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As filed with the Securities and Exchange Commission on March 10, 2000
Registration No. 333-94231
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO THE
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PEGASUS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
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4833
----
(Primary Standard Industrial Classification Code Number)
DELAWARE 51-0374669
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
c/o Pegasus Communications Management Company
225 City Line Avenue
Suite 200
Bala Cynwyd, Pennsylvania 19004
(888) 438-7488
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
--------------
Ted S. Lodge, Senior Vice President, Chief Administrative Officer,
General Counsel and Secretary
c/o Pegasus Communications Management Company
225 City Line Avenue
Suite 200
Bala Cynwyd, Pennsylvania 19004
(888) 438-7488
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Scott A. Blank, Esq. Michael B. Jordan, Esq.
c/o Pegasus Communications Diana E. McCarthy, Esq.
Management Company Drinker Biddle & Reath LLP
225 City Line Avenue One Logan Square
Suite 200 18th & Cherry Streets
Bala Cynwyd, Pennsylvania 19004 Philadelphia, Pennsylvania 19103-6996
(888) 438-7488 (215) 988-2700
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
______________
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall thereafter
become effective on such date as the Commission, acting pursuant to said Section
8(a) may determine.
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Prospectus
March __, 2000
[GRAPHIC OMITTED]
PEGASIS
COMMUNICATIONS
Pegasus Communications Corporation
Exchange of registered 12 1/2% Series B senior
notes due 2007 for any and all of our
unregistered outstanding
12 1/2% Series A senior notes due 2007
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o We offer to exchange new registered 12 1/2% Series B senior notes due
2007 for our outstanding 12 1/2 % Series A senior notes due 2007, of
which $155.0 million in principal amount at maturity are outstanding.
o There has been no public market for the notes before the exchange
offer. We do not intend to apply for the listing of the new notes on
any national securities exchange or for quotation through the Nasdaq
National Market.
o The offer will expire at 5:00 p.m., New York City time, on __________,
2000, unless extended or earlier terminated.
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This investment involves risks. See Risk Factors beginning on page 8.
================================================================================
Neither the SEC nor any state securities commission has
determined whether this prospectus is truthful or complete. Nor have they made,
nor will they make, any determination as to whether anyone should buy these
securities. Any representation to the contrary is a criminal offense.
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Prospectus Summary
This summary highlights information contained elsewhere in this
prospectus. This summary is not complete and may not contain all of the
information that you should consider before deciding to exchange your 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.
The information in this prsopectus assumes the completion of the
acquisition of Golden Sky Holdings, Inc. and other pending acquisitions
described in our annual report on Form 10-K.
Pegasus Communications Corporation is:
o The largest independent distributor of DIRECTV(R) with 725,800
subscribers at December 31, 1999. We have the exclusive right
to distribute DIRECTV digital broadcast satellite services to
over 5.3 million rural households in 36 states. We distribute
DIRECTV through the Pegasus retail network, a network in
excess of 2,500 independent retailers.
o The owner or programmer of ten TV stations affiliated with
either Fox, UPN or the WB.
o One of the fastest growing media companies in the United
States. We have increased our revenues at a compound growth
rate of 89% per annum since our inception in 1991.
We were incorporated in Delaware in May 1996. Our principal executive
office is at 225 City Line Avenue, Suite 200, Bala Cynwyd, PA 19004. Our
telephone number is (888) 438-7488.
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The Exchange Offer
<S> <C>
The Old Notes................... We issued $155.0 million in principal amount of our 12 1/2% Series A senior notes due
2007 on November 19, 1999. Because we did not register the old notes under the
Securities Act, they are subject to restrictions on transfer.
The New Notes................... We offer $155.0 million in principal amount of our 12 1/2% Series B senior notes due
2007 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 __________ 2000, 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 19, 1999, 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.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Withdrawal Rights............... You may withdraw your tender of old notes at any time before the exchange offer expires.
The procedure for doing this is described in The Exchange Offer -- Withdrawal of
Tenders.
Certain United States Federal
Income Tax Consequences of the
Exchange Offer.................. We discuss certain federal income tax considerations relating to the exchange in
Material United States Federal Income Tax Consequences of the Exchange Offer and
Material United States Federal Income Tax Consequences.
</TABLE>
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<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
Total amount of notes offered..... $155.0 million in principal amount of 121/2% Series B senior notes due 2007.
Maturity.......................... August 1, 2007.
Interest.......................... Annual rate -- 12 1/2%
Payment frequency -- every six months on August 1 and February 1. First payment --
February 1, 2000.
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 and trade payables of our subsidiaries, even their
subordinated indebtedness. Our subsidiaries currently have $714.8 million of
indebtedness and trade payables, after giving effect to the acquisition of Golden
Sky Holdings, Inc., that will effectively rank senior to the new notes. We describe
this in more detail under Risk Factors -- Risks of Investing in the New Notes---
These Notes are not guaranteed which could adversely affect your investment.
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. They are required to do
this if they guarantee or incur certain types of other indebtedness.
Optional redemption............... Prior to August 1, 2000, we may redeem up to 35% of the notes at a redemption price
of 112.50% of the principal amount, plus accrued and unpaid interest, with net
proceeds of certain equity offerings. On or after August 1, 2003, we may redeem some
or all of the notes at any time at the redemption prices listed in Description of
Notes -- Optional Redemption.
Mandatory offer to repurchase..... Subject to certain exceptions, if we sell certain assets or experience specific
kinds of changes in control, we must offer to repurchase the notes.
Basic covenants of the indenture.. We will issue the notes under an indenture. The indenture restricts our ability and
the ability of our subsidiaries to:
o sell assets;
o make certain payments, including dividends;
o incur indebtedness and create liens;
o sell certain preferred securities;
o engage in certain transactions with our affiliates;
o issue certain equity; and
o merge or consolidate.
See Description of Notes -- Certain Covenants for a discussion of these
restrictions.
</TABLE>
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Market
We do not plan to list the new notes on any exchanges or with the
Nasdaq National Market. No one has made a binding agreement to make a market for
the new notes. We offer no assurance that a market for the new notes will
develop or provide meaningful liquidity for investors.
The old notes are eligible for trading in the private offerings,
resales and trading through automated linkages (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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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, DC 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. These SEC filings are also available to the public over the
Internet at the SEC's web site at http://www.sec.gov, which contains reports,
proxy statements and other information regarding registrants like Pegasus that
file electronically with the SEC. Our Class A common stock is quoted on the
Nasdaq National Market and reports and other information about us may be
inspected at the Nasdaq National Market at 1735 K Street, NW, Washington, DC
20007-1500.
This prospectus is part of a registration statement on Form S-4 we have
filed with the SEC. As permitted by SEC rules, this prospectus does not contain
all of the information included in the registration statement and the
accompanying exhibits filed with the SEC. You may refer to the registration
statement and its exhibits, including the indenture covering the notes which are
the subject of this offering, for more information.
The SEC allows us to incorporate by reference into this prospectus the
information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus. If we
subsequently file updating or superseding information in a document that is
incorporated by reference into this prospectus, the subsequent information will
also become part of this prospectus and will supersede the earlier information.
We are incorporating by reference the following documents that we have
filed with the SEC:
o Pegasus' Annual Report on Form 10-K filed with the SEC on March 10,
2000 for the fiscal year ended December 31, 1999.
o Pegasus' Current Reports on Form 8-K filed with the SEC on
January 12, 2000 dated January 12, 2000 and on January 12, 2000 dated
November 19, 1999 (as amended by Form 8-K/A filed on February 2,
2000 and as further amended by Form 8-K/A filed on February 16,
2000).
o The sections entitled "Golden Sky Holdings, Inc." and "Pegasus
Communications Corporation Pro Forma Consolidated Financial
Information (unaudited)" beginning at pages F-25 and F-59,
respectively of the proxy statement/prospectus contained in Pegasus'
Registration Statement on Form S-4 (File No. 333-31080).
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 200, 225 City Line Avenue
Bala Cynwyd, PA 19004
Attention: Vice President of Communications
Telephone: (888) 438-7488
To obtain timely delivery of this information you must request this
information no later than March ___, 2000 or five days after any extension of
this offer, whichever is later. You should rely only on the information provided
in this prospectus, in the accompanying letter of transmittal, or incorporated
by reference. We have not authorized anyone to provide you with different
information. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the cover page of the prospectus.
We are not making this offer of securities in any state or country in which the
offer or sale is not permitted.
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Risk Factors
You should carefully consider the risks described below before you
decide to exchange. They could materially and adversely affect our financial
condition and results of operation. They could impair our ability to repay the
new notes and pay interest on the notes, and you might lose all or part of your
investment.
Risks of Investing in These Notes
Our Substantial Indebtedness Could Adversely Affect Your Investment
We have now and, after the exchange offer, will continue to have a
significant amount of indebtedness. Our substantial indebtedness could have
important consequences to you. For example, it could:
o make it more difficult for us to pay our obligations under these
notes;
o increase our vulnerability to general adverse economic and industry
conditions;
o require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, acquisitions and other activities;
o limit our flexibility in planning for, or reacting to, changes in
our business and the industries in which we operate; and
o place us at a competitive disadvantage compared to our competitors
that have less debt.
The following chart shows certain important credit statistics, after
giving effect to the acquisition of Golden Sky Holdings, Inc. (in thousands):
As of
December 31, 1999
Total indebtedness.......................... $1,053,792
Common stockholders' equity ................ $439,677
Debt to equity ratio........................ 2.4x
Our earnings would have been inadequate to cover our fixed charges and
preferred stock dividends by $429.2 million for the year ended December 31,
1999, after giving effect to the acquisition of Golden Sky Holdings, Inc. (as if
it had occurred on January 1, 1999). Neither total indebtedness nor
stockholders' equity, as set forth above, includes the approximately $142.7
million in outstanding Series A preferred stock or a $3.9 million minority
interest in our subsidiaries.
We and Our Subsidiaries May Still Be Able To Incur Substantially More
Debt Which Could Exacerbate the Risks Described Above
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. If new debt is added to our and our subsidiaries'
current debt levels, the risks described above that we and they now face could
intensify. The terms of the indenture do not fully prohibit us or our
subsidiaries from doing so. The Pegasus Media & Communications credit facility
and the Golden Sky credit facility currently permit our subsidiaries to borrow
up to an additional $264.6 million, and all of those borrowings would
effectively rank senior to the new notes.
We May Not Be Able To Generate Enough Cash To Service Our Debt
Our ability to make payments on and to refinance our indebtedness,
including these notes, and to fund planned capital expenditures and other
activities will depend on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control.
Accordingly, we cannot assure you that our business will generate sufficient
cash flow to service our debt.
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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 that:
o our business will generate sufficient cash flow from operations,
o currently anticipated cost savings and operating improvements will
be realized on schedule, or
o future borrowings will be available to us under our credit
facilities in amounts sufficient to enable us to pay our
indebtedness, including these notes, or to fund our other liquidity
needs.
We may need to refinance all or a portion of our indebtedness,
including these notes, on or before maturity. We cannot assure you that we will
be able to refinance any of our indebtedness, including our credit facilities
and these notes, on commercially reasonable terms or at all.
These Notes Are Not Guaranteed Which Could Adversely Affect Your
Investment
Only Pegasus Communications Corporation owes payment of these notes.
None of our subsidiaries have guaranteed them, and if our business were to be
liquidated, our subsidiaries' debt would be paid first before payment is made on
the notes.
We conduct all of our business operations through subsidiaries. Our
subsidiaries have their own debt, including $392.1 million of publicly held debt
securities and bank credit facilities under which they could borrow up to an
additional $264.6 million, including Golden Sky's publicly held debt securities
and the Golden Sky credit facility. 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 $215.0 million of other senior notes
that we issued in 1997 and 1998. Therefore, while these notes are not
subordinated to other debts of Pegasus Communications Corporation, they
effectively rank behind our subsidiaries' debts.
We May Have Difficulty Obtaining Cash from Our Subsidiaries To Pay
Notes Which Could Adversely Affect Your Investment
Our only source for the cash we need to pay current interest on these
notes and our other debt is the cash that our subsidiaries generate from their
operations or their borrowings. The credit facility of one of our principal
subsidiaries permits that subsidiary to distribute cash to us to pay interest on
these notes and our other senior notes, but only so long as we are not in
default under that credit facility. If we default under it, we would have no
cash to pay interest on these notes.
If a Change of Control Occurs, We May Be Unable To Refinance Our
Publicly Held Debt, Bank Debt and Preferred Stock
If certain kinds of change of control events occur, we will be required
to offer to repurchase all outstanding notes. We must offer to redeem other
publicly held debt securities and preferred stock for approximately $914.8
million, including Golden Sky's publicly held debt securities. In addition, our
bank debt, including the Golden Sky bank debt, of approximately $256.2 million
at December 31, 1999, would also come due on a change of control. If a change of
control occurs, and we are unable to finance it, we would be in default. See
Description of Notes - Repurchase at the Option of Holders - Change of Control.
Federal and State Courts Could Void Guarantees of These Notes and
Require Noteholders To Return Payments Received From Guarantors
None of our subsidiaries have guaranteed these notes, but they could be
required to do so in certain circumstances. If a subsidiary guarantor was found
to be insolvent, any payments made by the guarantor could be voided and would be
required to be returned.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor if, among
other things, the guarantor, at the time it incurred the indebtedness evidenced
by its guarantee was insolvent. In addition, these laws could require that any
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payment by the guarantor under its guarantee be voided and returned to the
guarantor, or to a fund for the benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer
laws will vary depending upon the law applied in any proceeding to determine
whether a fraudulent transfer has occurred. Generally, however, a guarantor
would be considered insolvent if the sum of its debts were greater than the
value of all of its assets or it could not pay its debts as they become due. See
Description of Notes - Subsidiary Guarantees for a description of the
circumstances under which a subsidiary might be required to guarantee the these
notes.
Risks of Our Direct Broadcast Satellite Business
Satellite and Direct Broadcast Satellite Technology Could Fail or Be
Impaired
If any of the DIRECTV satellites is damaged or stops working partially
or completely for any of a number of reasons, DIRECTV customers would lose
programming. We would in turn likely lose customers, which could materially and
adversely affect our operations, financial performance and ability to pay these
notes.
Direct broadcast satellite technology is highly complex and is still
evolving. As with any high-tech product or system, it might not function as
expected. In particular, the satellites at the 101(degree) W orbital location
may not last for their expected lives. In July 1998, DIRECTV reported that the
primary spacecraft control processor failed on DBS-1. As it was designed to do,
the satellite automatically switched to its on-board spare processor with no
interruption of service to DIRECTV subscribers. A more substantial failure or
DIRECTV's direct broadcast satellite system could occur in the future. See We
May Lose Our DIRECTV Rights After the Initial Term of Our Agreements With the
National Rural Telecommunications Cooperative.
Events at DIRECTV Could Adversely Affect Us
Because we are an intermediary for DIRECTV, events at DIRECTV that we
do not control can adversely affect us. One of the most important of these is
DIRECTV's ability to provide programming that appeals to mass audiences. DIRECTV
generally does not produce its own programming; it purchases it from third
parties. DIRECTV's success -- and therefore ours -- depends in large part on
DIRECTV's ability to make good judgments about programming sources and obtain
programming on favorable terms. We have no control or influence over this.
Programming Costs May Increase, Which Could Adversely Affect Our Direct
Broadcast Satellite Business
Programmers could increase the rates that DIRECTV pays for programming.
As a result, our costs would increase. This could cause us to increase our rates
and lose either customers or revenues.
The law requires programming suppliers that are affiliated with cable
companies to provide programming to all multichannel distributors -- including
DIRECTV -- on nondiscriminatory terms. The rules implementing this law are
scheduled to expire in 2002. If they are not extended, these programmers could
increase DIRECTV's rates, and therefore ours. If we increase our rates, we may
lose customers. If we do not increase our rates, our revenues and financial
performance could be adversely affected.
We May Lose Our DIRECTV Rights After the Initial Term of Our Agreements
With the National Rural Telecommunications Cooperative
We may or may not be able to continue in the DIRECTV business after the
current DIRECTV satellites are replaced. If we can continue, we cannot predict
what it will cost us to do so.
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As part of a counterclaim in the litigation between the National Rural
Telecommunications Cooperative and DIRECTV, DIRECTV is seeking a declaratory
judgement that the term of the National Rural Telecommunications Cooperative's
agreement with DIRECTV is measured only by the orbital life of DBS-1, the first
DIRECTV satellite launched, and not the orbital lives of the other DIRECTV
satellites at the 101(degree) W orbital location. According to DIRECTV, DBS-1
suffered a failure of its primary control processor in July 1998 and since that
time has been operating normally using a spare control processor. If DIRECTV
were to prevail on its counterclaim, any failure of DBS-1 could have a material
adverse effect on our DIRECTV rights. While the National Rural
Telecommunications Cooperative has a right of first refusal to receive certain
services from any successor DIRECTV satellite, the scope and terms of this right
of first refusal are also being disputed in the litigation. This right is not
expressly provided for in our agreements with the National Rural
Telecommunications Cooperative.
On January 10, 2000, Pegasus and Golden Sky Holdings, Inc. filed a
class action lawsuit in federal court in Los Angeles against DIRECTV as
representatives of a proposed class that would include all members and
affiliates of the National Rural Telecommunications Cooperative that are
distributors of DIRECTV. The complaint contains causes of action for various
torts, common counts and declaratory relief based on DIRECTV's failure to
provide the National Rural Telecommunications Cooperative from providing this
programming to the class members and affiliates. The claims are also based on
DIRECTV's position with respect to launch fees and other benefits, term and
rights of first refusal. The complaint seeks monetary damages and a court order
regarding the rights of the National Rural Telecommunications Cooperative and
its members and affiliates.
On February 10, 2000, Pegasus and Golden Sky filed an amended
complaint, which added new tort claims against DIRECTV for interference with
plaintiffs' relationships with manufacturers, distributors and dealers of direct
broadcast satellite equipment. Pegasus and Golden Sky also withdrew the class
action allegations to allow a new class action to be filed on behalf of the
members and affiliates of the National Rural Telecommunications Cooperative. The
outcome of this litigation and the litigation filed by the National Rural
Telecommunications Cooperative could have a material adverse effect on the scope
and duration of Golden Sky's right to provide DIRECTV programming in its rural
markets, its capital requirements and its costs of operations.
Our revenues and financial performance would be adversely affected if
we are not able to continue in the DIRECTV business for the reasons described
above.
The Effect of New Federal Satellite Television Legislation on Our
Business Is Unclear
On November 29, 1999, the President signed The Satellite Home Viewer
Improvement Act of 1999. The Act contains provisions that will be phased in over
time. In addition, the FCC and other federal agencies will undertake rulemaking
and studies in connection with this legislation. Therefore, we cannot predict
the effect of this new law on our business at this time.
The Act resolves many of the issues involved in years of litigation
between the networks and the direct broadcast satellite industry regarding
retransmission of network programming to direct broadcast satellite subscribers.
Generally, it also preserves the industry's right to retransmit distant network
programming to subscribers in "unserved" areas. It also extends through December
31, 2004 the statutory right, for a copyright royalty fee, of the industry to
retransmit independent programming - so-called superstations - to subscribers as
"distant" signals. Further, satellite carriers will be required to deliver
signals only to households that cannot clearly receive over-the-air network
signals with a rooftop antenna.
Before this legislation was enacted, we had cut-off network programming
to approximately 159,000 of our subscribers in connection with settlement of the
litigation referred to above. We are unsure at this time how many of these
subscribers will be eligible and will want to receive network programming
services under this legislation.
Among other things, the Act directs the FCC to take actions to
prescribe the picture quality standard that the FCC uses to predict what
households do not receive a strong enough network broadcast signal over-the-air
and therefore are eligible to receive distant network signals. The effect on our
business of these FCC actions and other studies and rulemakings that the FCC
will undertake cannot be predicted at this time.
We Could Lose Money Because of Signal Theft
If signal theft becomes widespread, our revenues would suffer. Signal
theft has long been a problem in the cable and direct broadcast satellite
industries. DIRECTV uses encryption technology to prevent people from
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receiving programming without paying for it. The technology is not foolproof and
there have been published reports that it has been compromised.
We Could Lose Revenues if We Have Out-of-Territory Subscribers
Just as we have exclusive DIRECTV distribution rights in our
territories, we are not allowed to have customers outside our territories. The
problem is that customers are not always truthful about where they live. If it
turns out that large numbers of our subscribers are not in our territories, we
would lose substantial revenues when we disconnect them. We could also face
legal consequences for having subscribers in Canada, where DIRECTV reception is
illegal.
Direct Broadcast Satellite Services Face Competition from Cable
Operators
One of the competitive advantages of direct broadcast satellite systems
is their ability to provide customers with more channels and a better quality
digital signal than traditional analog cable television systems. Many cable
television operators are making significant investments to upgrade their systems
from analog to digital. This upgrade will significantly increase the number of
channels that cable television operators can provide to their customers and the
quality of the transmission. In addition, many cable television operators are
upgrading their systems to provide their customers with high-speed Internet
access. These upgrades could make cable television a more attractive alternative
for consumers, which could have an adverse effect on our direct broadcast
satellite business.
Direct Broadcast Satellite Equipment Shortages Cold Adversely Affect
Our Direct Broadcast Business
There have been periodic shortages of direct broadcast satellite
equipment and there may be such shortages in the future. During such periods, we
may be unable to accept new subscribers and, as a result, potential revenue
could be lost. If we are unable to obtain direct broadcast satellite equipment
in the future, or if we cannot obtain such equipment on favorable terms, our
subscriber base and revenues could be adversely affected.
Risks of Our Broadcast Television Business
Our Broadcast Operations Could Be Adversely Affected if We Fail To
Negotiate Successfully Our Network Affiliation Agreements
Our network affiliation agreements with Fox formally expired on January
30, 1999 (other than the affiliation agreement for television station WTLH,
which is scheduled to expire on December 31, 2000). Except in the case of WTLH,
we currently broadcast Fox programming under arrangements between Pegasus and
Fox which have generally conformed in practice to such affiliation agreements,
and we are in the process of negotiating new affiliation agreements. If we are
not successful in these negotiations, our broadcast operations could suffer
materially.
Fox Could Cancel Our Affiliation Agreements if It Acquires a
Significant Ownership Interest in One of Our Markets
In addition, if Fox acquires a significant ownership interest in
another station in one of our markets, it can cancel our affiliation agreement
or arrangement for that market without penalty. Fox has done this in the past to
other broadcasters.
Our Broadcast Operations Could Be Adversely Affected if the FCC
Prevents Our Local Marketing Agreement Strategy
One of our important strategies in broadcast television is to achieve
economies of scale by programming two stations in each of our markets. Because
the FCC did not allow a broadcaster to own more than one television station in
the same market, we implemented our strategy -- like other broadcasters --
through arrangements known as local marketing agreements. Under these
arrangements, we contracted to provide programming and other services to the
licensee of a separate television station in the market. We currently have local
marketing agreements for second stations in three of our markets and our only
station in another market is programmed through a local marketing agreement. We
expect to program a second station under such an agreement in one more market by
2000.
In August 1999, the FCC revised its television ownership rules to
permit, in certain circumstances, the common ownership of two stations in a
television market. The FCC also decided to treat most television local marketing
agreements as if the station providing programming owned the programmed station.
These decisions could prohibit us from programming or acquiring additional
in-market stations and could also require us to terminate some of our existing
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local marketing agreements by August 2001. We will vigorously seek to obtain
favorable rulings from the FCC and to preserve and expand our broadcast
television strategy through the grandfathering of our existing arrangements or
outright common ownership. Unfavorable implementation decisions by the FCC,
however, could cost us significant revenues and could affect our broadcast
operations materially and adversely.
Antitrust Laws Could Limit Our Local Marketing Agreement Strategy
Apart from the FCC, federal agencies that administer the antitrust laws
have said they intend to review market concentrations in television, including
through local marketing agreements that the FCC permits. If so, these agencies
could limit partially or altogether our ability to program stations through
local marketing agreements. We cannot predict how this will affect us.
Our Inability To Control Licensees Under Our Local Marketing Agreements
Could Adversely Affect Our Broadcast Operations
Even if we can keep and expand our local marketing agreements, their
use carries the inherent risk that we do not control the other parties that
actually own the stations and hold the stations' FCC licenses. It is conceivable
that the licensee could pre-empt our programming. In an extreme case, the
licensee could cease to meet FCC qualifications and put its license in jeopardy,
in which case, we could lose the ability to program the station.
The Planned Industry Conversion to Digital Television Could Adversely
Affect Our Broadcast Business
All commercial television stations in the United States must start
broadcasting in digital format by May 2002 and must abandon the present analog
format by 2006, though the FCC may extend these dates.
o It will be expensive to convert from the current analog format to
digital format. We cannot now determine what that cost will be.
o The digital technology will allow us to broadcast multiple channels,
compared to only one today. We cannot predict whether or at what
cost we will be able to obtain programming for the additional
channels. Increased revenues from the additional channels may not
make up for the conversion cost and additional programming expenses.
Also, multiple channels programmed by other stations could increase
competition in our markets.
o The FCC has generally made available much higher power allocations
to digital stations that will replace stations on existing channels
2 through 13 than digital stations that will replace existing
channels 14 through 69. All of our existing stations are on channels
14 through 69. This power disparity could put us at a disadvantage
to our competitors that now operate on channels 2 through 13.
o In some cases, when we convert a station to digital television, the
signal may not be received in as large a coverage area, or it may
suffer from additional interference. Also, because of the technical
standards adopted by the FCC, the digital signal may be subject to
interference to a greater degree than current analog transmissions.
As a result, viewers using antennas located inside their homes, as
opposed to outdoor, roof-top antennas, may not receive a reliable
signal. If viewers do not receive a high-quality, reliable signal
from our stations, they may be encouraged to seek service from our
competitors.
o The FCC is considering whether to require cable companies to carry
both the analog and the digital signals of their local broadcasters
when television stations will be broadcasting both, during the
transition period between 2002, at the latest, and 2006. If the FCC
does not require this, cable customers in our broadcast markets may
not receive our digital signal, which could affect us unfavorably.
The New Federal Satellite Television Legislation Could Adversely Affect
Our Broadcast Business
The Satellite Home Viewer Improvement Act of 1999 could have an adverse
effect on our broadcast stations' audience share and advertising revenues.
This legislation may allow satellite carriers to provide the signal of
distant stations with the same network affiliation as our stations to more
television viewers in our markets than would have been permitted under previous
law.
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In addition, the legislation allows satellite carriers to provide local
television signals by satellite within a station market, but does not require
satellite carriers to carry all local stations in a market until 2002. Satellite
carriers could decide to carry other stations in our markets, but not our
stations, which could adversely affect our stations' audience share and
revenues.
Risks of Our Cable Business
We Could Lose Revenues Because of Our Geographic Concentration in
Puerto Rico
All of our cable operations are in Puerto Rico. This geographic
concentration carries risks:
o Puerto Rico gets more hurricanes and other severe weather than many
other places. Because of Hurricane Georges, which struck Puerto Rico
in September 1998, we lost $1.4 million of revenue in the fourth
quarter of 1998 alone, and we spent about $300,000 to repair the
damage. Future hurricanes can be expected and could be even worse
for us.
o A local downturn in the Puerto Rico economy could cause us to lose
revenues from subscribers and advertisers. This would affect our
cable business more seriously than if we were more geographically
diversified.
o A material adverse change in our Puerto Rico cable operations cold
affect our ability to sell our cable systems at all or for the
consideration agreed upon in the letter of intent relating to the
sale of the business.
The FCC's Digital Television Requirements May Prevent Us from Expanding
Our Cable Programming
The FCC's digital television rules may cause us to lose customers and
revenues. We mentioned above that the FCC is considering whether to require
cable companies to carry both the analog and digital signals of local television
stations during the transition to digital broadcasting. See Risks of Our
Broadcast Television Business -- The Planned Industry Conversion to Digital
Television Could Adversely Affect Our Broadcast Operations. Because we have only
so much channel capacity in our cable system, this requirement could hurt our
ability to expand our programming offerings. If we cannot expand programming
offerings, we may lose customers and revenues.
We Could Become Subject to Rate Regulation Which Could Reduce Our Cable
Revenues
We may lose revenues if we become subject to rate regulation. The
government can regulate the rates cable companies charge for the lowest level of
their service. The government does not now regulate our rates since the FCC has
found that our cable systems are subject to effective competition. This means
that less than 30% of the people that could subscribe to the systems do
subscribe. But if we are successful in significantly increasing the percentage
of people that subscribe to our service, the lowest level of cable service we
offer could become subject to rate regulation. If so, we might have to reduce
our cable rates, resulting in decreased revenues. If our cable systems become
subject to rate regulation, we may not be able to sell our cable systems at all
or for the consideration agreed upon in the letter of intent relating to the
sale of the business.
Other Risks of Our Business
We Face Certain Other Regulatory Risks
The direct broadcast satellite, television broadcast, and cable
industries are subject to regulation by the FCC under the Communications Act of
1934 and, to a certain extent, by state and local authorities. Proceedings to
implement the Communications Act are on-going, and we cannot predict the
outcomes of these proceedings or their effect on our business. We depend on
broadcast licenses from the FCC to operate our broadcast station, and DIRECTV
depends on FCC licenses to operate its digital broadcast satellite service. If
the FCC cancels, revokes, suspends, or fails to renew any of these licenses, it
could have a harmful effect on us.
We Have a History of Substantial Losses; We Expect Them To Continue;
Losses Could Adversely Affect Our Stock Price and Access to Capital
Markets
We have never made a profit, except in 1995, when we had a $10.2
million extraordinary gain. Because of interest expense on our substantial debt
and because of high expense in amortizing goodwill from our acquisitions, we do
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not expect to have net income for the foreseeable future. To the extent
investors measure our performance by net income or loss, rather than alternative
measures based on cash flow, continuing losses could adversely affect our access
to capital markets and our ability to pay the notes.
We Face Significant Competition; the Competitive Landscape Changes
Constantly
Our direct broadcast satellite business faces competition from other
current or potential multichannel programming distributors, including other
direct broadcast satellite operators, direct-to-home distributors, cable
operators, wireless cable operators, Internet and local and long-distance
telephone companies, which may be able to offer more competitive packages or
pricing than we or DIRECTV can provide. In addition, the direct broadcast
satellite industry is still evolving and recent or future competitive
developments could adversely affect us.
Our TV stations compete for audience share, programming and advertising
revenue with other television stations in their respective markets and with
direct broadcast satellite operators, cable operators and other advertising
media. Direct broadcast satellite and cable operators in particular are
competing more aggressively than in the past for advertising revenues in our TV
stations' markets. This competition could adversely affect our stations'
revenues and performance in the future.
Our cable systems face competition from television stations, satellite
master antennae television systems, wireless cable systems, direct-to-home
distributors, direct broadcast satellite systems and open video systems.
In addition, the markets in which we operate are in a constant state of
change due to technological, economic and regulatory developments. We are unable
to predict what forms of competition will develop in the future, the extent of
such competition or its possible effects on our businesses.
Our Acquisition Strategy May Become Too Expensive Which Could Adversely
Affect Our Financial Performance
We may not be able to keep making acquisitions on attractive terms. If
we cannot continue to make acquisitions on attractive terms, our financial
performance and stock price could suffer.
If we pay for an acquisition with our stock, the acquisition could
dilute existing stockholders, depending on its terms. If we finance an
acquisition by borrowing, this would increase our already high leverage and
interest expense.
We May Not Be Able To Get the Consents Necessary To Implement Our
Acquisition Strategy
We have been able to get the necessary consents to make acquisitions in
the past, but this could change, or become more difficult, or require us to
incur additional costs, for reasons we cannot predict. Our acquisitions normally
require third party consents that we do not control. These include the consents
of DIRECTV and the National Rural Telecommunications Cooperative for direct
broadcast satellite acquisitions, the FCC and the television networks for
broadcast TV acquisitions, and cable franchising authorities and programmers for
cable acquisitions. Some acquisitions also require the consent of our lenders.
We May Not Be Able To Integrate Acquired Companies Successfully Which
Could Affect Our Financial Performance
We could encounter difficulties integrating any given acquired business
into our operations. These difficulties can cost money and divert management's
attention from other important matters.
The Year 2000 Problem Could Adversely Affect Us
We may be adversely affected by year 2000 computer-related
malfunctions. An issue exists for all companies that rely on computers. 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 completed 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 have not been
and 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
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non-compliance with the year 2000 issue by the software and/or equipment vendors
and others with whom we conduct business.
We May Not Be Aware of All Risks
These risks and uncertainties are not the only ones we face. Others
that we do not know about now, or that we do not now think are important, may
impair our business or our ability to pay the notes.
Forward-Looking Statements May Prove Inaccurate
This offering memorandum 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 Exchange
Act. We use words such as "anticipate," "believe," "estimate," "expect,"
"intend," "project," "should" and similar expressions to identify forward
looking statements. Those statements include, among other things, the
discussions of our business strategy and expectations concerning our market
position, future operations, margins, profitability, liquidity and capital
resources, as well as statements concerning the integration of our acquisitions
and related achievement of cost savings and other synergies. We caution you that
reliance on any forward-looking statement involves risks and uncertainties, and
that although we believe that the assumptions on which our forward-looking
statements are based are reasonable, any of those assumptions could prove to be
inaccurate, and, as a result, the forward-looking statements based on those
assumptions also could be incorrect. The uncertainties in this regard include,
but are not limited to, those identified in the risk factors discussed above. In
light of these and other uncertainties, you should not conclude that we will
necessarily achieve any plans and objectives or projected financial results
referred to in any of the forward-looking statements. We do not undertake to
release the results of any revisions of these forward-looking statements to
reflect future events or circumstances.
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Ratio of Earnings to Fixed Charges
Our earnings were inadequate to cover our combined fixed charges and
preferred stock dividends by approximately $8.1 million, $9.8 million, $29.6
million, $94.8 million and $204.0 million for the years ended December 31, 1995,
1996, 1997, 1998, and 1999, respectively. Assuming the exchange offer had
occurred on January 1, 1999 at the beginning of such periods, our earnings would
have been inadequate to cover our fixed charges and preferred stock dividends by
$203.5 million for the year ended December 31, 1999. 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.
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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 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 December 31, 1999, all $155.0 million aggregate principal amount
at maturity of the old notes were outstanding and registered in the name of Cede
& Co., as nominee for The Depository Trust Company. Only a registered holder of
the old notes or such holder's legal representative or attorney-in-fact, as
reflected on the records of First Union National Bank under the indenture, may
participate in the exchange offer. There will be no fixed record date for
determining which registered holders of the old notes may participate in the
exchange offer.
We will accept validly tendered old notes by giving the exchange agent
oral or written notice. The exchange agent also will be the agent for the
tendering holders of old notes for receiving the new notes from us.
Resale of New Notes
We believe that holders of the new notes will be able to transfer the
new notes without complying with the registration and prospectus delivery
requirements of the Securities Act, provided that the holder is acquiring the
new notes in the ordinary course of business and is not participating in and had
no prior arrangement to participate in the notes' distribution. The preceding
restriction does not apply to broker-dealers who have purchased new notes
directly from us for resale under SEC Rule 144A or to any person that is our
affiliate. Broker-dealers who acquire new notes as the result of trading
activities must acknowledge that they will deliver a prospectus in connection
with any resale of the new notes. These statements are based on interpretations
of the SEC's staff that are subject to change.
Expiration; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., New York City time on
____________, 2000 unless we extend it in our sole discretion.
To extend the exchange offer, we must notify the exchange agent and the
registered holders of the old notes by mail or other means we select before 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date.
We may also delay or end the exchange offer by notifying the exchange
agent if the conditions to the offer described below are not satisfied. We will
notify the holders by mail or other means we select of any such delay, extension
or ending as promptly as practicable.
We may amend the exchange offer in our discretion. If the amendment is
material, we will promptly disclose the amendment in a prospectus supplement
that we will distribute to registered holders. In such a situation, 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 public announcement, other than by making a timely release to an
appropriate news agency.
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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, unless such holder tenders through The Depository Trust Company's
Automated Tender Offer Program, as described below. 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;
o the exchange agent must receive a timely confirmation of a book-entry
transfer of such old notes into the exchange agent's account at The
Depository Trust Company, before the end of the exchange offer; or
o the holder must comply with the guaranteed delivery procedures
described below.
Holders who do not withdraw their tenders before the exchange offer
ends will have agreed with the terms and conditions discussed in this prospectus
and in the letter of transmittal.
Holders select the method of delivery of old notes and the letter of
transmittal and all other required documents to the exchange agent at their own
risk. We recommend that holders use a properly insured overnight or hand
delivery service, instead of the mails. Holders should allow sufficient time to
assure delivery to the exchange agent before the end of the offer. Holders must
not send a letter of transmittal or old notes to Pegasus. Holders may ask their
respective brokers, dealers, commercial banks, trust companies or nominees to
complete the transaction for them.
Any beneficial owner(s) whose old notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on its 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 SEC Rule
17Ad-15 which is a member of one of the recognized signature
guarantee programs identified in the letter of transmittal.
If a person other than the registered holder of any old notes signs the
letter of transmittal, such old notes must be endorsed or accompanied by a
properly completed bond power, signed by such registered holder as such
registered holder's name appears on the notes.
If a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person 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.
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The exchange agent and The Depository Trust Company have confirmed that
any financial institution that is a participant in The Depository Trust
Company's system may tender old notes through The Depository Trust Company's
Automated Tender Offer Program.
We will determine all questions as to the validity, form, eligibility,
including time of receipt, acceptance and withdrawal of tendered old notes. Our
determination will be final and binding. We may reject any and all old notes not
properly tendered or any old notes our acceptance of which would, in the opinion
of our counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular old notes.
Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding. A holder must cure any defects or irregularities in connection with
tenders of old notes within such time as we shall determine. Although we intend
to notify holders of such defects or irregularities, no one will incur any
liability for failure to notify. A tender will not be effective until the holder
has cured or we have waived any defects or irregularities.
While we have no present plan to acquire or file a registration
statement for any old notes which holders do not tender in this exchange offer,
we reserve the right to purchase or make offers for any old notes that remain
outstanding after the offer expires or after we terminate it. We may do this in
the open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers could differ from the terms of this exchange offer.
By tendering, each holder will represent to us, among other things,
that the holder:
o is acquiring the new notes in the ordinary course of business;
o has no arrangement or understanding with any person to participate in
the distribution of new notes;
o acknowledges and agrees that any broker-dealer registered under the
Exchange Act or participating in the exchange offer for the purposes
of distributing the new notes must comply with the registration and
prospectus delivery requirements of the Securities Act in a secondary
resale transaction of the new notes acquired by such person and
cannot rely on the position of the staff of the SEC set forth in
certain no-action letters;
o understands that a secondary resale transaction described above and
any resales of new notes it obtains in exchange for old notes it
acquires directly from us should be covered by an effective
registration statement containing the selling securityholder
information required by Item 507 or Item 508, as applicable, of SEC
Regulation S-K; and
o is not our affiliate, as defined in SEC Rule 405.
If the holder is a broker-dealer that will receive new notes for its
own account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities, the holder is required to
acknowledge in the letter of transmittal that it will deliver a prospectus in
connection with any resale of such new notes. However, by so acknowledging and
by delivering a prospectus, the holder will not admit that it is an underwriter
within the meaning of the Securities Act.
Return of Old Notes
If we reject any tendered old notes or if holders withdraw old notes or
submit them for a greater principal amount than the holders desire to exchange,
we will return old notes without expense to the tendering holder as promptly as
practicable. If the holder tenders by book-entry transfer into the exchange
agent's account at The Depository Trust Company, such old notes will be credited
to an account maintained with The Depository Trust Company.
Book-Entry Transfer
The exchange agent will request to establish an account for the old
notes at The Depository Trust Company. Any financial institution that is a
participant in The Depository Trust Company's system may make book-entry
delivery of old notes by causing the depositary to transfer such old notes into
the exchange agent's account at The Depository Trust Company. Although holders
may deliver old notes through book-entry transfer, holders must transmit, and
the exchange agent must receive, the letter of transmittal, with any required
signature guarantees and any other required documents at the address given below
on or before the end of this offer or under the guaranteed delivery procedures
described below.
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Guaranteed Delivery Procedures
Holders who wish to tender their old notes and whose old notes are not
immediately available or who cannot deliver their old notes, the letter of
transmittal or any other required documents to the exchange agent before the end
of the exchange offer, may effect a tender if:
o the holder tenders through an eligible institution.
o before the end of the exchange offer, the exchange agent receives
from such eligible institution a properly completed and duly executed
notice of guaranteed delivery substantially in the form provided by
us. This form must set forth the name and address of the holder, the
certificate number(s) of such old notes and the principal amount of
old notes tendered. This form must further state that a tender is
being made and guaranteeing that, within five business days after the
expiration of this offer, an eligible institution will deposit the
letter of transmittal together with the certificate(s) representing
the old notes in proper form for transfer or a book-entry
confirmation, as the case may be, and any other documents required by
the letter of transmittal with the exchange agent.
o the exchange agent receives within five business days of the end of
the offer such properly executed letter of transmittal or facsimile
thereof, and as the certificate(s) representing all tendered old
notes in proper form for transfer and all other documents required by
the letter of transmittal.
Upon request, the exchange agent will send a notice of guaranteed
delivery to holders who wish to tender their old notes according to the
guaranteed delivery procedures.
Withdrawal of Tenders
Except as this prospectus otherwise provides, holders may withdraw
tenders of old notes at any time before the exchange offer ends.
For the withdrawal to be effective, the exchange agent must receive a
written or facsimile transmission notice of withdrawal at its address set forth
below before the ending of the offer. The notice of withdrawal must:
o specify the name of the person who deposited the old notes to be
withdrawn;
o identify the old notes to be withdrawn including the certificate
number or numbers and principal amount of such old notes; and
o be signed by the holder in the same manner as the original signature
on the letter of transmittal by which such old notes were tendered
including any required signature guarantees.
We will determine all questions as to the validity, form and
eligibility, including time of receipt, of such notices. We will deem notes
withdrawn not to have been validly tendered for purposes of the exchange offer.
No new notes will be issued with respect to withdrawn tenders unless the old
notes so withdrawn are validly retendered. Properly withdrawn old notes may be
retendered by following one of the procedures described above at any time before
the offer ends.
Conditions
If the exchange offer violates applicable law, rule or regulation or an
applicable interpretation of the staff of the SEC, we will not accept for
exchange any old notes and may end the exchange offer before we accept any old
notes. If we determine that any of these violations may be present, we can
extend or amend the exchange offer and attempt to cure the problem. See The
Exchange Offer -- Expiration; Extensions; Amendments above for a discussion of
the relevant procedures.
Registration Rights Agreement
Shelf Registration
We are making this exchange offer according to procedures that the SEC
has approved in various no action letters. Those procedures have some
exceptions, and it is possible that the SEC may change them. In certain
instances, we must file a
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shelf registration statement to cover resales of the old notes by the holders
who satisfy certain conditions. For example, we must file a shelf registration
if we cannot consummate this exchange offer because it is or becomes illegal or
against public policy or if any holder of transfer restricted securities
notifies us within the specified time period that:
o SEC policy or law prevents the holder from participating in the
exchange offer; or
o 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 it is a broker-dealer and owns notes acquired directly from us or our
affiliate.
We are also obligated to use our best efforts to cause the SEC to
declare the shelf registration effective as promptly as possible. For this
purpose, transfer restricted securities means each old note until the earliest
to occur of:
o the date on which such note has been exchanged by a person other than
a broker-dealer for a new note in the exchange offer;
o following the exchange by a broker-dealer in the exchange offer of an
old note for a new note, the date on which such new note is sold to a
purchaser who receives from such broker-dealer on or before the date
of such sale a copy of this prospectus, as it may be amended or
supplemented;
o the date on which such note has been effectively registered under the
Securities Act and disposed of in accordance with the shelf
registration statement; or
o the date on which such note is distributed to the public under SEC
Rule 144.
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 file the shelf registration statement described in the
preceding section by the time required, or it does not become
effective by the time required.
o This prospectus or the prospectus contained in the shelf registration
statement, if we are required to file it, ceases to be usable to sell
notes during the periods specified in the registration rights
agreement.
During the first 90-day period immediately following the occurrence of
one of these events, the liquidated damages will be $.05 per week per $1,000
aggregate principal amount of transfer restricted notes. The amount of the
liquidated damages will increase by an additional $.05 per week per $1,000
aggregate principal amount of transfer restricted notes with respect to each
subsequent 90-day period until we have cured all of the events described above.
There is a maximum amount of liquidated damages of $.30 per week per $1,000
aggregate principal amount of notes.
We will require holders of notes to make certain representations to
participate in the exchange offer. We will also require the holders to deliver
information for the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement to have their old notes included in the shelf
registration statement and benefit from the provisions regarding liquidated
damages.
Termination of Registration Rights
All rights under the registration rights agreement including
registration rights of holders of the old notes eligible to participate in the
exchange offer will end upon consummation of the exchange offer except with
respect to our continuing obligations:
o to indemnify the holders, including any broker-dealers, and certain
parties related to the holders against certain liabilities, including
liabilities under the Securities Act;
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o to provide, upon the request of any holder of transfer-restricted
securities, the information required by SEC Rule 144A(d)(4) to permit
resales of such old notes under SEC Rule 144A;
o to use our best efforts to keep this registration statement effective
to the extent necessary to ensure that it is available for resales of
transfer-restricted securities by broker-dealers for a period of one
year from the date on the cover of this prospectus; and
o to provide copies of the latest version of the prospectus to
broker-dealers upon their request for a period of one year from the
date on the cover of this prospectus.
Exchange Agent
We have appointed First Union National Bank as exchange agent.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the letter of transmittal and requests for notice of guaranteed
delivery should be directed to First Union National Bank as follows:
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<TABLE>
<CAPTION>
<S> <C> <C>
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 28262 (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 $115,000. 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 persons whose old notes are
exchanged for new notes in the exchange offer are as follows, subject to the
limitations and qualifications set forth below.
The new notes should not be considered to differ materially either in
kind or in extent from the old notes. Therefore, the exchange of the new notes
for the old notes should not be treated as an exchange for federal income tax
purposes under Section 1001 of the Internal Revenue Code, and Treasury
Regulation Section 1.1001-3. As a result, no material federal income tax
consequences should result to persons 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 note owners 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 Treasury Regulations promulgated thereunder,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service will not take a contrary view.
Pegasus has not sought and will not seek a ruling from the Internal Revenue
Service. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify these statements or conclusions. Any
such changes or interpretations may or may not be retroactive and could affect
the tax consequences to holders. Certain note owners, 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 owner 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 of Notes
section, the word "Pegasus" refers only to Pegasus Communications Corporation
and not to any of its subsidiaries.
Pegasus issued the old notes under an indenture between itself and
First Union National Bank, as trustee. The terms of the notes include those
stated in the indenture and those made part of the indenture by reference to the
Trust Indenture Act of 1939.
The following description is a summary of the material provisions of
the indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, define your rights as
holders of these notes. To get a copy of the indenture, refer above to the
caption Where You Can Find More Information.
Brief Description of the Notes and Possible Guarantees
The notes will rank senior in right of payment to all subordinated
indebtedness of Pegasus and will rank equally in right of payment with all
senior indebtedness of Pegasus.
Substantially all operations of Pegasus are conducted through its
subsidiaries and, therefore, Pegasus is dependent upon the cash flow of its
subsidiaries to meet its obligations, including its obligations under the notes.
On the date of issuance of the notes, none of Pegasus' subsidiaries will
guarantee the notes. However, Pegasus' subsidiaries may be required to
unconditionally guarantee notes on a senior unsecured basis in the cases
described below under the subheading - Subsidiary Guarantees. If this happens,
any right of Pegasus to receive assets of any of its subsidiaries that do not
guarantee the notes will be effectively subordinated to the claims of that
subsidiary's creditors, including trade creditors.
Principal, Maturity and Interest
The total principal amount of the notes will be a maximum of $155.0
million. Pegasus will issue the notes in denominations and integral multiples of
$1,000. The notes will mature on August 1, 2007.
Interest on these notes will accrue at the rate of 12 1/2% per annum
and will be payable semi-annually in arrears on August 1 and February 1,
commencing on February 1, 2000, to holders of record on the immediately
preceding July 15 and January 15, respectively.
Interest on the notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a holder gives wire instructions to Pegasus, Pegasus will wire all
principal, premium, interest and liquidated damages, if any, in accordance with
the holder's instructions. All other payments of principal, premium, interest
and liquidated damages, if any, on the notes will be payable at the office or
agency of Pegasus maintained for such purpose within the City and State of New
York. At the option of Pegasus, payment of interest and liquidated damages, if
any, may be made by check mailed to the holders of the notes. Until otherwise
designated by Pegasus, Pegasus' office or agency in New York will be the office
of the trustee maintained for such purpose.
Optional Redemption
Until August 1, 2000, Pegasus may, on any one or more occasions, use
the net proceeds of one or more public equity offerings to redeem up to 35% of
the aggregate principal amount of the notes at a redemption price of 112.500% of
the principal amount of the notes redeemed, plus accrued and unpaid interest and
liquidated damages, to the date of redemption. Pegasus may only do this if:
o after any such redemption, the aggregate principal amount of the
notes outstanding (excluding notes held by Pegasus and its
subsidiaries) equals at least 65% of the notes issued in the
exchange offer; and
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o each redemption occurs within 90 days of the date of closing of the
related equity offering.
Except as described in the preceding paragraph, the notes will not be
redeemable at Pegasus' option prior to August 1, 2003. The notes may be
redeemed, in whole or in part, at the option of Pegasus on or after August 1,
2003, at the redemption prices specified below, together with accrued and unpaid
interest and any liquidated damages, to the date of redemption, upon not less
than 30 nor more than 60 days' notice, if redeemed during the twelve-month
period beginning on August 1 of the years indicated below:
Redemption
Year Price (as % of Principal Amount)
---- --------------------------------
2003.............................. 106.250%
2004.............................. 104.167%
2005.............................. 102.083%
2006 and thereafter............... 100.000%
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:
o if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are
listed; or
o 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 will be issued in the name of the holder upon cancellation of the
original note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on notes
or portions of them called for redemption.
Mandatory Redemption
Pegasus is not required to make mandatory redemption or sinking fund
payments with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a change of control of Pegasus occurs, each holder of notes will
have the right to require Pegasus to repurchase all or any part equal to $1,000
or an integral multiple thereof of such holder's notes in connection with the
change of control offer. In a change of control offer, Pegasus will offer a
change of control payment in cash equal to 101% of the aggregate principal
amount of notes purchased plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase. Within ten days following any change
of control, Pegasus will mail a notice to each holder describing the transaction
or transactions that constitute the change of control and offering to repurchase
notes under the procedures required by the indenture and described in the
notice. Pegasus will comply with the requirements of SEC Rule 14e-1 and any
other applicable securities laws and regulations in connection with the
repurchase of the notes as a result of a change of control.
On the change of control payment date, Pegasus will:
(1) accept for payment all notes or portions thereof properly tendered
under the change of control offer;
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(2) deposit with the paying agent, an amount equal to the change of
control payment in respect of all notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to First Union National Bank the
notes so accepted together with an officers' certificate stating
the aggregate principal amount of notes or portions being
purchased by Pegasus.
The paying agent will promptly mail to each holder of notes so tendered
the change of control payment for such notes, and First Union National Bank will
promptly authenticate and mail or cause to be transferred by book entry to each
holder a new note equal in principal amount to any unpurchased portion of the
notes surrendered. Pegasus will publicly announce the results of the change of
control offer on or as soon as practicable after the change of control payment
date.
The provisions described above will be applicable whether or not any
other provisions of the indenture are applicable. Except as described above with
respect to a change of control, the indenture does not contain provisions that
permit the holders of the notes to require that Pegasus repurchase or redeem the
notes in the event of a takeover, recapitalization or similar transaction.
The definition of "change of control" includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of all or substantially
all of the assets of Pegasus and its restricted subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, it is uncertain whether a holder of notes has
the ability to require Pegasus to repurchase such notes as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of Pegasus and its restricted subsidiaries taken as a whole to another person or
group.
The publicly held debt securities and bank credit facilities of
Pegasus' subsidiaries restrict them from paying dividends or making other
distributions to Pegasus. Thus, if a change of control occurs, Pegasus could
seek the consent of its subsidiaries' lenders to provide funds to Pegasus for
the purchase of the notes or could attempt to refinance the borrowings that
contain such restrictions. If Pegasus does not obtain such a consent or repay
such borrowings, it will likely not have the financial resources to purchase the
notes, and its subsidiaries will be restricted in paying dividends to Pegasus
for the purpose of such purchase. In any event, we cannot assure you that
Pegasus' subsidiaries will have the resources available to make any such
dividend or distribution. In addition, any future credit agreements or other
agreements relating to indebtedness to which Pegasus becomes a party may
prohibit it from purchasing any notes before their maturity, and may also
provide that certain change of control events with respect to Pegasus would
constitute a default under these agreements. If a change of control occurs at a
time when Pegasus is prohibited from purchasing notes, it could seek the consent
of its lenders to the purchase of notes or could attempt to refinance the
borrowings that contain such prohibition. If Pegasus does not obtain such a
consent or repay such borrowings, it will remain prohibited from purchasing the
notes. If this happens, Pegasus' failure to purchase tendered notes would
constitute an event of default under the indenture.
Pegasus will not be required to make a change of control offer if a
change of control occurs if a third party makes the change of control offer
according to the requirements contained in the indenture and purchases all notes
validly tendered and not withdrawn under such change of control offer.
Asset Sales
Pegasus will not, and will not permit any of its restricted
subsidiaries to, consummate an asset sale unless:
(1) Pegasus or the restricted subsidiary, as the case may be, receives
consideration at the time of such asset sale at least equal to the
fair market value of the assets or equity interests issued or sold
or otherwise disposed of ;
(2) the fair market value is determined by Pegasus' board of directors
and evidenced by a resolution set forth in an officer's
certificate; and
(3) at least 85% of the consideration received by Pegasus or the
restricted subsidiary is in the form of cash. For purpose of this
provision, each of the following shall be treated as cash:
(a) any liabilities as shown on Pegasus' or the restricted
subsidiary's most recent balance sheet or in the notes
thereto, other than liabilities that are by their terms
subordinated to the notes or any guarantees of the notes that
are assumed by the transferee of any such assets; and
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(b) any securities, notes or other obligations received by Pegasus
or the restricted subsidiary from a transferee that are
contemporaneously converted by Pegasus or the restricted
subsidiary into cash to the extent of the cash received.
However, Pegasus and its restricted subsidiaries may engage in asset
swaps which shall not constitute asset sales for purposes of this covenant.
Pegasus may do this if, immediately after giving effect to the asset swap,
Pegasus would be permitted to incur at least $1.00 of additional indebtedness
under the indebtedness to adjusted operating cash flow ratio set forth in the
first paragraph of the covenant described under the caption Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock.
Within 180 days after the receipt of any net proceeds from an asset
sale, Pegasus or the applicable restricted subsidiary may apply the net proceeds
to:
(1) permanently reduce indebtedness outstanding under any bank
facility and to permanently reduce the commitments thereunder by a
corresponding amount;
(2) permanently reduce indebtedness of any of Pegasus' restricted
subsidiaries; or
(3) the acquisition by Pegasus or any of its restricted subsidiaries
of another business, the making of a capital expenditure or the
acquisition of other long-term assets, in each case, in a
permitted business. However, if Pegasus or the restricted
subsidiary enters into a legally binding agreement with an entity
that is not an affiliate of Pegasus to reinvest the net proceeds
in accordance with this clause within 180 days after the receipt
of the proceeds, the provisions of this covenant will be satisfied
so long as the binding agreement is consummated within one year
after the receipt of the net proceeds.
If a legally binding agreement to reinvest the net proceeds is terminated, then
Pegasus may, within 360 days of the asset sale, apply the net proceeds as
provided in clauses (1), (2) or (3) of this paragraph without regard to the
condition contained in clause (3) of this paragraph. Pending the final
application of any such net proceeds, Pegasus or the applicable restricted
subsidiary may temporarily reduce indebtedness under any bank facility or
otherwise invest the net proceeds in any manner that is not prohibited by the
indenture. A reduction of indebtedness under any bank facility is not permanent
for purposes of clause (1) of this paragraph if an amount equal to the amount of
such reduction is reborrowed and used to make an acquisition described in clause
(3) of this paragraph within the time period specified in this covenant.
Any net proceeds from asset sales that are not applied or invested as
provided above will be deemed to constitute excess proceeds. Within five days of
each date on which the aggregate amount of excess proceeds exceeds $10 million,
Pegasus will be required to make an offer to all holders of notes and the
holders of the other Pegasus debt that ranks equally in right of payment to the
notes, to the extent required by the terms thereof to purchase the maximum
principal amount of notes and the other Pegasus debt that ranks equally in right
of payment to the notes that may be purchased out of the excess proceeds.
Pegasus will make this offer at a price in cash in an amount equal to 100% of
the principal amount of the notes and debt plus, in each case, accrued and
unpaid interest and liquidated damages, if any, to the date of purchase, in
accordance with the procedures set forth in the applicable indenture or the
agreements governing the other Pegasus debt that ranks equally in right of
payment to the notes. However, Pegasus may only purchase the other Pegasus debt
that ranks equally in right of payment to the notes in an asset sale offer that
was issued under an indenture having a provision substantially similar to the
asset sale offer provision contained in the indenture.
To the extent that the aggregate amount of notes and the other Pegasus
debt that ranks equally in right of payment to the notes tendered under an asset
sale offer is less than the excess proceeds, Pegasus may use any remaining
excess proceeds for general corporate purposes. If the aggregate principal
amount of notes and the other Pegasus debt that ranks equally in right of
payment to the notes surrendered exceeds the amount of excess proceeds, First
Union National Bank shall select the notes and the other Pegasus debt that ranks
equally in right of payment to the notes to be purchased on a pro rata basis,
based upon the principal amount thereof surrendered in such asset sale offer.
Upon completion of the offer to purchase, the amount of excess proceeds shall be
reset at zero.
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Certain Covenants
Restricted Payments
Pegasus will not, and will not permit any of its restricted
subsidiaries to:
(A) declare or pay any dividend or make any other payment or
distribution on account of Pegasus' equity interests, including,
without limitation, any payment in connection with any merger or
consolidation involving Pegasus;
(B) declare or pay any dividend or make any payment or distribution on
account of any qualified subsidiary stock;
(C) make any payment or distribution, other than compensation paid to,
or reimbursement of expenses of, employees in the ordinary course
of business, to or for the benefit of the direct or indirect
holders of Pegasus' equity interests or the direct or indirect
holders of any qualified subsidiary stock in their capacities as
such, other than dividends or distributions payable in equity
interests, other than disqualified stock, or additional shares of
such qualified subsidiary stock;
(D) purchase, redeem or otherwise acquire or retire for value any
equity interests of Pegasus or any direct or indirect parent of
Pegasus other than the equity interests owned by Pegasus or any of
its restricted subsidiaries;
(E) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any indebtedness
that is subordinated to the notes, except a payment of interest or
principal at stated maturity;
(F) forgive any loan or advance to or other obligation of any
affiliate of Pegasus other than a loan or advance to or other
obligations of a wholly-owned restricted subsidiary of Pegasus
which at the time it was made was not a restricted payment; or
(G) make any restricted investment.
The above payments and other actions described in clauses (A) through
(G) above are considered restricted payments under the indenture unless, at the
time of and immediately after the restricted payment is made:
(1) no default or event of default has occurred and is continuing or
would occur as a consequence of the action; and
(2) Pegasus would be permitted to incur $1.00 of additional
indebtedness under the indebtedness to adjusted operating cash
flow ratio described in the first paragraph of the covenant
described under the caption Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock; and
(3) the restricted payment, together with the aggregate of all other
restricted payments made by Pegasus and its restricted
subsidiaries after the closing date, excluding restricted payments
permitted by clauses (2) and (3) below, is less than the sum of,
without duplication, an amount equal to:
a. the cumulative operating cash flow for the period from the
beginning of the first full month commencing after the closing
date to the end of Pegasus' most recently ended fiscal quarter
for which internal financial statements are available at the
time of the restricted payment, less
b. 1.4 times Pegasus' cumulative total interest expense for the
basket period, plus
c. 100% of the aggregate net cash proceeds and, in the case of
proceeds consisting of assets constituting or used in a
permitted business, 100% of the fair market value of the
aggregate net proceeds other than cash, received since the
closing date by Pegasus as capital contributions to Pegasus
other than from a subsidiary or from the sale by Pegasus other
than to a subsidiary of its equity interests, other than
disqualified stock, plus
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d. to the extent that any restricted investment that was made
after the closing date is sold for cash or otherwise
liquidated or repaid for cash, the net proceeds received by
Pegasus or a wholly-owned restricted subsidiary upon the sale,
liquidation or repayment of such restricted investment, plus
e. to the extent that any unrestricted subsidiary is designated
by Pegasus as a restricted subsidiary, an amount equal to the
fair market value of such investment at the time of such
designation, plus
f. 100% of any cash dividends and other cash distributions
received by Pegasus from an unrestricted subsidiary, plus
g. $2.5 million.
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration, if at the date of declaration the payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement or other acquisition of any
equity interests or subordinated indebtedness of Pegasus in
exchange for, or out of the net proceeds of, the substantially
concurrent sale, other than to a subsidiary of Pegasus of other
equity interests of Pegasus other than any disqualified stock. The
amount of any net proceeds that are used for any redemption,
repurchase, retirement or other acquisition of this type shall be
excluded from clause (3)(c) of the paragraph above;
(3) the defeasance, redemption or repurchase of indebtedness with the
proceeds of a substantially concurrent issuance of permitted
refinancing debt in accordance with the provisions of the covenant
described under the caption Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock;
(4) the payment by Pegasus of advances under the split dollar
agreement in an amount not to exceed $250,000 in any four-quarter
period;
(5) the repurchase or redemption from employees of Pegasus and its
subsidiaries, other than Marshall W. Pagon, of capital stock of
Pegasus in an amount not to exceed an aggregate of $5.0 million
since the date of the indenture;
(6) the payment of dividends on the Series A preferred stock in
accordance with the terms of the stock as in effect on the
settlement date. However, cash dividends may not be paid on the
Series A preferred stock under this clause before July 1, 2002;
(7) the issuance of subordinated exchange notes in exchange for shares
of the Series A preferred stock, if the issuance is permitted by
the covenant described below under the caption Certain Covenants
-- Incurrence of Indebtedness and Issuance of Preferred Stock;
(8) cash payments made in lieu of the issuance of subordinated
exchange notes having a face amount less than $1,000 and any cash
payments representing accrued and unpaid dividends in respect of
Series A preferred stock, not to exceed $100,000 in the aggregate
in any fiscal year, if Pegasus elects to issue subordinated
exchange notes in exchange for Series A preferred stock; and
(9) cash payments made in lieu of the issuance of additional
subordinated exchange notes having a face amount less than $1,000
and any cash payments representing accrued and unpaid interest in
respect thereof, not to exceed $100,000 in the aggregate in any
fiscal year.
The amount of all restricted payments other than cash shall be the fair
market value on the date of the restricted payment of the asset(s) or securities
proposed to be transferred or issued by Pegasus or the applicable restricted
subsidiary, net of any liabilities proposed to be assumed by the transferee and
novated under a written agreement releasing Pegasus and its subsidiaries. Not
later than the date of making any restricted payment, Pegasus shall deliver to
First Union National Bank an officers' certificate stating that the restricted
payment is permitted. The officers' certificate will also set forth the
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basis upon which the calculations required by this covenant were computed, which
calculations may be based upon Pegasus' latest available financial statements.
The board of directors may designate any restricted subsidiary to be an
unrestricted subsidiary if the designation would not cause a default or an event
of default under the indenture. For purposes of making this determination, all
outstanding investments by Pegasus and its restricted subsidiaries in the
subsidiary so designated shall be deemed to be restricted payments at the time
of the designation, valued as set forth below, and shall reduce the amount
available for restricted payments under the first paragraph of this covenant.
All outstanding investments shall be deemed to constitute investments in an
amount equal to the fair market value of the investments at the time of the
designation. The designation shall only be permitted if the restricted payment
would be permitted at the time and if the restricted subsidiary would otherwise
meet the definition of an unrestricted subsidiary.
Incurrence of Indebtedness and Issuance of Preferred Stock
Pegasus will not, and will not permit any of its subsidiaries to
create, incur, issue, assume, guarantee or otherwise become liable, contingently
or otherwise, for any indebtedness, including acquired debt. Pegasus also shall
not, and shall not permit any subsidiary guarantor to, issue any disqualified
stock and shall not permit any of its restricted subsidiaries that are not
subsidiary guarantors to issue any shares of preferred stock other than
qualified subsidiary stock. However, Pegasus or a restricted subsidiary may
incur indebtedness, including acquired debt, or issue shares of preferred stock
including disqualified stock if:
o Pegasus' indebtedness to adjusted operating cash flow ratio as of
the date on which the indebtedness is incurred or the preferred
stock or disqualified stock is issued would have been 7.0 to 1 or
less, calculated as if the additional indebtedness had been
incurred, or the disqualified stock or preferred stock had been
issued, as of the date of the calculation; and
o no default or event of default would occur as a result.
Pegasus will not, and will not permit any subsidiary guarantor to incur
any indebtedness that is contractually subordinated to any other indebtedness of
Pegasus or of the subsidiary guarantor, unless the indebtedness is also
contractually subordinated to the notes or the subsidiary guarantee of the
subsidiary guarantor on substantially identical terms. However, no indebtedness
will be deemed to be contractually subordinated to any other indebtedness solely
by virtue of being unsecured.
The preceding provisions do not apply to the following, which is
permitted debt:
(1) the incurrence by Pegasus' unrestricted subsidiaries of
non-recourse debt or the issuance by unrestricted subsidiaries of
preferred stock. However, if any such indebtedness of an
unrestricted subsidiary ceases to be non-recourse debt or any
preferred stock becomes preferred stock other than qualified
subsidiary stock of a restricted subsidiary, these events shall be
deemed to constitute an incurrence of indebtedness by, or an
issuance of preferred stock other than qualified subsidiary stock
of a restricted subsidiary of Pegasus;
(2) Pegasus' or any of its restricted subsidiaries' incurring
indebtedness under one or more bank facilities if the aggregate
principal amount at any time outstanding incurred under this
clause does not exceed $50 million;
(3) Pegasus' and its restricted subsidiaries' incurrence of the
existing indebtedness;
(4) Pegasus' incurrence of indebtedness under the subordinated
exchange notes to pay interest on outstanding subordinated
exchange notes;
(5) indebtedness under the notes and the subsidiary guarantees;
(6) Pegasus or any of its wholly-owned restricted subsidiaries
incurring intercompany indebtedness. However:
(a) if Pegasus or a subsidiary guarantor is the obligor on the
indebtedness, the indebtedness is expressly subordinated to
the prior payment in full in cash of all obligations with
respect to the notes or the subsidiary guarantee of the
subsidiary guarantor; and
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(b) any subsequent issuance or transfer of equity interests that
result in any indebtedness being held by a person other than
Pegasus or a wholly-owned restricted subsidiary of Pegasus
shall be deemed to constitute an incurrence of indebtedness by
Pegasus or the restricted subsidiary; and
(c) any sale or other transfer of indebtedness to a person that is
not either Pegasus or a wholly-owned restricted subsidiary of
Pegasus shall be deemed, to constitute an incurrence of such
indebtedness by Pegasus or the restricted subsidiary;
(7) Pegasus or any of its restricted subsidiaries incurring
indebtedness represented by capital lease obligations, mortgage
financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price
or cost of construction or improvement of property used in the
business of Pegasus or a restricted subsidiary, in an aggregate
principal amount not to exceed $7.5 million at any time
outstanding. This includes all permitted refinancing debt incurred
under clause (8) below to refund, replace or refinance any
indebtedness incurred under this clause;
(8) Pegasus or any of its restricted subsidiaries incurring permitted
refinancing debt in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund,
indebtedness other than intercompany indebtedness permitted by the
indenture;
(9) Pegasus or any restricted subsidiaries incurring indebtedness in
addition to indebtedness permitted by any other clause of this
paragraph in an aggregate principal amount at any time
outstanding, including all permitted refinancing debt incurred
under clause (8) above to refund, replace or refinance any
indebtedness incurred under this clause, not to exceed $7.5
million; and
(10) Pegasus' or any restricted subsidiary's guarantee of indebtedness
of Pegasus or a subsidiary of Pegasus that another provision of
this covenant permits.
For purposes of determining compliance with this covenant, if an item
of indebtedness meets the criteria of more than one of the categories of
permitted debt described in clauses (1) through (10) above, or if the first
paragraph of this covenant permits it to be incurred and it also meets the
criteria of one or more of the categories of permitted debt described in clauses
(1) through (10) above, Pegasus shall, in its sole discretion, classify the item
of indebtedness in any manner that complies with this covenant. It may also from
time to time reclassify the item of indebtedness in any manner in which the item
could be incurred at the time of the reclassification. For purposes of this
paragraph, indebtedness includes disqualified stock and preferred stock of
subsidiaries. Accrual of interest and the accretion of accreted value will not
be deemed to be an incurrence of indebtedness for purposes of this covenant.
Limitation of Certain Subsidiary Indebtedness and Preferred Stock
Pegasus will not, and will not permit any of its restricted
subsidiaries to incur any indebtedness other than eligible indebtedness. It will
also not permit any issuance of disqualified stock. However, any restricted
subsidiary that is a subsidiary guarantor may incur indebtedness whether or not
the indebtedness is eligible indebtedness or issue disqualified stock if it is
permitted under the covenant described above under the caption Certain Covenants
- -- Incurrence of Indebtedness and Issuance of Preferred Stock. However, Pegasus
will not permit any of its restricted subsidiaries to incur any indebtedness
represented by senior secured bonds or other senior secured securities, unless
the subsidiary is a subsidiary guarantor and its subsidiary guarantee is secured
on an equal and ratable basis with the other senior secured bonds or senior
secured securities.
Liens
Pegasus will not, and will not permit any of its restricted
subsidiaries to create, incur, assume or allow any lien on any asset now owned
or later acquired, or any income or profits from the asset, or assign or convey
any right to receive income from the asset, except liens permitted under the
indenture.
Dividend and Other Payment Restrictions Affecting Subsidiaries
Pegasus will not, and will not permit any of its restricted
subsidiaries to create or otherwise cause or allow any encumbrance or
restriction on the ability of any restricted subsidiary to:
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(1) pay dividends or make any other distributions to Pegasus or any of
its restricted subsidiaries on its capital stock or with respect
to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to Pegasus or any of its
restricted subsidiaries;
(2) make loans or advances to Pegasus or any of its restricted
subsidiaries; or
(3) transfer any of its properties or assets to Pegasus or any of its
restricted subsidiaries.
However, the restrictions above will not apply to encumbrances or
restrictions existing under or by reason of:
(1) the terms of any indebtedness permitted by the indenture to be
incurred by any subsidiary of Pegasus if the indebtedness permits
the payment of cash dividends to Pegasus in an amount sufficient
to enable Pegasus to make payments of:
(a) interest required to be paid in respect of the notes;
(b) interest required to be paid in respect of the 1997 notes and
the 1998 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 subordinated exchange notes, if issued,
in each case, in accordance with the terms of each except
during the continuance of a default or event of default under
the other indebtedness;
(2) existing indebtedness or the Pegasus Media & Communications, Inc.
credit facility;
(3) the indenture, the notes, the subsidiary guarantees, the 1997
indenture, the 1997 notes and the 1997 notes subsidiary
guarantees, the 1998 indenture, the 1998 notes and the 1998 notes
subsidiary guarantees;
(4) applicable law;
(5) any instrument governing indebtedness or capital stock of a person
acquired by Pegasus or any of its restricted subsidiaries as in
effect at the time of the acquisition except if the indebtedness
was incurred in connection with or in contemplation of the
acquisition, and the encumbrance or restriction is not applicable
to any person, properties or assets, other than the acquired
person and its subsidiaries, or their property or assets so
acquired;
(6) customary non-assignment provisions in leases and other contracts
entered into in the ordinary course of business and consistent
with past practices; or
(7) any agreement for the sale of any subsidiary or its assets that
restricts distributions by that subsidiary pending its sale.
Merger, Consolidation or Sale of Assets
Pegasus will not consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, person or entity unless:
(1) Pegasus is the surviving corporation or the entity or the person
formed by or surviving the consolidation or merger, if other than
Pegasus, or to which the sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia;
(2) the entity or person formed by or surviving the consolidation or
merger, if other than Pegasus, or the entity or person to which
the sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of
Pegasus under the notes, the indenture and the registration rights
agreement under a supplemental indenture in a form reasonably
satisfactory to First Union National Bank;
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(3) immediately after the transaction no default or event of default
exists;
(4) Pegasus is able to incur at least $1.00 of additional indebtedness
under the indebtedness to adjusted operating cash flow ratio set
forth in the first paragraph of the covenant described under the
caption Certain Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock. This also applies to any entity or
person formed by or surviving the consolidation or merger or to
which the sale was made; and
(5) each subsidiary guarantor, 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, the notes and the
Registration Rights Agreement.
Transactions with Affiliates
Pegasus will not, and will not permit any of its restricted
subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make any contract, agreement, understanding, loan, advance or guarantee with,
or for the benefit of, any affiliate unless:
(1) the affiliate transaction is on terms as favorable to Pegasus or
the relevant restricted subsidiary as those that would have been
obtained in a comparable transaction by Pegasus or the restricted
subsidiary with an unrelated person, and
(2) Pegasus delivers to First Union National Bank with respect to the
affiliate transaction or series of related affiliate transactions
involving aggregate consideration in excess of:
(a) $1.0 million, a resolution of the board of directors set forth
in an officers' certificate certifying that the affiliate
transaction complies with clause (1) above and that the
affiliate transaction has been approved by a majority of the
disinterested members of the board of directors and a majority
of the independent directors; and
(b) $5.0 million, an opinion as to the fairness to Pegasus or the
restricted subsidiary of the affiliate transaction from a
financial point of view issued by an investment banking firm
of national standing. However, Pegasus shall not, and shall
not permit any of its restricted 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 Pegasus' board of directors.
The following will not be affiliate transactions and not subject to the
restrictions just described:
o any employment agreement entered into by Pegasus or any of its
restricted subsidiaries in the ordinary course of business and
consistent with the past practice;
o transactions between or among Pegasus and/or its restricted
subsidiaries;
o the payment of any dividend on, or the issuance of additional
subordinated exchange notes in exchange for, the Series A
preferred stock, if the dividends are paid on a pro rata basis and
the additional subordinated exchange notes are issued in
accordance with the certificate of designation; and
o transactions permitted by the provisions of the covenant described
under the caption Certain Covenants -- Restricted Payments.
Limitation on Issuances and Sales of Capital Stock of Wholly-Owned
Restricted Subsidiaries
Pegasus will not, and will not permit any wholly-owned restricted
subsidiary to, transfer, convey, sell or otherwise dispose of any capital stock
of any wholly-owned restricted subsidiary to any person other than Pegasus or a
wholly-owned restricted subsidiary unless:
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(1) the transfer, conveyance, sale, lease or other disposition is of
all the capital stock of such wholly-owned restricted subsidiary;
and
(2) the cash net proceeds from the transfer, conveyance, sale, lease
or other disposition are applied in accordance with the covenant
described under the caption Repurchase at the Option of Holders --
Asset Sales.
In addition, Pegasus shall not permit any wholly-owned restricted
subsidiary to issue any of its equity interests other than, if necessary, shares
of its capital stock constituting directors' qualifying shares to any person
other than to Pegasus or a wholly-owned restricted subsidiary.
Subsidiary Guarantees
Pegasus will not permit any restricted subsidiary to guarantee the
payment of any of its indebtedness or any indebtedness of any subsidiary
guarantor unless:
(1) the restricted subsidiary which is not a subsidiary guarantor
simultaneously executes and delivers a supplemental indenture
providing for a guarantee of payment of the notes;
(2) if the guaranteed debt is by its express terms subordinated in
right of payment to the notes or the subsidiary guarantee of the
obligor, the guarantee of the subsidiary guarantor with respect to
the guaranteed debt shall be subordinated in right of payment to
the subsidiary guarantor's subsidiary guarantee with respect to
the notes substantially to the same extent as the guaranteed debt
is subordinated to the notes or the subsidiary guarantee of the
obligor;
(3) the restricted subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights
of reimbursement, indemnity or subrogation or any other rights
against Pegasus or any other restricted subsidiary as a result of
any payment by the restricted subsidiary under its subsidiary
guarantee; and
(4) the restricted subsidiary shall deliver to First Union National
Bank an opinion of counsel to the effect that the subsidiary
guarantee of the notes:
(A) has been duly executed and authorized; and
(B) constitutes a valid, binding and enforceable obligation of the
restricted subsidiary, except as enforcement of it may be
limited by bankruptcy, insolvency or similar laws including,
all laws relating to fraudulent transfers and except insofar
as enforcement is subject to general principles of equity.
No subsidiary guarantor may consolidate with or merge with or into
another corporation, person or entity whether or not affiliated with the
subsidiary guarantor unless:
(1) subject to the provisions of the following paragraph, the person
formed by or surviving the consolidation or merger, if other than
the subsidiary guarantor, assumes all the obligations of the
subsidiary guarantor under a supplemental indenture under the
notes, the indenture and the registration rights agreement;
(2) immediately after the transaction, no default or event of default
exists; and
(3) Pegasus would be permitted to incur $1.00 of additional
indebtedness under the indebtedness to adjusted operating cash
flow ratio described in the first paragraph of the covenant
described above under the caption Certain Covenants -- Incurrence
of Indebtedness and Issuance of Preferred Stock.
If a sale or other disposition of all of the assets or capital stock of
any subsidiary guarantor, by way of merger, consolidation or otherwise occurs,
then the subsidiary guarantor or the corporation acquiring the property, will be
released and relieved of any obligation under its subsidiary guarantee; provided
that the net proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the indenture.
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Any subsidiary guarantor that is designated as an unrestricted
subsidiary under the indenture will be released and relieved of its obligations
under its subsidiary guarantee for so long as the subsidiary is so designated.
No Amendment to Subordination Provisions
Without the consent of each holder of notes outstanding, Pegasus will
not amend, modify or alter the subordinated exchange note indenture in any way
that will:
(1) increase the rate of or change the time for payment of interest on
any subordinated exchange notes;
(2) increase the principal of, advance the final maturity date of or
shorten the weighted average life to maturity of any subordinated
exchange notes;
(3) alter the redemption provisions or the price or terms at which
Pegasus is required to offer to purchase the subordinated exchange
notes in a manner that would be adverse to any holder of notes; or
(4) amend the subordination provisions of the subordinated exchange
note indenture.
Reports
Whether or not required by the SEC, so long as any notes are
outstanding, Pegasus will furnish to the holders of notes within the time
periods specified in the SEC's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if Pegasus were required to file such forms, including
the section entitled Management's Discussion and Analysis of
Financial Condition and Results of Operations and, with respect to
the annual information only, a report thereon by Pegasus'
certified independent accountants; and
(2) all current reports that would be required to be filed with the
SEC on Form 8-K if Pegasus were required to file such reports, in
each case.
In addition, whether or not required by the SEC, Pegasus 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 the filing. Pegasus will also make this information available to
securities analysts and prospective investors upon request.
In addition to the financial information required by the Exchange Act,
each such quarterly and annual report shall to contain summarized financial
information, as defined in SEC Rule 1-02(aa)(1) of Regulation S-X, showing
adjusted operating cash flow for Pegasus and its restricted subsidiaries, on a
consolidated basis. Pegasus' adjusted operating cash flow will be calculated in
a manner consistent with the manner described under the definition of adjusted
operating cash flow in this prospectus. Pegasus may include summarized financial
information in the footnotes to audited consolidated financial statements or its
unaudited quarterly financial statements. The statements will be as of the same
dates and for the same periods as the consolidated financial statements of
Pegasus and its subsidiaries required under the Exchange Act. In addition,
Pegasus has agreed that, for so long as any notes remain outstanding, it will
furnish to the holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered under SEC Rule
144A(d)(4).
Events of Default and Remedies
Each of the following constitutes an event of default under the
indenture:
(1) default for 30 days in the payment of interest and liquidated
damages, if any, on the notes when due;
(2) default in payment when due of the principal of or premium, on the
notes;
(3) failure by Pegasus or any subsidiary to comply with the provisions
described under the captions:
o Repurchase at the Option of Holders-- Change of Control,
o Repurchase at the Option of Holders-- Asset Sales,
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o Certain Covenants-- Restricted Payments,
o Certain Covenants -- Incurrence of Indebtedness and Issuance
of Preferred Stock, or
o Certain Covenants -- Merger, Consolidation or Sale of Assets;
(4) failure by Pegasus or any subsidiary for 60 days after notice to
comply with any of its other agreements in the indenture or the
notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any indebtedness for money borrowed by Pegasus or any of its
restricted subsidiaries or the payment of which is guaranteed by
Pegasus or any of its restricted subsidiaries, whether the
indebtedness or guarantee now exists, or shall be later created,
and the default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on the indebtedness before the expiration of the
grace period provided in the indebtedness on the date of the
default; or
(b) results in the acceleration of the indebtedness before its
express maturity and, in each case, the principal amount of
the indebtedness, together with the principal amount of any
other indebtedness under which there has been a payment
default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(6) failure by Pegasus or any restricted subsidiary that would be a
significant subsidiary to pay final judgments aggregating in
excess of $5.0 million, which are not paid, discharged or stayed
for a period of 60 days;
(7) certain events of bankruptcy or insolvency with respect to Pegasus
or any restricted subsidiary that would constitute a significant
subsidiary or any group of restricted subsidiaries that, taken
together, would constitute a significant subsidiary; and
(8) the termination of any subsidiary guarantee for any reason not
permitted by the indenture, or the denial by any subsidiary
guarantor or any person acting on behalf of any subsidiary
guarantor of such subsidiary guarantor's obligations under its
respective subsidiary guarantee.
If any event of default occurs and is continuing, First Union National
Bank or the holders of at least 25% in principal amount of the then outstanding
notes may declare all the notes to be due and payable immediately. Upon such
declaration, the principal of, premium, if any, and accrued and unpaid interest
and liquidated damages, on the notes shall be due and payable immediately.
However, in the case of an event of default arising from certain events
of bankruptcy or insolvency with respect to Pegasus, any restricted subsidiary
that would constitute a significant subsidiary or any group of restricted
subsidiaries that, taken together, would constitute a significant subsidiary,
all outstanding notes will become due and payable without further action or
notice. Holders of the notes may not enforce the indenture or the notes except
as provided in the indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding notes may direct First
Union National Bank in its exercise of any trust or power. First Union National
Bank may withhold from holders of the notes notice of any continuing default or
event of default, except a default or event of default relating to the payment
of principal or interest or liquidated damages, if any, if it determines that
withholding notice is in their interest.
In the case of any event of default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of Pegasus with the
intention of avoiding payment of the premium that Pegasus would have had to pay
if it then had elected to redeem the notes under the optional redemption
provisions of the indenture, Pegasus will have to pay an equivalent premium to
the extent lawful upon the acceleration of the notes. If an event of default
occurs before August 1, 2003 by reason of any willful action or inaction taken
or not taken by or on behalf of Pegasus with the intention of avoiding the
prohibition on redemption of the notes before August 1, 2003, then the premium
specified in the indenture shall also become immediately due and payable to the
extent permitted by law upon the acceleration of the notes.
The holders of a majority in aggregate principal amount of the notes
then outstanding by notice to First Union National Bank may on behalf of the
holders of all of the notes waive any existing default or event of default and
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its consequences under the indenture. However, they may not waive a continuing
default or event of default in the payment of principal, interest or premium or
liquidated damages, if any, on the notes.
Pegasus must deliver to First Union National Bank annually a statement
regarding compliance with the indenture. As soon as it becomes aware of any
default or event of default, Pegasus must deliver to First Union National Bank a
statement specifying the default or event of default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Pegasus
or any subsidiary guarantor, shall have any liability for any obligations of
Pegasus or the subsidiary guarantors under the notes, the subsidiary guarantees
or the indenture or for any claim based on these obligations or their creation.
Each holder of notes by accepting a note waives and releases these persons from
all liability for these obligations. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws, and it is the view of the
SEC that this waiver is against public policy.
Legal Defeasance and Covenant Defeasance
Pegasus may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and have each
subsidiary guarantor's obligation discharged with respect to its subsidiary
guarantee, which is known as legal defeasance, except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest and
liquidated damages, if any, on such notes when such payments are
due from the trust referred to below;
(2) Pegasus' obligations with respect to the notes concerning issuing
temporary notes, registration of the notes, mutilated, destroyed,
lost or stolen notes and the maintenance of an office or agency
for payment and to hold money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of First Union
National Bank, and Pegasus' obligations to First Union; and
(4) the legal defeasance provisions of the indenture.
In addition, Pegasus may, at its option and at any time, elect to have
its obligations and each subsidiary guarantor's obligation released with respect
to certain covenants that are described in the section of the indenture entitled
Covenant Defeasance and thereafter any omission to comply with such obligations
shall not constitute a default or event of default with respect to the notes. If
covenant defeasance occurs, certain events, not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events, described under
Events of Default will no longer constitute an event of default with respect to
the notes.
To exercise either legal defeasance or covenant defeasance:
(1) Pegasus must irrevocably deposit with First Union National Bank,
in trust, for the benefit of the holders of the notes, cash and/or
government securities sufficient to pay the principal of, interest
and premium and liquidated damages, if any, on the outstanding
notes. Pegasus must also specify whether the notes are being
defeased to maturity or to a particular redemption date and make
payment accordingly;
(2) in the case of legal defeasance, Pegasus shall have delivered to
First Union National Bank an opinion of counsel in the United
States reasonably acceptable to First Union National Bank
confirming that:
(A) Pegasus has received from, or the Internal Revenue Service has
published a ruling; or
(B) since the date of the indenture, there has been a change in
the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall
confirm that, the holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes
as a result of such legal defeasance and will be subject to
federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such legal
defeasance had not occurred;
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(3) in the case of covenant defeasance, Pegasus shall have delivered
to First Union National Bank an opinion of counsel reasonably
acceptable to First Union National Bank confirming that the
holders of the outstanding notes will not recognize income, gain
or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not
occurred;
(4) no default or event of default shall have occurred and be
continuing on the date of such deposit other than a default or
event of default resulting from the borrowing of funds to be
applied to such deposit or insofar as events of default from
bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit or greater
period of time in which any such deposit of trust funds may remain
subject to bankruptcy or insolvency laws insofar as those apply to
the deposit by Pegasus;
(5) the legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument other than the indenture to which Pegasus
or any of its subsidiaries is a party or by which Pegasus or any
of its subsidiaries is bound;
(6) Pegasus must have delivered to First Union National Bank an
opinion of counsel to the effect that, as of the date of such
opinion, the trust funds will not be subject to rights of holders
of indebtedness other than the notes. The opinion must state that,
assuming no intervening bankruptcy of Pegasus between the date of
deposit and the 91st day following the deposit and assuming no
holder of notes is an insider of Pegasus, after the 91st day
following the deposit, the trust funds will not be subject to the
effects of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally under any
applicable United States or state law;
(7) Pegasus must deliver to First Union National Bank an officers'
certificate stating that the deposit was not made by Pegasus with
the intent of preferring the holders of notes over the other
creditors of Pegasus with the intent of defeating, hindering,
delaying or defrauding creditors of Pegasus or others; and
(8) Pegasus must deliver to First Union National Bank an officers'
certificate and an opinion of counsel, each stating that all
conditions precedent relating to the legal defeasance or the
covenant defeasance have been complied with.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the
indenture. The registrar and First Union National Bank may require a holder,
among other things, to furnish appropriate endorsements and transfer documents
and Pegasus may require a holder to pay any taxes and fees required by law or
permitted by the indenture. Pegasus is not required to transfer or exchange any
note selected for redemption. Also, Pegasus is not required to transfer or
exchange any note for a period of 15 days before a selection of notes to be
redeemed.
The registered holder of a note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
indenture, the notes or the subsidiary guarantees may be amended or supplemented
with the consent of the holders of at least a majority in principal amount of
the notes then outstanding, including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes. Any
existing default or compliance with any provision of the indenture or the notes
may be waived with the consent of the holders of a majority in principal amount
of the then outstanding notes, including, without limitation, consents obtained
in connection with a purchase of, or tender offer or exchange offer for, notes.
Without the consent of each holder affected, an amendment or waiver may
not with respect to any notes held by a non-consenting holder:
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
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(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.
However, Pegasus, a subsidiary guarantor with respect to a subsidiary
guarantee or the indenture to which it is a party, and First Union National Bank
may amend or supplement the indenture, the notes or the subsidiary guarantees
without the consent of any holder of notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of Pegasus' or any subsidiary
guarantor's obligations to holders of notes in the case of a
merger or consolidation;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect
the legal rights under the indenture of any such holder; or
(5) to comply with requirements of the SEC to maintain the
qualification of the indenture under the Trust Indenture Act or to
allow any subsidiary guarantor to guarantee the notes.
Concerning First Union National Bank
If First Union National Bank becomes a creditor of Pegasus, the
indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. First Union National Bank will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue or
resign.
The holders of a majority in principal amount of the then outstanding
notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to First Union National Bank,
subject to certain exceptions. The indenture provides that in case an event of
default shall occur, which shall not be cured, First Union National Bank will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, First Union
National Bank will be under no obligation to exercise any of its rights or
powers under the indenture at the request of any holder of notes, unless such
holder shall have offered to First Union National Bank security and indemnity
satisfactory to it against any loss, liability or expense.
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Book-Entry, Delivery and Form
Depository Procedures
The following description of the operations and procedures of The
Depository Trust Company, Euroclear and Cedel are provided solely as a matter of
convenience. These operations and procedures are solely within the control of
the respective settlement systems and are subject to changes by them from time
to time. Pegasus takes no responsibility for these operations and procedures and
urges investors to contact the system or their participants directly to discuss
these matters.
The Depository Trust Company has advised Pegasus that The Depository
Trust Company is a limited-purpose trust company created to hold securities for
its participating organizations, and to facilitate the clearance and settlement
of transactions in those securities between participants through electronic
book-entry changes in accounts of its participants. The participants include
securities brokers and dealers, including the initial purchasers, banks, trust
companies, clearing corporations and certain other organizations. Access to The
Depository Trust Company's system is also available to other indirect
participants such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant. Persons who are
not participants may beneficially own securities held by or on behalf of The
Depository Trust Company only through the participants or indirect participants.
The ownership interests in, and transfers of ownership interests in, each
security held by or on behalf of The Depository Trust Company are recorded on
the records of the participants and indirect participants.
The Depository Trust Company has also advised Pegasus that, under
procedures established by it:
o upon deposit of the global notes, The Depository Trust Company
will credit the accounts of participants designated by the
initial purchasers with portions of the principal amount of
the global notes; and
o ownership of the interests in the global notes will be shown
on, and the transfer of ownership thereof will be effected
only through, records maintained by The Depository Trust
Company, for the participants or by the participants and the
indirect participants for other owners of beneficial interest
in the global notes.
Except as described below, owners of interest in the global notes will
not have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.
Payments in respect of the principal of, and premium, if any,
liquidated damages, if any, and interest on a global note registered in the name
of The Depository Trust Company or its nominee will be payable to The Depository
Trust Company in its capacity as the registered holder under the indenture.
Under the terms of the indenture, Pegasus and First Union National Bank will
treat the persons in whose names the notes, including the global notes, are
registered as the owners of the notes for the purpose of receiving these
payments and for any and all other purposes whatsoever. Consequently, neither
Pegasus, First Union National Bank nor any agent of Pegasus or First Union
National Bank has or will have any responsibility or liability for:
o any aspect of The Depository Trust Company's records or any
participant's or indirect participant's records relating to or
payments made on account of beneficial ownership interest in
the global notes, or for maintaining, supervising or reviewing
any of The Depository Trust Company's records or any
participant's or indirect participant's records relating to
the beneficial ownership interests in the global notes; or
o any other matter relating to the actions and practices of The
Depository Trust Company or any of its participants or
indirect participants. The Depository Trust Company has
advised Pegasus that its current practice, upon receipt of any
payment in respect of securities such as the notes, including
principal and interest, is to credit the accounts of the
relevant participants with the payment on the payment date, in
amounts proportionate to their respective holdings in the
principal amount of beneficial interest in the relevant
security as shown on the records of The Depository Trust
Company unless The Depository Trust Company has reason to
believe it will not receive payment on such payment date.
Payments by the participants and the indirect participants to the
beneficial owners of notes will be governed by standing instructions and
customary practices and will be the responsibility of the participants or the
indirect participants. Payments will not be the responsibility of The Depository
Trust Company, First Union National Bank or Pegasus. Neither Pegasus nor First
Union National Bank will be liable for any delay by The Depository Trust Company
or any of its
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participants in identifying the beneficial owners of the notes. Pegasus and
First Union National Bank may conclusively rely on and will be protected in
relying on instructions from The Depository Trust Company or its nominee for all
purposes.
Except for trades involving only Euroclear and Cedel participants,
interests in the global notes are expected to be eligible to trade in The
Depository Trust Company's Same-Day Funds Settlement System. Therefore,
secondary market trading activity in such interests will settle in immediately
available funds, subject in all cases to the rules and procedures of The
Depository Trust Company and its participants. See Same Day Settlement and
Payment.
Transfers between participants in The Depository Trust Company will be
made in accordance with The Depository Trust Company's procedures, and will be
settled in same day funds. Transfers between participants in Euroclear and Cedel
will be made in the ordinary way in accordance with their respective rules and
operating procedures.
Cross-market transfers between the participants in The Depository Trust
Company, on the one hand, and Euroclear or Cedel participants, on the other
hand, will be made through The Depository Trust Company in accordance with its
rules on behalf of Euroclear or Cedel, as the case may be. However, these
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in the system in accordance with
the rules and procedures and within the established deadlines, according to
Brussels time, of the system. Euroclear or Cedel, as the case may be, will
deliver instructions to its respective depositary to take action to make final
settlement on its behalf by delivering or receiving interests in the relevant
global note in The Depository Trust Company. Payment will be made or received in
accordance with normal procedures for same-day funds settlement applicable to
The Depository Trust Company. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
The Depository Trust Company has advised Pegasus that it will take any
action permitted to be taken by a holder of notes only at the direction of one
or more participants to whose account The Depository Trust Company has credited
the interests in the global notes. Moreover, The Depository Trust Company will
take action only in respect of the portion of the aggregate principal amount of
the notes as to which the participant has or given direction. However, if there
is an event of default under the notes, The Depository Trust Company reserves
the right to exchange the global notes for legended notes in certificated form,
and to distribute such notes to its participants.
The Depository Trust Company, Euroclear and Cedel have agreed to the
foregoing procedures to facilitate transfers of interests in the global notes
among participants in The Depository Trust Company, Euroclear and Cedel.
However, they are under no obligation to perform or to continue to perform these
procedures, and they may be discontinued at any time. Neither Pegasus nor First
Union National Bank nor any of their respective agents will have any
responsibility for the performance by The Depository Trust Company, Euroclear or
Cedel or their participants or indirect participants of their obligations under
the rules and procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
A global note is exchangeable for certificated notes if:
(1) The Depository Trust Company notifies Pegasus that it is
unwilling or unable to continue as depositary for the global
notes and Pegasus thereupon fails to appoint a successor
depositary, or
(2) The Depository Trust Company has ceased to be a clearing
agency registered under the Exchange Act;
(3) Pegasus, at its option, notifies First Union National Bank in
writing that it elects to cause the issuance of the
certificated notes, or
(4) there shall have occurred and be continuing a default or event
of default with respect to the notes.
In addition, beneficial interests in a global note may be exchanged for
certificated notes upon request but only upon prior written notice given to
First Union National Bank by or on behalf of The Depository Trust Company in
accordance with the indenture. In all cases, certificated notes delivered in
exchange for any global note or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of the depositary in accordance with its customary procedures and will
bear the applicable restrictive legend referred to in Notice to Investors,
unless Pegasus determines otherwise in compliance with applicable law.
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Same Day Settlement and Payment
Payments in respect of the notes represented by the global notes,
including principal, premium, if any, interest and liquidated damages, if any,
will be made by wire transfer of immediately available funds to the accounts
specified by the global note holder. With respect to notes in certificated form,
Pegasus will make all payments of principal, premium, if any, interest and
liquidated damages, if any, by wire transfer of immediately available funds to
the accounts specified by the holders thereof or, if no such account is
specified, by mailing a check to each such holder's registered address. The
notes represented by the global notes are expected to trade on The Depository
Trust Company's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in the notes will, therefore, be required by the
depositary to be settled in immediately available funds. Pegasus expects that
secondary trading in any certificated notes will also be settled in immediately
available funds.
Because of time zone differences, the securities account of a Euroclear
or Cedel participant purchasing an interest in a global note from a participant
in The Depository Trust Company will be credited, and any such crediting will be
reported to the relevant Euroclear or Cedel participant, during the securities
settlement processing day immediately following the settlement date of The
Depository Trust Company. The Depository Trust Company has advised Pegasus that
cash received in Euroclear or Cedel as a result of sales of interests in a
global note by or through a Euroclear or Cedel participant to a participant in
The Depository Trust Company will be received with value on the settlement date
of The Depository Trust Company but will be available in the relevant Euroclear
or Cedel cash account only as of the business day for Euroclear or Cedel
following The Depository Trust Company's settlement date.
Certain Definitions
Set forth below are certain defined terms used in the indenture and in
the section Description of Notes. You should consult the indenture for full
definitions of all these terms.
1997 Indenture means the indenture, dated as of October 21, 1997,
between Pegasus and First Union National Bank, as trustee, governing the terms
of the 1997 notes.
1997 Notes means Pegasus' 9 5/8% senior notes due 2005.
1997 Notes Subsidiary Guarantees means the guarantees of Pegasus'
payment obligations under the 1997 indenture and the 1997 notes, if and when
executed by the subsidiaries of Pegasus under the provisions of the 1997
indenture.
1998 Indenture means the indenture dated November 30, 1998, between
Pegasus and First Union National Bank, as trustee, governing the terms of the
1998 notes.
1998 Notes means Pegasus' 9 3/4% senior notes due 2006.
1998 Notes Subsidiary Guarantees means the guarantees of Pegasus'
payment obligations under the 1998 indenture and the 1998 notes, if and when
executed by the Subsidiaries of Pegasus pursuant to the provisions of the 1998
indenture.
Acquired Debt means, with respect to any specified person:
(1) Indebtedness of any other person existing at the time such
other person is merged with or into or became a subsidiary of
such specified person, including, without limitation,
indebtedness incurred in connection with, or in contemplation
of, such other person merging with or into or becoming a
subsidiary of such specified person; and
(2) Indebtedness secured by a lien encumbering any asset acquired
by such specified person.
Adjusted Operating Cash Flow means, for the four most recent fiscal
quarters for which internal financial statements are available, operating cash
flow of the person and its restricted subsidiaries less direct broadcast
satellite cash flow for the most recent four-quarter period plus direct
broadcast satellite cash flow for the most recent quarterly period, multiplied
by four.
Affiliate of any specified person means any other person controlling or
controlled by or under common control with the specified person. For purposes of
this definition, control, including the correlative terms "controlling,"
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"controlled by" and "under common control with," as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities, by agreement or otherwise.
However, beneficial ownership of 10% or more of the voting securities of a
person shall be deemed to be control.
Asset Sale means:
(1) the sale, lease, conveyance or other disposition of any assets
other than in the ordinary course of business consistent with
past practices. However, the sale, lease, conveyance or other
disposition of all or substantially all of the assets of
Pegasus and its subsidiaries taken as a whole will be governed
by the provisions described above under the caption Repurchase
at the Option of Holders -- Change of Control and/or the
provisions described above under the caption Certain Covenants
-- Merger, Consolidation or Sale of Assets and not by the
provision of the asset sale covenant; and
(2) the issue or sale by Pegasus or any of its restricted
subsidiaries of equity interests of any of Pegasus' restricted
subsidiaries, in the case of either clause (1) or (2), whether
in a single transaction or a series of related transactions
that have a fair market value in excess of $1.0 million or for
net proceeds in excess of $1.0 million.
The following transactions will not be deemed to be asset sales:
(1) a transfer of assets by Pegasus to a wholly owned restricted
subsidiary of Pegasus or by a wholly-owned restricted
subsidiary of Pegasus to Pegasus or to another wholly owned
restricted subsidiary of Pegasus;
(2) an issuance of equity interests by a wholly-owned restricted
subsidiary of Pegasus to Pegasus or to another wholly-owned
restricted subsidiary of Pegasus; and
(3) a restricted payment that is permitted by the provisions of
the covenant described above under the caption Certain
Covenants -- Restricted Payments.
Asset Swap means an exchange of assets by Pegasus or a restricted
subsidiary of Pegasus for:
(1) one or more permitted businesses;
(2) a controlling equity interest in any person whose assets
consist primarily of one or more permitted businesses; and/or
(3) long-term assets that are used in a permitted business in a
like-kind exchange under Section 1031 of the Internal Revenue
Code or any similar or successor provision of the Internal
Revenue Code.
Bank Facilities means, with respect to Pegasus or any of its restricted
subsidiaries, one or more debt facilities or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing, including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
Capital Lease Obligation means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with generally accepted accounting principles.
Capital Stock means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other
equivalents, however designated, of corporate stock;
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(3) in the case of a partnership or limited liability company,
partnership or membership interests whether general or
limited; and
(4) any other interest or participation that confers on a person
the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing person.
Cash Equivalents means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured
by the United States Government or any agency or
instrumentality thereof having maturities of not more than six
months from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500.0
million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days
or on demand for underlying securities of the types described
in clauses (2) and (3) above entered into with any financial
institution meeting the qualifications specified in clause (3)
above;
(5) commercial paper having the highest rating at acquisition
obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months
after the date of acquisition; and
(6) money market funds at least 95% of the assets of which
constitute cash equivalents of the kinds described in clauses
(1) through (5) of this definition.
Certificate of Designation means the certificate of designation,
preferences and relative, participating, optional and other special rights of
preferred stock and qualifications, limitations and restrictions thereof of 12
3/4% Series A cumulative exchangeable preferred stock of Pegasus.
Change of Control means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition,
other than by way of merger or consolidation, in one or a
series of related transactions, of all or substantially all of
the assets of Pegasus and its restricted subsidiaries taken as
a whole to any person as that term is used in Section 13(d)(3)
of the Exchange Act other than the principal or his related
parties;
(2) the adoption of a plan relating to the liquidation or
dissolution of Pegasus;
(3) the consummation of any transaction, including, without
limitation, any merger or consolidation the result of which is
that:
(A) any person, as defined below, becomes the beneficial
owner, as that term is defined in SEC Rules 13d-3 and
13d-5, of more of the voting stock of Pegasus,
measured by voting power rather than number of
shares, than is at the time beneficially owned by
Marshall W. Pagon and his related parties in the
aggregate. For purposes of this definition, a person
is deemed to own all securities that the person has a
right to acquire, whether immediately or at some
later time or upon the happening of an event
(B) Marshall W. Pagon and his related parties
collectively cease to beneficially own, as defined
above, voting stock of Pegasus having at least 30% of
the combined voting power of all classes of voting
stock of Pegasus then outstanding; or
(C) Marshall W. Pagon and his affiliates acquire, in the
aggregate, beneficial ownership as defined above of
more than 66 2/3% of the shares of Class A common
stock at the time outstanding; or
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(D) the first day on which a majority of the members of
the board of directors of Pegasus are not continuing
directors.
Closing Date means November 19, 1999, the original date of issuance of
the notes.
Consolidated Net Income means, with respect to any person for any
period, the aggregate of the net income of such person and its restricted
subsidiaries for such period, on a consolidated basis, determined in accordance
with generally accepted accounting principles, provided that:
(1) the net income, but not loss, of any person that is not a
subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent
person or a wholly-owned restricted subsidiary thereof;
(2) the net income of any person acquired in a pooling of
interests transaction for any period before the date of such
acquisition shall be excluded;
(3) the cumulative effect of a change in accounting principles
shall be excluded; and
(4) the net income of any unrestricted subsidiary shall be
excluded, whether or not distributed to Pegasus or one of its
subsidiaries.
Continuing Directors means, as of any date of determination, any member
of the board of directors of Pegasus who was a member of the board of directors
on the closing date or was nominated for election or elected to the board of
directors with the approval of a majority of the continuing directors who were
members of the board at the time of the nomination or election.
Cumulative Operating Cash Flow means, as of any date of determination,
operating cash flow for Pegasus and its restricted subsidiaries for the period,
taken as one accounting period, from the beginning of the first full month
commencing after the closing date to the end of the most recently ended fiscal
quarter for which internal financial statements are available at the date of
determination, plus all cash dividends received by Pegasus or a wholly-owned
restricted subsidiary of Pegasus from any unrestricted subsidiary of Pegasus or
wholly-owned restricted subsidiary of Pegasus to the extent that such dividends
are not included in the calculation of permitted restricted payments under
subparagraph (3) of the second paragraph of the covenant described under the
caption Certain Covenants -- Restricted Payments by virtue of clause (3) of such
subparagraph.
Cumulative Total Interest Expense means, with respect to Pegasus and
its restricted subsidiaries, as of any date of determination, total interest
expense for the period, taken as one accounting period, from the beginning of
the first full fiscal month commencing after the closing date to the end of the
most recently ended fiscal quarter for which internal financial statements are
available at such date of determination.
Digital Television Services Credit Facility means the Second Amended
and Restated Credit Agreement, dated as of July 30, 1997, by and among Digital
Television Services, LLC, CIBC Oppenheimer Corp., as arranger, Morgan Guaranty
Trust Company of New York, as syndication agent, Fleet National Bank, as
documentation agent, and Canadian Imperial Bank of Commerce, as administrative
agent, as amended through the closing date.
Direct Broadcast Satellite Cash Flow means income from operations
before depreciation, amortization and non-cash incentive compensation to the
extent deducted in arriving at income from operations for the satellite segment
determined on a basis consistent with the segment data contained in Pegasus'
consolidated audited financial statements.
Disqualified Stock means any capital stock that, by its terms or by the
terms of any security into which it is convertible or for which it is
exchangeable, or upon the happening of any event, matures or is mandatorily
redeemable, under a sinking fund obligation or otherwise, or is redeemable at
the option of the holder thereof, in whole or in part, on or before the date
that is 91 days after the date on which the notes mature unless, in any such
case, the issuer's obligation to pay, purchase or redeem such capital stock is
expressly conditioned on its ability to do so in compliance with the provisions
of the covenant described under the caption Certain Covenants -- Restricted
Payments.
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
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and sold on any stock exchange, automated trading system or over-the-counter or
other securities market, including, without prejudice to the generality of the
foregoing, the market for securities eligible for resale under SEC Rule 144A.
Equity Interests means capital stock and all warrants, options or other
rights to acquire capital stock, but excluding any debt security that is
convertible into, or exchangeable for, capital stock.
Existing Credit Facilities means the Digital Television Services credit
facility and the Pegasus Media & Communications, Inc. credit facility.
Existing Indebtedness means all indebtedness of Pegasus and its
subsidiaries other than indebtedness under the existing credit facilities in
existence on the closing date, until such amounts are repaid.
Fair Market Value means, with respect to assets or aggregate net
proceeds having a fair market value
(a) of less than $5.0 million, the fair market value of such
assets or proceeds determined in good faith by the board of
directors of Pegasus including a majority of the independent
directors thereof and evidenced by a board resolution; and
(b) equal to or in excess of $5.0 million, the fair market value
of such assets or proceeds as determined by an investment
banking firm of national standing.
However, the fair market value of the assets purchased in an
arm's-length transaction by an affiliate of Pegasus, other than a subsidiary,
from a third party that is not also an affiliate of Pegasus or such purchaser
and contributed to Pegasus within five business days of the consummation of the
acquisition of the assets by the affiliate shall be deemed to be the aggregate
consideration paid by the affiliate, which may include the fair market value of
any non-cash consideration to the extent that the valuation requirements of this
definition are complied with as to any such non-cash consideration.
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.
Global Notes means one or more notes in registered, global form without
interest coupons representing the notes that are being exchanged in this
offering, and which have been registered with The Depository Trust Company or
its nominee.
Government Securities means direct obligations of, or obligations
guaranteed by, the United States for the payment of which guarantee or
obligations the full faith and credit of the United States is pledged.
Guarantee means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, co-borrowing
arrangements, letters of credit and reimbursement agreements in respect thereof,
of all or any part of any indebtedness.
Hedging Obligations means, with respect to any person, the obligations
of such person under interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements and other agreements or arrangements
designed to protect such person against fluctuations in interest rates.
Indebtedness means, with respect to any person, any indebtedness of
such person, whether or not contingent:
o in respect of borrowed money; or
o evidenced by bonds, notes, debentures or similar instruments,
or letters of credit or reimbursement agreements in respect of
these instruments; or
o representing any capital lease obligations or the balance
deferred and unpaid of the purchase price of any property; or
o representing any hedging obligations.
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However, indebtedness does not include any balance that constitutes an accrued
expense or trade payable, if and to the extent any of the foregoing
indebtedness, other than letters of credit and hedging obligations, would appear
as a liability upon a balance sheet of the person prepared in accordance with
generally accepted accounting principles. It also does not include indebtedness
of others secured by a lien on any asset of the person whether or not the
indebtedness is assumed by the person and, to the extent not otherwise included,
the guarantee by the person of any indebtedness of any other person. The amount
of indebtedness of any person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date. However, the amount outstanding at
any time of any indebtedness issued with original issue discount is the full
amount of the indebtedness less the remaining unamortized portion of the
original issue discount of such indebtedness at the time as determined in
conformity with generally accepted accounting principles. The amount of any
indebtedness outstanding as of any date shall be:
o the accreted value thereof, in the case of any indebtedness
issued with original issue discount; and
o the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any
other indebtedness.
Indebtedness to Adjusted Operating Cash Flow Ratio means, as of any
date of determination, the ratio of:
(a) the aggregate principal amount of all outstanding
indebtedness of a person and its restricted subsidiaries as of the date on a
consolidated basis, plus the aggregate liquidation preference of all outstanding
preferred stock of the restricted subsidiaries of the person as of the date
excluding qualified subsidiary stock and any such preferred stock held by the
person or a wholly-owned restricted subsidiary of the person, plus the aggregate
liquidation preference or redemption amount of all disqualified stock of the
person excluding any disqualified stock held by the person or a wholly-owned
restricted subsidiary of the person as of the date of determination to
(b) adjusted operating cash flow of the person and its
restricted subsidiaries for the most recent four-quarter period for which
internal financial statements are available determined on a pro forma basis
after giving effect to all acquisitions and dispositions of assets, disregarding
clause (3) of the definition of "consolidated net income," including, without
limitation, asset swaps made by the person and its restricted subsidiaries since
the beginning of such four-quarter period through the date of determination as
if the acquisitions and dispositions had occurred at the beginning of the
four-quarter period.
Independent Director means a member of the board of directors who is
neither an officer nor an employee of Pegasus or any of its affiliates.
Investments means, with respect to any person, all investments by the
person in other persons and their affiliates in the forms of
o direct or indirect loans, including guarantees of indebtedness
or other obligations,
o advances or capital contributions, excluding commission,
travel and similar advances to officers and employees made in
the ordinary course of business,
o purchases or other acquisitions for consideration of
indebtedness,
o equity interests or other securities, and
o all other items that are or would be classified as investments
on a balance sheet prepared in accordance with generally
accepted accounting principles.
However, an acquisition of assets, equity interests or other securities
by Pegasus for consideration consisting of common equity securities, or
preferred stock which is not disqualified stock, of Pegasus shall not be deemed
to be an investment.
Lien means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of the asset,
whether or not filed, recorded or otherwise perfected under applicable law. It
also means any conditional sale or other title retention agreement, any lease in
the nature of such a sale or agreement, any option
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or other agreement to sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform Commercial Code or
equivalent statutes of any jurisdiction.
Net Income means, with respect to any person, the net income or loss of
the person, determined in accordance with generally accepted accounting
principles and before any reduction in respect of preferred stock dividends,
excluding, however:
(1) any gain, but not loss, together with any related provision
for taxes on the gain, but not loss, realized in connection
with any asset sale, including, without limitation,
dispositions under sale and leaseback transactions, or the
disposition of any securities by the person or any of its
restricted subsidiaries or the extinguishment of any
indebtedness of the person or any of its restricted
subsidiaries; and
(2) any extraordinary or nonrecurring gain but not loss, together
with any related provision for taxes on such extraordinary or
nonrecurring gain but not loss.
Net Proceeds means the aggregate cash proceeds received by Pegasus or
any of its restricted subsidiaries in respect of any asset sale, including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any asset sale, net of the direct costs
relating to the asset sale. Direct costs include without limitation,
o legal, accounting, investment banking fees, and sales
commissions and any relocation expenses incurred as a result
thereof,
o taxes paid or payable as a result thereof after taking into
account any available tax credits or deductions and any tax
sharing arrangements,
o amounts required to be applied to the repayment of
indebtedness in connection with the asset sale, and
o any reserve for adjustment in respect of the sale price of the
asset or assets established in accordance with generally
accepted accounting principles.
Non-Cash Incentive Compensation means incentive compensation paid to
any officer of Pegasus or any of its subsidiaries in the form of Class A common
stock of Pegasus or options to purchase Class A common stock of Pegasus under
the Pegasus restricted stock plan and the Pegasus 1996 stock option plan.
Non-Recourse Debt means indebtedness:
(1) as to which neither Pegasus nor any of its restricted
subsidiaries:
(a) provides credit support of any kind, including any
undertaking, agreement or instrument that would
constitute indebtedness;
(b) is liable, as a guarantor or otherwise; or
(c) constitutes the lender; and
(2) no default with respect to which, including any rights that
the holders of the indebtedness may have to take enforcement
action against an unrestricted subsidiary, would permit upon
notice, lapse of time or both any holder of any other
indebtedness of Pegasus or any of its restricted subsidiaries
to declare a default on the other indebtedness or cause the
payment thereof to be accelerated or payable before its stated
maturity; and
(3) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of
Pegasus or any of its restricted subsidiaries.
Obligations means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any indebtedness.
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Operating Cash Flow means, with respect to any person for any period,
the consolidated net income of the person for such period, plus:
(1) extraordinary net losses and net losses on sales of assets
outside the ordinary course of business during the period, to
the extent the losses were deducted in computing such
consolidated net income, plus
(2) provision for taxes based on income or profits, to the extent
such provision for taxes was included in computing such
consolidated net income, and any provision for taxes used in
computing the net losses under clause (1) above, plus
(3) consolidated interest expense of the person and its
subsidiaries for the period, whether paid or accrued and
whether or not capitalized, including, without limitation
o amortization of original issue discount,
o non-cash interest payments,
o the interest component of any deferred payment
obligations,
o the interest component of all payments associated
with capital lease obligations,
o commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers'
acceptance financings, and
o net payments if any under hedging obligations, to the
extent that any expense was deducted in computing the
consolidated net income, plus
(4) depreciation, amortization, including amortization of goodwill
and other intangibles but excluding amortization of prepaid
cash expenses that were paid in a prior period and other
non-cash charges, excluding any non-cash charge to the extent
that it represents an accrual of or reserve for cash charges
in any future period or amortization of a prepaid cash expense
that was paid in a prior period, of the person and its
subsidiaries for the period to the extent that the
depreciation, amortization and other non-cash charges were
deducted in computing the consolidated net income, plus
(5) non-cash incentive compensation to the extent the compensation
expense was deducted in computing the consolidated net income
and to the extent not included in clause (4) of this
definition; and
less all non-cash income for the period, excluding any non-cash income to the
extent it represents an accrual of cash income in any future period or
amortization of cash income received in a prior period.
Other Debt that Ranks Equally in Right of Payment to the Notes means
senior indebtedness of Pegasus or any subsidiary guarantor permitted by the
covenant described under the caption Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock, which is equal in right of payment
with the notes or any subsidiary guarantee.
Pegasus Media & Communications, Inc. Credit Facility means the credit
agreement, dated as of December 10, 1997, by and among Pegasus Media &
Communications, Inc., the several lenders from time to time party thereto and
Bankers Trust Company, as agent for the lenders, as amended through November 30,
1998.
Pegasus Media & Communications, Inc. Notes means Pegasus Media &
Communications, Inc.'s 12 1/2% Series B senior subordinated notes due 2005.
Pegasus Satellite Television of Virginia, Inc. Preferred Stock means
the Series A preferred stock, par value $1.00 per share, of Pegasus Satellite
Television of Virginia, Inc.
Permitted Businesses means:
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(1) any media or communications business, including but not
limited to, any broadcast television station, cable franchise
or other business in the television broadcasting, cable or
direct-to-home satellite television industries; and
(2) any business reasonably related or ancillary to any of the
foregoing businesses.
Permitted Investments means:
(1) any investments in Pegasus or in a wholly-owned restricted
subsidiary of Pegasus;
(2) any investments in cash equivalents;
(3) Investments by Pegasus or any restricted subsidiary of Pegasus
in a person, if as a result of the investment:
o the person becomes a wholly-owned restricted
subsidiary of Pegasus or
o such person is merged, consolidated or
amalgamated with or into, or transfers or
conveys substantially all of its assets to,
or is liquidated into, Pegasus or a
wholly-owned restricted subsidiary of
Pegasus;
(4) Investments made as a result of the receipt of non-cash
consideration from an asset sale that was made under and in
compliance with the provisions of the covenant described under
the caption Repurchase at the Option of Holders -- Asset
Sales; and
(5) other investments made since the date of the indenture
measured as of the time made and without giving effect to
subsequent changes in value that do not exceed an amount equal
to $15.0 million plus, to the extent any such investments are
sold for cash or are otherwise liquidated or repaid for cash,
any gains less any losses realized on the disposition of such
investments.
Permitted Liens means:
(1) Liens securing term loans, revolving borrowings, letters of
credit or other obligations under any bank facility;
(2) Liens securing eligible indebtedness of a subsidiary that was
permitted to be incurred under the indenture;
(3) Liens on property of a person existing at the time the person
is merged into or consolidated with Pegasus or any subsidiary
of Pegasus, if such liens were not created in contemplation of
the merger or consolidation and do not extend to any assets
other than those of the person merged into or consolidated
with Pegasus or any restricted subsidiary of Pegasus;
(4) Liens on property existing at the time of acquisition thereof
by Pegasus or any subsidiary of Pegasus, if the liens were not
created in contemplation of the acquisition;
(5) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations
of a like nature incurred in the ordinary course of business;
(6) Liens existing on the closing date;
(7) Liens to secure indebtedness represented by capital lease
obligations, mortgage financings or purchase money obligations
permitted by clause (7) of the third paragraph of the covenant
described under the caption Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock, covering only
the assets acquired with such indebtedness;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with
generally accepted accounting principles shall have been made
therefor;
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(9) Liens incurred in the ordinary course of business of Pegasus
or any subsidiary of Pegasus with respect to obligations that
do not exceed $1.5 million at any one time outstanding;
(10) Liens on deposits or cash equivalents made under legally
binding agreements or non-binding letters of intent to acquire
assets, or the capital stock of persons owning such assets, in
an amount not to exceed 10% of the purchase price of such
assets or capital stock, if the assets to be acquired or the
capital stock of persons owning the assets will be owned by
Pegasus or a restricted subsidiary of Pegasus upon
consummation of the contemplated acquisition;
(11) Liens encumbering deposits or cash equivalents made to secure
obligations of Pegasus to repurchase capital stock of Pegasus
pledged to secure obligations of employees of Pegasus in an
aggregate amount not to exceed $5.0 million at any time
outstanding; and
(12) Liens on assets of or equity interests in unrestricted
subsidiaries that secure non-recourse debt of unrestricted
subsidiaries.
Permitted Refinancing Debt means any indebtedness of Pegasus or any of
its restricted subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
indebtedness of Pegasus or any of its restricted subsidiaries, if:
(1) the principal amount or accreted value, if applicable, of such
permitted refinancing debt does not exceed the principal
amount of or accreted value, if applicable; plus
o accrued interest on, the indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded;
plus
o the amount of reasonable expenses incurred in
connection therewith; and
o the amount of any premium required to be paid in
connection with the refinancing under the terms of
the refinancing or deemed by Pegasus or the
restricted subsidiary necessary to be paid to
effectuate the refinancing;
(2) the permitted refinancing debt has a final maturity date not
earlier than the final maturity date of, and has a weighted
average life to maturity equal to or greater than the weighted
average life to maturity of, the indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
(3) if the indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the notes, the permitted refinancing debt has a
final maturity date later than the final maturity date of the
notes, and is subordinated in right of payment to the notes on
terms at least as favorable to the holders of notes as those
contained in the documentation governing the indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded;
(4) the indebtedness is incurred either by Pegasus or by the
restricted subsidiary who is the obligor on the indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded; and
(5) if the permitted refinancing debt is incurred by a restricted
subsidiary that is not a subsidiary guarantor, such permitted
refinancing debt constitutes eligible indebtedness.
Qualified Subsidiary Stock means capital stock of a subsidiary of
Pegasus which by its terms:
(1) does not mature, or is not mandatorily redeemable, under a
sinking fund obligation or otherwise, and is not redeemable at
the option of a holder, in whole or in part, before December
1, 2007, in each case, whether automatically or upon the
happening of any event, unless, in any such case, the issuer's
obligation to pay, purchase or redeem such capital stock is
expressly conditioned on its ability to do so in compliance
with the provisions of the covenant described under the
caption Certain Covenants - Restricted Payments;
(2) is automatically exchangeable into shares of capital stock of
Pegasus that is not disqualified stock on the earlier to occur
of (a) the date of an event of default and (b) December 1,
2005;
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(3) has no voting or remedial rights; and
(4) does not permit the payment of cash dividends before December
1, 2006, unless the issuer's ability to pay cash dividends is
expressly conditioned on its ability to do so in compliance
with the provisions of the covenant described under the
caption Certain Covenants -- Restricted Payments. However, for
all purposes under the indenture, qualified subsidiary stock
shall be deemed to include the Pegasus Satellite Television of
Virginia, Inc. preferred stock.
Related Party with respect to Marshall W. Pagon means:
(1) any immediate family member of Marshall W. Pagon or
(2) any trust, corporation, partnership or other entity,
more than 50% of the voting equity interests of which
are owned and controlled by Marshall W. Pagon and/or
other persons referred to above in clause (1).
For purposes of this definition:
o Control has the meaning specified in the definition of
"affiliate" contained under the caption Certain Definitions.
In addition, Marshall W. Pagon's estate shall be deemed to be
a related party until such time as the estate is distributed
in accordance with Marshall W. Pagon's will or applicable
state law; and
o Immediate Family Member means spouse, parent, step-parent,
child, sibling or step-sibling.
Restricted Investment means an investment other than a permitted
investment.
Restricted Subsidiary of a person means any subsidiary of the person
that is not an unrestricted subsidiary.
Satellite Segment means the business involved in the marketing of video
and audio programming and data information services through transmission media
consisting of space-based satellite broadcasting services, the assets related to
the conduct of this business held by Pegasus and its restricted subsidiaries on
the closing date, plus all other assets acquired by Pegasus or any of its
restricted subsidiaries that are directly related to this business. Satellite
segment does not include the terrestrial television broadcasting business and
related assets and the cable television business and related assets. However,
any assets acquired by Pegasus or any of its restricted subsidiaries after the
closing date that are not directly related to the Satellite segment, as
described above, shall not be included for purposes of this definition.
Series A Preferred Stock means Pegasus' 12 3/4% Series A cumulative
exchangeable preferred stock.
Significant Subsidiary means any subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
under the Securities Act, as such regulation is in effect on the closing date.
Split Dollar Agreement means the split dollar agreement between Pegasus
and Nicholas A. Pagon, Holly T. Pagon and Michael B. Jordan, as trustees of an
insurance trust established by Marshall W. Pagon, as in effect on the closing
date.
Stated Maturity means, with respect to any interest or principal on any
series of indebtedness, the date on which the payment of interest or principal
was scheduled to be paid in the original documentation governing the
indebtedness, and shall not include any contingent obligations to repay, redeem
or repurchase any interest or principal before the date originally scheduled for
the payment thereof.
Subordinated Exchange Note Indenture means the indenture filed as an
exhibit to the certificate of designation which would govern the subordinated
exchange notes, if issued, as the same may be amended, but without giving effect
to any amendment that materially alters the economic terms of the indenture.
Subordinated Exchange Notes means Pegasus' 12 3/4% senior subordinated
exchange notes due 2007 issuable under the subordinated exchange note indenture
in exchange for Pegasus' Series A preferred stock.
Subsidiary means, with respect to any person:
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(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of capital
stock entitled to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled by the
person or one or more of the other subsidiaries of that person
or a combination thereof; and
(2) any partnership
(a) the sole general partner or the managing general partner
of which is such person or a subsidiary of such person, or
(b) the only general partners of which are such person or of
one or more subsidiaries of such person, or any combination
thereof.
Subsidiary Guarantor means any restricted subsidiary that shall have
guaranteed, under a supplemental indenture and the requirements of the
indenture, the payment of all principal of, and interest and premium, if any,
on, the notes and all other amounts payable under the notes or the indenture,
which guarantee shall be equal or senior to all indebtedness of such restricted
subsidiary.
Total Interest Expense means, with respect to any person for any
period, the sum of:
(1) the consolidated interest expense of the person and its
restricted subsidiaries for the period, whether paid or
accrued, including, without limitation, amortization of
original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the
interest component of all payments associated with capital
lease obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments, if any, under hedging
obligations; and
(2) the consolidated interest expense of such person and its
restricted subsidiaries that was capitalized during the
period, to the extent such amounts are not included in clause
(1) of this definition; and
(3) any interest expense for such period on indebtedness of
another person that is guaranteed by the person or one of its
restricted subsidiaries or secured by a lien on assets other
than equity interests in unrestricted subsidiaries securing
indebtedness of unrestricted subsidiaries of the person or one
of its restricted subsidiaries whether or not the guarantee or
lien is called upon; and
(4) all cash dividend payments during such period on any series of
preferred stock of a restricted subsidiary of the person.
Unrestricted Subsidiary means any subsidiary that is designated by the
board of directors as an unrestricted subsidiary under a board resolution, but
only if the subsidiary:
(1) has no indebtedness other than non-recourse debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Pegasus or any restricted subsidiary of
Pegasus unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to Pegasus
or such restricted subsidiary than those that might be
obtained at the time from persons who are not affiliates of
Pegasus;
(3) is a person with respect to which neither Pegasus nor any of
its restricted subsidiaries has any direct or indirect
obligation to:
o subscribe for additional equity interests or
o maintain or preserve such person's financial
condition or to cause such person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise provided credit support for
any indebtedness of Pegasus or any of its restricted
subsidiaries; and
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(5) has at least one executive officer that is not a director or
executive officer of Pegasus or any of its restricted
subsidiaries. Pegasus shall evidence any such designation made
by the board of directors at a time when any notes are
outstanding by filing with First Union National Bank a
certified copy of the board resolution giving effect to the
designation and an officers' certificate certifying that the
designation complied with the foregoing conditions and was
permitted by the provisions of the covenant described under
the caption Certain Covenants - Restricted Payments.
If, at any time, any unrestricted subsidiary would fail to meet the
foregoing requirements as an unrestricted subsidiary, it shall thereafter cease
to be an unrestricted subsidiary for purposes of the indenture and any
indebtedness of the subsidiary shall be deemed to be incurred by a restricted
subsidiary of Pegasus as of that date. If the indebtedness is not permitted to
be incurred as of that date under the provisions of the covenant described under
the caption Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock. Pegasus shall be in default of the covenant. If an unrestricted
subsidiary ceases to meet the requirement set forth in clause (5) of this
definition, the unrestricted subsidiary shall have 60 days to meet the
requirement before the unrestricted subsidiary shall cease to be an unrestricted
subsidiary.
The board of directors of Pegasus may at any time designate any
unrestricted subsidiary to be a restricted subsidiary. However, the designation
shall be deemed to be an incurrence of indebtedness by a restricted subsidiary
of Pegasus of any outstanding indebtedness of the unrestricted subsidiary and
the designation shall be permitted only if:
o the indebtedness is permitted under the covenant described
under the caption Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock; and
o no default or event of default would be in existence following
the designation.
Voting Stock means with respect to any specified person, capital stock
with voting power, under ordinary circumstances and without regard to the
occurrence of any contingency, to elect the directors or other managers or
trustees of the person.
Weighted Average Life to Maturity means, when applied to any
indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining
installment, sinking fund, serial maturity
or other required payments of principal,
including payment at final maturity, by
(b) the number of years calculated to the
nearest one-twelfth that will elapse between
that date and the making of the payment, by
(2) the then outstanding principal amount of such indebtedness.
Wholly-Owned Restricted Subsidiary of any person means a restricted
subsidiary of such person all of the outstanding capital stock other than
qualified subsidiary stock or other ownership interests of which other than
directors' qualifying shares shall at the time be owned by the person and/or by
one or more wholly-owned restricted subsidiaries of the person.
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Material United States Federal Income Tax Consequences
The following is a general discussion of the material U.S. federal
income and estate tax consequences of the acquisition, ownership and disposition
of notes by an initial beneficial owner of notes that, for U.S. federal income
tax purposes, is not a U.S. person. This discussion is based upon the U.S.
federal tax law now in effect, which is subject to change, possibly
retroactively. For purposes of this discussion, a U.S. person means a citizen or
resident of the U.S., a corporation, partnership or other entity created or
organized in the U.S. or under the laws of the U.S. or of any political
subdivision thereof, an estate whose income is includible in gross income for
U.S. federal income tax purposes regardless of its source or a trust, if a U.S.
court is able to exercise primary supervision over the administration of the
trust and one or more U.S. fiduciaries have the authority to control all
substantial decisions of the trust. The tax treatment of the owners of the notes
may vary depending upon their particular situations. U.S. persons acquiring the
notes are subject to different rules from those discussed below. In addition,
certain other note owners, 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,
owning 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 are generally currently effective for payments made
after December 31, 1999, subject to certain transition rules. The new
withholding regulations are quite complex. Non-U.S. holders are strongly urged
to consult their own tax advisors with respect to the new withholding
regulations.
Interest
Interest we pay to a non-U.S. holder will not be subject to U.S.
federal income or withholding tax if the interest is not effectively connected
with the conduct of a trade or business within the U.S. by such non-U.S. holder
(or, if different, the non-U.S. beneficial owner of the rate) and the non-U.S.
holder and, if different, the non-U.S. beneficial owner:
o does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Pegasus;
o is not a controlled foreign corporation with respect to which
Pegasus is a related person within the meaning of Section
864(d)(4) of the Internal Revenue Code; and
o certifies, under penalties of perjury, that the beneficial owner
is not a U.S. person and provides the owner's name and address.
The current regulations provide that the statement must be
received no later than the calendar year in which the payment is
made. The new withholding regulations require the statement to be
made on Form W-8 or approved substitute before payment. Certain
special procedures are provided in the new withholding regulations
for payments through qualified intermediaries or to entities that
are classified as partnerships for U.S. federal income tax
purposes.
Gain on Disposition
A non-U.S. note owner 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:
o the gain is effectively connected with the conduct of a trade or
business within the U.S. by the non-U.S. owner or
o in the case of a non-U.S. owner who is a nonresident alien
individual and holds the note as a capital asset, such person is
present in the U.S. for 183 or more days in the taxable year and
certain other requirements are met.
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Federal Estate Taxes
If interest on the notes is exempt from withholding of U.S. federal
income tax under the rules described above, the notes will not be included in
the estate of a deceased non-U.S. owner for U.S. federal estate tax purposes.
Information Reporting and Backup Withholding
In the case of payments of interest to non-U.S. holders, Treasury
regulations provide that the 31% backup withholding tax and certain information
reporting will not apply to such payments with respect to which either the
requisite certification, as described above, has been received or an exemption
has otherwise been established, if neither we nor our payment agent has actual
knowledge that the owner is a U.S. person or that the conditions of any other
exemption are not in fact satisfied. Information reporting and backup
withholding requirements will apply to the gross proceeds paid to a non-U.S.
holder on the disposition of the notes by or through a U.S. office of a U.S. or
foreign broker, unless the owner certifies to the broker under penalties of
perjury as to his name, address and status as a foreign person or the owner
otherwise establishes an exemption. Information reporting requirements, but not
backup withholding, will also apply to a payment of the proceeds of a
disposition of the notes by or through a foreign office of a U.S. broker or
foreign brokers with certain types of relationships to the U.S. unless the
broker has documentary evidence in its file that the owner of the notes is not a
U.S. person, and the broker has no actual knowledge to the contrary, or the
owner establishes an exception. Neither information reporting nor backup
withholding generally will apply to a payment of the proceeds of a disposition
of the notes by or through a foreign office of a foreign broker not subject to
the preceding sentence.
The new withholding regulations provide that to the extent a non-U.S.
holder certifies on Form W-8 or a permitted substitute form as to the owner's
status as a foreign person, the backup withholding provisions and the
information reporting provisions will generally not apply. If a non-U.S. holder
fails to provide such certification, it may be subject to certain information
reporting and the 31% backup withholding tax.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be refunded or credited against the non-U.S.
owner's U.S. federal income tax liability, provided that the required
information is furnished to the Internal Revenue Service.
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Plan of Distribution
Each broker-dealer that receives new notes for its own account under
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. A broker-dealer may use this
prospectus, as it may be amended or supplemented, in connection with the resales
of new notes received in exchange for old notes where the old notes were
acquired as a result of market-making activities or other trading activities. We
have agreed that for a period of one year after the date on the cover of this
prospectus, we will make this prospectus, as amended or supplemented, available
to any broker-dealer that requests such documents in the letter of transmittal
for use in connection with any such resale.
New notes received by broker-dealers for their own account under the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer and/or the
purchasers of any new notes. Any broker-dealer that resells new notes that were
received by it for its own account under the exchange offer and any broker or
dealer that participates in a distribution of new notes may be deemed to be an
underwriter within the meaning of the Securities Act and any profit on any
resale of new notes and any commissions or concessions received by any persons
may be deemed to be underwriting compensation under the Securities Act. The
letter of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an underwriter within the meaning of the Securities Act.
We have agreed to pay expenses incurred with the exchange offer and the
performance of our other obligations under a registration rights agreement. We
have also agreed to indemnify the holders, including any broker-dealers, and
certain parties related to the holders against certain liabilities, including
liabilities under the Securities Act.
By accepting this exchange offer, each broker-dealer that receives the
new notes under the exchange offer agrees that, after receiving notice from us
of any event that makes any statement in this prospectus untrue in any material
respect or which requires us to make any change in this prospectus to make the
statements therein not misleading, the broker will not use this prospectus until
we have amended or supplemented it to correct the misstatement or omission and
have furnished copies of the amended or supplemented prospectus to the
broker-dealer.
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Legal Matters
Drinker Biddle & Reath LLP, counsel for Pegasus, has passed upon the
validity of the new notes. Michael B. Jordan, a partner of Drinker Biddle &
Reath LLP, is an Assistant Secretary of Pegasus.
Experts
The financial statements as of December 31, 1999 and 1998 and for each
of the three years in the period ended December 31, 1999 incorporated by
reference in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
Golden Sky Holdings, Inc.'s consolidated balance sheets as of December
31, 1998 and 1999 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999 included in this prospectus, have been included
herein in reliance on the report of KPMG LLP, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
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<PAGE>
======================================================
We have not authorized any dealer, salesperson or any
other person to give any information or represent
anything not contained in this offering memorandum.
You must not rely on any unauthorized information.
This offering memorandum does not offer to sell or buy
any notes in any jurisdiction where it is unlawful.
Table of Contents
Prospectus Summary................................ 2
Where You Can Find More
Information..................................... 7
Risk Factors...................................... 8
Ratio of Earnings to Fixed Charges................ 17
Use of Proceeds................................... 17
The Exchange Offer ............................... 18
Material United State Federal Income Tax
Consequences of the Exchange Offer.............. 25
Description of Notes.............................. 26
Material United States Federal
Income Tax Consequences........................ 57
Plan of Distribution.............................. 59
Legal Matters..................................... 60
Experts........................................... 60
======================================================
======================================================
[LOGO]
Pegasus Communications Corporation
Exchange of Registered
12 1/2% Series B senior notes due 2007
for any and all outstanding
12 1/2% Series A senior notes due 2007
-------------------------------------
PROSPECTUS
March , 2000
======================================================
<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 office 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 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 maintains directors' and officers' liability insurance.
Item 21. Exhibits and Financial Statement Schedules.
Exhibit
Number Description of Document
- ------- -----------------------
3.1 Amended and Restated Certificate of Incorporation (incorporated
by reference herein to Exhibit 3.1 to Pegasus' Form 10-Q dated
August 13, 1999).
3.2 Bylaws, as amended (incorporated by reference herein to Exhibit
3.1 to Pegasus' Form 10-Q dated May 14, 1998).
4.1* Indenture, dated as of November 19, 1999, by and between Pegasus
and First Union National Bank, as Trustee, relating to the 12
1/2% Senior Notes due 2007.
4.2* Form of Note (included in Exhibit 4.1).
5.1* Opinion of Drinker Biddle & Reath LLP.
8.1* Opinion of Drinker Biddle & Reath LLP concerning tax matters.
10.1* Registration Rights Agreement, dated as of November 19, 1999,
among Pegasus Communications Corporation and the Holders of its
12 1/2% Series A Senior Notes due 2007.
21 Subsidiaries of registrant (incorporated by reference herein to
Exhibit 21.1 to Pegasus' registration statement on Form S-3
(File No. 333-70949)).
23.1* Consent of Drinker Biddle & Reath LLP (included in Exhibits 5.1
and 8.1).
23.2** Consent of PricewaterhouseCoopers LLP.
23.3** Consent of KPMG 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.
* Previously filed.
** Filed herewith.
- --------------------------------------------------------------------------------
II-1
<PAGE>
Item 22. Undertakings.
The registrant undertakes that:
(1) It will respond to requests for information that is incorporated by
reference into the prospectus within one business day of receipt of such
request, and it will send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed after the effective date of the registration statement through the date of
responding to the request.
(2) It will supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the registration statement
when it became effective.
(3) For purposes of determining the liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities and Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that is has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bala Cynwyd, Commonwealth of Pennsylvania, on
March 10, 2000.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ Ted S. Lodge
------------------------------
Ted S. Lodge
Senior Vice President
Date: March 10, 2000
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*/s/ Ted S. Lodge President, Chief Executive Officer, March 10, 2000
- -------------------------------------------- Chairman of the Board and Director
Marshall W. Pagon
(Principal Executive Officer)
*/s/ Ted S. Lodge Vice President and Acting March 10, 2000
- -------------------------------------------- Chief Financial Officer
M. Kasin Smith
(Principal Financial and Accounting Officer)
*/s/ Ted S. Lodge Director March 10, 2000
- --------------------------------------------
Robert N. Verdecchio
*/s/ Ted S. Lodge Director March 10, 2000
- --------------------------------------------
James J. McEntee, III
*/s/ Ted S. Lodge Director March 10, 2000
- --------------------------------------------
Mary C. Metzger
*/s/ Ted S. Lodge Director March 10, 2000
- --------------------------------------------
Donald W. Weber
*/s/ Ted S. Lodge Director March 10, 2000
- --------------------------------------------
Michael C. Brooks
*/s/ Ted S. Lodge Director March 10, 2000
- --------------------------------------------
Harry F. Hopper, III
*/s/ Ted S. Lodge Director March 10, 2000
- --------------------------------------------
William P. Phoenix
*/s/ Ted S. Lodge Director March 10, 2000
- --------------------------------------------
Riordon B. Smith
</TABLE>
*By: /s/ Ted S. Lodge
--------------------
Ted S. Lodge
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document
- ------- -----------------------
3.1 Amended and Restated Certificate of Incorporation (incorporated
by reference herein to Exhibit 3.1 to Pegasus' Form 10-Q dated
August 13, 1999).
3.2 Bylaws, as amended (incorporated by reference herein to Exhibit
3.1 to Pegasus' Form 10-Q dated May 14, 1998).
4.1* Indenture, dated as of November 19, 1999, by and between Pegasus
and First Union National Bank, as Trustee, relating to the 12
1/2% Senior Notes due 2007.
4.2* Form of Note (included in Exhibit 4.1).
5.1* Opinion of Drinker Biddle & Reath LLP.
8.1* Opinion of Drinker Biddle & Reath LLP concerning tax matters.
10.1* Registration Rights Agreement, dated as of November 19, 1999,
among Pegasus Communications Corporation and the Holders of its
12 1/2% Series A Senior Notes due 2007.
21 Subsidiaries of registrant (incorporated by reference herein to
Exhibit 21.1 to Pegasus' registration statement on Form S-3
(File No. 333-70949)).
23.1* Consent of Drinker Biddle & Reath LLP (included in Exhibits 5.1
and 8.1).
23.2** Consent of PricewaterhouseCoopers LLP.
23.3** Consent of KPMG 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.
* Previously filed.
** Filed herewith.
- --------------------------------------------------------------------------------
II-3
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Pegasus Communications Corporation of our report dated
February 11, 2000 relating to the financial statements and financial statement
schedules appearing in Pegasus Communications Corporation's Annual Report on
Form 10-K for the year ended December 31, 1999. We also consent to the
references to us under the headings of "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Philadelphia, PA
March 10, 2000
<PAGE>
CONSENT OF INDEPENDENT
Auditors
Board of Directors
Golden Sky Holdings, Inc.
We consent to the use of our report incorporated herein by reference
and to the reference to our firm under the heading "Experts" in the
registration statement.
/s/ KPMG LLP
Kansas City, Missouri
March 10, 2000
