificate of the Comptroller of the Currency
dated March 4, 1998, evidencing the authority of the
trustee to transact business.**
_____ 3. Copy of the Certification of Fiduciary Powers of the trustee
by the Office of the Comptroller of the Currency dated
March 4, 1998.**
_____ 4. Copy of existing by-laws of the trustee.*
_____ 5. Copy of each indenture referred to in Item 4, if the obligor
is in default.
-Not Applicable.
__X__ 6. Consent of the trustee required by Section 321(b) of the Act.
__X__ 7. Copy of report of condition of the trustee at the close of
business on September 30, 1998, published pursuant to the
requirements of its supervising authority.
_____ 8. Copy of any order pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
- Not Applicable
_____ 9. Consent to service of process required of foreign trustees
pursuant to Rule 10a-4 under the Act.
- Not Applicable
- ---------------------
* Previously filed with the Securities and Exchange Commission on March
16, 1998 as an Exhibit to Form T-1 in connection with Registration
Statement Number 333-47985, ** and filed with the Securities and
Exchange Commission on July 15, 1998 as an Exhibit to Form T-1 in
connection with Registration Statement Number 333-59145, and
incorporated herein by reference.
-4-
<PAGE>
NOTE
The trustee disclaims responsibility for the accuracy or completeness
of information contained in this Statement of Eligibility and Qualification not
known to the trustee and not obtainable by it through reasonable investigation
and as to which information it has obtained from the obligor and has had to rely
or will obtain from the principal underwriters and will have to rely.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, First Union National Bank, a national banking association organized and
existing under the laws of the United States of America, has duly caused this
Statement of Eligibility and Qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Philadelphia and
Commonwealth of Pennsylvania, on the 26th day of January, 1999.
FIRST UNION NATIONAL BANK
By: s/Alan G. Finn
---------------
Alan G. Finn
Vice President
-5-
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, and in connection with the proposed issue of Pegasus Communications
Corporation, Debt Securities, First Union National Bank, hereby consents that
reports of examinations by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
FIRST UNION NATIONAL BANK
By: s/Alan G. Finn
---------------
Alan G. Finn
Vice President
Philadelphia, Pennsylvania
January 26, 1999
-6-
<PAGE>
EXHIBIT 7
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the First Union National
Bank, Charlotte, North Carolina, at the close of business on September 30, 1998
published in response to call made by Comptroller of the Currency, under title
12, United States Code, Section 161. Charter Number 22693 Comptroller of the
Currency.
Statement of Resources and Liabilities
<TABLE>
<CAPTION>
ASSETS
Thousand of Dollars
-------------------
<S> <C>
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin..................................................10,212,563
Interest-bearing balances............................................................................1,529,435
Securities .............................................................................................. /////////
Hold-to-maturity securities..........................................................................1,994,665
Available-for-sale securities.......................................................................37,427,525
Federal funds sold and securities purchases to resell.....................................................7,551,730
Loans and lease financing receivables:
Loan and leases, net of unearned income.................................................................133,841,290
LESS: Allowance for loan and lease losses.................................................................1,856,548
LESS: Allocated transfer risk reserve.............................................................................0
Loans and leases, net of unearned income, allowance, and
Reserve ................................................................................................131,984,742
Assets held in trading accounts...........................................................................8,349,640
Premises and fixed assets (including capitalized leases)..................................................3,208,660
Other real estate owned.....................................................................................127,757
Investment in unconsolidated subsidiaries and associated.................................................//////////
Companies ..................................................................................................351,648
Customer's liability to this bank on acceptances outstanding..............................................1,026,154
Intangible assets ........................................................................................5,215,196
Other assets..............................................................................................9,099,122
Total assets............................................................................................218,078,837
LIABILITIES
Deposits:
In domestic offices............................................................................131,541,691
Noninterest-bearing........................................................................23,997,063
Interest-bearing..........................................................................107,544,628
In foreign offices, Edge and Agreement subsidiaries,
and IBFs....................................................................................8,708,735
Noninterest-bearing...........................................................................400,989
Interest-bearing............................................................................8,307,746
Federal funds purchased and securities sold under agreements
to repurchase.......................................................................................24,903,299
Demand notes issued to the U.S. Treasury................................................................ 772,252
Trading liabilities.......................................................................................6,496,578
Other borrowed money:................................................................................... /////////
With original maturity of one year or less......................................................11,928,951
With original maturity of more than one year thru 3 yrs..........................................1,260,353
With a maturity of more than three years...........................................................775,219
Not applicable.............................................................................................////////
Bank's liability on acceptances executed and outstanding..................................................1,036,587
Subordinated notes and debentures.........................................................................3,501,546
Other liabilities.........................................................................................9,211,139
Total liabilities.......................................................................................200,136,350
Not applicable..........................................................................................///////////
EQUITY CAPITAL
Perpetual preferred stock and related surplus...............................................................160,540
Common Stock................................................................................................454,543
Surplus..................................................................................................13,206,354
Undivided profits and capital reserves....................................................................3,553,449
Net unrealized holding gains (losses) on available-for-sale.............................................../////////
Securities..................................................................................................572,731
Cumulative foreign currency translation adjustments..........................................................(5,130)
Total equity capital.....................................................................................17,942,487
Total liabilities and equity capital....................................................................218,078,837
</TABLE>
-7-
<PAGE>
----------
LETTER OF TRANSMITTAL
for
9 3/4% Series A Senior Notes due 2006
of
Pegasus Communications Corporation
Pursuant to the Prospectus
dated ________ ___, 1999
by
Pegasus Communications Corporation
===============================================================================
PEGASUS COMMUNICATIONS CORPORATION WILL ACCEPT ALL OLD NOTES (AS HEREINAFTER
DEFINED) TENDERED AND NOT WITHDRAWN BEFORE 5:00 P.M., NEW YORK CITY TIME, ON
_____________ ___, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN AT ANY TIME BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
===============================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
The Exchange agent is:
First Union National Bank
By Mail: By Hand/Overnight Express: By Facsimile:
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>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus dated
______________ ___, 1999 (the "Prospectus"), of Pegasus Communications
Corporation (the "Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), which together with the Prospectus constitutes the Company's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its 9 3/4%
Series B Senior Notes due 2006 (the "New Notes") for each $1,000 principal
amount of its outstanding 9 3/4% Series A Senior Notes due 2006 (the "Old
Notes"). Recipients of the Prospectus should read the requirements described in
such Prospectus with respect to eligibility to participate in the Exchange
Offer. Capitalized terms used but not defined herein have the meaning given to
them in the Prospectus.
The undersigned hereby tenders the Old Notes described in the
box entitled "Description of Old Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Old Notes and the undersigned
represents that it has received from each beneficial owner of old notes
("Beneficial Owners") a duly completed and executed form of "Instruction to
Registered Holder from Beneficial Owner" accompanying this Letter of
Transmittal, instructing the undersigned to take the action described in this
Letter of Transmittal.
<PAGE>
This Letter of Transmittal is to be used only by a holder of
Old Notes (i) if certificates representing Old Notes are to be forwarded
herewith or (ii) if delivery of old notes is to be made by book-entry transfer
to the Exchange agent's account at The Depository Trust Company ("Depositary"),
pursuant to the procedures set forth in the section of the Prospectus entitled
"The Exchange Offer -- Procedures for Tendering." If delivery of the Old Notes
is to be made by book-entry transfer to the account maintained by the Exchange
agent at the Depositary, this Letter of Transmittal need not be manually
executed; provided, however, that tenders of the Old Notes must be effected in
accordance with the procedures mandated by the Depositary's Automated Tender
Offer Program and the procedures set forth in the Prospectus under the caption
"The Exchange Offer -- Book-Entry Transfer."
The undersigned hereby represents and warrants that the
information set forth in the box entitled "Beneficial Owner(s)" is true and
correct.
Any beneficial owner whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such registered holder of Old Notes promptly
and instruct such registered holder of Old Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, before completing and executing this Letter of
Transmittal and delivering its Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such beneficial owner's name or obtain
a properly completed bond power from the registered holder of Old Notes. The
transfer of record ownership may take considerable time.
To properly complete this Letter of Transmittal, a holder of
Old Notes must (i) complete the box entitled "Description of Old Notes," (ii) if
appropriate, check and complete the boxes relating to book-entry transfer,
guaranteed delivery, Special Issuance Instructions and Special Delivery
Instructions, (iii) sign the Letter of Transmittal by completing the box
entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each holder of
Old Notes should carefully read the detailed instructions below before
completing the Letter of Transmittal.
Holders of Old Notes who desire to tender their Old Notes for
exchange and (i) whose Old Notes are not immediately available, (ii) who cannot
deliver their Old Notes and all other documents required hereby to the Exchange
Agent on or before the Expiration Date or (iii) who are unable to complete the
procedure for book-entry transfer on a timely basis, must tender the old notes
pursuant to the guaranteed delivery procedures set forth in the section of the
Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." See
Instruction 2.
Holders of Old Notes who wish to tender their Old Notes for
exchange must, at a minimum, complete columns (1) through (3) in the box below
entitled "Description of Old Notes" and sign the box below entitled "Sign Here."
If only those columns are completed, such holder of Old Notes will have tendered
for exchange all Old Notes listed in column (3) below. If the holder of Old
Notes wishes to tender for exchange less than all of such Old Notes, column (4)
must be completed in full. In such case, such holder of Old Notes should refer
to Instruction 5.
-2-
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
DESCRIPTION OF OLD NOTES
=================================================================================================================
(1) (2) (3) (4)
<S> <C> <C> <C>
Principal
Amount
Tendered
For
Exchange
(only if
different
amount
Old from
Note column
Number(s)(1) (3)) (must
(Attach be in
Name(s) and Address(es) of Registered signed List Aggregate integral
Holder(s) of Old Note(s), exactly as name(s) if Principal multiples
appear(s) on Old Note Certificate(s) necessary) Amount of $1,000)(2)
(Please fill in, if blank)
- -----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
=================================================================================================================
</TABLE>
(1) Column (2) need not be completed by holders of Old Notes tendering Old
Notes for exchange by book-entry transfer. Please check the appropriate
box below and provide the requested information.
(2) Column (4) need not be completed by holders of Old Notes who wish to
tender for exchange the principal amount of Old Notes listed in Column
(3). Completion of column (4) will indicate that the holder of Old
Notes wishes to tender for exchange only the principal amount of Old
Notes indicated in column (4).
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITARY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS
(AS HEREINAFTER DEFINED) ONLY):
Name of Tendering Institution
Account Number
Transaction Code Number
-3-
<PAGE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Old Note(s)
Date of Execution of Notice of Guaranteed Delivery
Window Ticket Number (if available)
Name of Institution which Guaranteed Delivery
Account Number (if delivered by book-entry transfer)
<TABLE>
<CAPTION>
======================================================== ======================================================
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 6, 7 and 8) (See Instructions 1, 6, 7 and 8)
<S> <C>
To be completed ONLY (i) if the New Notes issued To be completed ONLY if the New Notes issued in
in exchange for Old Notes, certificates for Old Notes exchange for Old Notes or certificates for Old Notes
in a principal amount not exchanged for New Notes or in a principal amount not exchanged for New Notes or
old notes (if any) not tendered for exchange, are to Old Notes (if any) not tendered for exchange, are to
be issued in the name of someone other than the be mailed or delivered to someone other than the
undersigned, or (ii) if Old Notes tendered by undersigned, or to the undersigned at an address
book-entry transfer which are not exchanged are to be other than the address shown below the undersigned's
returned by credit to an account maintained at the signature.
Depositary.
Mail or delivered to:
Issue to:
Name______________________________________________
Name______________________________________________ (Please Print)
(Please Print)
Address___________________________________________
Address___________________________________________ __________________________________________________
__________________________________________________ __________________________________________________
__________________________________________________ (Include Zip Code)
(Include Zip Code)
__________________________________________________
__________________________________________________ (Tax Identification or Social Security No.)
(Tax Identification or Social Security No.)
Credit Old Notes not exchanged and delivered by
book-entry transfer to the Depositary account set
forth below:
__________________________________________________
(Account Number)
======================================================== ======================================================
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
BENEFICIAL OWNER(S)
- --------------------------------------------------------------------------------------------------------------------
State of Principal Residence of Each Principal Amount of old notes
Beneficial Owner of old notes Held for Account of Beneficial Owner(s)
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
</TABLE>
If delivery of Old Notes is to be made by book-entry transfer
to the account maintained by the Exchange agent at the Depositary, then tenders
of Old Notes must be effected in accordance with the procedures mandated by the
Depositary's Automated Tender Offer Program and the procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer."
-5-
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the offer by Pegasus Communications Corporation
(the "Company"), upon the terms and subject to the conditions set forth in the
Prospectus dated ____________ __, 1999 (the "Prospectus") and this Letter of
Transmittal (the "Letter of Transmittal"), which together with the Prospectus
constitutes the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 9 3/4% Series B Senior Notes Due 2006 (the "New Notes")
for each $1,000 principal amount of its outstanding 9 3/4% Series A Senior Notes
Due 2006 (the "Old Notes"). The undersigned hereby tenders to First Union
National Bank for exchange the old notes indicated above.
By executing this Letter of Transmittal and subject to and
effective upon acceptance for exchange of the old notes tendered for exchange
herewith, the undersigned will have irrevocably sold, assigned, transferred and
exchanged, to the Company, all right, title and interest in, to and under all of
the old notes tendered for exchange hereby, and hereby appoints the Exchange
Agent as the true and lawful agent and attorney-in-fact (with full knowledge
that the Exchange Agent also acts as agent of the Company) of such holder of Old
Notes with respect to such old notes, with full power of substitution to (i)
deliver certificates representing such Old Notes, or transfer ownership of such
old notes on the account books maintained by the Depositary (together, in any
such case, with all accompanying evidences of transfer and authenticity), to the
Company, (ii) present and deliver such Old Notes for transfer on the books of
the Company and (iii) receive all benefits and otherwise exercise all rights and
incidents of beneficial ownership with respect to such Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that (i) the
undersigned is the owner; (ii) has a net long position within the meaning of
Rule 14e-4 under the Securities Exchange Act as amended ("Rule 14e-4") equal to
or greater than the principal amount of Old Notes tendered hereby; (iii) the
tender of such Old Notes complies with Rule 14e-4 (to the extent that Rule 14e-4
is applicable to such exchange); (iv) the undersigned has full power and
authority to tender, exchange, assign and transfer the Old Notes and (v) that
when such Old Notes are accepted for exchange by the Company, the Company will
acquire good and marketable title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The undersigned will, upon receipt, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the exchange, assignment and transfer of the old notes tendered for
exchange hereby.
The undersigned hereby further represents to the Company that
(i) the New Notes to be acquired by the undersigned in exchange for the Old
Notes tendered hereby and any beneficial owner(s) of such Old Notes in
connection with the Exchange Offer will be acquired by the undersigned and such
beneficial owner(s) in the ordinary course of business of the undersigned, (ii)
the undersigned (if not a broker-dealer referred to in the last sentence of this
paragraph) are not participating and do not intend to participate in the
distribution of the New Notes, (iii) the undersigned have no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) the undersigned and each beneficial owner acknowledge and agree that
any person participating in the Exchange Offer for the purpose of distributing
the New Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the New Notes acquired by such person and cannot rely on the
position of the staff of the SEC set forth in certain no-action letters, (v) the
undersigned and each beneficial owner understand that a secondary resale
transaction described in clause (iv) above should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the SEC
and (vi) neither the undersigned nor any beneficial owner is an "affiliate" of
the Company, as defined under Rule 405 under the Securities Act. If the
undersigned 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, it acknowledges that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such new notes received in respect of such Old Notes pursuant to the
Exchange Offer; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
-6-
<PAGE>
For purposes of the Exchange Offer, the Company will be deemed
to have accepted for exchange, and to have exchanged, validly tendered Old
Notes, if, as and when the Company gives oral or written notice thereof to the
Exchange agent. Tenders of Old Notes for exchange may be withdrawn at any time
before 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders" in the Prospectus. Any Old Notes tendered by the
undersigned and rejected for exchange will be returned to the undersigned at the
address set forth above unless otherwise indicated in the box above entitled
"Special Delivery Instructions."
The undersigned acknowledges that the Company's acceptance of
Old Notes validly tendered for exchange pursuant to any one of the procedures
described in the section of the Prospectus entitled "The Exchange Offer" and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer.
Unless otherwise indicated in the box entitled "Special
Issuance Instructions," please return any Old Notes not tendered for exchange in
the name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for Old
Notes not tendered or exchanged (and accompanying documents, as appropriate) to
the undersigned at the address shown below the undersigned's signature(s). If
both "Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the certificates representing the New Notes issued in
exchange for the Old Notes accepted for exchange in the name(s) of, and return
any Old Notes not tendered for exchange or not exchanged to, the person(s) so
indicated. The undersigned recognizes that the Company has no obligation
pursuant to the "Special Issuance Instructions" and "Special Delivery
Instructions" to transfer any Old Notes from the name of the holder of Old
Note(s) thereof if the Company rejects for exchange any of the Old Notes so
tendered for exchange or if such transfer would not be in compliance with any
transfer restrictions applicable to such Old Note(s).
To validly tender old notes for exchange, holders of Old Notes
must complete, execute, and deliver this Letter of Transmittal.
Except as stated in the Prospectus, all authority herein
conferred or agreed to be conferred shall survive the death or incapacity of the
undersigned, and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Old Notes is irrevocable.
===============================================================================
SIGN HERE
X__________________________________________________________________________X
(Signature(s) of Owner(s))
Date: _______________, 199_
Must be signed by the registered holder(s) of old notes exactly as name(s)
appear(s) on certificate(s) representing the Old Notes or on a security position
listing or by person(s) authorized to become registered Old Note holder(s) by
certificates and documents transmitted herewith. If signature is by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, please
provide the following information. (See Instruction 6).
Name(s)____________________________________________
(Please Print)
Capacity (full title)______________________________
===============================================================================
-7-
<PAGE>
===============================================================================
(Include Zip Code)
Area Code and Telephone No. (_____)____________________________________
Tax Identification or Social Security Nos._____________________________
Please complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 1)
Authorized Signature__________________________________________________
Dated_________________________________________________________________
Name and Title________________________________________________________
(Please Print)
Name of Firm _________________________________________________________
===============================================================================
-8-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or is a commercial bank or
trust company having an office or correspondence in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934 which is a member of one of the following
recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the old notes
tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such old notes are
tendered for the account of an Eligible institution. In all other cases, all
signatures must be guaranteed by an eligible institution.
2. Delivery of this Letter of Transmittal and Old Notes; Guaranteed
Delivery Procedure. This Letter of Transmittal is to be completed by holders of
old notes (i) if certificates are to be forwarded herewith or (ii) if tenders
are to be made pursuant to the procedures for tender by book-entry transfer or
guaranteed delivery set forth in the section of the Prospectus entitled "The
exchange offer." Certificates for all physically tendered old notes or any
confirmation of a book-entry transfer (a "Book-Entry Confirmation"), as well as
a properly completed and duly executed copy of this Letter of Transmittal or
facsimile hereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange agent at its address set forth on
the cover of this Letter of Transmittal before 5:00 p.m., New York City time, on
the Expiration Date. Holders of old notes who elect to tender old notes and (i)
whose old notes are not immediately available, (ii) who cannot deliver the old
notes or other required documents to the Exchange agent before 5:00 p.m., New
York City time on the Expiration Date or (iii) who are unable to complete the
procedure for book-entry transfer on a timely basis, may have such tender
effected if (a) such tender is made by or through an Eligible institution; and
(b) before 5:00 p.m., New York City time, on the Expiration Date, the Exchange
agent has received from such Eligible institution a properly completed and duly
executed Letter of Transmittal (or a facsimile hereof) and Notice of Guaranteed
Delivery (by telegram, telex, facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of such old notes, the
certificate numbers(s) of such old notes and the principal amount of old notes
tendered for exchange, stating that tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, the certificates representing such old notes (or a Book-Entry
Confirmation), in proper form for transfer, and any other documents required by
this Letter of Transmittal, will be deposited by such Eligible institution with
the Exchange agent; and (c) certificates for all tendered old notes, or a
Book-Entry Confirmation, together with a copy of the previously executed Letter
of Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal are received by the Exchange agent within five New York
Stock Exchange trading days after the Expiration Date.
The method of delivery of Old Notes, this letter of
transmittal and all other required documents is at the election and risk of the
tendering holder of old notes. Except as otherwise provided below, the delivery
will be deemed made only when actually received or confirmed by the exchange
agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Neither this letter of transmittal nor any old
notes should be sent to the company or the trustee.
No alternative, conditional or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter of
Transmittal (or facsimile hereof, if applicable), waive any right to receive
notice of the acceptance of their Old Notes for exchange.
-9-
<PAGE>
3. Inadequate Space. If the space provided in the box entitled
"Description of Old Notes" above is inadequate, the certificate numbers and
principal amounts of the Old Notes being tendered should be listed on a separate
signed schedule affixed hereto.
4. Withdrawals. A tender of Old Notes may be withdrawn at any time
before 5:00 p.m., New York City time, on the Expiration Date by delivery of
written notice of withdrawal to the Exchange Agent at the address set forth on
the cover of this Letter of Transmittal. To be effective, a notice of withdrawal
of Old Notes must (i) specify the name of the person who tendered the Old Notes
to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and aggregate principal amount of
such Old Notes), (iii) be signed by the holder of Old Notes 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) or be accompanied by
documents of transfer sufficient to have the applicable transfer agent register
the transfer of such Old Notes into the name of the person withdrawing the
tender. Withdrawals of tenders of Old Notes may not be rescinded, and any Old
Notes withdrawn will thereafter be deemed not validly tendered for purposes of
the Exchange Offer and no New Notes will be issued with respect thereto unless
the Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes
may be retendered by following one of the procedures described in the section of
the Prospectus entitled "The Exchange Offer -- Procedures for Tendering" at any
time before 5:00 p.m., New York City time, on the Expiration Date.
5. Partial Tenders. (Not applicable to holders of Old Notes who tender
Old Notes by book-entry transfer). Tenders of Old Notes will be accepted only in
integral multiples of $1,000 principal amount. If a tender for exchange is to be
made with respect to less than the entire principal amount of any Old Notes,
fill in the principal amount of Old Notes which are tendered for exchange in
column (4) of the box entitled "Description of Old Notes," as more fully
described in the footnotes thereto. In case of a partial tender for exchange, a
new certificate, in fully registered form, for the remainder of the principal
amount of the Old Notes, will be sent to the holders of Old Notes unless
otherwise indicated in the appropriate box on this Letter of Transmittal as
promptly as practicable after the expiration or termination of the Exchange
Offer.
6. Signatures on this Letter of Transmittal, Powers of Attorney and
Endorsements.
(a) The signature(s) of the holder of Old Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the Old
Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Old Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal and any necessary or required
documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Old
Notes listed and transmitted hereby, no endorsements of Old Notes or separate
powers of attorney are required. If, however, Old Notes not tendered or
rejected, are to be issued or returned in the name of a person other than the
holder of Old Notes, then the Old Notes transmitted hereby must be endorsed or
accompanied by appropriate powers of attorney in a form satisfactory to the
Company, in either case signed exactly as the name(s) of the holder of Old Notes
appear(s) on the Old Notes. Signatures on such Old Notes or powers of attorney
must be guaranteed by an Eligible institution (unless signed by an Eligible
institution).
(e) If this Letter of Transmittal or Old Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Company of their authority so to act must be submitted.
-10-
<PAGE>
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Old Notes listed, the old notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name(s) of the registered holder of Old Notes appear(s) on the certificates.
Signatures on such Old Notes or powers of attorney must be guaranteed by an
Eligible institution (unless signed by an Eligible institution).
7. Transfer Taxes. Holders tendering pursuant to the Exchange Offer
will not be obligated to pay brokerage commissions or fees to pay transfer taxes
with respect to their exchange under the exchange offer unless the box entitled
"Special Issuance Instructions" in this Letter of Transmittal has been
completed, or unless the securities to be received upon exchange are to be
issued to any person other than the holder of the Old Notes tendered for
exchange. The Company will pay all other charges or expenses in connection with
the Exchange Offer. If holders tender Old Notes for exchange and the Exchange
Offer is not consummated, certificates representing the old notes will be
returned to the holders at the Company's expense.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the certificate(s) specified in this Letter
of Transmittal.
8. Special Issuance and Delivery Instructions. If the new notes are to
be issued, or if any Old Notes not tendered for exchange are to be issued or
sent to someone other than the holder of Old Notes or to an address or other
than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed. Holders of Old Notes tendering Old Notes by book-entry
transfer may request that Old Notes rejected be credited to such account
maintained at the Depositary as such holder of Old Notes may designate.
9. Irregularities. All questions as to the form of documents and the
validity, eligibility (including time or receipt), acceptance and withdrawal of
Old Notes will be determined by the Company, in its sole discretion, whose
determination shall be final and binding. The Company reserves the absolute
right to reject any or all tenders for exchange of any particular Old Notes that
are not in proper form, or the acceptance of which would, in the opinion of the
Company or its counsel, be unlawful. The Company reserves the absolute right to
waive any defect, irregularity or condition of tender for exchange with regard
to any particular Old Notes. The Company's interpretation of the term of, and
conditions to, the exchange offer (including the instructions herein) will be
final and binding. Unless waived, any defects or irregularities in connection
with the Exchange Offer must be cured within such time as the Company shall
determine. Neither the Company, the Exchange Agent nor any other person shall be
under any duty to give notice of any defects or irregularities in Old Notes
tendered for exchange, nor shall any of them incur any liability for failure to
give such notice. A tender of Old Notes will not be deemed to have been made
until all defects and irregularities with respect to such tender have been cured
or waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, amend or modify certain of the specified conditions as described under
"The Exchange Offer -- Conditions" in the Prospectus in the case of any Old
Notes tendered (except as otherwise provided in the Prospectus).
11. Mutilated, Lost, Stolen or Destroyed old notes. If a holder of Old
Notes desires to tender Old Notes pursuant to the Exchange Offer, but any of
such Old Notes has been mutilated, lost, stolen or destroyed, such holder of Old
Notes should write to or telephone the Trustee at the address listed below,
concerning the procedures for obtaining replacement certificates for such Old
Notes, arranging for indemnification or any other matter that requires handling
by the Trustee:
First Union National Bank
123 South Broad Street
PA 1249
Philadelphia, Pennsylvania 19109
Attention: Corporate Trust Administration
(215) 985-7207
-11-
<PAGE>
12. Requests for Information or Additional Copies. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange agent at the address or telephone
number set forth on the cover of this Letter of Transmittal.
IMPORTANT: This Letter of Transmittal (or a facsimile thereof, if
applicable) together with certificates, or confirmation of book-entry or the
Notice of Guaranteed Delivery, and all other required documents must be received
by the Exchange agent before 5:00 p.m., New York City time, on the Expiration
Date.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of old notes
whose tendered old notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payer), through the
Exchange agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Old Notes is
awaiting a TIN) and that (A) the holder of old notes has not been notified by
the Internal Revenue Service that he or she is subject to backup withholding as
a result of a failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the holder of Old Notes that he or she is no longer
subject to backup withholding; or (ii) an adequate basis for exemption from
backup withholding. If such holder of Old Notes is an individual, the TIN is
such holder's social security number. If the Exchange agent is not provided with
the correct taxpayer identification number, the holder of Old Notes may be
subject to certain penalties imposed by the Internal Revenue Service.
Certain holders of old notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Old Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange agent will
provide upon request) signed under penalty of perjury, attesting to the holder's
exempt status. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, the Company is required to
withhold 31% of any payment made to the holder of Old Notes or other payee.
Backup withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced by
the amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The holder of Old Notes is required to give the Exchange agent
the TIN (e.g., social security number or employer identification number) of the
record owner of the Old Notes. If the Old Notes are held in more than one name
or are not held in the name of the actual owner, consult the enclosed Guidelines
for additional guidance regarding which number to report.
-12-
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
PAYER'S NAME: PEGASUS COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR __________________________________
TIN IN THE BOX AT RIGHT AND Social Security Number
Form W-9 CERTIFY BY SIGNING AND DATING
BELOW OR
Department of the Treasury
Internal Revenue Service __________________________________
Employer Identification Number
Payer's Request for Taxpayer
Identification Number (TIN)
----------------------------------------------------------------------------------
Part 2 - Part 3 -
Certification Under Penalties of Perjury, I
certify that: Awaiting
TIN [ ]
(1) The number shown on this form is my
current taxpayer identification
number (or I am waiting for a number
to be issued to me) and
(2) I am not subject to backup
withholding either because I have not
been notified by the Internal Revenue
Service (the "IRS") that I am subject
to backup withholding as a result of
a failure to report all interest or
dividends, or the IRS has notified
me that I am no longer subject to
backup withholding.
----------------------------------------------------------------------------------
Certificate instructions - You must cross out item (2) in Part 2 above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you are subject to backup withholding you receive another
notification from the IRS stating that you are no longer subject to backup
withholding, do not cross out item (2).
SIGNATURE__________________________________________ DATE ________________
NAME_____________________________________________________________________
ADDRESS__________________________________________________________________
CITY ______________________ STATE_________________ ZIP CODE _____________
=====================================================================================================================
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
-13-
<PAGE>
===============================================================================
PAYER'S NAME: PEGASUS COMMUNICATIONS CORPORATION
===============================================================================
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver such an application in the near future. I understand
that if I do not provide a taxpayer identification number with sixty (60) days,
31% of all reportable payments made to me thereafter will be withheld until I
provide such a number.
- -------------------------------------------------- -------------------
Signature Date
===============================================================================
-14-
<PAGE>
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
PEGASUS COMMUNICATIONS CORPORATION
9 3/4% Series A Senior notes due 2006
The undersigned hereby acknowledges receipt of the Prospectus dated
______________ __, 1999 (the "Prospectus") of Pegasus Communications
Corporation, a Delaware corporation (the "Company") and the accompanying Letter
of Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "exchange offer"). Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be
taken by you relating to the exchange offer with respect to the 9 3/4% Series A
Senior notes due 2006(the "old notes") held by you for the account of the
undersigned.
The aggregate face amount of the old notes held by you for the account
of the undersigned is (fill in amount):
$__________ of the old notes.
With respect to the exchange offer, the undersigned hereby instructs
you (check appropriate box):
[ ] To TENDER the following old notes held by your for the account of
the undersigned (insert principal amount of old notes to be tendered, if any):
$__________ of the old notes.
[ ] NOT to TENDER any old notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Old Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) ____________________, (ii) the undersigned is acquiring the 9
3/4% Series B Senior notes due 2006 (the "New Notes") in the ordinary course of
business of the undersigned, (iii) the undersigned is not participating, does
not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of New Notes, (iv) the undersigned
acknowledges that any person participating in the Exchange Offer for the purpose
of distributing the New Notes must comply with the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended, in connection
with any resale transaction of the New Notes acquired by such person and cannot
rely on the position of the Staff of the Securities and Exchange Commission set
forth in certain no-action letters (See the section of the Prospectus entitled
"The Exchange Offer -- Resale of the New Notes"), (v) the undersigned
understands that a secondary resale transaction described in clause (iv) above
should be covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, if applicable, of
Regulation S-K of the Commission, (vi) the undersigned is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company, (vii) if the
undersigned is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, a distribution of New Notes; and (viii) if the undersigned
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, it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes received in respect of such Old Notes pursuant to the Exchange
Offer; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act; (b) to agree, on behalf of the undersigned, as
set forth in the Letter of Transmittal; and (c) to take such other action as
necessary under the Prospectus or the Letter of Transmittal to effect the valid
tender of Old Notes.
SIGN HERE
Name of Beneficial Owner(s):
Signature(s):
Name(s) (please print):
Address:
Telephone Number:
Taxpayer Identification or Social Security Number:
Date:
-15-
