<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 16, 1998 (January 13, 1998)
---------------------------------------------------------------------------
Date of Report (Date of earliest event reported)
PanAmSat Corporation*
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(Exact name of registrant as specified in its charter)
Delaware 0-22531 95-4607698
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Pickwick Plaza, Greenwich, CT 06830
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 622-6664
----------------------
* PanAmSat Corporation ("PanAmSat" or the "Registrant") is the parent
corporation of PanAmSat International Systems, Inc. ("Old PanAmSat") (Commission
File No. 0-26712; IRS Employer Identification No. 06-1407851), which was known
as "PanAmSat Corporation" until May 16, 1997, when it became a wholly-owned
subsidiary of PanAmSat as a consequence of the combination of Old PanAmSat and
the commercial satellite business (the "Galaxy Business") of Hughes
Communications, Inc. The Registrant has applied the purchase method of
accounting to the transaction with the Galaxy Business as the acquiror.
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events.
- ------ ------------
Registrant's press release dated January 16, 1998 with respect to the
consummation of an offering of certain debt securities of the Registrant is
filed herewith as Exhibit 20, and is incorporated herein by reference. The
Offering Memorandum dated January 13, 1998 distributed to prospective purchasers
of such debt securities in connection with such offering is filed herewith as
Exhibit 99 and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
- ------ ---------------------------------
(c) Exhibits.
--------
20. Press release of Registrant dated January 16, 1998.
99. Offering Memorandum of Registrant dated January 13,
1998.
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this Current Report to be signed on
its behalf by the undersigned thereunto duly authorized.
PANAMSAT CORPORATION
--------------------
(Registrant)
By Kenneth N. Heintz
--------------------------------
Kenneth N. Heintz
Executive Vice President and
Chief Financial Officer
and a Duly Authorized Officer
of the Company
Date: January 16, 1998
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered Page
- ------- -------------
20. Press release of Registrant dated
January 16, 1998.
99. Offering Memorandum dated
January 13, 1998.
<PAGE>
FOR IMMEDIATE RELEASE EXHIBIT 20
FROM PANAMSAT
==============================================================================
PANAMSAT COMPLETES PRIVATE PLACEMENT
GREENWICH, Conn., January 16, 1998--PanAmSat Corporation (NASDAQ:SPOT) today
announced that it has completed a private placement of $750,000,000 aggregate
principal amount of new debt securities. The private placement consisted of the
following four tranches:
<TABLE>
<S> <C> <C> <C> <C>
Amount $200 million $275 million $150 million $125 million
Maturity 1/15/2003 1/15/2005 1/15/2008 1/15/2028
Coupon 6% 6-1/8% 6-3/8% 6-7/8%
Issue Price 99.936% 99.411% 99.751% 98.675%
Yield 6.015% 6.23% 6.409% 6.981%
</TABLE>
The net proceeds from the offering will be used to repay bank loans incurred
partially to finance the recent tender offer for certain debt securities of
PanAmSat's subsidiaries, as well as for general corporate purposes. After
application of such net proceeds, PanAmSat will have $500,000,000 of credit
available under an existing revolving credit facility with Citibank. Any
amounts borrowed under such credit facility must be repaid in full in 2003.
The securities were issued pursuant to a Rule 144A offering. The securities
have not been registered under the Securities Act of 1933 and may not be offered
or sold in the United States absent such registration or an applicable exemption
from the registration requirements.
PanAmSat is the world's leading commercial provider of satellite-based
communications services. The company operates a global network of 17
state-of-the-art satellites supported by PanAmSat professionals on five
continents. These resources enable PanAmSat to provide broadcast and
telecommunications services to hundreds of customers worldwide.
###
<PAGE>
EXHIBIT 99
OFFERING MEMORANDUM STRICTLY CONFIDENTIAL
$750,000,000
PanAmSat Corporation
$200,000,000 6% NOTES DUE 2003
$275,000,000 6 1/8% NOTES DUE 2005
$150,000,000 6 3/8% NOTES DUE 2008
$125,000,000 6 7/8% DEBENTURES DUE 2028
---------------
Interest payable January 15 and July 15
---------------
THE 6% NOTES DUE 2003 (THE "2003 NOTES"), THE 6 1/8% NOTES DUE 2005 (THE
"2005 NOTES"), THE 6 3/8% NOTES DUE 2008 (THE "2008 NOTES") AND THE 6 7/8%
DEBENTURES DUE 2028 (THE "2028 DEBENTURES," AND TOGETHER WITH THE 2003
NOTES, THE 2005 NOTES AND THE 2008 NOTES, THE "SECURITIES") OF PANAMSAT
CORPORATION, A DELAWARE CORPORATION ("PANAMSAT" OR THE "COMPANY"),
WILL MATURE ON JANUARY 15, 2003, JANUARY 15, 2005, JANUARY 15, 2008
AND JANUARY 15, 2028, RESPECTIVELY. EACH SERIES OF THE SECURITIES
WILL BE REDEEMABLE AS A WHOLE OR IN PART AT THE OPTION OF THE
COMPANY AT ANY TIME, AT A REDEMPTION PRICE EQUAL TO THE GREATER
OF (I) 100% OF THE PRINCIPAL AMOUNT OF SUCH SECURITIES OR (II)
THE SUM OF THE PRESENT VALUES OF THE REMAINING SCHEDULED
PAYMENTS OF PRINCIPAL AND INTEREST THEREON DISCOUNTED TO
THE DATE OF REDEMPTION ON A SEMIANNUAL BASIS (ASSUMING A
360-DAY YEAR CONSISTING OF TWELVE 30-DAY MONTHS) AT THE
TREASURY RATE (AS DEFINED HEREIN) PLUS 10 BASIS POINTS
IN THE CASE OF THE 2003 NOTES, 15 BASIS POINTS IN
THE CASE OF THE 2005 NOTES, 20 BASIS POINTS IN THE
CASE OF THE 2008 NOTES AND 20 BASIS POINTS IN THE
CASE OF THE 2028 DEBENTURES, PLUS, IN EACH
CASE, ACCRUED INTEREST THEREON TO THE DATE OF
REDEMPTION. THE SECURITIES SHALL NOT BE SUBJECT
TO ANY SINKING FUND. THE SECURITIES WILL BE
UNSECURED AND WILL RANK PARI PASSU WITH ALL
OTHER UNSECURED AND UNSUBORDINATED INDEBTEDNESS
OF THE COMPANY.
SECURITIES SOLD TO QUALIFIED INSTITUTIONAL BUYERS IN RELIANCE ON RULE 144A
WILL BE EVIDENCED BY ONE OR MORE GLOBAL SECURITIES IN FULLY REGISTERED FORM
(THE "144A GLOBAL SECURITIES"). SECURITIES SOLD IN OFFSHORE TRANSACTIONS IN
RELIANCE ON REGULATION S UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), WILL BE EVIDENCED, SUBJECT TO CERTAIN EXCEPTIONS,
BY ONE OR MORE GLOBAL SECURITIES IN FULLY REGISTERED FORM (THE "REGULATION
S GLOBAL SECURITIES" AND, TOGETHER WITH THE 144A GLOBAL SECURITIES, THE
"GLOBAL SECURITIES"). THE GLOBAL SECURITIES WILL BE DEPOSITED WITH A
CUSTODIAN FOR, AND WITH TITLE TO SUCH SECURITIES REGISTERED IN THE NAME
OF THE NOMINEE OF, DTC IN NEW YORK, NEW YORK. BENEFICIAL INTERESTS IN
THE SECURITIES REPRESENTED BY THE REGULATION S GLOBAL SECURITIES MAY
ONLY BE HELD THROUGH MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
BRUSSELS OFFICE, AS OPERATOR OF THE EUROCLEAR SYSTEM ("EUROCLEAR"),
AND CEDEL BANK, S.A. ("CEDEL BANK"). BENEFICIAL INTERESTS IN THE
GLOBAL SECURITIES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE
EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY DTC AND ITS
PARTICIPANTS (INCLUDING EUROCLEAR AND CEDEL BANK). SECURITIES
SOLD TO INSTITUTIONAL ACCREDITED INVESTORS (AS DEFINED HEREIN)
WILL BE REPRESENTED BY DEFINITIVE SECURITIES IN REGISTERED AND
CERTIFICATED FORM. INSTITUTIONAL ACCREDITED INVESTORS WHO ARE
NOT QUALIFIED INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A)
WILL RECEIVE CERTIFICATES FOR THE SECURITIES OWNED BY THEM,
WHICH CANNOT THEN BE TRADED THROUGH THE FACILITIES OF DTC,
EXCEPT IN CONNECTION WITH A TRANSFER TO A QUALIFIED
INSTITUTIONAL BUYER. IN THE EVENT THE SECURITIES SOLD IN
OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S ARE NOT
EVIDENCED BY REGULATION S GLOBAL SECURITIES, PHYSICAL
DELIVERY OF CERTIFICATES REPRESENTING SUCH SECURITIES
WILL BE MADE. SEE "DESCRIPTION OF THE SECURITIES--BOOK
ENTRY; DELIVERY AND FORM" AND "TRANSFER RESTRICTIONS."
INTERESTS IN GLOBAL SECURITIES WILL TRADE IN THE
DEPOSITORY TRUST COMPANY, NEW YORK, NEW YORK ("DTC")
SAME-DAY FUNDS SETTLEMENT SYSTEM, AND SECONDARY
MARKET TRADING ACTIVITY WILL THEREFORE SETTLE IN
IMMEDIATELY AVAILABLE FUNDS. ALL PAYMENTS OF
PRINCIPAL AND INTEREST WILL BE MADE BY THE COMPANY
IN IMMEDIATELY AVAILABLE FUNDS. SEE "DESCRIPTION OF
THE SECURITIES--SAME-DAY SETTLEMENT AND PAYMENT."
THE COMPANY HAS AGREED TO FILE AN EXCHANGE OFFER REGISTRATION STATEMENT
(AS DEFINED HEREIN) OR, UNDER CERTAIN CIRCUMSTANCES, A SHELF
REGISTRATION STATEMENT (AS DEFINED HEREIN), PURSUANT TO A
REGISTRATION RIGHTS AGREEMENT (AS DEFINED HEREIN). IN
THE EVENT THAT THE COMPANY FAILS TO COMPLY WITH
CERTAIN OF ITS OBLIGATIONS UNDER THE
REGISTRATION RIGHTS AGREEMENT, ADDITIONAL
INTEREST (AS DEFINED HEREIN) WILL BE PAYABLE
ON THE SECURITIES. SEE "EXCHANGE OFFER;
REGISTRATION RIGHTS."
---------------
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. ACCORDINGLY, THE SECURITIES ARE BEING OFFERED AND SOLD ONLY TO (A)
QUALIFIED INSTITUTIONAL BUYERS IN RELIANCE ON THE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144A AND
(B) A LIMITED NUMBER OF INVESTORS THAT ARE INSTITUTIONAL "ACCREDITED
INVESTORS" AS THAT TERM IS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT AND THAT, PRIOR TO THEIR PURCHASE OF ANY SECURITIES,
DELIVER TO THE INITIAL PURCHASERS (AS DEFINED HEREIN) A LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS AND (C) OUTSIDE THE UNITED STATES
IN COMPLIANCE WITH REGULATION S. FOR A DESCRIPTION OF CERTAIN
RESTRICTIONS ON RESALE OR TRANSFER, SEE "TRANSFER RESTRICTIONS."
---------------
PRICE PER 2003 NOTE 99.936% AND ACCRUED INTEREST, IF ANY
PRICE PER 2005 NOTE 99.411% AND ACCRUED INTEREST, IF ANY
PRICE PER 2008 NOTE 99.751% AND ACCRUED INTEREST, IF ANY
PRICE PER 2028 DEBENTURE 98.675% AND ACCRUED INTEREST, IF ANY
---------------
The Securities are offered, subject to prior sale, when, as and if accepted
by the Initial Purchasers and subject to approval of certain legal matters by
Latham & Watkins, counsel for the Initial Purchasers. It is expected that
delivery of the Securities will be made on or about January 16, 1998 at the
offices of Morgan Stanley & Co. Incorporated, New York, New York against
payment therefor in immediately available funds.
---------------
MORGAN STANLEY DEAN WITTER
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON SMITH BARNEY
CITICORP SECURITIES, INC.
BANCAMERICA ROBERTSON STEPHENS
J.P. MORGAN & CO.
January 13, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES.
SPECIFICALLY, THE INITIAL PURCHASERS MAY OVERALLOT IN CONNECTION WITH THE
OFFERING, AND MAY BID FOR, AND PURCHASE, THE SECURITIES IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PRIVATE PLACEMENT."
THIS CONFIDENTIAL OFFERING MEMORANDUM (THE "OFFERING MEMORANDUM") DOES NOT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF
THE SECURITIES PLACED HEREBY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL FOR SUCH PERSON TO MAKE AN OFFERING OR A SOLICITATION. NEITHER THE
DELIVERY OF THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY OR THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE SECURITIES, INCLUDING THE
MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED,
APPROVED OR DISAPPROVED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR
REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
STATE SECURITIES LAWS AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE. THESE SECURITIES MAY NOT BE TRANSFERRED OR RESOLD EXCEPT PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL
RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE BY THE INITIAL
PURCHASERS AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION SET FORTH
HEREIN, AND NOTHING CONTAINED IN THIS OFFERING MEMORANDUM IS, OR SHALL BE
RELIED UPON AS, A PROMISE OR REPRESENTATION, WHETHER AS TO THE PAST OR THE
FUTURE. THE INITIAL PURCHASERS HAVE NOT INDEPENDENTLY VERIFIED ANY OF SUCH
INFORMATION AND ASSUME NO RESPONSIBILITY FOR ITS ACCURACY OR COMPLETENESS.
NONE OF THE COMPANY, THE INITIAL PURCHASERS OR ANY OF THEIR RESPECTIVE
REPRESENTATIVES IS MAKING ANY REPRESENTATION TO ANY OFFEREE OR PURCHASER OF
THE SECURITIES OFFERED HEREBY REGARDING THE LEGALITY OF AN INVESTMENT BY SUCH
OFFEREE OR PURCHASER UNDER APPROPRIATE LEGAL INVESTMENT OR SIMILAR LAWS. EACH
INVESTOR SHOULD CONSULT WITH HIS OWN ADVISORS AS TO LEGAL, TAX, BUSINESS,
FINANCIAL AND RELATED ASPECTS OF A PURCHASE OF THE SECURITIES.
2
<PAGE>
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING, NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE
MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON,
SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY
PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT
WITH THE PROVISIONS OF THIS PARAGRAPH.
This Offering Memorandum is highly confidential and has been prepared by the
Company solely for use in connection with the proposed placement of the
Securities. The Company and Morgan Stanley & Co. Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation, Salomon Brothers Inc, Citicorp
Securities, Inc., BancAmerica Robertson Stephens and J.P. Morgan Securities
Inc. (the "Initial Purchasers") reserve the right to reject any offer to
purchase, in whole or in part, for any reason, or to sell less than all of the
Securities offered hereby. This Offering Memorandum is personal to the offeree
to whom it has been delivered by the Initial Purchasers and does not
constitute an offer to any other person or to the public generally to
subscribe for or otherwise acquire the Securities. Distribution of this
Offering Memorandum to any person other than the offeree and those persons, if
any, retained to advise such offeree with respect thereto is unauthorized, and
any disclosure of any of its contents, without the prior written consent of
the Company, is prohibited. Each offeree, by accepting delivery of this
Offering Memorandum, agrees to the foregoing and to make no photocopies of
this Offering Memorandum or any documents referred to herein and, if the
offeree does not purchase Securities or the placement is terminated, to return
this Offering Memorandum and all documents referred to herein to: Morgan
Stanley & Co. Incorporated, 1585 Broadway, New York, New York 10036,
Attention: Prospectus Department.
Each person receiving this Offering Memorandum acknowledges that (i) such
person has been afforded an opportunity to request from the Company and to
review, and has received, all additional information considered by it to be
necessary to verify the accuracy of, or to supplement, the information
contained herein, (ii) such person has not relied on the Initial Purchasers or
any person affiliated with the Initial Purchasers in connection with its
investigation of the accuracy of such information or its investment decision
and (iii) no person has been authorized to give any information or to make any
representation concerning the Company or the Securities other than as
contained herein, and information given by duly authorized officers and
employees of the Company in connection with investors' examination of the
Company and the terms of the offering and, if given or made, any such other
information or representation should not be relied upon as having been
authorized by the Company or the Initial Purchasers.
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC").
Reports, proxy statements and other information filed by the Company with
the SEC can be inspected, without charge, and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington D.C. 20549 and at the SEC's regional offices at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. The SEC also maintains a site on
the Internet at <http://www.sec.gov> that contains reports, proxies and other
information regarding registrants that file electronically with the SEC, and
certain filings by the Company are available at such web site. Copies of such
materials also can be obtained from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated herein by
reference and shall be deemed to be a part hereof: (1) the Company's Quarterly
Reports on Form 10-Q/A-1 for the quarters ended June 30, 1997 and September
30, 1997; (2) the Company's Registration Statement on Form S-4 dated April 18,
1997 (Registration No. 333-25293) (the "Registration Statement"); (3) the
Company's Current Report on Form 8-K dated May 30, 1997; and (4) the Company's
Current Report on Form 8-K/A dated June 5, 1997.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
sale to the Initial Purchasers of all Securities offered hereby shall be
deemed to be incorporated by reference in this Offering Memorandum and to be a
part hereof from the date of filing of such documents. Any statement contained
in a document or report incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Offering Memorandum to the extent that a statement contained herein or in any
document subsequently incorporated herein by reference modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Offering Memorandum.
The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Offering Memorandum has been
delivered, on written or oral request, a copy of any and all of the documents
incorporated in this Offering Memorandum by reference, other than exhibits to
such documents not specifically incorporated by reference therein. Requests
for such copies should be directed to the Investor Relations Department,
PanAmSat Corporation, One Pickwick Plaza, Greenwich, Connecticut 06830 (tel.:
(203) 622-6664).
FORWARD-LOOKING STATEMENTS
This Offering Memorandum, including the documents that are incorporated by
reference as set forth in "Available Information" and "Incorporation of
Certain Documents by Reference," contains forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. These statements are based on management's beliefs and
assumptions, based on information currently available to management and are
subject to risks and uncertainties. Forward-looking statements include the
information concerning possible or assumed future results of operations of the
Company set forth (1) under "Business" and "Management's Discussion and
Analysis" in each Quarterly Report on Form 10-Q/A-1 and in the Registration
Statement incorporated by reference into this document and (2) in this
document and the documents incorporated herein by reference preceded by,
followed by, or that include, the words "believes," "expects," "anticipates,"
"intends," "plans," "estimates" or similar expressions.
Forward-looking statements are not guarantees of performance. The future
results of the Company may differ materially from those expressed in such
forward-looking statements. Many of the factors that will determine these
results are beyond the ability of the Company to control or predict.
Prospective holders of the Securities are cautioned not to put undue reliance
on any forward-looking statements.
4
<PAGE>
Prospective holders of the Securities should understand that the following
important factors, in addition to those discussed herein and elsewhere in the
documents which are incorporated by reference herein, could affect the future
results of the Company and could cause results to differ materially from those
expressed in such forward-looking statements: (i) successful launch of the
satellites on their anticipated schedules, (ii) continued functionality of the
existing in-orbit satellites, (iii) future economic and competitive conditions
in the regional, national and global markets in which the Company competes,
(iv) success in obtaining necessary regulatory approvals and licenses, (v)
continued ability to fund capital programs and meet debt obligations, (vi)
successful resolution of material pending litigation matters and (vii)
continued employment of Frederick A. Landman, the Company's President and
Chief Executive Officer, Carl A. Brown, Executive Vice President, and Lourdes
Saralegui, Executive Vice President. Further, the Company operates in an
industry sector where securities values may be volatile and may be influenced
by economic and other factors beyond the Company's control.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.............. 4
Incorporation of Certain Documents
by Reference...................... 4
Forward-Looking Statements......... 4
The Company........................ 6
Use of Proceeds.................... 11
Capitalization..................... 12
Selected Historical Financial
Information of PanAmSat
International..................... 13
Selected Historical Financial
Information of Galaxy and
PanAmSat.......................... 15
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Financial Information..... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Description of the Securities....... 24
Exchange Offer; Registration
Rights............................. 32
Certain United States Federal Income
Tax Considerations................. 34
Private Placement................... 37
Transfer Restrictions............... 38
Legal Matters....................... 40
Independent Accountants............. 40
</TABLE>
5
<PAGE>
THE COMPANY
GENERAL
PanAmSat is the largest commercial provider of global satellite-based
communications services. PanAmSat commenced operations on May 16, 1997 upon
the merger (the "Merger") of PanAmSat International Systems, Inc. (then
operating under its previous name, PanAmSat Corporation) ("PanAmSat
International") and the Galaxy Satellite Services division ("Galaxy") of
Hughes Communications, Inc. ("HCI") with Galaxy as acquiror. As a result of
the Merger and the consummation of a separate but related stock contribution,
HCI became the owner of approximately 71.5% of the outstanding shares of
Common Stock, par value $.01 per share, of PanAmSat (the "PanAmSat Common
Stock"). The Company is a leading distributor of television programming to
network, cable and other redistribution sources in the United States, Latin
America, Africa, south Asia and the Asia-Pacific region. PanAmSat's global
network of 17 satellites (excluding Brasilsat A1), seven technical ground
facilities and more than 400 professionals on five continents enable the
Company to provide state-of-the-art video distribution and telecommunications
services for customers worldwide. Currently, an aggregate of more than 120
million households worldwide daily receive television programming carried by
PanAmSat satellites. PanAmSat satellites also serve as the transmission
platforms for six planned or operational direct-to-home television ("DTH")
services worldwide, including Galaxy Latin America and Sky Latin America;
Showtime (Middle East); and MultiChoice and the South African Broadcasting
Corp. (South Africa). The Company also provides satellite services and related
technical support for live transmissions for news and special events coverage.
PanAmSat's broadcasting customers include the BBC, China Central Television,
Disney, NHK, Time Warner and Viacom.
In addition, PanAmSat provides satellite services to telecommunications
carriers, corporations and Internet service providers for the provision of
satellite-based communications networks, including private corporate networks
employing very small aperture antennas ("VSATs") and international access to
the U.S. Internet backbone. Currently, more than 100,000 VSATs worldwide relay
communications over PanAmSat satellites, and Internet service providers in 29
countries access the U.S. Internet backbone via PanAmSat satellites.
PanAmSat's telecommunications customers include Citicorp, Hughes Network
Systems, ImpSat, MCI and Telstra.
6
<PAGE>
The following tables describe the Company's operational and anticipated fleet
of satellites:
SUMMARY SATELLITE DATA
OPERATIONAL SATELLITES
<TABLE>
<CAPTION>
PAS-1 PAS-2 PAS-3 PAS-4 PAS-5
-------------------- --------------------- --------------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Region Covered.. Atlantic Ocean Pacific Ocean Atlantic Ocean Indian Ocean Atlantic Ocean
Satellite....... GE 3000 HS 601 HS 601 HS 601 HS 601
Expected End of
Useful
Life(2)........ 2001 2009 2008 2011 2012(3)
Orbital
Location....... 45(degrees) W.L. 191(degrees) W.L. 43(degrees) W.L. 68.5(degrees) E.L.(4) 58(degrees) W.L.
Transponders(5)
Ku-band(6)...... 6 @ 72 MHz 12 @ 54 MHz 12 @ 54 MHz 16 @ 27 MHz 24 @ 36 MHz
4 @ 64 MHz 4 @ 64 MHz 6 @ 54 MHz
2 @ 64 MHz
C-band(7)....... 6 @ 72 MHz 12 @ 54 MHz 12 @ 54 MHz 12 @ 54 MHz 24 @ 36 MHz
12 @ 36 MHz 4 @ 64 MHz 4 @ 64 MHz 4 @ 64 MHz
Usable
Bandwidth(8)... 1,296 MHz 1,808 MHz 1,808 MHz 1,768 MHz 1,728 MHz
Output Power(9)
Ku-band......... 6 @ 16 Watts 16 @ 63 Watts 16 @ 63 Watts 24 @ 60 Watts 18 @110 Watts
6 @ 60 Watts
C-band.......... 6 @ 16 Watts 16 @ 30 Watts 16 @ 34 Watts 16 @ 30 Watts 24 @ 50 Watts
12 @ 8.5 Watts
Total Output
Power.......... 294 Watts 1,488 Watts 1,552 Watts 1,920 Watts 3,540 Watts
<CAPTION>
GALAXY I-R GALAXY III-R GALAXY IV GALAXY V GALAXY VI
-------------------- --------------------- --------------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Region Covered.. United States Latin America/ United States United States United States
United States
Satellite....... HS 376 HS 601 HS 601 HS 376 HS 376
Expected End of
Useful
Life(10)....... 2006 2004 2005 2004 2003
Orbital
Location....... 133(degrees) W.L.(4) 95(degrees) W.L. 99(degrees) W.L. 125(degrees) W.L. 74(degrees) W.L.(4)
Transponders(5)
Ku-band(6)...... -- 16 @ 27 MHz 16 @ 27 MHz -- --
8 @ 54 MHz 8 @ 54 MHz
C-band(7)....... 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz
Usable
Bandwidth(8)... 864 MHz 1,728 MHz 1,728 MHz 864 MHz 864 MHz
Output Power(9)
Ku-band......... -- 24 @ 63 Watts 24 @ 50 Watts -- --
C-band.......... 24 @ 16 Watts 24 @ 16 Watts 24 @ 16 Watts 24 @ 16 Watts 24 @ 10 Watts
Total Output
Power.......... 384 Watts 1,896 Watts 1,584 Watts 384 Watts 240 Watts
<CAPTION>
GALAXY VIII-I(11) GALAXY IX SBS-4 SBS-5 SBS-6
-------------------- --------------------- --------------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Region Covered.. Latin America United States United States United States United States
Satellite....... HS 601HP HS 376 HS 376 HS 376 HS 393
Expected End of
Useful
Life(10)....... 2012(13) 2010 (inclined)(14) 1999 2007
Orbital 95(degrees) W.L. 123(degrees) W.L.(15) 77(degrees) W.L.(4) 123(degrees) W.L.(15) 74(degrees) W.L.(4)
Location.......
Transponders(5)
Ku-band(6)...... 32 @ 24 MHz -- 10 @ 43 MHz 10 @ 43 MHz 19 @ 43 MHz
4 @ 110 MHz
C-band(7)....... -- 24 @ 36 MHz -- -- --
Usable
Bandwidth(8)... 768 MHz 864 MHz 430 MHz 870 MHz 817 MHz
Output Power(9)
Ku-band......... 32 @ 115 Watts -- 10 @ 20 Watts 14 @ 20 Watts 19 @ 41 Watts
C-band.......... -- 24 @ 16 Watts -- -- --
Total Output
Power.......... 3,680 Watts 384 Watts 200 Watts 280 Watts 779 Watts
<CAPTION>
PAS-6(1)
-------------------
<S> <C>
Region Covered.. Atlantic Ocean
Satellite....... SS/L FS-1300
Expected End of
Useful
Life(2)........ 2012(3)
Orbital
Location....... 43(degrees) W.L.
Transponders(5)
Ku-band(6)...... 36 @ 36 MHz
C-band(7)....... --
Usable
Bandwidth(8)... 1,296 MHz
Output Power(9)
Ku-band......... 24 @ 100 Watts
12 @ 110 Watts
C-band..........
Total Output
Power.......... 3,720 Watts
<CAPTION>
GALAXY VII
-------------------
<S> <C>
Region Covered.. United States
Satellite....... HS 601
Expected End of
Useful
Life(10)....... 2006
Orbital
Location....... 91(degrees) W.L.
Transponders(5)
Ku-band(6)...... 16 @ 27 MHz
8 @ 54 MHz
C-band(7)....... 24 @ 36 MHz
Usable
Bandwidth(8)... 1,728 MHz
Output Power(9)
Ku-band......... 24 @ 50 Watts
C-band.......... 24 @ 16 Watts
Total Output
Power.......... 1,584 Watts
<CAPTION>
BRASILSAT A1(12)
-------------------
<S> <C>
Region Covered.. United States
Satellite....... HS 376
Expected End of
Useful
Life(10)....... (inclined)(14)
Orbital 79(degrees) W.L.
Location.......
Transponders(5)
Ku-band(6)...... --
C-band(7)....... 24 @ 36 MHz
Usable
Bandwidth(8)... 864 MHz
Output Power(9)
Ku-band......... --
C-band.......... 24 @ 10 Watts
Total Output
Power.......... 240 Watts
SATELLITES UNDER DEVELOPMENT
<CAPTION>
PAS-7(1) PAS-8(1) GALAXY X GALAXY XI PAS-9
-------------------- --------------------- --------------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Region Covered.. Indian Ocean Pacific Ocean United States United States Indian Ocean
Expected
Launch(16)..... 1998 1998 1998 1998 1999
Satellite....... SS/L FS-1300(17) SS/L FS-1300(17) HS 601HP HS 702 HS 702
Expected End of
Useful
Life(13)....... 2011(18) 2013(3) 2010 2013 2014(3)
Orbital
Location....... 68.5(degrees) E.L.(4) 166(degrees) E.L.(4) 123(degrees) W.L.(15) 74(degrees) W.L.(4) To be determined
Transponders(5)
Ku-band(6)...... 30 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 16 @ 27 MHz 48 @ 36 MHz
24 @ 36 MHz
C-band(7)....... 14 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 12 @ 36 MHz
Usable
Bandwidth(8)... 1,584 MHz 1,728 MHz 1,728 MHz 2,160 MHz 2,160 MHz
Output Power(9)
Ku-band......... 30 @ 100 Watts 24 @ 100 Watts 24 @ 63 Watts 16 @ 140 Watts To be determined
24 @ 75 Watts
C-band.......... 14 @ 50 Watts 24 @ 50 Watts 24 @ 20 Watts 24 @ 20 Watts To be determined
Total Output
Power.......... 3,700 Watts 3,600 Watts 1,992 Watts 4,520 Watts To be determined
<CAPTION>
PAS-1R
-------------------
<S> <C>
Region Covered.. United States
Expected
Launch(16)..... 1999
Satellite....... HS 702
Expected End of
Useful
Life(13)....... 2014(2)
Orbital
Location....... 45(degrees) W.L.(4)
Transponders(5)
Ku-band(6)...... 36 @ 36 MHz
C-band(7)....... 36 @ 36 MHz
Usable
Bandwidth(8)... 2,592 MHz
Output Power(9)
Ku-band......... To be determined
C-band.......... To be determined
Total Output
Power.......... To be determined
</TABLE>
7
<PAGE>
- --------
(1) See "--Recent Developments."
(2) The information for PAS-1, PAS-2, PAS-3 and PAS-4 is based on fuel level
estimates at October 31, 1997. The information for PAS-5 and PAS-6 is
based on the terms of their satellite contracts and their launch
contracts. Anomalies have begun to occur on PAS-1, which is beyond its
construction design life. As a cautionary measure, PAS-1R, a replacement
satellite for PAS-1, is planned for launch in 1999.
(3) The use of certain launch vehicles may yield significantly longer fuel
life for these satellites. The chart shows the conservative design life
for such satellites. Actual life may be longer in such cases.
(4) PanAmSat has received conditional regulatory approval for the orbital
slot of 72(degrees) E.L. from the Federal Communications Commission (the
"FCC"), which approval is subject to a full financial showing and
demonstration of consultation with Intelsat. In addition, PanAmSat has
requested approval to co-locate a satellite with PAS-4 at 68.5(degrees)
E.L. PanAmSat intends to locate PAS-7 at the 68.5(degrees) E.L. orbital
location if its application for such orbital location is granted, in
which case the 72(degrees) E.L. orbital slot could be used for another
satellite. PanAmSat tentatively plans to locate PAS-8 at 166(degrees)
E.L. and has an application for that orbital slot pending with the FCC.
The Company has not yet filed an application with the FCC for PAS-1R. The
FCC gives a "replacement expectancy" with respect to the use of the same
orbital location at the same frequencies for replacement satellites. This
replacement expectancy may increase the likelihood that PanAmSat will be
able to expand the frequencies or coverages employed by PAS-1 at
45(degrees) W.L.; however, no assurance can be given that the Company
will be successful at expanding such frequencies and coverages. SBS-4's
FCC license expired in 1994, and the satellite is operated pursuant to
grants of special temporary authority that are renewed periodically.
PanAmSat has filed an application with the FCC for Galaxy II (H) (to be
known as Galaxy XI), a hybrid satellite that will replace Galaxy VI (a C-
band satellite) and SBS-6 (a Ku-band satellite) at 74(degrees) W.L.
Currently, the Company has not identified any future orbital locations
for Galaxy VI and SBS-6. Once slots have been identified, the Company
plans to apply for temporary authority to operate at such slots until
other satellites are authorized for, and commence operations at, such
slots.
(5) Satellite transponders receive transmissions from Earth and relay them
back to Earth. Transponders are composed of receivers, preamplifiers,
power amplifiers, frequency shifters and a host of other electronics.
(6) Ku-band is a range of relatively high frequencies (between approximately
12 GHz and 14 GHz) used for commercial satellite communications. Ku-band
is widely used for distribution of broadcast television and DTH services,
as well as business communications, and allows the use of relatively
small receive antennas.
(7) C-band is a range of relatively low frequencies (between approximately 4
GHz and 6 GHz) used for commercial satellite communications. C-band is
used primarily for cable and broadcast distribution and requires the use
of relatively large receive antennas on the ground.
(8) Bandwidth is one measure of the information carrying capacity of a
transponder. A transponder's bandwidth and power together primarily
determine the amount of information that can be carried.
(9) Output power is the transmitter power of each transponder and is not a
measure of the signal power received on Earth. Total output power is the
aggregate power of all the transponders on the satellite. High output
power allows for the use of smaller and less expensive receiving antennas
to obtain a satellite signal. See "--Recent Developments."
(10) The expected end of useful life for each of the Galaxy operational
satellites (other than SBS-4) is based on fuel level estimates at October
30, 1997.
(11) On December 8, 1997, the Company successfully launched its Galaxy VIII-i
satellite. The satellite will be placed in service after successful
completion of in-orbit testing.
(12) On September 28, 1995, PanAmSat's predecessor-in-interest, Hughes
Communications Galaxy, Inc. ("HCG"), filed an application for interim
authority to use C-band capacity on Brasilsat A1 for a two-year period to
help alleviate a shortage of C-band capacity in the United States. At
that time, Brasilsat A1 was located at 63(degrees) W.L., operating in
inclined orbit, and carrying no traffic. HCG also asked that the FCC
allow all U.S. earth station licensees to communicate with the Brasilsat
A1 satellite during the period of its interim authority pursuant to the
ALSAT designation in their licenses. On June 14, 1996, HCG filed an
amendment to its application for interim authority to use C-band capacity
on Brasilsat A1. As HCG explained at that time, many of its customers
were unable to communicate with Brasilsat A1 because the 63(degrees) W.L.
orbital location did not provide good elevation angles for earth stations
located on the west coast of the U.S. and because some earth stations
could not be steered to communicate with satellites as far east as
63(degrees) W.L. Consequently, HCG asked that the FCC grant it interim
authority to use C-band capacity on Brasilsat A1 from the 79(degrees)
W.L. orbital location rather than the 63(degrees) W.L. location
originally requested. To accommodate the future launch of GE Americom's
GE-5 satellite, which the FCC has authorized to use the 79(degrees) W.L.
orbital location, HCG agreed to cease operations on Brasilsat A1 at that
location upon the launch of GE-5. On December 24, 1996, the FCC granted
HCG interim authority to use C-band capacity on Brasilsat A1 at
79(degrees) W.L. as requested in HCG's amended application, until
December 31, 1997, or the launch of the GE-5 satellite, whichever comes
first. On December 11, 1997, PanAmSat requested an extension of the
interim authority for Brasilsat A1.
(13) The expected end of useful life for each of the indicated satellites is
based on the terms of the relevant satellite construction contract and
the terms (with respect to Galaxy VIII-i, Galaxy X and Galaxy XI) or
anticipated terms (with respect to PAS-1R or PAS-9) of the relevant
satellite launch arrangement.
(14) Satellite operators may opt to extend the life of a satellite beyond its
useful life by allowing it to move into a fuel-conserving mode called
"inclined orbit." When a satellite is put into inclined orbit, only east-
west station-keeping is continued. While in this mode, the satellite
moves in a figure-8 crossing the equator twice daily. The uncorrected
north-south inclination increases over time and customers must retrofit
their existing ground equipment or purchase new equipment to enable them
to track the movement of the satellite. After reaching a certain degree
of north-south inclination, tracking antennas can no longer reliably
follow the movement of the satellite and its useful life ends.
(15) Galaxy X (a C-band/Ku-band hybrid) will replace SBS-5 (a Ku-band
satellite) at 123(degrees) W.L. Galaxy IX (a C-band satellite) is an
expansion satellite that is authorized to operate at 127(degrees) W.L.
The FCC has authorized Galaxy IX to operate temporarily at 123(degrees)
W.L. until Galaxy X is launched and occupies that orbital location. The
decision granting the Galaxy IX application was conditioned on
relinquishing any right to the continued operation of SBS-5 once Galaxy X
begins commercial operations. The Company plans to request that the FCC
grant PanAmSat interim authority to move SBS-5 to 127(degrees) W.L. when
Galaxy IX relocates there, subject to coordination with satellites in
adjacent locations. The interim authority would permit SBS-5 to occupy
127(degrees) W.L. until the FCC licenses another satellite for
127(degrees) W.L. and the satellite commences operations at that orbital
location. There can be no assurance that the FCC will grant PanAmSat's
request to relocate SBS-5 to 127(degrees) W.L. on such basis.
(16) Future launch dates are based on PanAmSat estimates.
(17) PanAmSat has entered into a contract with Space Systems/Loral, Inc.
("SS/Loral") for the construction and delivery of PAS-7 and PAS-8, with
options to purchase additional satellites and/or replacement satellites
for PAS-7 or PAS-8. See "--Recent Developments."
(18) PAS-7 has a design life of 15 years, but SS/Loral has informed PanAmSat
that it is expected to substantially exceed its contractual weight
specifications. To ensure that the excess weight does not affect the
satellite's intended operational lifetime, PanAmSat is exploring several
options, including the use of an alternative Ariane 4 launcher
configuration to deploy the spacecraft.
8
<PAGE>
[CHART]
PANAMSAT'S GLOBAL SYSTEM 2000
133(D) WL Galaxy IR 169(D) EL PAS-2
127(D) WL Galaxy 1X 166(D) EL PAS-8(1)
125(D) WL Galaxy V PAS-9
123(D) WL SBS 5 68.5(D) EL PAS-4
123(D) WL Galaxy X(1) 68.5(D) EL PAS-7(1)
99 (D) WL Galaxy 1V
95 (D) WL Galaxy IIIR
95 (D) WL Galaxy V111-i
91 (D) WL Galaxy V11
77 (D) WL SBS-4
74 (D) WL Galaxy X1(1)
74 (D) WL SBS-6
74 (D) WL Galaxy V1
58 (D) PAS-IR
45 (D) WL PAS-1
45 (D) WL PAS-IR(1)
43 (D) WL PAS-6
43 (D) WL PAS -3
(1) Satellite under development
(2) Exact orbital location to be determined
For detailed information regarding PanAmSat's operational or planned
satellites, please see "Summary Satellite Data" and the related footnotes
thereto.
9
<PAGE>
THE MERGER
The Merger was the result of an Agreement and Plan of Reorganization dated
September 20, 1996 (as amended April 4, 1997) (the "Reorganization Agreement")
entered into among HCI, Hughes Communications Galaxy, Inc., Hughes
Communications Satellite Services, Inc., Hughes Communications Services, Inc.,
Hughes Communications Carrier Services, Inc., Hughes Communications Japan,
Inc., PanAmSat International and the Company. In addition, an Agreement and
Plan of Merger dated April 4, 1997 (the "Merger Agreement") was entered into
among PanAmSat International, PanAmSat and PAS Merger Corp., a newly formed
subsidiary of PanAmSat ("PAS Merger Corp.").
As a result of the transactions contemplated by the Reorganization Agreement
and the Merger Agreement, on May 16, 1997, among other things, PAS Merger
Corp. merged with and into PanAmSat International and was contributed to
PanAmSat, with the result that (a) PanAmSat International became a wholly-
owned subsidiary of PanAmSat; (b) each issued and outstanding share of
PanAmSat International's Class A Common Stock, par value $.01 per share, and
Common Stock, par value $.01 per share, was converted into, at the election of
each holder, either (i) an amount in cash equal to $15, plus one-half ( 1/2)
share of PanAmSat, (ii) one share of PanAmSat Common Stock or (iii) an amount
equal to approximately $16.38 in cash plus 0.45 shares of PanAmSat Common
Stock, in each case subject to proration (collectively, the "Merger
Consideration"); (c) PanAmSat became Galaxy's owner and operator; and (d) HCI
and certain of its subsidiaries received an aggregate of 106,622,807 shares of
PanAmSat Common Stock. Following payment by PanAmSat of the Merger
Consideration and consummation of a separate but related stock contribution
transaction, the shares of PanAmSat Common Stock owned by HCI constitute
approximately 71.5% of the outstanding shares of PanAmSat Common Stock.
Prior to the Merger, PanAmSat International (formerly known as PanAmSat
Corporation) operated the world's first privately owned global (excluding
domestic U.S.) satellite communications system, consisting of four satellites
serving Latin America, the Caribbean, Europe, Asia, the Middle East and
Africa. Galaxy was the leading provider of commercial satellite services in
the United States, with a fleet consisting of 10 satellites.
RECENT DEVELOPMENTS
On August 8, 1997, the Company launched its PAS-6 Atlantic Ocean Region
Satellite, the first communications satellite ever dedicated to DTH services
in Latin America. The entire PAS-6 payload, 36 Ku-band transponders, is fully
sold to Sky Latin America, which will use the satellite to beam hundreds of
television channels to its DTH service subscribers in Latin America. Sky Latin
America is a partnership formed by News Corporation, Grupo Televisa,
Organizacoes Globo and Tele-Communications International, Inc. PAS-6 reached
its final orbital location at 43 degrees West Longitude and commenced service
on September 19, 1997 after successful completion of in-orbit testing. An
anomaly has been detected in PAS-6's solar arrays. The satellite has
experienced several circuit failures in its solar arrays and may experience
additional failures in the future. The circuit failures will require the
Company to forego the use of some transponders initially and to turn off
additional transponders in later years. However, the ability of transponders
to provide transmission power for DTH signal reception using 60-centimeter
dishes is not affected. The Company is working with its customers on PAS-6 to
ensure that PanAmSat's services continue to meet the customers' requirements.
Among the options currently being considered by the Company with its customers
is the construction of a companion satellite for PAS-6 that would be capable
of providing replacement or additional capacity. Due to contract performance
issues relating to the PAS-7 and PAS-8 construction programs, the Company has
informed the vendor that such vendor is in default under the construction
contracts for such satellites. Such notice gives the Company the right to
terminate in whole or in part its contract for the construction and delivery
of PAS-7, PAS-8 and a replacement satellite for either of such satellites or
for PAS-6. The Company believes that it has adequate sources to procure
satellites in the event such performance issues are not satisfactorily
resolved. The vendor has responded to the Company's notice by asserting that
the Company is precluded from initiating a default termination of such
contracts.
On August 27, 1997, the Company successfully launched its PAS-5 Atlantic
Ocean Region Satellite. Service on PAS-5 commenced on October 13, 1997. PAS-5
will deliver more than 20 television channels to Latin America, establishing
PAS-5 as PanAmSat's latest platform for program distribution to cable and
other redistribution systems in Latin America. The satellite will broadcast
Spanish and Portuguese-language television
10
<PAGE>
channels from programmers based in Argentina, Britain, Chile and the United
States. PAS-5 joins two other PanAmSat satellites, PAS-1 and PAS-3, that
showcase leading television networks to Latin America. The PAS-5 programmer
lineup includes HBO Ole, Cinemax, E! Entertainment Television, Mundo Ole, Sony
Entertainment Television and WBTV-The Warner Channel from HBO Latin America,
among others. In addition to the C-band programming, PAS-5 is the platform for
Sky Latin America's DTH service in Mexico. Sky Latin America is using 12 Ku-
band transponders on PAS-5.
On December 8, 1997, the Company successfully launched its Galaxy VIII-i
satellite, the dedicated transmission platform for the Galaxy Latin America
DTH service called DIRECTV. The 3,560-kilogram communications satellite will
transmit more than 200 digital television and music channels for reception by
Galaxy Latin America's growing DTH subscriber base. The satellite will be
placed in service after successful completion of in-orbit testing.
On November 14, 1997, the Company's wholly-owned subsidiaries, PanAmSat
International and PanAmSat Capital Corporation ("PanAmSat Capital," and
together with PanAmSat International, the "Subsidiaries"), commenced tender
offers and consent solicitations for an aggregate of $1.008 billion principal
amount at maturity of their outstanding 9 3/4% Senior Secured Notes due 2000,
11 3/8% Senior Subordinated Discount Notes due 2003 and 12 3/4% Senior
Subordinated Notes due 2005 (the "Tender Offers"). At midnight, December 19,
1997, the Tender Offers expired and approximately $171.4 million principal
amount of 9 3/4% Senior Secured Notes (approximately 98%), $453.2 million
principal amount of 11 3/8% Senior Subordinated Discount Notes (approximately
99%), and $373.6 million principal amount of 12 3/4% Senior Subordinated Notes
(approximately 99%) had been tendered and were ultimately purchased by the
Subsidiaries.
On December 23, 1997, the Company executed a Credit Agreement (the "Credit
Agreement") with certain lenders and Citicorp USA, Inc. as Administrative
Agent (the "Administrative Agent"). The Credit Agreement provides the Company
with up to $500 million of revolving credit loans (the "Revolving Credit
Loans") for five years, and up to $300 million in short-term loans maturing on
April 30, 1998 (the "Term Loans," and together with the Revolving Credit
Loans, the "Bank Loans"). The Credit Agreement provides for interest payable
at a variable rate based upon, among other things, the Company's credit
ratings. As a condition precedent to the closing of the Credit Agreement, the
loan agreement dated as of May 15, 1997 between Hughes Electronics Corporation
(formerly known as Hughes Network Systems, Inc.) ("Hughes Electronics"), as
lender, and the Company, as borrower (the "Hughes Loan Agreement"), was
amended to extend the maturity date to June 24, 2003 subject to a put
commencing in the year 2000. Under the terms of the original Hughes Loan
Agreement, the interest rate on this indebtedness was subject to adjustment
based upon the Company obtaining an investment grade debt rating. Accordingly,
the interest rate was adjusted to the pricing available under the Credit
Agreement. In addition, Hughes Electronics agreed to subordinate the Company's
obligations owing to it under the Hughes Loan Agreement to those owing to the
lenders under the Credit Agreement. On December 24, 1997, the Company borrowed
$500 million in the form of Revolving Credit Loans and $100 million in the
form of Term Loans. The Subsidiaries used such proceeds to consummate the
Tender Offers. The balance of the funds necessary to consummate the Tender
Offers was obtained from cash and marketable securities of the Subsidiaries.
The Credit Agreement requires that upon the consummation of this Offering, the
Term Loans be prepaid and any commitments to make additional Term Loans be
terminated in their entirety. On January 6, 1998, the aggregate amount of Bank
Loans outstanding was $725 million. On the closing date of this Offering, the
Company expects to have $500 million of Revolving Credit Loans available.
On January 5, 1998, the Company exercised its option under its sale
leaseback arrangements for eleven transponders on SBS-6 (the "Early Buy-Out").
In connection with the exercise of the Early Buy-Out, the Company paid
approximately $96.6 million to the owner-participant. The Early Buy-Out was
funded with Term Loans.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Securities offered hereby will be used to repay all outstanding Bank Loans
(including Term Loans in an aggregate amount of $225 million and Revolving
Credit Loans in an aggregate amount of $500 million), and for general
corporate purposes including working capital. See "The Company--Recent
Developments."
11
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited historical capitalization of
PanAmSat as of September 30, 1997, and the unaudited pro forma capitalization
of PanAmSat as of September 30, 1997, after giving effect to applying the
purchase method of accounting with Galaxy as the acquiror of PanAmSat, the
loan by Hughes Electronics of $1.725 billion to PanAmSat (the "New Financing")
as well as the effects of the debt refinancing plan including (i) the
consummation of the Tender Offers, (ii) the Company's borrowings under the
Credit Agreement and (iii) this Offering and the application of the proceeds
herefrom. The capitalization of PanAmSat should be read in conjunction with
PanAmSat's consolidated financial statements and notes thereto, and PanAmSat's
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included in PanAmSat's Quarterly Report on Form 10-Q/A-1 for the
quarter ended September 30, 1997, which is incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED
------------ --------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Current debt:
Bank debt(a)...................................... $ -- $ --
Other current indebtedness........................ 4.5 4.5
------------ ------------
Total current debt.................................. $ 4.5 $ 4.5
============ ============
Long-term debt:
Bank debt(a)...................................... $ -- $ --
Securities offered hereby......................... -- 750.0
9 3/4% Senior Secured Notes....................... 175.0 3.7
11 3/8% Senior Subordinated Discount Notes........ 418.5 4.5
12 3/4% Senior Subordinated Notes................. 373.7 0.1
Subordinated Merger debt(b)....................... 1,725.0 1,725.0
Other indebtedness(c)............................. 227.4 114.4
------------ ------------
Total long-term debt................................ 2,919.6 2,597.7
Stockholders' equity................................ 2,536.7 2,517.7
------------ ------------
Total capitalization................................ $ 5,456.3 $ 5,115.4
============ ============
</TABLE>
- --------
(a) On December 24, 1997, the Company borrowed $500 million in the form of
Revolving Credit Loans and $100 million in the form of Term Loans. The
Subsidiaries used such proceeds to consummate the Tender Offers. The
balance of the funds necessary to consummate the Tender Offers was
obtained from cash and marketable securities of the Subsidiaries. The
Credit Agreement requires that upon the consummation of this Offering, the
Term Loans be prepaid and any commitments to make additional Term Loans be
terminated in their entirety. The net proceeds to be received by the
Company from the sale of the Securities offered hereby will be used to
repay all outstanding Bank Loans and for general corporate purposes
including working capital. On January 6, 1998, the aggregate amount of
Bank Loans outstanding was $725 million. On the closing date of this
Offering, the Company expects to have $500 million of Revolving Credit
Loans available.
(b) Reflects the subordinated loan of $1.725 billion made by Hughes
Electronics to the Company in connection with the Merger.
(c) Reflects the elimination of the write-up to fair value of the 9 3/4%
Senior Secured Notes, 11 3/8% Senior Subordinated Discount Notes and 12
3/4% Senior Subordinated Notes resulting from the Merger.
12
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF PANAMSAT INTERNATIONAL
The following selected financial information for and as of each year in the
five-year period ended December 31, 1996 has been derived from the
consolidated financial statements of PanAmSat International and its
subsidiaries and predecessor entities, audited by Arthur Andersen LLP,
independent public accountants. This selected financial information should be
read in conjunction with the PanAmSat International Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in the Registration Statement, which are incorporated by
reference herein.
<TABLE>
<CAPTION>
PANAMSAT INTERNATIONAL HISTORICAL DATA(1)
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $ 40,328 $ 50,798 $ 63,744 $ 116,155 $ 246,943
-------- -------- ---------- ---------- ----------
Operating expenses
Direct expenses........ $ 2,175 $ 3,424 $ 4,254 $ 5,729 $ 10,505
Sales and marketing.... 2,599 4,461 7,179 9,543 14,012
Engineering and
technical............. 3,918 3,841 5,811 10,659 17,337
General and
administrative........ 5,554 7,066 9,768 15,688 25,349
Depreciation and
amortization.......... 6,990 8,231 16,331 33,412 61,334
Other expenses(2)...... -- 737 -- -- 4,758
Compensatory
programs(3)........... -- -- -- 8,341 4,874
-------- -------- ---------- ---------- ----------
Total operating
expenses.............. 21,236 27,760 43,343 83,372 138,169
-------- -------- ---------- ---------- ----------
Income from operations.. $ 19,092 $ 23,038 $ 20,401 $ 32,783 $ 108,774
Interest and other
expense (income),
net................... 1,984(4) 6,103(5) 2,403(5) (1,592)(5) 622(5)
-------- -------- ---------- ---------- ----------
Income before taxes..... 17,108 16,935 17,998 34,375 108,152
Income taxes(6)......... -- -- -- 16,829 46,432
-------- -------- ---------- ---------- ----------
Net income.............. 17,108 16,935 17,998 17,546 61,720
Preferred stock dividend
requirement(7)......... -- -- -- 25,976 41,422
-------- -------- ---------- ---------- ----------
Net income (loss) to
common shares.......... $ 17,108 $ 16,935 $ 17,998 $ (8,430) $ 20,298
======== ======== ========== ========== ==========
OTHER FINANCIAL DATA:
EBITDA(8)............... $ 25,306 $ 31,269 $ 36,732 $ 66,195(9) $ 170,108(9)
EBITDA margin........... 63% 62% 58% 57%(9) 69%(9)
Capital expenditures for
satellite systems under
development............ $ 22,555 $260,134 $ 300,217 $ 333,052 $ 280,858
Payments due from
customers under long-
term contracts(10)..... $239,700 $764,500 $1,270,000 $1,928,200 $2,435,608
Customers under long-
term contracts at end
of period(10).......... 89 108 121 177 199
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital
(deficit).............. $ 27,039 $ 51,179 $ 21,992 $ (889) $ (8,758)
Total assets............ 136,594 731,660 820,255 1,438,820 1,615,363
Long-term debt (less
current portion)(11)... 5,474 455,727 510,202 575,284 626,010
Long-term debt (less
current portion) plus
Preferred Stock(11).... 5,474 455,727 510,202 862,932 955,080
Partner's interest-
conditionally
redeemable(12)......... 50,000 193,936 194,591 -- --
Partners'/stockholders'
equity(13)............. 49,098 59,847 80,935 476,862 497,368
</TABLE>
- --------
(1) On May 16, 1997, as a result of the Merger, PanAmSat International became
a wholly-owned subsidiary of PanAmSat. See "The Company--The Merger" for a
description of the Merger.
(2) Other expenses related to costs incurred in connection with the
Reorganization Agreement.
(3) In 1995, this reflected expenses related to the assumption by PanAmSat
International of phantom stock plans of a predecessor company and the
grant of a limited partnership interest in PanAmSat, L.P. (the
"Partnership") to a former Executive Vice President of PanAmSat
International in connection with the corporate reorganization of PanAmSat
International. In 1996, this represented a cash bonus paid to employees
who would otherwise have qualified for the grant of stock options under
PanAmSat International's Long-Term Stock Investment Plan.
(4) In 1992, this included costs (net of insurance reimbursement) arising from
damages caused by Hurricane Andrew to PanAmSat International's teleport in
Homestead, Florida.
13
<PAGE>
(5) Net of capitalized interest of $9.0 million, $41.0 million, $37.8 million
and $39.5 million for the years ended December 31, 1993, 1994, 1995 and
1996, respectively.
(6) As a partnership, the Partnership was not subject to federal or state
income taxes. Accordingly, no income taxes were deducted from net income
on the Partnership's financial statements. However, the Partnership was
obligated under its Partnership Agreement to make certain tax
distributions to its partners. On March 2, 1995, the Partnership was
converted to corporate form (the "Conversion") and, accordingly, became
subject to income taxes.
(7) On September 30, 1997, PanAmSat International exchanged its 12 3/4%
Mandatorily Exchangeable Senior Redeemable Preferred Stock into 12 3/4%
Senior Subordinated Notes due 2005.
(8) Represents earnings before net interest expense, income taxes,
depreciation and amortization. EBITDA is commonly used in the
communications industry to analyze companies on the basis of operating
performance, leverage and liquidity. EBITDA should not be considered as a
measure of profitability or liquidity as determined in accordance with
generally accepted accounting principles in the statements of operations
and cash flows.
(9) Included expenses related to the assumption by PanAmSat International of
phantom stock plans of a predecessor company and the grant of a limited
partnership interest in the Partnership to a former Executive Vice
President of PanAmSat International in connection with the corporate
reorganization of PanAmSat International of $8.3 million for the year
ended December 31, 1995 and expenses related to the Reorganization
Agreement and a corporate compensation plan totaling $9.6 million for the
year ended December 31, 1996. EBITDA and EBITDA margin excluding such
expenses were $74.5 million and 64% for the year ended December 31, 1995
and $179.7 million and 73% for the year ended December 31, 1996.
(10) Represented future payments due from customers under long-term contracts
at the end of the periods indicated, excluding arrangements for satellite
capacity for DTH services in Latin America. At December 31, 1996,
approximately $22.6 million of PAS-1 customer payments, $92.4 million of
PAS-2 customer payments, $35.6 million of PAS-3 customer payments and
$79.2 million of PAS-4 customer payments were under contracts which are
terminable by the customer under certain circumstances, including after a
minimum service period. Certain contracts could also be terminated if
certain technical performance specifications contained in the agreements,
including useful life, were not achieved, or, at the customer's option
after a minimum service period. Future cash payments expected from
customers could be reduced for outage or transponder failure and may be
further reduced for "lowest price" provisions for like transponder
capacity given to similarly situated customers. The terms of PanAmSat
International's long-term contracts range from one year to the life of
the satellite.
(11) Excluded, as to each of PAS-5 and PAS-6, a portion of the respective
purchase prices which became payable after such satellite was delivered
and which amounts could be paid immediately in cash or deferred over
periods of up to 15 years with interest rates ranging from 8.0% to 10.0%
per annum. At December 31, 1996, this amount totaled approximately $34.5
million. A portion of the respective purchase prices of PAS-7 and PAS-8
may also be deferrable. PanAmSat presently intends to defer such payments
at the time they become payable to the extent such deferral is permitted
under the terms of its outstanding indebtedness.
(12) Under the Partnership Agreement of the Partnership, if the launches of
PAS-2, PAS-3 and PAS-4 were not all successfully completed by December
31, 2001, USHI, Inc., formerly known as Univisa Satellite Holdings, Inc.
("USHI") would have had the right to redeem its $200.0 million investment
in PanAmSat in 2004 for $200.0 million, less certain distributions paid
to USHI, plus a yield thereon of 6.0% per annum. In the Conversion,
USHI's redemption rights with respect to its interest in the Partnership
were extinguished.
(13) Net of distributions of $16.4 million and $6.2 million for the years
ended December 31, 1992 and 1993, respectively, and a contribution of $.7
million for the year ended December 31, 1994. There were no distributions
or contributions in 1995 or 1996.
14
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF GALAXY AND PANAMSAT
The following selected financial information of Galaxy as of December 31,
1994, 1995 and 1996 for each of the four years in the period ended December
31, 1996 have been derived from the financial statements of Galaxy audited by
Deloitte & Touche LLP, independent auditors. The selected financial
information set forth below as of December 31, 1992 and 1993 and for the
period ended December 31, 1992 have been derived from unaudited financial
statements of Galaxy which, in the opinion of management, include all
adjustments necessary for a fair and consistent presentation of such
information. This selected financial information should be read in conjunction
with the Galaxy Financial Statements and "Galaxy Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in the
Registration Statement incorporated by reference herein. The selected
financial information as of and for the nine-month period ended September 30,
1997 has been derived from the unaudited consolidated financial statements of
PanAmSat included in PanAmSat's Quarterly Report on Form 10-Q/A-1 for the
quarter ended September 30, 1997, and should be read in conjunction with
PanAmSat's consolidated financial statements and notes thereto, and PanAmSat's
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in such Quarterly Report on Form 10-Q/A-1, which is
incorporated by reference herein.
<TABLE>
<CAPTION>
PANAMSAT
HISTORICAL
DATA(1)
----------
GALAXY HISTORICAL DATA NINE
-------------------------------------------------- MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------- SEPTEMBER
1992 1993 1994 1995 1996 30, 1997
-------- -------- -------- --------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Total revenues.......... $371,642 $220,247 $328,243 $ 386,126 $ 482,770 $ 432,060
-------- -------- -------- --------- --------- ---------
Operating expenses
Cost of outright sales
and sales-type
leases................ 117,230 34,530 45,747 49,616 52,969 20,476
Leaseback expense, net
of deferred gain...... 18,524 36,576 36,617 36,597 59,927 46,395
Depreciation and
amortization.......... 59,403 52,025 54,126 76,522 58,523 94,423
Direct operating
costs................. 58,826 35,034 33,627 29,931 34,794 27,263
Selling, general &
administrative........ 22,289 19,278 51,595 30,146 34,119 43,127
-------- -------- -------- --------- --------- ---------
Operating income........ 95,370 42,804 106,531 163,314 242,438 200,376
Interest expense,
net(2)................ (3,525) (5,848) (6,826) (5,828) (4,903) (15,599)
Other income........... 2,818 44,876 3,885 7,892 2,184 385
-------- -------- -------- --------- --------- ---------
Income before taxes and
minority interest...... 94,663 81,832 103,590 165,378 239,719 185,162
Income tax expense...... 35,499 30,687 38,846 62,017 89,895 83,172
Minority interest....... -- -- -- -- -- 12,819
-------- -------- -------- --------- --------- ---------
Net income.............. $ 59,164 $ 51,145 $ 64,744 $ 103,361 $ 149,824 $ 89,171
======== ======== ======== ========= ========= =========
OTHER FINANCIAL DATA:
EBITDA(3)............... $157,591 $139,705 $164,542 $ 247,728 $ 303,145 $ 295,184
EBITDA margin........... 42% 63% 50% 64% 63% 68%
Capital expenditures.... $290,481 $111,104 $114,660 $ 280,543 $ 308,735 $ 423,393
Total assets............ 872,948 850,640 868,408 1,137,978 1,275,516 6,217,900
</TABLE>
- --------
(1) Includes financial data for PanAmSat International from May 16, 1997 (the
effective date of the Merger). See "The Company--The Merger" for a
description of the Merger.
(2) Net of capitalized interest of $9.7 million, $1.6 million, $5.1 million,
$10.1 million, $14.6 million and $57.1 million for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 and the nine months ended
September 30, 1997, respectively.
(3) Represents earnings before net interest expense, income tax expense,
depreciation and amortization. EBITDA is commonly used in the
communications industry to analyze companies on the basis of operating
performance, leverage and liquidity. EBITDA should not be considered as a
measure of profitability or liquidity as determined in accordance with
generally accepted accounting principles in the statements of income and
cash flows.
15
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The Unaudited Pro Forma Financial Statements of PanAmSat give effect to the
transactions contemplated by the Merger applying the purchase method of
accounting with Galaxy as the acquiror of PanAmSat, the loan by Hughes
Electronics of $1.725 billion to PanAmSat (the "New Financing"), and the
effects of the debt refinancing plan including (i) the consummation of the
Tender Offers, (ii) the Company's borrowings under the Credit Agreement, (iii)
this Offering and the application of the net proceeds herefrom and (iv) the
Early Buy-Out, as if they had occurred at January 1, 1996 and 1997 for
purposes of the Unaudited Pro Forma Combined and Consolidated Statements of
Income and on September 30, 1997 for purposes of the Unaudited Pro Forma
Consolidated Balance Sheet. The Unaudited Pro Forma Combined and Consolidated
Financial Statements do not purport to present the financial position or
results of operations of PanAmSat had the transactions and events assumed
therein occurred on the dates specified, nor are they necessarily indicative
of the results of operations that may be achieved in the future.
16
<PAGE>
PANAMSAT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS (AS ADJUSTED)
---------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............ $ 311,898 $ (243,914)(a) $ 119,109
(2,275)(b)
53,400 (d)
Operating lease, sale and contract
receivables......................... 54,354 54,354
Net investment in sales-type leases.. 25,621 25,621
Prepaid expenses and other
receivables......................... 15,384 15,384
Deferred income taxes................ 36,799 36,799
---------- ----------- ----------
Total current assets............... 444,056 (192,789) 251,267
Satellites and other property and
equipment, net...................... 1,274,193 52,400 (c) 1,326,593
Satellite systems under development.. 1,187,175 1,187,175
Net investment in sales-type leases.. 332,070 332,070
Marketable securities and restricted
cash................................ 242,545 (242,545)(a)
Intangible assets, net of
amortization........................ 2,496,977 2,496,977
Deferred costs and other assets...... 69,971 (17,873)(a) 54,373
2,275 (b)
Deferred income taxes................ 170,913 12,628 (a) 183,541
---------- ----------- ----------
Total assets....................... $6,217,900 $ (385,904) $5,831,996
========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
liabilities......................... $ 62,457 $ (816)(a) $ 61,641
Accrued in-orbit performance
insurance........................... 16,885 16,885
Deferred gains on sales and
leasebacks.......................... 42,871 (4,900)(c) 37,971
Deferred revenues.................... 13,938 13,938
Current portion of long-term debt.... 4,487 4,487
---------- ----------- ----------
Total current liabilities.......... 140,638 (5,716) 134,922
Due to affiliates.................... 1,798,747 1,798,747
Long-term debt....................... 1,120,881 (1,071,946)(a) 798,935
750,000 (d)
600,000 (a)
(696,600)(d)
96,600 (c)
Accrued operating leaseback and
contract expense.................... 78,692 (19,000)(c) 59,692
Deferred gains on sales and
leasebacks.......................... 202,599 (20,300)(c) 182,299
Deferred revenues.................... 102,827 102,827
Deferred income taxes................ 236,829 236,829
---------- ----------- ----------
Total liabilities.................. 3,681,213 (366,962) 3,314,251
Stockholder's equity................. 2,536,687 (18,942)(a) 2,517,745
---------- ----------- ----------
Total liabilities and stockholders'
equity............................ $6,217,900 $ (385,904) $5,831,996
========== =========== ==========
</TABLE>
17
<PAGE>
PANAMSAT CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PANAMSAT
PRO FORMA
OLD PANAMSAT CONSOLIDATED
JANUARY 1 (AS ADJUSTED)
THROUGH PRO FORMA SEPTEMBER 30,
ACTUAL MAY 15, 1997 ADJUSTMENTS 1997(K)
-------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Revenues
Outright sales and
sales-type leases...... $ 61,559 $ 61,559
Operating leases,
satellite services and
other.................. 370,501 $126,041 $ (1,075)(g) 495,467
-------- -------- -------- --------
Total revenues........ 432,060 126,041 (1,075) 557,026
-------- -------- -------- --------
Operating expenses
Cost of outright sales
and sales-type leases.. 20,476 20,476
Leaseback expense, net
of deferred gain....... 46,395 46,395
Depreciation and
amortization........... 94,423 24,336 22,966 (e) 141,725
Direct operating costs
and selling, general
and administrative
costs.................. 70,390 28,068 (1,075)(g) 97,383
-------- -------- -------- --------
Total operating
expenses............. 231,684 52,404 21,891 305,979
-------- -------- -------- --------
Operating income.......... 200,376 73,637 (22,966) 251,047
Interest expense, net... (15,599) 4,199 (52,213)(f) (63,613)
Other income............ 385 385
-------- -------- -------- --------
Income before income taxes
and minority interest and
extraordinary item....... 185,162 77,836 (75,179) 187,819
Income tax expense........ 83,172 33,121 (20,885)(h) 95,408
Minority interest......... 12,819 (12,819)(i)
-------- -------- -------- --------
Income before
extraordinary item....... 89,171 44,715 (41,475) 92,411
Extraordinary item, loss
on extinguishment of
debt, net of taxes....... (18,942)(a) (18,942)
-------- -------- -------- --------
Net income................ 89,171 44,715 (60,417) 73,469
-------- -------- -------- --------
Preferred stock dividend.. 16,877 (16,877)(i)
-------- -------- -------- --------
Net income to common
shares................... $ 89,171 $ 27,838 $(43,540) $ 73,469
======== ======== ======== ========
Income per share.......... $ .28 $ .49
======== ========
Weighted average number of
common shares
outstanding.............. 100,464 48,659 149,123
======== ======== ========
</TABLE>
18
<PAGE>
PANAMSAT CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
GALAXY PANAMSAT ADJUSTMENTS PANAMSAT(K)
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Outright sales and sales-
type leases............... $163,686 $163,686
Operating leases, satellite
services and other........ 319,084 $246,943 $ (2,866)(g) 563,161
-------- -------- --------- --------
Total revenues........... 482,770 246,943 (2,866) 726,847
-------- -------- --------- --------
Operating expenses
Cost of outright sales and
sales-type leases......... 52,969 52,969
Leaseback expense, net of
deferred gain............. 59,927 59,927
Depreciation and
amortization.............. 58,523 61,334 61,243 (e) 181,100
Direct operating costs..... 34,794 27,842 (2,866)(g) 59,770
Selling, general and
administrative expenses... 34,119 39,361 73,480
Compensatory programs...... 4,874 4,874
Reorganization costs....... 4,758 4,758
-------- -------- --------- --------
Total operating
expenses................ 240,332 138,169 58,377 436,878
-------- -------- --------- --------
Operating income............. 242,438 108,774 (61,243) 289,969
Interest expense, net...... (4,903) (622) (85,646)(f) (91,171)
Other income............... 2,184 2,184
-------- -------- --------- --------
Income before income taxes
and minority interest....... 239,719 108,152 (146,889) 200,982
Income tax expense........... 89,895 46,432 (34,258)(h) 102,069
Minority interest............
-------- -------- --------- --------
Income before extraordinary
item........................ 149,824 61,720 (112,631) 98,913
Extraordinary item, loss on
extinguishment of debt, net
of taxes.................... (18,942)(a) (18,942)
-------- -------- --------- --------
Net income................... 149,824 61,720 (131,573) 79,971
-------- -------- --------- --------
Preferred stock dividend..... 41,422 (41,422)(i)
-------- -------- --------- --------
Net income to common shares.. $149,824 $ 20,298 $ (90,151) $ 79,971
======== ======== ========= ========
Income per share............. $ .20 $ .54
======== ========
Weighted average number of
common shares outstanding... 100,332 48,791 (j) 149,123
======== ========= ========
</TABLE>
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
(a) To reflect the Tender Offers and the recognition of the extraordinary
loss on the extinguishment of debt calculated as follows:
<TABLE>
<S> <C>
Amount of notes tendered in the Tender Offers.................. $ 998,200
Elimination of the write-up to fair value of the tendered
notes......................................................... 113,222
Tax effect of the resulting loss on extinguishment of debt..... 12,628
Payment of outstanding interest................................ 2,816
Cash used...................................................... (243,914)
Marketable securities used..................................... (242,545)
Use of bank proceeds........................................... (600,000)
Write-off of deferred charges relating to the tendered notes... (17,873)
Write-off of Original Issue Discount on the 11 3/8% Senior Sub-
ordinated Discount
Notes due 2003................................................ (39,476)
Recognition of fees related to the Tender Offers............... (2,000)
---------
Extraordinary loss on extinguishment of debt................... $ (18,942)
=========
</TABLE>
(b) To reflect costs incurred in connection with the Credit Agreement.
(c) To reflect the Early Buy-Out.
(d) To reflect this Offering and the repayment of the Bank Loans.
(e) To reflect amortization of the excess of the purchase price of PanAmSat
International over the fair value of the net assets acquired using the
straight line method over 40 years.
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED AND CONSOLIDATED
FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)
(f) To reflect the incremental amount of interest expense relating to the
tendered notes and this Offering as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Interest on the New Financing at an assumed
rate of 6.1%
(six-month LIBOR plus 0.40%)................. $105,225 $ 78,918
Interest on the Securities at an average rate
of 6.33%..................................... 47,475 35,606
Differential in interest capitalized resulting
from change in interest rates assumed........ 16,843 24,613
-------- --------
Sub-total................................. 169,543 139,137
Less:
Interest expense relating to outstanding
debt included in
historical amounts......................... (83,897) (86,924)
-------- --------
Pro forma increase in interest expense...... $ 85,646 $ 52,213
======== ========
</TABLE>
A 0.125% increase or decrease in the assumed interest rate for the New
Financing would change pro forma interest expense by $132 and $99 for
the year ended December 31, 1996 and the nine months ended September
30, 1997, respectively. Pro forma net income would change by $79 and
$59 for the year ended December 31, 1996 and the nine months ended
September 30, 1997, respectively.
(g) To eliminate intercompany revenues, costs and transactions between
Galaxy and PanAmSat International.
(h) To reflect income taxes at an assumed marginal rate of 40% on the pro
forma adjustments. Amortization of goodwill is not deductible for tax
purposes.
(i) To eliminate preferred stock dividend and minority interest as a result
of the exchange of the 12 3/4% Mandatorily Exchangeable Senior
Redeemable Preferred Stock into 12 3/4% Senior Subordinated Notes due
2005 and the subsequent tender of such notes.
(j) Represents the difference between PanAmSat International's weighted av-
erage common shares and the number of shares of PanAmSat Common Stock
that were assumed to be outstanding upon consummation of the Merger.
(k) The Pro Forma Combined Operating Results exclude the impact of the
$225,000 gain on the sale of DTH rights in certain foreign markets to
an affiliate, as well as certain professional and advisory fees
incurred in connection with the combination totaling $33,100, both of
which are non-recurring items which are not indicative of the Company's
ordinary course of business.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Results of Operations. The Company's results of operations incorporate
PanAmSat International's activity commencing May 16, 1997, the effective date
of the Merger. Since this represents only four and a half months of activity
for PanAmSat International, management has determined that for comparative
purposes, it would be more meaningful to present the information shown below
on a "pro forma" basis reflecting (1) the Merger as though it had occurred at
the beginning of the respective periods presented (excluding the impact of the
$225 million gain on the sale of the Company's DTH rights in certain foreign
markets (the "DTH Options") to an affiliate concurrent with the Merger, as
well as certain professional and advisory fees incurred in connection with the
Merger totaling $33.1 million, both of which are non-recurring items that are
not indicative of the Company's ordinary course of business) and (2) the debt
refinancing plan including (a) the consummation of the Tender Offers, (b) the
Company's borrowings under the Credit Agreement and (c) this Offering and the
application of the net proceeds herefrom. The pro forma results are not
necessarily indicative of the combined results that would have occurred had
the Merger actually occurred at the beginning of fiscal 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
(PRO FORMA)
--------------------------
1996 1997
------------ ------------
(UNAUDITED; IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenues
Outright sales and sales-type leases............ $ 137,333 $ 61,559
Operating leases, satellite services and other.. 409,714 495,467
------------ ------------
Total Revenue................................. 547,047 557,026
------------ ------------
Operating expenses
Cost of outright sales and sales type leases.... 44,634 20,476
Leaseback expense, net of deferred gain......... 44,414 46,395
Direct operating and SG&A costs................. 95,687 97,383
------------ ------------
Total operating expenses...................... 184,735 164,254
------------ ------------
EBITDA............................................ 362,312 392,772
Depreciation and amortization................... 134,080 141,725
Interest expense, net........................... 62,843 63,613
Other income.................................... (2,528) (385)
------------ ------------
Income before income taxes and extraordinary
item............................................. 167,917 187,819
Income tax expense................................ 82,582 95,408
------------ ------------
Income before extraordinary item.................. 85,335 92,411
Extraordinary item, loss on extinguishment of
debt, net of taxes............................... (18,942) (18,942)
------------ ------------
Net income........................................ $ 66,393 $ 73,469
------------ ------------
Earnings per share................................ $ .45 $ .49
</TABLE>
Pro forma revenues for the nine months ended September 30, 1997 were $557.0
million, an increase of $10.0 million or 2% as compared to the same period in
1996. The increase in total revenues for the nine-month period represents
increases in the Company's operating lease/service agreement revenue due to
the addition of several new long-term contracts as the Company continues to
sell its available satellite in-orbit transponder capacity, offset by a
reduction in sales and sales type lease revenue during 1997 as more customers
opted for operating leases/service agreements.
22
<PAGE>
Pro forma earnings before interest, taxes, depreciation and amortization
("EBITDA") for the nine months ended September 30, 1997 was $392.8 million, an
increase of $30.5 million or 8% as compared to the same period in 1996. The
increase in EBITDA for the nine-month period was due primarily to the increase
in total revenues offset by reduced cost of sales and sales type leases, and
lower SG&A costs reflecting reduced marketing activity on the Company's Global
Satellite System in anticipation of future satellite launches.
Pro forma interest expense, net for the nine months ended September 30, 1997
was $63.6 million, an increase of $.8 million or 1% as compared to the same
period in 1996. The increase in interest expense, net for the nine-month
period was primarily due to a decrease in interest income earned during 1997.
Pro forma net income for the nine months ended September 30, 1997 was $73.5
million, an increase of $7.1 million or 11% as compared to the same period in
1996. The increase in net income for the nine-month period was due primarily
to the increase in EBITDA.
Financial Condition
Effective May 16, 1997, the Merger was completed. Pursuant to the Merger,
aggregate consideration paid to PanAmSat International shareholders consisted
of approximately $1.5 billion in cash and approximately 42.5 million shares of
PanAmSat Common Stock. The cash portion was funded by a three year term loan
in the amount of $1.725 billion from Hughes Electronics. (Galaxy was owned and
operated by HCI which itself is an indirect, wholly-owned subsidiary of Hughes
Electronics). In addition to the $1.725 billion loan, at September 30, 1997
the Company also has long-term indebtedness of $1.195 billion (including $73.7
million due to affiliates).
On November 14, 1997, the Subsidiaries commenced the Tender Offers. At
midnight, December 19, 1997, the Tender Offers expired and approximately
$171.4 million of 9 3/4% Senior Secured Notes (approximately 98%), $453.2
million of 11 3/8% Senior Subordinated Discount Notes (approximately 99%), and
$373.6 million of 12 3/4% Senior Subordinated Notes (approximately 99%), had
been tendered and were ultimately purchased by the Subsidiaries.
On December 24, 1997, the Company borrowed $500 million in the form of
Revolving Credit Loans and $100 million in the form of Term Loans. The
Subsidiaries used such proceeds to consummate the Tender Offers. The balance
of the funds necessary to consummate the Tender Offers was obtained from cash
and marketable securities of the Subsidiaries. The Credit Agreement requires
that upon the consummation of this Offering, the Term Loans be prepaid and any
commitments to make additional Term Loans be terminated in their entirety. The
net proceeds to be received by the Company from the sale of the Securities
offered hereby will be used to repay all outstanding Bank Loans and for
general corporate purposes including working capital. On January 6, 1998, the
aggregate amount of Bank Loans outstanding was $725 million. On the closing
date of this Offering, the Company expects to have $500 million of Revolving
Credit Loans available.
On January 5, 1998, the Company completed the Early Buy-Out, and in
connection therewith paid approximately $96.6 million to the owner-
participant. The Early Buy-Out was funded with Term Loans.
The significant cash outlays for the Company will continue to be primarily
capital expenditures related to the construction and launch of satellites and
debt service costs. With the launches of PAS-6 on August 8, 1997, PAS-5 on
August 27, 1997 and Galaxy VIII-i on December 8, 1997, the Company now has six
satellites under various stages of development for which the Company has
budgeted capital expenditures. See "The Company--Recent Developments" above
for information regarding subsequent events affecting PAS-6. The Company will
require approximately $900 million to complete the construction, insurance and
launch of PAS-1R, PAS-7, PAS-8, PAS-9, Galaxy X and Galaxy XI. This amount is
expected to be funded from cash on hand and cash flow from operations. In
addition to funding new satellites, the Company also expects to exercise its
early buy-out options.
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DESCRIPTION OF THE SECURITIES
The 2003 Notes, the 2005 Notes, the 2008 Notes and the 2028 Debentures
offered hereby constitute separate series of securities to be issued pursuant
to an Indenture, to be dated as of January 16, 1998, between the Company and
The Chase Manhattan Bank, as Trustee. Copies of the proposed Indenture and
Registration Rights Agreement (as defined below) are available from PanAmSat
by writing to the Investor Relations Department, PanAmSat Corporation, One
Pickwick Plaza, Greenwich, Connecticut 06830. The following summary of certain
provisions of the Indenture and the Securities does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
provisions of the Indenture, including the definitions therein of certain
terms and of those terms in the Trust Indenture Act of 1939 made a part
thereof.
GENERAL
The 2003 Notes will be limited to $200 million aggregate principal amount,
the 2005 Notes will be limited to $275 million aggregate principal amount, the
2008 Notes will be limited to $150 million aggregate principal amount and the
2028 Debentures will be limited to $125 million aggregate principal amount.
The 2003 Notes will bear interest at the rate of 6% per annum, the 2005 Notes
will bear interest at the rate of 6 1/8% per annum, the 2008 Notes will bear
interest at the rate of 6 3/8% per annum, and the 2028 Debentures will bear
interest at the rate of 6 7/8% per annum, in each case, from January 16, 1998
or from the most recent interest payment date to which interest has been paid
or duly provided for, payable semi-annually on each January 15 and July 15
commencing July 15, 1998, to the persons in whose names the Securities are
registered at the close of business on the January 1 or July 1 as the case may
be, preceding such January 15 or July 15.
The 2003 Notes will mature on January 15, 2003, the 2005 Notes will mature
on January 15, 2005, the 2008 Notes will mature on January 15, 2008, and the
2028 Debentures will mature on January 15, 2028. The Securities will be
unsecured and will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company.
The Securities will be issued only in fully registered book-entry form,
without coupons, in denominations of $100,000 and integral multiples of $1,000
in excess thereof. No service charge will be made for any transfer or exchange
of the Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
(Sections 302, 305). The Securities will be represented by Global Securities
registered in the name of a nominee of The Depository Trust Company, New York,
New York. Except as set forth under "Book-Entry; Delivery and Form" below,
Securities will not be issuable in certificated form.
REDEMPTION
Each series of the Securities will be redeemable as a whole or in part at
the option of the Company at any time, at a redemption price equal to the
greater of (i) 100% of the principal amount of such Securities or (ii) the sum
of the present values of the remaining scheduled payments of principal and
interest thereon discounted to the date of redemption on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate (as defined herein) plus 10 basis points in the case of the 2003 Notes,
15 basis points in the case of the 2005 Notes, 20 basis points in the case of
the 2008 Notes and 20 basis points in the case of the 2028 Debentures, plus,
in each case, accrued interest thereon to the date of redemption. The
Securities shall not be subject to any sinking fund.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury
Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable
to the remaining term of the Securities, as the case may be, to be redeemed
that would be utilized, at the time of selection and in accordance with
customary financial
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practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of such Securities, as the case may be.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such business day, the
average of the Reference Treasury Dealer Quotations actually obtained by the
Trustee for such redemption date. "Reference Treasury Dealer Quotations"
means, with respect to each Reference Treasury Dealer and any redemption date,
the average, as determined by the Trustee of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by such Reference Treasury
Dealer at 5:00 p.m. on the third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation and Salomon Brothers Inc,
and their respective successors; provided, however, that if any of the
foregoing shall cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Company shall substitute therefor
another Primary Treasury Dealer.
Notice of any redemption will be mailed at least 30 days but no more than 60
days before the redemption date to each holder of Securities to be redeemed.
Unless the Company defaults in payment of the redemption price, on and after
the redemption date interest will cease to accrue on the Securities or
portions thereof called for redemption.
CERTAIN COVENANTS
Liens. The Indenture provides that the Company will not create, incur,
assume or guarantee and will not permit any Restricted Subsidiary (as defined
below) to create, incur, assume or guarantee any indebtedness that is secured
by a mortgage, security interest, pledge or lien (collectively, "lien") on any
Principal Property (as defined below) or shares of capital stock or
indebtedness of any Restricted Subsidiary, whether owned at the date of the
Indenture or thereafter acquired, without effectively providing that the
Securities shall be secured by such lien equally and ratably with any and all
other indebtedness thereby secured. The foregoing restrictions, however, shall
not apply to, among others, indebtedness secured by (i) liens on any Principal
Property acquired, constructed or improved by the Company or any Restricted
Subsidiary after the date of the Indenture to secure indebtedness incurred for
the purpose of financing all or any part of the construction costs of such
Principal Property or the improvements thereon or liens on any Principal
Property at the time of its acquisition; (ii) liens on property or shares of
capital stock or indebtedness of a corporation existing at the time such
corporation is merged into or consolidated with the Company or a Restricted
Subsidiary or at the time of a sale, lease or other disposition of the
properties of a corporation as an entirety or substantially entirety to the
Company or a Restricted Subsidiary; (iii) liens on property or shares of
capital stock or indebtedness of a corporation existing at the time such
corporation becomes a Restricted Subsidiary; (iv) liens to secure indebtedness
of any Restricted Subsidiary to the Company or another Restricted Subsidiary
but only so long as such indebtedness is held by the Company or a Restricted
Subsidiary; (v) liens in favor of the United States of America or any state
thereof, or any department agency or political subdivision of the United
States of America or any state thereof, to secure partial progress, advance or
other payments pursuant to any contract or statute including, without
limitation, liens to secure indebtedness represented by pollution control or
industrial revenue bonds, or to secure any indebtedness incurred for the
purpose of financing all or any part of the purchase price or the cost of
constructing or improving the portion of the property subject to such liens;
(vi) certain liens in favor of a customer in respect of payments for goods
produced for or services rendered to such customer; (vii) liens existing at
the date of the Indenture; (viii) mechanics' or other similar liens arising in
the ordinary course of business; (ix) certain pledges or deposits,
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liens resulting from litigation or judgments, taxes or other governmental
charges or landlord or tenant rights and liens incidental to the conduct of
the business or the ownership of the property and assets of the Company or a
Restricted Subsidiary and which do not, in the opinion of the Company,
materially detract from the value of the property or assets or materially
impair the use thereof in the operation of the business of the Company, and
its Restricted Subsidiaries, taken as a whole; and (x) liens for the sole
purpose of extending, renewing or replacing in whole or in part any lien
referred to in the foregoing clauses (i) to (ix), inclusive, or in this clause
(x), provided that the principal amount of indebtedness secured thereby shall
not exceed the principal amount of indebtedness so secured at the time of such
extension, renewal or replacement and that such extension, renewal or
replacement shall be limited to all or a part of the property subject to the
lien so extended, renewed or replaced (plus improvements on such property).
(Section 1006).
For purposes of the "Liens" covenant described herein, the giving of a
guarantee which is secured by a lien on a Principal Property (including shares
of capital stock or indebtedness) of a Restricted Subsidiary and the creation
of a lien on Principal Property (including shares of capital stock or
indebtedness) of the Company or of any Restricted Subsidiary to secure
indebtedness which existed prior to the creation of such lien will be deemed
to involve the creation of indebtedness secured by a lien in an amount equal
to, without duplication, the principal amount secured by such lien.
Sale and Lease-Back Transactions. The Indenture provides that the Company
will not, nor will it permit any Restricted Subsidiary to, enter into any
arrangement with any Person providing for the leasing by the Company or any
Restricted Subsidiary of any Principal Property (except for (x) leases
existing at the date of the Indenture, (y) leases of not more than three years
and (z) leases between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries), which property has been owned and operated by the
Company or any Restricted Subsidiary for more than 180 days and has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person in anticipation of such leasing (a "Sale and Lease-Back Transaction"),
unless either (a) the Company or such Restricted Subsidiary would be entitled
to incur indebtedness secured by a lien on such property without equally and
ratably securing the Securities pursuant to the Indenture or (b) the Company
shall apply an amount equal to the Attributable Debt (as defined below) of
such Sale and Lease-Back Transaction to (i) the acquisition of another
Principal Property of equal or greater fair market value, (ii) the retirement
of indebtedness for borrowed money, including the Securities, incurred or
assumed by the Company or any Restricted Subsidiary (other than indebtedness
for borrowed money owed to the Company or any Restricted Subsidiary) or (iii)
any combination of the foregoing. Notwithstanding the foregoing, no retirement
referred to in clause (ii) of the preceding sentence may be effected by
payment at maturity or pursuant to any mandatory sinking fund payment or any
mandatory prepayment provision. (Section 1007).
Exemption from Limitations. Notwithstanding the restrictions described
above, the Company or any Restricted Subsidiary may, without equally and
ratably securing the Securities, create, incur, assume, or guarantee
indebtedness secured by liens and enter into Sale and Lease-Back Transactions
which would otherwise be restricted by the foregoing provisions, provided that
at such time (and after giving effect to the transactions, to the receipt and
application of the net proceeds thereof and to the retirement of any
indebtedness which is concurrently being retired out of such proceeds) the sum
of the aggregate indebtedness secured by such liens plus the Attributable Debt
of all Sale and Lease-Back Transactions shall not exceed 10% of Consolidated
Net Tangible Assets (as defined below) as determined in accordance with the
most recent published consolidated balance sheet of the Company. (Section
1008).
Certain Definitions. "Attributable Debt" means, as to any particular lease
under which any Person is at the time liable at any date as of which the
amount thereof is to be determined, the total net amount of rent required to
be paid by such Person under such lease during the remaining term thereof,
excluding renewals, discounted at a rate per annum equal to the prevailing
market interest rate, at the time such lease was entered into, on United
States Treasury obligations having a maturity substantially the same as the
average term of such lease, plus 3%. The net amount of rent required to be
paid under any such lease for any such period shall be the amount of the rent
payable by the lessee with respect to such period, after excluding amounts
required to be paid
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on account of maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges and contingent rents such as those based on sales.
In the case of any lease which is terminable by the lessee upon the payment of
a penalty, such net amount shall also include the amount of such penalty, but
no rent shall be considered as required to be paid under such lease subsequent
to the first date upon which it may be so terminated.
"Consolidated Net Tangible Assets" means the total assets shown on the most
recent audited annual consolidated balance sheet of the Company and its
consolidated subsidiaries, after deducting the amount of all current
liabilities and intangible assets.
"Principal Property" means any satellite or satellite systems equipment,
whether under development or in operation, manufacturing, development, testing
or research facility or warehouse (including, without limitation, land,
fixtures and equipment) owned or leased by the Company or any Restricted
Subsidiary (including any of the foregoing owned or leased after the date of
the Indenture), but not including (a) any property which in the good faith
determination of the Board of Directors of the Company is not of material
importance to the total business conducted by the Company as an entirety or
(b) any portion of a particular property which is similarly found not to be of
material importance to the use or operation of such property.
"Restricted Subsidiary" means a subsidiary of the Company which owns a
Principal Property.
RESTRICTION UPON MERGER AND SALE OF ASSETS
The Indenture provides that no merger of the Company with or sale of the
Company's property substantially as an entirety to any other corporation shall
be made if, as a result, properties or assets of the Company would become
subject to a mortgage or lien which would not be permitted by the Indenture,
unless the Securities shall be equally and ratably secured with such
obligations. Any successor entity must be a corporation organized in the
United States, shall expressly assume the due and punctual payment of the
principal (and premium, if any) and interest on the Securities and,
immediately after giving effect to a merger or consolidation, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing. (Section
801).
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the holders of at least a majority in
aggregate principal amount of each series of outstanding Securities affected
by such modification or amendment; but no such modification or amendment may,
without the consent of the holder of each outstanding Security affected
thereby, (a) change the stated maturity of the principal of, or any
installment of interest on, any Security, (b) reduce the principal amount of
or interest on, any Security, (c) change the place or currency of payment of
principal of or interest on any Security, (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any Security,
(e) reduce the percentage in principal amount of outstanding Securities, the
consent of whose holders is required for modification or amendment of the
Indenture, (f) reduce the percentage in principal amount of outstanding
Securities necessary for waiver of compliance with certain provisions of the
Indenture or for waiver of certain defaults or (g) modify such provisions with
respect to modification and waiver. (Section 902).
The holders of at least a majority in principal amount of the outstanding
Securities may waive compliance by the Company with certain restrictive
provisions of the Indenture. (Section 1012). The holders of a majority in
principal amount of the outstanding Securities may waive any past default
under the Indenture, except a default in the payment of principal or interest
and certain covenants and provisions of the Indenture which cannot be amended
without the consent of the holder of each outstanding Security affected.
(Section 513).
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to each
series of Securities issued thereunder: (a) failure to pay principal of or any
premium on such series when due, and (b) failure to pay interest on such
series when due, continued for 30 days.
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The following are Events of Default under the Indenture with respect to each
series of Securities or all Securities (acting as one class): (a) failure to
perform or breach of any other covenant of the Company in the Indenture
continued for 90 days after written notice by the Trustee or holders of at
least 25% of the principal amount of such outstanding Securities as provided
in the Indenture; (b) certain events of bankruptcy, insolvency or
reorganization of the Company; and (c) a default under any other indenture or
instrument evidencing or under which the Company has outstanding any
indebtedness for borrowed money in a principal amount of $25 million or more
in the aggregate, as a result of which such indebtedness shall have been
accelerated without such indebtedness having been discharged or such
acceleration having been annulled within 15 days after written notice thereof
shall first have been received by the Company from the Trustee or by such
Trustee and the Company from the holders of at least 25% in aggregate
principal amount of such outstanding Securities, provided that if such default
shall be cured or waived pursuant to such other indenture or instrument, it
shall cease to be an Event of Default under the Indenture and any acceleration
of such Securities shall be automatically rescinded and annulled without
action by the Trustee or the holders of such Securities. (Section 501).
If an Event of Default with respect to the Securities of any series (or of
all series, as the case may be) shall occur and be continuing, either the
Trustee or the holders of at least 25% in aggregate principal amount of such
outstanding Securities may declare the principal amount of such Securities to
be due and payable immediately. At any time after a declaration of
acceleration with respect to the Securities of any series (or of all series,
as the case may be) has been made but before a judgment or decree for payment
of the money due has been obtained by the Trustee, the holders of a majority
in aggregate principal amount of such outstanding Securities may rescind any
declaration of acceleration and its consequences, if all payments due (other
than those due as a result of acceleration) have been made, or deposited with
the Trustee and all other Events of Default with respect to such Securities
have been cured or waived. (Section 502).
The Indenture requires the Company to file annually with the Trustee a
written statement signed by two officers of the Company as to the absence of
certain defaults under the terms of the Indenture. The Indenture provides that
the Trustee may withhold notice to the holders of any default (except in
payment of principal or premium, if any, or interest) if it considers it in
the interest of the holders to do so. (Sections 602, 1010).
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the
Indenture provides that the Trustee shall be under no obligation to exercise
any of its rights or powers under the Indenture at the request, order or
direction of holders unless such holders shall have offered to the Trustee
reasonable indemnity. Subject to such provisions for indemnification and
certain other rights of the Trustee, the Indenture provides that the holders
of a majority in principal amount of the Securities then outstanding shall
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. (Sections 512, 603).
DEFEASANCE AND DISCHARGE
The terms of each series of Securities provide the Company with the option
to be discharged from any and all obligations to holders of such series of
Securities (except for certain obligations to register the transfer or
exchange of Securities, to replace stolen, lost or mutilated Securities, to
maintain paying agencies and hold moneys for payment in trust) upon the
deposit with the Trustee, in trust, of money or U.S. Government Obligations
(as defined), or both, which through the payment of interest and principal
thereof in accordance with their terms will provide money in an amount
sufficient to pay any installment of principal (and premium, if any) and
interest on the stated maturity of such payments in accordance with the terms
of the Indenture and such Securities. Such option may be exercised only if the
Company has received from, or there has been published by, the United States
Internal Revenue Service (the "IRS") a ruling to the effect that such a
discharge will not be deemed, or result in, a taxable event with respect to
such holders. (Section 403).
DEFEASANCE OF CERTAIN COVENANTS
The terms of each series of Securities provide the Company with the option
to omit to comply with the covenants described under the headings "Liens" and
"Sale and Lease-Back Transactions" above. The
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Company, in order to exercise such option, will be required to deposit with
the Trustee money or U.S. Government Obligations, or both, which through the
payment of interest and principal thereof in accordance with their terms will
provide money in an amount sufficient to pay principal (and premium, if any)
on the Stated Maturity (as defined) of such payments in accordance with the
terms of the Indenture and such Securities. The Company will also be required
to deliver to the Trustee an opinion of counsel to the effect that the deposit
and related covenant defeasance will not cause the holders of such series to
recognize income, gain or loss for federal income tax purposes. (Section
1009).
BOOK-ENTRY; DELIVERY AND FORM
Each series of Securities will be issued in fully-registered form.
Securities held by "qualified institutional buyers," as defined in Rule 144A
under the Securities Act ("QIBs"), will be evidenced by 144A Global
Securities, which will be deposited on behalf of DTC and registered in the
name of Cede & Co. ("Cede"), as DTC's nominee.
Securities held by persons who acquired such Securities in compliance with
Regulation S under the Securities Act (a "Non-U.S. Person") will, subject to
certain exceptions, be evidenced by Regulation S Global Securities, which will
be deposited with a custodian for DTC and registered in the name of Cede, as
DTC's nominee, for the accounts of Euroclear and Cedel Bank. Beneficial
interests in the Regulation S Global Securities may only be held through
Euroclear or Cedel Bank, and any resale or transfer of such interests to U.S.
persons shall only be permitted as described under "Transfer Restrictions"
herein. The 144A Global Securities and the Regulation S Global Securities are
hereinafter sometimes referred to individually as a "Global Security" and
collectively as the "Global Securities." Except as set forth below, the record
ownership of the Global Security may be transferred, in whole or in part, only
to DTC, another nominee of DTC or to a successor of DTC or its nominee. In the
event Securities of any series sold in offshore transactions in reliance on
Regulation S are not evidenced by a Regulation S Global Security, physical
delivery of the certificates representing such Securities will be made.
QIBs may hold their interests in any of the 144A Global Securities directly
through DTC, or indirectly through organizations which are participants in DTC
("Participants"). Transfers between Participants will be effected in the
ordinary way in accordance with DTC rules and will be settled in immediately
available funds. Non-U.S. Persons may hold their interests in the relevant
Regulation S Global Security directly through Cedel Bank or Euroclear, or
indirectly through organizations that are participants in Cedel Bank or
Euroclear ("Cedel Participants" and "Euroclear Participants," respectively).
Cedel Bank and Euroclear will hold interests in the relevant Regulation S
Global Securities on behalf of their participants through DTC. Transfers
between Cedel Participants and between Euroclear Participants will be effected
in the ordinary way in accordance with the respective rules and operating
procedures of Cedel Bank and Euroclear.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Cedel Participants, on the other, will be
effected in DTC in accordance with DTC rules on behalf of Euroclear or Cedel
Bank, as the case may be, by its respective depositary; however, such cross-
market transactions will require delivery of instructions to Euroclear or
Cedel Bank, as the case may be, by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(Brussels time). Euroclear or Cedel Bank, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf
by delivering or receiving beneficial interests in the relevant Global
Security in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Cedel Participants
and Euroclear Participants may not deliver instructions directly to the
depositories for Cedel Bank or Euroclear.
Because of time zone differences, the securities account of a Euroclear or
Cedel Participant purchasing a beneficial interest in a Global Security from a
Participant will be credited during the securities settlement processing day
immediately following the DTC settlement date and such credit of any
transactions in beneficial
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interests in such Global Security settled during such processing will be
reported to the relevant Euroclear or Cedel Participant on such business day.
Cash received in Euroclear or Cedel Bank as a result of sales of beneficial
interests in a Global Security by or through a Euroclear or Cedel Participant
to a Participant will be received with value on the DTC settlement date but
will be available in the relevant Euroclear or Cedel Bank cash account only as
of the business day following settlement in DTC.
QIBs and Non-U.S. Persons who are not Participants may beneficially own
interests in a Global Security held by DTC only through Participants,
including Euroclear and Cedel Bank, or certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly, and have
indirect access to the DTC system ("Indirect Participants"). So long as Cede,
as the nominee of DTC, is the registered owner of any Global Security, Cede
for all purposes will be considered the sole holder of such Global Security.
Except as provided below, owners of beneficial interests in a Global Security
will not be entitled to have certificates registered in their names, will not
receive or be entitled to receive physical delivery of certificates in
definitive form, and will not be considered the holder thereof.
Each of the Company and the Trustee (or any registrar or paying agent) will
not have any responsibility for the performance by DTC, Euroclear or Cedel
Bank or any of the Participants, Indirect Participants, Cedel Participants or
Euroclear Participants of their respective obligations under the rules and
procedures governing their operations. DTC has advised the Company that it
will take any action permitted to be taken by a holder of Securities only at
the direction of one or more Participants whose accounts are credited with DTC
interests in a Global Security.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions, such as transfers and pledges, among Participants
in deposited securities through electronic book-entry charges to accounts of
its Participants, thereby eliminating the need for physical movement of
securities certificates. Participants include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
Certain of such Participants (or their representatives), together with other
entities, own DTC. The rules applicable to DTC and its Participants are on
file with the SEC.
Purchases of Securities under the DTC system must be made by or through
Participants, which will receive a credit for the Securities on DTC's records.
The ownership interest of each actual purchaser of each Security (a
"Beneficial Owner") is in turn to be recorded on the Participants' and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transactions, as well
as periodic statements of their holdings, from the Participant or Indirect
Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Securities are to be accomplished by
entries made on the books of Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in Securities, except in the event that use of the book-
entry system for the Securities is discontinued.
The deposit of Securities with a custodian for DTC and their registration in
the name of Cede effect no change in beneficial ownership. Each of the Company
and DTC has no knowledge of the actual Beneficial Owners of the Securities;
DTC's records reflect only the identity of the Participants to whose accounts
such Securities are credited, which may or may not be the Beneficial Owners.
The Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in any Global Security.
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Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
Principal and interest payments on the Securities will be made to DTC by
wire transfer of immediately available funds. DTC's practice is to credit
Participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payable date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers
in bearer form or registered in "street name," and will be the responsibility
of such Participant and not of DTC or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
principal and interest to DTC is the responsibility of the Company,
disbursement of such payments to Participants shall be the responsibility of
DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Participants and Indirect Participants. Neither the Company,
the Trustee nor any Initial Purchaser will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Securities or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
DTC may discontinue providing its services as securities depositary with
respect to the Securities at any time by giving reasonable notice to the
Company. In the event that DTC notifies the Company that it is unwilling or
unable to continue as depositary for any Global Security or if at any time DTC
ceases to be a clearing agency registered as such under the Exchange Act when
DTC is required to be so registered to act as such depositary and no successor
depositary shall have been appointed within 90 days of such notification or of
the Company becoming aware of DTC's ceasing to be so registered, as the case
may be, certificates for the relevant Securities will be printed and delivered
in exchange for interests in such Global Security. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for
relevant Securities registered in such names as DTC shall direct. It is
expected that such instructions will be based upon directions received by DTC
from its Participants with respect to ownership of beneficial interests in
such Global Security.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
certificates representing the Securities will be printed and delivered.
Certificated Securities. Securities sold to investors that are neither QIBs
nor Non-U.S. Persons will be issued in definitive registered form and may not
be represented by a Global Security. In addition, in the event that Securities
sold in offshore transactions in reliance on Regulation S are not evidenced by
Regulation S Global Securities, such Securities shall be issued in definitive
registered form. QIBs and Non-U.S. Persons may request that any certificated
Securities they hold in definitive registered form be exchanged for interests
in the applicable Global Security. Certificated Securities will be issued in
exchange for interests in the relevant Global Security under the limited
circumstances described above.
Restrictions on Transfer; Legends. The Securities will be subject to certain
transfer restrictions as described herein under "Transfer Restrictions," and
certificates evidencing the Securities will bear a legend to such effect.
The information in this section concerning DTC, Cedel Bank, Euroclear and
DTC's book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company does not take responsibility for the
accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Securities will be made by the Initial Purchasers in
immediately available funds. So long as DTC continues to make its Same-Day
Funds Settlement System available to the Company, all payments of principal of
and interest on the Securities will be made by the Company in immediately
available funds.
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EXCHANGE OFFER; REGISTRATION RIGHTS
Pursuant to a Registration Rights Agreement among the Company and the
Initial Purchasers (the "Registration Rights Agreement"), it is contemplated
that the Company will file with the SEC and use its reasonable best efforts to
cause to become effective a registration statement (the "Exchange Offer
Registration Statement") with respect to issues of Securities identical in all
material respects to the Securities (the "New Securities") and, upon becoming
effective, to offer the holders of the Securities the opportunity to exchange
their Securities for the New Securities (the "Exchange Offer"). Under existing
SEC interpretations set forth in several no-action letters to third parties,
the New Securities would in general be freely transferable (other than by
holders who are broker-dealers or by an affiliate of the Company) after the
Exchange Offer without further registration under the Securities Act. In the
event that due to a change in current interpretations by the SEC, the Company
is not permitted to effect such Exchange Offer, it is contemplated that the
Company will instead file a registration statement covering resale by the
holders of Securities (a "Shelf Registration Statement") and will use its
reasonable best efforts to cause such Shelf Registration Statement to become
effective and to keep such Shelf Registration Statement effective until the
earlier to occur of (x) two years from the date on which the Company delivers
the Securities to the Initial Purchasers (the "Closing Date") and (y) the time
when all Securities registered thereunder have been sold. The Company shall,
in the event a Shelf Registration Statement is filed, provide to each holder
of the Securities copies of the prospectus and notify each such holder when
the Shelf Registration Statement has become effective. A holder that sells
Securities pursuant to a Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus
and to deliver a current prospectus to purchasers, and will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales. The New Securities will be issued (i) under the
Indenture or (ii) under an indenture substantially similar to the Indenture,
which, in either event, will provide that the New Securities will not be
subject to the transfer restrictions described under "Transfer Restrictions."
Under the Registration Rights Agreement, the Company has agreed to use its
reasonable best efforts to: (i) file the Exchange Offer Registration Statement
or a Shelf Registration Statement with the SEC, (ii) have such Exchange Offer
Registration Statement or Shelf Registration Statement declared effective by
the SEC within 180 days after the Closing Date and (iii) commence the Exchange
Offer and issue the New Securities in exchange for all Securities validly
tendered in accordance with the terms of the Exchange Offer prior to the close
of the Exchange Offer, or, in the alternative, cause such Shelf Registration
Statement to remain effective until the earlier to occur of (x) two years from
the Closing Date and (y) the time when all Securities registered thereunder
have been sold. Although the Company intends to file the registration
statement described above, there can be no assurance that such registration
statement will be filed or, if filed, that it will become effective.
If the Company fails to comply with the above provisions (a "Registration
Default"), additional interest ("Additional Interest") shall be assessed as
follows:
(i) If the Exchange Offer Registration Statement or Shelf Registration
Statement is not filed 150 days following the Closing Date, then commencing
on the 151st day after the Closing Date, Additional Interest shall be
accrued on the Securities over and above the accrued interest at a rate of
.25% per annum; or
(ii) If an Exchange Offer Registration Statement or Shelf Registration
Statement is filed pursuant to (i) above and is not declared effective
within 180 days following the Closing Date, then commencing on the 181st
day after the Closing Date, Additional Interest shall be accrued on the
Securities over and above the accrued interest at a rate of .25% per annum;
or
(iii) If either (A) the Company has not exchanged New Securities for all
Securities validly tendered in accordance with the terms of the Exchange
Offer on or prior to 35 days after the date on which the Exchange Offer
Registration Statement was declared effective, or (B) if applicable, the
Shelf Registration Statement has been declared effective but, subject to
certain exceptions, such Shelf Registration Statement ceases to be
effective at any time prior to the earlier to occur of (x) two years from
the Closing Date and (y) the time when all Securities registered thereunder
have been sold, then Additional Interest shall be accrued on the Securities
over and above the accrued interest at a rate of .25% per annum immediately
following the
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(X) 36th day after such effective date, in the case of (A) above, or (Y)
the day such Registration Statement ceases to be effective in the case of
(B) above;
provided, however, that the Additional Interest rate on the Securities may not
exceed .25% per annum; and, provided, further, that (1) upon the filing of the
Exchange Offer Registration Statement or Shelf Registration Statement (in the
case of (i) above), (2) upon the effectiveness of the Exchange Offer
Registration Statement or Shelf Registration Statement (in the case of (ii)
above), or (3) upon the exchange of New Securities for all Securities tendered
or upon the effectiveness of the Shelf Registration which, subject to certain
exceptions, had ceased to remain effective prior to the earlier to occur of
(x) two years from the Closing Date and (y) the time when all Securities
thereunder have been sold (in the case of (iii) above), Additional Interest on
the Securities as a result of such clause (i), (ii) or (iii) shall cease to
accrue.
Any amounts of Additional Interest due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on the same original payment dates of the
Securities. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Securities, multiplied by a fraction, the numerator of which is the number
of days such Additional interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
If the Company effects the Exchange Offer, the Company will be entitled to
close the Exchange Offer provided that it has accepted all Securities
theretofore validly tendered in accordance with the terms of the Exchange
Offer. Securities not tendered in the Exchange Offer shall bear interest at
the same rates as in effect at the time of issuance of the Securities.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the Securities is
based upon laws, regulations, rulings and decisions now in effect, all of
which are subject to change (including changes in effective dates) or possible
differing interpretations. It deals only with Securities held as capital
assets and does not purport to deal with persons in special tax situations,
such as financial institutions, insurance companies, regulated investment
companies, dealers in securities or currencies, persons holding Securities as
a hedge against currency risks or as a position in a "straddle" for tax
purposes, or persons whose functional currency is not the United States
dollar. The following summary also assumes that the "issue price" of the
Securities, as determined for United States federal income tax purposes,
equals the principal amount thereof. It also does not deal with holders other
than original purchasers (except where otherwise specifically noted). Persons
considering the purchase of the Securities should consult their own tax
advisors concerning the application of United States federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Securities arising under the laws of any
other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a
Security that is for United States federal income tax purposes (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of
any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income tax regardless of its source or (iv) a
trust which is subject to primary supervision by a court within the United
States and with respect to which one or more United States persons have the
authority to control all substantial decisions. As used herein, the term "non-
U.S. Holder" means a beneficial owner of a Security that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest. It is anticipated that the Securities will be sold for
an amount such that they will not be considered to bear original issue
discount. As a result, payments of interest on a Security generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received, in accordance with the U.S. Holder's regular
method of tax accounting.
Market Discount. If a U.S. Holder purchases a Securities after its original
issuance for an amount that is less than its principal amount, such U.S.
Holder will be treated as having purchased such Security at a "market
discount," unless such market discount is less than .25% of the stated
redemption price at maturity multiplied by the number of complete years to
maturity (after the U.S. Holder acquired the Security).
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment on, or any gain realized on the sale, exchange,
retirement or other disposition of, a Security as ordinary income to the
extent of the lesser of (i) the amount of such payment or realized gain or
(ii) the market discount which has not previously been included in income and
is treated as having accrued on such Security at the time of such payment or
disposition. Market discount will be considered to accrue on a straight-line
basis during the period from the date of acquisition to the maturity date of
the Security, unless the U.S. Holder irrevocably elects to accrue market
discount on the basis of a constant interest rate compounded semiannually.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Security with market discount until the maturity of the
Security or certain earlier dispositions. A U.S. Holder may elect to include
market discount in income currently as it accrues, in which case the rules
described above regarding the treatment as ordinary income of gain upon the
disposition of the Security and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. An election to
include market discount in income currently applies to all taxable debt
instruments acquired by the U.S. Holder on or after the first day of the first
taxable year to which such election applies and may be revoked only with the
consent of the IRS. Persons considering making this election should consult
their tax advisor.
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Premium. If a U.S. Holder purchases a Security for an amount that is greater
than the principal amount of the Security, such U.S. Holder will be considered
to have purchased the Security with "amortizable bond premium" equal in amount
to such excess. A U.S. Holder may elect to amortize such premium using a
constant yield method over the remaining term of the Security and may offset
interest otherwise required to be included in respect of the Security during
any taxable year by the amortized amount of such excess for the taxable year.
Any election to amortize bond premium applies to all taxable debt instruments
acquired by the U.S. Holder on or after the first day of the first taxable
year to which such election applies and may be revoked only with the consent
of the IRS. Persons considering making this election should consult their tax
advisor.
Disposition of a Security. Except as discussed above, upon the sale,
exchange or retirement of a Security, a U.S. Holder generally will recognize
taxable gain or loss equal to the difference between the amount realized on
the sale, exchange or retirement (other than amounts representing accrued and
unpaid interest) and such U.S. Holder's adjusted tax basis in the Security. A
U.S. Holder's adjusted tax basis in a Security generally will equal such U.S.
Holder's initial investment in the Security increased by any accrued market
discount that the U.S. Holder has included in income and decreased by the
amount of any amortizable bond premium taken with respect to such Security. If
a Security is redeemed, in whole or in part, prior to maturity at a redemption
price greater than its principal amount (in addition to accrued interest),
such excess will be treated as part of the amount realized on the redemption
(rather than as interest). Such gain or loss generally will be capital gain or
loss. Capital gain realized by an individual U.S. Holder is generally subject
to a maximum tax rate of 28% in respect of property held for more than one
year but less than 18 months and to a maximum tax rate of 20% in respect of
property held in excess of 18 months.
If Additional Interest is paid upon a Registration Default (as such terms
are defined in "Exchange Offer; Registration Rights"), although not free from
doubt, such payment should be taxable to a U.S. Holder as ordinary income at
the time it accrues or is received in accordance with such holder's regular
method of accounting. A U.S. Holder will not recognize any gain or loss on the
exchange of Securities for New Securities pursuant to the exchange offer.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Security, provided that interest on a Security is
not effectively connected with the conduct of a trade or business by the non-
U.S. Holder, unless such non-U.S. Holder is a direct or indirect 10% or
greater shareholder of the Company or a controlled foreign corporation related
to the Company. To qualify for the exemption from taxation, the last United
States payor in the chain of payment prior to payment to a non-U.S. Holder
(the "Withholding Agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar
years, a statement that (i) is signed by the beneficial owner of the Security
under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Security is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement
to the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution.
Generally, a non-U.S. Holder will not be subject to federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Security, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable (such as a non-U.S. Holder who is a nonresident
alien individual holding the Security as a capital asset and is present in the
United States for 183 or more days in the taxable year), and a non-U.S. Holder
should consult its tax advisor in this regard.
Interest paid to a non-U.S. Holder of the Securities that is effectively
connected with a United States trade or business conducted by such non-U.S.
Holder is taxed at the graduated rates applicable to U.S. Holders, and is
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not subject to withholding tax if the non-U.S. Holder gives an appropriate
statement to the Company or its paying agent in advance of the interest
payment. In addition to the graduated tax, effectively connected interest
received by a non-U.S. Holder that is a corporation may also be subject to an
additional branch profits tax at a rate of 30% (or such lower rate as may be
specified by an applicable income tax treaty). If capital gain derived from
sale, retirement or disposition of a Security is effectively connected with a
United States trade or business conducted by a non-U.S. Holder, the holder
will be taxed on the net gain under the graduated United States federal income
tax rates that are applicable to U.S. Holders (and, with respect to corporate
non-U.S. Holders, may also be subject to the branch profits tax described
above).
The Securities will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of
the Company or, at the time of such individual's death, payments in respect of
the Securities would have been effectively connected with the conduct by such
individual of a trade or business in the United States.
BACKUP WITHHOLDING; INFORMATION REPORTING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the Securities to registered owners who
are not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Notes to a U.S. Holder must be reported to the
IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding for
those non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Security to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient
or (ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller
is a non-U.S. Holder (and certain other conditions are met). Such a sale must
also be reported by the broker to the IRS, unless either (a) the broker
determines that the seller is an exempt recipient or (b) the seller certifies
its non-U.S. status (and certain other conditions are met). Certification of
the registered owner's non-U.S. status would be made normally on an IRS Form
W-8 under penalties of perjury, although in certain cases it may be possible
to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
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PRIVATE PLACEMENT
Under the terms and subject to the conditions contained in the Purchase
Agreement dated January 13, 1998, the Initial Purchasers have severally agreed
to purchase from the Company, and the Company has agreed to sell to them,
severally, all of the Securities offered hereby.
The Purchase Agreement provides that the obligation of the Initial
Purchasers to pay for and accept delivery of the Securities is subject to,
among other conditions, the delivery of certain legal opinions by its counsel.
In the Purchase Agreement, subject to the conditions thereof, the Initial
Purchasers have agreed to purchase the Securities at a discount from the price
indicated on the cover page hereof and to resell such securities to purchasers
as described herein under "Transfer Restrictions." The Securities will
initially be offered at the price indicated on the cover page hereof. After
the initial offering of the Securities, the offering price and other selling
terms may from time to time be varied by the Initial Purchasers.
The Purchase Agreement provides that the Company will indemnify the Initial
Purchasers against certain liabilities, including liabilities under the
Securities Act, and will contribute to payments the Initial Purchasers may be
required to make in respect thereof.
The Company does not intend to apply to list the Securities on any
securities exchange, but has been advised by the Initial Purchasers that they
presently intend to make a market in the Securities as permitted by applicable
laws and regulations. The Initial Purchasers are not obligated, however, to
make a market in the Securities and any such market making may be discontinued
at any time without prior notice at the sole discretion of the Initial
Purchasers. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Securities.
The Initial Purchasers and their respective affiliates provide various
investment banking and commercial banking services to the Company. Citibank,
N.A. (an affiliate of Citicorp Securities, Inc.), The Bank of America National
Trust and Savings Association (an affiliate of BancAmerica Robertson Stephens)
and Morgan Guaranty Trust Company of New York (an affiliate of J.P. Morgan
Securities Inc.) are acting as lenders to the Company under the Credit
Agreement. In addition, Citicorp USA, Inc. (an affiliate of Citicorp
Securities, Inc.) is acting as Administrative Agent under the Credit
Agreement. The net proceeds to be received by the Company from the sale of the
Securities offered hereby will be used to repay all outstanding Bank Loans and
for general corporate purposes including working capital.
In order to facilitate the offering of the Securities, the Initial
Purchasers may engage in transactions that stabilize, maintain or otherwise
affect the price of the Securities. Specifically, the Initial Purchasers may
overallot in connection with the offering, creating a short position in the
Securities for their own account. In addition, to cover overallotments or to
stabilize the price of the Securities, the Initial Purchasers may bid for, and
purchase, the Securities in the open market. Finally, the offering syndicate
may reclaim selling concessions allowed to an Initial Purchaser or a dealer
for distributing the Securities in the offering, if the syndicate repurchases
previously distributed Securities in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Securities above independent
market levels. The Initial Purchasers are not required to engage in these
activities, and may end any of these activities at any time.
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TRANSFER RESTRICTIONS
The Securities have not been registered under the Securities Act and they
may not be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act. Accordingly, the Securities are being offered and sold only (i) to
"qualified institutional buyers" (as defined in Rule 144A ("QIBs")) in
compliance with Rule 144A, (ii) to a limited number of other institutional
"accredited investors" (as defined in Rule 501 (a) (1),(2),(3) or (7) under
the Securities Act ("Institutional Accredited Investors")) that, prior to
their purchase of any Securities, deliver to the Initial Purchasers a letter
containing certain representations and agreements substantially in the form of
Exhibit A to this Offering Memorandum and (iii) outside the United States to
persons other than U.S. persons ("foreign purchasers," which term shall
include dealers or other professional fiduciaries in the United States acting
on a discretionary basis for foreign beneficial owners (other than an estate
or trust) in offshore transactions meeting the requirements of Rule 904 of
Regulation S under the Securities Act ("Regulation S")). As used herein, the
terms "offshore transaction," "United States" and "U.S. person" have the
respective meanings given to them in Regulation S.
Each purchaser of Securities will be deemed to have represented and agreed
as follows:
1. It is purchasing the Securities for its own account or an account with
respect to which it exercises sole investment discretion and that it and
any such account is (a) a QIB and is aware that the sale to it is being
made in reliance on Rule 144A, (b) an Institutional Accredited Investor, or
(c) a foreign purchaser that is outside the United States (or a foreign
purchaser that is a dealer or other fiduciary as referred to above).
2. It acknowledges that the Securities have not been registered under the
Securities Act and that none of the Securities may be offered or sold
within the United States or to, or for the account or benefit of, U.S.
persons except as set forth below.
3. It shall not resell or otherwise transfer any of such Securities
within two years after the original issuance of the Securities except (a)
to the Company or any of its subsidiaries, (b) inside the United States to
a QIB in compliance with Rule 144A, (c) inside the United States to an
Institutional Accredited Investor that, prior to such transfer, furnishes
to the Trustee a signed letter containing certain representations and
agreements (the form of which letter can be obtained from the Trustee), (d)
outside the United States to foreign purchasers in offshore transactions
meeting the requirements of Rule 904 of Regulation S under the Securities
Act, (e) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (f) pursuant to an effective
registration statement under the Securities Act.
4. It agrees that it will give to each person to whom it transfers the
Securities notice of any restrictions on transfer of such Securities.
5. It understands that all of the Securities will bear a legend
substantially to the following effect unless otherwise agreed by the
Company, the Trustee and the holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501 (a)
(1),(2), (3) OR (7) UNDER THE SECURITIES ACT (AN "INSTITUTIONAL
ACCREDITED INVESTOR")) OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT
WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED
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LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED
STATES TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS
MEETING THE REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
6. It shall not sell or otherwise transfer Securities to, and each
purchaser represents and covenants that it is not acquiring the Securities
for or on behalf of, any pension or welfare plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or plan (as defined in Section 4975 of the Code) (collectively,
a "Plan") or any entity whose assets consist of assets of a Plan by reason
of Department of Labor Regulation 2510.3-101 or otherwise (a "Plan
Entity"), except that such a purchase for or on behalf of a Plan Entity
shall be permitted:
(i) to the extent such purchase is made by or on behalf of a bank
collective investment fund maintained by the purchaser in which, at any
time while the Securities are held by the purchaser, no Plan (together
with any other Plans maintained by the same employer or employee
organization) has an interest in excess of 10% of the total assets in
such collective investment fund and all the other conditions of
Prohibited Transaction Class Exemption 91-38 issued by the Department
of Labor are satisfied;
(ii) to the extent such purchase is made by or on behalf of an
insurance company pooled separate account maintained by the purchaser
in which, at any time while the Securities are held by the purchaser,
no Plan (together with any other Plans maintained by the same employer
or employee organization) has an interest in excess of 10% of the total
of all assets in such pooled separate account and all the other
conditions of Prohibited Transaction Class Exemption 90-1 issued by the
Department of Labor are satisfied;
(iii) to the extent such purchase is made on behalf of a Plan by (a)
an investment adviser registered under the Investment Advisers Act of
1940, as amended, that had as of the last day of its most recent fiscal
year total client assets under its management and control in excess of
$50,000,000 and had stockholders' or partners' equity in excess of
$750,000, as shown in its most recent balance sheet prepared in
accordance with generally accepted accounting principles, (b) a bank as
defined in Section 202(a)(2) of the Investment Advisers Act of 1940, as
amended, that has the power to manage, acquire or dispose of assets of
a Plan, with equity capital in excess of $1,000,000 as of the last day
of its most recent fiscal year, (c) an insurance company which is
qualified under the laws of more than one state to manage, acquire or
dispose of any assets of a Plan, which insurance company has, as of the
last day of its most recent fiscal year, net worth in excess of
$1,000,000 and which is subject to supervision and examination by a
state authority having supervision over insurance companies, or (d) a
savings and loan association, the accounts of which are insured by the
Federal Deposit Insurance Corporation, that has made application for
and been granted trust powers to manage, acquire or dispose of assets
of a Plan by a State or Federal authority having supervision over
savings and loan associations, which savings and loan association has,
as of the last day of its most recent fiscal year, equity capital or
net worth in excess of $1,000,000 and, in any case, such investment
adviser, bank, insurance company or savings and loan is otherwise a
qualified professional asset manager, as such term is used in
Prohibited Transaction Class Exemption 84-14 issued by the Department
of Labor, with respect to such Plan, and the assets of such Plan
managed by such investment advisor, bank, insurance company or savings
and loan, when combined with the assets of other plans established or
maintained by the same employer (or affiliate thereof as defined in
such exemption) or employee organization and
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managed by such investment adviser, bank, insurance company or savings
and loan do not represent more than 20% of the total client assets
managed by such investment adviser, bank, insurance company or savings
and loan and the conditions of Part I of such exemption are otherwise
satisfied;
(iv) to the extent such Plan is a governmental plan (as defined in
Section 3 of ERISA) which is not subject to the provisions of Title I
of ERISA or Section 4975 of the Code;
(v) to the extent that such purchase is made by or on behalf of an
insurance company general account and the purchase of the Securities is
exempt under the provisions of the Prohibited Transaction Class
Exemption 95-60, published by the Department of Labor in the Federal
Register on July 12, 1995 (60 FR 35925); or
(vi) to the extent such purchase is made on behalf of a Plan by an
in-house asset manager and the conditions of Part I of Prohibited
Transaction Class Exemption 96-23 issued by the Department of Labor are
satisfied.
7. It acknowledges that the Trustee will not be required to accept for
registration of transfer any Securities acquired by it, except upon
presentation of evidence satisfactory to the Company and the Trustee that
the restrictions set forth herein have been complied with.
8. It acknowledges that the Company, the Trustee, the Initial Purchasers
and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agrees that if any of
the acknowledgments, representations or agreements deemed to have been made
by its purchase of the Securities are no longer accurate, it shall promptly
notify the Company, the Trustee and the Initial Purchasers. If it is
acquiring the Securities as a fiduciary or agent for one or more investor
accounts, it represents that it has sole investment discretion with respect
to each such account and it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of each account.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Company by Chadbourne & Parke LLP, New York, New York.
The validity of the Securities will be passed upon for the Initial Purchasers
by Latham & Watkins, New York, New York.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of PanAmSat International incorporated
by reference in this Offering Memorandum have been audited by Arthur Andersen
LLP, independent public accountants, as stated in their report incorporated
herein by reference.
The financial statements of Galaxy incorporated by reference in this
Offering Memorandum have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report incorporated herein by reference.
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EXHIBIT A
ACCREDITED INVESTOR LETTER
, 1998
Morgan Stanley & Co. Incorporated Donaldson, Lufkin & Jenrette Securities
Corporation Salomon Brothers Inc Citicorp Securities, Inc. BancAmerica
Robertson Stephens J.P. Morgan Securities Inc. c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
As Initial Purchasers in connection with the Offering Memorandum referred
to below
PanAmSat Corporation
One Pickwick Plaza
Greenwich, Connecticut 06830
Ladies and Gentlemen:
In connection with our proposed purchase of the securities described below
(the "Securities") of PanAmSat Corporation (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated January 13, 1998, relating to the Securities and such
other information as we deem necessary in order to make our investment
decision. We acknowledge that we have read and agree to the matters stated
in the section entitled "Transfer Restrictions" of such Offering
Memorandum, including the restrictions on duplication and circulation of
such Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
dated as of January 16, 1998 (the "Indenture") relating to the Securities
and that any subsequent transfer of the Securities is subject to certain
restrictions and conditions set forth under "Transfer Restrictions" and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities
Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act and that the Securities may not be
offered or sold except as permitted in the following sentence. We agree, on
our own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Securities prior to the
resale restriction date, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes to the Trustee (as defined in the Indenture) a signed
letter containing certain representations and agreements relating to the
restrictions on transfer of the Securities (the form of which letter can be
obtained from the Trustee), (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act
(if available) or (F) pursuant to an effective registration statement under
the Securities Act, and, in each case, in accordance with applicable state
securities laws and securities laws of
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any other applicable jurisdictions. We further agree to provide to any
person purchasing any of the Securities from us a notice advising such
purchaser that resales of the Securities are restricted as stated herein.
4. We understand that, on any proposed resale of any Securities, we will
be required to furnish to the Company and the Trustee such certifications,
legal opinions and other information as the Company and the Trustee may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Securities purchased
by us will bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are each able
to bear the economic risk of our or their investment.
6. We are acquiring the Securities purchased by us for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You, the Company and the Trustee are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
Very truly yours,
By: _________________________________
Title:
Name:
Securities To Be Purchased:
$ principal amount of Notes
$ principal amount of 2028 Debentures
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PanAmSat Corporation
