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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT ON FORM 10-K PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 COMMISSION FILE NO. 0-22531
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PANAMSAT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 95-4607698
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
ONE PICKWICK PLAZA, GREENWICH, CONNECTICUT 06830
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 622-6664
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.[_]
As of March 24, 1998, the registrant had outstanding 149,149,008 shares of
Common Stock. As of such date, the aggregate market value of voting stock held
by non-affiliates of the registrant was approximately $2,352,000,000.
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<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the Proxy Statement for the Annual Meeting
of Stockholders of Registrant to be held on May 4, 1998 (to be filed not later
than 120 days after the end of the Company's fiscal year) is incorporated by
reference into Part III hereof.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Annual Report on Form 10-K contains certain forward-looking information
under the captions "Item 1. Business" and "Item 7. Management's Discussion and
Analysis of Financial Conditions and Results of Operations." The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain
forward-looking statements so long as such information is identified as
forward-looking and is accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those projected in the information. When used in this Annual
Report on Form 10-K, the words "estimate," "project," "anticipate," "expect,"
"intend," "believe," and other similar expressions are intended to identify
forward-looking statements and information. PanAmSat identifies the following
important factors which could cause PanAmSat's actual results to differ
materially from any results which might be projected, forecasted, estimated or
budgeted by PanAmSat in forward-looking information: (i) risks associated with
technology, (ii) regulatory risks, (iii) effect of loss of key personnel, and
(iv) litigation. Such factors are more fully described under the caption "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors," and such descriptions are incorporated herein by
reference. PanAmSat cautions that the foregoing list of important factors is
not exclusive. Further, PanAmSat 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.
<PAGE>
PART I
ITEM 1. BUSINESS
OVERVIEW
PanAmSat Corporation, a Delaware corporation ("PanAmSat" or the "Company"),
is the world's largest commercial provider of global satellite-based
communications services. The Company 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"). 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"). For further
information on the Merger, see "--The Merger" below and Note 1 to the
Consolidated Financial Statements included in Item 8 hereof. Unless the
context otherwise requires, the term "Company" is used to refer collectively
to the parent company and the subsidiaries through which its various
businesses are actually conducted, including PanAmSat International.
The Company is a leading provider of satellite capacity for television
program distribution 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, which is
in inclined orbit and does not provide the Company with a significant source
of revenues) provide state-of-the-art video distribution and
telecommunications services for customers worldwide. Currently, an aggregate
of more than 120 million households worldwide are capable of receiving
television programming carried by PanAmSat satellites. PanAmSat satellites
also serve as the transmission platforms for seven planned or operational
direct-to-home ("DTH") services worldwide. The Company also provides satellite
services and related technical support for live transmissions for news and
special events coverage.
In addition, PanAmSat provides satellite services to telecommunications
carriers, corporations and Internet service providers ("ISPs") for the
provision of satellite-based communications networks, including private
corporate networks employing very small aperture terminals ("VSATs") and
international access to the U.S. Internet backbone. Currently, more than
100,000 VSATs worldwide relay communications over PanAmSat satellites, and
ISPs in 29 countries access the U.S. Internet backbone via PanAmSat
satellites.
The Company, together with its subsidiaries, provides global satellite
services in three areas: Video Services, Telecommunications Services and Other
Services.
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 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 Galaxy 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 Common Stock,
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(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; (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 the Merger, 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 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.
SERVICES
In the year ended December 31, 1997, PanAmSat's pro forma revenues of $756.0
million were derived from the following service areas:
<TABLE>
<CAPTION>
SERVICES 1997 REVENUES
-------- -------------
<S> <C>
Video Services............................................. 80%
Telecommunications Services................................ 16%
Other Services............................................. 4%
----
Total...................................................... 100%
</TABLE>
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Results of Operations."
VIDEO SERVICES
PanAmSat's Video Services provide for the long-term, part-time and
occasional use of PanAmSat satellite services for the transmission of news,
sports, entertainment and education programming worldwide. PanAmSat's Video
Services are comprised of four categories: (i) video distribution services,
(ii) DTH services, (iii) special events services and (iv) contribution
services.
Video Distribution Services. PanAmSat's primary video distribution service
is the full-time transmission of television programming to cable systems,
network affiliates and other redistribution systems. Certain PanAmSat
satellites contain broad C-band beams that deliver dozens of television
channels to these redistribution systems. PanAmSat generally provides video
distribution services under long-term contracts for full or partial
transponder usage and digital channels. The Company also offers bundled,
valued-added services that include satellite capacity, digital encoding of
video channels and, if required, uplinking and downlinking services to
PanAmSat satellites from the Company's teleport facilities.
PanAmSat currently operates satellites for the distribution of television
programming to cable and other redistribution systems in the United States,
Latin America, Africa, south Asia and the Asia-Pacific region. The Company
creates "video neighborhoods" on these satellites with dozens of popular
television channels. Cable and other redistribution systems then install
antennas to access the popular channels for their subscribers. Several of the
Company's Galaxy satellites deliver television programming to virtually all of
the United States' 11,000 cable systems, approximately 70 million cable
television households, as well as nearly two million households using C-band
backyard dishes. The Ku-band beams on several of the Company's domestic U.S.
and international satellites are also used for video distribution to cable
systems and network affiliates.
DTH Services. PanAmSat creates high-power Ku-band transmission beams on
several satellites that serve as platforms for the delivery of multiple
television channels for household reception using 60-90 centimeter antennas.
PanAmSat believes there is significant demand for digital DTH services because
of limited available
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terrestrial television channels or cable television service in many
international markets, and in the United States, limited ethnic or niche
programming.
PanAmSat has arrangements with customers to operate platforms on five
satellites for seven current or planned DTH services in Latin America, South
Africa, the Middle East, India and the United States. PanAmSat also designs
many of these platforms to facilitate DTH service expansion through the launch
of multiple satellites in the same orbital location.
Special Events Services. PanAmSat provides broadcasters with satellite
transmission services for the timely broadcast of news, sports and events
coverage on a short-term basis. This service is designed to enable
broadcasters to conduct on-the-scene transmissions using small, portable
antennas and to receive the transmissions at their broadcast centers or
affiliate stations. PanAmSat conducted approximately 58,000 hours of total
special events transmissions in 1997. In addition to short-term services for
special events coverage, PanAmSat has long-term transponder service agreements
with certain satellite brokers in the United States. These customers package
domestic U.S. transponder capacity for their broadcast, business, educational
and government users.
Contribution Services. PanAmSat provides broadcasters with satellite
transmission services for the full-time transmission of news, sports and
entertainment segments to their network affiliates or broadcast centers within
the United States or around the world.
TELECOMMUNICATIONS SERVICES
PanAmSat's Telecommunications Services support the creation of satellite-
based networks that relay voice, video and data communications within
individual countries, throughout regions and around the world. PanAmSat has
designed virtually all of its satellites for high-power, bandwidth-intensive
applications that relay large amounts of digital information among multiple
sites using small, cost-effective antennas. PanAmSat's Telecommunications
Services are comprised of four categories: (i) carrier services, (ii) private
business networks, (iii) Internet access and (iv) telephony.
Carrier Services. PanAmSat provides satellite services to telecommunications
carriers licensed by one or more countries to provide voice, video and data
communications networks for businesses, governments and other users. The
Company's high-power satellites, which facilitate high information throughput
and the ability to use VSATs on the ground, have enabled emerging carriers to
introduce competitive new telecommunications services in Latin America, Africa
and Asia. In addition, PanAmSat offers value-added satellite services for
telecommunications customers that include satellite capacity and teleport
services that can connect customers to U.S. terrestrial networks.
Private Business Networks. PanAmSat provides satellite services directly to
network suppliers and businesses for the development and operation of private
business networks in the United States, Latin America, Europe, Africa and
Asia. These rooftop-to-rooftop VSAT networks provide dedicated, proprietary
one-way and two-way communications links among multiple business sites. VSAT
network customers include retail chains for rapid credit card authorization
and inventory control, banks for the connection of automated teller machines
with processing computers and news agencies for the timely dissemination of
news and financial information. More than 100,000 VSAT antennas worldwide
currently relay communications over PanAmSat satellites. The Company's largest
single telecommunications customer is Hughes Network Systems, Inc., an
affiliate of the Company ("HNS"), which uses the equivalent of more than 20
U.S. domestic satellite transponders to create and operate VSAT networks for
its business customers.
In addition, PanAmSat provides satellite services directly to businesses.
These include value-added satellite communications services, such as the
purchase and installation of on-site antennas and the design, integration,
management, operation and maintenance of business networks. These services are
provided via PanAmSat's teleports in the United States or through
subcontractors.
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Internet Access. PanAmSat provides satellite services for the full-time
delivery of Internet information from the United States and other countries to
various locations around the world. PanAmSat's customers consist of
educational organizations, ISPs and companies providing direct-to-consumer
Internet applications. PanAmSat believes that its high-power domestic U.S. and
international satellites are well-suited for Internet service because of the
tremendous demand for reliable, high-speed access to the U.S. Internet
backbone, where approximately 80 percent of all Internet data currently
resides. In many cases, PanAmSat's satellites are capable of delivering
Internet data internationally at nearly 20 times the speed of traditional
telephone links. PanAmSat currently provides Internet services in
approximately 30 countries.
PanAmSat also provides SPOTbytesSM, a value-added, bundled Internet service,
that offers an integrated package of services including international
satellite capacity, uplinking services from a PanAmSat teleport and dedicated
links from the teleport to the U.S. Internet backbone.
Telephony. The Company provides domestic and international satellite
services for public switched telephone network ("PSTN") transmissions. PSTN
services represented less than one percent of total combined pro forma
revenues in 1997.
PanAmSat's ability to provide domestic and international PSTN services are
restricted by various telecommunications regulations in most countries. See
"Item 1. Business--Government Regulation." The Company believes competition
for long-distance services and significant deregulation in several countries
could create new service opportunities for the Company. In addition, the
Company believes that its international satellites are particularly well-
suited for thin-route PSTN applications in developing countries or remote
areas where fiber-optic telephone systems are not feasible or cost-effective.
OTHER SERVICES
Telemetry, Tracking and Control. PanAmSat provides telemetry, tracking and
control ("TT&C") services for 21 satellites owned by PanAmSat and other
satellite operators. PanAmSat personnel maintain proper orbital location and
attitude, monitor on-board housekeeping systems, adjust transponder levels and
remotely "rewire" satellites, if necessary, to bring backup systems on-line in
the event of a subsystem failure. The necessary TT&C satellite commands are
initiated from PanAmSat's Operations Control Center in Long Beach, California
and are transmitted to the satellites from PanAmSat Teleport facilities
located in New York, Florida, Georgia, Colorado and California.
Galaxy Backup Capacity. As part of its video distribution service on certain
Galaxy satellites, PanAmSat offers customers a premium service that includes
backup C-band capacity on the Galaxy VI satellite. Generally, subject to the
specific terms of individual contracts, these customers are entitled to
replacement capacity on Galaxy VI if a transponder failure occurs and no spare
amplifier or reserved transponder is available on their current satellite.
Galaxy VI can meet a customer's immediate needs by providing transponder
capacity at Galaxy VI's current orbital location or, subject to Federal
Communications Commission ("FCC") approval, from a relocated orbital position.
Galaxy VI serves as the in-orbit spare satellite because current Galaxy VI
customers are subject to preemption if their capacity is required to serve as
a backup transponder. As of December 31, 1997, PanAmSat had not been required
to preempt an existing full-time customer on Galaxy VI.
4
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BUSINESS STRATEGY
PanAmSat's business strategy is based on more than 15 years of experience
providing satellite-based communications services and the Company's ongoing
analysis of expected worldwide market demand for its services. PanAmSat's
strategy is based on five key elements:
. Global satellite network;
. One-stop-shopping;
. Value-added services;
. Satellite broadcasting and telecommunications franchises; and
. Long-term customer relationships.
GLOBAL SATELLITE NETWORK
PanAmSat has created a global satellite communications network that is
designed to provide broadcast and telecommunications services worldwide. The
network currently consists of 17 satellites, seven teleport or TT&C facilities
in the United States and more than 450 PanAmSat professionals on five
continents. In addition, teleports operated by third parties in Europe, Latin
America, the United States and Asia also provide access to PanAmSat
satellites. PanAmSat's global satellite network is focused on the point-to-
multipoint communications market, which includes the distribution of
television channels to cable and other redistribution systems, DTH and private
business networks.
PanAmSat's core resource is its growing fleet of satellites. The Company has
designed many of its satellites to provide high-power transmissions that
reflect specific market demographics and customer service requirements. The
Company intends to launch six additional satellites by late 1999 that employ
the most advanced satellite technology commercially available. These new
satellites are designed to provide additional transmission capacity, higher
power, expanded coverage and/or extended operational life. Satellites are
subject to significant risks related to delayed and failed launches and in-
orbit failures. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Risk Factors--Risks Associated With
Technology."
PanAmSat's geostationary C-band and/or Ku-band satellites each provide
coverage over specific geographic areas, such as in the United States or
across ocean regions. To facilitate continued network expansion, PanAmSat has
received authorization from the FCC to use additional orbital slots for C-band
and/or Ku-band satellites and nine slots for Ka-band satellites. The Company
also has requested authorization for 11 V-band slots and six additional Ka-
band slots. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Risk Factors--Regulatory Risks."
ONE-STOP-SHOPPING
While PanAmSat has designed each satellite to reflect specific market
requirements, its global satellite network also serves as a single resource
for a customer's worldwide transmission requirements. PanAmSat is the only
commercial company that offers global satellite services on a one-stop-
shopping basis.
VALUE-ADDED SERVICES
The Company employs its satellites, teleports and professional staff to
offer value-added services that are market driven and responsive to customer
needs. In addition to satellite transmission capacity, PanAmSat's service
offerings include:
. Network design and systems engineering;
. Transmission of video channels and management of private business
network traffic from PanAmSat teleports;
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. The provision of broadcast studios for video preparation and
transmission to PanAmSat satellites during major sporting and special
events sites; and
. Development of new service applications.
PanAmSat's value-added services also include bundled packages of PanAmSat
resources. In an effort to provide cost-effective digital video services
particularly for smaller programmers, for instance, PanAmSat offers a multi-
channel per carrier service in which several television channels are digitally
encoded and transmitted from a PanAmSat teleport to a specific cable
television market. The Company's SPOTbytesSM bundled Internet service consists
of international satellite transmission capacity, and if required, uplinking
services from a PanAmSat teleport and dedicated links from the teleport to the
U.S. Internet backbone.
SATELLITE BROADCASTING AND TELECOMMUNICATIONS FRANCHISES
A key element of PanAmSat's strategy is the creation of "service franchises"
that help the Company to maintain and build its customer base. These
franchises are based on large numbers of users who aim their ground antennas
at PanAmSat satellites for the delivery of their television programming or
communications traffic. The resulting infrastructure of ground antennas
creates neighborhoods that bring added value to the Company's satellite
transmission capacity.
PanAmSat franchises include the distribution of premier television channels
to cable systems and network affiliates; DTH television services to subscriber
households; and private business networks to multiple corporate sites.
PanAmSat initially enters into service agreements with several key programmers
that serve as anchor tenants offering popular television channels on the
satellite's cable television "neighborhood." These anchor broadcasters seed
the ground infrastructure accessing the programming and also attract
additional programmers that want to join the programming neighborhood.
LONG-TERM CUSTOMER RELATIONSHIPS
PanAmSat's strategy is to build long-term relationships with its customers
by understanding their business objectives and offering long-term solutions to
their satellite transmission needs. Most of PanAmSat's revenues result from
long-term contracts with its customers. In many cases, programmers,
corporations and ISPs have incrementally increased usage of PanAmSat
satellites based on their service experience.
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THE SATELLITES
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 Loca-
tion........... 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
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 Band-
width(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>
Latin America/
Region Covered.. United States 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 Loca-
tion........... 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 Band-
width(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 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(12) 2010 (inclined)(13) 1999 2007
Orbital Loca-
tion........... 95(degrees) W.L. 123(degrees) W.L.(14) 77(degrees) W.L.(4) 123(degrees) W.L.(14) 74(degrees) W.L.(4)
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 Band-
width(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 Loca-
tion........... 43(degrees) W.L.
Transponders(5)
Ku-band(6)..... 36 @ 36 MHz
2 @ 64 MHz
C-band(7)...... --
Usable Band-
width(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 Loca-
tion........... 91(degrees) W.L.
Transponders(5)
Ku-band(6)..... 16 @ 27 MHz
8 @ 54 MHz
C-band(7)...... 24 @ 36 MHz
Usable Band-
width(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(11)
----------------
<S> <C>
Region Covered.. United States
Satellite....... HS 376
Expected End of
Useful Life(10) (inclined)(13)
Orbital Loca-
tion........... 79(degrees) W.L.
Transponders(5)
Ku-band(6)...... --
C-band(7)....... 24 @ 36 MHz
Usable Band-
width(8)....... 864 MHz
Output Power(9).
Ku-band......... --
C-band.......... 24 @ 10 Watts
Total Output
Power.......... 240 Watts
</TABLE>
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SATELLITES UNDER DEVELOPMENT
<TABLE>
<CAPTION>
PAS-6B(1) PAS-7(1) PAS-8(1) GALAXY X GALAXY XI
---------------- --------------------- -------------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Region Covered.. Atlantic Ocean Indian Ocean Pacific Ocean United States United States
Expected
Launch(15)..... 1998 1998 1998 1998 1998
Satellite....... HS 601HP SS/L FS-1300(1) SS/L FS-1300(1) HS 601HP HS 702
Expected End of
Useful Life(13).. 2013(3) 2011(1) 2013(3) 2010 2013
Orbital Loca-
tion........... 43(degrees) W.L. 68.5(degrees) E.L.(4) 166(degrees) E.L.(4) 123(degrees) W.L.(14) 74(degrees) W.L.(4)
Transponders(5)
Ku-band(6)..... 32 @ 36 MHz 30 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz 16 @ 27 MHz
24 @ 36 MHz
C-band(7)...... -- 14 @ 36 MHz (4) 24 @ 36 MHz 24 @ 36 MHz 24 @ 36 MHz
Usable Band-
width(8)....... 1,152 MHz 1,584 MHz 1,728 MHz 1,728 MHz 2,160 MHz
Output Power(9)
Ku-band........ To be determined 30 @ 100 Watts 24 @ 100 Watts 24 @ 63 Watts 16 @ 140 Watts
24 @ 75 Watts
C-band......... -- 14 @ 50 Watts 24 @ 50 Watts 24 @ 20 Watts 24 @ 20 Watts
Total Output
Power.......... To be determined 3,700 Watts 3,600 Watts 1,992 Watts 4,520 Watts
<CAPTION>
PAS-9 PAS-1R
---------------- -------------------
<S> <C> <C>
Region Covered.. Indian Ocean United States
Expected
Launch(15)..... 1999 1999
Satellite....... HS 702 HS 702
Expected End of
Useful Life(13).. 2014(3) 2014(2)
Orbital Loca-
tion........... To be determined 45(degrees) W.L.(4)
Transponders(5)
Ku-band(6)..... 48 @ 36 MHz 36 @ 36 MHz
C-band(7)...... 12 @ 36 MHz 36 @ 36 MHz
Usable Band-
width(8)....... 2,160 MHz 2,592 MHz
Output Power(9)
Ku-band........ To be determined To be determined
C-band......... To be determined To be determined
Total Output
Power.......... To be determined To be determined
</TABLE>
- --------
(1) See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations--Risk Factors."
(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. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Factors" for a discussion of recent events affecting PAS-
6.
(4) PanAmSat has received conditional regulatory approval for the orbital slot
of 72(degrees) E.L. from the FCC, which approval is subject to a full
financial showing and demonstration of consultation with Intelsat, an
international treaty organization of 142 member nations ("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. If PAS-7 is to be co-located with PAS-4, it
is unlikely that PAS-7 will be permitted to operate its C-band
transponders for transmitting to or from Russia until certain coordination
issues are resolved with the Russian Federation. 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.
8
<PAGE>
(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 footnote 1.
(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 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.
(12) 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.
(13) 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.
(14) 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.
(15) Future launch dates are based on PanAmSat estimates.
9
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SATELLITE PROCUREMENT
The Company currently has seven satellites under construction and
development. The Company has agreements with Hughes Space and Communications
Company ("HSC"), an affiliate of the Company, for construction of Galaxy X,
Galaxy XI, PAS-1R, PAS-6B and PAS-9, and with Space Systems/Loral, Inc.
("SS/Loral") for the construction of PAS-7 and PAS-8. These agreements
generally require the Company to pay the majority of the total contract price
for each satellite during the period of the satellite's construction, with the
remainder of such contract price to be paid in the form of incentive payments
based on orbital performance over the design life of the satellite following
launch. The contracts also provide for price reductions or liquidated damage
payments in the event of late delivery due to the fault of the manufacturer.
Each contract provides for a limited pre-launch warranty that a satellite will
be free from any defects and conform to technical specifications. The
satellite construction contracts contain provisions that would enable the
Company to terminate such contracts both with and without cause. If terminated
without cause, the Company would forfeit its progress payments and be subject
to termination payments that escalate with the passage of time. If terminated
for cause, the Company would be entitled to recover any payments it made under
the contracts and certain liquidated damages as specified in such contracts.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Factors--Risks Associated with Technology."
LAUNCH ARRANGEMENTS
The Company has entered into launch contracts for the launch of both
specified and unspecified future satellites. Each of the Company's launch
contracts provide that the Company may terminate such contract at its option,
subject to payment by the Company of a specified termination liability that
increases in magnitude as the applicable launch date approaches. In addition,
in the event of the failure of any launch, the Company may exercise the right
to obtain a replacement launch within a specified period following the
Company's request for relaunch. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations--Risk Factors--Risks
Associated with Technology."
CONTROL OF SATELLITES AFTER LAUNCH
Once a satellite is placed at its orbital location, ground stations control
it until the end of its in-orbit lifetime. PanAmSat generally provides TT&C
services for its own satellites, as well as for certain satellites owned or
operated by others.
INSURANCE
Launch Insurance. Under PanAmSat's satellite construction contracts, the
contractor generally bears the risk of loss of a satellite during the
construction phase up to delivery, at which time risk of loss passes to
PanAmSat and launch insurance coverage begins. PanAmSat generally maintains
launch insurance with respect to its satellites in an amount approximately
equal to the construction, launch and insurance costs for each of such
satellites.
Coverage under PanAmSat's launch insurance includes claims arising from
occurrences up to three years after launch, except for PAS-6. Such coverage
includes not only catastrophic loss of a satellite during launch, but also the
failure of a satellite to obtain proper orbit, or to perform in accordance
with design specifications once in orbit. The terms of the policies generally
provide for payment of the full insured amount if 50% or more of a satellite's
communications capacity is lost within such three-year period, and, subject to
certain deductibles, partial payment for losses of less than 50% of the
satellite's communications capacity within such period. Such insurance
policies include standard commercial launch insurance provisions and customary
exclusions including (i) military or similar actions, (ii) laser, directed-
energy or nuclear anti-satellite devices, (iii) insurrection and similar acts
or governmental action to prevent such acts, (iv) governmental confiscation,
(v) nuclear reaction or radiation contamination, (vi) willful or intentional
acts of PanAmSat or its contractors, (vii) loss of market, loss of revenue,
extra expenses, incidental and consequential damages, and (viii) third-party
claims against
10
<PAGE>
PanAmSat. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Risk Factors--Risks Associated with
Technology" for a description of certain insurance arrangements with respect
to PAS-6.
In-orbit Insurance. PanAmSat typically obtains in-orbit insurance in advance
of the expiration of the relevant launch insurance policy, and coverage
thereunder commences upon expiration of such launch insurance policy. PanAmSat
generally obtains in-orbit insurance with respect to its satellites in an
initial amount approximately equal to the construction, launch and insurance
costs for each of such satellites. The amount of in-orbit insurance in force
with respect to each of PanAmSat's satellites generally decreases over time,
usually on straight line basis over the estimated useful life of such
satellite.
PanAmSat generally does not insure against lost revenues in the event of a
total or partial loss of the communications capacity of a satellite. The
Company does, however, purchase insurance to cover revenues from a satellite
when revenues have been recognized in connection with an outright sale, sales-
type lease or other arrangement with performance warranty provisions with
respect to such satellite.
Coverage under PanAmSat's in-orbit insurance policies includes claims
arising from occurrences after the expiration of the relevant launch insurance
policy. The insurance coverage includes the failure of a satellite to continue
to perform in accordance with design specifications. Payments in respect of
losses of communications capacity are calculated in the same manner as under
the launch insurance policies.
PanAmSat's in-orbit policies typically include customary commercial
satellite insurance exclusions, including, among other things, damage or loss
caused by military actions or acts of war, anti-satellite devices, government
action, frequency interference or nuclear reaction.
SALE LEASEBACK ARRANGEMENTS
The Company entered into sale-leaseback arrangements with respect to certain
transponders on SBS-6, Galaxy VII and Galaxy IIIR in December 1991, September
1993 and February 1996, respectively. Pursuant to such arrangements, Galaxy
sold 19 Ku-band transponders on SBS-6, 16 Ku-band and 14 C-band transponders
on Galaxy VII and 24 Ku-band transponders on Galaxy IIIR. Concurrently with
such sales, Galaxy agreed to lease back such transponders on terms that
required it to make scheduled semi-annual lease payments and operate and
maintain such transponders and the applicable satellites for terms of 11.2
years, 11 years and 6.9 years, respectively. As a result of the Merger,
PanAmSat succeeded to these arrangements. At the end of each lease's initial
term, the Company has the option to renew such lease through the end of the
applicable satellite's useful life. The Company's obligations under each sale-
leaseback arrangement are guaranteed by General Motors Acceptance Corporation
(as successor in interest to Hughes Electronics Corporation) ("GMAC"). In
connection with the Merger, the Company agreed to pay and indemnify GMAC for
performing any of its obligations under such guarantees.
The Company has an option under such leases to repurchase such transponders
prior to the end of the respective lease terms as follows: $152 million in
1998 (for which an early buy-out option for $96.6 million relating to
transponders on SBS-6 was exercised by the Company in January 1998) and $366
million in 1999.
Each of the sale-leaseback leases imposes limits on the Company's ability to
move the applicable satellite to a different orbital location other than in
certain specified situations and imposes limitations on the Company's ability
to consolidate or merge with another entity unless certain circumstances are
satisfied. The Company is also required under the terms of each such lease to
maintain in-orbit insurance on the applicable satellite. In addition, upon the
loss of one or more transponders, the Company is required either to pay a
specified loss amount or provide replacement transponder capacity to the
relevant lessor.
11
<PAGE>
SALES AND MARKETING
PanAmSat's sales and marketing activities are separated into three general
service areas: full-time program distribution; part-time and ad hoc broadcast;
and business communications and long-distance telephony.
PanAmSat's Greenwich headquarters has a sales and marketing department for
each service area. PanAmSat also has sales and marketing offices in Long
Beach, California, Coral Gables, Florida, Sydney, Australia, London, England,
Tokyo, Japan and Johannesburg, South Africa, which provide integrated sales
and marketing for all three service areas in their respective regions. The
senior executive officers of PanAmSat have been directly involved in marketing
to key broadcasting and business communications customers.
COMPETITION
PanAmSat primarily competes with companies and organizations that own or
utilize satellite or terrestrial transmission facilities.
OTHER SATELLITE OPERATORS
PanAmSat's satellite competitors are divided among three categories: (i)
global competitors; (ii) companies that intend to create global satellite
systems; and (iii) regional or domestic satellite operators.
PanAmSat's only global competitor is Intelsat, an international treaty
organization of 142 member nations based in Washington, D.C. that provides
global satellite capacity primarily through its members called signatories.
Comsat Corporation ("Comsat") is the U.S. signatory and is the only company
permitted to provide Intelsat satellite capacity in the United States.
Intelsat's mandate is to provide international satellite capacity on a non-
discriminatory basis to countries around the world. Since its formation in
1964, Intelsat's primary business has been the provision of satellite capacity
for long-distance telephony circuits. According to Intelsat's 1996 annual
report, video services comprised 26 percent of Intelsat's operating revenue.
Intelsat generally provides capacity directly to its signatories which then
market such capacity to their customers.
In recent years, Intelsat has launched higher-powered satellites that are
capable of providing video distribution, DTH and private business network
services. In addition, many countries now permit companies other than the
Intelsat signatory to market Intelsat satellite capacity in that country.
Intelsat and its signatories have announced an intention to create an
affiliate company that will own and operate high-power satellites designed for
DTH and other high-growth services and that will directly market those
services to end users. In February 1998, Intelsat announced a plan that would
spin off six satellites and related resources to a new commercial company that
would effectively be controlled by current Intelsat signatories. Comsat has
also requested approval from the FCC to be regulated as a non-dominant
carrier.
In addition to Intelsat, PanAmSat experiences competition from companies
that have announced plans to create global satellite systems, primarily
through acquisitions, partnerships or equity interests in domestic or regional
satellite systems. These companies include Loral Space and Communications Ltd.
("Loral"), GE American Communications, Inc. ("GE Americom") and Lockheed
Martin Corp. For instance, in 1997 Loral acquired AT&T Skynet (a domestic U.S.
satellite operator), announced plans to acquire Orion Network Systems (a
transatlantic satellite operator with plans to launch additional international
satellites in other regions) and entered into a strategic partnership to own
and operate Satelites Mexicanos, S.A. de C.V. (a Mexican satellite system that
provides satellite capacity in Latin America).
PanAmSat also experiences competition from numerous companies and/or
governments that operate domestic or regional satellite systems in the United
States, Latin America, Europe, the Middle East, Africa and Asia. Competition
from these satellite operators is limited to service within one country or
region, depending on
12
<PAGE>
the operator's satellite coverage and market activities. In the United States,
GE Americom, Loral and Comsat all currently provide fixed satellite services
on a regional or domestic basis, and are the Company's primary competitors in
such market.
PROPOSED SATELLITE SYSTEMS
Other companies have announced plans to operate regional or transoceanic
satellite systems. Entry into the international satellite communication
industry can be expensive and difficult. The construction and launch of a
satellite comparable to PanAmSat's new satellites usually takes approximately
three or more years and costs approximately $200 million to $250 million. In
addition, there are a limited number of orbital slots. The operation of an
international satellite communications system also requires approvals from
national telecommunications authorities and Intelsat and, in certain cases,
from regional satellite authorities. See "--Government Regulation." While the
trend around the world is to liberalize these regulatory requirements, at
present obtaining the necessary licenses involves significant time, expense
and expertise.
The Company believes that low-earth-orbit satellite systems under
development, such as Celestri, Globalstar, Iridium, Skybridge and Teledesic,
are not competitors of PanAmSat. These low-earth-orbit systems are designed
primarily for mobile telephony and data services and are not expected to serve
the fixed point-to-multipoint video and telecommunications markets.
SERVICE PROVIDERS
In some cases, PanAmSat experiences competition for its value-added
satellite services from companies that also provide value-added services.
These companies typically lease large amounts of satellite capacity from
satellite operators and then use that capacity to provide value-added
communications networks for their customers. For instance, several carriers
operate VSAT networks for businesses that PanAmSat also could provide as a
value-added service. In addition, brokers in the United States provide value-
added special events services to broadcasters, businesses and educational
institutions that also could be provided by PanAmSat. Many of these value-
added service providers and brokers are PanAmSat customers for their satellite
capacity.
OPTICAL FIBER CABLES
Optical fiber cables generally do not compete with PanAmSat's services. The
primary use of optical fiber cables is to carry high-volume telephony
communications on a point-to-point basis. Transcontinental optical fiber
cables currently carry video traffic, but this service is largely for point-
to-point traffic (e.g., New York to London). Optical fiber cables are not
readily usable for point-to-multipoint broadcast applications or for the
transmission of ad hoc events which require transportable uplink earth
stations.
GOVERNMENT REGULATION
As an operator of a privately-owned global satellite system, PanAmSat is
subject to: (i) the regulatory authority of the U.S. government; (ii) the
regulatory authority of other countries in which PanAmSat operates; (iii) the
Intelsat consultation process; and (iv) the frequency coordination process of
the International Telecommunications Union (the "ITU").
U.S. REGULATION
The ownership and operation of PanAmSat's satellite system is regulated by
the FCC. PanAmSat is subject to the FCC's jurisdiction primarily for: (i) the
licensing of satellites and earth stations; (ii) avoidance of interference
with other radio stations; and (iii) compliance with FCC rules governing U.S.-
licensed satellite systems. Violations of the FCC's rules can result in
various sanctions including fines, loss of authorizations, or the denial of
applications for new authorizations or to renew existing authorizations.
PanAmSat is not regulated as a common carrier and, therefore, is not subject
to rate regulation or the obligation not to discriminate among
13
<PAGE>
customers, and operates with minimal governmental scrutiny of its business
decisions. PanAmSat must pay FCC filing fees in connection with its space
station and earth station applications; must pay annual regulatory fees that
are intended to defray the FCC's regulatory expenses; and, to the extent
PanAmSat is deemed to be providing interstate telecommunications, must
contribute to funds used to support universal service.
Authorization to Construct, Launch, and Operate Satellites. The FCC grants
authorizations to satellite operators who meet its legal, technical and
financial qualification requirements. Under the FCC's financial qualification
rules, an applicant must demonstrate that it has sufficient funds to
construct, launch, and operate for one year each requested satellite. Licenses
are issued for an initial ten-year term, and may be extended by the FCC,
although it may not be possible for satellites operating beyond their initial
ten-year term to remain in the same orbital location or even, in all cases, to
be provided a new orbital location. The FCC's rules and policies limit the
number of expansion satellite authorizations that may be granted for the same
frequency band at one time.
PanAmSat has final FCC authorization for seventeen satellites operating in
the C-band, the Ku-band, or both bands. In addition, PanAmSat has a final
authorization to operate nine satellites in the Ka-band (one Atlantic Ocean
Region ("AOR"), to be located at 58(degrees) W.L.; two Pacific Ocean Region
("POR"), to be located at 149(degrees) E.L. and 173(degrees) E.L.; four Indian
Ocean Region ("IOR"), to be located at 36(degrees) E.L., 40(degrees) E.L.,
48(degrees) E.L., and 124.5(degrees) E.L.; and two U.S., to be located at
103(degrees) W.L. and 125(degrees) W.L.). PanAmSat has requested authority
also to operate five of these satellites in the BSS band, and to operate three
other satellites exclusively in the BSS band, but FCC processing of PanAmSat's
requests must await the resolution of issues concerning the ITU's BSS band
plan.
In addition to the above final authorizations, PanAmSat has a conditional
authorization for an IOR satellite, to be located at 72(degrees) E.L. In order
to finalize this authorization, PanAmSat must make a full financial showing
and complete its consultation with Intelsat for the satellite.
None of PanAmSat's final or conditional authorizations is subject to further
administrative or judicial reconsideration or review. The FCC reserves the
right to require a satellite to be relocated to a different orbital location
if it determines that such a change is in the public interest, but the FCC has
rarely used this authority.
PanAmSat operates two additional satellites under interim or special
temporary authority. The first of these satellites, Brasilsat A1, is providing
U.S. domestic service from 79(degrees) W.L. under an interim authorization
that expired on December 31, 1997. PanAmSat has requested, but has not yet
received, an extension of this authority. The second satellite, SBS-4,
exceeded its regular license term in 1994 and, since that time, has operated
at 77(degrees) W.L. under successive grants of special temporary authority.
Both Brasilsat A1 and SBS-4 must be relocated once the U.S. satellites
assigned to 79(degrees) W.L. and 77(degrees) W.L., respectively, are launched.
Although PanAmSat has requested authority to relocate SBS-4 to 79(degrees)
W.L., there can be no assurance that either of the satellites will be
authorized to operate at another orbital location.
PanAmSat has filed the following applications for additional or replacement
satellites in the C-band and/or the Ku-band: (1) applications for two hybrid
C/Ku-band satellites (one POR and one U.S.), and one Ku-band satellite (U.S.),
that are now ripe for FCC action; (2) applications for two hybrid C/Ku-band
satellites (one IOR and one U.S.); and (3) an application for a hybrid C/Ku-
band satellite to replace its separate C-band and Ku-band satellites at
74(degrees) W.L. In order to grant two of the U.S. additional satellite
applications, the FCC would have to assign different orbital locations than
those requested by PanAmSat (79(degrees) W.L. and 93(degrees) W.L.) because,
after PanAmSat's applications were filed, the FCC assigned these orbital
locations to other entities. PanAmSat has requested that the 79(degrees) W.L.
application be associated with the 81(degrees) W.L. orbital location.
In 1996, the FCC modified its rules for processing international satellite
system applications. Under the new rules, FCC action on one IOR application
and one U.S. application would be substantially delayed. PanAmSat has
requested a waiver of these rules.
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PanAmSat has filed applications for six additional Ka-band satellites (two
AOR; two POR; and two IOR), which will be processed in the second Ka-band
satellite processing round. Finally, PanAmSat has applied for twelve V-band
satellites (two AOR, six IOR, and four U.S.), but the FCC has not yet accepted
these applications for filing.
Under the FCC's rules, unless an applicant has received an authorization to
launch and operate, it must notify the FCC in writing prior to commencing
satellite construction, and any construction engaged in is at the applicant's
own risk. While PanAmSat therefore may proceed with the construction of
planned satellites without prior FCC approval, it must accept the risk that
the FCC may not grant the application, may not assign the satellite to its
proposed orbital location, or otherwise may act in a manner that limits or
eliminates some or all of the value of the construction previously done on the
satellite.
Other FCC Authorizations. Under the FCC's rules, an entity that provides
international telecommunications services on a common carrier basis must first
receive authorization, pursuant to Section 214 of the Communications Act of
1934, as amended, to provide such services. The FCC has granted PanAmSat
Carrier Services, Inc. ("PCSI") and PanAmSat Communications Carrier Services,
Inc. ("PCCS"), wholly owned subsidiaries of the Company, Section 214 authority
to provide international private line and public switched services. As common
carriers, PCSI and PCCS are subject to rate regulation, tariffing and non-
discrimination requirements.
Other Authorizations. PanAmSat Asia Carrier Services, Inc. ("PACS"), a
wholly owned subsidiary of the Company, intends to apply for a common carrier
license in Australia. If such license is granted, PACS will be subject to rate
regulation, tariffing and other possible requirements.
Scope of Services Authorized. In 1996, the FCC eliminated the regulatory
distinction between U.S. domestic satellites and U.S.-licensed international
satellites. As a result, each of PanAmSat's satellites may be used, to the
extent technically feasible, to provide both U.S. domestic and international
services. Due to a restriction in the FCC's rules, however, the transponders
on PAS-5 that operate in the 10.7-11.7 GHz and 12.75-13.25 GHz frequency bands
may be used solely for international service. PanAmSat has requested a waiver
of this restriction.
Coordination Requirements. Orion Satellite Corporation ("Orion") has an FCC
authorization for the orbital location adjacent to PAS-1. Orion has taken the
position that PanAmSat must accept interference from Orion's satellite because
PAS-1 does not have "full frequency reuse," while PanAmSat has disputed this
position. The FCC has suggested that Orion's position is incorrect, but stated
that it will not rule definitively on the issue unless the parties are unable
to resolve their differences by frequency coordination. Orion announced in
1993 that it had cancelled its contract for construction of the satellite
which was intended for this orbital slot but reaffirmed its intention to build
such satellite at an unspecified later date.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Factors--Regulatory Risks" generally and for a
description of certain frequency coordination issues affecting PAS-6 and PAS-
7.
REGULATION BY NON-U.S. NATIONAL TELECOMMUNICATIONS AUTHORITIES
Foreign laws and regulatory practices governing the provision of satellite
services to licensed entities and directly to end users vary substantially.
Most countries in which PanAmSat operates are signatories of Intelsat and, as
a result, may require PanAmSat to confirm that it has successfully completed
technical consultation with Intelsat before providing services on a given
satellite. See "--Intelsat Consultation." In addition, PanAmSat may be subject
to national communications and/or broadcasting laws with respect to its
provision of international satellite service. While these vary from country to
country, national telecommunications authorities, with limited exceptions,
typically have not required satellite operators to obtain licenses or
regulatory authorizations in order to provide space segment capacity to
licensed entities.
15
<PAGE>
Many countries--particularly in Latin America and, increasingly, in Europe,
Africa and Asia--have liberalized their regulations to permit multiple
entities to seek licenses to provide voice, data or video services for their
own use or for third-party use; to own and operate private earth station
equipment; and to choose a provider of satellite capacity. This trend should
accelerate with the commitments by many World Trade Organization ("WTO")
members, in the context of the WTO Agreement on Basic Telecommunications
Services, to open their satellite markets to competition. Many countries allow
licensed radio and television broadcasters and cable television providers to
own their own transmission broadcast facilities and purchase satellite
capacity without restriction. In such environments, customer access to
PanAmSat's services can be a relatively simple procedure. Other countries,
however, have maintained strict monopoly regimes. In such markets, a single
entity (often the government-owned Posts, Telephone and Telegraph authority)
may hold a monopoly on the ownership and operation of facilities or on the
provision of communications and/or broadcasting services to, from, and within
the country, including via satellite, rendering the provision of service from
PanAmSat and other U.S.-licensed satellites more complicated.
Many countries also permit satellite carriers to provide services directly
to end users. In others, however, a license is required. PanAmSat has obtained
licenses in Argentina, Columbia, Ecuador, France, Germany, Japan, Pakistan and
the United Kingdom to provide certain services directly to end users. Through
its wholly-owned subsidiary, PACS, the Company intends to apply for a carrier
license in Australia.
Notwithstanding the wide variety of regulatory regimes extant in the
countries in which PanAmSat provides service, PanAmSat believes that it and
its customers are in compliance in all material respects with all applicable
laws and regulations.
Intelsat Consultation. In connection with its international satellite
services, PanAmSat must complete a consultation process with Intelsat under
Article XIV of the Intelsat Agreement to assure that use of any new satellite
will not cause Intelsat technical harm. To provide domestic satellite services
in any country, PanAmSat must complete a technical consultation.
The FCC is responsible for ensuring that PanAmSat has undergone the
necessary consultations and that it operates in accordance with the technical
parameters forming the basis for each Article XIV consultation. If PanAmSat
changes the terms (either technical or service) of its operation in a
significant way, it may need to reconsult with Intelsat.
The ITU Frequency Coordination Process. Each ITU member nation is required
to register its proposed use of orbital slots with the ITU's Radio Regulations
Board. Other nations then may give notice of any use or intended use of the
radio spectrum that would conflict with the proposal. The nations then are
obligated to seek to coordinate the proposed uses and resolve interference
concerns. If all disputes are resolved, the ITU "notifies" the proposed use
which, at least theoretically, protects it from subsequent or nonconforming
interfering uses. The ITU Radio Regulations Board has no dispute resolution or
enforcement mechanisms, however, and international law provides no clear
remedies if this voluntary process fails.
While the right to use most frequencies is determined on a "first-come,
first-served" basis, the ITU has "planned" the use of certain frequency bands
in a manner that effectively reserves for various countries the right to use
those frequencies in accordance with certain technical parameters at a given
orbital location. PanAmSat's proposed use of BSS frequencies on eleven
satellites is subject to unresolved issues concerning the ITU's BSS band plan.
All of the registrations for PanAmSat's satellites are or will be subject to
the ITU coordination process. Certain entities have filed notices of intended
use with respect to certain orbital slots which conflict with PanAmSat's
registered orbital slots for PAS-2, PAS-4 and PAS-8. Such filings may delay
the receipt of final registration of such orbital slots with the ITU Radio
Regulations Board.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Factors--Regulatory Risks."
16
<PAGE>
EMPLOYEES
At December 31, 1997, PanAmSat had approximately 450 full-time employees.
PanAmSat believes that its relations with its employees are good.
ITEM 2. PROPERTIES
PanAmSat's executive offices are located in Greenwich, Connecticut. PanAmSat
leases its executive offices pursuant to a lease that will expire on March 31,
2003. PanAmSat currently operates seven teleports and operations centers in
conjunction with its global satellite network. PanAmSat operates its primary
teleport in Ellenwood, Georgia and operates regional teleports in Castle Rock,
Colorado; Fillmore, California; Homestead, Florida; Long Beach, California;
Napa, California; and Spring Creek, New York. PanAmSat's operations centers
located in Ellenwood and Long Beach provide other services, such as customer
service support, in addition to teleport operations. PanAmSat owns its
Homestead, Florida; Spring Creek, New York; Napa, California; and Fillmore,
California teleports. PanAmSat leases its Castle Rock, Colorado and Ellenwood,
Georgia teleports, and its Long Beach, California teleport and operations
center.
PanAmSat also leases office space for its sales and marketing offices in
Washington, D.C.; Coral Gables, Florida; Sydney, Australia; Johannesburg,
South Africa; London, England; and Tokyo, Japan. PanAmSat's leases for its
foreign offices have been entered into upon terms that PanAmSat deems to be
reasonable and customary.
ITEM 3. LEGAL PROCEEDINGS
On or about October 25, 1996, an action was commenced by Comsat against the
Company, News Corporation, Ltd. ("News") and Grupo Televisa, S.A.,
("Televisa") in the United States District Court for the Central District of
California. The complaint alleges that News wrongfully terminated an agreement
with Comsat for the lease of transponders on an Intelsat satellite over the
term of a five year lease, breached certain alleged promises related to such
agreement, and breached its alleged obligations under a tariff filed by Comsat
with the FCC. As to the Company, the complaint alleges that the Company, alone
and in conspiracy with Televisa, intentionally interfered with the alleged
agreement and with Comsat's economic relationship with News. The complaint in
the present action seeks actual and consequential damages, and punitive or
exemplary damages, in an amount to be determined at trial. On December 11,
1996 the Company, News and Televisa filed motions to dismiss the action on
various grounds, including that the FCC has primary jurisdiction over the
dispute, that Federal law preempts the claims asserted against the Company and
Televisa, that the claims asserted against Televisa and the Company are not
recognized by Federal law, that the claims against the Company and Televisa
fail to state a cause of action and that because the claims against the
Company and Televisa depend upon the existence of enforceable rights under the
tariff Comsat filed with the FCC, the claims fail if the FCC determines that
Comsat has no such rights. In this regard, in April 1996, News filed a
complaint with the FCC challenging Comsat's tariff. By order adopted September
15, 1997, the FCC dismissed that complaint without prejudice. On January 27,
1997, the court denied defendants' motions to dismiss the action. The trial is
scheduled to begin on November 17, 1998. The Company believes this action is
without merit and intends to vigorously contest this matter, although there
can be no assurance that PanAmSat will prevail. If PanAmSat were not to
prevail, the amounts involved could be material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1997, no matters were submitted to a
vote of stockholders through the solicitation of proxies or otherwise.
17
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PanAmSat Common Stock was listed on the Nasdaq National Market in connection
with the Merger and commenced trading on May 19, 1997 under the symbol "SPOT".
The following table sets forth, for the calendar periods indicated, the high
and low closing sales price per share for PanAmSat Common Stock, as reported
by the Nasdaq National Market and the Dow Jones News Retrieval Service.
<TABLE>
<CAPTION>
1997 HIGH LOW
---- -------- --------
<S> <C> <C>
Second Quarter (from May 19, 1997)........................... $30- 3/8 $27- 1/2
Third Quarter................................................ $44- 1/2 $29- 1/4
Fourth Quarter............................................... $46- 1/4 $36- 7/8
</TABLE>
At March 24, 1998, there were approximately 85 holders of record of PanAmSat
Common Stock.
To date, the Company has not declared or paid cash dividends on PanAmSat
Common Stock. The Company presently intends to retain future earnings to
support the growth of its business and, therefore, does not anticipate paying
cash dividends in the near future. The payment of any future dividends on
PanAmSat Common Stock will be determined by the Company's Board of Directors
in light of conditions then existing, including the Company's earnings,
financial condition and capital requirements, restrictions in financing
agreements, business conditions and other factors.
18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of Galaxy (as predecessor) as of
December 31, 1996, 1995 and 1994 and for each year of the three year period
ended December 31, 1996 have been derived from the audited financial
statements of Galaxy. The selected financial data set forth below as of
December 31, 1993 and for the year ended December 31, 1993 have been derived
from the unaudited financial statements of Galaxy which, in the opinion of
management, include all adjustments necessary (consisting only of normal
recurring adjustments) for a fair and consistent presentation of such
information. The selected financial data as of and for the year ended December
31, 1997 have been derived from the audited consolidated financial statements
of PanAmSat appearing elsewhere in this Annual Report, and should be read in
conjunction with such financial statements and notes related thereto and "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
PANAMSAT
HISTORICAL GALAXY HISTORICAL DATA
DATA(1) (AS PREDECESSOR)
------------ -------------------------------------------
YEAR ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
------------ ---------- ---------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DA-
TA:
Total revenues.......... $ 629,939 $ 482,770 $ 386,126 $ 328,243 $220,247
----------- ---------- ---------- --------- --------
Costs and expenses
Cost of outright sales
and sales-type leases.. 20,476 52,969 49,616 45,747 34,530
Leaseback expense, net
of deferred gain....... 61,907 59,927 36,597 36,617 36,576
Depreciation and amorti-
zation................. 149,592 58,523 76,522 54,126 52,025
Direct operating costs.. 61,199 34,794 29,931 33,627 35,034
Selling, general & ad-
ministrative........... 42,561 34,119 30,146 51,595 19,278
----------- ---------- ---------- --------- --------
Operating income........ 294,204 242,438 163,314 106,531 42,804
Interest expense,
net(2)................. (30,973) (4,903) (5,828) (6,826) (5,848)
Other income............ 385 2,184 7,892 3,885 44,876
----------- ---------- ---------- --------- --------
Income before taxes, mi-
nority interest
and extraordinary item. 263,616 239,719 165,378 103,590 81,832
Income tax expense...... 117,325 89,895 62,017 38,846 30,687
Minority interest....... 12,819 -- -- -- --
Extraordinary item(3)... 20,643 -- -- -- --
----------- ---------- ---------- --------- --------
Net income.............. $ 112,829 $ 149,824 $ 103,361 $ 64,744 $ 51,145
=========== ========== ========== ========= ========
OTHER FINANCIAL DATA:
EBITDA(4)............... $ 444,181 $ 303,145 $ 247,728 $ 164,542 $139,705
EBITDA margin........... 71% 63% 64% 50% 63%
Net cash provided by op-
erating activities..... 286,726 151,238 83,690 110,490 --
Net cash used in invest-
ing activities......... (1,414,972) (42,122) (270,396) (109,560) --
Net cash provided by
(used in) financing
activities............. 1,219,956 (109,122) 186,720 (1,126) --
Capital expenditures.... 541,879 308,735 280,543 114,660 111,104
Total assets............ 5,682,434 1,275,516 1,137,978 868,408 850,640
Total long-term obliga-
tions.................. 3,016,680 394,187 290,963 319,620 342,070
Total stockholders' eq-
uity................... 2,560,836 -- -- -- --
</TABLE>
- --------
(1) Includes financial data for PanAmSat International from May 16, 1997 (the
effective date of the Merger). See "Item 1. Business--Overview--The
Merger" for a description of the Merger.
(2) Net of capitalized interest of $80.5 million, $14.6 million, $10.1
million, $5.1 million and $1.6 million for the years ended December 31,
1997, 1996, 1995, 1994 and 1993, respectively, and net of interest income
of $28.0 million in 1997.
(3) Represents loss on early extinguishment of debt, net of tax.
(4) 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.
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results
of operations of PanAmSat should be read in conjunction with the financial
data and the Consolidated Financial Statements appearing elsewhere in this
Annual Report.
The Company commenced operations on May 16, 1997 upon the Merger. Prior to
the Merger, the Company was an inactive corporation formed solely for the
purpose of consummating the Merger, and each of PanAmSat International and
Galaxy was primarily engaged in the business of providing satellite-based
communication services.
RESULTS OF OPERATIONS
The Company's results of operations as reported incorporate PanAmSat
International's activity commencing May 16, 1997, the effective date of the
Merger. Since this represents only seven and one-half months of activity for
PanAmSat International in 1997, management has determined that for comparative
purposes, it would be more meaningful to present the information shown below
on a "pro forma" basis reflecting the Merger as though it had occurred at the
beginning of the respective periods presented (excluding the impact of
PanAmSat International's $225 million gain on the sale of its direct-to-home
television rights in certain foreign markets (the "DTH Options") to an
affiliate concurrent with the Merger, as well as certain professional and
advisory fees and other expenses incurred in connection with the Merger
totaling $31.6 million, both of which are non-recurring items that are not
indicative of the Company's ordinary course of business). 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 1996.
<TABLE>
<CAPTION>
PRO FORMA
(UNAUDITED) AS REPORTED
------------------ ----------------------------
1997 1996 1997 1996 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES
Operating leases, satellite
services and other......... $684,663 $566,027 $558,622 $319,084 $236,382
Outright sales and sales-
type leases................ 71,317 163,686 71,317 163,686 149,744
-------- -------- -------- -------- --------
Total revenue.............. 755,980 729,713 629,939 482,770 386,126
-------- -------- -------- -------- --------
COSTS AND EXPENSES
Cost of outright sales and
sales-type leases.......... 20,476 52,969 20,476 52,969 49,616
Leaseback expense, net of
deferred gain.............. 61,907 59,927 61,907 59,927 36,597
Direct operating and SG&A
costs...................... 130,076 136,116 103,760 68,913 60,077
Depreciation and amortiza-
tion....................... 197,116 181,100 149,592 58,523 76,522
-------- -------- -------- -------- --------
Total...................... 409,575 430,112 335,735 240,332 222,812
-------- -------- -------- -------- --------
Income from operations...... 346,405 299,601 294,204 242,438 163,314
Interest expense, net....... 68,981 125,308 30,973 4,903 5,828
Other income................ (385) (2,184) (385) (2,184) (7,892)
-------- -------- -------- -------- --------
Income before income taxes,
minority interest and
extraordinary item......... 277,809 176,477 263,616 239,719 165,378
Income tax expense.......... 134,343 92,549 117,325 89,895 62,017
-------- -------- -------- -------- --------
Income before minority
interest and extraordinary
item....................... 143,466 83,928 146,291 149,824 103,361
Minority interest,
subsidiary preferred stock
dividend................... 24,838 28,474 12,819 -- --
-------- -------- -------- -------- --------
Income before extraordinary
item....................... 118,628 55,454 133,472 149,824 103,361
Extraordinary item: loss on
extinguishment of debt, net
of tax..................... 20,643 -- 20,643 -- --
-------- -------- -------- -------- --------
Net income.................. $ 97,985 $ 55,454 $112,829 $149,824 $103,361
-------- -------- -------- -------- --------
Earnings per share--basic
and diluted................ $ 0.66 $ 0.37
</TABLE>
20
<PAGE>
CONSOLIDATED RESULTS
1997 COMPARED TO 1996 (PRO FORMA AND AS REPORTED)
The following discussion of 1997 versus 1996 performance is primarily based
on pro forma results. Pro forma results for 1997 and 1996 and as reported
results since the Merger date reflect the impact of the acquisition of
PanAmSat International, including the use of purchase accounting. Comparisons
of as reported results reflect significant increases in amortization of
intangible assets, interest expense, the effective income tax rate and shares
outstanding arising from the Merger.
Revenues. Pro forma revenues increased $26.3 million, or 4%, to $756.0
million in 1997 from $729.7 million in 1996. Pro forma video services revenues
increased $88.4 million, or 17%, to $607.6 million in 1997 from $519.2 million
in 1996, principally as a result of increased service agreements associated
with available transponder capacity, increased ad hoc revenue associated with
significant international news events and increased revenues associated with
DTH services. Pro forma telecommunications services revenues decreased $43.1
million, or 26%, to $123.2 million in 1997 from $166.3 million in 1996. The
decrease was primarily due to less outright sales and sales-type lease
activity during 1997. Pro forma satellite services and other revenues
decreased $19.0 million, or 43%, to $25.2 million in 1997 from $44.2 million
in 1996 principally due to a decrease in ground services sales.
The pro forma revenue increase can also be analyzed based on the type of
agreement. Pro forma revenues from sales and sales-type leases decreased to
$71.3 million in 1997 from $163.7 million in 1996. The decrease was
attributable to a lower volume in 1997 relative to 1996 of outright sales and
sales-type leases. Pro forma revenues from operating leases of transponders,
satellite services and other increased $118.7 million, or 21%, to $684.7
million in 1997 from $566.0 million in 1996, due primarily to additional
transponder capacity placed in service.
As reported revenues increased $147.1 million, or 30%, to $629.9 million in
1997 from $482.8 million in 1996, primarily due to the impact of the Merger,
and also due to increased service agreements associated with available
transponder capacity.
Cost of Outright Sales and Sales-Type Leases of Transponders. Pro forma cost
of outright sales and sales-type leases of transponders decreased $32.5
million, or 61%, to $20.5 million in 1997 from $53.0 million in 1996, due to
the decrease in outright sales and sales-type leases.
Leaseback Expense, Net of Deferred Gain. Pro forma leaseback expense, net of
deferred gain, increased $2.0 million, or 3%, to $61.9 million in 1997 from
$59.9 million in 1996.
Direct Operating and Selling, General and Administrative Costs. Pro forma
direct operating and selling, general and administrative costs decreased $6.0
million, or 4%, to $130.1 million in 1997 from $136.1 million in 1996.
Depreciation and Amortization. Pro forma depreciation and amortization
increased $16.0 million, or 9%, to $197.1 million in 1997, from $181.1 million
in 1996, due primarily to depreciation expense associated with additional
transponder capacity placed in service.
As reported depreciation and amortization increased $91.1 million, or 156%,
to $149.6 million in 1997, from $58.5 million in 1996. In addition to the
impact of the Merger, the increase was a result of depreciation expense
associated with additional transponder capacity placed in service.
Income from Operations. Pro forma income from operations increased $46.8
million, or 16%, to $346.4 million in 1997, from $299.6 million in 1996. The
increase was primarily due to the increase in revenues and the decrease in
cost of outright sales and sales-type leases.
Interest Expense, Net. Pro forma interest expense, net decreased $56.3
million, or 45%, to $69.0 million in 1997, from $125.3 million in 1996. The
decrease in pro forma interest expense, net was due to increased
21
<PAGE>
interest income earned on marketable securities coupled with reduced interest
expense reflecting larger amounts of interest capitalized on satellites under
construction which are expected to be launched in 1998 and 1999.
Income Tax Expense. Pro forma income tax expense increased $41.8 million, or
45%, to $134.3 million in 1997, from $92.5 million in 1996. The increase in
pro forma income tax expense was principally due to the increase in taxable
income. The pro forma tax rates for 1997 and 1996 of 48% and 52%,
respectively, are higher than the statutory rate due to the fact that goodwill
amortization attributable to the Merger is not deductible for tax purposes.
Minority Interest. Pro forma minority interest, representing preferred stock
dividends of PanAmSat International, decreased $3.7 million to $24.8 million
in 1997 from $28.5 million in 1996. The decrease was due to the conversion of
PanAmSat International's 12 3/4% Mandatorily Exchangeable Senior Redeemable
Preferred Stock due 2005 into 12 3/4% Senior Subordinated Notes due 2005 in
the third quarter of 1997 and the related termination of dividend payment
obligations.
Extraordinary Item. The Company recorded an extraordinary charge of $20.6
million ($34.3 million before taxes) during 1997 related to the early
extinguishment of certain indebtedness of PanAmSat's subsidiaries. The charge
principally represented the excess of the price paid for the debt over its
carrying value, net of any deferred financing costs and fair value adjustments
recognized in connection with the Merger.
1996 COMPARED TO 1995 (AS REPORTED)
Revenues. Revenues increased $96.7 million, or 25%, to $482.8 million in
1996 from $386.1 million in 1995. Video services revenues increased $78.5
million, or 33%, to $314.4 million in 1996 from $235.9 million in 1995,
principally as a result of additional transponder capacity with the successful
launch of Galaxy III-R and Galaxy IX. Telecommunications services revenues
increased $28.0 million, or 28%, to $126.4 million in 1996 from $98.4 million
in 1995. The increase was primarily due to an increase in the full and
occasional use of SBS 6, Galaxy IV and Galaxy VII Ku-band transponders.
Satellite services and other revenues decreased $9.8 million, or 19%, to $42.0
million in 1996 from $51.8 million in 1995 principally due to a decrease in
ground service sales.
The revenue increase can also be analyzed based on the type of agreement.
Revenues from sales and sales-type leases increased to $163.7 million in 1996
from $149.7 million in 1995. The increase was attributable to higher interest
income on sales-type leases offset by a lower volume in 1996 relative to 1995
of outright sales and sales-type leases of transponders previously placed in
service. The lower volume of outright sales and sales-type leases in 1996
primarily reflected a decrease in available in-orbit C-band transponder
capacity, which is typically purchased outright or via sales-type leases by
cable video providers. Revenues from operating leases of transponders,
satellite services and other increased $82.7 million, or 35%, to $319.1
million in 1996 from $236.4 million in 1995, due primarily to additional
transponder capacity placed in service with the launch of Galaxy III-R and
Galaxy IX in 1996, including revenues received from a related party for
certain Galaxy III-R transponder leases.
Cost of Outright Sales and Sales-Type Leases of Transponders. Cost of
outright sales and sales-type leases of transponders increased $3.4 million,
or 7%, to $53.0 million in 1996 from $49.6 million in 1995, reflecting
relatively constant margins on transponder sales and sales-type leases.
Leaseback Expense, Net of Deferred Gain. Leaseback expense, net of deferred
gain, increased $23.3 million, or 64%, to $59.9 million in 1996 from $36.6
million in 1995. This increase in leaseback expense, net of deferred gain, was
due to the sale-leaseback of Galaxy III-R in 1996.
Direct Operating and Selling, General and Administrative Costs. Direct
operating and selling, general and administrative costs increased $8.8
million, or 15%, to $68.9 million in 1996 from $60.1 million in 1995
principally due to an increase in TT&C costs related to Galaxy III-R and
Galaxy IX which were launched in 1996 and an increase in the provision for
doubtful accounts.
22
<PAGE>
Depreciation and Amortization. Depreciation decreased $18.0 million, or 24%,
to $58.5 million in 1996, from $76.5 million in 1995, due primarily to
accelerated depreciation in 1995 attributable to a reduction in the expected
useful lifetime of one noncommercial satellite resulting from a customer's
decision not to exercise a lease renewal option, partially offset by
additional depreciation associated with the launch and placement in service of
Galaxy III-R.
Income from Operations. Income from operations increased $79.1 million, or
48%, to $242.4 million in 1996, from $163.3 million in 1995. The increase is
primarily due to the increase in revenues offset by an increase in leaseback
expense, net of deferred gain.
Other Income. Other income decreased $5.7 million to $2.2 million in 1996
from $7.9 million in 1995, primarily due to non-recurring revenue earned in
1995 for providing services to General Motors Corporation.
Income Tax Expense. The effective tax rate for each of 1996 and 1995 was
38%, reflecting the U.S. federal, state and local income taxes reduced for
foreign sales corporation benefits.
LIQUIDITY AND CAPITAL RESOURCES
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. In connection with
the Merger, the Company obtained a term loan in the amount of $1.725 billion
from Hughes Electronics Corporation, an affiliate of the Company ("HE"). In
addition to the $1.725 billion loan, at December 31, 1997 the Company also had
long-term indebtedness of $717 million (comprised primarily of $600 million of
loans under the Original Credit Agreement (as defined below) and $77.2 million
due to affiliates).
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 commencement of construction of PAS-6B, the
Company now has seven satellites under various stages of development for which
the Company has budgeted capital expenditures. See "--Risk Factors" below. The
Company will require approximately $900 million to complete the construction,
insurance and launch of PAS-6B, PAS-7, PAS-8, Galaxy X, Galaxy XI, PAS-9, and
PAS-1R, together with related equipment. This amount is expected to be funded
from cash flow from operations, vendor financing and borrowings under the
Credit Agreement (as defined below). In addition to funding the construction
and launch of new satellites, the Company also expects to exercise its
remaining early buy-out options under certain satellite sale-leaseback
transactions entered into in prior years which will require the Company to
fund outlays of approximately $152 million in 1998 (for which an early buy-out
option for $96.6 million relating to transponders on SBS-6 was exercised by
the Company in January 1998) and approximately $366 million in 1999. Such
additional outlays are expected to be funded from cash flow from operations
and borrowings under the Credit Agreement.
On January 16, 1998, PanAmSat completed a private placement pursuant to Rule
144A under the Securities Act of 1933 of $750 million aggregate principal
amount of new debt securities (the "Offering"). The net proceeds from the
Offering were 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.
In connection with the Offering, the Company executed a Credit Agreement
(the "Credit Agreement") with certain lenders and Citicorp USA, Inc. as
administrative agent. The Credit Agreement amends and restates the credit
agreement among the parties dated December 24, 1997 (the "Original Credit
Agreement"). The Original Credit Agreement provided 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"). The Credit Agreement amends the Original Credit Agreement
to terminate the Term Loan facility. The Company currently has $500 million of
Revolving Credit Loans available to it under the Credit Agreement.
PanAmSat believes that the Credit Agreement, vendor financing, future cash
flow from operations (assuming satellites in development are successfully
launched and commence service on the schedule currently
23
<PAGE>
contemplated) and cash on hand will be sufficient to fund PanAmSat's
operations, anticipated exercise of early buy-out options on certain satellite
sale-leaseback transactions and its remaining costs for the construction and
launch of the satellites currently in development for the next twelve months.
There can be no assurance, however, that PanAmSat's assumptions with respect
to future construction and launch costs will be correct, or that additional
vendor financing, PanAmSat's future cash flow from operations and borrowings
under the Credit Agreement will be sufficient to cover any shortfall in
funding for future launches caused by launch failures, cost overruns, delays
or other unanticipated expenses. If circumstances required PanAmSat to incur
additional indebtedness, the ability of PanAmSat to incur any such additional
indebtedness would be subject to the terms of PanAmSat's outstanding
indebtedness. The failure to obtain such financing could have a material
adverse effect on PanAmSat's operations and its ability to accomplish its
business plan.
Net cash provided by operating activities decreased to $61.7 million in
1997, from $151.2 million in 1996, an increase from $83.7 million in 1995. The
decrease in 1997 was primarily attributable to payments of various liabilities
acquired in the Merger, offset by larger adjustments related to amounts of
depreciation and amortization as a result of the Merger. The increase in 1996
was primarily attributable to increased cash receipts from customers on
additional transponders committed under sales-type and operating leases.
Net cash used in investing activities increased to $1,640.0 million in 1997,
from $42.1 million in 1996, a decrease from $270.4 million in 1995. The
increase in 1997 was primarily attributable to the net cash paid in connection
with the Merger and additional capital expenditures for satellite systems
under development, offset by proceeds from the sale of marketable securities.
The decrease in 1996 was primarily due to proceeds from the sale and leaseback
of Galaxy III-R.
Net cash provided by (used in) financing activities increased to $1,670.0
million in 1997, from $(109.1) million in 1996, a decrease from $186.7 million
in 1995. The increase in 1997 was primarily due to new borrowings (including
$1.725 billion of Merger-related borrowings), offset by repayments of long-
term debt in connection with the tender offer for certain debt securities of
the Company's subsidiaries. The decrease in 1996 (representing distributions
by Galaxy to its parent company) was primarily a result of proceeds from the
sale and leaseback of Galaxy III-R and increased cash collections from
customers.
MARKET RISKS
From time to time the Company is exposed to market risks relating to
interest rate changes. The Company does not enter into derivatives or other
financial instruments for trading or speculative purposes. At December 31,
1997, in connection with its debt refinancing activities, the Company entered
into certain U.S. Treasury rate lock contracts to reduce its exposure to
fluctuations in interest rates. The aggregate nominal value of these contracts
was $375 million and these contracts were accounted for as hedges because they
were applied to a specific refinancing plan that was consummated shortly after
December 31, 1997. The counterparties are major financial institutions. The
fair value of these financial instruments at December 31, 1997 approximated
their contract value. The cost to unwind these instruments in 1998 will be
amortized to expense over the term of the newly placed debt securities to
which such hedges were applied.
YEAR 2000 MATTERS
Many of the world's computer systems currently record years in a two-digit
format. Such computer systems will be unable to properly interpret dates
beyond the year 1999, which could lead to disruption in the U.S. and
internationally. PanAmSat has begun an evaluation of its major business and
operations software systems for Year 2000 compliance and expects to complete
that evaluation in 1998. As a part of that process, the Company is identifying
any applications software which may require further analysis and updating. The
Company's most significant assets, the satellites themselves, do not utilize
year-specific code in their processing systems and hence are not subject to
spontaneous events at the change in year.
Nearly all of the PanAmSat satellites are less than 10 years old, and the
ground-based satellite control software systems were also largely developed in
the last 10 years with many new software systems and
24
<PAGE>
enhancements added in the last 5 years. Instances where date corrections may
be necessary are anticipated to be far fewer than in the older Cobol-based
systems which have been highlighted in other industries as requiring
significant re-coding. Further, in all cases the satellite control activities
are subject to real-time confirmation by human operators, and any unforeseen
software problems can be potentially identified and bypassed before any
actions are taken which would adversely affect a satellite.
Based upon the facts and circumstances described above, PanAmSat does not
believe that the Year 2000 software issue presents any material risk to the
business or assets of PanAmSat or to the Company's ability to perform its
obligations under its agreements to provide satellite services. As indicated
above, PanAmSat will continue to conduct analysis and take appropriate
remedial action when required with respect to its critical systems. The total
cost to the Company of Year 2000 compliance activities has not been and is not
anticipated to have a material adverse effect on its financial position or
results of operations.
RISK FACTORS
Risks Associated with Technology. Satellites are subject to significant
risks related to delayed and failed launches and in-orbit failures. Of the 25
satellite launches by PanAmSat or its predecessors since 1983, the Company has
experienced three launch failures: on December 1, 1994, the original PAS-3 was
destroyed upon launch as a result of a malfunction of an Ariane IV launch
vehicle; on August 22, 1992, the Company's original Galaxy I-R satellite was
destroyed upon launch as a result of an Atlas launch vehicle malfunction; and
the Company's Leasat 4, which was launched on August 27, 1985, was not placed
in service after launch due to the failure of its communications payload. Each
of the foregoing satellites was insured in an amount sufficient to
substantially recover the Company's investment therein, and each was
subsequently replaced with a satellite that was successfully launched.
Certain launch vehicles present special risks to the Company. Certain launch
vehicles scheduled to be used by PanAmSat have unproven track records and are
susceptible to certain risks associated with new launch vehicles. For example,
Sea Launch and Delta III are two launchers that are scheduled to be used by
PanAmSat to launch satellites within the next two years. These launchers have
no commercial launch history, which poses special risks including potential
launch delays and failures.
The Company expects to launch Galaxy X on a Delta III launch vehicle, Galaxy
XI on a Sea Launch launch vehicle, PAS-7, PAS-6B and PAS-1R on Ariane launch
vehicles, and PAS-8 and PAS-9 on Proton launch vehicles. The Company has
contracts directly with Arianespace S.A. ("Arianespace") and with
International Launch Services (formerly known as Lockheed-Khrunichev-Energia
International, Inc.) ("ILS") for the Ariane and Proton launches, respectively.
The Company has a contract with Hughes Space and Communications International,
Inc. ("HSCI") for one Delta III launch and one Sea Launch launch, such launch
services to be provided by Boeing and Sea Launch LP, respectively, under
contracts between HSCI and such providers.
The Company's contract with ILS provides for launch services on the Proton
launch vehicle. The Proton is built in Russia and launched in Kazakhstan. ILS
suffered a launch failure of a Proton launch vehicle in December 1997; an
investigation into the failure has commenced, but a final report has not been
issued. In addition, there were two Proton launch failures in 1996. Under the
Company's contract with ILS, if the Proton is unavailable due to technical,
regulatory or other factors, ILS would provide launch services for at least
one launch using an alternative launch vehicle. The contract provides for the
launch of three PanAmSat satellites using Proton launch vehicles. PAS 5 was
launched on a Proton in August 1997 and it is anticipated that PAS-8 will be
launched on a Proton in the third quarter of 1998.
The Company plans to launch Galaxy X in June 1998 from Cape Canaveral,
Florida, aboard a Delta III launch vehicle manufactured by Boeing (formerly
McDonnell Douglas). This launch will be the first commercial launch of the
Delta III, the latest generation based in part on the Delta II launch vehicle.
A Delta II launch vehicle carrying an Air Force satellite suffered a launch
failure in January 1997.
The Company plans to launch Galaxy XI in the fourth quarter of 1998 using a
Sea Launch launch vehicle. Sea Launch is a joint venture among Boeing
Commercial Space Co., Kvaerner A.S., RSC-Energia and the NPO-
25
<PAGE>
Yuzhnoye space concern. This launch will be the first commercial launch of the
Sea Launch service, which will utilize a three-stage launch vehicle launched
from a novel semi-submersible launch platform in the Pacific Ocean near the
equator.
There can be no assurance that PanAmSat's planned launches on Delta III or
using the Sea Launch platform will be successful.
Galaxy XI is scheduled to be a Hughes-manufactured HS-702 model spacecraft.
The HS-702 model has an unproven track record and may be susceptible to
certain risks related to its new technology. There can be no assurance that
PanAmSat's planned use of an HS-702 model spacecraft will be successful.
A significant delay in the delivery or launch of any future satellite would
adversely affect the Company's marketing plan for such satellite. Delays can
result from the construction of satellites and launch vehicles, launch
failures, the periodic unavailability of reliable launch opportunities and
possible delays in obtaining regulatory approvals. If satellite construction
schedules are not met, there can be no assurance that a launch opportunity
will be available at the time a satellite is ready to be launched. The
occurrence of a launch failure results in a significant delay in the
deployment of a particular satellite because of the need both to construct a
replacement satellite and obtain another launch opportunity. A significant
delay in the launch of any of PanAmSat's satellites could enable customers who
pre-purchased or agreed to lease capacity of such satellite to terminate their
contracts.
Satellites are also subject to risks after they have been properly deployed
and operational. The likelihood of in-orbit failure may be heightened by
PanAmSat's use on certain of their satellites of new technology, including a
new xenon ion propulsion system on PAS-5, Galaxy VIII-i and Galaxy XI. In
addition, the Company's planned deployment of new HS-702 model satellites may
increase the risk of in-orbit failure.
Following the launch of PAS-6, an anomaly was detected in its 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. In November 1997, the Company negotiated an
extension of the launch insurance policy for PAS-6 to extend the period of
coverage from 181 days from the launch date to one year plus 181 days from the
launch date. In February 1998, the Company filed a proof of loss totaling
approximately $29 million with its launch insurance underwriters based on
certain anomalies discovered in the solar panels on PAS-6 prior to February 5,
1998. The Company expects to receive payment from the insurers pursuant to the
proof of loss in the second quarter of 1998. In connection with the extension
of the launch insurance policy for PAS-6, the Company has agreed to forego any
further claims for partial loss due to subsequent anomalies involving the
spacecraft's solar panels but the endorsement to PAS-6's launch insurance
policy does not otherwise affect the Company's ability to claim a total
constructive launch failure of the spacecraft for any reason (other than
normal policy exclusions).
On March 9, 1998, the Company entered into arrangements with its customers
to build a new satellite to be designated as PAS-6B. In connection with these
arrangements, the Company entered into an amendment to its agreements with its
customers on PAS-6. Under these amendments, PanAmSat will acquire a new Hughes
HS-601HP satellite that is scheduled to be launched on an Ariane IV launch
vehicle in the fourth quarter of 1998. The Company is exploring its options
for the deployment and use of the original PAS-6 satellite and anticipates
either using that satellite as either a backup for PAS-6B, or moving it to
another orbital location for other purposes. Management believes that it will
be able to generate sufficient future revenues on PAS-6 to enable it to
recover the carrying value of its investment in the satellite.
Due to contract performance issues relating to the PAS-7 and PAS-8
construction programs, the Company has informed SS/Loral that SS/Loral 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
26
<PAGE>
PAS-7, PAS-8 and a replacement satellite for either of such satellites or for
PAS-6. The Company believes it has adequate sources to procure satellites in
the event such performance issues are not satisfactorily resolved. SS/Loral
has responded to the Company's notice by asserting that the Company is not
entitled to claim a default termination under such circumstances.
Regulatory Risks. The satellite industry is highly regulated both in the
United States and internationally. PanAmSat is subject to the regulatory
authority of the U.S. government (primarily the FCC) and the national
communications authorities of the countries in which it operates. The business
prospects of PanAmSat could be adversely affected by the adoption of new laws,
policies, regulations, or changes in the interpretation or application of
existing laws, policies or regulations, that modify the present regulatory
environment. While PanAmSat has generally been successful in obtaining
necessary licenses, there can be no assurance that PanAmSat will obtain all
requisite regulatory approvals for the construction, launch and operation of
any of PanAmSat's future satellites and for the orbital slots planned for
these satellites or, if obtained, that such licenses will not impose
operational restrictions on PanAmSat. Nor can there be any assurance that
PanAmSat will succeed in coordinating any or all of its future satellites
internationally.
Regulatory schemes in countries in which PanAmSat operates may impose
impediments to the Company's operations. PanAmSat, its customers or companies
with which PanAmSat does business must have authority from each country in
which PanAmSat provides services. Although PanAmSat believes that it, its
customers and/or companies with which it does business presently hold the
requisite licenses and approvals for the countries in which it currently
provides services, the regulatory schemes in each country are different and
thus there may be instances of noncompliance of which PanAmSat is not aware.
In addition, portions of PanAmSat's future satellites are being designed to
provide service to countries in which regulatory impediments continue to
exist. Although PanAmSat believes these regulatory schemes will not prevent it
from pursuing its business plan, there can be no assurance that any current
regulatory approvals held by PanAmSat are, or will remain, sufficient in the
view of foreign regulatory authorities, or that any additional necessary
approvals will be granted on a timely basis, or at all, in all jurisdictions
in which the Company wishes to operate its new satellites or that restrictions
applicable thereto will not be unduly burdensome.
Certain of the frequencies that are intended to be used to uplink to PAS-7
and PAS-6 must be coordinated with the U.S. government on an earth-station-by-
earth-station basis to ensure that harmful interference to government
operations is minimized. PanAmSat has undertaken such coordination and
believes that it will be able to coordinate successfully with federal
government users or will institute operational solutions that will mitigate
the problem, but there can be no assurance that PanAmSat's efforts will be
successful.
Effect of Loss of Key Personnel. The success of PanAmSat's business depends
in part upon the continued employment of Frederick A. Landman, President and
Chief Executive Officer and Lourdes Saralegui, Executive Vice President. The
loss of either of these executives could have an adverse effect on PanAmSat's
business. PanAmSat is not the beneficiary of key man life insurance policies
for either Mr. Landman or Ms. Saralegui. To minimize the potential adverse
effect that the loss of either of these executives would have on PanAmSat's
business, Mr. Landman has established a senior advisory committee known as the
Office of the President. The Office of the President consists of several
executive officers of PanAmSat, selected by Mr. Landman, including Ms.
Saralegui. The committee meets regularly with Mr. Landman to discuss key
issues affecting the Company's business and operations. The Company believes
that in the event of a loss of either Mr. Landman or Ms. Saralegui, the Office
of the President or certain of its members would be capable of overseeing the
Company's operations and business, mitigating the adverse impact caused by any
loss.
Litigation. See "Item 3. Legal Proceedings."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Market Risks."
27
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. 29
Consolidated Statements of Income for Each of the Three Years Ended Decem-
ber 31, 1997............................................................. 30
Consolidated Balance Sheets--December 31, 1997 and 1996................... 31
Consolidated Statements of Changes in Stockholders' Equity for Each of the
Three Years Ended December 31, 1997...................................... 33
Consolidated Statements of Cash Flows for Each of the Three Years Ended
December 31, 1997........................................................ 34
Notes to Consolidated Financial Statements................................ 35
</TABLE>
28
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
PanAmSat Corporation
We have audited the accompanying consolidated balance sheets of PanAmSat
Corporation and subsidiaries and predecessor entity as of December 31, 1997
and 1996, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PanAmSat
Corporation and subsidiaries and predecessor entity as of December 31, 1997
and 1996 and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Stamford, Connecticut
January 23, 1998 (except for Note 4,
which is March 9, 1998)
29
<PAGE>
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Operating leases, satellite services and other.. $558,622 $319,084 $236,382
Outright sales and sales-type leases............ 71,317 163,686 149,744
-------- -------- --------
Total revenues................................ 629,939 482,770 386,126
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Cost of outright sales and sales-type leases.... 20,476 52,969 49,616
Leaseback expense, net of deferred gains........ 61,907 59,927 36,597
Depreciation and amortization................... 149,592 58,523 76,522
Direct operating costs.......................... 61,199 34,794 29,931
Selling, general and administrative expenses.... 42,561 34,119 30,146
-------- -------- --------
Total operating costs and expenses............ 335,735 240,332 222,812
-------- -------- --------
INCOME FROM OPERATIONS........................... 294,204 242,438 163,314
INTEREST EXPENSE--Net............................ (30,973) (4,903) (5,828)
OTHER INCOME..................................... 385 2,184 7,892
-------- -------- --------
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND
EXTRAORDINARY ITEM.............................. 263,616 239,719 165,378
INCOME TAXES..................................... 117,325 89,895 62,017
-------- -------- --------
INCOME BEFORE MINORITY INTEREST AND EXTRAORDINARY
ITEM............................................ 146,291 149,824 103,361
MINORITY INTEREST--Subsidiary preferred stock
dividend........................................ 12,819 -- --
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM................. 133,472 149,824 103,361
EXTRAORDINARY ITEM, LOSS ON EXTINGUISHMENT OF
DEBT, NET OF TAX................................ 20,643 -- --
-------- -------- --------
NET INCOME....................................... $112,829 $149,824 $103,361
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
30
<PAGE>
PANAMSAT CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................... $ 91,739 $ 29
Accounts receivable--net................................ 41,030 21,742
Net investment in sales-type leases..................... 27,757 20,634
Prepaid expenses and other.............................. 77,891 23,313
Deferred income taxes................................... 46,940 46,989
---------- ----------
Total current assets.................................. 285,357 112,707
---------- ----------
SATELLITES AND OTHER PROPERTY AND EQUIPMENT--Net......... 2,506,082 720,225
NET INVESTMENT IN SALES-TYPE LEASES...................... 324,689 320,610
GOODWILL--Net of amortization............................ 2,498,498 72,896
DEFERRED CHARGES--Including deferred income taxes of
$28,073 in 1996......................................... 67,808 49,078
---------- ----------
TOTAL ASSETS............................................. $5,682,434 $1,275,516
========== ==========
</TABLE>
See notes to consolidated financial statements.
31
<PAGE>
PANAMSAT CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.......................... $ 16,398 $ --
Accounts payable and accrued liabilities................... 26,828 30,941
Deferred gains on sale-leasebacks.......................... 42,870 42,871
Deferred revenues.......................................... 18,822 5,424
---------- ----------
Total current liabilities................................ 104,918 79,236
DUE TO AFFILIATES (PRINCIPALLY MERGER-RELATED INDEBTEDNESS).. 1,802,195 --
LONG-TERM DEBT............................................... 640,123 --
DEFERRED GAINS ON SALE-LEASEBACKS............................ 191,882 234,751
DEFERRED INCOME TAXES........................................ 179,267 --
OTHER LIABILITIES AND DEFERRED CREDITS....................... 103,029 51,595
ACCRUED OPERATING LEASEBACK EXPENSE.......................... 100,184 107,841
---------- ----------
TOTAL LIABILITIES............................................ 3,121,598 473,423
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Parent company's net investment............................ -- 802,093
Common stock, $0.01 par value--400,000,000 shares autho-
rized;
149,135,654 shares issued and outstanding................. 1,491 --
Additional paid-in capital................................. 2,501,344 --
Retained earnings.......................................... 58,001 --
---------- ----------
Total stockholders' equity............................... 2,560,836 802,093
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................... $5,682,434 $1,275,516
========== ==========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
PAR VALUE
------------------
PARENT ADDITIONAL
COMPANY'S PAID-IN RETAINED
NET INVESTMENT SHARES AMOUNT CAPITAL EARNINGS
-------------- ----------- ------ ---------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1995................... $ 471,310 -- $ -- $ -- $ --
Net contributions from
Parent............... 186,720 -- -- -- --
Net income............ 103,361 -- -- -- --
---------- ----------- ------ ---------- --------
BALANCE, DECEMBER 31,
1995................... 761,391 -- -- -- --
Net distributions to
Parent............... (109,122) -- -- -- --
Net income............ 149,824 -- -- -- --
---------- ----------- ------ ---------- --------
BALANCE, DECEMBER 31,
1996................... 802,093 -- -- -- --
Net income prior to
Merger............... 54,828 -- -- -- (54,828)
Net contributions from
Parent............... 370,424 -- -- -- --
Capitalization in con-
nection with Merger.. (1,227,345) 149,122,807 1,491 2,500,854
Additional issuance of
stock................ -- 12,847 -- 490 --
Net income............ -- -- -- -- 112,829
---------- ----------- ------ ---------- --------
BALANCE, DECEMBER 31,
1997................... $ -- 149,135,654 $1,491 $2,501,344 $ 58,001
========== =========== ====== ========== ========
</TABLE>
See notes to consolidated financial statements.
33
<PAGE>
PANAMSAT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---------- -------- --------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net income.................................... $ 112,829 $149,824 $103,361
Adjustments to reconcile net income to net
cash provided by operating activities:
Cost of outright sales....................... -- 14,523 5,990
Gross profit on sales--type leases........... (33,180) (51,802) (62,855)
Depreciation and amortization................ 149,592 58,523 76,522
Deferred income taxes........................ 129,065 (21,399) (18,235)
Amortization of gains on sale-leasebacks..... (42,870) (41,559) (27,133)
Provision for uncollectible receivables...... -- 1,315 (6,666)
Interest expense capitalized................. (80,468) (14,613) (10,147)
Minority interest............................ 12,819 -- --
Extraordinary item........................... 20,643 -- --
Changes in assets and liabilities, net of ac-
quired assets and liabilities:
Collections on investments in sales-type
leases...................................... 21,978 31,204 19,554
Operating lease and other receivables........ (8,086) (6,053) (6,543)
Prepaid expenses and other current assets.... (37,333) 1,725 (1,604)
Accounts payable and accrued liabilities..... (130,921) (935) 8,486
Accrued operating leaseback expense.......... (7,657) 38,738 3,441
Deferred revenues and other.................. (44,685) (8,253) (481)
---------- -------- --------
Net cash provided by operating activities... 61,726 151,238 83,690
---------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of PanAmSat International, net of
cash acquired............................... (1,486,266) -- --
Capital expenditures......................... (541,879) (294,122) (270,396)
Proceeds from sale-leaseback of satellite
transponders................................ -- 252,000 --
Proceeds from sale of marketable securities.. 388,173 -- --
---------- -------- --------
Net cash used in investing activities....... (1,639,972) (42,122) (270,396)
---------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
New borrowings (including acquisition
borrowings of $1.725 billion)............... 2,391,836 -- --
Net contributions from (distributions to)
parent company.............................. -- (109,122) 186,720
Parent company contributions prior to the
Merger...................................... 370,424 -- --
Repayments of long-term debt................. (1,092,794) -- --
Stock issued to 401(k) plan.................. 490 -- --
---------- -------- --------
Net cash provided by (used in) financing ac-
tivities................................... 1,669,956 (109,122) 186,720
---------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.................................. 91,710 (6) 14
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR.. 29 35 21
---------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR........ $ 91,739 $ 29 $ 35
========== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMA-
TION:
Cash received for interest................... $ 22,229 $ -- $ --
========== ======== ========
Cash paid for interest....................... $ 109,858 $ -- $ --
========== ======== ========
Cash paid for taxes.......................... $ 105,218 $ -- $ --
========== ======== ========
</TABLE>
See notes to consolidated financial statements.
34
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1.BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
BASIS OF PRESENTATION--Effective May 16, 1997, PanAmSat Corporation (the
"Company") acquired the business of PanAmSat International Systems, Inc. (then
operating under its previous name, PanAmSat Corporation) ("PanAmSat
International"). In connection with the acquisition, the net assets of the
Galaxy Business of Hughes Communications, Inc. (the "Galaxy Business") were
contributed to the Company. (As used herein, the Company refers to the
business and operations of PanAmSat Corporation and the Galaxy Business, its
predecessor entity.) The consideration paid to PanAmSat International's common
stockholders consisted of $1.5 billion in cash and 42.5 million shares of
common stock of the Company having an estimated value of $1.3 billion. The
acquisition of PanAmSat International was accounted for as a purchase and its
operating results have been consolidated from the date of acquisition. The
purchase price exceeded the estimated fair value of PanAmSat International's
net assets (principally satellites) by approximately $2.5 billion, which has
been allocated to goodwill and is being amortized on a straight-line basis
over forty years.
In a separate but related transaction, as a condition precedent to the
merger, the Company redeemed 7.5 million shares of its common stock that was
received by a PanAmSat International stockholder for $225 million in cash, and
these proceeds were used by the former PanAmSat International stockholder to
acquire the Company's rights to equity interests in certain direct-to-home
businesses in Latin America and the Iberian Peninsula (the "DTH Rights").
In connection with the transactions described above, the Company borrowed
$1.725 billion from Hughes Electronics Corporation ("Hughes"), a wholly owned
subsidiary of General Motors Corporation ("GM") and owner of 71 1/2% of the
Company's common stock. The Hughes borrowings initially had a term of three
years, a floating interest rate of London Interbank Offered Rate ("LIBOR")
plus 2% and quarterly principal payments of $50 million commencing in August
1998. (See Note 7 for a description of certain modifications made to the terms
of these borrowings.)
As a result of the merger transactions described above (the "Merger"), the
Company acquired the indebtedness of PanAmSat International consisting
primarily of 9 3/4% Senior Secured Notes due 2000 and 11 3/8% Senior
Subordinated Discount Notes due 2003, as well as its 12 3/4% Mandatorily
Exchangeable Senior Redeemable Preferred Stock due 2005 (the "Preferred
Stock"). During the third quarter of 1997, PanAmSat International exchanged
the Preferred Stock into 12 3/4% Senior Subordinated Notes due 2005. These
debt instruments are collectively referred to as the "Old Notes."
The principal components of the Merger were as follows:
<TABLE>
<S> <C>
Fair value of assets acquired (excluding goodwill)............... $1,954,902
Goodwill......................................................... 2,470,000
Fair value of liabilities assumed (including Old Notes).......... (1,424,902)
Fair value of common stock issued................................ (1,275,000)
----------
Debt issued in connection with the Merger........................ 1,725,000
Less: Cash acquired.............................................. (238,734)
----------
Net cash paid in connection with the Merger...................... $1,486,266
==========
</TABLE>
35
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Unaudited pro forma summary results of operations as if PanAmSat
International had been acquired at the beginning of 1997 and 1996 are
presented below (in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenues.................................................. $755,980 $729,713
Income before extraordinary items......................... $118,628 $ 55,454
Net income................................................ $ 97,985 $ 55,454
Income before extraordinary item per share--basic and di-
luted.................................................... $ 0.80 $ 0.37
Net income per share--basic and diluted................... $ 0.66 $ 0.37
</TABLE>
The unaudited pro forma results of operations include adjustments to reflect
the issuance of certain indebtedness related to the Merger, fair value
adjustments and the recognition of goodwill associated with the transaction.
The unaudited pro forma results exclude the impact of PanAmSat International's
$225 million pre-tax gain on the sale of the DTH Rights, as well as certain
professional and advisory fees and other expenses incurred by PanAmSat
International in connection with the Merger totaling $31.6 million, both of
which are nonrecurring items which are not indicative of the Company's
ordinary course of business. The pro forma earnings per share for the years
ended December 31, 1997 and 1996 is calculated on a basic and diluted basis
using the pro forma average number of common shares assumed to be outstanding
during the period.
DESCRIPTION OF THE BUSINESS--PanAmSat is the world's largest commercial
provider of satellite-based communications services through its global network
of 17 satellites (excluding Brasilsat A1, which is in inclined orbit and does
not provide the Company with a significant source of revenues) that provide
state-of-the-art telecommunications services for customers worldwide. The
Company is a leading provider of satellite capacity for television program
distribution to network, cable and other redistribution sources in the United
States, Latin America, Africa, south Asia and the Asia-Pacific region. The
Company also provides satellite services and related technical support for
live transmissions for news and special events coverage. 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 and international access to the U.S. Internet backbone.
Prior to the Merger, the Galaxy Business was an operating division of a
wholly owned subsidiary of Hughes and its financial information for these
periods was derived from the historical financial statements of the subsidiary
based upon assumptions that the Company's management believes represent a
reasonable basis for presenting results of operations and financial position.
Financial data for these periods also included the allocation of certain
corporate expenses of Hughes and its wholly owned subsidiary based upon a
systematic allocation process that was uniformly applied to similar operating
business units of Hughes.
2.SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include
the accounts of the Company and its domestic and foreign subsidiaries. All
significant intercompany balances and transactions have been eliminated.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported therein. Due to the inherent
uncertainty involved in making estimates, actual results reported in future
periods may be based upon amounts that differ from those estimates.
REVENUE RECOGNITION--The Company enters into contracts to provide satellite
capacity and related services. Revenues are generated from outright sale,
sales-type lease and operating lease contracts with customers to provide
satellite transponders and transponder capacity and, in certain cases, earth
station and teleport facilities,
36
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
for periods ranging from one year to the life of the satellite. Virtually all
contracts stipulate payment terms in U.S. dollars.
Pursuant to an outright sale contract, all rights and title to a transponder
may be purchased. In connection with an outright sale, the Company recognizes
the sale amount as revenue and the cost basis of the transponder is removed
and charged to cost of sales. Contracts for the sale of transponders include a
telemetry, tracking and control ("TT&C") service agreement with the customer.
Lease contracts qualifying for capital lease treatment (typically based on
the term of the lease) are accounted for as sales-type leases. For sales-type
lease transactions, the Company recognizes as revenue the net present value of
the future minimum lease payments. The cost basis of the transponder is
removed and charged to cost of sales. During the life of the lease, the
Company recognizes as revenue in each respective period, that portion of each
periodic lease payment deemed to be attributable to interest income. The
balance of each periodic lease payment, representing principal repayment, is
recognized as a reduction of the net investment in sales-type leases. Interest
income from sales-type leases of approximately $38 million, $41 million and
$27 million is included in sales-type lease revenues for the years ended
December 31, 1997, 1996 and 1995, respectively.
Lease contracts that do not qualify as sales-type leases are accounted for
as operating leases. Operating lease revenues are recognized on a straight-
line basis over the lease term. Differences between operating lease payments
received and revenues recognized are deferred and included in operating lease
receivables. Revenues for occasional services are recognized as services are
performed and billed. The Company has certain obligations, including providing
spare or substitute capacity if available, in the event of satellite service
failure under certain long-term agreements. If no spare or substitute capacity
is available, the agreements may be terminated. Except for certain deposits,
the Company is not obligated to refund payments previously made.
The Company has entered into sale-leaseback agreements for the sale of
certain of its satellite transponders that are subject to operating leases.
Gains resulting from such transactions are deferred and amortized over the
leaseback period. Leaseback expense is recorded using the straight-line method
over the term of the lease, net of the amortization of the deferred gains.
Differences between operating leaseback payments made and expense recognized
are deferred and included in accrued operating leaseback expense.
Future cash payments expected from customers under all long-term
arrangements described above aggregate approximately $7.0 billion as of
December 31, 1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amounts of cash, accounts
receivables, accounts payable and accrued liabilities approximate their fair
values generally due to the short maturity of these items. The carrying amount
of the net investment in sales-type leases approximates fair value based on
the interest rates implicit in the leases.
At December 31, 1997, in connection with its debt refinancing activities,
the Company entered into certain U. S. Treasury rate lock contracts to reduce
its exposure to fluctuations in interest rates. The aggregate nominal value of
these contracts was $375 million and these contracts were accounted for as
hedges because they were applied to a specific refinancing plan that was
consummated shortly after December 31, 1997. The fair value of these financial
instruments at December 31, 1997 approximated their contract value. The cost
to unwind these instruments in 1998 will be amortized to expense over the term
of the newly placed debt securities to which such hedges were applied.
CONCENTRATION OF CREDIT RISK--The Company provides satellite transponders
and related services and extends credit to a large number of customers in the
commercial satellite communications market. Management monitors its exposure
to credit losses and maintains allowances for anticipated losses which are
charged to selling, general and administrative expenses. The currency in which
the majority of the contracts are denominated is the U.S. dollar.
37
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CASH AND CASH EQUIVALENTS--Cash and cash equivalents consists of cash on
hand and highly liquid investments with maturities at date of acquisition of
three months or less.
ACCOUNTS RECEIVABLE--Accounts receivable include amounts earned under
service agreements and occasional services which are billable as performed. An
allowance for doubtful accounts was provided for in the amount of
approximately $1.0 million and $0.8 million at December 31, 1997 and 1996,
respectively.
SATELLITES AND OTHER PROPERTY AND EQUIPMENT--Satellites and other property
and equipment are stated at historical cost, or in the case of satellites
acquired from PanAmSat International, the fair value at the date of
acquisition. The capitalized cost of satellites includes all construction
costs, incentive obligations, launch costs, launch insurance, direct
development costs, and capitalized interest. Substantially all other property
and equipment consists of the Company's teleport facilities.
Depreciation and amortization are provided using the straight-line method
over the estimated useful lives of the respective assets as follows:
<TABLE>
<CAPTION>
ESTIMATED LIVES
(YEARS)
---------------
<S> <C>
Satellite systems under development.......................... --
Satellites in service........................................ 13-15
Communications equipment..................................... 7
General support equipment.................................... 5-10
Buildings.................................................... 25
</TABLE>
The estimated useful lives of the satellites are determined by an
engineering analysis performed at the initial in-service dates. Estimated
useful lives are periodically reviewed using current TT&C data provided by
various service providers. To date, no significant change in the original
estimated useful lives has resulted. The telecommunications industry is
subject to rapid technological change which may require the Company to revise
the estimated useful lives of its satellites and communications equipment or
to adjust their carrying amounts.
EVALUATION OF LONG-LIVED ASSETS--The Company periodically evaluates
potential impairment loss relating to long-lived assets, including goodwill,
by assessing whether the unamortized carrying amount can be recovered over the
remaining life through undiscounted future expected cash flows generated by
the underlying assets.
DEBT ISSUANCE COSTS--Included in Deferred Charges in the accompanying
balance sheet are debt issuance costs incurred in connection with the $1.725
billion loan from Hughes of $17.3 million at December 31, 1997, which are
being amortized on a straight line basis over the life of the loan. The
accumulated amortization at December 31, 1997 is approximately $3.6 million.
GOODWILL--Goodwill is primarily related to the acquisition of PanAmSat
International and is being amortized over 40 years. Accumulated amortization
was $77.8 million at December 31, 1997.
DEFERRED REVENUES--The Company enters into agreements with its customers
under which they make prepayments for services to be rendered over a specific
period. Payments received are deferred and amortized over the periods of
performance.
TRANSPONDER INSURANCE--The Company accrues an obligation for the present
value of estimated in-orbit performance insurance costs on transponder sale,
sales-type lease and other agreements with performance warranty provisions,
concurrently with the recognition of the related revenue. The Company also
purchases insurance for the replacement value of its owned satellite
transponders. Premiums paid relative to such insurance are amortized to
expense over the insurance policy terms, which are typically one to three
years.
38
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INCOME TAXES--The provision for income taxes is based upon reported income
before income taxes. Deferred income tax assets and liabilities reflect the
impact of temporary differences between the amounts of assets and liabilities
recognized for financial reporting purposes and such amounts recognized for
tax purposes, as measured by applying currently enacted tax laws. The Company
and its domestic subsidiaries file a consolidated U. S. Federal income tax
return.
Prior to the Merger, Hughes Communications, Inc. (which owned the Galaxy
Business), along with other Hughes subsidiaries, joined with GM in filing a
consolidated U.S. Federal tax return. Current and deferred income taxes were
computed by Hughes and allocated to the Company in accordance with principles
established by Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Hughes paid the Company's share of the
consolidated income tax liability. The income taxes that would have been paid
by Galaxy if it were a separate taxpayer but were not paid under the Hughes
policy resulted in an increase in the parent company's net investment.
EARNINGS PER SHARE--The Company has adopted Statement of Financial
Accounting Standards No. 128, Earnings Per Share, which supercedes Accounting
Principles Board No. 15, Earnings Per Share, and modifies the presentation of
primary earnings per share ("EPS") on the face of the income statement. As the
Company was an operating division of Hughes for all periods prior to the
merger, presentation of EPS data for the years ended December 31, 1997, 1996
and 1995 have not been presented on the face of the income statement.
STOCK-BASED COMPENSATION--As permitted by Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation, the Company
accounts for stock-based awards to employees using the intrinsic value method
in accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
RECLASSIFICATION--Certain prior period amounts have been reclassified to
conform with the current year's presentation.
NEW ACCOUNTING PRONOUNCEMENTS--The financial accounting Standards Board
issued Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure," Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," and Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in 1997. The Company will adopt the
disclosure requirements of these statements in 1998.
3.NET INVESTMENT IN SALES-TYPE LEASES
The components of net investment in sales-type leases are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Total minimum lease payments........................... $ 662,453 $ 696,723
Allowance for doubtful accounts........................ (12,897) (17,968)
Less unearned interest income.......................... (297,110) (337,511)
--------- ---------
Total net investment in sales-type leases.............. 352,446 341,244
Less current portion................................... (27,757) (20,634)
--------- ---------
$ 324,689 $ 320,610
========= =========
</TABLE>
39
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum payments due from customers under sales-type leases and
related service agreements (primarily TT&C and in-orbit performance
protection) as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
MINIMUM SERVICE
LEASE AGREEMENT
PAYMENTS PAYMENTS
-------- ---------
<S> <C> <C>
1998...................................................... $ 70,256 $ 7,860
1999...................................................... 77,440 9,800
2000...................................................... 76,093 9,720
2001...................................................... 77,391 9,720
2002...................................................... 77,926 9,720
2003 and thereafter....................................... 283,347 22,020
-------- -------
$662,453 $68,840
======== =======
</TABLE>
4.SATELLITES AND OTHER PROPERTY AND EQUIPMENT--NET
The Company's principal operating assets consists of satellites in service,
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Satellite transponders under lease.................... $1,713,409 $ 602,059
Satellite systems under development................... 1,038,886 316,332
Buildings and leasehold improvements.................. 42,078 41,632
Machinery and equipment............................... 136,989 92,573
Other................................................. 11,406 8,346
---------- ---------
2,942,768 1,060,942
Less accumulated depreciation......................... (436,686) (340,717)
---------- ---------
$2,506,082 $ 720,225
========== =========
</TABLE>
At December 31, 1997, the Company had contracts for the construction and
development of six satellites with two satellite vendors. Satellite contracts
typically require the Company to make progress payments during the period of
the satellite's construction and orbital incentive payments (plus interest)
over the orbital life of the satellite. The incentive obligations are subject
to reduction or refund if the satellite fails to meet specific technical
operating standards. The satellite construction contracts contain provisions
that would enable the Company to terminate the contracts both with and without
cause. If terminated without cause, the Company would forfeit its progress
payments and be subject to termination payments that escalate with the passage
of time. If terminated for cause, the Company would be entitled to recover any
payments it made under the contracts and certain liquidated damages as
specified in the contracts.
The Company has entered into launch contracts for the launch of both
specified and unspecified future satellites. Each of the Company's launch
contracts provide that the Company may terminate such contract at its option,
subject to payment by the Company of a specified termination liability that
increases in magnitude as the applicable launch date approaches. In addition,
in the event of a failure of any launch, the Company may exercise the right to
obtain a replacement launch within a specified period following the Company's
request for relaunch.
On August 8, 1997, the Company launched its PAS-6 satellite which commenced
service on September 19, 1997 after successfully completing its in-orbit
testing. After launch, an anomaly was detected in PAS-6's solar arrays
affecting several of the onboard electrical circuits that provide power to the
satellite's transponders. The
40
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
circuit failures will require the Company to forego the use of some
transponders initially, and turn off additional transponders in later years.
However, the ability of transponders to provide transmission power for DTH
signal reception to meet the customer's requirements is not affected. The
Company is working with its customers on PAS-6 to ensure that the Company's
services continue to meet their needs. Management has evaluated the effects of
this anomaly and has determined that no impairment loss has occurred.
On March 9, 1998, the Company announced that it had entered into
arrangements with its customers to build a new satellite to be designated as
PAS-6B. In connection with these arrangements, the Company entered into an
amendment to its agreements with its customers on PAS-6 (the "PAS-6B DTH
Amendments"). Under these amendments, the Company will acquire a new Hughes HS
601 HP satellite that is scheduled to be launched on an Ariane IV launch
vehicle in the fourth quarter of 1998. The Company is exploring its options
for the deployment and use of the original PAS-6 satellite and anticipates
using this satellite as either a back-up for PAS-6B or moving it to another
orbital location for other purposes. Management believes that it will be able
to generate sufficient future cash flows on PAS-6 to enable it to recover the
carrying value of its investment in the satellite. In addition, the Company
has filed an insurance claim relating to PAS-6 and expects to receive a
payment of approximately $29 million from the insurance carrier.
Future minimum lease payments due from customers under non-cancelable
operating leases on completed satellites, exclusive of sublease payments
reported below are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
MINIMUM LEASE
PAYMENTS
-----------------
<S> <C>
1998....................................................... $ 695,864
1999....................................................... 666,102
2000....................................................... 612,164
2001....................................................... 571,626
2002....................................................... 505,210
2003 and thereafter........................................ 2,721,459
----------
$5,772,425
==========
</TABLE>
In February 1996, the Company entered into a sale-leaseback agreement for
certain transponders on Galaxy III-R with General Motors Acceptance
Corporation ("GMAC"), a subsidiary of GM. Proceeds from the sale were $252
million and the sale resulted in a gain of $109 million, which was deferred
and is being amortized over the seven-year leaseback period. The transponders
on Galaxy III-R are currently under month-to-month subleases pending the
planned conversion of the satellite from international to domestic service in
early 1998. Accordingly, there are no sublease payments on these transponders
in the table below. In prior years, the Company entered into sale-leaseback
agreements for the sale of certain transponders on SBS-6 and Galaxy VII,
resulting in deferred gains which are being amortized over the leaseback
periods. The transponder leaseback terms include early buy-out options as
follows: $152 million in 1998 (for which an early buy-out option for $96.6
million relating to transponders on SBS-6 was exercised by the Company in
January 1998) and $366 million in 1999.
41
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1997, the future minimum lease amounts payable to lessors
under the sale-leaseback agreements and the future minimum payments due from
subleases under noncancelable subleases are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------
LEASEBACK SUBLEASE
AMOUNTS PAYMENTS
--------- --------
<S> <C> <C>
1998...................................................... $102,469 $ 76,555
1999...................................................... 133,269 74,946
2000...................................................... 164,657 69,693
2001...................................................... 90,930 67,031
2002...................................................... 138,278 56,477
2003 and thereafter....................................... 228,471 159,512
-------- --------
$858,074 $504,214
======== ========
</TABLE>
5.LONG-TERM DEBT
As of December 31, 1997 and 1996, long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Borrowings under bank agreements......................... $600,000 $ --
Incentive obligations.................................... 42,500 --
Other.................................................... 10,193 --
-------- --------
652,693 --
Less current maturities.................................. (12,570) --
-------- --------
$640,123 $ --
======== ========
</TABLE>
In December 1997, the Company commenced a debt tender offer and
restructuring program (the "Program") for the Old Notes. In connection with
the Program, the Company purchased approximately 99% of the principal amount
of each class of the Old Notes then outstanding. The Company also entered into
a bank borrowing agreement (the "Bank Agreement") that provided for bridge
loans of up to $300 million (terminating in April 1998) and loans of up to
$500 million under a five-year revolving credit facility. Using $600 million
in borrowings under the Bank Agreement (including $100 million under the
bridge loans) and available cash (including cash from the liquidation of
certain marketable securities), the Company retired Old Notes having a
principal value of approximately $1.1 billion. The debt refinancing Program
resulted in the recognition of an extraordinary charge of $20.6 million ($34.3
million before taxes) related principally to the excess of the price paid for
the debt over its carrying value, net of any deferred financing costs and fair
value adjustments recognized in connection with the Merger.
In January 1998, the Company borrowed an additional amount of $125 million
under the Bank Agreement principally for the purpose of exercising an early
buy-out option on a sale-leaseback agreement. Also in January 1998, the
Company completed a private placement debt offering for five, seven, ten and
thirty year notes aggregating $750 million (the "Notes Offering"), the
proceeds of which were used to retire all of the outstanding borrowings under
the Bank Agreement. As a result of the Notes Offering, the bridge loan under
the Bank Agreement terminated, and the five year revolving credit facility
remains in effect. Because all of the bank borrowings were refinanced on a
long term basis shortly after year end, these amounts have been classified as
long term as of December 31, 1997.
42
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C>
1998.............................................................. $ 12,570
1999.............................................................. 12,180
2000.............................................................. 7,819
2001.............................................................. 148
2002.............................................................. --
2003 and thereafter............................................... 619,976
--------
$652,693
========
</TABLE>
Interest expense for 1997 is presented net of $19.6 million of interest
income.
6.INCOME TAXES
The income tax provision consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Taxes currently payable (receivable) U.S. Fed-
eral and state................................ $(11,740) $111,294 $80,252
Deferred tax (assets) liabilities--net U.S.
Federal and state............................. 129,065 (21,399) (18,235)
-------- -------- -------
Total income tax provision..................... $117,325 $ 89,895 $62,017
======== ======== =======
</TABLE>
The income tax provision was different than the amount computed using the
U.S. statutory income tax rate for the reasons set forth in the following
table:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Expected tax at U.S. statutory income tax rate.. $ 92,266 $83,902 $57,882
U.S. state and local income taxes--net of fed-
eral income tax effect......................... 12,900 14,479 9,989
Foreign sales corporation tax benefit........... (9,485) (9,589) (6,615)
Non-deductible goodwill amortization............ 14,527 -- --
Other........................................... 7,117 1,103 761
-------- ------- -------
Total income tax provision...................... $117,325 $89,895 $62,017
======== ======= =======
</TABLE>
Temporary differences which gave rise to deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
DEFERRED DEFERRED
TAX DEFERRED TAX DEFERRED
ASSETS TAX LIABILITIES ASSETS TAX LIABILITIES
-------- --------------- -------- ---------------
<S> <C> <C> <C> <C>
Sales and leasebacks....... $ 85,780 $ -- $111,049 $ --
Depreciation............... -- 238,476 -- 71,616
Launch insurance costs..... -- 41,175 -- --
Customer deposits.......... 23,854 -- -- --
Accruals and advances...... 29,969 -- 29,841 --
Other...................... 14,275 6,554 5,788 --
-------- -------- -------- -------
Total deferred taxes....... $153,878 $286,205 $146,678 $71,616
======== ======== ======== =======
</TABLE>
At December 31, 1997, the Company had non-current deferred tax liabilities
of $286,205 and deferred tax assets of $153,878, of which $46,940 are current
in nature. At December 31, 1996, the Company had deferred tax assets of
$75,062, of which $46,989 was current in nature.
43
<PAGE>
PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7.RELATED PARTY TRANSACTIONS AND BORROWINGS
The Company purchases certain of its satellites and launch services from a
subsidiary of Hughes and has provided services to several subsidiaries of
Hughes. The Company also reimburses Hughes for the allocated costs of certain
expense items it jointly incurs with Hughes, principally relating to
administrative and other expenses. The aggregate amounts of related party
transactions in 1997 are summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Satellite Purchases............................... $345,546 $196,400 $115,337
Satellite Services Revenues:
Operating lease revenues........................ 87,235 72,043 26,261
Other satellite services........................ 5,363 11,397 18,513
Allocations of Expenses:
Administrative and other expenses............... 9,005 11,016 12,242
Interest expense................................ 91,020 19,475 15,924
</TABLE>
Interest expense for 1997 is presented net of $8.4 million of interest
income.
The following table provides summary information relative to the Company's
related party borrowings from Hughes and its affiliates:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ---------
<S> <C> <C>
Merger related borrowings (see Note 1)................ $1,725,000 $ --
Incentive obligations................................. 80,819 --
Other................................................. 204 --
---------- ---------
1,806,023 --
Less current maturities............................... (3,828) --
---------- ---------
Total due to Affiliates............................... $1,802,195 $ --
========== =========
</TABLE>
In connection with the Notes Offering described in Note 5, the Company also
modified the terms of its indebtedness with Hughes so that the maturity of the
borrowings was extended to June 24, 2003, the mandatory principal payments
were eliminated (however, prepayments of principal are permitted under certain
circumstances depending upon the level of cash flow from operations), the
interest rate on the debt was adjusted to be a floating rate equal to that of
the Bank Agreement, and the debt became subordinated to the Bank Agreement and
the Notes Offering. In addition, subsequent to May 16, 2000 (the original
maturity of the indebtedness), Hughes has the right to request that the
Company use its best efforts to replace the credit facility with another
Hughes credit facility on terms that may then be available to the Company.
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C>
1998............................................................ $ 3,828
1999............................................................ 4,015
2000............................................................ 4,435
2001............................................................ 4,900
2002............................................................ 5,413
2003 and thereafter............................................. 1,783,432
----------
$1,806,023
==========
</TABLE>
44
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PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8.RETIREMENT AND INCENTIVE PLANS
EMPLOYEE BENEFIT PLANS:
DEFINED CONTRIBUTION PLANS 401(K) PLAN--The Company has a 401(k) plan for
qualifying employees. A portion of employee contributions is matched by the
Company with shares of its common stock. The number of shares contributed to
the plan and the respective market values for 1997 were 12,847 shares and $0.5
million, respectively.
DEFERRED COMPENSATION PLAN--The Company has a Restoration and Deferred
Compensation Plan (the "Deferred Compensation Plan") for eligible employees.
Under the Deferred Compensation Plan, executives and other highly compensated
employees of the Company are entitled to defer a portion of their compensation
to future years. The annual amount that can be deferred is subject to certain
limitations, and a portion of the employee's contribution may be matched by
the Company if the employee elected to defer in the 401(k) Plan the maximum
amount permissible under the Deferred Compensation Plan and the Internal
Revenue Code of 1986, as amended. The maximum annual Company match under both
the 401(k) Plan and the Deferred Compensation Plan is limited to an aggregate
level of 4% of annual compensation. The Company matched portion of the
Deferred Compensation Plan consists of "credits" which vest when awarded.
Contributions that receive employer matching are required to be deferred until
termination of employment, and any nonmatched contributions may be deferred
over a period selected by the employee. In addition, the Company, at its
discretion, may make contributions to the Plan for the benefit of any
participant as supplemental compensation. The Deferred Compensation Plan is an
unfunded plan, and the deferrals and matching credits will receive earnings
based upon rates set by the Compensation Committee of the Board of Directors
(the "Compensation Committee"), but in no event will these amounts earn less
than 100% of the Moody's Corporate Bond Index Rate.
1997 STOCK INCENTIVE PLAN--On May 5, 1997, the Company's Board of Directors
adopted the PanAmSat Corporation Long-Term Stock Incentive Plan established in
1997 (the "Stock Plan"), which provides for the granting of nonqualified stock
options, incentive stock options, alternate appreciation rights, restricted
stock, performance units and performance shares to executive officers, other
employees, directors and independent contractors of the Company. Restricted
stock, performance units and performance shares may be granted at the
discretion of the Compensation Committee on such terms as such committee may
decide. The maximum number of shares of common stock which may be issued under
the Stock Plan is 7,456,140 and the maximum number of shares of common stock
which may be issued to any grantee pursuant to the Stock Plan is 2,000,000.
The Stock Plan is administered by the Compensation Committee. As of December
31, 1997, nonqualified options for 584,890 shares of common stock have been
granted under the Stock Plan. Such options are exercisable at a price equal to
100% of the fair market value at the date of grant and vest ratably over three
years.
As permitted by Statement of Financial Accounting Standards No. 123
"Accounting for Stock Based Compensation" ("SFAS 123"), the Company has
applied the recognition and measurement principles of Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued To Employees" to its stock
options and other stock-based compensation awards and, accordingly, no
compensation expense has been recognized on options granted to date. Options
outstanding at December 31, 1997 have exercise prices ranging from $29.00--
$38.25 per share (weighted average of $29.09 per share), a remaining life of
approximately nine and one-half years, and none of the options are
exercisable. Had compensation expense for stock options granted been
determined based on the fair value of the options at the grant dates
(consistent with the provisions of SFAS 123), the Company's net income for
1997 would have been reduced by approximately $2.0 million.
The Company uses the Black-Scholes model for estimating the fair value of
its compensation instruments. The estimated fair value of options granted in
1997 was $16.80 and the weighted average assumptions used for
45
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PANAMSAT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
calculation of the value were as follows; risk-free interest rate of 6.7%;
dividend yield 0%; expected life of ten years; and stock volatility of 30%.
COMPENSATION PLANS--On May 16, 1997, the Company assumed the certain
obligations of PanAmSat International with respect to its General Severance
Policy, Employee Separation Plan and an Executive Severance Pay Program. These
plans allow for benefits to be paid to the former employees of PanAmSat
International who became employees of the Company as a result of the Merger
under certain circumstances relating to a termination of employment. The
benefits provided under these programs expire at various dates through May
1999. During 1997, there were no material payments made under these programs.
9.COMMITMENTS AND CONTINGENCIES
The Company has commitments for operating leases primarily relating to
equipment and its executive office facilities in Greenwich, Connecticut and
various other locations. These leases contain escalation provisions for
increases as a result of increases in real estate taxes and operating
expenses. Minimum annual rentals of all leases, exclusive of potential
increases in real estate taxes and operating assessments, are as follows:
<TABLE>
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1998................................................................. $ 2,335
1999................................................................. 2,315
2000................................................................. 2,088
2001................................................................. 1,894
2002................................................................. 1,653
2003 and thereafter.................................................. 4,117
-------
$14,402
=======
</TABLE>
In October 1996, Comsat Corporation ("Comsat") initiated an action seeking
unspecified actual, consequential and punitive or exemplary damages against
PanAmSat International, Televisa and News Corporation ("News"). The complaint
alleges that the Company interfered with the alleged termination by News of an
alleged contract between Comsat and News. Although the Company believes this
action is without merit and intends to vigorously contest this matter, it is
unable to predict the final outcome of this action at this time.
The Company is involved in other litigation in the normal course of its
operations. Management does not believe the outcome of such matters will have
a material effect on the consolidated financial statements.
10.QUARTERLY FINANCIAL INFORMATION--UNAUDITED
THREE MONTHS ENDED
---------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
--------- -------- ------------- ------------
Revenues...................... $127,553 $134,192 $170,315 $197,879
Operating income.............. 67,511 62,098 70,766 93,829
Income before extraordinary
item......................... 41,853 19,902 27,416 44,301
Net income.................... 41,853 19,902 27,416 23,658
Income before extraordinary
item per common share--basic
and diluted.................. 0.18 0.30
Net income per common share--
basic and diluted............ 0.18 0.16
46
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See the information set forth under the captions "Election of Directors" and
"Executive Officers of the Company" contained in the Company's Proxy Statement
(to be filed not later than 120 days after the end of the Company's fiscal
year) for the 1998 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
See the information set forth under the caption "Executive Compensation" (up
to but not including the subcaption "Report of the Compensation Committee on
Executive Compensation") contained in the Company's Proxy Statement (to be
filed not later than 120 days after the end of the Company's fiscal year) for
the 1998 Annual Meeting of Stockholders, which information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" contained in the Company's Proxy
Statement (to be filed not later than 120 days after the end of the Company's
fiscal year) for the 1998 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the information set forth under the subcaptions "Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions" under the
caption "Executive Compensation" contained in the Company's Proxy Statement
(to be filed not later than 120 days after the end of the Company's fiscal
year) for the 1998 Annual Meeting of Stockholders, which information is
incorporated herein by reference.
47
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)1.FINANCIAL STATEMENTS
See Index to Financial Statements on page 28.
2.FINANCIAL STATEMENT SCHEDULES
Financial statement schedules are omitted because of the absence of
the conditions under which they are required, or because the
information is set forth in the financial statements or notes
thereto.
(B)REPORTS ON FORM 8-K
During the last quarter of 1997, the Company did not file any
Current Reports on Form 8-K with the Securities and Exchange
Commission.
(C)EXHIBITS
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2.1 Agreement and Plan of Reorganization, dated September 20, 1996, among
Hughes Communications, Inc., Hughes Communications Galaxy, Inc.,
Hughes Communications Satellite Services, Inc., Hughes Communications
Services, Inc., Hughes Communications Carrier Services, Inc., Hughes
Communications Japan, Inc., PanAmSat Corporation (formerly known as
Magellan International, Inc. ("PanAmSat")) and PanAmSat International
Systems, Inc. (formerly known as PanAmSat Corporation and successor
corporation to PanAmSat, L.P. ("PanAmSat International")) is
incorporated herein by reference to Exhibit 2.3 to PanAmSat
International's Quarterly Report on Form 10-Q for the period ended
June 30, 1996.
2.2 Amendment to Agreement and Plan of Reorganization dated as of April 4,
1997 constituting Exhibit 2.1 hereto is incorporated herein by
reference to Appendix AA to the Proxy Statement/Prospectus (the "Proxy
Statement/Prospectus") contained in PanAmSat's Registration Statement
on Form S-4 (Reg. No. 333-25293) filed on April 16, 1997 (the
"Registration Statement").
2.3 Agreement and Plan of Merger, dated as of April 4, 1997, among
PanAmSat International, PAS Merger Corp. and PanAmSat is incorporated
herein by reference to Appendix B to the Proxy Statement/Prospectus.
2.4 Assurance Agreement, dated September 20, 1996, between Hughes
Electronics Corporation, PanAmSat International, Satellite Company,
L.L.C. and PanAmSat is incorporated herein by reference to Appendix K
to the Proxy Statement/Prospectus.
2.5 Principal Stockholders Agreement, dated September 20, 1996, among
Hughes Communications, Inc., Hughes Communications Galaxy, Inc.,
Satellite Company, L.L.C., Univisa Satellite Holdings, Inc., the
holders of Class A Common Stock of PanAmSat International and the
Trustees of that certain Voting Trust of certain holders of Class A
Common Stock of PanAmSat International is incorporated herein by
reference to Appendix L to the Proxy Statement/Prospectus.
2.6 Stock Contribution and Exchange Agreement, dated September 20, 1996,
among Grupo Televisa, S.A., Satellite Company, L.L.C., PanAmSat and
Hughes Communications, Inc. is incorporated herein by reference to
Exhibit 2.4 to the Registration Statement.
3.1 Restated Certificate of Incorporation of PanAmSat.
3.2 Restated Bylaws of PanAmSat.
</TABLE>
48
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4.1 Amended and Restated Stockholder Agreement, dated as of May 16,
1997, by and among PanAmSat, Hughes Communications, Inc., Satellite
Company, LLC and the former holders of Class A Common Stock of
PanAmSat International is incorporated herein by reference to
Appendix M to the Proxy Statement/Prospectus.
4.2 Amended and Restated Registration Rights Agreement, dated as of May
16, 1997, by and among PanAmSat, Hughes Communications, Inc.,
Hughes Communications Galaxy, Inc., Hughes Communications Satellite
Services, Inc., Satellite Company, LLC and the former holders of
Class A Common Stock of PanAmSat International is incorporated
herein by reference to Appendix N to the Proxy
Statement/Prospectus.
4.3.1 Loan Agreement, dated May 15, 1997, between Hughes Network Systems,
Inc. and PanAmSat is incorporated by reference to Exhibit 4.3 to
PanAmSat's Current Report on Form 8-K dated June 5, 1997.
4.3.2 First Amendment to Loan Agreement, constituting Exhibit 4.3.1
hereto, dated as of December 23, 1997, between Hughes Electronics
Corporation and PanAmSat.
4.3.3 Subordination and Amendment Agreement, dated as of February 20,
1998, among Hughes Electronics Corporation, PanAmSat and Citicorp
USA, Inc., as administrative agent.
4.4 Indenture, dated as of January 16, 1998, between PanAmSat and The
Chase Manhattan Bank, as Trustee.
10.1 Participation Agreement, dated as of December 27, 1991, among
Satellite Transponder Leasing Corporation, GM Hughes Electronics
Corporation, Security Pacific Equipment Leasing, Inc., Wilmington
Trust Company, State Street Bank and Trust Company of Connecticut,
National Association ("State Street") and Goldman, Sachs & Co. is
incorporated herein by reference to Exhibit 10.1 to the
Registration Statement.
10.2 Lease Agreement, dated as of December 27, 1991, among GM Hughes
Electronics Corporation, Satellite Transponder Leasing Corporation
and Wilmington Trust Company is incorporated herein by reference to
Exhibit 10.2 to the Registration Statement.
10.3 Participation Agreement, dated as of December 27, 1991, among
Satellite Transponder Leasing Corporation, GM Hughes Electronics
Corporation, Student Loan Marketing Association, Wilmington Trust
Company, State Street and Goldman Sachs & Co. is incorporated
herein by reference to Exhibit 10.3 to the Registration Statement.
10.4 Lease Agreement, dated as of December 27, 1991, among GM Hughes
Electronics Corporation, Satellite Transponder Leasing Corporation
and Wilmington Trust Company is incorporated herein by reference to
Exhibit 10.4 to the Registration Statement.
10.5.1 Participation Agreement and Purchase Agreement, dated as of August
21, 1992, among Hughes Communications Galaxy, Inc., Orion One,
Inc., State Street, Wilmington Trust Company, Hughes
Communications, Inc. and BT Securities Corporation, as agent is
incorporated herein by reference to Exhibit 10.5.1 to the
Registration Statement.
10.5.2 First Amendment to Participation Agreement and Purchase Agreement,
constituting Exhibit 10.5.1 hereto, dated as of December 24, 1992,
among Hughes Communications Galaxy, Inc., Orion One, Inc., State
Street, Hughes Communications, Inc., Wilmington Trust Company, BT
Securities Corporation, as agent, and the other participants to the
Transponder Purchase Agreement is incorporated herein by reference
to Exhibit 10.5.2 to the Registration Statement.
10.5.3 Second Amendment to Participation Agreement and Purchase Agreement,
constituting Exhibit 10.5.1 hereto, dated as of June 18, 1993,
among Hughes Communications Galaxy, Inc., Orion One, Inc., State
Street, CIBC Inc., Internationale Nederlanden Lease Structured
Finance B.V., Wilmington Trust Company and BT Securities
Corporation, as agent is incorporated herein by reference to
Exhibit 10.5.3 to the Registration Statement.
</TABLE>
49
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10.6.1 Lease Agreement, dated as of December 31, 1992, by and between
Hughes Communications Galaxy, Inc. and State Street is incorporated
herein by reference to Exhibit 10.6.1 to the Registration
Statement.
10.6.2 First Amendment to Lease Agreement constituting Exhibit 10.6.1,
dated as of June 18, 1993, by and between Hughes Communications
Galaxy, Inc. and State Street is incorporated herein by reference
to Exhibit 10.6.2 to the Registration Statement.
10.7 Schedule identifying certain agreements that have been omitted on
the basis that such agreements are substantially identical to the
agreements filed as Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and
10.6.2 hereto is incorporated herein by reference to Exhibit 10.7
to the Registration Statement.
10.8.1 Launch Services Agreement No. 9411-002, dated November 14, 1994,
between Lockheed-Khrunichev-Energia International, Inc. and
PanAmSat International is incorporated herein by reference to
Exhibit 10.10 to Amendment No. 3 to PanAmSat International's
Registration Statement on Form S-1 (Reg. No. 33-84836), dated March
9, 1995. (1)
10.8.2 First Amendment to Launch Services Agreement No. 9411-002
constituting Exhibit 10.8.1 hereto, dated March 30, 1995, between
Lockheed-Khrunichev-Energia International, Inc. and PanAmSat
International is incorporated herein by reference to Exhibit
10.10.2 to Amendment No. 1 to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995.
(1)
10.8.3 Second Amendment to Launch Services Agreement No. 9411-002
constituting Exhibit 10.8.1 hereto, dated June 9, 1995, between
Lockheed-Khrunichev-Energia International, Inc. and PanAmSat
International is incorporated herein by reference to Exhibit
10.10.3 to Amendment No. 1 to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-95396), dated August 17, 1995.
(1)
10.8.4 Amendment Number 3 to Launch Services Agreement No. 9411-002
constituting Exhibit 10.8.1 hereto, dated August 23, 1996, between
Lockheed-Khrunichev-Energia International, Inc. and PanAmSat
International is incorporated herein by reference to Exhibit
10.10.4 to PanAmSat International's Quarterly Report on Form 10-Q
for the period ended September 30, 1996. (1)
10.9.1 Agreement for the Launching into Geostationary Transfer Orbit of
the PanAmSat 6 Satellite by an Ariane Launch Vehicle, No. 94.5.918,
dated November 21, 1994, between PanAmSat International and
Arianespace S.A. is incorporated herein by reference to Exhibit
10.12 to Amendment No. 4 to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-84836), dated March 29, 1995.
(1)
10.9.2 Amendment No. 1 to Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch
Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated May
1995, between PanAmSat International and Arianespace S.A. is
incorporated herein by reference to Exhibit 10.12.2 to Amendment
No. 1 to PanAmSat International's Registration Statement on Form S-
1 (Reg. No. 33-95396), dated August 17, 1995. (1)
10.9.3 Amendment No. 2 to Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch
Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated as
of April 29, 1996, between PanAmSat International and Arianespace
S.A. is incorporated herein by reference to Exhibit S-1 to PanAmSat
International's Quarterly Report on Form 10-Q for the period ended
March 31, 1996.
</TABLE>
50
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10.9.4 Amendment No. 3 to Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an Ariane Launch
Vehicle, No. 94.5.918 constituting Exhibit 10.9.1 hereto, dated
December 31, 1996, between PanAmSat International and Arianespace
S.A. is incorporated herein by reference to Exhibit 10.12.8 to
PanAmSat International's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996. (1)
10.10.1 Memorandum of Understanding, dated as of March 27, 1995, between
Grupo Televisa, S.A. and PanAmSat International is incorporated
herein by reference to Exhibit 10.13 to Amendment No. 4 to
PanAmSat International's Registration Statement on Form S-1
(Reg. No. 33-84836), dated March 29, 1995. (1)
10.10.2 Revised DTH System in Latin America Memorandum of Understanding,
dated as of September 20, 1996, between PanAmSat International and
Grupo Televisa, S.A. is incorporated herein by reference to
Exhibit 10.13.2 to PanAmSat International's Quarterly Report on
Form 10-Q for the period ended September 30, 1996.
10.11.1 Satellite Purchase Contract, dated as of March 31, 1995, between
Hughes Aircraft Company and PanAmSat International is incorporated
by reference to Exhibit 10.14 to Amendment No. 5 to PanAmSat
International's Registration Statement on Form S-1 (Reg. No. 33-
84836), dated April 13, 1995. (1)
10.11.2 Amendment No. 1 to Satellite Purchase Contract constituting
Exhibit 10.11.1 dated as of September 3, 1996, between Hughes
Aircraft Company and PanAmSat International is incorporated herein
by reference to Exhibit 10.14.1 to PanAmSat's Quarterly Report on
Form 10-Q for the period ended September 30, 1996. (1)
10.12 Galaxy IX Satellite and Services Contract, No. 95-HCG-001, dated
August 7, 1995, between Hughes Communications Galaxy, Inc. and
Hughes Space and Communications Company is incorporated herein by
reference to Exhibit 10.12 to the Registration Statement. (1)
10.13 Letter Agreement, dated November 29, 1995, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy X and Galaxy XI is
incorporated herein by reference to Exhibit 10.13 to the
Registration Statement. (1)
10.14 Galaxy VIII-I Satellite and Services Contract (95-HCG-002), dated
October 31, 1995, between Hughes Communications Galaxy, Inc. and
Hughes Space and Communications Company is incorporated herein by
reference to Exhibit 10.14 to the Registration Statement. (1)
10.15.1 Agreement for the Launching into Geostationary Transfer Orbit of
PanAmSat Satellites by an Ariane Launch Vehicle, No. 95.5.933,
dated as of December 20, 1995, between PanAmSat International and
Arianespace S.A. is incorporated herein by reference to Exhibit
10.12.3 to PanAmSat International's Quarterly Report on Form 10-Q
of the Registrant for the period ended March 31, 1996. (1)
10.15.2 Side Letter to Agreement for Launching into Geostationary Transfer
Orbit of PanAmSat Satellites by an Ariane Launch Vehicle, No.
95.5.933, dated as of December 20, 1995, between PanAmSat
International and Arianespace S.A., constituting Exhibit 10.15.1
hereto, is incorporated herein by reference to Exhibit 10.12.4 to
PanAmSat International's Quarterly Report on Form 10-Q for the
period ended March 31, 1996. (1)
10.15.3 Amendment No. 1 to Agreement for Launching into Geostationary
Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle,
No. 95.5.933, dated as of April 29, 1996, between PanAmSat
International and Arianespace S.A., constituting Exhibit 10.15.1
hereto, is incorporated herein by reference to Exhibit 10.12.5 to
PanAmSat International's Quarterly Report on Form 10-Q for the
period ended March 31, 1996.
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51
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10.15.4 Amendment No. 2 to Agreement for Launching into Geostationary
Transfer Orbit of PanAmSat Satellites by an Ariane Launch Vehicle,
No. 95.5.933, dated December 31, 1996, between PanAmSat
International and Arianespace S.A., constituting Exhibit 10.15.1
hereto, is incorporated herein by reference to Exhibit 10.12.6 to
PanAmSat International's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996. (1)
10.16 Participation Agreement, dated as of February 7, 1996, among
Hughes Communications Galaxy, Inc., General Motors Acceptance
Corporation, Wilmington Trust Company, Chemical Bank and the
lending institutions listed as loan participants in Schedule I to
the Agreement is incorporated herein by reference to Exhibit 10.16
to the Registration Statement.
10.17 Lease Agreement, dated as of February 7, 1996, by and between
Wilmington Trust Company and Hughes Communications Galaxy, Inc. is
incorporated herein by reference to Exhibit 10.17 to the
Registration Statement.
10.18.1 Letter Agreement, dated February 29, 1996, among The News
Corporation Limited, Globo Participacoes, Ltd., Grupo Televisa,
S.A., and PanAmSat International is incorporated herein by
reference to Exhibit 10.17.1 to PanAmSat International's Quarterly
Report on Form 10-Q/A for the period ended March 31, 1996. (1)
10.18.2 Amendment to Letter Agreement, dated November 4, 1996,
constituting Exhibit 10.18.1 hereto, among The News Corporation
Limited, Globo Participacoes, Ltd., Grupo Televisa, S.A., and
PanAmSat International is incorporated herein by reference to
Exhibit 10.17.2 to PanAmSat International's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
10.19 Amended and Restated Contract for PanAmSat Program, dated May 2,
1996, between PanAmSat International and Space Systems/Loral, Inc.
is incorporated herein by reference to Exhibit 10.7.3 to PanAmSat
International's Quarterly Report on Form 10-Q for the period ended
March 31, 1996. (1)
10.20 Letter Agreement, dated June 10, 1996, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy XI is incorporated
herein by reference to Exhibit 10.20 to the Registration
Statement. (1)
10.21 Letter Agreement, dated August 12, 1996, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy XII is incorporated
herein by reference to Exhibit 10.21 to the Registration
Statement. (1)
10.22 Letter Agreement, dated August 12, 1996, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy XIII, XIV, XV and XVI
is incorporated herein by reference to Exhibit 10.22 to the
Registration Statement. (1)
10.23 Letter Agreement, dated August 21, 1996, between Hughes
Communications Galaxy, Inc. and Hughes Space and Communications
Company regarding the construction of Galaxy XI is incorporated
herein by reference to Exhibit 10.23 to the Registration
Statement. (1)
10.24 DTH Option Purchase Agreement, dated September 20, 1996, between
PanAmSat International, Grupo Televisa, S.A. and Satellite
Company, L.L.C. is incorporated herein by reference to Exhibit
10.13.1 to PanAmSat International's Quarterly Report on Form 10-Q
for the period ended September 30, 1996.
10.25 Full-Time Transponder Service Agreement From PAS-3 (European
Beam), dated as of September 20, 1996, between PanAmSat
International and Televisa, S.A. is incorporated herein by
reference to Exhibit 10.16 to PanAmSat International's Quarterly
Report on Form 10-Q for the period ended September 30, 1996. (1)
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52
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10.26 Transponder Purchase and Sale Agreement, dated as of June 26, 1996,
between PanAmSat International and Net Sat Servicos Ltda. is
incorporated herein by reference to Exhibit 10.2 to Net Sat
Servicios Ltda.'s Registration Statement on Form F-4 (Reg. No. 333-
6318), dated January 21, 1997. (1)
10.27 Amended and Restated Transponder Purchase and Sale Agreement, dated
as of June 26, 1996, between PanAmSat International and Net Sat
Servicos Ltda. is incorporated herein by reference to Exhibit 10.2.1
to Net Sat Servicios Ltda.'s Registration Statement on Form F-4
(Reg. No. 333-6318), dated January 21, 1997. (1)
10.28 Amended and Restated Launch Services Agreement, dated as of January
17, 1997, between Hughes Communications Galaxy, Inc. and Hughes
Space and Communications International, Inc. is incorporated herein
by reference to Exhibit 10.28 to the Registration Statement. (1)
10.29 Galaxy X Spacecraft, Related Services and Documentation Contract
(96-HCG-001), dated March 20, 1997, between Hughes Communications
Galaxy, Inc. and Hughes Space and Communications Company is
incorporated herein by reference to Exhibit 10.29 to the
Registration Statement. (1)
10.30 Employment Agreement between PanAmSat and Frederick A. Landman,
dated as of May 15, 1997, is incorporated herein by reference to
Exhibit 10.30 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.*
10.31 Amended and Restated Collateral Trust Agreement, dated as of May 16,
1997 by and among PanAmSat, Hughes Communications, Inc., Satellite
Company, LLC, Grupo Televisa, S.A. and IBJ Schroder Bank & Trust
Company is incorporated herein by reference to Exhibit 10.31 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended June
30, 1997.
10.32 Pledge and Security Agreement, dated as of May 16, 1997, by and
among Satellite Company, LLC, Grupo Televisa, S.A., in favor of IBJ
Schroder Bank & Trust Company is incorporated herein by reference to
Exhibit 10.30 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.
10.33 PanAmSat Corporation Long Term Incentive Plan established in 1997 is
incorporated herein by reference to Exhibit 10.33 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.*
10.34 PanAmSat Corporation Annual Incentive Plan, effective January l,
1997, is incorporated herein by reference to Exhibit 10.34 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended June
30, 1997.*
10.35 Intellectual Property Cross License Agreement, dated as of May 16,
1997, by and between PanAmSat and Hughes Electronics Corporation is
incorporated herein by reference to Exhibit 10.35 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
10.36 Leveraged Lease Guaranty Indemnification Agreement, dated as of May
16, 1997 by and between PanAmSat and Hughes Electronics Corporation
incorporated herein by reference to Exhibit 10.36 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
10.37 Fixed Price Contract between Hughes Communications Galaxy, Inc. and
Hughes Space & Communications Company for Galaxy XI HS702,
Spacecraft, Related Services and Documentation, Contract No. 96-HCG-
002, executed May 1997 is incorporated herein by reference to
Exhibit 10.37 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.38 Fixed Price Contract for PAS 1R and PAS 9 HS-702 Spacecraft, Related
Services and Documentation--Contract No. 97-HCG-001, dated as of
August 15, 1997, between Hughes Space and Communications Company,
Inc. and PanAmSat. (2)
</TABLE>
53
<PAGE>
<TABLE>
<C> <S>
10.39 Transponder Sublease Agreement for Galaxy III-R between Hughes
Communications Galaxy, Inc. and California Broadcast Center, LLC,
dated April 21, 1997 is incorporated herein by reference to
Exhibit 10.39 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.40 Transponder Lease Agreement for Galaxy VIII(i) between Hughes
Communications Galaxy, Inc. and California Broadcast Center, LLC,
dated April 21, 1997 is incorporated herein by reference to
Exhibit 10.40 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.41.1 Form of Indemnity Agreement between PanAmSat and each of its
directors and executive officers is incorporated herein by
reference to Exhibit 10.41 to PanAmSat's Quarterly Report on Form
10-Q for the period ended June 30, 1997.*
10.41.2 Schedule identifying substantially identical agreements to the
Indemnity Agreement constituting Exhibit 10.41.1 hereto in favor
of Charles H. Noski, Frederick A. Landman, Patrick J. Costello,
Steven D. Dorfman, John J. Higgins, Ted G. Westerman, Dennis F.
Hightower, James M. Hoak, Joseph R. Wright, Jr., Michael T. Smith,
Lourdes Saralegui, Carl A. Brown, Kenneth N. Heintz, Robert A.
Bednarek, James W. Cuminale and David P. Berman.*
10.42 Credit Agreement, dated February 20, 1998, among PanAmSat, certain
lenders and Citicorp USA, Inc., as administrative agent.
10.43 Agreement, dated as of May 15, 1996, between PanAmSat
International and Patrick J. Costello is incorporated herein by
reference to Exhibit 10.11.19 to PanAmSat's Quarterly Report on
Form 10-Q for the period ended June 30, 1996.*
10.44 Agreement, dated as of March 21, 1997, between PanAmSat and
Patrick J. Costello.*
10.45 Agreement, dated as of May 15, 1996, between PanAmSat
International and Frederick A. Landman is incorporated herein by
reference to Exhibit 10.11.16 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.46 Agreement, dated as of May 15, 1996, between PanAmSat
International and Lourdes Saralegui is incorporated herein by
reference to Exhibit 10.11.17 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.47 Agreement, dated as of May 15, 1996, between PanAmSat
International and Robert A. Bednarek is incorporated herein by
reference to Exhibit 10.11.18 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.48 Agreement, dated as of May 15, 1996, between PanAmSat
International and James W. Cuminale is incorporated herein by
reference to Exhibit 10.11.20 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.49 Agreement, dated as of May 15, 1996, between PanAmSat
International and David P. Berman incorporated herein by reference
to Exhibit 10.11.21 to PanAmSat International's Quarterly Report
on Form 10-Q for the period ended June 30, 1996.*
10.50 Agreement, dated April 7, 1997, between PanAmSat and Hughes
Electronics Corporation, regarding the terms of assignment of
Kenneth N. Heintz to PanAmSat.*
21.1 Subsidiaries of PanAmSat.
24. l Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
(1) Portions of this Exhibit have been omitted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment with
respect thereto.
(2) Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
54
<PAGE>
Exhibits indicated with a * symbol are an executive contract or compensatory
plan or arrangement filed pursuant to Item 14 of Form 10-K.
In lieu of filing certain instruments with respect to long-term debt of the
kind described in Item 601(b)(4) of Regulation S-K, Registrant agrees to
furnish a copy of such instruments to the Securities and Exchange Commission
upon request.
A copy of any of the exhibits included in this Annual Report on Form 10-K,
other than those as to which confidential treatment is pending or has been
granted by the Securities and Exchange Commission, upon payment of a fee to
cover the reasonable expenses of furnishing such exhibits, may be obtained by
written request to the Company, at the address set forth on the front cover,
attention General Counsel.
55
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the Town of Greenwich, State of Connecticut.
PanAmSat Corporation
By: /s/ Kenneth N. Heintz
__________________________________
Kenneth N. Heintz
Executive Vice President and
Chief Financial Officer
March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
* Chairman of the Board of March 27, 1998
_____________________________________ Directors
MICHAEL T. SMITH
* President and Chief Executive
Officer (principal executive
officer) and Director
March 27, 1998
_____________________________________
FREDERICK A. LANDMAN
* Director March 27, 1998
_____________________________________
PATRICK J. COSTELLO
* Director March 27, 1998
_____________________________________
STEVEN D. DORFMAN
* Director March 27, 1998
_____________________________________
JOHN J. HIGGINS
* Director March 27, 1998
_____________________________________
DENNIS F. HIGHTOWER
* Director March 27, 1998
_____________________________________
JAMES M. HOAK
* Director March 27, 1998
_____________________________________
CHARLES H. NOSKI
* Director March 27, 1998
_____________________________________
TED G. WESTERMAN
* Director March 27, 1998
_____________________________________
JOSEPH R. WRIGHT
56
<PAGE>
NAME TITLE DATE
/s/ Kenneth N. Heintz Executive Vice President and
Chief Financial Officer
(principal financial officer
and principal accounting
officer)
March 27, 1998
_____________________________________
KENNETH N. HEINTZ
*By: /s/ James W. Cuminale
_____________________________________
(JAMES W. CUMINALE, ATTORNEY-IN-
FACT)
57
<PAGE>
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<TABLE>
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<S> <C>
2.1 Agreement and Plan of Reorganization, dated September 20, 1996,
amon gHughes Communications, Inc., Hughes Communications Galaxy,
Inc., Hughes Communications Satellite Services, Inc., Hughes
Communications Services, Inc., Hughes Communications Carrier
Services, Inc., Hughes Communications Japan, Inc., PanAmSat
Corporation (formerly known as Magellan International, Inc.
("PanAmSat")) and PanAmSat International Systems, Inc. (formerly
known as PanAmSat Corporation and successor corporation to PanAmSat,
L.P. ("PanAmSat International")) is incorporated herein by reference
to Exhibit 2.3 to PanAmSat International's Quarterly Report on Form
10-Q for the period ended June 30, 1996.
2.2 Amendment to Agreement and Plan of Reorganization dated as of April
4, 1997 constituting Exhibit 2.1 hereto is incorporated herein by
reference to Appendix AA to the Proxy Statement/Prospectus (the
"Proxy Statement/Prospectus") contained in PanAmSat's Registration
Statement on Form S-4 (Reg. No. 333-25293) filed on April 16, 1997
(the "Registration Statement").
2.3 Agreement and Plan of Merger, dated as of April 4, 1997, among
PanAmSat International, PAS Merger Corp. and PanAmSat is
incorporated herein by reference to Appendix B to the Proxy
Statement/Prospectus.
2.4 Assurance Agreement, dated September 20, 1996, between Hughes
Electronics Corporation, PanAmSat International, Satellite Company,
L.L.C. and PanAmSat is incorporated herein by reference to Appendix
K to the Proxy Statement/Prospectus.
2.5 Principal Stockholders Agreement, dated September 20, 1996, among
Hughes Communications, Inc., Hughes Communications Galaxy, Inc.,
Satellite Company, L.L.C., Univisa Satellite Holdings, Inc., the
holders of Class A Common Stock of PanAmSat International and the
Trustees of that certain Voting Trust of certain holders of Class A
Common Stock of PanAmSat International is incorporated herein by
reference to Appendix L to the Proxy Statement/Prospectus.
2.6 Stock Contribution and Exchange Agreement, dated September 20, 1996,
among Grupo Televisa, S.A., Satellite Company, L.L.C., PanAmSat and
Hughes Communications, Inc. is incorporated herein by reference to
Exhibit 2.4 to the Registration Statement.
3.1 Restated Certificate of Incorporation of PanAmSat.
3.2 Restated Bylaws of PanAmSat.
</TABLE>
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- ------- -------------
4.1 Amended and Restated Stockholder Agreement, dated
as of May 16, 1997, by and among PanAmSat, Hughes
Communications, Inc., Satellite Company, LLC and
the former holders of Class A Common Stock of
PanAmSat International is incorporated herein by
reference to Appendix M to the Proxy Statement/
Prospectus.
4.2 Amended and Restated Registration Rights Agreement,
dated as of May 16, 1997, by and among PanAmSat,
Hughes Communications, Inc., Hughes Communications
Galaxy, Inc., Hughes Communications Satellite
Services, Inc., Satellite Company, LLC and the former
holders of Class A Common Stock of PanAmSat
International is incorporated herein by reference
to Appendix N to the Proxy Statement/Prospectus.
4.3.1 Loan Agreement, dated May 15, 1997, between Hughes
Network Systems, Inc. and PanAmSat is incorporated
by reference to Exhibit 4.3 to PanAmSat's Current
Report on Form 8-K dated June 5, 1997.
4.3.2 First Amendment to Loan Agreement, constituting
Exhibit 4.3.1 hereto, dated as of December 23, 1997,
between Hughes Electronics Corporation and PanAmSat.
4.3.3 Subordination and Amendment Agreement, dated as of
February 20, 1998, among Hughes Electronics Corporation,
PanAmSat and Citicorp USA, Inc., as administrative agent.
4.4 Indenture, dated as of January 16, 1998, between PanAmSat and The
Chase Manhattan Bank, as Trustee.
10.1 Participation Agreement, dated as of December 27, 1991,
among Satellite Transponder Leasing Corporation, GM
Hughes Electronics Corporation, Security Pacific Equipment
Leasing, Inc., Wilmington Trust Company, State Street Bank
and Trust Company of Connecticut, National Association
("State Street") and Goldman, Sachs & Co. is incorporated
herein by reference to Exhibit 10.1 to the Registration Statement.
10.2 Lease Agreement, dated as of December 27, 1991, among
GM Hughes Electronics Corporation, Satellite Transponder
Leasing Corporation and Wilmington Trust Company is
incorporated herein by reference to Exhibit 10.2 to the
Registration Statement.
10.3 Participation Agreement, dated as of December 27, 1991,
among Corporation, Student Loan Marketing Association,
Wilmington Trust Company, State Street and Goldman Sachs
& Co. is incorporated herein by reference to Exhibit 10.3
to the Registration Statement.
10.4 Lease Agreement, dated as of December 27, 1991, among
GM Hughes Electronics Corporation, Satellite Transponder
Leasing Corporation and Wilmington Trust Company is
incorporated herein by reference to Exhibit 10.4 to the
Registration Statement.
10.5.1 Participation Agreement and Purchase Agreement, dated
as of August 21, 1992, among Hughes Communications Galaxy,
Inc., Orion One, Inc., State Street, Wilmington Trust
Company, Hughes Communications, Inc. and BT Securities
Corporation, as agent is incorporated herein by reference
to Exhibit 10.5.1 to the Registration Statement.
10.5.2 First Amendment to Participation Agreement and Purchase
Agreement, among Hughes Communications Galaxy, Inc.,
Orion One, Inc., State Street, Hughes Communications,
Inc., Wilmington Trust Company, BT Securities Corporation,
as agent, and the other participants to the Transponder
Purchase Agreement is incorporated herein by reference
to Exhibit 10.5.2 to the Registration Statement.
10.5.3 Second Amendment to Participation Agreement and Purchase
Agreement, constituting Exhibit 10.5.1 hereto, dated as
of June 18, 1993, among Hughes Communications Galaxy, Inc.,
Orion One, Inc., State Street, CIBC Inc., Internationale
Nederlanden Lease Structured Finance B.V., Wilmington
Trust Company and BT Securities Corporation, as agent
is incorporated herein by reference to Exhibit 10.5.3
to the Registration Statement.
<PAGE>
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10.6.1 Lease Agreement, dated as of December 31, 1992,
by and between Hughes Communications Galaxy, Inc.
and State Street is incorporated herein by reference
to Exhibit 10.6.1 to the Registration Statement.
10.6.2 First Amendment to Lease Agreement constituting
Exhibit 10.6.1, dated as of June 18, 1993, by and
between Hughes Communications Galaxy, Inc. and
State Street is incorporated herein by reference
to Exhibit 10.6.2 to the Registration Statement.
10.7 Schedule identifying certain agreements that have
been omitted on the basis that such agreements are
substantially identical to the agreements filed as
Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and
10.6.2 hereto is incorporated herein by reference to
Exhibit 10.7 to the Registration Statement.
10.8.1 Launch Services Agreement No. 9411-002, dated
November 14, 1994, between Lockheed-Khrunichev-Energia
International, Inc. and PanAmSat International is
incorporated herein by reference to Exhibit 10.10
to Amendment No. 3 to PanAmSat International's
Registration Statement on Form S-1 (Reg. No. 33-84836),
dated March 9, 1995. (1)
10.8.2 First Amendment to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto,
dated March 30, 1995, between Lockheed-Khrunichev-Energia
International, Inc. and PanAmSat International is
incorporated herein by reference to Exhibit 10.10.2
to Amendment No. 1 to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-95396), dated
August 17, 1995.(1)
10.8.3 Second Amendment to Launch Services Agreement No. 9411-002
constituting Exhibit 10.8.1 hereto, dated June 9, 1995,
between Lockheed-Khrunichev-Energia International, Inc.
and PanAmSat International is incorporated herein by
reference to Exhibit 10.10.3 to Amendment No. 1 to
PanAmSat International's Registration Statement on
Form S-1 (Reg. No. 33-95396), dated August 17, 1995.(1)
10.8.4 Amendment Number 3 to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto, dated
August 23, 1996, between Lockheed-Khrunichev-Energia
International, Inc. and PanAmSat International is
incorporated herein by reference to Exhibit 10.10.4
to PanAmSat International's Quarterly Report on
Form 10-Q for the period ended September 30, 1996. (1)
10.9.1 Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an
Ariane Launch Vehicle, No. 94.5.918, dated
November 21, 1994, between PanAmSat International and
Arianespace S.A. is incorporated herein by reference
to Exhibit 10.12 to Amendment No. 4 to PanAmSat
International's Registration Statement on Form S-1
(Reg. No. 33-84836), dated March 29, 1995.(1)
10.9.2 Amendment No. 1 to Agreement for the Launching into
Geostationary Transfer Orbit of the PanAmSat 6
Satellite by an Ariane Launch Vehicle, No. 94.5.918
constituting Exhibit 10.9.1 hereto, dated May 1995,
between PanAmSat International and Arianespace S.A.
is incorporated herein by reference to
Exhibit 10.12.2 to Amendment No. 1 to PanAmSat
International's Registration Statement on Form S-1
(Reg. No. 33-95396), dated August 17, 1995. (1)
10.9.3 Amendment No. 2 to Agreement for the Launching into
Geostationary Transfer Orbit of the PanAmSat 6
Satellite by an Ariane Launch Vehicle, No. 94.5.918
constituting Exhibit 10.9.1 hereto, dated as of
April 29, 1996, between PanAmSat International
and Arianespace S.A. is incorporated herein by
reference to Exhibit S-1 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended
March 31, 1996.
<PAGE>
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10.6.1 Lease Agreement, dated as of December 31, 1992, by
and between Hughes Communications Galaxy, Inc. and
State Street is incorporated herein by reference to
Exhibit 10.6.1 to the Registration Statement.
10.6.2 First Amendment to Lease Agreement constituting
Exhibit 10.6.1, dated as of June 18, 1993, by and
between Hughes Communications Galaxy, Inc. and
State Street is incorporated herein by reference
to Exhibit 10.6.2 to the Registration Statement.
10.7 Schedule identifying certain agreements that have
been omitted on the basis that such agreements are
substantially identical to the agreements filed as
Exhibits 10.5.1, 10.5.2, 10.5.3, 10.6.1 and
10.6.2 hereto is incorporated herein by reference
to Exhibit 10.7 to the Registration Statement.
10.8.1 Launch Services Agreement No. 9411-002, dated
November 14, 1994, between Lockheed-Khrunichev-
Energia International, Inc. and PanAmSat International
is incorporated herein by reference to Exhibit 10.10
to Amendment No. 3 to PanAmSat International's
Registration Statement on Form S-1 (Reg. No. 33-84836),
dated March 9, 1995. (1)
10.8.2 First Amendment to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto,
dated March 30, 1995, between
Lockheed-Khrunichev-Energia International, Inc.
and PanAmSat International is incorporated herein
by reference to Exhibit 10.10.2 to Amendment No. 1
to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-95396), dated
August 17, 1995. (1)
10.8.3 Second Amendment to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto,
dated June 9, 1995, between Lockheed-Khrunichev-
Energia International, Inc. and PanAmSat
International is incorporated herein by reference
to Exhibit 10.10.3 to Amendment No. 1 to PanAmSat
International's Registration Statement on
Form S-1 (Reg. No. 33-95396), dated August 17, 1995. (1)
10.8.4 Amendment Number 3 to Launch Services Agreement
No. 9411-002 constituting Exhibit 10.8.1 hereto,
dated August 23, 1996, between Lockheed-Khrunichev-
Energia International, Inc. and PanAmSat
International is incorporated herein by reference
to Exhibit 10.10.4 to PanAmSat International's
Quarterly Report on Form 10-Q for the period
ended September 30, 1996. (1)
10.9.1 Agreement for the Launching into Geostationary
Transfer Orbit of the PanAmSat 6 Satellite by an
Ariane Launch Vehicle, No. 94.5.918, dated
November 21, 1994, between PanAmSat International
and Arianespace S.A. is incorporated herein by
reference to Exhibit 10.12 to Amendment No. 4
to PanAmSat International's Registration
Statement on Form S-1 (Reg. No. 33-84836), dated
March 29, 1995. (1)
10.9.2 Amendment No. 1 to Agreement for the Launching
into Geostationary Transfer Orbit of the
PanAmSat 6 Satellite by an Ariane Launch Vehicle,
No. 94.5.918 constituting Exhibit 10.9.1 hereto,
dated May 1995, between PanAmSat International
and Arianespace S.A. is incorporated herein by
reference to Exhibit 10.12.2 to Amendment No. 1
to PanAmSat International's Registration Statement
on Form S-1 (Reg. No. 33-95396), dated
August 17, 1995. (1)
10.9.3 Amendment No. 2 to Agreement for the Launching
into Geostationary Transfer Orbit of the
PanAmSat 6 Satellite by an Ariane Launch
Vehicle, No. 94.5.918 constituting Exhibit 10.9.1
hereto, dated as of April 29, 1996, between
PanAmSat International and Arianespace S.A.
is incorporated herein by reference to
Exhibit S-1 to PanAmSat International's Quarterly
Report on Form 10-Q for the period ended
March 31, 1996.
<PAGE>
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10.15.4 Amendment No. 2 to Agreement for Launching into
Geostationary Transfer Orbit of PanAmSat Satellites
by an Ariane Launch Vehicle, No. 95.5.933, dated
December 31, 1996, between PanAmSat International
and Arianespace S.A., constituting Exhibit 10.15.1
hereto, is incorporated herein by reference to
Exhibit 10.12.6 to PanAmSat International's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1996. (1)
10.16 Participation Agreement, dated as of February 7, 1996,
among Hughes Communications Galaxy, Inc., General
Motors Acceptance Corporation, Wilmington Trust
Company, Chemical Bank and the lending institutions
listed as loan participants in Schedule I to the
Agreement is incorporated herein by reference to
Exhibit 10.16 to the Registration Statement.
10.17 Lease Agreement, dated as of February 7, 1996,
by and between Wilmington Trust Company and Hughes
Communications Galaxy, Inc. is incorporated herein
by reference to Exhibit 10.17 to the Registration
Statement.
10.18.1 Letter Agreement, dated February 29, 1996, among
The News Corporation Limited, Globo Participacoes,
Ltd., Grupo Televisa, S.A., and PanAmSat
International is incorporated herein by reference
to Exhibit 10.17.1 to PanAmSat International's Quarterly
Report on Form 10-Q/A for the period ended March 31,
1996. (1)
10.18.2 Amendment to Letter Agreement, dated November 4, 1996,
constituting Exhibit 10.18.1 hereto, among The News
Corporation Limited, Globo Participacoes, Ltd.,
Grupo Televisa, S.A., and PanAmSat International is
incorporated herein by reference to Exhibit 10.17.2
to PanAmSat International's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
10.19 Amended and Restated Contract for PanAmSat Program,
dated May 2, 1996, between PanAmSat International
and Space Systems/Loral, Inc. is incorporated
herein by reference to Exhibit 10.7.3 to PanAmSat
International's Quarterly Report on Form 10-Q for
the period ended March 31, 1996. (1)
10.20 Letter Agreement, dated June 10, 1996, between
Hughes Communications Galaxy, Inc. and Hughes Space
and Communications Company regarding the construction
of Galaxy XI is incorporated herein by reference to
Exhibit 10.20 to the Registration Statement. (1)
10.21 Letter Agreement, dated August 12, 1996, between
Hughes Communications Galaxy, Inc. and Hughes
Space and Communications Company regarding the
construction of Galaxy XII is incorporated
herein by reference to Exhibit 10.21 to the
Registration Statement. (1)
10.22 Letter Agreement, dated August 12, 1996, between
Hughes Communications Galaxy, Inc. and Hughes
Space and Communications Company regarding the
construction of Galaxy XIII, XIV, XV and XVI is
incorporated herein by reference to Exhibit 10.22
to the Registration Statement. (1)
10.23 Letter Agreement, dated August 21, 1996,
between Hughes Communications Galaxy, Inc. and
Hughes Space and Communications Company regarding
the construction of Galaxy XI is incorporated
herein by reference to Exhibit 10.23 to the
Registration Statement. (1)
10.24 DTH Option Purchase Agreement, dated September
20, 1996, between PanAmSat International, Grupo
Televisa, S.A. and Satellite Company, L.L.C.
is incorporated herein by reference to Exhibit
10.13.1 to PanAmSat International's Quarterly Report
on Form 10-Q for the period ended September 30, 1996.
10.25 Full-Time Transponder Service Agreement From
PAS-3 (European Beam), dated as of September 20,
1996, between PanAmSat International and Televisa,
S.A. is incorporated herein by reference to
Exhibit 10.16 to PanAmSat International's Quarterly
Report on Form 10-Q for the period ended
September 30, 1996. (1)
<PAGE>
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10.26 Transponder Purchase and Sale Agreement, dated as
of June 26, 1996, between PanAmSat International
and Net Sat Servicos Ltda. is incorporated herein
by reference to Exhibit 10.2 to Net Sat Servicios
Ltda.'s Registration Statement on Form F-4
(Reg. No. 333-6318), dated January 21, 1997. (1)
10.27 Amended and Restated Transponder Purchase and Sale
Agreement, dated as of June 26, 1996, between
PanAmSat International and Net Sat Servicos Ltda.
is incorporated herein by reference to Exhibit 10.2.1
to Net Sat Servicios Ltda.'s Registration Statement
on Form F-4 (Reg. No. 333-6318), dated
January 21, 1997. (1)
10.28 Amended and Restated Launch Services Agreement,
dated as of January 17, 1997, between Hughes
Communications Galaxy, Inc. and Hughes Space and
Communications International, Inc. is incorporated
herein by reference to Exhibit 10.28 to the
Registration Statement. (1)
10.29 Galaxy X Spacecraft, Related Services and
Documentation Contract (96-HCG-001), dated
March 20, 1997, between Hughes Communications Galaxy,
Inc. and Hughes Space and Communications Company is
incorporated herein by reference to Exhibit 10.29 to the
Registration Statement. (1)
10.30 Employment Agreement between PanAmSat and
Frederick A. Landman, dated as of May 15, 1997, is
incorporated herein by reference to Exhibit 10.30
to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.*
10.31 Amended and Restated Collateral Trust Agreement,
dated as of May 16, 1997 by and among PanAmSat,
Hughes Communications, Inc., Satellite Company,
LLC, Grupo Televisa, S.A. and IBJ Schroder Bank & Trust
Company is incorporated herein by reference to
Exhibit 10.31 to PanAmSat's Quarterly Report on
Form 10-Q for the period ended June 30, 1997.
10.32 Pledge and Security Agreement, dated as of
May 16, 1997, by and among Satellite Company,
LLC, Grupo Televisa, S.A., in favor of IBJ
Schroder Bank & Trust Company is incorporated
herein by reference to Exhibit 10.30 to
PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997.
10.33 PanAmSat Corporation Long Term Incentive Plan
established in 1997 is incorporated herein by
reference to Exhibit 10.33 to PanAmSat's Quarterly
Report on Form 10-Q for the period ended June 30, 1997.*
10.34 PanAmSat Corporation Annual Incentive Plan, effective January l,
1997, is incorporated herein by reference to Exhibit 10.34 to
PanAmSat's Quarterly Report on Form 10-Q for the period ended June
30, 1997.*
10.35 Intellectual Property Cross License Agreement, dated as of May 16,
1997, by and between PanAmSat and Hughes Electronics Corporation is
incorporated herein by reference to Exhibit 10.35 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
10.36 Leveraged Lease Guaranty Indemnification Agreement, dated as of May
16, 1997 by and between PanAmSat and Hughes Electronics Corporation
incorporated herein by reference to Exhibit 10.36 to PanAmSat's
Quarterly Report on Form 10-Q for the period ended June 30, 1997.
10.37 Fixed Price Contract between Hughes Communications Galaxy, Inc. and
Hughes Space & Communications Company for Galaxy XI HS702,
Spacecraft, Related Services and Documentation, Contract No. 96-HCG-
002, executed May 1997 is incorporated herein by reference to
Exhibit 10.37 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.38 Fixed Price Contract for PAS 1R and PAS 9 HS-702 Spacecraft, Related
Services and Documentation--Contract No. 97-HCG-001, dated as of
August 15, 1997, between Hughes Space and Communications Company,
Inc. and PanAmSat. (2)
<PAGE>
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10.39 Transponder Sublease Agreement for Galaxy III-R between Hughes
Communications Galaxy, Inc. and California Broadcast Center, LLC,
dated April 21, 1997 is incorporated herein by reference to
Exhibit 10.39 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.40 Transponder Lease Agreement for Galaxy VIII(i) between Hughes
Communications Galaxy, Inc. and California Broadcast Center, LLC,
dated April 21, 1997 is incorporated herein by reference to
Exhibit 10.40 to PanAmSat's Quarterly Report on Form 10-Q for the
period ended June 30, 1997. (1)
10.41.1 Form of Indemnity Agreement between PanAmSat and each of its
directors and executive officers is incorporated herein by
reference to Exhibit 10.41 to PanAmSat's Quarterly Report on Form
10-Q for the period ended June 30, 1997.*
10.41.2 Schedule identifying substantially identical agreements to the
Indemnity Agreement constituting Exhibit 10.41.1 hereto in favor
of Charles H. Noski, Frederick A. Landman, Patrick J. Costello,
Steven D. Dorfman, John J. Higgins, Ted G. Westerman, Dennis F.
Hightower, James M. Hoak, Joseph R. Wright, Jr., Michael T. Smith,
Lourdes Saralegui, Carl A. Brown, Kenneth N. Heintz, Robert A.
Bednarek, James W. Cuminale and David P. Berman.*
10.42 Credit Agreement, dated February 20, 1998, among PanAmSat, certain
lenders and Citicorp USA, Inc., as administrative agent.
10.43 Agreement, dated as of May 15, 1996, between PanAmSat
International and Patrick J. Costello is incorporated herein by
reference to Exhibit 10.11.19 to PanAmSat's Quarterly Report on
Form 10-Q for the period ended June 30, 1996.*
10.44 Agreement, dated as of March 21, 1997, between PanAmSat and
Patrick J. Costello.*
10.45 Agreement, dated as of May 15, 1996, between PanAmSat
International and Frederick A. Landman is incorporated herein by
reference to Exhibit 10.11.16 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.46 Agreement, dated as of May 15, 1996, between PanAmSat
International and Lourdes Saralegui is incorporated herein by
reference to Exhibit 10.11.17 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.47 Agreement, dated as of May 15, 1996, between PanAmSat
International and Robert A. Bednarek is incorporated herein by
reference to Exhibit 10.11.18 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.48 Agreement, dated as of May 15, 1996, between PanAmSat
International and James W. Cuminale is incorporated herein by
reference to Exhibit 10.11.20 to PanAmSat International's
Quarterly Report on Form 10-Q for the period ended June 30, 1996.*
10.49 Agreement, dated as of May 15, 1996, between PanAmSat
International and David P. Berman incorporated herein by reference
to Exhibit 10.11.21 to PanAmSat International's Quarterly Report
on Form 10-Q for the period ended June 30, 1996.*
10.50 Agreement, dated April 7, 1997, between PanAmSat and Hughes
Electronics Corporation, regarding the terms of assignment of
Kenneth N. Heintz to PanAmSat.*
21.1 Subsidiaries of PanAmSat.
24. l Powers of Attorney.
27.1 Financial Data Schedule.
- --------
(1) Portions of this Exhibit have been omitted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment with
respect thereto.
(2) Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
PANAMSAT CORPORATION
ARTICLE ONE
NAME
The name of the corporation is PANAMSAT CORPORATION (the
''Corporation'').
ARTICLE TWO
REGISTERED OFFICE
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle 19801, and the name of the registered agent at such address is The
Corporation Trust Company.
ARTICLE THREE
PURPOSES
The nature of the business or purposes of the Corporation is to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law, and by such statement all lawful acts and activities
shall be within the purposes of the Corporation, except for express limitations,
if any.
ARTICLE FOUR
CAPITAL STRUCTURE
4.1. The total number of shares of stock which the Corporation shall
have authority to issue is 450,000,000 shares of all classes of stock,
consisting of 400,000,000 shares of Common Stock, par value $.01 per share, and
50,000,000 shares of Preferred Stock, par value $.01 per share.
4.2. Shares of Preferred Stock may be issued from time to time in
one or more series as may from time to time be determined by the Board of
Directors, each of said series to be distinctly designated. The voting powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof, if any, of each such
series may differ from those of any and all other series of Preferred Stock at
any time outstanding, and the Board of Directors is hereby expressly granted
authority to fix or alter, by resolution or resolutions, the designation,
number, voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions
thereof, of each such series, including but without limiting the generality of
the foregoing, the following:
<PAGE>
(a) The distinctive designation of, and the number of shares of
Preferred Stock that shall constitute, such series, which number (except where
otherwise provided by the Board of Directors in the resolution establishing such
series) may be increased or decreased (but not below the number of shares of
such series then outstanding) from time to time by like action of the Board of
Directors;
(b) The rights in respect of dividends, if any, of such series of
Preferred Stock, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or on any other
series of the same or other class or classes of capital stock of the Corporation
and whether such dividends shall be cumulative or noncumulative;
(c) The right, if any, of the holders of such series of Preferred
Stock to convert the same into, or exchange the same for, shares of any other
class or classes or of any other series of the same or any other class or
classes of capital stock of the Corporation, and the terms and conditions of
such conversion or exchange;
(d) Whether or not shares of such series of Preferred Stock shall be
subject to redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, shares of such series of
Preferred Stock may be redeemed;
(e) The rights, if any, of the holders of such series of Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or winding-up
of the Corporation or in the event of any merger or consolidation of or sale of
assets by the Corporation;
(f) The terms of any sinking fund or redemption or repurchase or
purchase account, if any, to be provided for shares of such series of Preferred
Stock;
(g) The voting powers, if any, of the holders of any series of
Preferred Stock generally or with respect to any particular matter, which may be
less than, equal to or greater than one vote per share, and which may, without
limiting the generality of the foregoing, include the right, voting as a series
by itself or together with the holders of any other series of Preferred Stock or
all series of Preferred Stock as a class, to elect one or more directors of the
Corporation generally or under such specific circumstances and on such
conditions, as shall be provided in the resolution or resolutions of the Board
of Directors adopted pursuant hereto, including, without limitation, in the
event there shall have been a default in the payment of dividends on or
redemption of any one or more series of Preferred Stock; and
(h) Such other powers, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions thereof, as the Board of Directors shall determine.
ARTICLE FIVE
DIRECTORS
5.1. The initial Board of Directors shall consist of 10 directors.
Such number may be changed in such manner as provided in the bylaws of the
Corporation.
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5.2. Unless and except to the extent that the bylaws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
ARTICLE SIX
LIMITATION ON LIABILITY
A director of the Corporation shall not be liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or limitation
thereof is not permitted under the General Corporation Law as the same exists or
may hereafter be amended. Any amendment, modification or repeal of the foregoing
sentence shall not adversely affect any right or protection of a director of the
Corporation hereunder in respect of any act or omission occurring prior to the
time of such amendment, modification or repeal.
ARTICLE SEVEN
INDEMNIFICATION
SECTION 7.1. Right to Indemnification. The Corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
''proceeding'') by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) incurred by such person. Except as provided in
Section 7.3, the Corporation shall not be required to indemnify a person in
connection with a proceeding (or part thereof) initiated by such person unless
the proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.
SECTION 7.2. Advancement of Expenses. The Corporation shall pay the
expenses (including attorneys' fees) of any person referred to in Section 7.1 of
this ARTICLE SEVEN incurred in defending any proceeding in advance of its final
disposition; provided, however, that the advancement of expenses incurred by a
director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined that the director or
officer is not entitled to be indemnified under this ARTICLE SEVEN or otherwise.
SECTION 7.3. Claims. If a claim for indemnification or advancement
of expenses under this ARTICLE SEVEN is not paid in full within sixty (60) days
after a written claim therefor has been received by the Corporation (except in
the case of a claim for advancement of expenses, in which case the applicable
period shall be twenty (20) days), the claimant may file suit to recover the
unpaid amount of such claim. If successful in whole in such an action, the
claimant shall be entitled to be paid the expense of prosecuting such claim; if
successful in part in such an action, the claimant shall be entitled to be paid
the expense of prosecuting each successfully resolved claim, issue or matter. In
any such action the
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<PAGE>
Corporation shall have the burden of proving that the claimant was not entitled
to the requested indemnification or advancement of expenses under applicable
law.
SECTION 7.4. Non-Exclusivity of Rights. The rights conferred on any
person by this ARTICLE SEVEN shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision of this
Restated Certificate of Incorporation, provision of the bylaws, agreement, vote
of stockholders or disinterested directors or otherwise.
SECTION 7.5. Other Indemnification. The Corporation's obligation,
if any, to indemnify any person who was or is serving at its request as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, enterprise or nonprofit entity shall be reduced by any amount
such person would be entitled to retain as indemnification from such other
corporation, partnership, joint venture, trust, enterprise or nonprofit
enterprise.
SECTION 7.6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this ARTICLE SEVEN shall not adversely affect any right
or protection hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.
ARTICLE EIGHT
AMENDMENT OF CERTIFICATE
From time to time and at any time, any provision contained in this
Restated Certificate of Incorporation may be amended, altered, changed or
repealed by the Corporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Restated Certificate of Incorporation in its
present form or as hereafter amended are granted subject to the rights reserved
in this ARTICLE EIGHT.
ARTICLE NINE
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors of the Corporation is
expressly authorized to make, alter and repeal the bylaws of the Corporation.
ARTICLE TEN
STOCKHOLDER ACTION
Any action required or permitted to be taken by any stockholders of
the Corporation must be effected at a duly called annual or special meeting of
such stockholders and may not be effected by any consent in writing by such
stockholders. Except as otherwise required by law, special meetings of
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<PAGE>
stockholders of the Corporation may be called only by the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors.
ARTICLE ELEVEN
BUSINESS COMBINATIONS
The Corporation expressly elects not to be governed by Section 203 of
the General Corporation Law.
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<PAGE>
EXHIBIT 3.2
RESTATED BYLAWS
OF
PANAMSAT CORPORATION
ARTICLE I
STOCKHOLDERS
SECTION 1.1. Annual Meetings. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
SECTION 1.2. Special Meetings. Special meetings of stockholders for
any purpose or purposes may be called at any time by the Board of Directors, or
by a committee of the Board of Directors that has been duly designated by the
Board of Directors and whose powers and authority, as provided in a resolution
of the Board of Directors, include the power to call such meetings, but such
special meetings may not be called by any other person or persons.
SECTION 1.3. Notice of Meetings. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given that shall state the place, date and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation or
these Bylaws, the written notice of any meeting shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, such notice shall be
deemed to be given when deposited in the United States mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation.
SECTION 1.4. Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be given
to each stockholder of record entitled to vote at the meeting.
SECTION 1.5. Quorum. Except as otherwise provided by law, the
certificate of incorporation or these Bylaws, at each meeting of stockholders
the presence in person or by proxy of the holders of shares of stock having a
majority of the votes which could be cast by the holders of all outstanding
shares of stock entitled to vote at the meeting shall be necessary and
sufficient to constitute a quorum. Where a separate vote by a series, class or
classes is required, a majority of the outstanding shares of stock of such class
or classes on any particular issue, present in person or represented by proxy,
shall be necessary and sufficient to constitute a quorum for purposes of such
issue. In the absence of a quorum, the stockholders so present may, by majority
vote, adjourn the meeting from time to time in the manner provided in Section
1.4 of these Bylaws until a quorum shall attend. Shares of its own stock
belonging to
<PAGE>
the Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation to vote stock, including but not limited to
its own stock, held by it in a fiduciary capacity.
SECTION 1.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his absence by the
President, or in his absence by an Executive Vice President, or in the absence
of the foregoing persons by a chairman designated by the Board of Directors, or
in the absence of such designation by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting. The
chairman of the meeting shall announce at the meeting of stockholders the date
and time of the opening and the closing of the polls for each maker upon which
the stockholders will vote.
SECTION 1.7. Voting; Proxies. Each stockholder entitled to vote at
any meeting of stockholders shall be entitled to one vote for each share of
stock held by such stockholder which has voting power upon the matter in
question. At all meetings of stockholders for the election of directors, a
plurality of the votes cast shall be sufficient to elect a director. All other
elections and questions shall, unless otherwise provided by law, the certificate
of incorporation, these Bylaws or the rules or regulations of any stock exchange
applicable to the Corporation, be decided by the affirmative vote of the holders
of shares of stock having a majority of the votes present in person or
represented by proxy and entitled to vote thereon. Each stockholder entitled to
vote at a meeting of stockholders may authorize another person or persons to act
for him by proxy, but no such proxy shall be voted or acted upon after three
years from is date, unless the proxy provides for a longer period. A proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary of the Corporation. Voting
at meetings of stockholders need not be by written ballot.
SECTION 1.8. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (i) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten (10) days before the date of such meeting; and (ii) in the case of
any other action, shall not be more than sixty (60) days prior to such other
action. If no record date is fixed: (i) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held; and (ii) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall
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apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjured meeting.
SECTION 1.9. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any stockholder who is
present.
SECTION 1.10. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 1.9 of this ARTICLE I, or to vote
in person or by proxy at any meeting of stockholders.
SECTION 1.11. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine: (iv) restrictions on entry to
the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions or comments by participants.
Unless and to the extent otherwise determined by the Board of Directors or the
chairman of the meeting, meetings of stockholders shall not be required to be
held in accordance with the rules of parliamentary procedure.
SECTION 1.12. Advance Notice of Stockholder Nominations and Business.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders may be made
at an annual meeting of stockholders (a) pursuant to the Corporation's
notice of meeting, (b) by or at the direction of the Board of Directors or
(c) by any stockholder of the Corporation who was a stockholder of record
at the time of giving of notice provided for in this Bylaw, who is entitled
to vote at the meeting and complies with the notice procedures set forth in
this Bylaw.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(l) of this Bylaw, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's
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<PAGE>
notice shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the 60th
day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is more than
thirty (30) days before or more than sixty (60) days after such anniversary
date, notice by the stockholder to be timely must be so delivered not
earlier than the close of business on the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of an adjournment of
an annual meeting commence a new time period for the giving of a
stockholder's notice as described above. Such stockholder's notice shall
set forth (a) as to each person whom the stockholder proposes to nominate
for election or re-election as a director all information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such
beneficial owner, (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner, and (iii) whether the proponent intends or is part of a
group which intends to solicit proxies from other stockholders in support
of such proposal or nomination.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased Board
of Directors at least seventy (70) days prior to the first anniversary of
the preceding year's annual meeting, a stockholder's notice required by
this Bylaw shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following
the day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Bylaw, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Bylaw. In the event the
Corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the Board of Directors, any such stockholder may
nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Corporation's notice of meeting, if the
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stockholder's notice required by paragraph (A)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting, or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement or an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
(C) General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Bylaw. Except as otherwise provided by law, the certificate of
incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Bylaw and, if any proposed
nomination or business is not in compliance with this Bylaw, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock to elect directors under specified
circumstances.
SECTION 1.13. Stockholder Action. Any action required or permitted
to be taken by any stockholders of the Corporation must be effected at a duly
called annual or special meeting of such stockholders and may not be effected by
any consent in writing by such stockholders. Except as otherwise required by
law, special meetings of stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution approved by a majority of the
entire Board of Directors.
SECTION 1.14. Inspectors of Election. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors of
election, who may be employees of the Corporation, to act at the meeting or any
adjournment thereof and to make a written report thereof. The Corporation may
designate one or more persons as alternate inspectors to replace any inspector
who fails to act. In the event that no inspector so appointed or designated is
able to act at a meeting of stockholders, the person presiding at the meeting
shall appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his or her duties, shall take and sign an
oath to execute faithfully the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspector or inspectors so
appointed or designated shall (i) ascertain the number of shares of capital
stock of the Corporation outstanding and the voting power of each such share,
(ii) determine the shares of capital stock of the Corporation represented at the
meeting and the validity of proxies and ballots, (iii) count all votes
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and ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares of capital stock of the
Corporation represented at the meeting and such inspectors' count of all votes
and ballots. Such certification and report shall specify such other information
as may be required by law. In determining the validity and counting of proxies
and ballots cast at any meeting of stockholders of the Corporation, the
inspectors may consider such information as is permitted by applicable law. No
person who is a candidate for an office at an election may serve as an inspector
at such election.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1. Number; Qualifications. The Board of Directors shall
consist of one or more members, the number thereof to be determined from time to
time by resolution of the Board of Directors. Directors need not be
stockholders.
SECTION 2.2. Election; Resignation; Removal; Vacancies. At the first
annual meeting of stockholders and at each annual meeting thereafter, the
stockholders shall elect directors each of whom shall hold office for a term of
one year or until his successor is elected and qualified. The number of
directors constituting the initial Board of Directors shall be ten. Subject to
the rights of holders of any series of Preferred Stock to elect directors under
specified circumstances, the number of directors may be modified from time to
time exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of directors which the Corporation would have if
there were no vacancies. Any director may resign at any time upon written
notice to the Corporation. Any newly created directorship or any vacancy
occurring in the Board of Directors for any cause may be filled by a majority of
the remaining members of the Board of Directors, although such majority is less
than a quorum, or by a plurality of the votes cast at a meeting of stockholders,
and each director so elected shall hold office until the expiration of the term
of office of the director whom he has replaced or until his successor is elected
and qualified.
SECTION 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined notices thereof need not be given.
SECTION 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary, or
by any member of the Board of Directors. Notice of a special meeting of the
Board of Directors shall be given by the person or persons calling the meeting
at least twenty-four hours before the special meeting.
SECTION 2.5. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Bylaw shall constitute presence in person at such meeting.
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SECTION 2.6. Quorum; Vote Required for Action. At all meetings of
the Board of Directors a majority of the whole Board of Directors shall
constitute a quorum for the transaction of business. The vote of a majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors.
SECTION 2.7. Organization. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or in his absence by the
President, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the chairman
of the meeting may appoint any person to act as secretary of the meeting.
SECTION 2.8. Informal Action by Directors. Unless otherwise
restricted by the certificate of incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or such committee.
ARTICLE ILL
COMMITTEES
SECTION 3.1. Committees. The Board of Directors shall appoint the
committees provided for in these Bylaws in Sections 3.2 and 3.3 and may, by
resolution passed by the Board of Directors, designate one or more additional
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it.
SECTION 3.2. Compensation Committee.
(a) At each annual meeting of the Board of Directors, the Board of
Directors shall, by a resolution adopted by the Board of Directors, designate
and appoint from its members a Compensation Committee consisting of three or
more directors, each of whom shall be a "disinterested" person.
(b) The Compensation Committee shall have the following powers and
responsibilities:
(1) to review and recommend to the Board of Directors compensation
levels, bonus amounts and stock option grants of officers and compensation
and benefit plans recommended by management for other employees;
(2) to request and review reports from the corporation's management
on the scope, competence, performance and motivation of management
employees;
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(3) to develop, review and recommend to the Board of Directors
incentive, bonus, stock option and similar incentive plans or programs and
retirement and welfare plans or programs for officers and key managers;
(4) to interpret incentive, bonus, stock option and similar incentive
plans; and
(5) to develop, review and recommend to the Board of Directors
changes of major benefit programs.
(c) Action taken by the Compensation Committee or at meetings duly
called shall require the affirmative vote of at least a majority of its members.
SECTION 3.3. Audit Committee.
(a) At each annual meeting of the Board of Directors, the Board of
Directors shall, by a resolution adopted by the Board of Directors, designate
and appoint from its members an Audit Committee consisting of three or more
directors, none of whom is an officer or employee of the Corporation.
(b) The Audit Committee shall have the powers and responsibilities as
designated by the Board of Directors from time to time.
SECTION 3.4. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence of
such rules each committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to ARTICLE II of these Bylaws.
ARTICLE IV
OFFICERS
SECTION 4.1. Executive Officers; Election; Qualifications; Term of
Office; Resignation; Removal; Vacancies. The Board of Directors shall elect a
President and Secretary, and it may, if it so determines, choose a Chairman of
the Board from among its members. The Board of Directors may also choose one or
more Executive Vice Presidents, one or more Senior Vice Presidents, one or more
Assistant Secretaries, a Treasurer and one or more Assistant Treasurers. Each
such officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his election, and until
his successor is elected and qualified or until his earlier resignation or
removal. Any officer may resign at any time upon written notice to the
Corporation. The Board of Directors may remove any officer with or without
cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation. Any number of
offices may be held by the same person. Any vacancy occurring in any office of
the Corporation by death, resignation, removal or otherwise may be filled for
the unexpired portion of the term by the Board of Directors at any regular or
special meeting.
SECTION 4.2. Powers and Duties of Executive Officers. The officers
of the Corporation shall have such powers and duties in the management of the
Corporation as may be prescribed
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in a resolution by the Board of Directors and, to the extent not so provided, as
generally pertain to their respective offices, subject to the control of the
Board of Directors.
SECTION 4.3. Chairman of the Board. The Chairman of the Board shall
be a member of the Board of Directors. He shall preside at each meeting of the
Board of Directors or the stockholders. Unless the Chairman also holds another
office described in these Bylaws, he shall be a non-executive officer of the
Corporation.
SECTION 4.4. The President. The President shall be the chief
executive officer of the Corporation. He shall, in the absence of the Chairman
of the Board, preside at each meeting of the Board of Directors or the
stockholders. The President shall be responsible for the general supervision
and control of the business and affairs of the Corporation, subject to the
direction of the Board of Directors. The President may sign or countersign
certificates, contracts, agreements and other documents and instruments in the
name and on behalf of the Corporation, unless and except to the extent that any
document or instrument is required by law or by the Board of Directors to be
signed or countersigned by another officer of the Corporation. The President
may appoint additional officers that are not executive officers described in
these Bylaws (unless such appointments are approved by the Board of Directors),
and such additional officers shall serve the Corporation at the discretion of
the President. The President shall perform all duties incident to the office of
the President, and such other duties as may from time to time be assigned to him
by the Board of Directors.
SECTION 4.5. Executive Vice President. Each Executive Vice President
shall perform all such duties as from time to time may be assigned to him by the
Board of Directors or the President. At the request of the President or in his
absence or in the event of his inability or refusal to act, the Executive Vice
President, or if there shall be more than one, the Executive Vice Presidents in
the order determined by the Board of Directors (or if there be no such
determination, then the Executive Vice Presidents in the order of their
appointment), shall perform the duties of the President, and when so acting,
shall have the powers of and be subject to the restrictions placed upon the
President in respect of the performance of such duties.
SECTION 4.6. Senior Vice President. Each Senior Vice President shall
perform all such duties as from time to time may be assigned to him by the Board
of Directors or the President. Each Senior Vice President shall perform all
duties incident to the office of such Senior Vice President, and such other
duties as may from time to time be assigned to him by the Board of Directors.
SECTION 4.7. Chief Financial Officer. The Chief Financial Officer
shall be responsible for the financial affairs of the Corporation and shall be
the chief accounting officer for public securities purposes. If the Chief
Financial Officer is not also the Treasurer of the Corporation, he shall be
responsible for the supervision of the Treasurer. He shall perform all duties
incident to the office of Chief Financial Officer, and such other duties as may
from time to time be assigned to him by the Board of Directors.
SECTION 4.8. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
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(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of Directors
or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds;
(f) render to the Board of Directors, whenever the Board of Directors
may require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board of Directors.
In the event that any officer of the Corporation other than the
Treasurer shall be designated as the Corporation's chief financial officer, the
Treasurer shall share the foregoing powers and duties with such chief financial
officer, and all references in these Bylaws to the Treasurer shall be deemed to
include such chief financial officer of the Corporation.
SECTION 4.9. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the committees
of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation and
affix and attest the seal to all other documents to be executed on behalf of the
Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 4.10. Assistant Secretaries. During the absence or
disability of the Secretary, the Assistant Secretary shall have and may exercise
all of the powers and shall discharge all of the duties of the Secretary. Each
Assistant Secretary shall also perform all such other duties as are incident to
his office or are properly requested by the President, the Secretary or the
Board of Directors.
SECTION 4.11. Assistant Treasurers. During the absence or disability
of the Treasurer, the Assistant Treasurer shall have and may exercise all of the
powers and shall discharge all of the duties of the Treasurer. Each Assistant
Treasurer shall also perform all such other duties as are incident to his office
or are properly requested by the President, the Treasurer or the Board of
Directors.
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SECTION 4.12. Additional Officers. The Board of Directors may
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time to
time by the Board of Directors. The Board of Directors may from time to time
delegate to any officer or agent the power to appoint subordinate officers or
agents and to prescribe their respective rights, terms of office, authorities
and duties. Any such officer or agent may remove any such subordinate officer
or agent appointed by him, for or without cause.
ARTICLE V
STOCK
SECTION 5.1. Certificates. Every holder of stock shall be entitled
to have a certificate signed by or in the name of the Corporation by the
Chairman or the President or an Executive Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
Any of or all the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
SECTION 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance
of New Certificates. The Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall
be determined by resolution of the Board of Directors.
SECTION 6.2. Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
SECTION 6.3. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special
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meeting of the stockholders, directors or members of a committee of directors
need be specified in any written waiver of notice.
SECTION 6.4. Manner of Notice. Except as otherwise provided herein,
notices to directors and stockholders shall be in writing and delivered
personally or mailed to the directors or stockholders at their addresses
appearing on the books of the Corporation. Notice to directors may be given by
telegram, telecopier, telephone or other means of electronic transmission.
SECTION 6.5. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (i) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
SECTION 6.6. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs, or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time.
SECTION 6.7. Amendment of Bylaws. These Bylaws may be altered or
repealed, and new bylaws made, by the Board of Directors, but the stockholders
may make additional bylaws and may alter and repeal any Bylaws whether adopted
by them or otherwise.
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EXHIBIT 4.3.2
FIRST AMENDMENT TO LOAN AGREEMENT
---------------------------------
The First Amendment to Loan Agreement ("Amendment") is entered into as
of December 22, 1997, by and between HUGHES ELECTRONICS CORPORATION, formerly
known as Hughes Network Systems, Inc. ("Lender") and PANAMSAT CORPORATION,
formerly known as Magellan International, Inc. ("Borrower").
Whereas, Lender and Borrower are parties to this certain Loan
Agreement ("Agreement") dated as of May 15, 1997, and wish to amend said
Agreement as provided hereto:
Now, therefore, for good consideration, the receipt and sufficiency of
which is hereby acknowledged, Lender and Borrower agree as follows:
1. Capitalized terms not otherwise defined in this Amendment shall
have the meanings given in the Agreement.
2. The Loan Agreement is hereby amended by adding the following new
section 3.3:
3.3 Required Refinancing. At any time on or after May 16, 2000,
--------------------
Lender may, in its sole discretion, request Borrower to use its best
efforts to replace the credit facility provided by Lender pursuant to
this Agreement, with such credit facility and on such terms as may be
available to Borrower. Upon receipt of a written request from Lender
to replace such credit facility, Borrower agrees to diligently pursue
a replacement credit facility and it use its best efforts to locate
and conclude such replacement at the earliest possible date.
3. Except as specifically provided herein, all terms of the Agreement
remain unchanged and in full force and effect.
4. This Amendment may be executed in one or more counterparts, each
of which shall be an original document but all of which shall constitute but one
<PAGE>
agreement. Any document containing the signature of a party transmitted via
facsimile transmission by such party, shall be deemed an original executed
document.
HUGHES ELECTRONICS CORPORATION PANAMSAT CORPORATION
By: Edward B. Clarkson By: Kenneth N. Heintz
------------------------------- ----------------------------------
Edward B. Clarkson Kenneth Heintz
Assistant Treasurer Executive Vice President and
Chief Financial Officer
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EXHIBIT 4.3.3
SUBORDINATION AND AMENDMENT AGREEMENT
SUBORDINATION AND AMENDMENT AGREEMENT dated as of February 20, 1998 among
HUGHES ELECTRONICS CORPORATION (together with its successors and assigns,
"Hughes Electronics"), PANAMSAT CORPORATION (the "Borrower") and CITICORP USA,
INC., as Administrative Agent for the Lenders under the Credit Agreement
referred to below (in such capacity, the "Administrative Agent").
RECITALS
(1) The Borrower has entered into the Credit Agreement dated as of
February 20, 1998, with certain financial institutions (collectively, including
without limitation any entity acquiring the rights of a "Lender" under the
Credit Agreement after the date hereof, the "Lenders"), each of the Co-
Documentation Agents party thereto and the Administrative Agent (as from time to
time amended, the "Credit Agreement"), providing among other things for the
making of advances by the Lenders to the Borrower (the "Advances") in an
aggregate principal amount at any one time outstanding up to $500,000,000.
(2) Hughes Electronics has entered into the Loan Agreement dated as of May
15, 1997 with the Borrower (as from time to time amended, the "Hughes Loan
Agreement") pursuant to which Hughes Electronics has extended a credit facility
in the amount of $1,725,000,000 to the Borrower evidenced by the promissory note
dated May 15, 1997 (as from time to time amended, the "Hughes Note").
(3) It is a condition precedent to the effectiveness of the Credit
Agreement that Hughes Electronics and the Borrower shall have executed and
delivered an agreement in substantially the form hereof. Accordingly, the
parties agree as follows:
(S)1. Definitions. Except as otherwise expressly provided herein, terms
defined in the Credit Agreement have their respective defined meanings when used
herein. In addition, as used herein the following terms shall have the
following respective meanings:
"Excess Cash Flow" shall mean, for any period, with respect to the Borrower
and its consolidated Subsidiaries on a consolidated basis, the sum of (a) net
income plus (b) cash taxes plus (c) depreciation and amortization plus (d) non-
cash charges plus (or minus, as the case may be) (e) change in the level of
working capital and minus (f) the aggregate amount of capital expenditures made
during such period, all determined in accordance with GAAP. For purposes of
this definition, "working capital" means the excess, if any, of current assets
(excluding cash) over current liabilities, determined in accordance with GAAP.
"Final Payment Date" shall mean, with respect to the Senior Obligations,
the date of the final payment in full in cash of the principal thereof and
interest thereon and all other amounts now or hereafter payable or becoming
payable in connection therewith.
"Pay" and "Payment" shall mean, with respect to the Subordinated
Obligations or any of them, any payment or prepayment or other distribution on
or in respect of the Subordinated Obligations or any portion thereof, whether in
cash, securities or other property, by set-off, by purchase or redemption
thereof, by defeasance thereof, by the provision of a sinking fund or otherwise.
"Senior Obligations" shall mean, collectively, all present and future
obligations of the Borrower to the Administrative Agent and the Lenders under
the Credit Agreement and the other Loan Documents, including without limitation
the obligations of the Borrower thereunder to pay the principal of
<PAGE>
and interest (including, without limitation, interest accruing after the date of
any filing by the Borrower of any petition in bankruptcy or the commencement of
any bankruptcy, insolvency, reorganization or similar proceedings with respect
to the Borrower whether or not allowed as a claim in such proceedings) on the
Advances and all other amounts whatsoever payable or becoming payable under or
in respect of the Credit Agreement and the other Loan Documents, whenever
incurred, accruing or arising.
"Subordinated Obligations" shall mean, collectively, all present and future
obligations of the Borrower to Hughes Electronics under the Hughes Loan
Agreement and the Hughes Note, including without limitation the obligations of
the Borrower to pay the principal of and interest (including, without
limitation, interest accruing after the date of any filing by the Borrower of
any petition in bankruptcy or the commencement of any bankruptcy, insolvency,
reorganization or similar proceedings with respect to the Borrower whether or
not allowed as a claim in such proceedings) on the Hughes Note and any and all
other amounts whatsoever from time to time owing or becoming owing to Hughes
Electronics by the Borrower under the Hughes Loan Agreement and the Hughes Note,
whenever incurred, accrued or arising.
(S)2. Amendment of Hughes Loan. The Maturity Date (as defined in the
Hughes Loan Agreement and for all purposes of the Hughes Note) of the Hughes
Loan is hereby amended to be June 24, 2003.
(S)3. Subordination. Hughes Electronics hereby agrees with the
Administrative Agent for the benefit of the Administrative Agent and the Lenders
that except as expressly permitted by (S)4 hereof, (a) the Subordinated
Obligations are and shall be subordinated and subject in right of payment to the
prior payment in full of the Senior Obligations to the extent provided in (S)4
hereof, (b) Hughes Electronics will not ask, demand, accelerate, sue for, take
or receive from the Borrower, by set-off or in any other manner, any Payment of
the whole or any part of the Subordinated Obligations or any security therefor,
and (c) Hughes Electronics will not, without the prior written consent of the
Required Lenders, agree or consent to any amendment, waiver or other
modification of any provision of the Hughes Loan Agreement or the Hughes Note if
such amendment, waiver or modification would (i) increase the amount or change
the time of payment of any sum payable by the Borrower thereunder or otherwise
increase any of the obligations of the Borrower thereunder or (ii) adversely
affect in any way the rights or remedies of the Administrative Agent and the
Lenders. Hughes Electronics hereby directs the Borrower to make such prior
payment of the Senior Obligations.
(S)4. Payments. (a) Until the Final Payment Date, Hughes Electronics
and the Borrower agree with the Administrative Agent for the benefit of the
Administrative Agent and the Lenders that the Borrower shall not make and Hughes
Electronics shall not be entitled to receive or retain any Payment in respect of
any principal of the Subordinated Obligations except to the extent expressly
permitted by (S)4(b) and (c) hereof.
(b) The Borrower may, subject to the terms of (S)(S)5 and 6 hereof, make
payments of principal of the Hughes Note on or after January 1, 2001, in an
aggregate amount not exceeding in any fiscal year of the Borrower an amount
equal to 50% of Excess Cash Flow for the preceding fiscal year of the Borrower,
as set forth in the annual financial statements of the Borrower provided
pursuant to Section 5.03(c) of the Credit Agreement; provided, that no payment
of principal under this Section 4(b) shall be permitted at any time when the
Borrower Debt Rating is lower than BBB in the case of S&P or Baa2 in the case of
Moody's.
(c) The Borrower may at any time, subject to the terms of (S)(S)5 and 6
hereof, make payments of principal of the Hughes Note out of the proceeds of (i)
any issuance by the Borrower of shares of capital stock and (ii) any issuance by
the Borrower of Subordinated Debt.
(d) The Borrower may, subject to (S)(S)5 and 6 hereof, make payments of
interest on the Hughes Note at a rate per annum not exceeding the interest rate
per annum applicable to the Advances,
<PAGE>
plus additional interest at a rate not exceeding the rate at which facility fee
is payable under Section 2.07 of the Credit Agreement as in effect from time to
time.
(e) Hughes Electronics agrees that it will not take any guaranty of or
security for the Subordinated Obligations or any or them, unless in the case of
a guaranty such guaranty is subject to the provisions of this Agreement.
(f) Hughes Electronics will give to the Administrative Agent at least 15
days' prior written notice of any request by Hughes Electronics pursuant to the
Hughes Loan Agreement that the Borrower seek refinancing for or in respect of
the Hughes Note (it being understood that the Senior Debt must be paid in full
prior to any such refinancing).
(S)5. Distribution, Etc. In furtherance of, and to make effective, the
subordination provided for herein, Hughes Electronics agrees with the
Administrative Agent for the benefit of the Administrative Agent and the Lenders
as follows:
(a) In the event of any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the assets of the Borrower, or upon any indebtedness of the
Borrower, by reason of any Event of Default specified in Section 6.01(f) of the
Credit Agreement relating to the Borrower, then and in any such event and during
the continuance thereof:
(i) any Payment which but for this Agreement would be payable or
deliverable upon or with respect to the Subordinated Obligations or any of them
(including without limitation any Payment payable to Hughes Electronics under
any agreement relating to the subordination of any other indebtedness to the
payment of the Subordinated Obligations) shall instead be paid or delivered
directly to the Administrative Agent for application to the Senior Obligations;
and
(ii) Hughes Electronics hereby irrevocably authorizes and empowers the
Administrative Agent to demand, sue for, collect and receive every such Payment
and give acquittances therefor, and to file and/or vote claims and take such
other proceedings, in the Administrative Agent's own name or in the name of
Hughes Electronics or otherwise, as the Administrative Agent may deem necessary
or advisable for the enforcement of this Agreement; and Hughes Electronics
agrees duly and promptly to take such action as may be reasonably requested by
the Administrative Agent to assist in the collection of the Subordinated
Obligations for the account of the Administrative Agent and the Lenders, and/or
to file appropriate proofs of claim in respect of the Subordinated Obligations,
and to execute and deliver to the Administrative Agent on demand such powers of
attorney, proofs of claim, assignments of claim or other instruments as may be
requested by the Administrative Agent to enable the Administrative Agent to (x)
enforce any and all claims upon or with respect to the Subordinated Obligations,
and (y) to collect and receive any and all Payments which may be payable or
deliverable at any time upon or with respect to the Subordinated Obligations.
(b) If any Payment shall be received by Hughes Electronics upon or in
respect of the Subordinated Obligations in contravention of the provisions of
this (S)5 or of (S)4 or (S)6 hereof, Hughes Electronics will forthwith deliver
the same to the Administrative Agent in precisely the form received (except for
the endorsement or assignment of Hughes Electronics where necessary), for
application to the Senior Obligations, whether then due or not due, and, until
so delivered, the same shall be held in trust by Hughes Electronics for the sole
benefit of the Administrative Agent and the Lenders. In the event of the
failure by Hughes Electronics to make any such endorsement or assignment, the
Administrative Agent, or any of its officers or employees, is hereby irrevocably
authorized to make the same.
(c) Any Payment received by Hughes Electronics that was not made or
received in contravention of the provisions of this (S)5 or of (S)4 or (S)6
hereof may be retained by Hughes Electronics.
<PAGE>
(S)6. Event of Default. Hughes Electronics and the Borrower agree with
the Administrative Agent for the benefit of the Administrative Agent and the
Lenders that if there shall occur an Event of Default, no Payment shall be made
on or in respect of the Subordinated Obligations or any portion thereof, whether
of principal, interest or otherwise, until such time as the Administrative Agent
notifies Hughes Electronics in writing that such Event of Default has been
remedied, after which the Borrower may resume making required Payments (to the
extent permitted by (S)(S)4 and 5 hereof) in respect of the Subordinated
Obligations in accordance with the terms of the Hughes Note (including without
limitation any missed Payments). Without prejudice to the foregoing provisions
of this (S)6, the Administrative Agent will give Hughes Electronics and the
Borrower prompt notice of the occurrence of any Event of Default.
(S)7. Continuing Subordination, Etc. The subordination effected by this
Agreement is a continuing subordination, and Hughes Electronics hereby agrees
that at any time and from time to time without notice to it the Administrative
Agent or the Lenders may:
(a) change the manner, place or terms of payment or change or extend the
time of payment of, or renew, exchange, amend or alter, the terms of any Senior
Obligation, any security therefor or guarantee thereof or any liability of the
Borrower or any other Person to the Administrative Agent or the Lenders, or any
liability incurred directly or indirectly in respect thereof, or otherwise
amend, renew, exchange, modify or supplement in any manner the Senior
Obligations (without prejudice to the limitation on subordination set forth in
the proviso in the definition of "Senior Obligations"), any Loan Document or any
instrument evidencing or guaranteeing or securing the same or any agreement
under which the Senior Obligations are outstanding; provided, that the
Administrative Agent and the Lenders will not amend or modify the terms of the
Senior Debt in a way that (i) increases the principal amount of the Senior Debt
beyond an aggregate amount of $500,000,000, or (ii) increases the rate of
interest on the Senior Debt (except as set forth in the Credit Agreement), or
(iii) extends the Commitment Termination Date;
(b) sell, exchange, release, surrender, realize upon, enforce or otherwise
deal with in any manner and any order any property securing the Senior
Obligations or any liability of the Borrower or any other Person to the
Administrative Agent or the Lenders, or any liability incurred directly or
indirectly in respect thereof;
(c) settle or compromise any Senior Obligation or any other liability of
the Borrower or any other Person in respect of the Senior Obligations to the
Administrative Agent or the Lenders or any security therefor or any liability
incurred directly or indirectly in respect thereof and apply any sums by
whomsoever paid and however realized to any liability (including without
limitation, the Senior Obligations) in any manner or order; and
(d) fail to take or to record or otherwise perfect, for any reason or for
no reason, any Lien securing the Senior Obligations by whomsoever granted,
exercise or delay in or refrain from exercising any right or remedy against the
Borrower or any other Person or any security, elect any remedy and otherwise
deal freely with the Borrower and any guarantor of or security for the Senior
Obligations or any liability of the Borrower or any guarantor to such holder or
any liability incurred directly or indirectly in respect thereof.
The Borrower agrees to notify Hughes Electronics of each of the events
described in paragraphs (a) through (d) above; provided, that failure by the
Borrower so to notify Hughes Electronics shall not in any way affect the rights
of the Administrative Agent or the Lenders under this Agreement.
(S)8. Covenants.
(a) Hughes Electronics agrees that it will not transfer, assign, pledge or
encumber the Subordinated Obligations or any part thereof except to General
Motors Corporation or any Affiliate thereof, provided that in connection with
any such transaction, the respective instrument of assignment
<PAGE>
specifically provides that the assignee takes the Subordinated Obligations or
such part thereof subject to the provisions of this Agreement and such assignee
executes and delivers to the Administrative Agent an instrument in form and
substance satisfactory to the Administrative Agent pursuant to which such
assignee agrees to be bound by the provisions of this Agreement.
(b) Hughes Electronics agrees that it will give not less than ten (10)
days' prior written notice to the Administrative Agent in accordance with
Section 19 hereof of any acceleration by Hughes Electronics of the maturity of
the Subordinated Obligations or any thereof (without prejudice to the provisions
of (S)(S)3, 4, 5 and 6 hereof).
(c) Nothing in this Agreement shall limit the right of the Administrative
Agent and the Lenders to pursue any of their rights and remedies under the
Credit Agreement or the Loan Documents or applicable law at such times and in
such manner as they may determine.
(S)9. Waiver of Notice. Hughes Electronics hereby unconditionally waives
notice of the incurrence of the Senior Obligations or any part thereof and
waives notice of reliance by the Administrative Agent or the Lenders upon the
subordination of the Subordinated Obligations to the Senior Obligations.
(S)10. Representations and Warranties. Hughes Electronics hereby
represents and warrants that (i) it is a corporation duly incorporated and
validly existing under the laws of Delaware; (ii) its making and performance of
this Agreement have been duly authorized by all necessary action on its part;
(iii) the making and performance by it of this Agreement do not violate any
provision of applicable law or regulation or any contract or agreement to which
it is a party; and (iv) this Agreement constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms.
(S)11. Subrogation. On the Final Payment Date, Hughes Electronics shall,
to the extent of any amounts paid to the Administrative Agent hereunder, be
subrogated to the rights of the Administrative Agent and the Lenders to receive,
accept and retain distributions of assets of the Borrower, or Payments by or on
behalf of the Borrower, made on the Senior Obligations, until the Subordinated
Obligations shall be paid in full. For purposes solely of such subrogation, no
Payments to the Administrative Agent or the Lenders to which Hughes Electronics
would be entitled but for the provisions hereof, pursuant to the provisions
hereof, to the Administrative Agent or the Lenders by Hughes Electronics shall,
as between the Borrower, their creditors other than the Administrative Agent or
the Lenders, and Hughes Electronics, be deemed to be a payment or distribution
by the Borrower on account of the Senior Obligations.
(S)12. Benefit of Subordination Provisions. The subordination provisions
of this Agreement are intended solely to define the relative rights of Hughes
Electronics and its successors and assigns on the one hand and the
Administrative Agent and the Lenders and their successors and assigns on the
other hand, and nothing contained herein shall impair, as between the Borrower
and Hughes Electronics, the obligations of the Borrower (which are absolute and
unconditional) to pay the Subordinated Obligations as and when the same shall
become due and payable in accordance with the terms thereof, or affect the
relative rights against the Borrower of Hughes Electronics and creditors of the
Borrower other than the Administrative Agent and the Lenders.
(S)13. Reinstatement. If at any time any payment in respect of the Senior
Obligations (or in respect of any Subordinated Obligation that was paid over to
the Administrative Agent) is rescinded or must otherwise be restored or returned
by the Administrative Agent or any of the Lenders in connection with any
bankruptcy, insolvency, reorganization or similar proceeding, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Borrower or Hughes Electronics or any
substantial part of the Borrower's or Hughes Electronics' property, the
obligations of Hughes Electronics under this Agreement shall continue to be
effective, or be reinstated as of the time such payment in respect of the Senior
Obligations is so rescinded or must otherwise be restored, as the case may be,
all as though such payment had not then been made.
<PAGE>
(S)14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be identical and all of which, when taken
together, shall constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart.
(S)15. No Waiver. No failure on the part of the Administrative Agent or
any Lender to exercise, no delay in exercising, and no course of dealing with
respect to, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy. This Agreement may not be amended or modified except by written
agreement of the Borrower, Hughes Electronics and the Administrative Agent, and
no consent or waiver hereunder shall be valid unless in writing and signed by
the Administrative Agent.
(S)16. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, and their respective successors and
assigns, and each holder from time to time of any of the Senior Obligations or
Subordinated Obligations.
(S)17. Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of New York.
(S)18. Submission to Jurisdiction; Waiver of Jury Trial. Hughes
Electronics hereby submits, to the fullest extent permitted by law, to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or any of the other documents or the transactions contemplated hereby
or thereby, and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court, any claim that any such proceeding
brought in such a court has been brought in any inconvenient forum and any
claims or defenses arising from or related to any theory of sovereign immunity.
EACH OF HUGHES ELECTRONICS, THE BORROWER AND THE ADMINISTRATIVE AGENT HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
(S)19. Miscellaneous. All notices, requests and demands to or upon a
party hereto to be effective shall be in writing, shall be sent by certified or
registered mail, return receipt requested, or by telecopier or delivered by hand
or by a recognized overnight courier service and shall be deemed to have been
validly served, given or delivered when delivered against receipt or, in the
case of telecopy notice, when sent, or, in the case of telex, when the
appropriate answerback received, addressed as follows:
If to Hughes Electronics:
Hughes Electronics Corporation
7200 Hughes Terrace
Mail Station A-135, Building C-1
P.O. Box 45066
Los Angeles, CA 90045-0066
Attention: Edward B. Clarkson, Assistant Treasurer
Telephone: 310-568-6190
Facsimile: 310-568-6386
If to the Administrative Agent:
Citicorp USA, Inc.
<PAGE>
725 South Figueroa Street
Fifth Floor
Los Angeles, CA 90017
Attention: Walter L. Larsen
Telephone: 213-239-1501
Facsimile: 213-623-3592
If to PanAmSat:
PanAmSat Corporation
One Pickwick Plaza
Greenwich, CT 06830
Attention: Kenneth N. Heintz
Telephone: 203-622-6664
Facsimile: 203-622-9163
or to such other address as each party may designate for itself by like notice
given in accordance with this (S)19.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
HUGHES ELECTRONICS CORPORATION
By Edward B. Clarkson
------------------------------------------
Title: Assistant Treasurer
PANAMSAT CORPORATION
By Kenneth N. Heintz
------------------------------------------
Title:
CITICORP USA, INC.,
as Administrative Agent
By [Signature Illegible]
------------------------------------------
Title: Attorney-in-Fact
<PAGE>
EXHIBIT 4.4
PANAMSAT CORPORATION
TO
THE CHASE MANHATTAN BANK
Trustee
_________
Indenture
Dated as of January 16, 1998
_________
Debt Securities
<PAGE>
TABLE OF CONTENTS
-----------------
Page
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ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION............................................... 1
SECTION 101. Definitions............................................... 1
SECTION 102. Compliance Certificates and Opinions...................... 9
SECTION 103. Form of Documents Delivered to Trustee.................... 10
SECTION 104. Acts of Holders........................................... 11
SECTION 105. Notices, Etc., to Trustee and Company..................... 12
SECTION 106. Notice to Holders; Waiver................................. 12
SECTION 107. Conflict with Trust Indenture Act......................... 13
SECTION 108. Effect of Headings and Table of Contents.................. 13
SECTION 109. Successors and Assigns.................................... 13
SECTION 110. Separability Clause....................................... 13
SECTION 111. Benefits of Indenture..................................... 13
SECTION 112. Governing Law............................................. 14
SECTION 113. Legal Holidays............................................ 14
SECTION 114. References to Currency.................................... 14
ARTICLE TWO SECURITY FORMS............................................... 14
SECTION 201. Forms Generally........................................... 14
SECTION 202. Form of Trustee's Certificate of Authentication........... 15
SECTION 203. Securities Issuable in the Form of a Global Security...... 15
ARTICLE THREE THE SECURITIES............................................. 18
i
<PAGE>
Page
----
SECTION 301. Amount Unlimited; Issuable in Series................... 18
SECTION 302. Denominations.......................................... 21
SECTION 303. Execution, Authentication, Delivery and Dating......... 21
SECTION 304. Temporary Securities................................... 22
SECTION 305. Registration, Registration of Transfer and Exchange.... 23
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities....... 25
SECTION 307. Payment of Interest; Interest Rights Preserved......... 25
SECTION 308. Persons Deemed Owners.................................. 27
SECTION 309. Cancellation........................................... 27
SECTION 310. Computation of Interest................................ 28
ARTICLE FOUR SATISFACTION AND DISCHARGE............................... 28
SECTION 401. Satisfaction and Discharge of Indenture................ 28
SECTION 402. Application of Trust Funds; Indemnification............ 29
SECTION 403. Defeasance and Discharge of Indenture.................. 30
ARTICLE FIVE REMEDIES................................................. 32
SECTION 501. Events of Default...................................... 32
SECTION 502. Acceleration of Maturity; Rescission and Annulment..... 35
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee............................... 36
SECTION 504. Trustee May File Proofs of Claim....................... 37
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities........................................ 38
ii
<PAGE>
Page
----
SECTION 506. Application of Money Collected......................... 38
SECTION 507. Limitation on Suits.................................... 39
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest...................... 40
SECTION 509. Restoration of Rights and Remedies..................... 40
SECTION 510. Rights and Remedies Cumulative......................... 40
SECTION 511. Delay or Omission Not Waiver........................... 40
SECTION 512. Control by Holders..................................... 41
SECTION 513. Waiver of Past Defaults................................ 41
SECTION 514. Undertaking for Costs.................................. 42
SECTION 515. Waiver of Stay, Extension or Usury Laws................ 42
ARTICLE SIX THE TRUSTEE.............................................. 42
SECTION 601. Certain Duties and Responsibilities.................... 42
SECTION 602. Notice of Defaults..................................... 44
SECTION 603. Certain Rights of Trustee.............................. 45
SECTION 604. Not Responsible for Recitals or Issuance of
Securities........................................... 46
SECTION 605. May Hold Securities.................................... 46
SECTION 606. Money Held in Trust.................................... 46
SECTION 607. Compensation and Reimbursement......................... 47
SECTION 608. Disqualification; Conflicting Interests................ 48
SECTION 609. Corporate Trustee Required; Eligibility................ 48
SECTION 610. Resignation and Removal; Appointment of Successor...... 48
SECTION 611. Acceptance of Appointment by Successor................. 51
iii
<PAGE>
Page
----
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business............................... 52
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND
COMPANY................................................ 53
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders................................. 53
SECTION 702. Preservation of Information; Communications
to Holders........................................... 53
SECTION 703. Reports by Trustee..................................... 55
SECTION 704. Reports by Company..................................... 55
ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER
OR LEASE............................................... 56
SECTION 801. Company May Consolidate, etc., Only on
Certain Terms........................................ 56
SECTION 802. Successor Corporation Substituted...................... 57
ARTICLE NINE SUPPLEMENTAL INDENTURES................................ 58
SECTION 901. Supplemental Indentures without Consent of
Holders.............................................. 58
SECTION 902. Supplemental Indentures with Consent of Holders........ 60
SECTION 903. Execution of Supplemental Indentures................... 61
SECTION 904. Effect of Supplemental Indentures...................... 62
SECTION 905. Conformity with Trust Indenture Act.................... 62
SECTION 906. Reference in Securities to Supplemental
Indentures........................................... 62
ARTICLE TEN COVENANTS................................................ 62
SECTION 1001. Payment of Principal, Premium and Interest............. 62
SECTION 1002. Maintenance of Office or Agency........................ 63
iv
<PAGE>
Page
----
SECTION 1003. Money for Securities; Payments to Be Held in
Trust................................................ 63
SECTION 1004. Corporate Existence.................................... 65
SECTION 1005. Payment of Taxes....................................... 65
SECTION 1006. Limitation on Liens.................................... 66
SECTION 1007. Limitation on Sale and Lease-Back Transactions......... 69
SECTION 1008. Exemption from Limitation on Liens and Sale
and Lease-Back Transactions.......................... 69
SECTION 1009. Defeasance of Certain Obligations...................... 70
SECTION 1010. Statement by Officers as to Default.................... 71
SECTION 1011. Waiver of Certain Covenants............................ 71
ARTICLE ELEVEN REDEMPTION OF SECURITIES............................... 72
SECTION 1101. Applicability of Article............................... 72
SECTION 1102. Election to Redeem; Notice to Trustee.................. 72
SECTION 1103. Selection by Trustee of Securities To Be
Redeemed............................................. 72
SECTION 1104. Notice of Redemption................................... 73
SECTION 1105. Deposit of Redemption Price............................ 74
SECTION 1106. Securities Payable on Redemption Date.................. 74
SECTION 1107. Securities Redeemed in Part............................ 75
ARTICLE TWELVE SINKING FUNDS.......................................... 75
SECTION 1201. Applicability of Article............................... 75
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities........................................... 76
SECTION 1203. Redemption of Securities for Sinking Fund.............. 76
v
<PAGE>
Page
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TESTIMONIUM..........................................................
SIGNATURES AND SEALS.................................................
ACKNOWLEDGMENTS......................................................
vi
<PAGE>
Reconciliation and tie between Trust Indenture Act of 1939 and Indenture,
dated as of January 16, 1998
Trust Indenture
Act Section ..................... Indenture Section
(S)310(a)(1) ..................... 609
(a)(2) ..................... 609
(a)(3) ..................... Not Applicable
(a)(4) ..................... Not Applicable
(b) ..................... 608,610
(c) ..................... Not Applicable
(S)311(b)(2) ..................... 703(a)
(c) ..................... Not Applicable
(S)312(a) ..................... 701, 702(a)
(b) ..................... 702(b)
(c) ..................... 702(c)
(S)313(a) ..................... 703(a)
(d) ..................... 703(b)
(S)314(a) ..................... 704
(b) ..................... Not Applicable
(c)(1) ..................... 102
(c)(2) ..................... 102
(c)(3) ..................... Not Applicable
(d) ..................... Not Applicable
(e) ..................... 102
(f) ..................... Not Applicable
(S)315(a) ..................... 601(a)
(b) ..................... 602, 703(a)
(c) ..................... 601(b)
(d) ..................... 601(c)
(d)(1) ..................... 601(a)(1)
(d)(2) ..................... 601(c)(2)
(d)(3) ..................... 601(c)(3)
(e) ..................... 514
(S)316(a) ..................... 101
(a)(1)(A) ..................... 502, 512, 513
(a)(1)(B) ..................... 513
(a)(2) ..................... Not Applicable
(b) ..................... 508
(S)317(a)(1) ..................... 503
(a)(2) ..................... 504
(b) ..................... 1003
(S)318(a) ..................... 107
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
INDENTURE, dated as of January 16, 1998, between PANAMSAT CORPORATION,
a corporation duly organized and existing under the laws of the State of
Delaware (herein called the "Company" or the "Issuer"), having its principal
office at One Pickwick Plaza, Greenwich, Connecticut 06830, and THE CHASE
MANHATTAN BANK, a New York banking corporation, as Trustee hereunder (herein
called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities or of series
thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions. For all purposes of this Indenture,
-----------
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
<PAGE>
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation; and
(4) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain items, used principally in Article Six, are defined in that
Article.
"Act," when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"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 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
2
<PAGE>
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.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board duly authorized to act
hereunder.
"Board Resolution" means a copy of a resolution, certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions or trust companies are
authorized or obligated by law to close in The City of New York, the Borough of
Manhattan.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, a Vice Chairman,
its Chief Executive Officer or President or by a Vice President and its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"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.
3
<PAGE>
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of execution of this Indenture is located at 450 West
33rd Street, 15th Floor, New York, New York 10001, Attention: Global Trust
Services, or at any other time at such address as the Trustee may from time to
time designate by notice to the Holders.
"corporation" includes corporations, associations, companies, business
trusts and partnerships.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means, unless otherwise specified by the Company pursuant
to either Section 203 or 301, with respect to Securities of any series issuable
or issued as a Global Security, The Depository Trust Company, New York, New
York, or any successor thereto registered under the Securities Exchange Act of
1934, as amended, or other applicable statute or regulation.
"Event of Default" has the meaning specified in Section 501.
"Global Security" means a Security issued to evidence all or a part of
any series of Securities which is executed by the Company and authenticated and
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instruction, all in accordance with this Indenture and pursuant to a Company
Order, which shall be registered in the name of the Depositary or its nominee.
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of particular series of Securities established as
contemplated by Section 301.
"Interest," when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
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"Interest Payment Date," when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Issuer" means the Person named as the "Issuer" in the first paragraph
of this instrument until a successor corporation shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Issuer" shall
mean such successor corporation.
"lien" has the meaning specified in Section 1006.
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, Chief Executive Officer or the President or by a Vice President and
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee.
"Opinion of Counsel" means written opinion of counsel, who may be
counsel for the Company and whose opinion shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding," when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities for whose payment or redemption money or evidences of
indebtedness in the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if
5
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the Company shall act as its own Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be redeemed, notice of
--------
such redemption has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made; and
(iii) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
- -------- -------
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Securities which a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded. Securities so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Securities and that the pledgee is not the Company or
any other obligor upon the Securities or any Affiliate of the Company or of such
other obligor. In case of a dispute as to such right, any decision by the
Trustee shall be full protection to the Trustee. Upon request of the Trustee,
the Company shall furnish to the Trustee promptly an Officers' Certificate
listing and identifying all Securities, if any, known by the Company to be owned
or held by or for the account of any of the above-described persons; and,
subject to Section 601, the Trustee shall be entitled to accept such Officers'
Certificate as conclusive evidence of the facts therein set forth and of the
fact that all Securities not listed therein are Outstanding for the purposes of
any such determination.
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"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities of any
series, means the place or places where the principal of (and premium, if any)
and interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"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 this Indenture), but not including (a) any property which in the good
faith determination of the Board of Directors 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.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price," when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series
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means the date specified for that purpose as contemplated by Section 301.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Office including any Vice President,
Managing Director, Assistant Vice President, Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer or any officer of the Trustee customarily
performing functions similar to those performed by any of the above-designated
officers and also with respect to a particular matter, any other officer to whom
such matter is referred because of such officer's knowledge and familiarity with
the particular subject.
"Restricted Subsidiary" means a subsidiary of the Company which owns a
Principal Property.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
Voting Stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any
8
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series shall mean the Trustee with respect to Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as amended
and in force at the date as of which this instrument was executed, except as
provided in Section 905.
"U.S. Government Obligations" means securities which are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as to the timely
payment of principal and interest as a full faith and credit obligation by the
United States of America, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company which is a member of the Federal Reserve
System and having a combined capital and surplus of at least $50,000,000 as
custodian with respect to any such obligation evidenced by such depository
receipt or a specific payment of interest on or principal of any such obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
- --------
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the obligation
set forth in (i) or (ii) above or the specific payment of interest on or
principal of such obligation evidenced by such depository receipt.
"Vice President," when used with respect to the Company, means any
vice president, whether or not designated by a number or a word or words added
before or after the title "vice president".
"Voting Stock" means stock which ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
SECTION 102. Compliance Certificates and Opinions. Upon any
------------------------------------
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent,
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if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such Person, such Person
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such Person,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee. In any case
--------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
10
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representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such officer's certificate or opinion is
based are erroneous. Any such certificate or Opinion of Counsel may be based,
insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may be proved in
accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in any reasonable manner which the Trustee deems sufficient.
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(c) The ownership of Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
SECTION 105. Notices, Etc., to Trustee and Company. Any request,
-------------------------------------
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention: Global
Trust Services, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company, to the attention of the
General Counsel of the Company.
SECTION 106. Notice to Holders; Waiver. Where this Indenture
-------------------------
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in
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any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other case it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act. If any provision
---------------------------------
hereof limits, qualifies or conflicts with another provision which is required
or deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required or deemed provision shall control.
SECTION 108. Effect of Headings and Table of Contents. The Article
----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 109. Successors and Assigns. All covenants and agreements
----------------------
in this Indenture by the Company shall bind its successors and assigns, whether
so expressed or not.
SECTION 110. Separability Clause. In case any provision in this
-------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture. Nothing in this Indenture or
---------------------
in the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder and the Holders, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
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SECTION 112. Governing Law. This Indenture and the Securities
-------------
shall be governed by and construed in accordance with the laws of the State of
New York without regard to its conflicts of laws principles.
SECTION 113. Legal Holidays. In any case where any Interest
--------------
Payment Date, Redemption Date or Stated Maturity of any Security shall not be a
Business Day at any Place of Payment, then (notwithstanding any other provision
of this Indenture or of the Securities) payment of interest or principal (and
premium, if any) need not be made at such Place of Payment on such date, but may
be made on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on the Interest Payment Date or Redemption
Date, or at the Stated Maturity, provided that no interest shall accrue for the
---------
period from and after such Interest Payment Date, Redemption Date or Stated
Maturity, as the case may be, to the date of payment.
SECTION 114. References to Currency. All references in this
----------------------
Indenture to "dollars" or "$" are to the currency of the United States of
America.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally. The Securities of each series shall
---------------
be in substantially the forms established in one or more indentures supplemental
hereto or approved from time to time by or pursuant to a Board Resolution in
accordance with Section 301, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and any indenture supplemental hereto, and may have such letters,
numbers of other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. If the form of
Securities of any series is established by action taken pursuant to a Board
Resolution, a copy of an appropriate record of such action shall be certified by
the Secretary or an Assistant Secretary of the Company and delivered to the
Trustee at or prior to the delivery of the Company Order contemplated by Section
303 for the authentication and delivery of such Securities.
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The Trustee's certificate of authentication shall be in substantially
the form set forth in this Article.
The definitive Securities shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
SECTION 202. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
By
Authorized Officer
SECTION 203. Securities Issuable in the Form of a Global Security.
----------------------------------------------------
(a) If the Issuer shall establish pursuant to Sections 201 and 301
that the Securities of a particular series are to be issued in whole or in part
in the form of one or more Global Securities, then the Issuer shall execute and
the Trustee shall, in accordance with Section 303 and the Company Order
delivered to the Trustee thereunder, authenticate and deliver, such Global
Security or Securities, which (i) shall represent, and shall be denominated in
an amount equal to the aggregate principal amount of, the Outstanding Securities
of such series to be represented by such Global Security or Securities, (ii)
shall be registered in the name of the Depositary for such Global Security or
Securities or its nominee, (iii) shall be delivered by the Trustee to the
Depositary or pursuant to the Depositary's instruction and (iv) shall bear a
legend substantially to the following effect: "UNLESS AND UNTIL IT IS EXCHANGED
IN WHOLE OR IN PART FOR THE INDIVIDUAL SECURITIES REPRESENTED HEREBY, THIS
GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE (I) BY THE DEPOSITARY
TO A NOMINEE OF THE DEPOSITARY OR (II) BY A NOMINEE OF THE
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DEPOSITARY OR THE DEPOSITARY TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
(b) Notwithstanding any other provision of this Section 203 or of
Section 305, unless the terms of a Global Security expressly permit such Global
Security to be exchanged in whole or in part for individual Securities, a Global
Security may be transferred, in whole but not in part and in the manner provided
in Section 305, only to another nominee of the Depositary for such Global
Security, or to a successor Depositary for such Global Security selected or
approved by the Issuer or to a nominee of such successor Depositary.
(c) (i) If at any time the Depositary for a Global Security notifies
the Issuer that it is unwilling or unable to continue as Depositary for such
Global Security or if at any time the Depositary for the Securities for such
Series shall no longer be eligible or in good standing under the Securities
Exchange Act of 1934, as amended, or other applicable statute or regulation, the
Issuer shall appoint a successor Depositary with respect to such Global
Security. If a successor Depositary for such Global Security is not appointed by
the Issuer within 90 days after the Issuer receives such notice or becomes aware
of such ineligibility, the Issuer will execute, and the Trustee, upon receipt of
a Company Order for the authentication and delivery of individual Securities of
such series in exchange for such Global Security, will authenticate and deliver
individual Securities of such series of like tenor and terms in definitive form
in an aggregate principal amount equal to the principal amount of the Global
Security in exchange for such Global Security.
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(ii) If an Event of Default shall have occurred and be continuing or
an event shall have occurred which with the giving of notice or lapse of time or
both, would constitute an Event of Default with respect to the Securities
represented by such Global Security, the Trustee, upon receipt of a Company
Order for the authentication and delivery of individual Securities of such
series in exchange for such Global Security, will authenticate and deliver
individual Securities of such series of like tenor and terms in definitive form
in an aggregate principal amount equal to the principal amount of the Global
Security in exchange for such Global Security.
(iii) The Issuer may at any time and in its sole discretion determine
that the Securities of any series issued or issuable in the form of one or more
Global Securities shall no longer be represented by such Global Security or
Securities. In such event the Issuer will execute, and the Trustee, upon
receipt of a Company Order for the authentication and delivery of individual
Securities of such series in exchange in whole or in part for such Global
Security, will authenticate and deliver individual Securities of such series of
like tenor and terms in definitive form in an aggregate principal amount equal
to the principal amount of such Global Security or Securities representing such
series to be so exchanged for such Global Security or Securities.
(iv) If specified by the Issuer pursuant to Section 301 with respect
to Securities issued or issuable in the form of a Global Security, the
Depositary for such Global Security may surrender such Global Security in
exchange in whole or in part for individual Securities of such series of like
tenor and terms in definitive form on such terms as are acceptable to the Issuer
and such Depositary. Thereupon the Issuer shall execute, and the Trustee shall
authenticate and deliver, without service charge, (1) to each Person specified
by such Depositary a new Security or Securities of the same series of like tenor
and terms and of any authorized denomination of $l,000 and any integral multiple
thereof as requested by such Person in aggregate principal amount equal to and
in exchange for such Person's beneficial interest in the Global Security; and
(2) to such Depositary a new Global Security of like tenor and terms and in a
denomination equal to the difference, if any, between the principal amount of
the surrendered Global Security and the aggregate principal amount of Securities
delivered to Holders thereof.
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(v) In any exchange provided for in any of the preceding four
paragraphs, the Issuer will execute and the Trustee will authenticate and
deliver individual Securities in definitive registered form in authorized
denominations of $1,000 and any integral multiple thereof. Upon the exchange of
a Global Security for individual Securities, such Global Security shall be
cancelled by the Trustee. Securities issued in exchange for a Global Security
pursuant to this Section shall be registered in such names and in such
authorized denominations as the Depositary for such Global Security, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee in writing. The Trustee shall deliver such Securities to
the persons in whose names such Securities are so registered.
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series. The aggregate
------------------------------------
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and set forth in an Officers'
Certificate, or established in one or more indentures supplemental hereto, prior
to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall distinguish
the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of the
series pursuant to Sections 203, 304, 305, 306, 906 or 1107);
(3) the date or dates on which the principal of the Securities of the
series is payable;
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(4) the rate or rates at which the Securities of the series shall bear
interest, if any, the date or dates from which such interest shall accrue,
the Interest Payment Dates on which such interest shall be payable and the
Regular Record Date for the interest payable on the Interest Payment Date;
(5) the place or places where the principal of (and premium, if any)
and interest on Securities of the series shall be payable;
(6) the period or periods within which, the price or prices at which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company;
(7) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of the series shall be
issuable;
(9) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
502;
(10) any paying agents, transfer agents, registrars or any other
agents with respect to the Securities of the series, if other than the
Trustee;
(11) the currency or currencies, including composite currencies, in
which payment of the principal of (and premium, if any) and interest, if
any, on such Securities shall be payable (if other than the currency of the
United States of America), which unless otherwise specified shall be the
currency of the United States of America as at the time of payment is legal
tender for payment of public or private debts;
19
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(12) if the principal of (and premium, if any), or interest, if any,
on such Securities are to be payable, at the election of the Company or any
Holder thereof, in a coin or currency other than that in which such
Securities are stated to be payable, the period or periods within which,
and the terms and conditions upon which, such election may be made;
(13) if such Securities are to be denominated in a currency or
currencies, including composite currencies, other than the currency of the
United States of America, the equivalent price in the currency of the
United States of America for purposes of determining the voting rights of
Holders of such Securities as Outstanding Securities under this Indenture;
(14) if the amount of payments of principal of (and premium, if any),
or portions thereof, or interest, if any, on such Securities may be
determined with reference to an index, formula or other method based on a
coin or currency other than that in which such Securities are stated to be
payable, the manner in which such amounts shall be determined;
(15) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture); and
(16) whether the Securities of the series shall be issued in whole or
in part in the form of a Global Security or Securities; the terms and
conditions, if any, upon which such Global Security or Securities may be
exchanged in whole or in part for other individual Securities; and the
Depositary for such Global Security or Securities.
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to such Board Resolution and set forth in such Officers' Certificate or in any
such indenture supplemental hereto.
If any of the terms of the Securities of any series are established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or
20
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prior to the delivery of the Officers' Certificate setting forth the terms of
the Securities of any series.
SECTION 302. Denominations. The Securities of each series shall be
-------------
issuable in registered form without coupons in such denominations as shall be
specified as contemplated by Section 301. In the absence of any such provisions
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating. The
----------------------------------------------
Securities shall be executed on behalf of the Company by its Chairman of the
Board, a Vice Chairman, its Chief Executive Officer or President or by one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established in or
pursuant to one or more Board Resolutions as permitted by Sections 201 and 301,
or by a Supplemental Indenture as provided by Section 901, in authenticating
such Securities, and accepting the additional responsibilities under this
Indenture in relation to such Securities, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating,
(a) that such form has been established in conformity with the
provisions of this Indenture;
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(b) that such terms have been established in conformity with the
provisions of this Indenture;
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization and other laws of general applicability relating to or
affecting the enforcement of creditors' rights and to general equity
principles;
(d) that all laws and requirements in respect of the execution and
delivery by the Company of the Securities have been complied with; and
(e) such other matters as the Trustee may reasonably request.
If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Each Security shall be dated the date of its authentication unless
otherwise provided by the terms established and contemplated by Section 301.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of this Indenture.
SECTION 304. Temporary Securities. Pending the preparation of
--------------------
definitive Securities of any series, the Company may execute, and upon Company
Order the Trustee shall authenticate and deliver, temporary Securities which are
printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination,
22
<PAGE>
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any one
or more temporary Securities of any series the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Securities of the same series of authorized denominations.
Until so exchanged the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive securities
of such series.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause to be kept at one of its offices or agencies
maintained pursuant to Section 1002 or at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to
Section 203 and to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of Securities.
The Trustee initially is hereby appointed "Security Registrar" for the purpose
of registering Securities and transfers of Securities as herein provided.
Subject to (i) Section 203 and (ii) any restrictions on transfer set
forth in such Security, upon surrender for registration of transfer of any
Security of any series at the office or agency in a Place of Payment for that
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new
23
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Securities of the same series, of any authorized denominations and of a like
aggregate principal amount.
Subject to Section 203, at the option of the Holder, Securities of any
series may be exchanged for other Securities of the same series, of any
authorized denominations and of a like aggregate principal amount, upon
surrender of the Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which the Holder
making the exchange is entitled to receive.
Subject to Section 203, all Securities issued upon any registration or
transfer or exchange of Securities shall be valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 203, 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption (under Section 1103) and
ending at the close of business on the day of such mailing, or (ii) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of any Security being redeemed in part.
24
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SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
------------------------------------------------
If there shall be delivered to the Company and the Trustee (i)(A) any
mutilated Security or (B) evidence to their satisfaction of the destruction,
loss or theft of any Security and (ii) such security or indemnity as may be
required by them to save each of them and any agent of either of them harmless,
then, in the absence of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and upon
its written request the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Security or in exchange for such mutilated
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that
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Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be mailed, first-class postage prepaid, to each Holder of Securities of
such series at his address as it appears in the Security Register, not less
than 10 days prior to such Special Record Date. Notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be paid to the Persons
in
26
<PAGE>
whose names the Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
written notice given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be deemed practicable
by the Trustee.
Subject to the foregoing provisions of this Section, each Security
lawfully delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. Persons Deemed Owners. Subject to Section 203, the
---------------------
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of (and premium, if any) and
(subject to Section 307) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the Company,
the Trustee nor any agent of the Company or the Trustee shall be affected by
notice to the contrary.
SECTION 309. Cancellation. All Securities surrendered for payment,
------------
redemption, registration of transfer or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. The
27
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Trustee shall destroy cancelled Securities and deliver a certificate of such
destruction to the Company.
SECTION 310. Computation of Interest. Except as otherwise
-----------------------
specified as contemplated by Section 301 for the Securities of any series,
interest on the Securities of each series shall be computed on the basis of a
year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture. This
---------------------------------------
Indenture shall upon Company Request cease to be of further effect with respect
to any series of Securities (except as to (i) any surviving rights of
registration of transfer or exchange of Securities herein expressly provided
for, (ii) rights hereunder of Holders to receive payments of principal of, and
premium, if any, and interest on, Securities, and other rights, duties and
obligations of the Holders as beneficiaries hereof with respect to the amounts,
if any, so deposited with the Trustee, (iii) remaining obligations of the
Company to make mandatory sinking fund payments and (iv) the rights, obligations
and immunities of the Trustee hereunder), and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to any series of Securities, when
(1) either
(A) all Securities of such series theretofore authenticated and
delivered (other than (i) Securities of such series which have been
destroyed, lost or stolen and which have been replaced or paid as provided
in Section 306 and (ii) Securities of such series for whose payment money
has theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from such
trust, as provided in Section 1003) have been delivered to the Trustee for
cancellation; or
(B) all such Securities not theretofore delivered to the Trustee for
cancellation
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(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity within
one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited or
caused to be deposited with the Trustee as trust funds in trust for the
purpose an amount in cash sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal (and premium, if any) and interest to the
date of such deposit (in the case of Securities which have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2) if all series of Securities are being discharged, the Company has
paid or caused to be paid all other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003, shall survive.
SECTION 402. Application of Trust Funds; Indemnification.
-------------------------------------------
(a) Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401, all money and U.S.
Government Obligations deposited with the Trustee pursuant to Section 403 or
1010 and all money received by the Trustee
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<PAGE>
in respect of U.S. Government Obligations deposited with the Trustee pursuant to
Section 403 or 1010 shall be held in trust and applied by it, in accordance with
the provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own
Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of
the principal (and premium, if any) and interest for whose payment such money
has been deposited with or received by the Trustee or to make mandatory sinking
fund payments or analogous payments as contemplated by Section 403 or 1010, but
such money need not be segregated from other funds except to the extent required
by law.
(b) The Company shall pay and shall indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against U.S. Government
Obligations deposited pursuant to Section 403 or 1010, or the interest and
principal received in respect of such obligations other than any payable by or
on behalf of Holders.
(c) The Trustee shall deliver or pay to the Company from time to time
upon Company Request any U.S. Government Obligations or money held by it as
provided in Section 403 or 1010 which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are then in excess of the amount thereof which
then would have been required to be deposited for the purpose for which such
obligations or money were deposited or received.
SECTION 403. Defeasance and Discharge of Indenture. The Company
-------------------------------------
shall be deemed to have paid and discharged the entire indebtedness on all the
Outstanding Securities upon the date of the deposit referred to in subparagraph
(d) hereof, and the provisions of this Indenture, as it relates to such
Outstanding Securities, shall no longer be in effect (and the Trustee, at the
expense of the Company, shall at Company Request, execute proper instruments
acknowledging the same), except as to:
(a) the rights of Holders of Securities to receive, from the trust
funds described in subparagraph (d) hereof, (i) payment of the principal of
(and premium, if any) and each installment of principal of (and premium, if
any) or interest on the Outstanding Securities on the Stated Maturity of
such principal or installment of principal or interest and (ii) the
30
<PAGE>
benefit of any mandatory sinking fund payments applicable to the Securities
on the day on which such payments are due and payable in accordance with
the terms of this Indenture and the Securities;
(b) the Company's obligations with respect to such Securities under
Sections 305, 306, 1002 and 1003; and
(c) the obligations of the Company to the Trustee under Section 607;
provided that, the following conditions shall have been satisfied:
- --------
(d) the Company has or caused to be irrevocably deposited (except as
provided in Section 402) with the Trustee as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders of the Securities, (i) money in an amount, or (ii) U.S.
Government Obligations which through the payment of interest and principal
in respect thereof in accordance with their terms will provide not later
than one day before the due date of any payment referred to in clause (A)
or (B) of this subparagraph (d) money in an amount, or (iii) a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent certified public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge (A)
the principal of (and premium, if any) and each installment of principal of
(and premium, if any) and interest on the Outstanding Securities on the
Stated Maturity of such principal or installment of principal or interest
or on the applicable Redemption Date and (B) any mandatory sinking fund
payments applicable to the Securities on the day on which such payments are
due and payable in accordance with the terms of this Indenture and of the
Securities;
(e) such deposit shall not cause the Trustee with respect to the
Securities to have a conflicting interest for purposes of the Trust
Indenture Act with respect to the Securities;
(f) such deposit will not result in a breach or violation of, or
constitute a default under, any applicable laws, this Indenture or any
other agreement
31
<PAGE>
or instrument to which the Company is a party or by which it is bound;
(g) no Event of Default or event which with notice or lapse of time
would become an Event of Default with respect to the Securities shall have
occurred and be continuing on the date of such deposit;
(h) the Company has delivered to the Trustee an Opinion of Counsel to
the effect that Holders of the Securities will not recognize income, gain
or loss for Federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to Federal income tax on the
same amount and in the same manner and at the same times, as would have
been the case if such deposit, defeasance and discharge had not occurred;
and
(i) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
relating to the defeasance contemplated by this Section have been complied
with.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default. "Event of Default," wherever used
-----------------
herein with respect to Securities of any series, means any one of the following
events:
(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture
32
<PAGE>
(other than a covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with or which has
expressly been included in this Indenture solely for the benefit of series
of Securities other than that series), and continuance of such default or
breach for a period of 90 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(5) a default under any bond, debenture, note or other evidence of
indebtedness of the Company for money borrowed (including a default with
respect to Securities of any series other than that series) or under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness of the Company for
money borrowed (including this Indenture), whether such indebtedness now
exists or shall hereafter be created, which default shall constitute a
failure to pay an aggregate principal amount exceeding $25,000,000 of such
indebtedness when due and payable after the expiration of any applicable
grace period with respect thereto and shall have resulted in such
indebtedness in an aggregate principal amount exceeding $25,000,000
becoming or being declared due and payable prior to the date on which it
would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or
annulled, within a period of 15 days after there shall have been given, by
registered or certified mail, to the Company by the Trustee if such event
be known to a Responsible Officer of the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice specifying such default and
requiring the Company to cause such indebtedness to be discharged or cause
such acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" hereunder; provided, however, that if such default
-------- -------
under such bond, debenture, note, mortgage, indenture or other instrument
or evidence of indebtedness shall be remedied or cured by the Company or
waived pursuant to such agreement or instrument, then the Event of
33
<PAGE>
Default hereunder by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the part of
either the Trustee or the Holders and any acceleration of such Securities
as a result thereof shall likewise be automatically rescinded. Subject to
the provisions of Sections 601 and 602, the Trustee shall not be deemed to
have knowledge of such default unless either (A) a Responsible Officer of
the Trustee assigned to its Corporate Trust Department shall have actual
knowledge of such default or (B) such Responsible Officer shall have
received written notice thereof from the Company, from any Holder, from the
holder of any such indebtedness or from the trustee under any such
mortgage, indenture or other instrument; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(7) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company in an involuntary
case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the commencement of
any bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or relief
under any applicable Federal or State law, or the consent by it to the
filing of
34
<PAGE>
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company or of any substantial part of its property, or the making by
it of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due and
its willingness to have a case commenced against it or to seek an order for
relief under the Bankruptcy Code or any applicable bankruptcy, insolvency
or other similar law or the taking of corporate action by the Company in
furtherance of any such action; or
(8) any other Event of Default provided with respect to Securities of
that series.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount (or, if the Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all of the Securities
of that series to be due and payable immediately, by a notice in writing to the
Company (and to the Trustee if given by Holders), and upon any such declaration
such principal amount (or specified amount) shall become immediately due and
payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
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<PAGE>
(B) the principal of (and premium, if any, on) any Securities of
that series which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee and any predecessor
Trustee hereunder and all sums due the Trustee and any predecessor
Trustee under Section 607;
and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee. The Company covenants that if
- -------
(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
or rates prescribed
36
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therefor in such Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including all
amounts due the Trustee and any predecessor Trustee under Section 607.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If any Event of Default with respect to Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim. In case of the
--------------------------------
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Securities shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee,
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its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities. All rights of action and claims under this Indenture or the
- ----------
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected. Any money collected
------------------------------
by the Trustee pursuant to this Article shall be applied in the following order,
at the date or dates fixed by the Trustee and, in case of the distribution of
such money on account of principal (or premium, if any) or interest, upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
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FIRST: To the payment of all amounts due the Trustee and each
predecessor Trustee under Section 607;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been collected
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively; and
THIRD: To the Company.
SECTION 507. Limitation on Suits. No Holder of any Security of any
-------------------
series shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to it against the costs, expenses and liabilities
to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any
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other of such Holders, or to obtain or to seek to obtain priority or preference
over any other of such Holders or to enforce any right under this Indenture,
except in the manner herein provided and for the equal and ratable benefit of
all such Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest. Notwithstanding any other provision in this Indenture,
- --------------------
the Holder of any Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any) and
(subject to Section 307) interest on such Security on the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies. If the Trustee or
----------------------------------
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company, the Trustee and the Holders shall be restored severally and
respectively to their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative. Except as otherwise
------------------------------
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver. No delay or omission of
----------------------------
the Trustee or of any Holder of any Securities to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
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<PAGE>
constitute a waiver of any such Event of Default or any acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 512. Control by Holders. The Holders of a majority in
------------------
principal amount of the Outstanding Securities of any series 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, with respect to the Securities of such series, provided that
--------
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, expose the Trustee to personal liability or be unduly
prejudicial to holders not joining therein, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
Nothing in this Indenture shall impair the right of the Trustee to
take any other action deemed proper by the Trustee which is not inconsistent
with such direction.
SECTION 513. Waiver of Past Defaults. The Holders of not less than
-----------------------
a majority in principal amount of the Outstanding Securities of any series may
on behalf of the Holders of all the Securities of such series waive any past
default hereunder with respect to such series and its consequences, except a
default
(1) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this
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Indenture; but no such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
SECTION 514. Undertaking for Costs. All parties to this Indenture
---------------------
agree, and each Holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Company, to any suit instituted by the Trustee, to any
suit instituted by any Holder, or group of Holders, holding in the aggregate
more than 10% in principal amount of the Outstanding Securities of any series,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of (or premium, if any) or interest on any Securities on or after
the Stated Maturity or Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
SECTION 515. Waiver of Stay, Extension or Usury Laws. The Company
---------------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
-----------------------------------
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(a) Except during the continuance of an Event of Default with respect
to the Securities of any series,
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture with respect to such
series, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred with respect to
Securities of any series and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture with respect to such series
of Securities, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
------
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error or judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable for any action it takes or omits
to take in good faith that it reasonably believes to be authorized or
within its rights or powers nor shall it be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders
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of a majority in principal amount of the Outstanding Securities of any
series, determined as provided in Section 512, relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
this Indenture with respect to the Securities of such series; and
(4) no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 602. Notice of Defaults. Within 90 days after the
------------------
occurrence of any default hereunder with respect to the Securities of any
series, the Trustee shall transmit by mail to all Holders of Securities of such
series, as their names and addresses appear in the Security Register, notice of
such default hereunder actually known to a Responsible Officer of the Trustee,
unless such default shall have been cured or waived; provided, however, that,
-------- -------
except in the case of a default in the payment of the principal of (or premium,
if any) or interest on any Security of such series or in the payment of any
sinking fund installment with respect to Securities of such series, the Trustee
shall be fully protected in withholding such notice if and so long as the board
of directors, the executive committee or a trust committee of directors or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of Securities of
such series; and provided, further, that in the case of any default of the
-------- -------
character specified in Section 501(4) with respect to Securities of such series,
no such notice to Holders shall be given until at least 30 days after the
occurrence thereof. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default with respect to Securities of such series.
44
<PAGE>
SECTION 603. Certain Rights of Trustee. Subject to the provisions
-------------------------
of Section 601:
(a) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any Board Resolution, resolution,
Officers' Certificate, certificate, statement, instrument, Opinion of
Counsel, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
reasonably believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, conclusively rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee security or indemnity reasonably satisfactory
to it against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of
45
<PAGE>
indebtedness or other paper or document, but the Trustee, in its
discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled (at the expense
of the Company) to examine the books, records and premises of the Company,
personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
attorneys, custodians or nominees and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent, attorney,
custodian or nominee appointed with due care by it hereunder; and
(h) if the Trustee is acting as Paying Agent or Transfer Agent and
Registrar hereunder, the rights and protections afforded to the Trustee
pursuant to this Article VI shall also be afforded to such Paying Agent or
Transfer Agent and Registrar.
SECTION 604. Not Responsible for Recitals or Issuance of Securities.
------------------------------------------------------
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee assumes no responsibility for their correctness. The Trustee
makes no representations as to the validity or sufficiency of this Indenture or
of the Securities. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 605. May Hold Securities. The Trustee, any Paying Agent,
-------------------
any Security Registrar or any other agent of the Company, in its individual or
any other capacity, may become the owner or pledgee of Securities and, subject
to Section 608, may otherwise deal with, and collect obligations owed to it by,
the Company with the same rights it would have if it were not Trustee, Paying
Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust. Money held by the Trustee in
-------------------
trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
46
<PAGE>
money received by it hereunder except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement. The Company agrees
------------------------------
(1) to pay to the Trustee from time to time reasonable compensation as
shall be agreed upon in writing for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse each
of the Trustee and any predecessor Trustee upon its request for all
reasonable out-of-pocket expenses, disbursements and advances incurred or
made by it in accordance with any provision of this Indenture (including
the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its own negligence, bad faith or willful misconduct;
and
(3) to indemnify each of the Trustee, its officers, directors,
employees and agents and any predecessor Trustee for, and to hold it and
them harmless against, any and all loss, damage, claim liability or
expense, including taxes (other than taxes based on the income of the
Trustee) arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder and the performance of its
duties hereunder, including the costs and expenses of defending itself
against or investigating any claim or liability and of complying with any
process served upon it or any of its officers in connection with the
exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense is due to its own
negligence, bad faith or willful misconduct.
To ensure the performance of the obligations of the Company under this
Section, the Trustee shall have a senior claim to which the Securities are
hereby made subordinate upon all property and funds held or collected by the
Trustee as such, except property and funds held in trust for the payment of
principal of, premium, if any, or
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interest on particular Securities. Such lien shall survive the satisfaction and
discharge of this Indenture.
The obligations of the Company under this Section 607 to compensate
and indemnify the Trustee and each predecessor Trustee and to pay or reimburse
the Trustee and each predecessor Trustee for expenses, disbursements and
advances shall survive the satisfaction and discharge of this Indenture or the
rejection or termination of this Indenture under bankruptcy law. Such
additional obligations shall be a senior claim to that of the Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the benefit of the Holders of particular Securities or
coupons, and the Securities are hereby subordinated to such senior claim. If
the Trustee renders services and incurs expenses following an Event of Default
under Section 501(6) or Section 501(7) hereof, the parties hereto and the
Holders by their acceptance of the Securities hereby agree that such expenses
are intended to constitute expenses of administration under any bankruptcy law.
SECTION 608. Disqualification; Conflicting Interests. The Trustee
---------------------------------------
shall comply with the terms of Section 310(b) of the Trust Indenture Act.
SECTION 609. Corporate Trustee Required; Eligibility. There shall
---------------------------------------
at all times be a Trustee hereunder which shall be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to exercise corporate
trust powers having a combined capital and surplus of at least $50,000,000
subject to supervision or examination by Federal or State authority. If such
corporation publishes reports of condition at least annually, pursuant to law or
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
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<PAGE>
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series. If the acceptance of appointment is substantially
contemporaneous with the resignation, then the notice called for by the first
sentence of this subsection may be combined with the instrument called for by
Section 611.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609 and shall
fail to resign after written request therefor by the Company or by any such
Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all
49
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Securities, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee with respect to all Securities and the appointment of a
successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
611, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor appointed by the Company. If no
successor Trustee with respect to the Securities of any series shall have been
so appointed by the Company or the Holders and accepted appointment in the
manner required by Section 611, any Holder who has been a bona fide Holder of a
Security of such series for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the appointment of a successor Trustee with respect to the Securities of such
series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of
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the successor Trustee with respect to the Securities of such series and the
address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
--------------------------------------
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee after payment of all monies due and owing to it and each
successor Trustee with respect to the Securities of one or more series shall
execute and deliver an indenture supplemental hereto wherein each successor
Trustee shall accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and confirm to, and to
vest in, each successor Trustee all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series as to which the retiring Trustee is not retiring shall continue
to be vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-
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trustees of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee upon payment of all monies due and owing to it
with respect to Securities of that or those series shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any corporation into which the Trustee may be merged or converted
- --------
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect
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as if such successor Trustee had itself authenticated such Securities.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders. The Company will furnish or cause to be furnished to the Trustee
- -------
with respect to the Securities of each series
(a) semi-annually, not more than fifteen days after each Regular
Record Date, or, in the case of any series of Securities on which semi-
annual interest is not payable, not more than fifteen days after such semi-
annual dates as may be specified by the Trustee, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the
Holders as of such Regular Record Date or such semi-annual date, as the
case may be, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that so long as the Trustee is the Security Registrar, no
- -------- -------
such list need be furnished.
SECTION 702. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as "applicants")
apply in writing to the Trustee, and furnish to the Trustee reasonable proof
that each such applicant has owned a Security for a period of at least six
53
<PAGE>
months preceding the date of such application, and such application states that
the applicants' desire to communicate with other Holders with respect to their
rights under this Indenture or under the Securities and is accompanied by a copy
of the form of proxy or other communication which such applicants propose to
transmit, then the Trustee shall, within five Business Days after the receipt of
such application, at its election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 702(a), or
(ii) inform such applicants as to the approximate number of Holders
whose names and addresses appear in the information preserved at the time
by the Trustee in accordance with Section 702(a), and as to the approximate
cost of mailing to such Holders the form of proxy or other communication,
if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 702(a) a copy of
the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interest of the Holders
or would be in violation of applicable law. Such written statement shall
specify the basis of such opinion. If the Commission, after opportunity for a
hearing upon the objections specified in the written statement so filed, shall
enter an order refusing to sustain any of such objections or if, after the entry
of an order sustaining one or more of such objections, the Commission shall
find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee shall
mail copies of such material to all such Holders with reasonable promptness
after the entry of such order and the renewal of such tender; otherwise the
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Trustee shall be relieved of any obligation or duty to such applicants
respecting their application.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with Section 702(b), regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 702(b).
(d) The Depositary may grant proxies and otherwise authorize its
participants which own the Global Securities to give or take any Act which a
Holder is entitled to take under the Indenture; provided, however, that the
-------- -------
Depositary has delivered a list of such participants to the Trustee.
SECTION 703. Reports by Trustee.
------------------
(a) The Trustee shall transmit by mail to all Holders, as their names
and addresses appear in the Security Register, such reports concerning the
Trustee and its actions under this Indenture as may be required by Section 313
of the Trust Indenture Act at the times and in the manner provided pursuant
thereto, if so required.
(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with the Commission and with the Company.
The Company will notify the Trustee in writing when any Securities are listed on
any stock exchange.
SECTION 704. Reports by Company. The Company shall:
------------------
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if
55
<PAGE>
the Company is not required to file information, documents or reports
pursuant to either of said Sections, then it shall file with the Trustee
and the Commission, in accordance with rules and regulations prescribed
from time to time by the Commission, such of the supplementary and periodic
information, documents and reports which may be required pursuant to
Section 13 of the Securities Exchange Act of 1934 in respect of a security
listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (1) and (2) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge into any other corporation or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, and the Company shall not permit any Person to consolidate with
or merge into the Company, unless:
(1) in case the Company shall consolidate with or merge into another
corporation or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the corporation formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or
56
<PAGE>
which leases, the properties and assets of the Company substantially as an
entirety shall be a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia
and shall expressly assume, by an indenture supplemental hereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee, the due
and punctual payment of the principal of (and premium, if any) and interest
on all the Securities and the performance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or a Subsidiary
as a result of such transaction as having been incurred by the Company or
such Subsidiary at the time of such transaction, 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;
(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the Company or
such successor corporation or Person, as the case may be, shall take such
steps as shall be necessary effectively to secure the Securities equally
and ratably with (or prior to) all indebtedness secured thereby; and
(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 802. Successor Corporation Substituted. Upon any
---------------------------------
consolidation by the Company with or merger by the Company into any other
corporation or any conveyance, transfer or lease of the properties and assets of
the Company substantially as an entirety in accordance with Section 801, the
successor corporation formed by such
57
<PAGE>
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor corporation has been named as the Company
herein, and thereafter, except in the case of a lease, the predecessor
corporation shall be relieved of all obligations and covenants under this
Indenture and the Securities.
Such successor corporation may cause to be signed, and may issue
either in its own name or in the name of the Company prior to such succession,
any or all of the Securities issuable hereunder which theretofore shall not have
been signed by the Company and delivered to the Trustee; and, upon the order of
such successor corporation instead of the Company and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication pursuant to such provisions and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to the
Trustee on its behalf for that purpose pursuant to such provisions. All
Securities so issued in all respects have the same legal rank and benefit under
this Indenture as Securities theretofore or thereafter issued in accordance with
the terms of this Indenture as though all such Securities had been issued prior
to the date of such succession. In case of any such consolidation, merger, sale
or conveyance, such changes in phraseology and form may be made in the
Securities thereafter to be issued as may be appropriate.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a Board
Resolution, and the Trustee, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
58
<PAGE>
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such Events of Default
are to be for the benefit of less than all series of Securities, stating
that such Events of Default are expressly being included solely for the
benefit of such series); or
(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
--------
when there is no Security Outstanding of any series created prior to the
execution of such supplemental indenture which is entitled to the benefit
of such provision; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611(b); or
59
<PAGE>
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, provided such other provisions
--------
shall not adversely affect the interests of the Holders of Securities of
any series in any material respect; or
(10) to provide for uncertificated Securities in addition to and in
place of certificated Securities provided that the Company has, by adopting
a Board Resolution, elected to provide for uncertificated Securities.
SECTION 902. Supplemental Indentures with Consent of Holders. With
-----------------------------------------------
the consent of the Holders of not less than a majority in principal amount of
the Outstanding Securities of each series affected by such supplemental
indenture, by Act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee may enter into
an indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided, however, that no
-------- -------
such supplemental indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section
502, or the method in which amounts of payments of principal or interest
thereon are determined, or change any Place of Payment where, or the coin
or currency in which, any Security or any premium or the interest thereon
is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the case
of redemption, on or after the Redemption Date), or
60
<PAGE>
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (or compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or
(3) modify any of the provisions of this Section, Section 513 or
Section 1011, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby, provided, however, that this clause shall not be deemed to require
-------- -------
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section and Section 1011, or the
deletion of this proviso, in accordance with the requirements of Sections
611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures. In executing, or
------------------------------------
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this
61
<PAGE>
Indenture or is unduly prejudicial to the holders not joining therein or
otherwise.
SECTION 904. Effect of Supplemental Indentures. Upon the execution
---------------------------------
of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 905. Conformity with Trust Indenture Act. Every
-----------------------------------
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
--------------------------------------------------
Securities of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities of any series so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest. The
------------------------------------------
Company covenants and agrees for the benefit of each series of Securities that
it will duly and punctually pay the principal of (and premium, if any) and
interest on the Securities of that series in accordance with the terms of the
Securities and this Indenture. At the option of the Company payment of
principal (and premium, if any) and interest may be made by wire transfer or
(subject to collection) by check mailed to the address of the Person entitled
thereto at such address as shall appear in the Security Register.
62
<PAGE>
SECTION 1002. Maintenance of Office or Agency. The Company will
-------------------------------
maintain in each Place of Payment for any series of Securities an office or
agency where Securities of that series may be presented or surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities of that series and this Indenture may
be served. The Company hereby initially appoints the Trustee its office or
agency for each of said purposes. The Company will give prompt written notice
to the Trustee of the location, and any change in the location, of such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
-------- -------
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 1003. Money for Securities; Payments to Be Held in Trust.
--------------------------------------------------
If the Company shall at any time act as its own Paying Agent with respect to any
series of Securities, it will, on or before each due date of the principal of
(and premium, if any) or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, on or prior to each due date of the principal of
(and premium, if any) or interest on any Securities of that series, deposit with
a
63
<PAGE>
Paying Agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee in writing of
its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment on the principal of (and
premium, if any) or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee written notice of any default by the Company (or
any other obligor upon the Securities of that series) in the making of any
payment of principal (and premium, if any) or interest on the Securities of
that series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
The Company shall have no obligation to make payment of principal of
(or premium, if any) or interest on any Security in immediately available funds,
except that if the Company shall have received original payment for Securities
in immediately available funds it shall make
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<PAGE>
available immediately available funds for payment of the principal of such
Securities.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security of any series and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look, only to the Company
for payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
-------- -------
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be mailed or published once, in a newspaper
published in the English language, customarily published on each Business Day
and of general circulation in the City, County and State of New York, or both,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such mailing
or publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Corporate Existence. Subject to Article Eight, the
-------------------
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Company shall not be required to
-------- -------
preserve any such right or franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not disadvantageous in any
material respect to the Holders.
SECTION 1005. Payment of Taxes. The Company will pay or discharge
----------------
or cause to be paid or discharged, before the same shall become delinquent, all
material taxes, assessments and governmental charges lawfully levied or imposed
upon the Company or any Restricted Subsidiary or upon the income, profits or
property of the Company or any Restricted Subsidiary; provided, however, that
-------- -------
the Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment or charge whose
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legality, amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 1006. Limitation on Liens. Except to the extent provided
-------------------
in Section 1008, the Company will not create, incur, assume or guarantee, and
will not permit any Restricted Subsidiary to create, incur, assume or guarantee,
any indebtedness that is secured by a mortgage, security interest, pledge or
lien (collectively in this Article Ten referred to as a "lien") of or upon any
Principal Property or shares of capital stock or indebtedness of any Restricted
Subsidiary, whether owned at the date of this Indenture or thereafter acquired,
without making effective provision, and the Company in such case will make or
cause to be made effective provision whereby the Outstanding Securities shall be
secured by such lien equally and ratably with any and all other indebtedness
thereby secured so long as such other indebtedness shall be secured; provided
that the foregoing shall not apply to indebtedness that is secured by any of the
following:
(i) liens on any Principal Property acquired, constructed or
improved by the Company or any Restricted Subsidiary after the date of
this Indenture which are created or assumed contemporaneously with, or
within 180 days after the completion of such acquisition, construction
or improvement to secure or provide for the payment of any part of the
purchase price of such property or the cost of such construction or
improvement, or liens on any Principal Property at the time of
acquisition thereof; provided, however, that for purposes of this
-------- -------
clause (i), (x) a satellite will be treated as a newly-acquired
Principal Property as of the date such satellite is placed in service
and (y) any satellite transponder acquired through the exercise of an
early buy-out option shall be treated as a newly-acquired Principal
Property as of the date such option is exercised;
(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 as an
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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 a Restricted Subsidiary
to the Company or to 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, 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 property subject to such liens;
(vi) liens in favor of any customer arising in respect of
partial, progress, advance or other payments made by or on behalf of
such customer for goods produced for or services rendered to such
customer in the ordinary course of business not exceeding the amount
of such payments;
(vii) liens existing at the date of this Indenture or liens
existing at the date of the original issuance of the Securities of a
Series;
(viii) mechanics', workers', repairmen's, materialmen's,
warehousemen's, carriers' or other similar liens arising in the
ordinary course of business;
(ix) pledges or deposits under the workers' compensation
laws or similar legislation and liens of judgments thereunder which
are not currently dischargeable, or good faith deposits in connection
with bids, tenders, contracts (other than for the payment of money) or
leases to which
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the Company or any Restricted Subsidiary is a party, or deposits in
connection with obtaining or maintaining self-insurance or to obtain
the benefits of any law, regulation or arrangement pertaining to
unemployment insurance, old age pensions, social security or similar
matters, or deposits of cash or obligations of the United States of
America to secure surety, appeal or custom bonds to which the Company
or any Restricted Subsidiary is a party, or deposits in litigation or
other proceedings such as, but not limited to, interpleader
proceedings;
(x) liens created by or resulting form any litigation or
proceedings which are being contested in good faith; liens arising out
of judgments or awards against the Company or any Restricted
Subsidiary with respect to which the Company or such Restricted
Subsidiary is in good faith prosecuting an appeal or proceedings for
review; or liens incurred by the Company or any Restricted Subsidiary
for the purpose of obtaining a stay or discharge in the course of any
legal proceeding to which the Company or such Restricted Subsidiary is
a party;
(xi) liens for taxes or assessments or governmental charges
or levies not yet due or delinquent, or which can thereafter be paid
without penalty, or which are being contested in good faith by
appropriate proceedings; landlord's liens on property held under
lease, and tenants' rights under lease; or easements;
(xii) liens incidental to the conduct of the business or
the ownership of the property and assets of the Company or a
Restricted Subsidiary 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;
(xiii) 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 (xii), inclusive, or in this clause (xiii), provided
that the principal amount of indebtedness
68
<PAGE>
secured thereby shall not exceed the principal amount of any
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 1007. Limitation on Sale and Lease-Back Transactions.
----------------------------------------------
Except to the extent provided in Section 1008, the Company will not, nor will it
permit any Restricted Subsidiary to, after the date of this Indenture 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 this 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 (in this Section 1007 and in Section 1008 referred
to as a "Sale and Lease-Back Transaction") unless either (i) 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 provisions of Section 1006 or (ii) the Company shall apply an amount equal
to the Attributable Debt of such Sale and Lease-Back Transaction to (1) the
acquisition of another Principal Property of equal or greater fair market value,
or (2) 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 (3) any combination of the foregoing. Notwithstanding
the foregoing, no retirement referred to in clause (2) 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 1008. Exemption from Limitation on Liens and Sale and Lease-
-----------------------------------------------------
Back Transactions. Notwithstanding the provisions of Section 1006 and Section
- -----------------
1007, the Company or any Restricted Subsidiaries may, without equally and
ratably securing the Outstanding Securities, create, incur, assume or guarantee
indebtedness secured by liens and enter into Sale and Lease-Back Transactions
which would otherwise be
69
<PAGE>
restricted by such provisions, provided that at the time such indebtedness
secured by liens is created, incurred, assumed or guaranteed or such Sale and
Lease-Back Transaction is entered into (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 then outstanding
(except for leases existing at the date of this Indenture) shall not exceed 10%
of Consolidated Net Tangible Assets, as determined in accordance with the most
recent published consolidated balance sheet of the Company.
SECTION 1009. Defeasance of Certain Obligations. If this Section
---------------------------------
1009 is specified, as in accordance with Section 301, to be applicable to
Securities of any Series, the Company may omit to comply with any term,
provision or condition set forth in Sections 1006 to 1008, inclusive, with
respect to the Securities of that series if
(1) With reference to this Section 1009, the Company has deposited or
caused to be irrevocably deposited with the Trustee as trust funds in
trust, specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of the Securities of that series, (i) money in an
amount, or (ii) U.S. Government Obligations which through the payment of
interest and principal in respect thereof in accordance with their terms
will provide not later than one day before the due date of any payment
referred to in clause (A) or (B) of this subparagraph (1) money in an
amount, or (iii) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge (A) the principal of (and premium, if any) and each installment
of principal (and premium, if any) and interest on the Outstanding
Securities of that series on the Stated Maturity of such principal or
installment of principal or interest and (B) any mandatory sinking fund
payments or analogous payments applicable to Securities of such series on
the day on which such payments are due and payable in accordance with the
terms of the Indenture and of such Securities;
70
<PAGE>
(2) Such deposit shall not cause the Trustee with respect to the
Securities of that series to have a conflicting interest for purposes of
the Trust Indenture Act with respect to the Securities of any series;
(3) Such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other material agreement
or instrument to which the Company is a party or by which it is bound;
(4) The Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the Securities of such series will not
recognize income, gain or loss for Federal income tax purposes as a result
of such deposit and defeasance of certain obligations and will be subject
to Federal income tax on the same amount and in the same manner and at the
same times, as would have been the case if such deposit and defeasance had
not occurred; and
(5) The Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the defeasance contemplated by this Section
have been complied with.
SECTION 1010. Statement by Officers as to Default. The Company
-----------------------------------
will deliver to the Trustee, within 90 days after the end of each fiscal year of
the Company ending after the date hereof, a certificate of the principal
executive officer, principal financial officer or principal accounting officer
of the Company stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Indenture, and if the Company shall
be in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1011. Waiver of Certain Covenants. The Company may omit in
---------------------------
any particular instance to comply with any term, provision or condition set
forth in Sections 1006 to 1010, inclusive, if before or after the time for such
compliance the Holders of at least a majority in principal amount of the
Outstanding Securities (taken together as one class) shall, by Act of such
Holders, either waive such
71
<PAGE>
compliance in such instance or generally waive compliance with such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such term, provision or condition shall remain in
full force and effect.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article. Securities of any series
------------------------
which are redeemable before their Stated Maturity shall be redeemable in
accordance with their terms and (except as otherwise specified as contemplated
by Section 301 for Securities of any series) in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee. The election
-------------------------------------
of the Company to redeem any Securities shall be evidenced by a Board
Resolution. In case of any redemption at the election of the Company of less
than all the Securities of any series, the Company shall, at least 60 days prior
to the Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities of such series to be redeemed, such notice to
be accompanied by a written statement signed by an authorized officer of the
Company stating that no defaults in the payment of interest or Events of Default
with respect to the Securities of that series have occurred (which have not been
waived or cured). In the case of any redemption of Securities prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, the Company shall furnish the Trustee
with an Officers' Certificate evidencing compliance with such restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
-------------------------------------------------
If less than all the Securities of any series are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities of such series
not previously called for redemption, by such method as the Trustee in its sole
discretion shall deem fair and appropriate and which may provide for the
selection or redemption of portions (equal
72
<PAGE>
to the minimum authorized denomination for Securities of that series or any
integral multiple thereof) of the principal amount of Securities of such series
of a denomination larger than the minimum authorized denomination for Securities
of that series.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1104. Notice of Redemption. Notice of redemption shall be
--------------------
given by first-class mail, postage prepaid, mailed not less than 30 nor more
than 60 days prior to the Redemption Date, to each Holder of Securities to be
redeemed, at his address appearing in the Security Register. Any notice which
is mailed in the manner herein provided shall be conclusively presumed to have
been duly given, whether or not such Holder receives the notice. Failure to give
notice by mail, or any defect in the notice to any such Holder in respect of any
Security, shall not affect the validity of the proceedings for the redemption of
any other Security.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and any accrued interest,
(3) if less than all the Outstanding Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price and any accrued
interest will become due and payable upon each such Security to be redeemed
together with accrued interest thereon and, if applicable, that
73
<PAGE>
interest thereon will cease to accrue on and after said date,
(5) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and any accrued interest, and
(6) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price. On or prior to any
---------------------------
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 1003) an amount of money, in funds immediately
available on the due date, sufficient to pay the Redemption Price of, and
(except if the Redemption Date shall be an Interest Payment Date) accrued
interest on, all the Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date. Notice of
-------------------------------------
redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified together with accrued interest thereon, and from and after
such date (unless the Company shall default in the payment of the Redemption
Price and accrued interest) such Securities shall cease to bear interest. Upon
surrender of any such Security for redemption in accordance with said notice,
such Security shall be paid by the Company at the Redemption Price, together
with accrued interest to the Redemption Date; provided, however, that
-------- -------
installments ofinterest whose Stated Maturity is on the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
therefor in the Security.
74
<PAGE>
The Trustee shall not redeem any Securities of any series pursuant to
this Article (unless all Outstanding Securities of such series are to be
redeemed) or mail or give any notice of redemption of Securities during the
continuance of an Event of Default hereunder actually known to a Responsible
Officer of the Trustee with respect to such series, except that, where the
mailing of notice of redemption of any Securities shall theretofore have been
made, the Trustee shall redeem or cause to be redeemed such Securities, provided
that it shall have received from the Company a sum sufficient for such
redemption. Except as aforesaid, any moneys theretofore or thereafter received
by the Trustee shall, during the continuance of such Event of Default, be deemed
to have been collected under Article Five and held for the payment of all such
Securities of such series. In case such Event of Default shall have been waived
as provided in Section 513 or the default cured on or before the sixtieth day
preceding the Redemption Date, such moneys shall thereafter be applied in
accordance with the provisions of this Article.
SECTION 1107. Securities Redeemed in Part. Any Security which is
---------------------------
to be redeemed only in part shall be surrendered at a Place of Payment therefor
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new Security or
Securities of the same series, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article. The provisions of this
------------------------
Article shall be applicable to any sinking fund for the retirement of Securities
of a series except as otherwise specified as contemplated by Section 301 for
Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is
75
<PAGE>
herein referred to as a "mandatory sinking fund payment," and any payment in
excess of such minimum amount provided for by the terms of Securities of any
series is herein referred to as an optional sinking fund payment. If provided
for by the terms of Securities of any series, the cash amount of any sinking
fund payment may be subject to reduction as provided in Section 1202. Each
sinking fund payment shall be applied to the redemption of Securities of any
series as provided for by the terms of Securities of such series.
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.
-----------------------------------------------------
The Company (1) may deliver Outstanding Securities of a series (other than any
previously called for redemption) and (2) may apply as credit Securities of a
series which have been redeemed either at the election of the Company pursuant
to the terms of such Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such Securities, in each case in
satisfaction of all or any part of any sinking fund payment with respect to the
Securities of such series required to be made pursuant to the terms of such
Securities as provided for by the terms of such series; provided that such
--------
Securities have not been previously so credited. Such Securities shall be
received and credited for such purpose by the Trustee at the Redemption Price
specified in such Securities for redemption through operation of the sinking
fund and the amount of such sinking fund payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund. Not less
-----------------------------------------
than 60 days prior to each sinking fund payment date for any series of
Securities, the Company (1) will deliver to the Trustee an Officers' Certificate
(A) stating that no defaults in the payment of interest or Events of Default
with respect to Securities of that series have occurred (which have not been
waived or cured), (B) specifying the amount of the next ensuing sinking fund
payment for that series pursuant to the terms of Securities of that series, (C)
stating whether or not the Company intends to exercise its right, if any, to
make an optional sinking fund payment with respect to such series on the next
ensuing sinking fund payment date and, if so, specifying the amount of such
optional sinking fund payment and (D) specifying the portion of such sinking
fund payment, if any, which is to be satisfied by payment of cash and the
portion thereof, if any, which is to be satisfied by delivering and crediting
Securities of that series pursuant to Section 1202
76
<PAGE>
and (2) will also deliver to the Trustee any Securities to be so delivered. Not
less than 30 days before each such sinking fund payment date the Trustee shall
select the Securities of such series to be redeemed upon such sinking fund
payment date in the manner specified in Section 1103 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 1104. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 1105, 1106 and 1107. Failure of the Company, on or before any
such sixtieth day, to deliver such Officers' Certificate and Securities
specified in this Section, if any, shall not constitute a default but shall
constitute, on and as of such date, the irrevocable election of the Company (a)
that the mandatory sinking fund payment for such series due on the next
succeeding sinking fund payment date shall be paid entirely in cash without the
option to deliver or credit Securities of such series in respect thereof and (b)
that the Company will make no optional sinking fund payment with respect to
Securities of such series as provided in this Article.
The Trustee shall not redeem or cause to be redeemed any Security of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund during the continuance of a
default in payment of interest on such Securities or of any Event of Default
with respect to such series except that, where the mailing of notice of
redemption of any Securities shall theretofore have been made, the Trustee shall
redeem or cause to be redeemed such Securities, provided that it shall have
received from the Company a sum sufficient for such redemption. Except as
aforesaid, any moneys in the sinking fund for such series at the time when any
such default or Event of Default shall occur, and any moneys thereafter paid
into the sinking fund, shall, during the continuance of such default or Event of
Default, be deemed to have been collected under Article Five and held for the
payment of all such Securities of such series. In case such Event of Default
shall have been waived as provided in Section 513 or the default cured on or
before the sixtieth day preceding the sinking fund payment date, such moneys
shall thereafter be applied on the next succeeding sinking fund payment date in
accordance with this Section to the redemption of such Securities.
77
<PAGE>
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
78
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
PANAMSAT CORPORATION
[SEAL]
By Kenneth N. Heintz
-----------------------------
Name: Kenneth N. Heintz
Title: Executive Vice President
and Chief Financial
Officer
Attest:
James W. Cuminale
- -----------------
Name: James W. Cuminale
Title: Secretary
THE CHASE MANHATTAN BANK
[SEAL]
By Sheik Wiltshire
-----------------------------
Name: Sheik Wiltshire
Title: Second Vice President
Attest:
Gemmel Richards
- ------------------
Name: Gemmel Richards
Title: Assistant
Secretary
79
<PAGE>
STATE OF CONNECTICUT)
) ss.: Greenwich
COUNTY OF FAIRFIELD )
On the 16th day of January, 1998, before me personally came Kenneth N.
Heintz, to me known, who, being by me duly sworn, did depose and say that he is
Executive Vice President and Chief Financial Officer of PanAmSat Corporation,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
[Signature Illegible]
---------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 16th day of January, 1998, before me personally came S.
Wiltshire, to me known, who, being by me duly sworn, did depose and say that he
is Second Vice President of The Chase Manhattan Bank, one of the corporations
described in and which executed the foregoing instrument; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by authority
of the Board of Directors of said corporation, and that he signed his name
thereto by like authority.
Annabelle De Luca
------------------
Notary Public
80
<PAGE>
EXHIBIT 10.38
AMENDED AND RESTATED
FIXED PRICE CONTRACT
BETWEEN
PANAMSAT CORPORATION
AND
HUGHES SPACE & COMMUNICATIONS COMPANY
FOR
PAS 1R & PAS 9 HS702
SPACECRAFT, RELATED SERVICES AND DOCUMENTATION
CONTRACT No. 97-HCG-001
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1. EXHIBITS AND INCORPORATIONS..................................2
ARTICLE 2. ORDER OF PRECEDENCE..........................................3
ARTICLE 3. SPACECRAFT, DOCUMENTATION AND RELATED SERVICES...............4
ARTICLE 4. DELIVERABLES AND SCHEDULE....................................7
ARTICLE 5. PRICE.......................................................12
ARTICLE 6. PAYMENTS....................................................14
ARTICLE 7. SPACECRAFT LAUNCH DATE......................................35
ARTICLE 8. BUYER-FURNISHED ITEMS.......................................37
ARTICLE 9. INSPECTION AND ACCEPTANCE...................................44
ARTICLE 10. ACCESS TO WORK IN PROCESS...................................46
ARTICLE 11. TERMINATION FOR DEFAULT; LIMITATION OF LIABILITY............47
ARTICLE 12. EXCUSABLE DELAYS............................................49
ARTICLE 13. AMENDMENTS..................................................51
ARTICLE 14. TERMINATION FOR CONVENIENCE.................................52
ARTICLE 15. TITLE AND RISK OF LOSS......................................56
ARTICLE 16. SPACECRAFT WARRANTY.........................................60
ARTICLE 17. INDEMNIFICATION.............................................62
<PAGE>
ARTICLE 18. SPACECRAFT NOT LAUNCHED WITHIN SIX MONTHS AFTER ACCEPTANCE..64
ARTICLE 19. PATENT/COPYRIGHT INDEMNITY..................................66
ARTICLE 20. RIGHTS IN INVENTIONS........................................68
ARTICLE 21. INTELLECTUAL PROPERTY RIGHTS................................71
ARTICLE 22. FURNISHED DATA AND INFORMATION, DISCLOSURE AND USE..........72
ARTICLE 23. PUBLIC RELEASE OF INFORMATION...............................75
ARTICLE 24. TAXES.......................................................76
ARTICLE 25. GOVERNING LAW...............................................77
ARTICLE 26. TITLES......................................................78
ARTICLE 27. NOTICES AND AUTHORIZED REPRESENTATIVES......................79
ARTICLE 28. INTEGRATION.................................................81
ARTICLE 29. CHANGES.....................................................82
ARTICLE 30. EFFECTS OF STORAGE ON BATTERIES.............................88
ARTICLE 31. INTER-PARTY WAIVER OF LIABILITY.............................89
ARTICLE 32. SPACECRAFT STORAGE..........................................90
ARTICLE 33. DISPUTES....................................................91
ARTICLE 34. ASSIGNMENT..................................................94
ARTICLE 35. LIMITATION OF LIABILITY.....................................96
ARTICLE 36. OPTIONS.....................................................97
ARTICLE 37 REPLACEMENT SPACECRAFT .....................................99
ARTICLE 38 LIQUIDATED DAMAGES FOR LATE SHIPMENT ......................101
ARTICLE 39 EFFECTIVE DATE OF CONTRACT.................................104
<PAGE>
This AMENDED AND RESTATED FIXED PRICE CONTRACT (the "Contract") is entered into
as of the 15th day of August, 1997, by and between PANAMSAT CORPORATION (herein
called "Buyer"), a Delaware corporation having a place of business at One
Pickwick Plaza, Greenwich, Connecticut 06830, and HUGHES SPACE AND
COMMUNICATIONS COMPANY (herein called "Contractor"), a Delaware corporation
having a place of business at 909 North Sepulveda Boulevard, El Segundo,
California 90245.
WITNESSETH:
WHEREAS, Buyer (as assignee of Hughes Communications Galaxy, Inc.)
and Contractor are party to that certain Fixed Price Contract for Galaxy
XIII/XIV HS 702 Spacecraft, Related Services and Documentation (No. 97-HCG-001),
dated May 15, 1997 (the "Galaxy XIII/XIV Contract"), providing for Buyer to
purchase and Contractor to provide communications Spacecraft, Documentation, and
Related Services as therein specified,
WHEREAS, the Galaxy XIII/XIV Contract required the Parties to define
further the specifications and configurations of the Spacecraft to be delivered,
which definition has been established as set forth herein below;
WHEREAS, the Parties now desire to amend and restate the Galaxy
XIII/XIV Contract;
NOW, THEREFORE, the Parties hereby agree to amend and restate the
Galaxy XIII/XIV Contract in its entirety as follows:
1
<PAGE>
ARTICLE 1. EXHIBITS AND INCORPORATIONS
The following documents are hereby incorporated and made a part of
this Contract with the same force and effect as though set forth
herein:
1.1 Exhibit A - PAS 1R & PAS 9 Statement of Work - dated August
1997
1.2 Exhibit B - PAS 1R & PAS 9 Spacecraft Specification -
September 1997 for PAS 1R and October 1997 for PAS 9
1.3 Exhibit C - PAS 1R & PAS 9 Spacecraft Integration Test Plan
- August 1997
1.4 Exhibit D - PAS 1R & PAS 9 Product Assurance Plan - dated
August 1997
1.5 Exhibit E - Certain Documentation - dated August 1997
1.6 Exhibit F - Maximum Termination Liability - dated October
1997.
1.7 Exhibit G - Optional Spacecraft Satellite Payment Plan -
dated October 1997.
1.8 Exhibit H - Replacement Spacecraft Payment Plan - dated
October 1997.
1.9 Exhibit I - List of Agreed Exhibit Changes - dated October
1997
2
<PAGE>
ARTICLE 2. ORDER OF PRECEDENCE`
In the event of any conflict or inconsistency among the provisions of
this document and the exhibits attached and incorporated into this
Contract, such conflict or inconsistency shall be resolved by giving
precedence to this document, and then to the attached and
incorporated exhibits in the order listed in Article 1 herein,
entitled "Exhibits and Incorporations."
3
<PAGE>
ARTICLE 3. SPACECRAFT, DOCUMENTATION AND RELATED SERVICES ("DELIVERABLES")
3.1 Contractor shall sell and provide, and Buyer shall
purchase, the items and services referred to in Section
4.1. Contractor shall provide the necessary personnel,
material, services and facilities to design, fabricate,
test and deliver two (2) HS702 type Spacecraft for PAS 1R
and PAS 9 (hereinafter referred to as "Spacecraft"),
Documentation and Related Services (as defined in Article
4) in accordance with the provisions of this Contract and
in the manner specified under Exhibits A, B, C and D hereto
(in the case of Exhibit B, as completed pursuant to
Paragraph 3.7 and 8.7).
3.2 The Parties agree that [**********************************
**********************************************************
***********************].
3.3 All materials and services specified in Exhibit A, "PAS 1R
& PAS 9 Statement of Work," shall meet the requirements of
Exhibit B, entitled "PAS 1R & PAS 9 Spacecraft
Specification" as such Exhibit is completed in accordance
with Paragraphs 3.7 and 8.7.
3.4 If Contractor has not made delivery [**********************
******* ***************] or if, prior to the Launch Date,
[*********************************] Buyer at its election
may:
[*********************************************************
**********************************************************
***************************************************]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
4
<PAGE>
Any such election shall be made by Buyer in writing.
In either case (a) or (b) above,
[*************************************************
*************************************]
3.5 [**********************************************************
****************************************] in accordance
with: (i) current directives and instructions in the Hughes
Spacecraft Operators Handbook, utilized at either Buyer's
Operations Control Center (OCC) or Contractor's Mission
Control Center (MCC); and (ii) any other Documentation
utilized, including that Documentation which takes into
consideration the unique or special characteristics of the
contracted Spacecraft.
[******************************************
*******************************************] Contractor has
responsibility and liability for the Mission Control
Center. Buyer has responsibility and liability for the
Operations Control Center and its associated ground
station(s).
3.6 Spacecraft, Documentation and Related Services described
above shall be delivered to Buyer at the indicated
locations on the dates set forth in Article 4 entitled,
"Deliverables and Schedule" herein.
3.7 Contractor and Buyer shall complete Exhibit A and Exhibit B
to specify the complete Statement of Work and Spacecraft
Specifications for PAS 1R and PAS 9 (except for those
specifications to be provided pursuant to Paragraph 8.7) by
October 31, 1997 consistent with the parameters set forth in
the forms of Exhibit A and Exhibit B initially attached
hereto and consistent with the agreement of the parties to
make certain changes, attached hereto as Exhibit I, "List of
Agreed Exhibit Changes." In addition, Contractor and Buyer
agrees
[***] Filed separately with the Commission pursuant to a request
for confidential treatment.
5
<PAGE>
that the completed Spacecraft Specification for PAS 9 shall
be substantially similar to the Spacecraft Specification
for PAS IR, except for differences attributable to the
difference in their respective configurations.
6
<PAGE>
ARTICLE 4. DELIVERABLES AND SCHEDULE
4.1 The following deliverables to be furnished under this
Contract shall be furnished at the designated location(s)
on or before the dates specified below:
<TABLE>
<CAPTION>
- ------------------------------------------ ---------------------------------------- -----------------------------------------
Location of Shipment,
Date of Shipment, Delivery Delivery or
Deliverable(s) or Performance Performance
- ------------------------------------------ ---------------------------------------- -----------------------------------------
<S> <C> <C> <C>
o Shipped from Contractor's facility.
1A. One PAS 1R Spacecraft May 15, 1999/1/ o Delivery Site at Ariane facility,
("PAS 1R") ("Shipment Date") Kourou, French Guyana (subject to
change pursuant to Paragraph 4.2.)
- ------------------------------------------ ---------------------------------------- -----------------------------------------
o Shipped from Contractor's facility.
1B. One PAS 9 Spacecraft ("PAS 9") August 15, 1999/1/ o Delivery Site at Baikonur
("Shipment Date") Cosmodrome, Kazakhstan (subject to
change pursuant to Paragraph 4.2.)
- ------------------------------------------ ---------------------------------------- -----------------------------------------
o Performance Site to be determined
2A. Launch Support, Mission In Accordance with Exhibit A pursuant to Paragraph 4.2.
Operations and In-Orbit Testing o Fillmore, California
for PAS 1R ("Related Services") o Castle Rock, Colorado
o El Segundo, California
- ------------------------------------------ ---------------------------------------- -----------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
o Performance Site to be determined
2B. Launch Support, Mission In Accordance with Exhibit A pursuant to Paragraph 4.2.
Operations and In-Orbit Testing o Fillmore, California
for PAS 9 ("Related Services") o Castle Rock, Colorado
o El Segundo, California
- ------------------------------------------ ---------------------------------------- -----------------------------------------
- ------------------------------------------ ---------------------------------------- -----------------------------------------
3A. Documentation for PAS 1R In Accordance with Exhibit A 1500 Hughes Way
("Documentation") Long Beach, California
- ------------------------------------------ ---------------------------------------- -----------------------------------------
- ------------------------------------------ ---------------------------------------- -----------------------------------------
3B. Documentation for PAS 9 In Accordance with Exhibit A 1500 Hughes Way
("Documentation") Long Beach, California
- ------------------------------------------ ---------------------------------------- -----------------------------------------
</TABLE>
/1/ Contractor warrants that the Shipment Date will support a launch of
the Spacecraft thirty (30) days after the Shipment Date. [*************
*************].
[***] Filed separately with the Commission pursuant to a request
for confidential treatment.
8
<PAGE>
4.2 Designation of Launch Vehicle.
4.2.1 The initial launch vehicle designation for PAS 1R is
an Ariane launch vehicle. The initial launch vehicle
designation for PAS 9 is a Proton launch vehicle.
Buyer may change the designation of each
Spacecraft's launch vehicle at any time on or before
[********] prior to the scheduled Shipment Date for
such Spacecraft. If, subsequent to such time, Buyer
requests a change in the Launch Site or Approved
Storage Facility for such Spacecraft, such request
shall be dealt with as a Change Order Request of
Buyer under Article 29.
4.2.2 Buyer shall pay the costs of delivering the
Spacecraft to the Delivery Site, which costs are
included in the Contract Price.
4.3 The Contractor will arrange transportation required for
Items 1A and 1B, 2A and 2B, and 3A and 3B above. With
respect to Deliverable Items 1A and 1B and 2A and 2B, in
the event that a Sea Launch Vehicle is used with respect to
either Spacecraft, Contractor shall support a launch of the
Spacecraft fifty (50) days after the Shipment Date and the
following allocation of transportation duties for such
Spacecraft shall apply:
Such Spacecraft will be mated with a Sea Launch
Zenit Vehicle (the "Vehicle") at the Sea Launch,
L.P.facilities, Port of Long Beach (the "Integration
Facility"). The Parties contemplate that such mated
Spacecraft, associated equipment and Contractor
personnel necessary to assist in the monitoring and
control of such Spacecraft will be transported by
Sea Launch, L.P. Command Ship (the "Ship") at the
expense of Sea Launch, L.P. from the Integration
Facility to the Launch Site in the vicinity of the
Christmas Islands (the "Launch Site"). Contractor
may
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
9
<PAGE>
also utilize the Ship at Sea Launch L.P.'s expense
for the transportation of other related Contractor
personnel when accommodations are available and such
accommodations do not interfere with other Sea
Launch, L.P. commitments for the launch of such
Spacecraft.
4.3.1 If such Spacecraft fails to conform to the
warranty provisions set forth in Article 15
and: (i) such mated Spacecraft requires
testing, maintenance, replacement and/or
corrective actions at the Launch Site or (ii)
return to the Integration Facility and/or the
El Segundo Plant Site is necessary to
accomplish such actions, Contractor shall have
responsibility and liability as follows:
4.3.1.1 If Spacecraft warranty actions can be
performed at the Launch Site, Contractor
shall be responsible and liable for
[****************
**************************************] (as
each such term is defined in Article 24 of
this Contract) [**************************
****************] to the warranty provisions
of this Contract.
4.3.1.2 If return of the Spacecraft to the
Integration Facility and/or Plant Site is
necessary for such warranty actions,
Contractor shall be liable to Buyer in
[*****************************
**********************************] (as each
such term is defined in Article 24 of this
Contract) [****************************].
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
10
<PAGE>
4.4 [****] shall be responsible for obtaining and maintaining:
(i) all U.S. Government export licenses to enable export of
each Spacecraft, related test and support equipment to the
Launch Site and (ii) all authorizations required for the
performance of this Contract.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
11
<PAGE>
ARTICLE 5. PRICE
5.1 The total price (the "Contract Price") for Contractor to
provide Spacecraft, Documentation and Related Services
shall be as follows:
(a) For PAS 1R, [****************************************
**** ********************];
(b) For PAS 9, *******************************************
********************].
5.2 Buyer shall pay Contractor the Contract Price stated in
Paragraph 5.1 above in accordance with Article 6, Paragraph
6.2 of this Contract.
5.3 The Contract Price for each Spacecraft identified in
Paragraph 5.1 are contingent upon the utilization of the
launch vehicles initially designated for such Spacecraft in
Paragraph 4.2.1. If Buyer changes the designated launch
vehicle for a Spacecraft in accordance with Paragraph 4.2.1
(as opposed to Article 29), the Contract Price for the
applicable Spacecraft shall be adjusted in accordance with
the following table:
Table 5.3.1
Adjustment to Contract Price
- -------------------------------------------------------------------------------
Launch Vehicle PAS 1R PAS 9
- --------------------------------------------------------------------------------
Sea Launch [******] [*******]
- --------------------------------------------------------------------------------
Ariane N/A [*******]
- --------------------------------------------------------------------------------
Proton [*******] N/A
- --------------------------------------------------------------------------------
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
12
<PAGE>
5.4 Any adjustment to the Contract Price of a Spacecraft under
Paragraph 5.3 shall be allocated pro rata over the entire
Payment Plan for such Spacecraft (including In-Orbit
Performance Incentive Obligations). Adjustments allocated
to payments already made shall be promptly paid by Buyer or
refunded by Contractor, as the case may be.
13
<PAGE>
ARTICLE 6. PAYMENTS
6.1 Pursuant to the terms set forth in this Article 6, and
subject to Buyer's rights, defenses and remedies as
expressly stated in this Contract, Buyer shall pay to
Contractor the Contract Price as stated in Article 5 herein
for the applicable Spacecraft, Documentation, and Related
Services under this Contract.
6.2 Invoices shall be prepared and submitted by Contractor for
each Spacecraft in a form reasonably acceptable to Buyer.
Payments to Contractor for each Spacecraft shall be made
according to the following payment plans:
[****]
[********************]
- -------------------------------------------------------------------------------
[***** [*****
[****] *****] *****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- ------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
14
<PAGE>
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*****************************************************************************
******************************************************************************
******************************]
[*********]
[**********************]
- -------------------------------------------------------------------------------
[**** [*****
[********] *****] *******]
- -------------------------------------------------------------------------------
[*] [***] [***]
- -------------------------------------------------------------------------------
[*] [***] [***]
- -------------------------------------------------------------------------------
[*] [***] [***]
- -------------------------------------------------------------------------------
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
15
<PAGE>
- -------------------------------------------------------------------------------
[*] [***] [***]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*] [****] [****]
- -------------------------------------------------------------------------------
[*******************************************************************************
*******************************************************************************
***************************]
6.3 Incentives Obligations.
6.3.1 The following definitions are applicable to this
Section 6.3:
6.3.1.1 "Specified Operation Lifetime" means fifteen
(15) years
6.3.1.2 "Successfully Operating Payload". The
Spacecraft shall be equipped with one or
more Payloads, as specified in Exhibit B
upon definition of all Final Specifications.
Each Payload shall be deemed to be
Successfully Operating if at
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
16
<PAGE>
least that number of Transponders that is
one more than one-half of the total number
of Transponders within such Payload are
Successfully Operating Transponders (as
defined below).
6.3.1.3 "Successfully Operating Transponder". A
Successfully Operating Transponder is a
Transponder which meets either or both of
the following two criteria:
(a) The Transponder meets or exceeds the
performance specifications set forth in
Exhibit B. For the avoidance of doubt, if
the Spacecraft is placed into inclined
orbit, then the Transponders shall be deemed
not to meet the criteria stated in this
Paragraph 6.3.1.3(a) at such time as the
Spacecraft would have ceased to have a
Useful Commercial Life, (as mutually
determined by the Parties) had it not been
placed in such an orbit.
(b) The Transponder, while not meeting or
exceeding the performance specifications,
provides Buyer with no material loss in its
commercial value.
A Transponder shall also be deemed to be a
Successfully Operating Transponder if it
meets the performance specifications through
use of any redundant or spare equipment.
6.3.1.4 "Useful Commercial Life". The Useful
Commercial Life of a Spacecraft means the
period beginning on the Commencement Date
and ending on the earlier to occur of (i)
the date on which there is just sufficient
fuel remaining on
17
<PAGE>
board the Spacecraft only to eject the
Spacecraft from its geostationary orbital
location or (ii) the date on which at least
one-half of the Transponders on each Payload
are not Successfully Operating Transponders.
6.3.1.5 "Successfully Injected Spacecraft". The
Launched Spacecraft shall be deemed to be a
Successfully Injected Spacecraft if:
(a) The transfer orbit/spacecraft attitude meets
the following required criteria:
(1) Perigee altitude error is less than or
equal to +/-3 sigma;
(2) Apogee Altitude error is less than
or equal to +/-3 sigma;
(3) Inclination error is less than or equal
to +/-3 sigma;
(4) Argument of perigee error is less
than or equal to +/-3 sigma; and
(5) The Spacecraft has been separated with
attitude rate errors of less than or equal
to +/-3 sigma and
(b) The Spacecraft has not suffered physical
damage which resulted from Launch Vehicle
malfunction.
The calculated amount of Useful Commercial Life
(the "Calculated Operational Lifetime") shall
be mutually determined by Buyer and Contractor,
based on standard engineering practices, using
measured
18
<PAGE>
actuals of the Spacecraft, existing at
the time of the operational hand-off of the
Spacecraft to Contractor from the Launch
Vehicle provider. If the attained transfer
orbit/Spacecraft attitude does not meet the
criteria stated in this Section, but the
Calculated Operational Lifetime is greater than
or equal to the Specified Operational Lifetime
for the Spacecraft, then the Spacecraft shall
be deemed to have been a Successfully Injected
Spacecraft, If, on the other hand, the attained
transfer orbit/Spacecraft attitude does not
meet the criteria stated above, and the
Calculated Operational Lifetime is less than
the Specified Operational Lifetime, then the
Spacecraft shall be deemed not be a
Successfully Injected Spacecraft. If Buyer and
Contractor cannot agree on the Calculated
Operational Lifetime, then the Parties shall
resolve such disagreement in acceptance with
the dispute resolution procedures set forth in
Article 33. During such dispute resolution
procedure, Buyer shall commence all payments
under Section 6.3.2 to Contractor based on
Contractor's calculation of such Calculated
Operational Lifetime, except only the disputed
amount(s) which shall be paid by Buyer in
escrow as set forth in Section 29.4, and the
prevailing party shall be entitled to interest
as provided therein.
6.3.1.6 "Incentives Interest Rate". The Incentives
Interest Rate shall be the lesser of (i) the
prime rate of Chase Manhattan, New York, as
calculated on the first business day of each
month for which interest is calculated plus
[*************************] or (ii)
[*******************]
[***] Filed separately with the Commission pursuant to a request
for confidential treatment.
19
<PAGE>
6.3.1.7 "Commencement Date". The Commencement Date
shall be the date on which Buyer receives
written certification from Contractor that,
based upon the results of completed in-orbit
performance tests, at least one Payload is a
Successfully Operating Payload.
6.3.2 Buyer shall pay to Contractor the Incentives
Obligations and the Change Order Profit Component
(if applicable), as follows:
6.3.2.1 Incentives Obligations and Change Order
Profit Component. Subject to Section 6.3.2.3
through 6.3.2.6, Buyer shall be obligated to
pay to Contractor the Incentives Obligation
and any Change Order Profit Component (if
applicable), as follows: Buyer shall pay
Contractor an equal monthly payment that,
when calculated on a net present value basis
to the Commencement Date using the
Incentives Interest Rate, equals the total
amount of Incentives Obligations plus Change
Order Profit Component due hereunder. For
example, if the PAS 1R Spacecraft is a
Successfully Injected Spacecraft and on the
Commencement Date all Transponders on the
Spacecraft are and continue to be
Successfully Operating Transponders for
fifteen (15) years, assuming the maximum
[****************] for the entire period,
the monthly Incentives Obligations payment
would be [TBD] (the "Nominal Payment"). If
the Incentives Interest Rate is less than
[********************] for any given month,
the
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
20
<PAGE>
Incentives Obligations payment will be less
than the Nominal Payment. In such
circumstances, the amount of each month's
payment will be calculated on a net present
value basis to the date of the last month's
payment using the remaining unpaid principal
as the new principal, the Incentives
Interest Rate, and a term equal to the
number of months remaining in the Incentives
period. The Parties shall agree in writing
upon an appropriate allocation of the
portion of the Incentive Obligations which
shall be payable for each Payload on the
Spacecraft. The Incentives Obligations,
identified above, shall be payable in 180
equal and consecutive monthly installments
over a fifteen (15) year life of the
Spacecraft, except as may be adjusted as set
forth herein. Except as provided in
Paragraph 6.3.4, the first installment of
each Incentives Obligations shall be paid on
the Spacecraft's Commencement Date. A sample
schedule matrix showing Incentives
Obligations payments for fifteen years,
assuming fully successful operation, and
with varying hypothetical interests rates
will be attached to this Contract as
Schedule 6.3.2.1.
The foregoing notwithstanding:
(a) If the Spacecraft is not a Successfully
Injected Spacecraft pursuant to Section
6.3.1.4 but is successfully placed into its
on-station orbit by Hughes during the
"Transfer Period" (defined as the period
from separation of the Launch Vehicle
through on-station acquisition), then,
subject to Section
21
<PAGE>
6.3.2.3, Buyer shall pay the Incentives
Obligations for the Spacecraft in equal and
consecutive monthly installments over a
period of the Spacecraft's On Station
Operational Lifetime (defined at Section
6.3.2.1(b)).
(b) If the Spacecraft is Successfully
Injected, but is not successfully placed
into its on-station orbit by Contractor
during the Transfer Period, then the total
amount of the Incentives Obligations for the
Spacecraft shall be multiplied by a
percentile equal to (i) the On-Station
Operational Lifetime divided by (ii) the
Calculated Operational Lifetime, which
percentile shall, in no event, be greater
than one. Subject to Section 6.3.2.3, Buyer
shall pay such Incentives Obligations for
the Spacecraft in equal and consecutive
monthly installments over a period of the
Spacecraft's On-Station Operational
Lifetime. The "On Station Operational
Lifetime" shall be mutually determined by
Buyer and Contractor, based on standard
engineering practices, using measured
actuals of the Spacecraft, existing at the
end of the Transfer Period. However, should
the Spacecraft continue to operate
successfully beyond the On-Station
Operational Lifetime, Contractor will
continue to earn Incentives Obligations at
the same monthly rate up to the Specified
Operational Lifetime.
(c) Finally, if the Spacecraft is not a
Successfully Injected Spacecraft and, in
addition, is not successfully placed into
its on-station orbit during the Transfer
Period, then the total amount of the
Incentives Obligations shall be multiplied
by the sum of (A)(i) the Specified
Operational Lifetime, plus (ii) the
On-Station Operational Lifetime, minus (iii)
the
22
<PAGE>
Calculated Operational Lifetime, divided by
(B) the Specified Operational Lifetime,
which percentile shall, in no event, be
greater than one. Subject to Section
6.3.2.3, Buyer shall pay such Incentives
Obligations for the Spacecraft in equal and
consecutive monthly installments over a
period of the Spacecraft's On-Station
Operational Lifetime.
For purposes of any provision of this
Contract, if the Incentives Obligations or
related payment periods are to be
recalculated, the monthly installments due
shall be recalculated to reflect the imputed
interest element that is reflected in the
payment plans specified above.
6.3.2.2 Notwithstanding the foregoing, if at any
time Buyer continues to utilize for
revenue-producing purposes any Transponder
that is not a Successfully Operating
Transponder, then Buyer shall pay a pro
rated amount of the Incentives Obligation
attributable to such Transponder that is
proportionate to the partial benefit that
Buyer derives from such Transponder (the
"Partial Incentive Payment"), all as
mutually agreed upon by the Parties in good
faith.
6.3.2.3 Except for any Change Order Profit Component
(which is non-contingent), payment of any
Incentives Obligation shall be contingent
upon the Transponders being Successfully
Operating Transponders, as set forth herein,
on the applicable Payload and shall be
pro-rated, therefore, on a Transponder
equivalent-by-Transponder equivalent basis
over the duration of the applicable term of
such Obligation; provided, however, that
beginning on the date, if any, that any one
or more of the Payloads are no longer a
Successfully Operating Payload, as
23
<PAGE>
and when ascertained pursuant to in Section
6.3.2.4 (the "Degraded Payload"), then
Buyer's then-remaining Incentives
Obligations for such Payload(s) (exclusive
of any Change Order Profit Component, as
applicable) shall be deemed extinguished.
6.3.2.4 Whether any Transponder is not Successfully
Operating shall be mutually determined by
Buyer and Contractor, based on relevant
technical data, reports and analyses, and
each Party will make available the other
review upon reasonable request all data used
in making such determination. If Contractor
disagrees with such determination, then the
Parties shall resolve such disagreement in
accordance with the dispute resolution
procedure set forth in Article 33.
6.3.2.5 If the Spacecraft has not been, or is not
being, Properly Operated by the Buyer, and
any Transponders thereof are not
Successfully Operating Transponders, then
the Transponders of the Spacecraft which
were Successfully Operating prior to such
improper operation of the Spacecraft shall
be deemed to be Successfully Operating
Transponders for purposes of Contractor's
entitlement to payment of any applicable
Incentives Obligations for such period as
such Transponders would have reasonably been
predicted to continue to be Successfully
Operating had the Spacecraft and transponder
thereon been Properly Operated by Buyer;
provided, however, that if the failure is
the result of a defect in the deliverable
software or if Buyer demonstrates that the
failure of any Transponder to be
Successfully Operating was not caused
primarily, directly or indirectly, by any
act or omission of Buyer, its agents,
Subcontractors, Consultants or
24
<PAGE>
representatives of any kind, then the
foregoing provision shall not apply with
respect to such Transponder.
6.3.2.6 Buyer may prepay any portion of the
Incentives Obligations or the Change Order
Profit Component pursuant to the schedule
matrix attached as Exhibit 6.3.2.1. Any
remaining Incentives Obligations so prepaid
shall be subject to refund by Contractor to
Buyer, in any instance and to the extent
that Buyer's obligation to make such
payments is relieved pursuant to this
Article 6, as outlined in the last sentence
of Section 6.3.4.1 hereof.
6.3.3 "Spacecraft Retirement Payment". At any time
following the Spacecraft's Delivery, Buyer may, at
its option, cease to utilize the Spacecraft for any
purpose; provided, however, that if Buyer does cease
using the Spacecraft (or if the Spacecraft is
rendered a total loss by virtue of Buyer's failure
to Properly Operate the Spacecraft), then, upon the
exercise date of such option or the declaration of
the Spacecraft as a total loss as applicable, all
remaining Incentives Obligations payments for any
Transponder (and any Change Order Profit Component,
if applicable) (subject to the provisions of Section
6.3.2.3 through 6.3.2.5) shall become immediately
due and payable, all relative to the Spacecraft; and
Buyer shall pay to Contractor such amounts, in
immediately available funds, along with the
outstanding balance of principal and accrued
interest on any other outstanding payment
obligations with respect to the Spacecraft, if any,
as of such date. In determining the amount of
principal and interest due, present value analysis
discounted at the Incentives Interest Rate per annum
shall be done for any scheduled payment stream
previously created by the Parties hereunder.
Notwithstanding the foregoing, Buyer shall have the
right to cease
25
<PAGE>
using the Spacecraft and remove it from its orbital
location at any time following the expiration of the
Spacecraft's Useful Commercial Life, without payment
of such Spacecraft Retirement Payment.
6.3.4 Incentive Obligations and Launch Delay
6.3.4.1 If the Spacecraft has not been launched by
the 121st day after Delivery of the
Spacecraft, then, except as set forth in
Paragraph 6.3.4.2, the first of the equal
and consecutive monthly installment payments
for Incentive Obligations on the Spacecraft
shall be due and payable and the fifteen
year period shall be deemed to have begun
for purposes of this Paragraph 6.3 and such
payments shall commence (the "Pre-Launch
Incentive Payments"). If upon the
Commencement Date or at any time thereafter,
any Transponder ceases to be a successfully
Operating Transponder or a Payload becomes a
Degraded Payload, then Contractor shall
deliver to Buyer a refund (without interest)
of that portion of the Pre-Launch Incentive
Payment attributable to such Transponder or
Payload, taking into account the amount of
such time such Transponder or Payload met
the performance specifications, and Buyer's
subsequent Incentives Obligations shall be
reduced thereafter on a pro rata basis;
provided, if applicable, Buyer shall receive
a credit to the extent of any Pre-Launch
Incentive Payments, to be applied as an
offset against Buyer's consecutive monthly
installment payments for the Incentives
Obligations otherwise due and payable for
the months immediately following the
Commencement Date.
26
<PAGE>
6.3.4.2 Subject to the second sentence below, if on
or before the 121st day following the
Satellite's Delivery Date, the Satellite has
not been Launched, then the first of the
equal and consecutive monthly installments
payments for the Incentives Obligations on
the Spacecraft shall be due and payable on
the earlier to occur of the Spacecraft's
Commencement Date or the 241st following
such Spacecraft's Date of Delivery (except
that interest on such Incentives Obligations
shall begin to accrue on the 121st day
following the Delivery Date, as such date
may be modified herein). If, however, the
Spacecraft has not been Launched due
primarily to (1) Contractor's Fault after
Delivery or (2) Contractor's failure to
timely meet the Spacecraft's scheduled
Delivery Date (where such failure in
Delivery is not caused by a Buyer's Delay)
(or a combination of clauses (1) and (2)
immediately above) then the first of the
equal and consecutive monthly installments
of the Incentives Obligations on the
Spacecraft shall be due and payable on, and
interest shall not accrue until, the
Causation Date. If upon Spacecraft
Commencement, or at any time thereafter, any
Transponder on the Spacecraft (which has
been subject to a Launch delay under this
Paragraph 6.3.4.2) ceases to be a
Successfully Operating Transponder or a
Payload becomes a Degraded Payload, then
Contractor shall deliver to Buyer a refund
(without interest) of that portion of the
Pre-Launch Incentives Payments attributable
to such Transponder or Payload, taking into
account the amount of time such Transponder
or Payload met the performance
specifications, and Buyer's subsequent
Incentives Obligation for the affected
Payload on the
27
<PAGE>
Spacecraft shall be reduced thereafter on a
pro rata basis; provided, however, that
Buyer shall receive a credit to the extent
of any Pre-Launch Incentive Payments, such
credit to be applied as an offset against
Buyer's consecutive monthly installment
payments for the Incentives Obligations
otherwise due and payable for the months
immediately following the Commencement Date.
6.3.4.3 If, for any reason other than primarily
Contractor's Fault, the Spacecraft has not
been Launched within 24 months following the
Spacecraft's Delivery Date, then the full
amount of the Incentives Obligations (and
any Change Order Profit Component, if
applicable) (including principal and accrued
interest, if any) shall become immediately
due and payable upon the last day of such
24th month. If, however, the Spacecraft is
subsequently Launched within 54 months of
the Delivery Date and any Transponder of the
Spacecraft ceases to be a Successfully
Operating Transponder or a Payload becomes a
Degraded Payload, then Buyer shall be
entitled to a proportionate refund (without
interest) for any Incentives Obligations
(and any Change Order Profit, if applicable)
paid for such Transponder or Payload, taking
into account the amount of time such
Transponder or Payload met the performance
specifications. If, for any reason, the
Satellite has not been Launched prior to the
third anniversary of the Delivery Date (the
"Third Anniversary"), then Buyer shall have
an option (the "LOPS/MOPS Option"),
exercisable in writing received by
Contractor on or before the Third
Anniversary, to extend its right to utilize
the Related Services for the Satellite to
the fifth anniversary
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of the Delivery Date (the "Extension
Period"). If Buyer does not timely exercise
the LOPS/MOPS Option, then Contractor shall
credit any unused portion of the Baseline
Launch Costs for the Spacecraft against any
due and unpaid payment obligations of
Customer under this Contract (the "LOPS/MOPS
Refund"). If Buyer timely exercises the
LOPS/MOPS Option, then the price associated
with the Related Services (pursuant to
Paragraph 6.3) for the Spacecraft during the
Extension Period, shall be increased by a
[**********************] beginning on the
Third Anniversary. Buyer shall be obligated
to pay such Escalation Amount within 30 days
of receipt of invoice from Contractor. In
any case, Contractor's obligation to provide
such services shall terminate on the date
which is fifty-four (54) months (or as early
as thirty-six (36) months) from the Delivery
Date for the Spacecraft. If Contractor's
obligation to provide Launch and Mission
Operations Services is terminated under the
immediately preceding sentence, then Buyer
shall receive a LOPS/MOPS Credit or
LOPS/MOPS Refund, as applicable.
6.3.4.4 If, for any reason, other than Contractor's
Fault, a Launch delay occurs between the
time of Launch and the Commencement Date (or
if no Commencement occurs), then the full
amount of the Incentives Obligations (and
any Change Order Profit Component, if
applicable) (the
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"Recoverable Amount(s)") shall become
immediately due and payable upon the date of
such Launch delay. Contractor shall be
entitled to obtain payment of such
Recoverable Amounts from the proceeds of the
launch insurance obtained by Buyer and shall
be entitled to a priority in obtaining such
proceeds over Buyer and all other parties or
claims; provided, however, that nothing
herein shall relieve Buyer of its
obligations to pay to Contractor all such
Recoverable Amounts, as set forth herein.
During the six (6) months immediately
following such Launch delay, Buyer shall use
best reasonable efforts to obtain the
proceeds of its launch insurance to pay
Contractor the Recoverable Amounts,
hereunder. Provided further, however, that
if Contractor does not receive all such
Recoverable Amounts from the proceeds of
Buyer's launch insurance within such six (6)
month period, then Buyer shall be obligated
immediately to compensate Contractor for,
and Contractor may also look to Buyer
directly for satisfaction of, all such
Recoverable Amounts.
6.4 Contractor shall not be obligated to deliver a Spacecraft
to the Launch Site if there are any outstanding Delinquent
Payments owed by Buyer to Contractor with respect to such
Spacecraft under this contract one month prior to shipment
of such Spacecraft from the Contractor facility.
"Delinquent Payments" are defined as those payments not
received by Contractor within thirty (30) days of the dates
due as defined in Paragraphs 6.2.1 and 6.2.2 above. Once
Buyer has paid Contractor for any "Delinquent Payments" and
any interest accrued in accordance with Paragraph 6.10
below, Contractor shall use its reasonable best efforts to
ship such Spacecraft to the Launch Site so as to enable
launch on the scheduled Launch Date and in any event to
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make shipment as soon as practicable and no later than
sixteen (16) weeks after payment by Buyer of such
Delinquent Payments. Buyer will be responsible for and will
pay to Contractor any reasonable costs and [***] profit on
such costs that Contractor may incur as a result of a delay
in delivery due to Buyer's Delinquent Payments.
Notwithstanding the foregoing, this Section 6.4 shall not
relieve Contractor of its obligation to deliver a
Spacecraft, and no "Delinquent Payment" shall be deemed to
have occurred, due to any non-payment by Buyer on account
of an alleged breach by Contractor or other dispute as to
such payment. In such event, Buyer shall, within thirty
(30) days of the date such payment is due, pay the full
amount of such payment into an interest-bearing escrow
account to be established at Bank of America, Concord,
California. Upon settlement of the dispute as to such
payment and alleged breach in accordance with Article 33,
the Party entitled to the amount in escrow shall receive
such amount together with all accrued interest thereon and
the other Party shall pay all costs and fees associated
with the escrow of such amount.
6.5 Invoice
6.5.1 Invoices submitted to Buyer for payment shall
contain a cross-reference to the Contract number
and the date specified in Payment Plans of
Paragraphs 6.3.1 and 6.3.2. Contractor shall
submit one (1) original invoice for each
Spacecraft in each instance to:
PanAmSat Corporation
One Pickwick Plaza
Greenwich, CT 06830
Fax: (203)861-8692
Attention: Accounts Payable - Tony Walden
6.5.2 Invoice amounts, as specified in Paragraph 6.3,
provide for billings to
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be submitted by the 15th day of each month and
shall be paid by Buyer within thirty (30) days
upon receipt of the invoice by Buyer.
6.6 Late Payments
In the event of a failure by the Buyer or the Contractor to
make a payment required pursuant to this Contract, the
delinquent Party shall pay interest at the rate of
[***********] on the overdue amount for the number of days
that the payment is overdue, commencing on the date payment
is due and terminating on the date the overdue amount is
paid in full. Notwithstanding the foregoing, this Section
6.6 shall not apply to any payment made into escrow in
accordance with Section 29.4.
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ARTICLE 7. SPACECRAFT LAUNCH DATE
7.1.1 Launch Semester. A six (6) month period of time
---------------
in which a launch will occur, the first day of
which shall be thirty (30) days after the
Delivery Date under Section 4.1 herein (fifty
(50) days after Delivery Date if a Sea Launch is
utilized).
7.1.2 Launch Period. A ninety (90) day period of time
-------------
within a launch Semester during which a launch
will be scheduled to occur as shall be notified
by Buyer to Contractor.
7.1.3 Launch Slot Definition. A thirty (30) day period
----------------------
of time within a Launch Period during which a
Launch will occur. The Launch Slot within the
Launch Period shall be notified by Buyer to
Contractor not later than one (1) year prior to
the first day of the applicable Launch Period
and, once established, shall become an express
term of this Contract.
7.1.4 Launch Date Defined. The calendar date within the
-------------------
Launch Slot during which a Launch will occur. The
Launch Date within the Launch Slot shall be
notified by Buyer to Contractor no later than six
(6) months prior to the first day of the
applicable Launch Slot and once established,
shall become an express term of this Contract.
7.1.5 Launch Window Definition. A period of time within
------------------------
the Launch Date during which a Launch can occur
and meet mission requirements. The Launch Window
shall be established by notified by Buyer to
Contractor no later than forty-five (45) days
prior to the Launch Date and once established,
shall become an express term of this Contract.
7.1.6 Adjustment of dates. The time periods as
-------------------
delineated in Sections 7.1.2 through 7.1.5 shall
be adjusted to reflect applicable launch provider
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contracts, consistent with ordinary practices of
such providers as familiar to the Parties.
7.2 The Contract Price set forth in Paragraph 5.1 includes
Contractor furnished launch support services, post launch
support services, in-orbit test support services, and post
title transfer monitoring and command of each Spacecraft if
Buyer invokes the remedial provisions of Article 3,
Paragraph 3.3.
7.3 No less than sixteen (16) weeks prior to the launch date,
Buyer shall order Contractor by notice in writing to
commence launch campaign preparations.
7.4 If a Spacecraft Launch Date is postponed for any reason
other than the sole fault of Contractor, excluding any
postponement due to an Excusable Delay as defined in
Article 12, the Parties shall negotiate in good faith to
determine an equitable adjustment to the price and affected
terms of this Contract, if any. If the cost of supplies or
materials made obsolete or excess as a result of a such
postponement is included in the equitable adjustment, Buyer
shall have the right to prescribe the manner of disposition
of such supplies or materials. Costs included in the
equitable adjustment shall include but not be limited to:
support personnel standby; extra travel expenses; transport
termination or rescheduling fees and a profit rate of
[********].
7.5 Notwithstanding the foregoing, if a Spacecraft Launch Date
is postponed by either Party due to an Excusable Delay, as
defined in Paragraph 12.1 herein, the terms of Article 12
herein shall govern such postponement.
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ARTICLE 8. BUYER-FURNISHED ITEMS
8.1 The following facilities, equipment, and services
("Buyer-Furnished Items") shall be furnished by Buyer at no
cost to Contractor, in a timely manner, so as to enable
Contractor to perform the work described herein.
1) Facilities (buildings, power, phones and data
lines) and enumerated services: (i)
transportation of a Spacecraft, Contractor
related test equipment and personnel within the
Launch Site and if a Sea Launch is provided,
between the Integration Facility (Port of Long
Beach) and the Launch Site (vicinity of Christmas
Islands) unless Article 4, Paragraph 4.2.1
conditions apply (ii) storage of a Spacecraft and
related test equipment for all force majeure
events (which prevent Buyer from supplying
Buyer-Furnished Items) and/or launch vehicle
delays (iii) fueling (iv) photographs, (v)
interface hardware at the Launch Site and (vi)
earth station facilities for IOT including
appropriate RF facilities, but not specialized
test equipment.
2) Reservation and procurement of launch services and
associated services.
Contractor will provide preliminary requirements of Item 1
above to Buyer no later than 6 months after the Effective
Date of this Contract to assist Buyer's compliance with
this Article, which shall be consistent with what
Contractor has generally required Buyer to secure for
previous launches with the same launch provider. Subject to
the confidentiality requirements of the applicable
agreements, Contractor will be allowed to review the list
of basic and optional service which Buyer has procured in
Buyer's contract(s) for launch services.
In the event that the Buyer-Furnished Items set forth above
are not suitable for the intended purpose or are not
provided in a timely manner, excluding any
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excusable delay as defined in Article 12 herein, then Buyer
shall be liable to Contractor for all applicable costs
which shall include but not be limited to; procurement or
rental of suitable substitutes for such Buyer Furnished
Items at no higher than market prices; with title and
possession of all such procured items reverting to Buyer
after Contractor's use under this Contract; support
personnel standby; extra travel expenses; transport
termination or rescheduling fees; and
installation/de-installation of communication links to the
Launch Site and a profit rate of [************].
8.2 Contractor shall maintain a system to ensure the adequate
control and protection of Buyer's Property. For the
purposes of this Article, Buyer Property shall be defined
as any item which Buyer provides to the Contractor or
directs Contractor to maintain in storage or an inventory
account under this Contract. Upon receipt of notification
from Buyer, the Contractor shall complete and return within
fifteen (15) working days a Property System Certification
describing the system that will be used to control Buyer's
Property. Additionally, Buyer's representative may, at its
option and at no additional cost to Buyer, conduct
surveillance at a reasonable time of the Contractor's
Property Control System as Buyer deems necessary to assure
compliance with the terms and conditions of this Article.
8.3 Contractor shall, commencing with its receipt and during
its custody or the use of any Buyer's Property, accomplish
the following:
A. Establish and maintain inventory records and make such
records available for review upon Buyer's request;
B. Provide the necessary precautions to guard against
damage from handling and deterioration during storage;
C. Perform periodic inspection to assure adequacy of
storage conditions;
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and
D. Ensure that Buyer's Property is used only for
performing this Contract, unless otherwise
provided in this Article or approved by the
cognizant contracting officer.
8.4 Contractor shall not modify, add-on, or replace any Buyer
Property without Buyer's prior written authorization.
Contractor shall immediately report to Buyer's contract
representative the loss of any Buyer Property or any such
property found damaged, malfunctioning, or otherwise
unsuitable for use. The Contractor shall determine and
report the probable cause and necessity for withholding
such property from use.
8.5 Upon termination or completion of this Contract, and upon
request by Buyer, the Contractor shall perform a physical
inventory, adequate for accountability and disposition
purposes, of all Buyer's Property applicable to such
terminated or completed agreement and shall cause its
subcontractors and suppliers at every tier to do likewise.
8.6 Notwithstanding the provisions of Article 29, at any time
on or before [************] Buyer may make changes to the
PAS 9 configuration/specifications as follows:
[*********************************************************
***************************************]
[******]
[************]
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- -------------------------------------------------------------------------------
[*************] [********]
- -------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
[*************] [***********]
- --------------------------------------------------------------------------------
[*************] [***********]
- --------------------------------------------------------------------------------
[*************] [***********]
- --------------------------------------------------------------------------------
[*************] [***********]
- --------------------------------------------------------------------------------
[*************] [***********]
- --------------------------------------------------------------------------------
[*************] [***********]
- --------------------------------------------------------------------------------
8.6.2 Changes other than those specified in [*******]
shall result in an adjustment to the PAS 9 Contract
Price [*********************
****************************].
8.6.3 Any adjustment to the Contract Price of a Spacecraft
under Paragraphs 8.6.1 or 8.6.2 shall be allocated
pro rata over the entire Payment Plan for such
Spacecraft (including In-Orbit Performance Incentive
Obligations). Adjustments allocated to payments
already made shall be promptly paid by Buyer or
refunded by Contractor, as the case may be.
8.7 Buyer shall provide Contractor with the following payload
definitions to Contractor in accordance with the following
schedule, and once all such information has been provided
for a Spacecraft, Exhibit B, "PAS 1R & PAS 9 Interim
Spacecraft Specification", shall be completed and
thereafter shall be deemed the final specifications of such
Spacecraft (subject to change in accordance with the
provisions of this Contract):
[********]
[*****************]
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- -------------------------------------------------------------------------------
[********] [***] [*****]
- -------------------------------------------------------------------------------
[********] [***] [*****]
- -------------------------------------------------------------------------------
[********] [***] [*****]
- -------------------------------------------------------------------------------
[********] [***] [*****]
- -------------------------------------------------------------------------------
[********] [***] [*****]
- -------------------------------------------------------------------------------
[*********************************************]
Any changes to the payload requested by Buyer after the
applicable decision dates identified in Table 8.7.1 shall
be deemed to be a "Change Order Request" under Paragraph
29.3.
8.8 Contractor shall reasonably and promptly respond to Buyer's
requests for information and assistance in making the
configuration decisions required by Paragraph 8.7.
8.9 In the event that (i) Buyer does not provide Contractor
with the required information as to a Spacecraft in
accordance with Table 8.7.1 and (ii) Contractor has
complied with its obligations under Paragraph 8.8, then
with respect to such Spacecraft:
8.9.1 In the event of cumulative delays by Buyer of
[********] or less, the Shipment Date and any
remaining configuration decision dates for such
Spacecraft in Table 8.7.1 shall each be delayed
[*******]
8.9.2 In the event of cumulative delays by Buyer in excess
of [******* ******] and not longer than
[****************] (i) the Shipment Date and any
remaining configuration decision dates for such
Spacecraft in Table 8.7.1 shall each be delayed
[************** ******] of such delay in excess of
[*****] and (ii) Buyer [***** *************] for
cumulative delay beyond [***********] or, in
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the case of delays of [****************************
********************************************]
for the delay in such decisions, to be calculated
[*****************************] provided that the
maximum period of time for which Buyer shall
[***************] under this Paragraph 8.9.2 shall
be [*****************************] under Paragraph
8.9.1 per Spacecraft;
8.9.3 In the event of cumulative delays by Buyer in excess
of [******* ***********] such delays shall be deemed
to be a Change Order Request by Buyer for a stop
work order under Paragraph 29.3; or
8.9.4 In the event of cumulative delays by Buyer in excess
of [******** **********] Buyer shall be deemed to
have terminated this Contract pursuant to Paragraph
14.1 with respect to the applicable Spacecraft, and
Buyer's termination liability under Paragraph 14.1
shall be calculated as of the date that Buyer's
delay aggregated [**********************].
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ARTICLE 9. INSPECTION AND ACCEPTANCE
9.1 Inspection of all Hardware, documentation and Contractor's
services provided hereunder shall take place in accordance
with the terms of Article 10, entitled "Access to Work in
Process," herein.
9.2 Preliminary Acceptance of a Spacecraft shall occur when all
in-plant tests required to be performed by Contractor for
the Hardware have been completed and the Contractor has
demonstrated at the pre-ship review that the Hardware and
contract deliverables meet the requirements of this
Contract, at which time Buyer shall accept the Hardware on
a Preliminary basis in writing within five (5) business
days subject to completion of Launch Integration Facility
and/or Launch Site tests specified in Exhibit C, PAS 1R &
PAS 9 Spacecraft Integration Test Plan. If the Hardware is
unacceptable, Contractor shall promptly and at its expense,
rectify the unsatisfactory Hardware and resubmit the
Hardware for acceptance by Buyer as provided above. In
either case, the Hardware shall be deemed accepted upon
failure of Buyer to notify Contractor in writing within the
above five (5) business days that it is accepted, rejected
or that in Buyer's opinion further corrective action must
be taken by the Contractor.
9.3 Final Acceptance of a Spacecraft shall occur upon the
earliest of i) the completion of In-orbit Testing in
accordance with Exhibit A, ii) fifty (50) days after
Intentional Ignition (as defined in Article 16, Paragraph
16.2 of this Contract) or iii) immediately before a Partial
Failure, Total Failure or Total Constructive Failure (as
each such term is defined in the applicable Hughes
Communications Galaxy Launch Insurance Contract or
successor contract), which occurs at or after Intentional
Ignition. Buyer shall have access to Launch Integration
Facility and/or Launch Site test results during the launch
campaign in accordance with the provisions of Article 10,
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Paragraph 10.1 "Access to Work in Process."
9.4 With respect to deliverable Hardware which Buyer orders
Contractor to store, the Hardware shall be stored at a
location to be negotiated and Final Acceptance shall occur
at the end of the [*********] warranty period as set forth
in Article 16 herein, entitled "Spacecraft Warranty," or
such other event mutually agreed upon between the Parties.
9.5 Non-Conforming Products.
-----------------------
9.5.1 If (i) the Spacecraft does not meet its weight
requirements and (ii) Buyer will be required to pay
for additional weight from the launch provider in
order to achieve the Specified Operational Lifetime
without delaying the placing of the Spacecraft in
its orbital location by more than fifteen (15)
additional days, then Contractor shall reimburse
Buyer for such additional payments up to
[**************].
9.5.2 Any Preliminary Acceptance or Final Acceptance by
Buyer of Spacecraft that does not conform to the
requirements of this Contract (whether or not
related to weight) shall not affect the Parties
rights and obligations under Paragraph 6.3
("Incentive Obligations") with respect to a
Spacecraft or other deliverable that does not
perform to the specifications of this Contract.
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ARTICLE 10. ACCESS TO WORK IN PROCESS
10.1 Contractor shall afford Buyer access to work in progress
being performed at Contractor's plants and at the Launch
Integration Facility and/or Launch Site pursuant to this
Contract, including technical data, documentation, and
hardware, at reasonable times during the period of
Contract performance, provided such access does not
unreasonably interfere with such work or require the
disclosure of Contractor's proprietary information to
third Parties and subject to (i) Contractor's Security
Procedures and (ii) U.S. or Foreign Government
Regulations.
10.2 To the extent that the Contractor's major subcontracts
permit, Contractor shall afford Buyer access to work
being performed pursuant to this Contract in
subcontractor's plants in the company of Contractor's
representatives.
Contractor shall exert reasonable effort in
subcontracting to obtain permission for Buyer access to
those major subcontractors' plants. Major subcontracts
are defined as those subcontracts in excess of
[**********************].
10.3 Buyer shall have the right to witness on a
non-interference basis all system and subsystem tests
scheduled by Contractor in connection with the
performance of work under this Contract. If the system
or subsystem tests are performed by a subcontractor of
Contractor, Contractor shall take all reasonable steps
to secure Buyer's access to the subcontractor's facility
or facilities. Buyer's right to witness testing shall be
on a non-interference basis with the subcontractor's
activities and subject to (i) any subcontractor security
procedures and (ii) U.S. or Foreign Government
Regulations.
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ARTICLE 11. TERMINATION FOR DEFAULT; LIMITATION OF LIABILITY
11.1 Subject to provisions of Article 3 entitled "Spacecraft,
Documentation and Related Services," Article 5 entitled
"Price" and Article 12 entitled "Excusable Delays,"
Buyer may issue a written notice of default with respect
to a particular Spacecraft to Contractor if: (i)
Contractor fails
[*********************************************] as
confirmed in writing by the Contractor's and Buyer's
Senior Executives and such failure may result in a delay
in delivery of more than [*****] or (ii) the delivery of
such Spacecraft or Contractor's performance of any
material obligation under the Contract has been delayed
due to the primary fault of the Contractor for more than
[********] Subsequent to the issuance of said notice,
the Buyer may terminate this Contract with respect to
such Spacecraft and thereafter elect remedies as
identified in Paragraph 11.2 below.
11.2 If Buyer terminates this Contract, in whole or in part,
as provided in Paragraph 11.1 herein, Buyer, at its sole
option, shall either: (i) take title to all deliverable
hardware, all hardware in process which ultimately would
have been deliverable by Contractor and all drawings and
data produced by Contractor, the cost of which has been
charged or becomes chargeable to any work terminated
plus all reasonable reprocurement costs up to a maximum
amount per Spacecraft of: (a) [**************] in the
event of a termination of this Contract solely with
respect to Documentation and/or Related Services for
such Spacecraft or (b) [*** **********] with respect to
a complete termination of the Contract with respect to
such Spacecraft; or (ii) receive a refund of all
payments submitted to Contractor by the Buyer for
performance of this Contract for the portion terminated
by Buyer, plus [*********************] and Contractor
shall retain title and
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possession to all terminated Hardware which ultimately
would have been deliverable by Contractor. Contractor
shall continue the performance of this Contract to the
extent not terminated under the provisions of this
Article.
11.3 Notwithstanding the other provisions of this Article,
there will be no termination for default after
Intentional Ignition of the Launch Vehicle for the
applicable Spacecraft.
11.4 If, after termination of this Contract (or portion
thereof) under the provisions of this Article, it is
determined for any reason that Contractor was not in
default under the provisions of this Article, or that
the default was excusable under the provision of Article
12 entitled "Excusable Delays," the rights and
obligations of the Parties shall be the same as if
Notice of Termination had been issued pursuant to
Article 14, entitled "Termination for Convenience" or
pursuant to Article 12, Paragraph 12.4, as the case may
be.
11.5 Except as otherwise provided in the Contract, the rights
and remedies of the Parties provided in this Article
shall be in lieu of any other rights and remedies
provided by law or in equity in the event Contractor or
Buyer fails to meet its obligations under this Contract.
Buyer shall have no other rights or remedies for late
delivery of a Spacecraft, Documentation and Related
Services under this Contract except for those rights and
remedies expressly provided for in this Contract.
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ARTICLE 12. EXCUSABLE DELAYS
12.1 If either Party or a subcontractor of either Party is
delayed by act of God, or of the public enemy, fire,
flood, earthquake, epidemic, quarantine restriction,
strike, walkout, freight embargo, or any other event
which is beyond their control or does not arise from the
acts or omissions of either Party or its respective
subcontractors, said delay shall constitute an excusable
delay ("Force Majeure Events"). In the event of an
excusable delay, there shall be an equitable adjustment
to the time of delivery and/or performance stated in
this Contract. The affected Party shall give notice in
writing to the other Party within 10 working days that
an excusable delay condition exists after learning of
such delay. Such notification shall include the cause of
the excusable delay, the expected length of the
excusable delay, and alternate plans to mitigate the
effect of the excusable delay.
12.2 If the affected Party, as defined in Paragraph 12.1
above, requests or experiences, on a cumulative basis,
excusable delay(s) greater than [********] the Parties
shall enter into good faith negotiations to develop a
mutual course of action and/or an equitable adjustment
to the affected terms of this Contract.
12.3 Notwithstanding the foregoing, if the Launch Date for a
particular Spacecraft defined in Paragraph 7.1 herein is
delayed due to a Force Majeure event affecting Buyer's
ability to furnish any item to be supplied by it under
Article 8 hereof, Buyer shall reimburse Contractor for
all reasonable expenses incurred as a result, including
without limitation expenses for: support personnel
standby; extra travel expenses; and transport
termination or rescheduling fees.
12.4 Notwithstanding anything herein to the contrary, in
the event that a Force
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Majeure Event occurs and continues to delay or prevent
performance by Contractor of its obligations as to
either or both Spacecraft for a period of twelve (12)
months or longer from the initial occurrence of such
Force Majeure Event, then Buyer shall have the right to
terminate this Contract with respect to the affected
Spacecraft upon thirty (30) days written notice. In the
event of a termination under this Paragraph 12.4, Buyer
shall be entitled to a refund of all payments made to
Contractor with respect to the affected Spacecraft, and
Contractor shall retain title to all Deliverables
produced by Contractor under this Contract with respect
to the affected Spacecraft.
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ARTICLE 13. AMENDMENTS
The terms and provisions of this Contract shall not be amended or
modified without specific written provision to that effect, signed by
the Authorized Representative(s) of both Parties. These Authorized
Representative(s) are identified in Article 27, "Notices and
Authorized Representative(s)." No oral statement of any person shall
in any manner or degree modify or otherwise affect the terms and
provisions of this Contract.
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ARTICLE 14. TERMINATION FOR CONVENIENCE
14.1 Buyer may terminate all or any portion of the work to be
performed pursuant to this Contract with respect to one or
both of the Spacecraft upon five (5) days written notice to
Contractor. Buyer shall pay Contractor, in the event of
such termination, termination liability equaling all Costs
(as defined in Paragraph 14.6 below) expended by Contractor
for all work done up to the date of termination,
settlements with subcontractors for work performed prior to
termination, and Contractor's reasonable costs related to
termination which would not otherwise have been incurred
plus a [***] profit for the applicable termination costs
and charges, but in no event more than the maximum
termination liability that is set forth in Exhibit F
hereto, as of date of termination, less amounts previously
paid by Buyer to Contractor pursuant to the Payment
Article. Buyer shall pay the unpaid balance of such
termination liability within thirty (30) days of Buyer's
receipt of certification of Contractor's costs. In the
event that Buyer has paid to Contractor any amount in
excess of such termination liability, then Contractor shall
refund such excess amount to Buyer within thirty (30) days
of certification of costs. In no event shall the
termination liability exceed either the Contract price
defined in Article 5 herein or the amount specified in
Exhibit F.
14.2 In the event of termination by Buyer hereunder, and upon
payment in full of all amount due (if any) under 14.1
above, all tangible work in process inventories generated
under this Contract, with respect to the terminated work,
shall become the property of Buyer. Buyer shall direct
disposition of such property within sixty (60) days from
date of termination (which disposition may include
requesting Contractor to undertake mitigation efforts in
accordance with Paragraph 14.5 below) or such other date as
agreed to by the Parties. Final acceptance and transfer of
title for all tangible work in process inventories to be
delivered to the Buyer in the event of termination
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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shall be the subject of separate negotiations between
Buyer and Contractor and shall be subject to applicable
U.S. Government Export Regulations. The expense of
disposition shall be borne by Buyer.
14.3 In the event of partial termination with respect to a
Spacecraft, the Contract Price for such Spacecraft shall be
adjusted accordingly.
14.4 Notwithstanding any other provision in this Contract, in
the event that Buyer terminates PAS 1R for convenience, the
Contract Price of PAS 9 shall be adjusted in accordance
with the following schedule of maximum increases, with any
such increase to be paid in proportion to the remaining
payments in the PAS 9 Payment Plan in Table 6.2.2:
[**********]
[************************]
[********] [********]
[********] [********]
[********] [********]
[********] [********]
[********] [********]
[********] [********]
[********] [********]
[********] [********]
The parties agree that: (i) the amounts in Table 14.4.1 are
the maximum price increase in the event of a termination at
the beginning of each such three month period; (ii) the
actual increase in the PAS 9 Contract Price will be the sum
of (a) those non-recurring costs mutually beneficial to
both PAS 1R and PAS 9, allocated to the PAS 1R Contract
Price for convenience purposes
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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only, and not already completed by Contractor or otherwise
paid by Buyer (whether through the payment plan or
termination liability payments), plus (b) recurring costs
related to managerial labor common to both the PAS 1R and
PAS 9 programs; and (iii) the actual amount of such costs
will decrease over the course of each three-month period.
Buyer may request to have an independent audit performed of
such costs. Such audit shall be at the expense of Buyer
unless such audit shows Contractor to have overstated its
costs, in which event Contractor shall bear the audit
expense and the increase to the PAS 9 Contract Price will
be adjusted accordingly.
14.5 At Buyer's request, Contractor shall use reasonable best
efforts to identify an alternate use (i.e. sale to third
Parties and/or internal utilization) for any Hardware
affected by a termination under this Article 14, the
Contractor shall submit a proposal to Buyer, which, at a
minimum, defines (i) the applicable Hardware, (ii) the
intended use of the Hardware, (iii) the original
acquisition cost/value of the applicable Hardware, as
available, and (iv) the sale/transfer payment(s) to be
received by Buyer. Contractor shall use its reasonable best
efforts to obtain fair market value for the applicable
Hardware. Buyer, at its sole option, may accept or reject
the proposal submitted by Contractor. In the event that
Buyer accepts the proposal submitted by Contractor, payment
by Contractor to Buyer of the agreed upon payment value
shall occur within thirty (30) days of the sale/transfer of
the applicable Hardware, or such other payment period as
mutually accepted between the Parties. If the Contractor's
proposal is rejected by Buyer or if Contractor is unable to
find any alternative use within two (2) years of being
requested to do so, then Title to the applicable Hardware
shall be vested as stated in Paragraph 14.2 above.
14.6 As used in this Article 14, Contractor's "Costs" shall mean
costs actually incurred by Contractor in performing its
obligations hereunder (including
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G&A costs not to exceed [*******] of such costs) all such
costs to be determined in accordance with Contractor's
normal accounting practices. Contractor shall provide to
Buyer an invoice certified by a financial officer of the
company stating Contractor claim for costs properly
includes only the costs specified in this paragraph. In the
event Buyer desires independent verification of claim,
Buyer may request to have independent certified public
accountants (CPA) audit costs incurred by Contractor and
report to the Parties. Such audit shall be at Buyer's
expense unless such audit shows Contractor's costs to have
been overstated (in which event Contractor shall bear the
audit expense). Such audit shall constitute a final
determination of actual costs notwithstanding the provision
of Article 33; provided that, if the costs determined by
such report exceed the amount of Contractor's termination
claim, Buyer shall only be obliged to pay the amount of
Contractor's termination claim.
14.7 Contractor shall use its reasonable best efforts to include
in its subcontracts for work hereunder on terms that will
enable Contractor to terminate such subcontracts in a
manner consistent with this Article 14.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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ARTICLE 15. TITLE AND RISK OF LOSS
15.1 Title and risk of loss or damage in respect of all items to
be delivered under this Contract shall pass from Contractor
to Buyer as follows:
15.1.1 Risk of loss of the Spacecraft and title shall pass
from Contractor to Buyer upon the earliest of: (i)
the completion of In-orbit Testing in accordance
with Exhibit A, (ii) fifty (50) days after
Intentional Ignition (as defined in Article 15,
Paragraph 15.2 of this contract) or (iii)
immediately before a Partial Failure, Total Failure
or Total Constructive Failure (as each such term is
defined in the applicable Hughes Communications
Galaxy Launch Insurance Contract or successor
contract) which occurs at or after Intentional
Ignition.
15.1.2 In respect to a Spacecraft which Buyer directs
Contractor to store, title and risk of loss shall
remain with the Contractor until Final Acceptance as
specified in Article 9.4 herein.
15.1.3 Notwithstanding Paragraph 15.1.2 above, upon removal
of the Spacecraft from storage, the Contractor shall
not assume risk of loss relative to a Battery which
Buyer directs Contractor to replace after the
five-year storage period which disqualifies the
battery for a 15-year mission. In that event,
Article 30 herein entitled "Effects of Storage on
Batteries," shall apply.
15.1.4 "Risk of Loss" for purposes of this Article 15 is
limited to the responsibility and liability for a
Partial Failure, Total Failure or Total Constructive
Failure (as each such term is as defined in the
applicable Hughes Communications Galaxy
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Launch Insurance Contract or successor contract).
Responsibility and liability for the Spacecraft
prior to intentional ignition is with the
Contractor.
15.2 In the event of damage to or destruction of Hardware when
Contractor shall have risk of loss, Contractor shall repair
or replace (at Contractor's option) said Hardware. The
Buyer shall participate in the decision to repair or
replace said Hardware and the provisions of Article 16
shall apply.
15.3 Insurance Provided By Contractor. The Contractor shall,
---------------------------------
at its own expense, provide and maintain the following
insurance:
15.3.1 "All Risk" Insurance
--------------------
(i) The Policy for "All Risks" insurance shall
insure the Contractor and name Buyer as additional
insured and Loss Payee as their interest may appear.
(ii) The insurance shall cover the Spacecraft while
in or about the Contractor's and subcontractors'
plants, while at other premises which may be used or
operated by the Contractor for construction or
storage purposes, while in transit, or while at the
Designated Launch Site until Intentional Ignition,
or while Spacecraft is stored by the Contractor at
Buyer's direction until Final Acceptance as
specified in Article 9.4.
(iii) Such insurance shall be sufficient to cover
the full replacement value or selling price of the
Spacecraft and may be issued with deductibles, for
which losses shall be borne by the Contractor.
(iv) This "All Risk" insurance shall be in force
from the time of the Effective Date of this Contract
and shall continue in effect until
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Contractor's liabilities have expired at intentional
ignition.
15.3.2 Third Party Liability Insurance
-------------------------------
(i) The Policy(s) for Third Party Liability
insurance shall be written on forms the Buyer may
review and shall include Buyer as additional
insured.
(ii) This Third Party Liability insurance shall be
in force from the time of the Effective Date of this
Contract and shall continue in effect until
Contractor's liabilities have expired at intentional
ignition.
(iii) The Policy(s) may be issued with deductibles,
for which losses shall be borne by the Contractor.
15.4 General Insurance Requirements
------------------------------
(i) The Contractor shall, upon request, provide to
the Buyer certificates of the Insurance Policy(s)
issued by an agent of the Contractor's Insurer(s)
for coverage which the Contractor is required to
provide pursuant to the provisions of these
Articles.
(ii) All Policies of insurance to be provided and
maintained pursuant to these Articles shall require
the insurer(s) or its authorized agent(s) to give
each insured not less than thirty (30) days prior
written notice in the event of cancellation or any
proposed material change in such policies, except
for ten (10) days prior written notice in the event
of cancellation due to non-payment of premium.
(iii) The Contractor may also acquire and maintain,
at its own
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expense, other insurance for amounts and
perils, and upon such terms, conditions and
deductibles as it may deem advisable or necessary to
cover any loss or damage to persons or property that
may occur as a result of the performance of this
Contract.
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ARTICLE 16. SPACECRAFT WARRANTY
16.1 Contractor warrants that a Spacecraft, upon successful
completion of Spacecraft in plant Tests pursuant to Article
9 herein, shall be free from any defects in material or
workmanship and shall conform to the applicable
specifications and drawings, as evidenced by the acceptance
criteria in Exhibits A-D herein.
16.2 This warranty shall start from the date of Preliminary
Acceptance of a Spacecraft as stated in Article 9 herein,
entitled "Inspection and Acceptance," and continue for a
period of [*****], or until the Intentional Ignition
(defined herein as the "Intentional Ignition of any rocket
motor on the first stage of the launch vehicle") of the
applicable launch vehicle, whichever is earlier.
[*********************************************************
********************************] ("Warranty Time Period").
Contractor shall not be liable in Contract or in Tort for
any incidental, special, contingent, or consequential
damages.
16.3 Buyer shall have the right at any time during the Warranty
Time Period to reject any goods not conforming to this
warranty and require that Contractor, at its expense,
correct or replace (at Contractor's option) such goods with
conforming goods. If any time during the Warranty Time
Period Contractor fails to correct or replace such
defective goods and fails to initiate reasonable efforts to
correct or replace such defective goods within a reasonable
period after written notification and authorization from
Buyer, Buyer may then, by contract or otherwise, correct or
replace such defective goods and equitably adjust the
price.
16.4 Except as otherwise expressly agreed upon in this Contract,
Contractor shall have no liability, or responsibility in
Contract or in Tort with respect to a Spacecraft after
Intentional Ignition (as defined in Paragraph 16.2) of the
launch vehicle.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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16.5 THE ABOVE WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING FITNESS FOR PARTICULAR
PURPOSE OR MERCHANTABILITY AND THE REMEDY PROVIDED HEREIN
IS THE SOLE REMEDY FOR FAILURE BY CONTRACTOR TO FURNISH A
SPACECRAFT THAT IS FREE FROM MATERIAL DEFECTS IN MATERIAL
OR WORKMANSHIP AS SET FORTH IN PARAGRAPH 16.1 ABOVE. ALL
OTHER WARRANTIES OR CONDITIONS IMPLIED BY ANY OTHER
STATUTORY ENACTMENT OR RULE OF LAW WHATSOEVER ARE EXPRESSLY
EXCLUDED AND DISCLAIMED. CONTRACTOR AND ITS SUBCONTRACTORS
SHALL HAVE NO LIABILITY IN CONTRACT OR IN TORT (INCLUDING
NEGLIGENCE) OR IN ANY OTHER MANNER WHATSOEVER FOR A
SPACECRAFT AFTER INTENTIONAL IGNITION OTHER THAN AS
EXPRESSLY PROVIDED IN THIS CONTRACT.
16.6 Any limitations on warranties, liability or requests for
indemnification from liability for the malfunction of
delivered items which are imposed upon the Contractor by
its various equipment suppliers shall be passed on directly
to Buyer provided, however, nothing therein shall decrease
or invalidate the rights of the Buyer during, or the length
of, the Warranty Time Period as stated in this Article.
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ARTICLE 17. INDEMNIFICATION
17.1 Each Party shall indemnify and hold the other and/or all
its officers, agents, servants, subsidiaries, affiliates,
parent companies and employees, or any of them, harmless
from any liability or expense in connection herewith on
account of damage to property (excepting other Spacecraft
in flight) and injuries, including death, to all persons
including but not limited to employees of the Parties, and
their subcontractors, and of all other persons performing
any part of the work hereunder, arising from any occurrence
caused by an negligent act or omission of the indemnifying
Party or its subcontractors, or any of them in connection
with the work to be performed by such Party under this
Contract. The indemnifying Party shall have the right, but
not the obligation, to participate in any legal or other
proceedings concerning claims for which it is indemnifying
under this Article 17 and to direct the defense of such
claims. However, with respect to such legal or other
proceedings, the indemnifying Party shall pay all expenses
(including attorneys fees incurred by the indemnified Party
in connection with such legal or other proceedings) and
satisfy all judgments, costs or other awards which may be
incurred by or rendered against the indemnified Party. The
indemnifying Party shall not settle any such claim, legal
or other proceeding without first giving thirty (30) days
prior written notice of the Terms and Conditions of such
settlement and obtaining the consent of the indemnified
Party, which consent shall not be unreasonably withheld or
delayed.
17.2 Notwithstanding the foregoing, neither the Contractor nor
its subcontractors shall have any liability in Contract or
in Tort, for damages to or caused by a Spacecraft after
Intentional Ignition (as defined in Paragraph 16.2), and
Buyer shall obtain waivers of subrogation rights from
Buyer's insurers against Contractor, and affiliates and
subcontractors of Contractor.
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ARTICLE 18. SPACECRAFT NOT LAUNCHED WITHIN SIX MONTHS AFTER ACCEPTANCE
18.1 If a Spacecraft is not launched within six (6) months after
its Preliminary Acceptance per Article 9, entitled
"Inspection and Acceptance," and is subsequently ordered to
be launched within [********] following its Preliminary
Acceptance, it is agreed that such Spacecraft shall be
returned at Contractor's option at Contractor's expense, to
Contractor's facility for inspection and refurbishment. Any
inspection and refurbishment undertaken by Contractor to
meet the requirements of Article 16 entitled, "Spacecraft
Warranty," shall be at Contractor's expense, including
Spacecraft transit insurance.
18.2 If a Spacecraft is not launched within six (6) months after
its Preliminary Acceptance and is subsequently ordered to
be launched later than [********] following its
Preliminary Acceptance, it is agreed that such Spacecraft
shall be returned, at Buyer's expense, to Contractor's
facility for inspection and refurbishment. An equitable
adjustment to Contract price for such inspection and
refurbishment, to include a [***] profit component shall be
negotiated by the Parties unless the fact that the launch
is scheduled for later than [********] is due to
Contractor's negligent acts or omissions.
18.3 If a Spacecraft is returned to Contractor's facility for
inspection and refurbishment per the terms of Paragraph
18.2 above, all charges to return such Spacecraft to the
Launch Site shall be borne by Buyer.
18.4 If a Spacecraft has not been launched within [********]
after its preliminary Acceptance, neither Party shall be
further obligated to the other with respect to such
Spacecraft. Disposition of such Spacecraft shall be at the
option of Buyer with costs of such disposition to be borne
by Buyer.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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ARTICLE 19. PATENT/COPYRIGHT INDEMNITY
19.1 Contractor shall indemnify and hold Buyer harmless against
any liability or expense as a result of claims, actions, or
proceedings against Buyer alleging the infringement of any
trademarks, United States Copyright or mask work, United
States Letters Patent, any other intellectual property
rights, by any article fabricated by Contractor and
delivered to Buyer pursuant to this Contract as set forth
below.
19.2 Contractor agrees to defend at its own expense any claim,
action, proceeding or request for royalty payments or any
claim for equitable relief or damages against Buyer, its
officers, employees, agents, or subsidiaries based on an
allegation that the manufacture of any item under this
Contract or the use, lease, or sale thereof infringes any
United States Letters Patent trademark, United States
Copyright or mask work or any other intellectual property
right, and to pay any royalties and other costs related to
the settlement of such claim, action, proceeding or request
and to pay the costs and damages, including reasonable
attorney's fees finally awarded as the result of any claim,
action or proceeding based on such request, provided that
Contractor is given prompt written notice of such request
or claim by Buyer and given authority and such assistance
and information as is available to Buyer for resisting such
request or for the defense of such claim, action or
proceeding. Any such assistance or information which is
furnished by Buyer at the written request of Contractor is
to be at Contractor's expense.
19.3 In the event that, as a result of any such claim, action,
proceeding or request: a) prior to delivery, the
manufacture of any item is enjoined; or b) after delivery,
the use, lease or sale thereof is enjoined, Contractor
agrees to utilize its best effort to either: (1) negotiate
a license or other agreement with plaintiff so that such
item is no longer infringing; or (2) modify such
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item suitably or substitute a suitable item therefore,
which modified or substituted item is not subject to such
injunction, and to extend the provisions of this Article
thereto. In the event that neither of the foregoing
alternatives is suitably accomplished by Contractor,
Contractor shall be liable to Buyer for Buyer's additional
costs and damages arising as a result of such injunction;
provided however, that in no event shall Contractor's
entire liability under this Article exceed
[***************] for each Spacecraft. The existence of one
or more claims, actions, proceedings or lawsuits shall not
extend such amount.
19.4 The foregoing indemnity shall not apply to any infringement
resulting from a modification or addition, by other than
Contractor, to an item after delivery.
19.5 If the infringement results from the compliance by
Contractor with the Buyer's directed designs,
specifications or instructions, the Buyer will defend or
settle, at its expense, any such suit against the
Contractor.
19.6 The foregoing constitutes the Parties' entire obligation
with respect to claims for infringement.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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ARTICLE 20. RIGHTS IN INVENTIONS
20.1 As used in this Contract, "Program Invention" shall mean
any invention, discovery or improvement conceived of and
first reduced to practice in the performance of Work under
this Contract. Information relating to Inventions shall be
treated as proprietary information in accordance with the
provisions of this Contract. Rights to inventions conceived
solely by Contractor or its employees shall vest completely
with Contractor.
20.2 Contractor shall be the owner of all Program Inventions
invented solely by Contractor. Contractor grants Buyer a
royalty-free, nonexclusive license in Program Inventions to
use Program Inventions solely for the purposes of
maintenance and operation of a Spacecraft and delivered
Equipment. Contractor agrees that it will not revoke such
license if Buyer is in compliance with the terms of the
license.
20.3.1 In the case of joint Inventions, that is, inventions
conceived jointly by one or more employees of both
Parties hereto, each Party shall have an equal,
undivided one-half interest in and to such joint
Inventions, as well as in and to patent applications
and patents thereon in all countries.
20.3.2 In the case of such joint Inventions, Contractor
shall have the first right of election to file
patent applications in any country, and Buyer shall
have a second right of election. Each Party in turn
shall make its election at the earliest practicable
time, and shall notify the other Party of its
decision.
20.3.3 The expenses for preparing, filing and securing each
joint Invention patent application, and for issuance
of the respective patent shall be borne by the Party
which prepares and files the
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application. The other Party shall furnish the
filing Party with all documents or other assistance
that may be necessary for the filing and prosecution
of each application. Where such joint Invention
application for patent is filed by either Party in a
country which requires the payment of taxes,
annuities, maintenance fees or other charges on a
pending application or on an issued patent, the
Party which files the application shall, prior to
filing, request the other Party to indicate whether
it will agree to pay one-half of such taxes,
annuities, maintenance fees or other charges. If
within sixty (60) days of receiving such request,
the non-filing Party fails to assume in writing the
obligation to pay its proportionate share of such
taxes, annuities, maintenance fees or other charges,
or if either Party subsequently fails to continue
such payments within sixty (60) days of demand, it
shall forthwith relinquish to the other Party,
providing that said other Party continues such
payments, its interest in such application and
patent and the Invention disclosed therein, subject,
however, to retention of a paid-up, non-exclusive,
non-assignable license in favor of the relinquishing
Party, its parent, and any subsidiary thereof to
make, use, lease and sell apparatus and/or methods
under said application and patent.
20.4 Each owner of a jointly-owned patent application or patent
resulting therefrom shall, provided that it shall have
fulfilled its obligation, if any, to pay its share of
taxes, annuities, maintenance fees and other charges on
such pending application or patent, have the right to grant
non-exclusive licenses thereunder and to retain any
consideration that it may receive therefor without
obligation to account therefor to the other Party. In
connection therewith, each of the Parties hereby consents
to the granting of such non-exclusive licenses by the other
Party and also agrees not to assert
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any claim with respect to the licensed application or
patent against any licensee of the other Party thereunder
during the term of any such license.
20.5 No sale or lease hereunder shall convey any license by
implication, estoppel or otherwise, under any proprietary
or patent rights of Contractor, to practice any process
with such product or part, or, for the combination of such
product or part with any other product or part.
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ARTICLE 21. INTELLECTUAL PROPERTY RIGHTS
Except as provided in Article 20, neither Party shall acquire any
rights with respect to any patent, trademark, trade secret, or any
other intellectual property developed or used by the other Party in
the performance of this Contract.
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ARTICLE 22. FURNISHED DATA AND INFORMATION, DISCLOSURE AND USE
Proprietary Information shall mean any data and information received
by one Party from the other Party, which is identified as proprietary
in accordance with either of the following methods: (i) if in
writing, it shall be marked by the disclosing Party with an
appropriate proprietary legend, or (ii) if disclosed orally, it shall
be presented by the disclosing Party as Proprietary at the time of
disclosure and shall be confirmed by the disclosing Party as
Proprietary Information in writing within fifteen (15) days of its
initial oral disclosure.
22.1 The receiving Party agrees to protect such data and
information with the same degree of care which the
receiving Party uses to protect its own confidential data
and information;
22.2 The receiving Party shall not disclose or have disclosed to
third Parties, in any manner or form, or otherwise publish
such data and information so long as it remains proprietary
without the explicit authorization of the other Party or
except as otherwise permitted in this Article 22;
22.3 The receiving Party agrees that it shall use such data and
information solely in connection with the performance of
Work under this Contract, unless otherwise explicitly
authorized by or on behalf of the other Party with the
designation of specific data and information and use;
22.4 The foregoing obligations with regard to such data and
information shall exist unless and until such time as:
22.4.1 Such data and information are to the receiving Party
or otherwise publicly available prior to its receipt
by the receiving Party without the default of the
receiving Party; or
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22.4.2 Such data and information have been lawfully
disclosed to the receiving Party by a Third Party
which has the right to disclose such data; or
22.4.3 Such data and information are shown by written
record to have been independently developed by the
receiving Party; or
22.4.4 Such data and information are otherwise available in
the public domain without breach of this Contract by
the receiving Party; or
22.4.5 Such data and information are disclosed by or with
the permission of the disclosing Party to a Third
Party without restriction; or
22.4.6 Such data and information that a Party may be
required by law or government regulation or order to
disclose.
22.4.7 Such data and information are released for
disclosure in writing by or with the permission of
the disclosing Party.
22.5 Providing Buyer shall obtain from the recipient a
nondisclosure agreement at least as restrictive as this
Article 22, Buyer may disclose any proprietary information
on a need to know basis to its customer(s), contractors,
insurers, agents, counsel and actual or prospective
lenders, investors, or successors in interest.
22.6 Any copyrighted material belonging to a Party to this
Contract may be copied by the other Party as necessary to
enable the receiving Party to perform its obligations under
this Contract, provided always that the copyright legend is
retained on the material.
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ARTICLE 23. PUBLIC RELEASE OF INFORMATION
Neither Party shall issue news releases, articles, brochures,
advertisements, prepared speeches, and other information releases
concerning the work performed or to be performed under this Contract
by Contractor or its subcontractors, or any employee or consultant of
either, which contains new information not previously disclosed as
permitted under the Contract, without first obtaining the prior
written approval of the other Party concerning the content and timing
of such release which approval shall not be unreasonably withheld.
The initiating Party shall provide such releases to the other Party
for review within a reasonable time prior to the desired release date
and the other Party shall be required to respond within said time
period.
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ARTICLE 24. TAXES
24.1 The price which shall be paid by Buyer for Spacecraft,
Documentation and Related Services [***************] any
U.S. (federal, state or local) sales or use taxes, or fees
or other U.S. taxes against real or personal property,
however designated, which may be levied or assessed against
Contractor. Buyer shall be responsible for the payment of
all personal property taxes, if any, with regard to goods
which are levied upon subsequent to the date of delivery to
Buyer. Buyer shall be responsible for any inventory taxes,
state taxes or any other taxes that are assessed to
Contractor as a result of storage of a Spacecraft in
accordance with Article 32. If Sea Launch, L. P. is the
Launch Vehicle Provider for any such launch, Contractor
shall be relieved of responsibility for any taxes and/or
port fees associated with the Sea Launch Zenit Vehicle
except as provided by Article 4, Paragraph 4.3.1.2 of the
Contract.
24.2 In the event Contractor in the performance of this Contract
is required to pay non-U.S. customs, import duties,
value-added or sales taxes, commercial card fees, port
fees, harbor maintenance tax, other charges, or taxes, or
fees, (collectively, "Assessments") however designated
(except for (i) any Assessment based on Contractor's income
and (ii) any Assessment incurred as a result of or
associated with Contractor's manufacture of a Spacecraft),
then Buyer will reimburse Contractor for such Assessments
within thirty (30) days of written notification by
Contractor of payment; provided, however that, Contractor
shall used its reasonable best efforts to obtain waivers,
exemptions and/or relief from such Assessments when
practicable, and Buyer shall not be required to pay any
Assessment to the extent any such waiver, exemption or
relief is pending or has been obtained. Notification shall
then be supported by an invoice and attachment(s)
evidencing such payment having been made by Contractor.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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ARTICLE 25. GOVERNING LAW
This Contract shall be deemed made in the State of California and
shall be construed in accordance with the laws of the State of
California.
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ARTICLE 26. TITLES
Titles given to the Articles herein are inserted only for convenience
and are in no way to be construed as part of this Contract or as a
limitation of the scope of the particular article to which the title
refers.
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ARTICLE 27. NOTICES AND AUTHORIZED REPRESENTATIVES
Any notice or request required or desired to be given or made
hereunder shall be in writing and shall be effective if delivered in
person or sent by mail or by facsimile as indicated below:
1. PanAmSat Corporation
One Pickwick Plaza
Greenwich, Connecticut 06830
Attention: Robert Bednarek, Vice President and
Chief Technology Officer
cc: Stephen G. Salem, Senior Counsel
and
cc: Paul McLellan
Brian Sing
PanAmSat Corporation
1500 Hughes Way
Long Beach, CA 90810
Authorized Representative(s): Frederick Landman
President and Chief Executive Officer
2. Hughes Space and Communications Company
Post Office Box 92919, Airport Station
Bldg. S41, M/S A374
Los Angeles, California 90009
Attention: Samuel C. Tricoli, Contracts Manager
cc: Arthur W. Ackerman, Jr., Program Manager
Dr. William L. Ballhaus, Assistant Program Manager
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Authorized Representative(s): Michael Houterman
Vice President
or in each case as a Party may direct by notice to the other Party in
accordance with this Article 27.
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ARTICLE 28. INTEGRATION
This document, with Exhibits, constitutes the entire understanding
between the Parties with respect to the subject matter of this
Contract and supersedes all previous oral and/or written
negotiations, commitments, and understandings of the Parties,
including without limitation the versions of the Galaxy XIII/XIV
Contract dated May 9, 1997 and May 15, 1997.
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ARTICLE 29. CHANGES
Subject to Paragraphs 4.2.1, 5.3, 8.6 and 8.7:
29.1 Any changes requested by Contractor during the performance
of this Contract, within the general scope of this
Contract, which will add or delete work, stop work, affect
the design of a Spacecraft, change the method of shipment
or packing, or the place or time of delivery, or will
affect any other requirement of this Contract, shall be
submitted in writing ("Change Proposal") to Buyer sixty
(60) days prior to the proposed effective date of the
change. If such Contractor requested change causes an
increase or decrease in the total price or other terms of
this Contract, Contractor shall submit a proposal to Buyer
detailing the impact of such change.
29.2 Buyer shall notify Contractor in writing within thirty (30)
days after receipt of the requested change and price
adjustment (downward or upward), if any, whether or not it
agrees with and accepts such Change Proposal. If Buyer
agrees with and accepts the Contractor requested Change
Proposal, Contractor shall proceed with the performance of
the Contract as changed or in the case of a stop work
order, suspend the performance of this Contract, and an
amendment to the Contract reflecting the Change Proposal
shall be incorporated into the Contract. If Buyer does not
agree with the Contractor requested Change Proposal, the
Parties shall attempt to reach agreement on such Change
Proposal. If the Parties are unable to agree on the
requested change and price adjustment, then the Parties
shall proceed with the performance of this Contract, as
unchanged. In the event the Parties are able to reach
agreement on the change, but not on the price adjustment
component, then the Parties shall elevate such dispute to
the Senior Executives of the respective companies for
resolution. If resolution can not be achieved within a
reasonable period of time under the circumstances, Buyer
may make a qualified acceptance of the Change Proposal,
accepting
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all matters other than price adjustment, and the
issue of price adjustment shall be submitted for resolution
by arbitration in accordance with the provisions of
Paragraph 33.2 hereof. Pending such resolution of the price
issue, the Parties shall perform their obligations under
the Contract, or in the case of a Stop work order, suspend
their obligations, as if the Change Proposal had been
accepted; provided, however, that Buyer shall pay any
disputed amount of the price adjustment into an escrow
account in accordance with Paragraph 29.4 hereof on the
date such amount would have been due and payable had the
Change Proposal been accepted, or if the Change Proposal
could result in a downward adjustment in the Contract Price
in excess of the amount remaining to be paid by the Buyer,
Contractor shall deposit the disputed amount of such excess
into an escrow account in accordance with Paragraph 29.4
hereof.
29.3 Buyer may submit to Contractor in writing (a "Change Order
Request") detailing any changes requested by Buyer during
the performance of this Contract, within the general scope
of the Contract, which will add or delete work, stop work ,
affect the design of a Spacecraft, change the method of
shipment or packing, or the place or time of delivery, or
will affect any other requirement of this Contract.
Contractor shall respond to such Change Order Request in
writing to Buyer within thirty (30) days after such
request. If Contractor determines that the change requested
by Buyer is feasible and can be made at no additional cost
and with no associated delays, then Contractor shall so
notify, Buyer and Contractor shall commence implementing
such change. If the Contractor determines otherwise, then,
Contractor shall submit to Buyer, a proposal detailing the
impact of such change and the price adjustment (downward or
upward), if any, (the "Change Order Offer"). Buyer shall
notify Contractor in writing, within thirty (30) days after
receipt of Contractor's Change Order Offer, whether or not
it agrees with and accepts Contractor's Change Order Offer.
If Buyer agrees with and accepts Contractor's Change Order
Offer, Contractor shall immediately proceed with
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the performance of the Contract as changed, or in the case
of a stop work order, suspend the performance of this
Contract, and an amendment to the Contract reflecting such
change shall be incorporated into the Contract. If Buyer
does not agree with the Contractor's Change Order Offer,
the Parties shall attempt to reach agreement on such Change
Order Offer. In the event the Parties are able to reach
agreement on the change, but not on the price adjustment
component, then the Parties shall elevate such dispute to
the Senior Executives of the respective companies for
resolution. If resolution can not be achieved within a
reasonable period of time under the circumstances, Buyer
may make a qualified acceptance of the Change Order Offer,
accepting all matters other than price, and the issue of
price shall be submitted for resolution by arbitration in
accordance with the provisions of Paragraph 33.2 hereof.
Pending such resolution of the price issue, the Parties
shall perform their obligations under the Contract, or in
the case of a Stop work order, suspend their obligations,
as if the Change Order Offer had been accepted; provided
however, that the Buyer shall pay any disputed amount of
the price adjustment into an escrow account in accordance
with Paragraph 29.4 hereof on the date such amount would
have been due and payable had the Change Order Offer been
accepted, or if the Change Order Request could result in a
downward adjustment in the Contract Price in excess of the
amount remaining to be paid by Buyer, Contractor shall
deposit the disputed amount of such excess into an escrow
account in accordance with Paragraph 29.4 hereof. The
dispute shall then be resolved by arbitration under the
provisions of Article 33, entitled "Disputes."
29.4 Escrow Provisions - Disputed Amounts
Disputed amounts with respect to any change under this
Article 29 shall be paid into an interest bearing escrow
account to be established at Bank of America, Concord,
California. Upon settlement of the dispute as to such
payment and alleged breach in accordance with Article 33,
the Party entitled
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to the amount or part thereof in escrow, shall receive such
amount together with all accrued interest thereon and the
other Party shall pay all costs and fees associated with
the escrow of said amount. The placement of disputed
amounts into an escrow account shall not relieve either
Party of its remaining obligations under this contract.
29.5 Determination of Price Adjustment of Change
The Parties agree that the change order price adjustment
(downward or upward) for any change shall be equal to the
sum of (i) the "Change Order Cost" plus (ii) the "Change
Order Profit Component". The "Change Order Cost" shall mean
those additional or reduced recurring and non-recurring
costs to Contractor to implement such change ( or which are
not required to be implemented), as determined in
accordance with Contractor's normal accounting practices,
including those general and administrative costs ("G&A
Costs") of such change, as determined in accordance with
Contractor's normal accounting practices,
[*********************] of Contractor's costs for such
change. The "Change Order Profit Component" shall be equal
to [***********] of the Change Order Cost. The Total Change
Order Cost shall be payable in accordance with the payment
plan agreed by the Parties or, if applicable, by the
Arbitrator. Unless otherwise agreed by the Parties, the
Change Order Profit Component shall be payable in equal
monthly installments at the same time as the monthly
installments of Incentives Obligations; provided, however,
that payment of the Change Order Profit Component shall not
be conditioned upon performance of the Spacecraft or any
component thereof.
29.6 If Contractor makes any improvements to the generic HS-702
Spacecraft design, then Contractor shall provide reports to
Buyer concerning such improvements. Buyer may request that
any improvement to the HS-702 Spacecraft design reported to
Buyer be incorporated into the Spacecraft, and such
improvements shall be considered a Change and shall be
dealt with in
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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accordance with the Change Order process in this Article
29. The foregoing shall not apply to any changes to the
generic HS-702 Spacecraft design, to correct or mitigate
the impact of anomalies with respect to such design, made
by Contractor on its own accord or as necessary in
Contractor's reasonable engineering judgment, which changes
shall not relieve Contractor of its obligations to meet the
technical specifications for the Spacecraft, as set forth
in Exhibit B, hereto. Contractor shall notify Buyer on a
periodic basis or as requested by Buyer from time to time
of any anomalies with respect to such HS-702 Spacecraft
design.
29.7 The Change Order Price shall be allocated and payable as
follows: The Change Order Profit Component shall be an
independent payment obligation not contingent upon
performance of the Spacecraft and shall be payable at the
same time as the monthly installments of the Incentives
Obligations for the Spacecraft as set forth in Paragraph
6.3.4 and, in any case, the then-remaining Change Order
Profit Component for the Spacecraft shall be paid in full
with the last Incentives Obligations Payment. The Total
Change Order Cost shall be payable as agreed by the
Parties.
29.8 To the extent that (i) any change agreed under this Article
29 deletes any Hardware already produced by Contractor,
then the provisions of Paragraphs 14.2 and 14.5 shall apply
to the disposition of such Hardware.
29.9 The Spacecraft shall be designed to support the Launch
Vehicle interface requirements issued by the Launch Vehicle
provider (as to Ariane, Proton and Sea Launch launch
vehicles) existing at the time of the "Delivery Site
Designation Date" as defined in Paragraph 4.2.1. If there
are any changes to such interface requirements thereafter,
then any such change shall be deemed to be a Change Order
Request by Buyer, and the Change Order process set forth in
Section 29.3 shall apply.
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ARTICLE 30. EFFECTS OF STORAGE ON BATTERIES
For Spacecraft batteries to provide the required minimum fifteen (15)
years of in-orbit services per Exhibit B, it is understood that
launch must occur within three (3) years from the date of activation
of the first battery cell. In the event Buyer directs Contractor to
store any deliverable Spacecraft and the period of such storage
causes a launch later than three (3) years from the date of
activation of that Spacecraft's first battery cell, and Buyer upon
its election to either: (i) install replacement batteries or (ii)
recondition batteries, so directs Contractor, Buyer shall pay
Contractor its costs plus a [***] profit rate. In either case (i) or
(ii), the batteries shall meet a fifteen (15) year in-orbit service
requirement.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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ARTICLE 31. INTER-PARTY WAIVER OF LIABILITY
31.1 Prior to the time Buyer and the Contractor enter the Launch
Integration Facility and/or Launch Site, they each agree
that they will not make a claim against each other for an
event that occurs at the Launch Integration Facility and/or
Launch Site premises involving damage to, loss of, or loss
of use of their property or the property of others in their
possession, caused by the fault or negligence of the other
Party to this Contract, or otherwise caused by any defect
in any product manufactured or sold by the other Party to
this Contract. Such claims are waived and each Party will
bear its own losses. Buyer will include a comparable clause
in each of its contracts with vendors, subcontractors or
customers for services or benefits expected as a result of
the launch or orbiting of a Galaxy Spacecraft. Such
comparable clause shall include a requirement to flow the
clause down to lower-tier contractors.
31.2 Notwithstanding any other provisions of this Contract,
prior to the time any Party, associated with the PAS 1R
and/or PAS 9 launch activities at the Launch Integration
Facility and/or Launch Site, shall enter the Launch
Integration Facility and/or Launch Site, such Parties shall
be required to sign an Inter-Party Waiver of Liability
consistent with that between Buyer and the Contractor as
incorporated herein under Paragraph 31.1 of this provision
or other similar agreement as may be required by the launch
agency. Each Party shall have the responsibility to assure
that all the Parties associated with the launch of PAS 1R
and/or PAS 9 Spacecraft (for which they have control or
privity of Contract with hereunder) have executed said
Inter-Party Waiver of Liability.
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ARTICLE 32. SPACECRAFT STORAGE
32.1 Buyer may, at its option, order Contractor to store, in
accordance with the provisions of Exhibit B PAS 1R & PAS 9
Spacecraft Specification, each deliverable Spacecraft
(including separate storage of Batteries, if needed) for a
period of up to two (2) years from the date of their
delivery to Buyer. Buyer shall provide written notice to
the Contractor not later than six (6) months prior to the
scheduled delivery of said Spacecraft. Contractor's price
for providing storage shall be provided to Buyer in
accordance with Article 29, "Changes," (and such price
shall be deemed a "Change Proposal" for purposes of Article
29) within 30 days after receipt of Buyer's notice to store
such Spacecraft and Contractor shall provide storage
facilities. If such storage facilities are unavailable,
Contractor and Buyer shall hold discussions to determine a
mutually agreed storage arrangement.
32.2 Six (6) months prior to a stored Spacecraft's scheduled
launch date, Buyer shall, by notice in writing, order the
Contractor to remove said Spacecraft from storage and ship
it to a Launch Site designated by Buyer. In the case of a
Sea Launch, the cost for storage and additional
transportation costs exceeding that required to transport a
Spacecraft to the Port of Long Beach (Integration Facility)
point specified herein, shall be borne by Buyer. These will
be in addition to any charges which become the obligation
of the Buyer per Article 18 herein entitled "Spacecraft Not
Launched Within Six Months After Acceptance."
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ARTICLE 33. DISPUTES
33.1 Disputes
33.1.1 In the event any dispute arises between the
Contractor and the Buyer relating to this Contract,
either Party may give written notice to the other of
its objections and reasons therefore. The Contractor
and Buyer shall consult in an effort to reach a
mutual agreement to resolve such dispute. In the
event a mutual agreement cannot be reached within
fifteen (15) days after receipt of this notice, the
respective positions of the Parties shall be
forwarded to Contractor and Buyer's respective
Executive Offices for discussions and they shall
attempt to reach a mutual agreement to resolve such
dispute within another fifteen (15) day period.
33.2 Arbitration of Disputes
33.2.1 Grounds for Arbitration and Notice Requirement. Any
----------------------------------------------
dispute, disagreement, controversy or claim arising
out of or relating to this Contract or the
interpretation thereof or any arrangements relating
thereto, or the validity or enforceability thereof,
or contemplated therein or the breach, termination
or invalidity thereof which is not settled to the
mutual satisfaction of the Parties in accordance
with Paragraph 33.1 above, then it shall be settled
exclusively and finally by binding arbitration,
after written notice by either Party. Arbitration of
such disputes in accordance with this Article 33
shall be the Parties' exclusive remedy.
33.2.2 Administration and Rules. Arbitration proceedings in
------------------------
connection with the Contract shall be administered
by the American Arbitration Association in
accordance with its then in effect
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Commercial Arbitration Rules, together with any
relevant supplemental rules including but not
limited to its Supplementary Procedures for Large,
Complex Disputes, as modified by the terms and
conditions of the Contract. With respect to the
selection of arbitrators, arbitration proceedings in
connection with this Contract shall be conducted
before a panel of three (3) arbitrators. Within
fifteen (15) days after the commencement of
arbitration, each Party shall select from a list of
qualified persons one person to serve as an
arbitrator on the panel, and within ten (10) days of
their selection, the two arbitrators shall select a
third arbitrator who is listed as an active member
of the American Arbitration Association at the time
that arbitration proceedings commence. If the two
arbitrators selected by the respective Parties are
unable or fail to agree upon the third arbitrator in
the allotted time, then the third arbitrator shall
be selected by the American Arbitration Association.
33.2.3 Place of Arbitration. The place of arbitration shall
--------------------
be in Los Angeles, California, U.S.A.
33.2.4 Discovery. The arbitrators shall have the discretion
---------
to order a pre-hearing exchange of information by
the Parties, including without limitation,
production of requested documents, exchange of
summaries of testimony of proposed witnesses, and
examination by deposition of the Parties.
33.2.5 Award and Judgment. The arbitrators shall have no
-------------------
authority to award punitive damages, and may not, in
any event, make any ruling, finding or award that
does not conform to the terms and conditions of this
Contract. Subject to the foregoing, the Parties
agree that the judgment of the arbitrators shall be
final and binding upon the Parties and that the
judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction
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thereof.
33.2.6 Confidentiality. No Party or arbitrator may disclose
the existence, content, or results of any
arbitration proceedings in connections with this
Contract without prior written consent of all
Parties to the arbitration proceeding.
33.2.7 Fee and Expenses. All fees and expenses of any
arbitration proceedings in connection with this
Contract shall be borne by the losing Party.
However, each Party shall bear the expense of its
own counsel, experts, witnesses, and preparation and
presentation of evidence.
33.2.8 Performance. Contractor and Buyer shall continue
with performance under this Contract during any
disagreement, negotiation, or arbitration.
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ARTICLE 34. ASSIGNMENT
34.1 Neither Party shall assign, or transfer this Contract or
any of its rights, duties or obligations thereunder to any
person or entity, in whole or part without the prior
written consent of the other Party except that either Party
may assign or transfer any of its rights, duties or
obligations under this Contract, either in whole or in
part, to its parent company, subsidiary or affiliate./1/ In
addition, notwithstanding anything in this Article 34 to
the contrary, the consent of Contractor shall not be
required for, and Paragraph 34.2 shall not apply to any
assignment by Buyer of its rights, duties and/or
obligations hereunder as security for any indebtedness of
Buyer or its subsidiaries or affiliates.
Neither Party shall unreasonably withhold consent to any
assignment or transfer providing that the requesting Party
can demonstrate to the other Party's satisfaction that:
(1) its successor or assignee possesses the financial
resources to fulfill the obligations of this
Contract; and
(2) any such assignment or transfer shall not jeopardize
any data rights or competitive position, or violate
laws related to export or technology transfer, or
otherwise increase the other Party's risks or
obligations.
If the requesting Party cannot so demonstrate, both Parties
agree to negotiate in good faith suitable modifications and
new provisions to this Contract which would mitigate the
above risks and/or bring this Contract into conformance
with applicable laws.
/1/ Affiliate: An "affiliate" of, or a person "affiliated" with, a
specified person, is a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is
under common control with, the person specified.
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34.2 The Parties agree that in the event that the ownership or
control of Buyer or Contractor is changed, the Parties
reserve the right to negotiate in good faith suitable
modifications and new provisions to this Contract which
would mitigate any additional risks, financial or
otherwise, which may be brought about by such change in
ownership or control.
34.3 This Contract shall be binding upon the Parties hereto and
their successors and permitted assigns.
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ARTICLE 35. LIMITATION OF LIABILITY
35.1 The Parties to this Contract expressly recognize that
commercial space ventures involve substantial risks and
recognize the commercial need to define, apportion and
limit contractually such risks associated with this
commercial space venture. The payments and other remedies
expressly set forth in this Contract fully reflect the
Parties' negotiations, intentions and bargained-for
allocation of such risks associated with commercial space
ventures.
35.2 In no event shall the Parties be liable for any direct,
indirect, incidental, special, contingent or consequential
damages (including, but not limited to, lost revenues or
profits), except as expressly provided for in this
Contract. This Article shall survive the expiration or
termination of this Contract for whatever cause.
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ARTICLE 36. OPTIONS
36.1 Buyer may, in its sole discretion, exercise on or before 30
June 1998, the Option provisions of this Contract to
request Contractor to deliver to Buyer up to two (2)
additional Spacecraft, hereinafter referred to as PAS 10
and 11. Upon exercise of this Option, Buyer shall make the
first payment of [***] for each Spacecraft ordered. The
configuration and performance of PAS 10 and 11 shall be
"Substantially Similar" to PAS 1R and PAS 9, respectively.
For purposes of this Paragraph 36.1, a satellite shall be
deemed "Substantially Similar" to another satellite if the
total payload power and the size and number of antennae are
the same; provided that the RF amplifier power, antenna
coverage patterns and frequencies in the same band(s)
orbital range and associated technical parameters may be
different; provided, further, that any other change may be
made pursuant to Article 29, entitled "Changes."
36.2 The Contract Price for PAS 10 is [*********************]
The Contract Price for PAS 11 is [***********************]
Payment schedules for PAS 10 and PAS 11 are attached hereto
as Exhibit G.
36.3 Delivery to the Launch Site Integration Facility and/or
Launch Site will be as required to meet the established
Launch Schedule (consistent with the PAS 1R and PAS 9
delivery schedule span).
36.4 The PAS 10 and 11 Option prices provide for the following:
----------------------------------------------------------
(a) Up to two spacecraft substantially similar to PAS 1R
and 9 in configuration and performance
(b) Documentation
(c) Program Management
(d) Insurance up to the Intentional Ignition of Launch
Vehicle
(e) Launch and Mission Operations Services (Baselined
with a Sea Launch Vehicle)
[***] Filed separately with the Commission pursuant to a request for
onfidential treatment.
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("Related Services"). The price of each Optional
Spacecraft includes [********] for launch and
mission support services for launch on a Sea Launch
launch vehicle; if Buyer designates an Ariane or
Proton launch vehicle for a spacecraft, the price of
such spacecraft shall be increased by no more than
(i) [********] in the event of an Ariane launch
vehicle or (ii) [********] in the event of a Proton
launch vehicle, to account for launch and mission
support services.
(f) Storage for a Spacecraft on similar terms as PAS 1R
and PAS 9
(g) The terms of PAS 10 and/or 11 are pursuant to the
terms of this Contract
36.5 In the event that exercise of this Option does not occur on
or prior to the date stated in Paragraph 36.1, this Option
shall expire unless (i) the Parties otherwise agree or (ii)
this Option is superseded by a definitive Spacecraft
Acquisition Contract.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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ARTICLE 37. REPLACEMENT SPACECRAFT
Buyer shall have the right to purchase Replacement Spacecraft for one
or both of PAS 1R or PAS 9 in the event that one or both of these
Spacecraft suffers a launch failure (including any total or
constructive total loss that occurs prior to the placement of a
Spacecraft into commercial operations). Each Replacement Spacecraft
shall have the same configuration and performance of the Spacecraft
being replaced. The price for each such Replacement Spacecraft, if
ordered, shall be: (i) [***********************] for the PAS 1R
Replacement Spacecraft and (ii) [***********************] for the PAS
9 Replacement Spacecraft. Such prices include all associated
deliverables and services as specified in this Contract.
Notwithstanding the preceding sentence, each such prices includes
[*******] for launch and mission support services for launch on a Sea
Launch launch vehicle; if Buyer designates an Ariane or Proton launch
vehicle for a spacecraft, the price of such spacecraft shall be
increased by no more than (i) [*********] in the event of an Ariane
launch vehicle or (ii) [**********] in the event of a Proton launch
vehicle, to account for launch and mission support services. Except
as expressly specified in this Article, the terms and conditions of
this Contract shall apply in context to any Replacement Spacecraft
that is ordered under this Article.
A Replacement Spacecraft may be ordered at any time through ninety
(90) days after the launch of the applicable Spacecraft. Unless long
lead items are purchased, as provided below, the Spacecraft shall be
constructed and all associated deliverable provided to support a
launch within eighteen (18) months of the day ordered.
Buyer shall also have the option to require Contractor to purchase
long lead items sufficient to enable Contractor to have Replacement
Spacecraft, which could be configured as either PAS 1R or PAS 9 (to
be specified by Buyer if and when Buyer
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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orders the Spacecraft to be completed) and shall be ready to be
launched with the later of eighteen (18) months after a long lead
option is exercised or twelve (12) months after the go ahead is given
by Buyer to complete construction of the Spacecraft. The price for
the long lead items shall be [***********************], of which
[********] is attributable to the Replacement Spacecraft for PAS 1R
and an additional [**********] attributable to the Replacement
Spacecraft for PAS 9. The remaining portion of such Replacement
Spacecraft's Contract Price shall be payable if (and only if) such
Replacement Spacecraft is ordered by Buyer to be completed.
Payment schedules for the eighteen (18) months without long lead
items and long lead item and completion payment options are attached
hereto as Exhibit H.
If Buyer has purchased long lead items, within ninety (90) days of
the successful launch of both PAS 1R and PAS 9, Buyer shall direct
disposition of such long lead items either: (a) to build an identical
Spacecraft (at the same price and schedule as a twelve-month
Replacement Spacecraft); or (b) direct the disposition of such long
lead items pursuant to Paragraphs 14.2 and 14.5.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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ARTICLE 38. LIQUIDATED DAMAGES FOR LATE SHIPMENT
38.1 In the event that the shipment of PAS IR is delayed due to
the fault of Contractor (and/or Contractor's subcontractors
or suppliers) and not shipped on or before the PAS IR
Shipment Date identified under Article 4 (as such date may
be adjusted by mutual agreement of the Parties), Contractor
shall pay to Buyer liquidated damages as follows:
38.1.1 For [**********] of delay, Contractor shall
[****************]
38.1.2 For [************] of delay, Contractor shall [************
*************************]
38.1.3 For [***********] of delay, Contractor shall [*************
***************************]
38.1.4 For [*************] of delay, Contractor shall
[************* **************************************] and
38.1.5 For [************] of delay, Contractor shall
[***************************************************]
38.1.6 In the event of any delay of a partial month, the amounts
specified in Paragraphs [*****************************]
shall be pro rated on a day-for-day manner based upon the
number of days in such month.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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38.2 In the event that the shipment of PAS 9 is delayed due to
the fault of Contractor (and/or Contractor's subcontractors
or suppliers) and not shipped on or before the PAS 9
Shipment Date identified under Article 4 (as such date may
be adjusted by mutual agreement of the Parties), Contractor
shall pay to Buyer liquidated damages as follows:
38.2.1 For [****************************] of delay,
Contractor shall [****************************]
38.2.2 For [****************************] of delay,
commencing on the day after the period specified in
Paragraph 38.2.1, Contractor shall
[*************************************************
********************************]
38.2.3 In the event of any delay of a partial one-month
period, the amounts specified in Paragraph [******]
shall be pro rated on a day-for-day manner based
upon the number of days in such one-month period.
38.3 In addition, in the event that Contractor does not begin
[**************************************] on or before the
date (the "Test Date") that is [***************] prior to
the then-existing Shipment Date, Contractor shall pay to
Buyer liquidated damages in the amount of
[*********************************] for each day that such
testing is delayed past the Test Date, up to a maximum of
[************************] In the event that (i) Contractor
pays to Buyer liquidated damages under this Paragraph 38.3
with respect to a Spacecraft and (ii) Contractor then
completes construction and testing of such Spacecraft in
accordance with this Contract and the Exhibits thereto and
ships the Spacecraft on or before the applicable Shipment
Date, then Buyer shall refund to Contractor the liquidated
damages paid for such Spacecraft.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
96
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38.4 Contractor shall pay to Buyer the liquidated damages owed
pursuant to Paragraphs 38.1, 38.2 and 38.3 within thirty
(30) days of invoice from Buyer.
38.5 The Parties understand and agree that the liquidated
damages provided under this Article 38 shall be in lieu of
all other remedies of any kind except for Buyer's rights
and remedies under Articles 11 and 14. The reduction in
Contract Price shall constitute liquidated damages for such
late shipment and shall not constitute a penalty. The
Parties acknowledge and agree that such liquidated damages
are believed to represent a genuine estimate of the losses
that would be suffered by reason of any such delay (which
losses would be difficult or impossible to calculate with
certainty).
38.6 The Parties agree that the provisions of this Article 38
shall apply separately to each Spacecraft. The maximum
reduction in Contract Price under this Article 38 may equal
but shall not exceed
[**************************************] per Spacecraft.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
97
<PAGE>
ARTICLE 39. EFFECTIVE DATE OF CONTRACT
The "Effective Date" of this Amended and Restated Contract No. 97-HCG-001
shall be 15, August 1997.
98
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Amended and Restated
Contract No. 97-HCG-001 to become effective upon the date specified in Article
39, herein entitled, "Effective Date of Contract."
HUGHES SPACE & COMMUNICATIONS COMPANY
SIGNATURE: G.W. Durling
NAME: G.W. (Bill) Durling
TITLE: CBD Ops. Mgr. For President
DATE: 9 October 1997
PANAMSAT CORPORATION
SIGNATURE: Frederick A. Landman
NAME: Frederick A. Landman
TITLE: President and Chief Executive Officer
DATE: 9 October 1997
99
<PAGE>
EXHIBIT 10.41.2
Schedule identifying substantially identical agreements by PanAmSat Corporation
("PanAmSat") in favor of each of the following persons, to the form of Indemnity
Agreement constituting Exhibit 10.41.1 to the Annual Report on Form 10-K of
PanAmSat for the Fiscal Year ended December 31, 1997
- --------------------------------------------------------------------------------
Name
----
Charles H. Noski
Frederick A. Landman
Patrick J. Costello
Steven D. Dorfman
John J. Higgins
Ted G. Westerman
Dennis F. Hightower
James M. Hoak
Joseph R. Wright, Jr.
Michael T. Smith
Lourdes Saralegui
Carl A. Brown
Kenneth N. Heintz
Robert A. Bednarek
James W. Cuminale
David P. Berman
<PAGE>
EXHIBIT 10.42
EXECUTION
COUNTERPART
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
$500,000,000
dated as of February 20, 1998
among
PANAMSAT CORPORATION
as Borrower
CERTAIN LENDERS
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Co-Documentation Agents
THE CHASE MANHATTAN BANK
CREDIT SUISSE FIRST BOSTON
THE FIRST NATIONAL BANK OF CHICAGO
NATIONSBANK OF TEXAS, N.A.
as Co-Agents
and
CITICORP USA, INC.
as Administrative Agent
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
----
ARTICLE I
Section 1.01. Certain Defined Terms................................1
Section 1.02. Computation of Time Periods.........................19
Section 1.03. Accounting Terms....................................19
ARTICLE II
Section 2.01. The Advances........................................20
Section 2.02. Making the Advances.................................20
Section 2.03. Repayment...........................................22
Section 2.04. Termination or Reduction of the
Commitments...................................................22
Section 2.05. Prepayments, Etc....................................23
Section 2.06. Interest............................................23
Section 2.07. Fees................................................24
Section 2.08. Conversion and Continuation of Advances.............24
Section 2.09. Increased Costs, Illegality, Etc....................26
Section 2.10. Payments and Computations...........................28
Section 2.11. Taxes...............................................30
Section 2.12. Sharing of Payments, Etc............................33
Section 2.13. Use of Proceeds.....................................33
ARTICLE III
Section 3.01. Effective Date......................................33
Section 3.02. Conditions Precedent to Each Borrowing..............35
Section 3.03. Existing Credit Agreement...........................35
ARTICLE IV
Section 4.01. Representations and Warranties of the Borrower......36
ARTICLE V
Section 5.01. Affirmative Covenants...............................39
Section 5.02. Negative Covenants..................................41
Section 5.03. Reporting Requirements..............................43
Section 5.04. Financial Covenants.................................44
ARTICLE VI
Section 6.01. Events of Default...................................45
(i)
<PAGE>
ARTICLE VII
Section 7.01. Authorization and Action............................48
Section 7.02. Administrative Agent's Reliance, Etc................48
Section 7.03. CUSA and Affiliates.................................49
Section 7.04. Lender Credit Decision..............................49
Section 7.05. Indemnification.....................................49
Section 7.06. Successor Administrative Agent......................50
ARTICLE VIII
Section 8.01. Amendments, Consents, Etc...........................51
Section 8.02. Notices, Etc........................................51
Section 8.03. No Waiver; Remedies.................................52
Section 8.04. Costs, Expenses and Indemnification.................53
Section 8.05. Right of Setoff.....................................54
Section 8.06. Governing Law; Submission to Jurisdiction...........55
Section 8.07. Assignments and Participations......................55
Section 8.08. Execution in Counterparts...........................59
Section 8.09. WAIVER OF JURY TRIAL................................59
Section 8.10. Survival............................................59
Section 8.11. Captions............................................59
Section 8.12. Successors and Assigns..............................59
(ii)
<PAGE>
SCHEDULES
---------
SCHEDULE 4.01(b) Subsidiaries
SCHEDULE 4.01(g) Litigation
SCHEDULE 4.01(m) Existing Debt
EXHIBITS
--------
EXHIBIT A Form of Note
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C Form of Assignment and Acceptance
EXHIBIT D Form of Compliance Certificate
EXHIBIT E Form of Subordination and Amendment
Agreement
EXHIBIT F Form of Opinion of General Counsel of the
Borrower
EXHIBIT G Form of Opinion of Special New York Counsel to the
Borrower
EXHIBIT H Form of Opinion of Assistant General Counsel of
Hughes Electronics
EXHIBIT I Form of Opinion of Special New York Counsel to the
Administrative Agent
(iii)
<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT dated as of February 20, 1998 among PANAMSAT
CORPORATION, a Delaware corporation (the "Borrower"); each of the lenders (the
--------
"Initial Lenders") listed on the signature pages hereof and each other Person
- ----------------
that shall become a party hereto as a Lender pursuant to Section 8.07
(collectively with the Initial Lenders, the "Lenders"); BANK OF AMERICA NATIONAL
-------
TRUST AND SAVINGS ASSOCIATION and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Co-Documentation Agents (each, the "Co-Documentation Agents"); and CITICORP USA,
-----------------------
INC., as administrative agent (together with its successors in such capacity,
the "Administrative Agent").
--------------------
The Borrower has requested the Lenders to provide financing for the
general corporate purposes of the Borrower, and the Lenders are willing to
provide such financing on and subject to the terms and conditions hereof.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Administrative Agent" has the meaning specified in the recital of
--------------------
parties to this Agreement.
"Administrative Agent's Account" means the account of the
------------------------------
Administrative Agent maintained by the Administrative Agent at Citibank,
Account No. 36852248, Attention: Brian Maxwell or such other account
maintained by the Administrative Agent as may be designated by the
Administrative Agent in a written notice to the Lenders and the Borrower.
"Advances" means, collectively, the Advances provided for in Section
--------
2.01.
"Affiliate" means, as to any Person, any other Person that, directly
---------
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
------- -----------
Credit Agreement
----------------
<PAGE>
-2-
"controlled by" and "under common control with") of a Person means the
-------------- -------------------------
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of Voting Stock, by contract or otherwise.
"Applicable Debt Ratings" means, on any Rating Availability Date, the
-----------------------
Borrower Debt Ratings then in effect; provided that if the Borrower Debt
--------
Ratings shall fall within different Rating Levels, the Applicable Debt
Rating shall be the Borrower Debt Rating that falls in the higher Rating
Level; provided, that if the Borrower Debt Ratings shall be two or more
--------
Rating Levels apart, the Applicable Debt Rating shall be the Rating Level
that is one Rating Level higher than the Rating Level in which the lower
Borrower Debt Rating falls; and provided, further, that if Moody's shall
-------- -------
cease to provide a Borrower Debt Rating, the Implied Rating shall be
applied to determine the Borrower Debt Rating; and provided, further, that
-------- -------
if and for so long as neither Moody's nor S&P provides a Borrower Debt
Rating, Rating Level 5 shall be deemed to apply. For purposes of this
definition, "Implied Rating" means the long-term senior unsecured non-
--------------
credit-enhanced debt rating which is one sub-grade below the rating
assigned by Moody's to the senior secured debt securities of the Borrower.
"Applicable Facility Fee Percentage" means, on any Rating Availability
----------------------------------
Date, the percentage set forth below opposite the Rating Level with respect
to which the Applicable Margin is determined on such date:
RATING LEVEL APPLICABLE FACILITY FEE PERCENTAGE
(PER ANNUM)
- --------------------------------------------------------------------
Rating Level 1 0.085%
- --------------------------------------------------------------------
Rating Level 2 0.100%
- --------------------------------------------------------------------
Rating Level 3 0.125%
- --------------------------------------------------------------------
Rating Level 4 0.150%
- --------------------------------------------------------------------
Rating Level 5 0.175%
- --------------------------------------------------------------------
"Applicable Lending Office" means, with respect to each Lender, such
-------------------------
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"Applicable Margin" means, on any Rating Availability Date, the
-----------------
applicable percentage set forth below under the heading "Base Rate Margin"
or "Eurodollar Rate Margin", as applicable, based upon the Applicable Debt
Rating in effect
Credit Agreement
----------------
<PAGE>
-3-
on such date:
APPLICABLE DEBT Base Rate Margin Eurodollar Rate
RATING ----------------- -----------------
S&P/MOODY'S Margin
--------
- ------------------------------------------------------------------
Rating Level 1
- ---------------
0% 0.265%
A-/A3 or higher
- ------------------------------------------------------------------
Rating Level 2
- ---------------
0% 0.300%
BBB+/Baa1 or higher
but below Rating Level 1
- ------------------------------------------------------------------
Rating Level 3
- --------------
0% 0.325%
BBB/Baa2 or higher
but below Rating Level 2
- ------------------------------------------------------------------
Rating Level 4
- --------------
0% 0.400%
BBB-/Baa3 or higher
but below Rating
Level 3
- ------------------------------------------------------------------
Rating Level 5
- --------------
0% 0.575%
Below Rating
Level 4 or unrated
==================================================================
"Approved Lender Affiliate" means, as to any Lender, a Person that is
-------------------------
an Affiliate of such Lender or of a Person of which such Lender is an
Affiliate, and which is engaged primarily in the business of lending or, if
not so engaged, which has been approved by the Administrative Agent and the
Borrower (the Borrower's consent not to be unreasonably withheld).
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an Eligible Assignee, accepted by the Administrative
Agent, in accordance with Section 8.07, in substantially the form of
Exhibit C.
"Base Rate" means a fluctuating interest rate per annum in effect from
---------
time to time, which rate per annum shall at all times be equal to the
highest of:
(a) the rate of interest announced publicly by Citibank in New
York, New York, from time to time, as
Credit Agreement
----------------
<PAGE>
-4-
Citibank's "base rate";
(b) 1/2 of 1% per annum above the Federal Funds Rate; and
(c) the sum (adjusted to the nearest 1/16 of 1% or, if there is
no nearest 1/16 of 1%, to the next higher 1/16 of 1%) of (i) 1/2 of 1%
per annum plus (ii) the rate obtained by dividing (x) the latest
----
three-week moving average of secondary market morning offering rates
in the United States for three-month certificates of deposit of major
United States money center banks, such three-week moving average
(adjusted to the basis of a year of 360 days) being determined weekly
on each Monday (or, if such date is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by Citibank on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal Reserve
Bank of New York or, if such publication shall be suspended or
terminated, on the basis of quotations for such rates received by
Citibank from three New York certificate of deposit dealers of
recognized standing selected by Citibank by (y) a percentage equal to
100% minus the average of the daily percentages specified during such
-----
three-week period by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve
requirement (including, but not limited to, any emergency,
supplemental or other marginal reserve requirement) for Citibank with
respect to liabilities consisting of or including (among other
liabilities) three-month U.S. Dollar non-personal time deposits in the
United States plus (iii) the average during such three-week period of
----
the annual assessment rates estimated by Citibank for determining the
then current annual assessment rate payable by Citibank to the Federal
Deposit Insurance Corporation (or any successor) for insuring U.S.
Dollar deposits of Citibank in the United States.
Each change in any interest rate provided for herein based upon the Base
Rate resulting from a change in the Base Rate shall take effect at the time
of such change in the Base Rate.
"Base Rate Advance" means an Advance that bears interest as provided
-----------------
in Section 2.06(a)(i).
"Borrower" has the meaning specified in the recital of parties to this
--------
Agreement.
Credit Agreement
----------------
<PAGE>
-5-
"Borrower Debt Rating" for a Rating Agency at any time means the
--------------------
rating, if any, issued by such Rating Agency and then in effect with
respect to public long-term senior unsecured debt securities, or if
unavailable, to other indebtedness of the Borrower ("Rated Debt"). Each
----------
change by a Rating Agency of its rating of Rated Debt shall be effective
for purposes hereof as of the date on which such change is first announced
publicly by such Rating Agency.
"Borrower's Account" means the account of the Borrower maintained with
------------------
Citibank at its office at 399 Park Avenue, New York, New York 10043,
Account No. 40730083, or such other account maintained by the Borrower with
Citibank as may be designated by the Borrower in a written notice to the
Administrative Agent.
"Borrowing" means a borrowing consisting of simultaneous Advances of
---------
the same Type made by each of the Lenders pursuant to Section 2.01.
"Business Day" means a day on which banks are not required or
------------
authorized to close in New York City and, if such Business Day relates to a
Eurodollar Rate Advance, on which dealings are carried on in the London
interbank market.
"Capital Lease Obligations" means, for any Person, all obligations of
-------------------------
such Person to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) property to the extent such
obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP, and, for purposes of
this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act of 1980, as amended.
"Change in Control" means that Hughes Electronics shall cease to own,
-----------------
beneficially and of record, directly or indirectly, at least 51% of the
shares of outstanding Voting Stock of the Borrower.
"Citibank" means Citibank, N.A., a national banking association.
--------
"Commercial Paper" means short term commercial paper (with a maturity
----------------
date not in excess of 270 days from the date of its issuance) issued by the
Borrower (a) pursuant to the exemption from registration contained in
Section 4(2) of
Credit Agreement
----------------
<PAGE>
-6-
the Securities Act of 1933, as amended or modified from
time to time, or (b) pursuant to the exemption from registration contained
in Section 3(a)(3) of the Securities Act of 1933, as amended or modified
from time to time.
"Commitment" means, as to any Initial Lender, the amount set forth
----------
opposite its name on the signature pages hereof or, as to any Lender that
has entered into an Assignment and Acceptance, the amount set forth for
such Lender in the Register, in each case as the same may be reduced
pursuant to Section 2.04 or increased or reduced pursuant to assignments
effected in accordance with Section 8.07. The original aggregate amount of
the Commitments is $500,000,000.
"Commitment Termination Date" means the earlier of (i) December 24,
---------------------------
2002 (or, if such date is not a Business Day, the immediately preceding Business
Day) and (ii) the date of termination or cancellation of the Commitments
pursuant to the terms of this Agreement.
"Consolidated" refers to the consolidation of accounts in accordance
------------
with GAAP.
"Continuation", "Continue" and "Continued" each refers to a
------------ -------- ---------
continuation of Eurodollar Rate Advances from one Interest Period to the
next Interest Period pursuant to Section 2.08.
"Conversion", "Convert" and "Converted" each refers to a conversion of
---------- ------- ---------
Advances of one Type into Advances of the other Type pursuant to Section
2.08 or 2.09.
"CUSA" means Citicorp USA, Inc.
----
"Debt" of any Person, means (i) all indebtedness of such Person for
----
borrowed money, (ii) that portion of obligations with respect to Capital
Lease Obligations that is properly classified as a liability on a balance
sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations
for borrowed money, (iv) any obligation owed for all or any part of the
deferred purchase price of property or services (excluding any such
obligations incurred under ERISA), which purchase price is (a) due more
than six months from the date of incurrence of the obligations in respect
thereof or (b) evidenced by a note or similar written instrument, (v) any
direct or indirect liability, contingent or otherwise, of such Person (the
"obligor") with respect to the obligor's reimbursement obligations to any
other Person who has provided assurance to the obligee of the obligor's
primary obligation that such
Credit Agreement
----------------
<PAGE>
-7-
primary obligation will be paid or discharged, and any direct or indirect
guarantee by such Person of Debt of any other Person, and (vi) all Debt
described in clauses (i) through (v) above secured by any Lien on any
property or asset owned or held by such Person regardless of whether the
Debt secured thereby shall have been assumed by such Person or is
nonrecourse to the credit of such Person.
"Default" means any Event of Default and any event that would
-------
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"Domestic Lending Office" means, with respect to any Lender, the
-----------------------
office of such Lender specified as its "Domestic Lending Office" below its
name on the signature pages hereof or in the Assignment and Acceptance
pursuant to which it became a Lender, or such other office of such Lender
as such Lender may from time to time specify to the Administrative Agent.
"EBITDA" means, for purposes of this Agreement, the sum of (a) net
------
income (or net loss) plus (b) Interest Expense, (c) income tax expense and
----
(d) depreciation expense, amortization expense and other non-cash charges
deducted in arriving at such net income (or loss), including extraordinary
non-cash items which are not reasonably expected to result in a cash
outflow within one year, determined in accordance with GAAP for the
Borrower and its Subsidiaries on a Consolidated basis, for any period.
Anything contained herein to the contrary notwithstanding, for purposes of
determining the Leverage Ratio under Section 5.04(a) and the Interest
Coverage Ratio under Section 5.04(b), EBITDA for the Borrower and its
Subsidiaries for each of the fiscal quarters referred to below shall be
deemed to be the amount set forth opposite the reference to such fiscal
quarter (regardless of the actual amount of such EBITDA for any such fiscal
quarter):
Fiscal Quarter Ending EBITDA
------------------------------ ------------
March 31, 1997 $138,400,000
June 30, 1997 $136,100,000
September 30, 1997 $121,400,000
"Effective Date" has the meaning specified in Section 3.01.
--------------
"Eligible Assignee" means (a) a Lender and any Approved Lender
-----------------
Affiliate; (b) a commercial bank organized under the laws of the United
States, or any State thereof, and having total assets in excess of
$1,000,000,000; (c) a savings bank
Credit Agreement
----------------
<PAGE>
-8-
organized under the laws of the United States, or any state thereof, and
having a net worth in excess of $100,000,000; (d) a commercial bank
organized under the laws of any other country that is a member of the OECD
or that has concluded special lending arrangements with the International
Monetary Fund associated with its General Arrangements to Borrow, or a
political subdivision of any such country, and having total assets in
excess of $1,000,000,000; (e) the central bank of any country that is a
member of the OECD; (f) a finance company, insurance company or other
financial institution or fund (whether a corporation, partnership, trust or
other entity) that is engaged in making, purchasing or otherwise investing
in commercial loans in the ordinary course of its business, and having
total assets in excess of $100,000,000; and (g) any other Person (other
than the Borrower or an Affiliate of the Borrower) approved by the
Administrative Agent and the Borrower, such approval of the Borrower not to
be unreasonably withheld or delayed.
"Environmental Law" means any Federal, state, local or foreign
-----------------
governmental law, rule, regulation, order, writ, judgment, injunction or
decree relating to pollution or protection of the environment or the
treatment, storage, disposal, release, threatened release or handling of
Hazardous Materials, including, without limitation, CERCLA, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act,
the Clean Water Act, the Toxic Substances Control Act, the Clean Air Act,
the Safe Drinking Water Act, the Atomic Energy Act, the Federal
Insecticide, Fungicide and Rodenticide Act and the Occupational Safety and
Health Act, in each case as amended from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA Affiliate" of any Person means any other Person that for
---------------
purposes of Title IV of ERISA is a member of such Person's controlled
group, or under common control with such Person, within the meaning of
Sections 414(b), (c), (m) and (o) of the Internal Revenue Code.
"Eurocurrency Liabilities" has the meaning specified in Regulation D.
------------------------
"Eurodollar Lending Office" means, with respect to any Lender, the
-------------------------
office of such Lender specified as its "Eurodollar Lending Office" below
its name on the signature pages hereof or in the Assignment and Acceptance
pursuant to which it became a Lender (or, if no such office is specified,
its Domestic Lending Office), or such other office of such Lender as such
Lender may from time to time
Credit Agreement
----------------
<PAGE>
-9-
specify to the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for each Eurodollar
---------------
Rate Advance comprising part of the same Borrowing, an interest rate per
annum equal to the average (rounded upward to the nearest whole multiple of
1/100 of 1% per annum, if such average is not such a multiple) of the rates
per annum at which deposits in U.S. Dollars are offered by the principal
office of each of the Reference Banks in London, England to prime banks in
the London interbank market at approximately 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an amount
substantially equal to such Reference Bank's Eurodollar Rate Advance (or,
in the case of Citibank, an amount substantially equal to CUSA's Eurodollar
Rate Advance) comprising part of such Borrowing (determined without giving
effect to any assignments by such Reference Bank or CUSA, as the case may
be) and for a period equal to such Interest Period. The Eurodollar Rate
for each Interest Period for each Eurodollar Rate Advance comprising part
of the same Borrowing shall be determined by the Administrative Agent on
the basis of applicable rates furnished to and received by the
Administrative Agent from the Reference Banks two Business Days before the
first day of such Interest Period, subject, however, to the provisions of
------- -------
Sections 2.10 (c), 2.09 (c) and 2.09(d).
"Eurodollar Rate Advance" means an Advance that bears interest as
-----------------------
provided in Section 2.06(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for each
----------------------------------
Eurodollar Rate Advance comprising part of the same Borrowing means the
reserve percentage (if any) applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation,
any emergency, supplemental or other marginal reserve requirement) for a
member bank of the Federal Reserve System in New York City with deposits
exceeding $1,000,000,000 with respect to liabilities or assets consisting
of or including Eurocurrency Liabilities (or with respect to any other
category of liabilities that includes deposits by reference to which the
interest rate on Eurodollar Rate Advances is determined) having a term
equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
-----------------
"Existing Credit Agreement" means the $800,000,000 Credit Agreement
-------------------------
dated as of December 23, 1997 among the
Credit Agreement
----------------
<PAGE>
-10-
Borrower, certain Lenders and CUSA, as Administrative Agent.
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"GAAP" means generally accepted accounting principles in the United
----
States of America as in effect from time to time.
"Hazardous Materials" means (a) petroleum or petroleum products,
-------------------
natural or synthetic gas, asbestos in any form that is or could become
friable, and radon gas, (b) any substances defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes",
"toxic substances", "toxic pollutants", "contaminants" or "pollutants", or
words of similar meaning and regulatory effect, under any Environmental Law
and (c) any other substance exposure to which is regulated under any
Environmental Law.
"Hughes Electronics" means Hughes Electronics Corporation, a Delaware
------------------
corporation.
"Hughes Electronics Loan" means the loan made by Hughes Electronics to
-----------------------
the Borrower pursuant to the Loan Agreement dated as of May 15, 1997 between
Hughes Electronics and the Borrower, evidenced by the Hughes Electronics Note,
as heretofore amended and as the same may hereafter be amended, modified or
supplemented in accordance with the terms of the Subordination and Amendment
Agreement.
"Hughes Electronics Note" means the promissory note of the Borrower
-----------------------
dated May 15, 1997 in the amount of $1,725,000,000 in favor of Hughes
Electronics, as the same may be amended, modified or supplemented in
accordance with the terms of the Subordination and Amendment Agreement.
"Indemnified Party" has the meaning specified in Section 8.04(b).
-----------------
"Initial Lenders" has the meaning specified in the
---------------
Credit Agreement
----------------
<PAGE>
-11-
recital of parties to this Agreement.
"Insufficiency" means, with respect to any Plan at any date, the
-------------
amount, if any, by which the "accumulated benefit obligation" (as defined
in Statement of Financial Accounting Standards 87) exceeds the fair market
value of the assets of such Plan as of the date of the most recent
actuarial valuation for such Plan, calculated using the actuarial methods,
factors and assumptions used in such valuation.
"Interest Coverage Ratio" means, for any period, the ratio of (a)
-----------------------
EBITDA for such period to (b) Interest Expense for such period.
"Interest Expense" means, with respect to the Borrower and its
----------------
Subsidiaries on a Consolidated basis, for any period (without duplication),
interest expense, whether paid or accrued (including the interest component
of Capital Lease Obligations), on all Debt of the Borrower and its
Subsidiaries on a Consolidated basis for such period, net of interest
income, all determined in accordance with GAAP. Anything contained herein
to the contrary notwithstanding, for purposes of determining the Leverage
Ratio under Section 5.04(a) and the Interest Coverage Ratio under Section
5.04(b), Interest Expense for the Borrower and its Subsidiaries for each of
the fiscal quarters referred to below shall be deemed to be the amount set
forth opposite the reference to such fiscal quarter (regardless of the
actual amount of such Interest Expense for any such fiscal quarter):
Credit Agreement
----------------
<PAGE>
-12-
Fiscal Quarter Ending Interest Expense
--------------------- ----------------
March 31, 1997 $29,000,000
June 30, 1997 $29,000,000
September 30, 1997 $29,000,000
"Interest Period" means, for each Eurodollar Rate Advance comprising
---------------
part of the same Borrowing, the period commencing on the date of such
Eurodollar Rate Advance or the date of the Conversion of any Base Rate
Advance into such Eurodollar Rate Advance, and ending on the last day of
the period selected by the Borrower pursuant to the provisions below and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three or six
months, as the Borrower may, upon notice received by the Administrative
Agent not later than 11:00 A.M. (New York City time) on the third Business
Day prior to the first day of such Interest Period, select; provided that:
--------
(a) any Interest Period for any Eurodollar Rate Advance that
would otherwise extend beyond the Commitment Termination Date shall
end on the Commitment Termination Date;
(b) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day, provided that, if such extension would cause the last
--------
day of such Interest Period to occur in the next following calendar
month, the last day of such Interest Period shall occur on the next
preceding Business Day;
(c) whenever the first day of any Interest Period occurs on the
last day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month), such Interest Period shall end on the last Business Day of the
appropriate subsequent calendar month; and
(d) there shall not be more than eight Interest Periods in effect
at any one time.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Lenders" has the meaning specified in the recital of
--------
Credit Agreement
----------------
<PAGE>
-13-
parties hereto.
"Leverage Ratio" means, at any time, the ratio of (1) the aggregate
--------------
amount outstanding of Debt (excluding Debt evidenced by the Hughes
Electronics Note) of the Borrower and its Subsidiaries on a Consolidated
basis to (2) EBITDA for the most recently concluded Rolling Period.
"Lien" means any lien, security interest or other charge or
----
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
"Loan Documents" means, collectively, this Agreement, the Notes and
--------------
the Subordination and Amendment Agreement.
"Margin Stock" has the meaning specified in Regulations G, U and X.
------------
"Material Adverse Change" means any material adverse change in the
-----------------------
financial condition, business, assets, liabilities, properties, prospects
or results of operations of the Borrower or of the Borrower and its
Subsidiaries, taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
financial condition, prospects or results of operations of the Borrower (or
of the Borrower and its Subsidiaries, taken as a whole), (b) the rights and
remedies of the Administrative Agent or any Lender under the Loan Documents
or (c) the ability of the Borrower to perform its obligations under the
Loan Documents.
"Material Debt" has the meaning set forth in Section 6.01(e).
-------------
"Material Subsidiary" means, at any time, a Subsidiary of the Borrower
-------------------
that has (i) revenues for the then preceding period of four consecutive
fiscal quarters exceeding 10% of the revenues of the Borrower and its
Subsidiaries on a Consolidated basis or (ii) assets in excess of 10% of the
assets of the Borrower and its Subsidiaries on a Consolidated basis.
"Moody's" means Moody's Investors Service, Inc., or any rating agency
-------
successor thereto.
"Multiple Employer Plan" of any Person means a single employer plan,
----------------------
as defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of
ERISA and (a) is maintained
Credit Agreement
----------------
<PAGE>
-14-
for employees of such Person or any of its
ERISA Affiliates and at least one Person other than such Person and its
ERISA Affiliates or (b) was so maintained and in respect of which such
Person or any of its ERISA Affiliates has or would have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"Note" means a promissory note of the Borrower payable to the order of
----
a Lender, in substantially the form of Exhibit A hereto, evidencing the
aggregate indebtedness of the Borrower to such Lender resulting from the
Advances made by such Lender.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
-------------------
"OECD" means the Organization for Economic Cooperation and
----
Development.
"Old Notes" means the three series of notes issued under three
---------
separate Indentures as follows: (1) the 9 3/4% Senior Secured Notes due
2000 issued pursuant to the Indenture, dated as of August 5, 1993, among
PanAmSat International Systems, Inc. (the successor corporation to
PanAmSat, L.P.) and PanAmSat Capital Corporation (collectively, the
"Offerors") as issuers, and First Trust National Association, as trustee;
(2) the 11 3/8% Senior Subordinated Discount Notes due 2003 issued pursuant
to the Indenture, dated as of August 5, 1993, among the Offerors, as
issuers, and United States Trust Company of New York, as trustee; and (3)
the 12 3/4% Senior Subordinated Notes due 2005 issued pursuant to the
Indenture, dated as of September 30, 1997, between PanAmSat International
Systems, Inc. as issuer, and First Trust National Association, as trustee.
"Other Taxes" has the meaning specified in Section 2.11(b).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation or any
----
successor.
"Permitted Liens" means such of the following as to which no
---------------
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced (or, if such a proceeding has been commenced, such
proceeding is being contested in good faith by appropriate proceedings and
enforcement of any Lien has been and is stayed):
(a) Liens for taxes, assessments and governmental charges or
levies to the extent not required to be paid under Section 5.01(b),
Credit Agreement
----------------
<PAGE>
-15-
(b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens, statutory landlord's Liens
and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 30
days or which are being contested in good faith and by appropriate
proceedings,
(c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations,
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases (other than capital leases),
surety and appeal bonds, and performance bonds and other obligations
of a like nature incurred, in each case arising in the ordinary course
of business,
(e) as to any particular property at any time, such easements,
encroachments, covenants, rights of way, minor defects, irregularities
or encumbrances on title which do not materially impair the use of
such property for the purpose for which it is held by the owner
thereof,
(f) municipal and zoning ordinances that are not violated in any
material respect by the existing improvements and the present use made
by the owner thereof,
(g) real estate taxes and assessments not yet delinquent,
(h) Liens arising from Uniform Commercial Code financing
statements regarding operating leases permitted by this Agreement,
(i) Liens consisting of bank set-off rights arising by operation
of law in the ordinary course of business,
(j) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed or
the payment of which is covered in full (subject to a customary
deductible) by insurance,
(k) Liens securing obligations of any Material Subsidiary of the
Borrower to any other Material Subsidiary of the Borrower,
Credit Agreement
----------------
<PAGE>
-16-
(l) Liens existing on property at the time of its acquisition
(directly or indirectly), other than any such Lien created in
contemplation of such acquisition that is not otherwise permitted by
Section 5.02(a),
(m) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any
Lien referred to in this definition, provided that (x) the Lien shall
be limited to all or a part of the property covered by the Lien
extended, renewed or replaced (plus improvements thereon) and (y) that
any Debt secured by such Lien is not increased, and
(n) Liens not otherwise permitted by the above securing Debt in
an aggregate amount not in excess of $50,000,000.
"Permitted Swap Obligations" means all obligations (contingent or
--------------------------
otherwise) of the Borrower or any of its Subsidiaries existing or arising
under Swap Contracts, provided that such obligations are (or were) entered
into by such Person in the ordinary course of business for the purpose of
mitigating risks associated with liabilities, commitments or assets held or
reasonably anticipated by such Person, or changes in the value of
securities issued by such Person in conjunction with a securities
repurchase program, and not for purposes of speculation or taking a "market
view".
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
----
"Post-Default Rate" means, in respect of any principal of any Advance
-----------------
or any other amount whatsoever payable under this Agreement or any Note
that is not paid when due (whether at stated maturity, by acceleration, by
optional or mandatory prepayment or otherwise), a rate per annum during the
period from and including the due date to but excluding the date on which
such amount is paid in full equal to 2% per annum plus the Base Rate as in
----
effect from time to time plus the Applicable Margin for Base Rate Advances
----
(provided that, if the amount so in default is principal of a Eurodollar
--------
Rate Advance and the due date thereof is a day other than the last day of
an Interest Period therefor, the "Post-Default Rate" for such principal
shall be, for the
Credit Agreement
----------------
<PAGE>
-17-
period for and including such due date to but excluding
the last day of such Interest Period, 2% per annum plus the interest rate
----
for such Advance as provided in Section 2.06(a)(ii) and, thereafter, the
rate provided for above in this definition).
"Quarterly Dates" means March 31, June 30, September 30 and December
---------------
31 in each year, provided that, if any such day is not a Business Day, the
--------
relevant Quarterly Date shall be the immediately succeeding Business Day.
"Rating Agency" means each of Moody's and S&P.
-------------
"Rating Availability Date" means each date on which either or both of
------------------------
the Rating Agencies shall have in effect a Borrower Debt Rating.
"Rating Level" means each of Rating Level 1, Rating Level 2, Rating
------------
Level 3, Rating Level 4 and Rating Level 5 (with Rating Level 1 being the
highest Rating Level and Rating Level 5 being the lowest).
"Rating Level 1", "Rating Level 2", "Rating Level 3", "Rating Level 4"
-------------- -------------- -------------- --------------
and "Rating Level 5" have the meanings specified in the definition of
--------------
"Applicable Margin" in this Section 1.01.
"Reference Banks" means Citibank, Morgan Guaranty Trust Company of New
---------------
York and Bank of America National Trust and Savings Association (or their
respective Applicable Lending Offices, as the case may be).
"Register" has the meaning specified in Section 8.07(c).
--------
"Regulation A", "Regulation D", "Regulation G", "Regulation U" and
------------ ------------ ------------ ------------
"Regulation X" mean Regulations A, D, G, U and X of the Board of Governors
-------------
of the Federal Reserve System, respectively, as in effect from time to
time.
"Required Lenders" means at any time Lenders holding in the aggregate
----------------
at least 51% of the outstanding Advances (or, if no Advances are
outstanding, at least 51% of the then aggregate amount of the Commitments).
"Rolling Period" means each period of four consecutive fiscal quarters
--------------
of the Borrower, commencing with such period ending in December, 1997.
"Single Employer Plan" of any Person means a single employer plan, as
--------------------
defined in Section 4001(a)(15) of ERISA, that is subject to Title IV of
ERISA and that (a) is
Credit Agreement
----------------
<PAGE>
-18-
maintained for employees or former employees of such Person or any of its
ERISA Affiliates and no Person other than such Person and its ERISA
Affiliates or (b) was so maintained and in respect of which such Person or
any of its ERISA Affiliates has or would have liability under Section 4069
of ERISA in the event such plan has been or were to be terminated.
"S&P" means Standard & Poor's Ratings Services, a division of The
---
McGraw-Hill Companies, Inc., or any rating agency successor thereto.
"Subordinated Debt" means Debt of the Borrower subordinated to the
-----------------
Debt of the Borrower under this Agreement in substantially the same manner
as the Hughes Electronics Loan is subordinated under the Subordination and
Amendment Agreement and having a tenor that extends at least six months
beyond the Commitment Termination Date.
"Subordination and Amendment Agreement" means an agreement among the
-------------------------------------
Borrower, Hughes Electronics and the Administrative Agent in substantially
the form of Exhibit E, as from time to time amended.
"Subsidiary" of any Person means any corporation, partnership, joint
----------
venture, trust or estate of which (or in which) more than 50% of (a) the
issued and outstanding capital stock having ordinary voting power to elect
a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such
partnership or joint venture or (c) the beneficial interest in such trust
or estate is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one
or more of such Person's other Subsidiaries.
"Swap Contracts" means any agreement, whether or not in writing,
--------------
relating to any transaction that is a rate swap, basis swap, forward rate
transactions, commodity swap, commodity option, equity or equity index swap
or option bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, currency option or any other similar transaction
(including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
Credit Agreement
----------------
<PAGE>
-19-
"Taxes" means any and all present or future taxes, levies,
-----
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, including interest and penalties thereon.
"Type" refers to the distinction between Advances bearing interest at
----
the Base Rate and Advances bearing interest at the Eurodollar Rate.
"U.S. Dollars" and "$" means lawful money of the United States of
------------ -
America.
"Voting Stock" means capital stock issued by a corporation or
------------
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even though the right to so vote has been suspended by the
happening of such contingency.
"Withdrawal Liability" means, as of any determination date, the
--------------------
aggregate amount of the liabilities, if any, pursuant to Section 4201 of
ERISA if the Borrower or any ERISA Affiliate made a complete withdrawal
from all Plans and any increase in contributions pursuant to Section 4243
of ERISA.
Section 1.02. Computation of Time Periods. In this Agreement in the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" mean
"to but excluding".
Section 1.03. Accounting Terms. All accounting terms not
----------------
specifically defined herein shall be construed in accordance with GAAP;
provided, that if any change in GAAP proposed after the Effective Date
- --------
materially affects the calculation of any financial covenant in Section 5.04,
the Borrower may by notice to the Administrative Agent, or the Administrative
Agent (at the request of the Required Lenders) may, by notice to the Borrower,
require that such covenant thereafter be calculated in accordance with GAAP as
in effect, and applied by the Borrower, immediately before such change in GAAP
occurs. If such notice is given, the compliance certificates delivered pursuant
to Section 5.03 after such change occurs shall be accompanied by reconciliations
of the difference between the calculation set forth therein and a calculation
made in accordance with GAAP as in effect from time to time after such change
occurs. To enable the ready determination of compliance with the covenants set
forth in Section 5.04 hereof, the Borrower will not change from December 31 in
each year the date on which its fiscal year ends, nor from March 31, June 30 and
September 30 the dates on which
Credit Agreement
----------------
<PAGE>
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the first three fiscal quarters in each fiscal year end.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
Section 2.01. The Advances. (a) Each Lender severally agrees, on
------------
the terms and conditions hereinafter set forth, to make advances (each an
"Advance") to the Borrower from time to time on any Business Day during the
--------
period from the Effective Date until the Commitment Termination Date in an
aggregate amount at any one time outstanding not to exceed at any time the
amount set forth opposite the name of such Lender on the signature pages
hereof under the heading "Commitment" and, as to all Lenders, in an
aggregate principal amount up to but not exceeding $500,000,000.
(b) Each Borrowing shall be in an aggregate amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof and
shall consist of Advances of the same Type made on the same day.
(c) The Advances shall be made by the Lenders ratably according to
their respective Commitments.
(d) Within the limits of each Lender's Commitment in effect from time
to time, the Borrower may borrow under this Section 2.01, prepay pursuant
to Section 2.05(a) and reborrow on and subject to the terms and conditions
hereof.
Section 2.02. Making the Advances.
-------------------
(a) (i) Each Borrowing shall be made on notice, given not later than
11:00 A.M. (New York City time) on the Business Day of such Borrowing, in
the case of Base Rate Advances, or not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the date of such Borrowing, in the
case of Eurodollar Rate Advances, by the Borrower to the Administrative
Agent, which shall give to each Lender prompt notice thereof by telecopier.
Each such notice of a Borrowing (a "Notice of Borrowing") shall be by
-------------------
telecopier, confirmed immediately in writing, in substantially the form of
Exhibit B, specifying therein (1) the requested date of such Borrowing, (2)
the requested Type of Advances comprising such Borrowing, (3) the requested
aggregate amount of such Borrowing and (4) in the case of a Borrowing
consisting of Eurodollar Rate Advances, the requested initial Interest
Period for each such Advances.
(ii) In the case of a proposed Borrowing comprised of
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----------------
<PAGE>
-21-
Eurodollar Rate Advances, the Administrative Agent shall promptly notify
the Borrower and each Lender of the applicable interest rate under Section
2.06(a)(ii).
(iii) Each Lender shall, before 2:00 P.M. (New York City time) on the
date of each Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's ratable portion of such
Borrowing. Promptly after the Administrative Agent's receipt of such funds
and upon fulfillment of the applicable conditions set forth in Article III,
the Administrative Agent will transfer same day funds to the Borrower's
Account.
(b) Anything in subsection (a) above to the contrary notwithstanding,
the Borrower may not select Eurodollar Rate Advances for any Borrowing if
the aggregate amount of such Borrowing is less than $5,000,000 or if the
obligation of the Lenders to make Eurodollar Rate Advances shall then be
suspended pursuant to this Agreement.
(c) Each Notice of Borrowing shall be irrevocable and binding on the
Borrower. In the case of any Borrowing that the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the
Borrower shall indemnify each Lender against any loss, cost or expense
incurred by such Lender as a result of any failure to fulfill on or before
the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III (other than losses, costs or
expenses relating to Taxes or Other Taxes which shall be governed
exclusively by Section 2.11), including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund the Advance to be made by such Lender as part of such
Borrowing when such Advance, as a result of such failure, is not made on
such date.
(d) Unless the Administrative Agent shall have received notice from a
Lender prior to 12:00 Noon (New York City time) on the date of any
Borrowing that such Lender will not make available to the Administrative
Agent such Lender's ratable portion of such Borrowing, the Administrative
Agent may assume that such Lender has made such portion available to the
Administrative Agent on the date of such Borrowing in accordance with
Section 2.02(a) and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent that such Lender shall not have so made such
ratable portion available to the
Credit Agreement
----------------
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-22-
Administrative Agent and the Administrative Agent shall have made available
such corresponding amount to the Borrower, such Lender and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from
the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at such time under Section 2.06 to
Advances comprising such Borrowing and (ii) in the case of such Lender, the
Federal Funds Rate. If such Lender shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such
Lender's Advance as part of such Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Advance on the date of such Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Advance to be made by such other Lender on the date of any Borrowing.
Section 2.03. Repayment. The Borrower hereby promises to pay to the
---------
Administrative Agent for the account of each Lender, on the Commitment
Termination Date, the full outstanding principal amount of the Advances of such
Lender. All repayments of principal under this Section 2.03 shall be made
together with interest accrued to the date of such repayment on the principal
amount repaid.
Section 2.04. Termination or Reduction of the Commitments.
-------------------------------------------
(a) Mandatory. The Commitments shall be automatically reduced to
---------
zero on the Commitment Termination Date.
(b) Reductions. The Borrower may, upon three Business Days' notice
----------
to the Administrative Agent, reduce the Commitments in whole or in part in
a minimum amount of $5,000,000 or an integral multiple of $1,000,000 in
excess thereof. Each reduction of the Commitments shall be applied to the
Commitments of the Lenders pro rata according to their respective
--- ----
Commitments.
(c) Reductions Permanent. Commitments once terminated or reduced may
--------------------
not be reinstated.
Credit Agreement
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-23-
Section 2.05. Prepayments, Etc.
-----------------
(a) Optional Prepayments. The Borrower may, upon at least three
--------------------
Business Days' notice (in the case of prepayment of Eurodollar Rate
Advances) or upon notice given on the date of prepayment (in the case of
prepayments of Base Rate Advances) to the Administrative Agent (which
notice shall state the proposed date and aggregate principal amount of the
prepayment), and if such notice is given the Borrower shall, prepay the
outstanding principal amount of the Advances in the aggregate amount and on
the date specified in such notice, together with accrued interest to the
date of such prepayment on the principal amount prepaid; provided that (x)
--------
each partial prepayment shall be in an aggregate principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, (y) any
such prepayment of a Eurodollar Rate Advance other than on the last day of
an Interest Period therefor shall be accompanied by, and subject to, the
payment of any amount payable under Section 8.04(c) in respect of such
prepayment and (z) each such notice shall be made on the relevant day not
later than 11:00 a.m. (New York City time). Each prepayment of Advances
under this Section 2.05(a) shall be made for account of the Lenders pro
---
rata according to the aggregate outstanding principal amount of Advances
----
held by them.
(b) Payments with Interest. All prepayments under this Section 2.05
----------------------
shall be made together with accrued interest to the date of such prepayment
on the principal amount prepaid.
Section 2.06. Interest.
--------
(a) Ordinary Interest. The Borrower shall pay interest on the unpaid
-----------------
principal amount of each Advance owing to each Lender from the date of such
Advance until such principal amount shall be paid in full at the following
rates per annum:
(i) Base Rate Advances. If such Advance is a Base Rate Advance,
------------------
a rate per annum equal at all times to the sum of (1) the Base Rate in
effect from time to time plus (2) the Applicable Margin for Base Rate
----
Advances in effect from time to time, payable quarterly in arrears on
each Quarterly Date and on the date such Base Rate Advance shall be
Converted (but only on the amount Converted) or paid in full.
(ii) Eurodollar Rate Advances. If such Advance is a Eurodollar
------------------------
Rate Advance, a rate per annum equal at all times during each Interest
Period for such Advance
Credit Agreement
----------------
<PAGE>
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to the sum of (1) the Eurodollar Rate for such Interest Period for
such Advance plus (2) the Applicable Margin for Eurodollar Rate
Advances in effect from time to time, payable in arrears on the last
day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each three-month anniversary of
the first day of such Interest Period occurring during such Interest
Period.
(b) Post-Default Interest. Notwithstanding Section 2.06(a), the
---------------------
Borrower shall pay interest on any amount that is not paid when due
hereunder (whether at scheduled maturity, by acceleration or otherwise) at
the Post-Default Rate, such interest to be payable in arrears on the date
such amount shall be paid in full and on demand.
Section 2.07. Fees. The Borrower agrees to pay to the Administrative
----
Agent for the account of each Lender a facility fee on the average daily amount
(whether used or unused) of each of such Lender's Commitment from the Effective
Date (in the case of each Initial Lender), and from the effective date specified
in the Assignment and Acceptance pursuant to which it became a Lender (in the
case of each other Lender), until the Commitment Termination Date, payable in
arrears on each Quarterly Date and on the Commitment Termination Date, at a rate
per annum equal to the Applicable Facility Fee Percentage in effect from time to
time.
Section 2.08. Conversion and Continuation of Advances.
---------------------------------------
(a) Optional Conversion. The Borrower may on any Business Day, upon
-------------------
notice given to the Administrative Agent not later than 11:00 A.M. (New York
City time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions hereof, Convert all or any portion of
the Advances of one Type outstanding (and, in the case of Eurodollar Rate
Advances, having the same Interest Period); provided that any such Conversion of
--------
a Eurodollar Rate Advance other than on the last day of the Interest Period
therefor shall be accompanied by, and subject to, the payment of any amount
payable under Section 8.04(c) in respect of such Conversion, and any Conversion
of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not
less than the minimum amount specified in Section 2.02(b). Each such notice of
Conversion shall, within the restrictions specified above, specify (i) the date
of such Conversion, (ii) the aggregate amount and Type of the Advances (and, in
the case of Eurodollar Rate Advances, the Interest Period therefor) to be
Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for such Advances. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
Credit Agreement
----------------
<PAGE>
-25-
(b) Failure to Select; Certain Mandatory Conversions.
------------------------------------------------
(i) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment, prepayment, Conversion or otherwise, to less than $5,000,000, such
Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any Interest
Period for any outstanding Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01
and in clause (a) or (c) of this Section 2.08, the Administrative Agent
will forthwith so notify the Borrower and the Lenders, and the Borrower
shall automatically be deemed irrevocably to have selected an Interest
Period of one month.
(iii) Upon the occurrence and during the continuance of any Event of
Default, unless the Required Lenders otherwise agree, (x) each Eurodollar
Rate Advance will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance and (y) the
obligation of the Lenders to make, or to Convert Advances into, or to
Continue, Eurodollar Rate Advances shall be suspended.
(c) Continuations. The Borrower may, on any Business Day, upon
-------------
notice given to the Administrative Agent not later than 11:00 A.M. (New York
City time) on the third Business Day prior to the date of the proposed
Continuation, Continue all or any portion of the outstanding Eurodollar Rate
Advances having the same Interest Period as such Eurodollar Rate Advances;
provided, that any such Continuation shall be in an amount not less than the
- --------
minimum Borrowing amount specified in Section 2.02(b). Each such notice of
Continuation shall, within the restrictions specified above, specify (i) the
date of such Continuation, (ii) the aggregate amount of the Advances being
Continued and (iii) the duration of the initial Interest Period for the
Eurodollar Rate Advances subject to such Continuation. Each notice of
Continuation shall be irrevocable and binding on the Borrower.
Credit Agreement
----------------
<PAGE>
-26-
Section 2.09. Increased Costs, Illegality, Etc.
---------------------------------
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation (to the extent any such introduction
or change occurs after the Effective Date) or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
adopted or made after the Effective Date (whether or not having the force of
law, other than any thereof applicable to a particular Lender solely because of
such Lender's financial condition or capitalization), there shall be any
increase in the cost to any Lender of agreeing to make or making, funding or
maintaining Eurodollar Rate Advances (except with respect to costs relating to
Taxes which shall be governed exclusively by Section 2.11), then the Borrower
shall from time to time, within ten Business Days after demand by such Lender
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost; provided, that,
--------
before making any such demand, each Lender agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different Applicable Lending Office if the making of such a
designation would avoid the need for, or reduce the amount of, such increased
cost and would not, in the sole judgment of such Lender, be otherwise
disadvantageous to such Lender. A certificate as to the amount of such
increased cost, submitted to the Borrower by such Lender in good faith and
setting forth in reasonable detail the basis for such increased cost, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation enacted or introduced after the Effective Date or any guideline or
request from any central bank or other governmental authority adopted or made
after the Effective Date (whether or not having the force of law) affects the
amount of capital required or expected to be maintained by such Lender or any
corporation or other entity controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type (or similar contingent
obligations), or the Advances, then, within ten Business Days after demand by
such Lender (with a copy of such demand to the Administrative Agent), the
Borrower shall pay to the Administrative Agent for the account of such Lender,
from time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender (or such corporation or other entity) in the light of
such circumstances, to the extent that such Lender reasonably determines such
increase in capital to be allocable to the existence of such Lender's commitment
to lend hereunder or the Advances. A certificate as to such amounts submitted
to the
Credit Agreement
----------------
<PAGE>
-27-
Borrower by such Lender in good faith and setting forth in reasonable
detail the basis for such increased cost shall be conclusive and binding for all
purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances, (i) the
Required Lenders reasonably determine and notify the Administrative Agent that
the Eurodollar Rate for any Interest Period for such Advances will not
adequately reflect the cost to such Required Lenders of making, funding or
maintaining their respective Eurodollar Rate Advances for such Interest Period,
or (ii) if none of the Reference Banks furnish timely information to the
Administrative Agent for determining the Eurodollar Rate for any Eurodollar Rate
Advances, the Administrative Agent shall forthwith so notify the Borrower and
the Lenders, whereupon (x) each Eurodollar Rate Advance will automatically, on
the last day of any then existing Interest Period therefor, Convert to a Base
Rate Advance, and (y) the obligation of the Lenders to make, or to Convert
Advances into, or to Continue, Eurodollar Rate Advances shall be suspended until
the Administrative Agent shall notify the Borrower and such Lenders that the
circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation (to the extent any such introduction or change occurs after the
Effective Date) shall make it unlawful, or any central bank or other
governmental authority having appropriate jurisdiction shall assert in writing
that it is unlawful, for any Lender or its Eurodollar Lending Office to perform
its obligations hereunder to make Eurodollar Rate Advances or to continue to
fund or maintain Eurodollar Rate Advances hereunder, then, on notice thereof and
demand therefor by such Lender to the Borrower through the Administrative Agent,
(i) each Eurodollar Rate Advance of such Lender will automatically, on the last
day of the then current Interest Period or on such earlier date as may be
required by law, Convert to a Base Rate Advance and (ii) the obligation of such
Lender to make, or to Convert Advances into, or to Continue, Eurodollar Rate
Advances shall be suspended until the Administrative Agent shall notify the
Borrower that such Lender has determined that the circumstances causing such
suspension no longer exist; provided that, before making any such demand, such
--------
Lender agrees to use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate a different Eurodollar Lending
Office if the making of such a designation would allow such Lender or its
Eurodollar Lending Office to continue to perform its obligations to make
Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances and would not, in the sole judgment of such Lender, be otherwise
disadvantageous to such Lender.
Credit Agreement
----------------
<PAGE>
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Section 2.10. Payments and Computations.
-------------------------
(a) The Borrower shall make each payment hereunder and under the
Notes not later than 12:00 Noon (New York City time) on the day when due in U.S.
Dollars to the Administrative Agent at the Administrative Agent's Account in
same day funds and, except as expressly set forth herein, without deduction,
set-off or counterclaim. The Administrative Agent will promptly thereafter
cause to be distributed like funds relating to the payment of principal,
interest or facility fees ratably (other than amounts payable pursuant to
Section 2.09(a), 2.09(b), 2.11 or 8.04(c)) to the Lenders for the account of
their Applicable Lending Offices, and like funds relating to the payment of any
other amount payable to any Lender to such Lender for the account of its
Applicable Lending Office, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) If the Administrative Agent receives funds for application to the
obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances to which, or the manner in which, such
funds are to be applied, and the Borrower has not otherwise directed how such
funds are to be applied (which direction is consistent with the terms of the
Loan Documents), the Administrative Agent may, but shall not be obligated to,
elect to distribute such funds to each Lender ratably in accordance with such
Lender's proportionate share of the principal amount of all outstanding
Advances, in repayment or prepayment of such of the outstanding Advances or
other obligations owed to such Lender as the Administrative Agent shall direct.
(c) Each Reference Bank agrees to furnish to the Administrative Agent
timely information for the purpose of determining each Eurodollar Rate. If any
one or more of the Reference Banks shall not furnish such timely information to
the Administrative Agent for the purpose of determining any such interest rate,
the Administrative Agent shall determine such interest rate on the basis of
timely information furnished by the remaining Reference Banks.
(d) All computations of interest (other than interest determined
under paragraphs (a) and (b) of the definition of
Credit Agreement
----------------
<PAGE>
-29-
"Base Rate" in Section 1.01) and facility fees shall be made by the
Administrative Agent on the basis of a year of 360 days, and all computations of
interest under paragraphs (a) or (b) of the definition of "Base Rate" shall be
made by the Administrative Agent on the basis of a year of 365 or 366 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest or fees are
payable. Each determination by the Administrative Agent of an interest rate or
fee hereunder made in accordance with the provisions of this Agreement shall be
conclusive and binding for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided, that if such extension would cause payment of interest on or
--------
principal of Eurodollar Rate Advances to be made in the next following calendar
month, such payment shall be made on the immediately preceding Business Day.
(f) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to any Lender
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each such Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
Credit Agreement
----------------
<PAGE>
-30-
Section 2.11. Taxes.
-----
(a) Unless otherwise provided in this Section 2.11, any and all
payments by the Borrower hereunder or under the Notes shall be made, in
accordance with Section 2.10, free and clear of and without deduction for any
and all present or future Taxes imposed by the laws and regulations of the
United States or any state or local jurisdiction thereof or therein, excluding,
---------
in the case of each Lender and the Administrative Agent (each, a "Tax
---
Indemnitee"), (i) net income taxes that are imposed by the United States and
franchise taxes and net income taxes that are imposed on such Tax Indemnitee by
any state or local jurisdiction under the laws of which such Tax Indemnitee is
organized or any political subdivision thereof and (ii) in the case of such Tax
Indemnitee, net income taxes that are imposed by the United States and franchise
taxes and net income taxes that are imposed on it by the state or local
jurisdiction of such Person's Applicable Lending Office or any political
subdivision thereof (all such non-excluded Taxes being hereinafter referred to
as "Indemnified Taxes"). If the Borrower shall be required by law to deduct any
-----------------
Indemnified Taxes from or in respect of any sum payable hereunder or under any
Note to any Tax Indemnitee, (i) subject to Section 2.11(f), the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.11) such Tax Indemnitee receives an amount equal to the sum it
would have received had no such deductions been made ("Additional Amounts"),
------------------
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority in accordance with
applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies imposed under the laws of the United States or any state or local
jurisdiction thereof or therein, that arise from any payment made by it
hereunder or under the Notes or from the execution and delivery of this
Agreement or the Notes (hereinafter referred to as "Other Taxes").
-----------
(c) The Borrower will indemnify each Tax Indemnitee for the full
amount of Indemnified Taxes or Other Taxes reasonably and in good faith paid by
such Tax Indemnitee and any penalties and interest arising from the failure of
the Borrower to pay such Indemnified Taxes or Other Taxes. This indemnification
shall be made within 30 days from such date such Tax Indemnitee makes written
demand therefor, which demand shall contain an itemized summary of the amounts
so payable.
(d) Within 30 days after the date of any payment of
Credit Agreement
----------------
<PAGE>
-31-
Indemnified Taxes, the Borrower will furnish to the Administrative Agent, at its
address referred to in Section 8.02, appropriate evidence of payment thereof. If
the Borrower shall make a payment hereunder or under the Notes through an
account or branch outside the United States, or a payment is made on behalf of
the Borrower by a payor that is not a United States Person, the Borrower will,
if no Taxes are payable in respect of such payment, furnish, or will cause such
payor to furnish, to the Administrative Agent, at such address, a certificate
from the appropriate taxing authority or authorities, or an opinion of counsel
acceptable to the Administrative Agent, in either case stating that such payment
is exempt from or not subject to Taxes. For purposes of this subsection (d) and
subsection (e), the terms "United States" and "United States Person" shall have
------------- --------------------
the meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Tax Indemnitee that is not a United States Person (as such
term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S.
federal income tax purposes shall, on or prior to the date of its execution and
delivery of this Agreement (in the case of each Initial Lender) and on the date
of the Assignment and Acceptance pursuant to which it became a Lender (in the
case of each other Lender), and from time to time thereafter if requested in
writing by the Borrower or the Administrative Agent (but only so long as such
Tax Indemnitee remains lawfully able to do so after the date such Person becomes
a party hereto), provide the Administrative Agent and the Borrower with either
(i) Internal Revenue Service form 1001 or 4224, as appropriate, or any successor
form prescribed by the Internal Revenue Service, certifying that such Tax
Indemnitee is entitled to benefits under an income tax treaty to which the
United States is a party that reduces the rate of withholding tax on payments
under this Agreement and the Notes or certifying that the income receivable
pursuant to this Agreement and the Notes is effectively connected with the
conduct of a trade or business in the United States or (ii) Internal Revenue
Service form W-8, upon which the Borrower is entitled to rely, from a Tax
Indemnitee that has not at the time it becomes a party hereto been named in any
notice issued by the Secretary of the Treasury (or such Secretary's authorized
delegate) pursuant to Sections 881(c)(2)(B) or 871(h)(5) of the Internal Revenue
Code, or any successor form or statement prescribed by the Internal Revenue
Service in order to establish that such Tax Indemnitee is entitled to treat the
interest payments under this Agreement and the Notes as portfolio interest that
is exempt from withholding tax under the Internal Revenue Code, together with a
certificate stating that such Tax Indemnitee is not described in Section
881(c)(3) of the Internal Revenue Code. If the form provided by a Tax
Indemnitee at the time it first becomes a party to this Agreement indicates a
United States interest withholding tax rate in excess of zero (or if such Tax
Indemnitee cannot provide at such time such form because it is not entitled to
Credit Agreement
----------------
<PAGE>
-32-
reduced withholding under a treaty, the payments are not effectively connected
income and the payments do not qualify as portfolio interest), withholding tax
at the rate indicated in such form (or at the then existing U.S. statutory rate
if the Tax Indemnitee cannot provide such a form) shall be excluded from
Indemnified Taxes unless and until such Lender provides the appropriate form
certifying that a zero rate applies; provided, that, if at the date of the
--------
Assignment and Acceptance pursuant to which a Lender assignee becomes a party to
this Agreement, the Lender assignor was entitled to payments under subsection
(a) in respect of United States withholding tax with respect to interest paid at
such date, then, to the extent such tax results in liability for such payments,
the term Taxes shall include (in addition to withholding taxes that may be
imposed in the future or other amounts otherwise includable in Taxes) United
States interest withholding tax, if any, applicable with respect to the Lender
assignee on such date.
(f) For any period with respect to which a Tax Indemnitee has failed
to provide the Borrower and the Administrative Agent with the appropriate form
described in Section 2.11(e) (other than if such failure is due to a change in
----- ----
law occurring after the date on which a form originally was required to be
provided or if such form otherwise is not required under subsection (e)), such
Lender shall not be entitled to indemnification under subsection (a) or (c) with
respect to Indemnified Taxes imposed by the United States or any state or other
political subdivision thereof.
(g) Any Lender claiming any Additional Amounts payable pursuant to
this Section 2.11 shall use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Applicable Lending Office(s) if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that may thereafter
accrue and would not, in the sole judgment of such Lender, be otherwise
disadvantageous to such Lender.
(h) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.11 shall survive the payment in full of principal and interest
hereunder and under the Notes.
Credit Agreement
----------------
<PAGE>
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Section 2.12. Sharing of Payments, Etc. If any Lender shall obtain
-------------------------
any payment (whether voluntary, involuntary, through the exercise of any right
of set-off, or otherwise) on account of the Advances owing to it (other than
pursuant to Section 2.09(a), 2.09(b), 2.11 or 8.04(c)) in excess of its ratable
share of payments on account of the Advances obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
the Advances owing to them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them; provided, that if all or
--------
any portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 2.12 may exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation.
Section 2.13. Use of Proceeds. The proceeds of the Advances shall be
---------------
available (and the Borrower agrees that it shall use such proceeds) solely for
general corporate purposes of the Borrower and its Subsidiaries in compliance
with all applicable legal and regulatory requirements. Neither the
Administrative Agent nor any Lender shall have any responsibility as to the
application or use of any of the proceeds of any Advance.
ARTICLE III
CONDITIONS OF LENDING
Section 3.01. Effective Date. This Agreement shall become effective
--------------
on the date (the "Effective Date") on which the Administrative Agent notifies
--------------
the Borrower that the following conditions precedent have been satisfied:
(a) Documents. The Administrative Agent shall have received the
---------
following documents (with, except in the case of the Notes, sufficient
copies for each Lender), each of which shall be satisfactory to the
Administrative Agent in form and substance:
(1) Notes. The Notes payable to the order of the Lenders.
-----
Credit Agreement
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<PAGE>
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(2) Subordination and Amendment Agreement. The Subordination
-------------------------------------
and Amendment Agreement duly executed by the parties thereto.
(3) Corporate Documents. Certified copies of the charter and
-------------------
by-laws (or equivalent documents) of the Borrower and Hughes
Electronics and of all corporate authority for the Borrower and Hughes
Electronics (including, without limitation, board of director
resolutions and evidence of the incumbency, including specimen
signatures, of officers) with respect to the execution, delivery and
performance of the Loan Documents and each other document to be
delivered by the Borrower from time to time in connection herewith and
the extensions of credit hereunder (and the Administrative Agent and
each Lender may conclusively rely on such certificate until it
receives notice in writing from the Borrower to the contrary).
(4) Opinion of Counsel. (i) A favorable written opinion of
------------------
James W. Cuminale, General Counsel of the Borrower, in substantially
the form of Exhibit F hereto, and a favorable written opinion of
Chadbourne & Parke LLP, special New York counsel to the Borrower, in
substantially the form of Exhibit G hereto, with respect to such
matters relating to the Loan Documents as the Administrative Agent or
any Lender may request and (ii) a favorable opinion of Robert Hall,
Assistant General Counsel of Hughes Electronics, in substantially the
form of Exhibit H hereto, with respect to such matters relating to the
Subordination and Amendment Agreement as the Administrative Agent or
any Lender may request.
(5) Opinion of Administrative Agent's Counsel. An opinion of
-----------------------------------------
Milbank, Tweed, Hadley & McCloy, special New York counsel for the
Administrative Agent, in substantially the form of Exhibit I hereto,
covering such matters relating to this Agreement and the Notes as the
Administrative Agent may require.
(6) Borrower Debt Rating. Evidence that the senior unsecured
--------------------
long-term debt rating of the Borrower by S&P is BBB- or higher and
that the senior secured long-term debt rating of the Borrower by
Moody's is Baa2 or higher.
(7) Old Notes. Evidence that an aggregate principal amount of
---------
no more than $20,000,000 of the Old Notes is outstanding and that the
supplemental indentures modifying the terms of the Old Notes have
Credit Agreement
----------------
<PAGE>
-35-
been executed by the Borrower in substantially the form sent to the
holders thereof on November 14, 1997.
(b) Governmental Approvals. The Administrative Agent shall have
----------------------
received evidence satisfactory to it of receipt of all governmental and
third party consents and approvals necessary in connection with this
Agreement and the Notes (without the imposition of any conditions except
those that are acceptable to the Lenders) and that the same remain in
effect.
(c) Fees. The Administrative Agent shall have received confirmation
----
that the Borrower has paid in full all amounts whatsoever outstanding under
the Existing Credit Agreement (including without limitation any and all
fees thereunder accrued to the Effective Date).
(d) Material Adverse Change. The Lenders shall be satisfied that
-----------------------
since September 30, 1997, there shall have occurred no Material Adverse
Change.
(e) Other Items. The Administrative Agent shall have received such
-----------
other approvals, opinions and documents relating to this Agreement and the
transactions contemplated hereby as any Lender may, through the
Administrative Agent, reasonably request.
Section 3.02. Conditions Precedent to Each Borrowing. The obligation
--------------------------------------
of each Lender to make an Advance on the occasion of each Borrowing shall be
subject to the further conditions precedent that on the date of such Borrowing
the following statements shall be true (and each of the giving of the applicable
Notice of Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall constitute a representation and warranty by the Borrower that on
the date of such Borrowing such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct on and as of the date of such Borrowing before and
after giving effect to such Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date (except to the
extent such representations and warranties expressly relate to an earlier
date, in which case they shall be true and correct as of such earlier
date); and
(ii) no Default has occurred and is continuing, or would result from
such Borrowing or from the application of the proceeds therefrom.
Section 3.03. Existing Credit Agreement. Effective on the Effective
-------------------------
Date the Commitments under and as defined in the
Credit Agreement
----------------
<PAGE>
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Existing Credit Agreement and the Borrower's obligations thereunder shall
automatically and permanently terminate.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Borrower. The
----------------------------------------------
Borrower represents and warrants as follows as of the Effective Date:
(a) The Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which the conduct of its business
requires it to so qualify or be licensed and where, in each case, failure
so to qualify and be in good standing could reasonably be expected to have
a Material Adverse Effect and (iii) has all requisite power (corporate or
other) and authority to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be conducted.
(b) Set forth on Schedule 4.01(b) is a complete and accurate list of
all Subsidiaries of the Borrower as of the Effective Date, showing as of
such date (as to each such Subsidiary) the jurisdiction of its organization
and the percentage of the outstanding shares or interests of each class of
capital stock or partnership interests owned (directly or indirectly) by
the Borrower. All of the outstanding capital stock or partnership
interests of all of such Subsidiaries has been validly issued, is fully
paid and non-assessable and, except as otherwise specified on Schedule
4.01(b), is owned by the Borrower or one or more of its Subsidiaries free
and clear of all Liens except Permitted Liens.
(c) The execution, delivery and performance by the Borrower of each
Loan Document and the transactions contemplated hereby are within the
Borrower's powers (corporate or other), have been duly authorized by all
necessary corporate action, and do not (i) contravene the Borrower's
charter or by-laws, (ii) violate any applicable law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award, (iii)
conflict with or result in the breach of, or constitute a default under,
any contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument binding on or affecting the Borrower, any of its Material
Subsidiaries or any of their properties or (iv) result in or require the
creation or
Credit Agreement
----------------
<PAGE>
-37-
imposition of any Lien upon or with respect to any of the
properties of the Borrower or any of its Material Subsidiaries.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for (i) the due execution, delivery, recordation,
filing or performance by the Borrower of any Loan Document, or the
consummation of the transactions contemplated thereby or (ii) the exercise
by the Administrative Agent or any Lender of its rights under the Loan
Documents, except for the authorizations, approvals, actions, notices and
filings which have been duly obtained, taken, given or made and are in full
force and effect. No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or
any other third party is required for the transactions contemplated
thereby, except for the authorizations, approvals, actions, notices and
filings (x) the failure to obtain could not reasonably be expected to have
a Material Adverse Effect or (y) which have been duly obtained, taken,
given or made and are in full force and effect.
(e) Each of this Agreement and the Subordination and Amendment
Agreement is, and each of the Notes when delivered will have been, duly
executed and delivered by the Borrower. Each of this Agreement and the
Subordination and Amendment Agreement is, and each of the Notes when
delivered hereunder for value will be, the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency and other similar laws affecting creditors generally and by
general principles of equity (regardless of whether enforcement is sought
in equity or at law).
(f) The unaudited consolidated balance sheet of the Borrower and its
Subsidiaries as of September 30, 1997, and the related pro forma and actual
--- -----
consolidated statements of income or operations and cash flows for the
respective periods of three months and nine months ended on that date, and
the related actual consolidated statements of actual cash flow for the
period of three months ended on that date:
(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly
noted therein, subject to ordinary, good faith year end audit
adjustments; and
(ii) fairly present in all respects the financial
Credit Agreement
----------------
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condition of the Borrower and its Subsidiaries as of the date thereof
and results of operations for the period covered thereby. Since
September 30, 1997, there has been no Material Adverse Change.
(g) Except as set forth on Schedule 4.01(g), as of the Effective Date
there is no action, suit, litigation or proceeding against the Borrower or
any of its Subsidiaries or any of their respective property, including any
thereof under any Environmental Laws, pending before any court,
governmental agency or arbitrator, or (to the knowledge of the Borrower)
threatened, nor (to the knowledge of the Borrower) is there any
investigation pending in respect of the Borrower, that could reasonably be
expected to have a Material Adverse Effect.
(h) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock and no proceeds of
any Advance will be used to buy or carry any Margin Stock or to extend
credit to others for the purpose of buying or carrying any Margin Stock.
Less than 25% of the aggregate value of the assets of the Borrower and its
Material Subsidiaries that are subject to Section 5.02(a) consists of
Margin Stock.
(i) Except to the extent any of the following could not reasonably be
expected to have a Material Adverse Effect, (i) the operations and
properties of the Borrower and each of its Subsidiaries comply in all
material respects with all Environmental Laws, all necessary environmental
permits have been obtained and are in effect for the operations and
properties of the Borrower and its Subsidiaries, the Borrower and its
Subsidiaries are in compliance in all material respects with all such
environmental permits, and (ii) to the best of the Borrower's knowledge, no
circumstances exist that could (x) form the basis of an environmental
action against the Borrower or any of its Subsidiaries or (y) cause any
such property to be subject to any material restrictions on ownership,
occupancy, use or transferability under any Environmental Law.
(j) Except to the extent any of the following could not reasonably be
expected to have a Material Adverse Effect, as of the Effective Date none
of the properties of the Borrower or any of its Subsidiaries is listed or
proposed for listing on the National Priorities List under CERCLA or on the
Comprehensive Environmental Response, Compensation and Liability
Information System maintained by the Environmental Protection Agency or any
analogous state list of sites requiring investigation or cleanup.
Credit Agreement
----------------
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(k) Except to the extent any of the following could not reasonably be
expected to have a Material Adverse Effect, as of the Effective Date
neither the Borrower nor any of its Subsidiaries has been notified in
writing by any federal, state or local governmental agency or any other
Person that the Borrower or any of its Subsidiaries is potentially liable
for the remedial or other costs with respect to treatment, storage,
disposal, release, arrangement for disposal or transportation of any
Hazardous Material generated by the Borrower or any of its Subsidiaries,
except for costs incurred in the ordinary course of business with respect
to treatment, storage, disposal or transportation of such Hazardous
Materials.
(l) Neither the Borrower nor any of its Material Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
Borrower nor any of its Material Subsidiaries is a "holding company", or an
"affiliate" of a "holding company" or a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of
1935, as amended.
(m) Schedule 4.01(m) is a complete list of all Debt of the Borrower
and its Subsidiaries for or in respect of borrowed money, and any Material
Debt other than for or in respect of borrowed money, as of the Effective
Date.
(n) The aggregate outstanding principal amount of Advances (as such
term is defined in the Existing Credit Agreement) under the Existing Credit
Agreement immediately prior to the Effective Date is zero.
ARTICLE V
COVENANTS
Section 5.01. Affirmative Covenants. So long as any principal of or
---------------------
interest on any Advance or any other amount payable under this Agreement or any
Note shall remain unpaid or any Lender shall have any Commitment hereunder, the
Borrower will, and will cause each of its Material Subsidiaries to:
(a) Compliance with Laws, Etc. Comply with all applicable laws,
--------------------------
rules, regulations and orders, including, without limitation, compliance
with ERISA and all Environmental Laws and environmental permits, except to
the extent that non-compliance with any thereof could not reasonably be
expected to have a Material Adverse Effect.
Credit Agreement
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(b) Payment of Taxes, Etc. Pay and discharge, before the same shall
----------------------
become delinquent, (i) all Taxes imposed upon it or upon its property or
assets and (ii) all lawful claims that, if unpaid, might by law become a
Lien upon its property or assets; provided, that neither the Borrower nor
--------
any of its Subsidiaries shall be required to pay or discharge any such Tax
that is being contested in good faith and by proper proceedings and as to
which appropriate reserves are being maintained to the extent required by
GAAP.
(c) Maintenance of Insurance. Maintain with responsible and reputable
------------------------
insurance companies or associations, insurance, in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses.
(d) Preservation of Corporate Existence, Etc. Subject to Section
-----------------------------------------
5.02(c), preserve and maintain its corporate existence, rights (charter and
statutory) and franchises; provided, that neither the Borrower nor any of
--------
its Material Subsidiaries shall be required to preserve any right or
franchise if the Borrower or such Material Subsidiary shall determine that
the preservation thereof is no longer desirable in the conduct of the
business of the Borrower or such Material Subsidiary, as the case may be,
and that the loss thereof could not reasonably be expected to have a
Material Adverse Effect.
(e) Visitation Rights. At any reasonable time during normal business
-----------------
hours and as may be reasonably requested from time to time (and, so long as
no Event of Default shall have occurred and is continuing, upon reasonable
advance notice), permit the Administrative Agent, and its designated
officers, employees, agents and representatives, to have access thereto and
to make examination thereof at all reasonable times, to make audits and to
inspect and otherwise check its properties, real, personal and mixed.
(f) Keeping of Books. Keep proper books of record and account, in
----------------
which full and materially correct entries shall be made of all financial
transactions and the assets and business of the Borrower and each Material
Subsidiary in accordance with GAAP.
(g) Maintenance of Properties, Etc. Maintain and preserve, except to
-------------------------------
the extent the failure to do so could not reasonably be expected to have a
Material Adverse Effect, all of its properties and assets that are used or
useful in the conduct of its business in good working order and condition,
ordinary wear and tear excepted.
Credit Agreement
----------------
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(h) Transactions with Affiliates. Conduct all transactions with each
----------------------------
of its Affiliates on terms that are no less favorable to the Borrower than
those that would obtain in a comparable arm's-length transaction with a
Person that is not an Affiliate.
(i) Redemption of Old Notes. Redeem the outstanding Old Notes at the
-----------------------
earliest redemption date permitted by their respective terms.
Section 5.02. Negative Covenants. So long as any principal of or
------------------
interest on any Advance or any other amount payable under this Agreement or any
Note shall remain unpaid or any Lender shall have any Commitment hereunder, the
Borrower will not, and will not permit any of its Material Subsidiaries to:
(a) Liens, Etc.
-----------
(i) Create, assume or suffer to exist any Lien on or in respect of
any of its property, assets or revenues, except:
(1) Permitted Liens;
(2) Liens existing on the Effective Date and theretofore
disclosed in writing to the Administrative Agent;
(3) Liens securing the Old Notes; and
(4) Liens on property existing at the time of acquisition of
such property by the Borrower or a Material Subsidiary, or Liens to
secure the payment of all or any part of the purchase price of
property upon the acquisition of such property by the Borrower or a
Material Subsidiary or to secure any Debt incurred or guaranteed prior
to, at the time of, or within 180 days after, the later of the date of
acquisition of such property and the date such property is placed in
service, for the purpose of financing all or any part of the purchase
price thereof, or Liens to secure any Debt incurred or guaranteed for
the purpose of financing the cost to the Borrower or a Material
Subsidiary of improvements to such acquired property; provided,
--------
however, that for purposes of this clause (4), (i) a satellite will be
-------
treated as a newly-acquired asset as of the date it is placed in
service and (ii) any satellite transponder acquired through the
exercise of an early buy-out option shall be treated as a newly-
acquired asset as of the date such option is exercised.
Credit Agreement
----------------
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(b) Debt. Create, incur, assume or suffer to exist any Debt other
----
than:
(i) Debt hereunder;
(ii) Debt under the Old Notes, to the extent permitted hereunder;
(iii) Debt evidenced by the Hughes Electronics Note;
(iv) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(v) Debt outstanding on the Effective Date and heretofore
disclosed to the Lenders in writing;
(vi) Commercial Paper;
(vii) Subordinated Debt;
(viii) unsecured indebtedness for borrowed money, including the
offering of debt securities, in an aggregate amount not to exceed
$250,000,000;
(ix) indebtedness evidenced by deferred purchase payments and
other incentive payments payable by the Borrower or any of its
Subsidiaries to vendors for the purchase of satellites or satellite
related assets;
(x) Permitted Swap Obligations;
(xi) loans by Hughes Electronics or Subsidiaries thereof in the
ordinary course of business to the Borrower up to an aggregate amount
not exceeding $5,000,000 at any one time outstanding; and
(xii) renewals, refinancing and replacements of the Debt permitted
under the foregoing clauses (other than clause (ii)), without increase
in the principal amount or change in any direct or contingent obligor.
Credit Agreement
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(c) Mergers, Restricted Investments, Etc. Merge with or into or
-------------------------------------
consolidate with or into any Person except that if no Default shall have
occurred and be continuing or would result therefrom, (i) any Subsidiary of
the Borrower may be merged or consolidated with or into the Borrower
(provided that the Borrower shall be the continuing or surviving
---------
corporation) or any other Subsidiary of the Borrower and (ii) without
limiting clause (i), any Material Subsidiary of the Borrower may be merged
or consolidated with or into another Person so long as such Material
Subsidiary is the continuing or surviving corporation, and immediately
after giving effect thereto, no Default has occurred and is continuing.
(d) Change in Nature of Business. Make any material change in the
----------------------------
nature of the business of the Borrower and its Material Subsidiaries as
carried on at the Effective Date.
Section 5.03. Reporting Requirements. So long as any principal of or
----------------------
interest on any Advance or any other amount payable under this Agreement or any
Note shall remain unpaid or any Lender shall have any Commitment hereunder:
(a) Default Notice. The Borrower will furnish to the Administrative
--------------
Agent, as soon as possible and in any event within five Business Days after
the Borrower knows of the occurrence of a Default, a statement of a senior
financial officer of the Borrower setting forth details of such Default and
the action that the Borrower has taken and proposes to take with respect
thereto.
(b) Quarterly Financial. As soon as available and in any event
-------------------
within 60 days after the end of each of the first three quarters of each
fiscal year of the Borrower, the Borrower will furnish to the
Administrative Agent, with sufficient copies for each Lender, a
Consolidated balance sheet of the Borrower and its Subsidiaries as of the
end of such quarter and Consolidated statements of operations and cash
flows of the Borrower and its Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures
for the corresponding period of the preceding fiscal year in reasonable
detail and duly certified (subject to year-end audit adjustments) by a
senior financial officer of the Borrower as having been prepared in
accordance with GAAP, together with (i) a certificate of said officer in
substantially the form of Exhibit D (A) stating that no Default has
occurred and is continuing or, if a Default has occurred and is continuing,
setting forth a statement as to the nature thereof and the action that the
Borrower has
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----------------
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taken and proposes to take with respect thereto and (B) stating that since
the last fiscal quarter, there has been no Material Adverse Change and (ii)
a schedule in form satisfactory to the Administrative Agent of the
computations used by the Borrower in determining compliance with the
covenants contained in Section 5.04 and, commencing in the first quarter of
the year 2001, showing the calculations of Excess Cash Flow (as defined in
the Subordination and Amendment Agreement) for such quarter.
(c) Annual Financial. As soon as available and in any event within
----------------
120 days after the end of each fiscal year of the Borrower, the Borrower
will furnish to the Administrative Agent, with sufficient copies for each
Lender, the Consolidated balance sheet of the Borrower and its Subsidiaries
as of the end of such fiscal year and Consolidated statements of income and
cash flows of the Borrower and its Subsidiaries for such fiscal year,
setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year and accompanied by an unqualified opinion
thereon of Deloitte & Touche or other independent public accountants of
nationally recognized standing.
(d) Litigation. Promptly after the commencement thereof, the
----------
Borrower will furnish to the Administrative Agent notice of any action,
suit, litigation or proceeding of the kind described in Section 4.01(g).
(e) Public Filings. The Borrower shall, promptly upon their becoming
--------------
available, deliver to the Administrative Agent and each Lender copies of
any and all registration statements and regular periodic reports that the
Borrower shall have filed with the Securities and Exchange Commission (or
any governmental agency substituted therefor) or any national securities
exchange.
(f) Other Information. The Borrower shall promptly furnish to the
-----------------
Lenders through the Administrative Agent such other information respecting
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or any of its Subsidiaries as the
Administrative Agent or any Lender may from time to time reasonably
request.
Section 5.04. Financial Covenants. So long as any principal of or
-------------------
interest on any Advance or any other amount payable under this Agreement or any
Note shall remain unpaid or any Lender shall have any Commitment hereunder, the
Borrower will:
(a) Leverage Ratio. Cause the Leverage Ratio as of
--------------
Credit Agreement
----------------
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the last day of each fiscal quarter of the Borrower to be not greater than
3.0 to 1.0.
(b) Interest Coverage Ratio. Cause the Interest Coverage Ratio for
-----------------------
each Rolling Period to be at least equal to (i) for each Rolling Period to
and including the Rolling Period ending in December, 1998, 5.0 to 1.0; (ii)
for each Rolling Period ending in 1999, 5.5 to 1.0; and (iii) for each
Rolling Period thereafter, 6.0 to 1.0.
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
- -------------------
(a) the Borrower (i) shall fail to pay when due any principal of any
Advance or (ii) shall fail for three Business Days to pay when due any
interest on any Advance or any other amount payable by it under any Loan
Document; or
(b) any representation or warranty made by the Borrower under or in
connection with any Loan Document, or any representation or warranty by
Hughes Electronics in the Subordination and Amendment Agreement, shall
prove to have been incorrect in any material respect; or
(c) the Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 2.13, Section 5.02, or clause (a) of
Section 5.03, or Section 5.04, or Hughes Electronics shall fail to perform
any term, covenant or agreement in the Subordination and Amendment
Agreement if such failure by Hughes Electronics shall remain unremedied for
a period of 10 days after notice thereof from the Administrative Agent or
any Lender (through the Administrative Agent); or
(d) the Borrower shall fail to perform any other term, covenant or
agreement contained in any Loan Document on its part to be performed or
observed if such failure shall remain unremedied for a period of 30 days
after notice thereof from the Administrative Agent or any Lender (through
the Administrative Agent); or
(e) the Borrower or any of its Material Subsidiaries shall fail to
pay any principal of, premium or interest on or any other amount payable in
respect of any other Debt of the Borrower or such Material Subsidiary (as
the case may be) having an aggregate principal amount of at least
Credit Agreement
----------------
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$25,000,000 ("Material Debt"), when the same becomes due and payable
-------------
(whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise); or any other event shall occur or condition shall exist
under any agreement or instrument relating to any Material Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of Material Debt
or otherwise to cause, or to permit the holder or holders (or an agent or
trustee on its or their behalf) thereof to cause, such Material Debt to
become due in advance of its scheduled maturity; or
(f) the Borrower or any of its Material Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Borrower or any of its Material Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official
for it or for any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by it) that is
being diligently contested by it in good faith, either such proceeding
shall remain undismissed or unstayed for a period of 60 days or any of the
actions sought in such proceeding (including, without limitation, the entry
of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or any substantial part of its
property) shall occur; or the Borrower or any of its Material Subsidiaries
shall take any corporate action to authorize any of the actions set forth
above in this subsection (f); or
(g) any judgment or order for the payment of money in excess of
$25,000,000 shall be rendered against the Borrower or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect, unless such judgment or order shall have been vacated,
satisfied or dismissed or bonded pending appeal; or
(h) a Change in Control shall occur; or
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(i) there shall occur a "reportable event" within the meaning of
Section 4043 of ERISA with respect to any Plan of the Borrower or any of
its ERISA Affiliates; any fact or circumstance (including without
limitation an ERISA Event), which results in, or which the Required Lenders
determine in good faith could reasonably be expected to result in, the
termination of any Plan of the Borrower, any of its Subsidiaries or an
ERISA Affiliate by the PBGC or the appointment by an appropriate United
States District Court of a trustee to administer any such Plan, shall occur
and shall continue for 30 days after written notice of such determination
shall have been given to Borrower or any of its Subsidiaries by the
Administrative Agent, or a trustee shall be appointed by the appropriate
United States District Court to administer any Plan of the Borrower or any
of its Subsidiaries, or the PBGC shall institute proceedings to terminate
any Plan of the Borrower or any of its Subsidiaries or to appoint a trustee
to administer any such Plan and, upon the occurrence of any of the
foregoing, the aggregate amount of the unfunded vested liability for the
benefits guaranteed by the PBGC under all such Plans and the present value
of any Withdrawal Liability which remains unpaid is reasonably estimated to
be in excess of $75,000,000 and such liability is not covered by insurance;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances to be terminated,
whereupon the same shall forthwith terminate and (ii) shall at the request, or
may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Advances and the Notes, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith due
and payable, whereupon the Advances and the Notes, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, that in the event of an actual or deemed entry
--------
of an order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (x) the obligation of each Lender to make Advances shall automatically be
terminated and (y) the Advances and the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower.
Credit Agreement
----------------
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ARTICLE VII
THE ADMINISTRATIVE AGENT
Section 7.01. Authorization and Action. Each Lender hereby appoints
------------------------
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement and the
other Loan Documents as are delegated to the Administrative Agent by the terms
hereof, together with such powers and discretion as are reasonably incidental
thereto. As to any matters not expressly provided for by the Loan Documents,
including, without limitation, enforcement or collection of the Notes, the
Administrative Agent shall not be required to exercise any discretion or take
any action, and shall not be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) except upon the
instructions of the Required Lenders, and such instructions shall be binding
upon all Lenders and all holders of the Notes; provided, that the Administrative
--------
Agent shall not be required to take any action that exposes it to personal
liability or that is contrary to this Agreement or applicable law. The
Administrative Agent agrees to give to each Lender prompt notice of each notice
given to it by the Borrower pursuant to the terms of this Agreement. The
Administrative Agent is irrevocably authorized to enter into the Subordination
and Amendment Agreement.
Section 7.02. Administrative Agent's Reliance, Etc. Neither the
-------------------------------------
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with the Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent (i) may treat the payee of any Note as the
holder thereof until the Administrative Agent receives and accepts an Assignment
and Acceptance entered into by the Lender that is the payee of such Note, as
assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07;
(ii) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by them in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender and shall not be responsible to any
of them for any statements, warranties or representations made in or in
connection with the Loan Documents; (iv) shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of any Loan Document on the part of the Borrower or to inspect the
property (including
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----------------
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the books and records) of the Borrower; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Loan Document or any other instrument or document
furnished pursuant hereto; and (vi) shall incur no liability under or in respect
of any Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopy, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
Section 7.03. CUSA and Affiliates. With respect to its Commitment,
-------------------
the Advances made by it and the Notes issued to it, CUSA shall have the same
rights and powers under the Loan Documents as any other Lender and may exercise
the same as though it were not the Administrative Agent; and the term "Lender"
or "Lenders" shall, unless otherwise expressly indicated, include CUSA in its
individual capacity. CUSA and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures for, accept investment banking
engagements from and generally engage in any kind of business with, the
Borrower, any of its Subsidiaries, any of its Affiliates and any Person who may
do business with or own securities of the Borrower or any such Subsidiary or
Affiliate, all as if CUSA were not the Administrative Agent and without any duty
to account therefor to the Lenders.
Section 7.04. Lender Credit Decision. Each Lender acknowledges that
----------------------
it has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section 4.01
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
Section 7.05. Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent (to the extent not promptly reimbursed by the Borrower),
ratably according to the principal amounts of the Notes then held by each of
them (or if no Advances are at the time outstanding, ratably according to the
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against any of them in any way relating to or
arising out of the Loan Documents or any action taken or omitted by any of them
under the Loan Documents; provided, that no Lender shall be liable for any
--------
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or
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disbursements resulting from the gross negligence or willful misconduct of the
Administrative Agent. Without limitation of the foregoing, each Lender agrees to
reimburse the Administrative Agent promptly upon demand for its ratable share of
any costs and expenses payable by the Borrower under Section 8.04 of this
Agreement to the extent that the Administrative Agent is not promptly reimbursed
for such costs and expenses by the Borrower.
Section 7.06. Successor Administrative Agent. The Administrative
------------------------------
Agent may resign at any time by giving written notice thereof to the Lenders and
the Borrower and may be removed at any time with or without cause by the
Required Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint (subject, so long as no Default has occurred and
is continuing, to the consent of the Borrower, which consent shall not be
unreasonably withheld) a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Required Lenders'
removal of the Administrative Agent, as the case may be, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint (subject, so long as
no Default has occurred and is continuing, to the consent of the Borrower, which
consent shall not be unreasonably withheld) a successor Administrative Agent,
which shall be an Initial Lender or a commercial bank organized under the laws
of the United States or of any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent such
successor Administrative Agent shall succeed to and become vested with all the
rights, powers, discretion, privileges and duties of the retiring Administrative
Agent, as the case may be, and such retiring Administrative Agent shall be
discharged from its duties and obligations under the Loan Documents. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VII shall inure to the
benefit of the Administrative Agent as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
Credit Agreement
----------------
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ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments, Consents, Etc. No amendment or waiver of
--------------------------
any provision of this Agreement or the other Loan Documents, nor any consent to
any departure by the Borrower from any provision of this Agreement or the other
Loan Documents, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, that (i) no amendment, waiver or consent shall,
--------
unless in writing and signed by all the Lenders, do any of the following: (1)
waive any of the conditions specified in Section 3.01, (2) change the percentage
of the Commitments or of the aggregate unpaid principal amount of the Advances,
or the number or percentage of Lenders, that shall be required for the Lenders
or any of them to take any action hereunder, (3) amend this Section 8.01, (4)
reduce the principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, (5) postpone any date fixed for any payment of principal of,
or interest on, the Notes or any fees or other amounts payable hereunder or (6)
modify the Subordination and Amendment Agreement, and (ii) no amendment, waiver
or consent shall, unless in writing and signed by the Required Lenders and each
Lender that would be adversely affected by such amendment, waiver or consent,
increase the Commitment of such Lender or subject such Lender to any additional
obligations; and provided, further, that no amendment, waiver or consent shall,
-------- -------
unless in writing and signed by the Administrative Agent in addition to the
Lenders required above to take such action, affect the rights or duties of the
Administrative Agent under this Agreement, any Note or any other Loan Document.
This Agreement, the other Loan Documents and each confidentiality agreement
entered into in connection herewith constitute the entire agreement of the
parties with respect to the subject matter hereof and thereof.
Section 8.02. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall be in writing (including telecopy communication)
and mailed, telecopied or delivered:
(a) if to the Borrower, at One Pickwick Plaza, Greenwich, CT 06830,
Attention Kenneth N. Heintz, telephone number (203) 622-6664, telecopier
number (203) 622-9163, with a copy to James W. Cuminale, Senior Vice
President & General Counsel at the same address and a copy to David Wilf,
Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, NY, telephone
number (212) 408-5440, telecopier number (212) 541-5369;
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(b) if to any Initial Lender, at its Domestic Lending Office
specified opposite its name on the signature pages hereof;
(c) if to any other Lender, at its Domestic Lending Office specified
in the Assignment and Acceptance pursuant to which it became a Lender;
(d) if to the Administrative Agent, at its address at 2 Penns Way,
Suite 200, New Castle, Delaware 19720, Attention: Brian Maxwell, telephone
number 302-894-6023, telecopier number 302-894-6120; with copies to Mr.
Walter Larsen, 725 South Figueroa Street, 5th Floor, Los Angeles, CA 90018,
telephone number 213-239-1501, telecopier number 213-623-3592;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and communications
shall, when mailed or telecopied, be effective when deposited in the mails or
transmitted by telecopier, respectively, except that notices and communications
to the Administrative Agent pursuant to Article II or III shall not be effective
until received by the Administrative Agent.
Section 8.03. No Waiver; Remedies. No failure on the part of any
-------------------
Lender or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Credit Agreement
----------------
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Section 8.04. Costs, Expenses and Indemnification.
-----------------------------------
(a) The Borrower agrees to pay on demand (i) all reasonable out-of-
pocket costs and expenses of the Administrative Agent in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents including, without limitation, the reasonable and documented
fees and expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel
to the Administrative Agent, whether or not any of the transactions contemplated
by this Agreement are consummated, and the reasonable and documented fees and
expenses of counsel for the Administrative Agent, with respect to advising the
Administrative Agent as to its rights and responsibilities, or the protection or
preservation of rights or interests, under the Loan Documents, and (ii) all
documented costs and expenses of the Administrative Agent and the Lenders in
connection with the enforcement of the Loan Documents, whether in any action,
suit or litigation, any bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally or otherwise (including, without
limitation, the reasonable fees and expenses of counsel for the Administrative
Agent and each Lender with respect thereto).
(b) The Borrower agrees to indemnify and hold harmless the
Administrative Agent and each Lender and each of their Affiliates and their
officers, directors, employees, agents, advisors and representatives (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
- ------------------
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party (other than a claim by a Lender against another Lender or the
Administrative Agent or by the Administrative Agent against a Lender), in each
case arising out of the entering into and performance of the Loan Documents, the
preparation for a defense of, any investigation, litigation or proceeding
arising therefrom or any of the other transactions contemplated hereby or
thereby, in each case whether or not such investigation, litigation or
proceeding is brought by the Borrower, its directors, shareholders or creditors
or an Indemnified Party or any Indemnified Party is otherwise a party thereto
and whether or not the transactions contemplated hereby or thereby are
consummated, except to the extent such claim, damage, loss, liability or expense
is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's negligence or
willful misconduct. The Borrower also agrees that the Administrative Agent, the
Lenders, their Affiliates and their respective directors, officers, employees,
attorneys, agents or representatives shall have no liability on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to the transactions
Credit Agreement
----------------
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-54-
contemplated herein or in any other Loan Document or the actual or proposed use
of the proceeds of the Advances.
(c) If for any reason any payment of principal of, or Conversion of,
any Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender other than on the last day of an Interest Period for such Advance, the
Borrower shall, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender any amounts required to compensate such Lender for any additional losses,
costs or expenses that it may incur as a result of such payment, including,
without limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund or maintain such Advance. A
certificate of such Lender setting forth in reasonable detail the amount to
which such Lender is then entitled under this clause (c) shall be conclusive and
binding on the Borrower in the absence of manifest error.
(d) The Borrower agrees to pay to each Lender, so long as such Lender
shall be required under regulations of the Board of Governors of the Federal
Reserve System to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or the equivalent),
additional interest on the unpaid principal amount of each Eurodollar Rate
Advance, from the date of such Eurodollar Rate Advance until such principal
amount is paid in full, at an interest rate per annum equal at all times to the
remainder obtained by subtracting (i) the Eurodollar Rate for the then current
Interest Period for such Eurodollar Rate Advance from (ii) the rate obtained by
dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar
-----
Rate Reserve Percentage for such Interest Period, payable on each date on which
interest is payable on such Eurodollar Rate Advance. A certificate of such
Lender setting forth in reasonable detail the amount to which such Lender is
then entitled under this clause (d) shall be conclusive and binding on the
Borrower in the absence of manifest error.
(e) If the Borrower fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, reasonable fees and expenses of counsel and indemnities, such amount
may be paid on behalf of the Borrower by the Administrative Agent or any Lender,
in its sole discretion.
Section 8.05. Right of Setoff. Upon (a) the occurrence and during
---------------
the continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender is hereby authorized at any time and
Credit Agreement
----------------
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-55-
from time to time, to the fullest extent permitted by law, to set off and
otherwise apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the Borrower against any
and all of the obligations of the Borrower now or hereafter existing under this
Agreement and the Note held by such Lender, irrespective of whether such Lender
shall have made any demand under this Agreement or such Note and although such
obligations may be unmatured. Each Lender agrees promptly to notify the
Borrower after any such setoff and application; provided, that the failure to
--------
give such notice shall not affect the validity of such setoff and application.
The rights of each Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of setoff) that such
Lender may have.
Section 8.06. Governing Law; Submission to Jurisdiction. This
-----------------------------------------
Agreement and the Notes shall be governed by, and construed in accordance with,
the law of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York County
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby, and hereby irrevocably
appoints CT Corporation System having offices on the date hereof at 1633
Broadway, New York, New York 10019 as its true and lawful attorney-in-fact in
its name, place and stead to accept such service of process. The Borrower
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
Section 8.07. Assignments and Participations.
------------------------------
(a) Each Lender may assign to one or more banks or other entities all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment, the Advances owing to it
and the Note or Notes held by it); provided, that:
--------
(i) except in the case of an assignment to a Person that, immediately
prior to such assignment, was a Lender or an Approved Lender Affiliate or
an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being
assigned pursuant to each such assignment (determined as of the date of the
Assignment and Acceptance with respect to such assignment) shall in no
event be less than the lesser
Credit Agreement
----------------
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of (x) such Lender's Commitment hereunder and (y) $5,000,000 or an integral
multiple of $1,000,000 in excess thereof (except as otherwise agreed by the
Borrower and the Administrative Agent),
(ii) except in the case of an assignment to a Person that, immediately
prior to such assignment, was a Lender or an Approved Lender Affiliate,
each such assignment shall be made only upon the prior written approval of
the Borrower and the Administrative Agent, such approvals not to be
unreasonably withheld or delayed,
(iii) each such assignment shall be to an Eligible Assignee,
(iv) each such assignment by a Lender of its Advances, Commitment or
Note shall be made in such manner so that the same portion of its Advances,
Commitment and Note is assigned to the respective assignee, and
(v) the parties to each such assignment shall execute and deliver to
the Administrative Agent, for its acceptance and recording in the Register,
an Assignment and Acceptance, together with any Note or Notes subject to
such assignment and a processing and recordation fee of $3,000.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in such Assignment and Acceptance, (x) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with
Credit Agreement
----------------
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-57-
respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Administrative Agent, such assigning
Lender, or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; (vii) such assignee agrees to
comply with its obligations under Section 2.11(e); and (viii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at its address referred to in Section 8.02 a copy
of each Assignment and Acceptance delivered to and accepted by it and a register
for the recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Advances owing to, each Lender from time to time
(the "Register"). The entries in the Register shall be conclusive and binding
--------
for all purposes, absent manifest error, and the Borrower, the Administrative
Agent and the Lenders shall treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. No
assignment shall be effective until it is recorded in the Register pursuant to
this Section 8.07(c). The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee, together with any Note or Notes subject to
such assignment, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form prescribed
herein, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower. Within five Business Days after its receipt of such notice, the
Borrower, at its own expense, shall execute and deliver to the Administrative
Agent in exchange for
Credit Agreement
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the surrendered Note or Notes a new Note or Notes to the order of such assignee
in an amount equal to the Commitment assumed by it pursuant to such Assignment
and Acceptance and, if the assigning Lender has retained a Commitment, a new
Note or Notes to the order of the assigning Lender in an amount equal to the
portion so retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit A.
(e) Each Lender may sell participations in or to all or a portion of
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment, the Advances owing to it and the Note or
Notes held by it); provided, that (i) such Lender's obligations under this
--------
Agreement (including, without limitation, its Commitment) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) such Lender shall remain
the holder of any such Note for all purposes of this Agreement, (iv) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of any Loan Document, or any consent to any departure by the Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Notes or any fees or other amounts
payable hereunder, in each case to the extent subject to such participation,
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, in each case to the extent
subject to such participation.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided, that, prior to any such disclosure, the
--------
assignee or participant or proposed assignee or participant shall agree in
writing to preserve the confidentiality of any confidential information received
by it from such Lender in form and substance reasonably satisfactory to the
Borrower.
(g) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and the Note or Notes held by it) in favor of any Federal Reserve
Bank in
Credit Agreement
----------------
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accordance with Regulation A.
(h) Anything in this Section 8.07 to the contrary notwithstanding,
neither the Borrower nor any of its Subsidiaries or Affiliates may acquire
(whether by assignment, participation or otherwise), and no Lender shall assign
or participate to the Borrower or any of its Subsidiaries or Affiliates, any
interest in any Commitment, Advance or other amount owing hereunder without the
prior consent of each Lender.
Section 8.08. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 8.09. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
--------------------
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS, THE ADVANCES OR THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Section 8.10. Survival. The obligations of the Borrower under
--------
Sections 2.09, 2.11 and 8.04, and the obligations of the Lenders under Section
7.05, shall survive the repayment of the Advances and the termination of the
Commitments. In addition, each representation and warranty made, or deemed to
be made by a notice of any extension of credit, herein or pursuant hereto shall
survive the making of such representation and warranty, and no Lender shall be
deemed to have waived, by reason of making any extension of credit hereunder,
any Default that may arise by reason of such representation or warranty proving
to have been false or misleading, notwithstanding that such Lender or the
Administrative Agent may have had notice or knowledge or reason to believe that
such representation or warranty was false or misleading at the time such
extension of credit was made.
Section 8.11. Captions. The table of contents and captions and
--------
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
Section 8.12. Successors and Assigns. This Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, provided, that the Borrower may not assign any
--------
of its rights or
Credit Agreement
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obligations hereunder or under the other Loan Documents without
the prior consent of all of the Lenders and the Administrative Agent.
Credit Agreement
----------------
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BORROWER
--------
PANAMSAT CORPORATION
By /s/ Lourdes Saralegui
-------------------------
Title:
Credit Agreement
----------------
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ADMINISTRATIVE AGENT
--------------------
CITICORP USA, INC.
By [Signature Illegible]
----------------------------
Title: Attorney-in-Fact
CO-DOCUMENTATION AGENTS
-----------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By [Signature Illegible]
----------------------------
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Douglas Maher
---------------------------
Title: Vice President
Credit Agreement
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LENDERS
-------
Commitment
- ----------
$50,000,000 CITICORP USA, INC.
By [Signature Illegible]
----------------------------
Title: Attorney-in-Fact
Eurodollar Lending Office:
399 Park Avenue
New York, New York 10043
Domestic Lending Office:
399 Park Avenue
New York, New York 10043
Attention: Brian Maxwell
Facsimile: 302-894-6120
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Commitment
- ----------
$45,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By [Signature Illegible]
-----------------------------
Title: Vice President
Eurodollar Lending Office:
GPO-Domestic Account Administration
#5693
1850 Gateway Blvd., 3rd Floor
Concord, California 94520
Domestic Lending Office:
GPO-Domestic Account Administration
#5693
1850 Gateway Blvd., 3rd Floor
Concord, California 94520
Attention: Donna Cowan
Facsimile: 510-603-8209
Credit Agreement
----------------
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Commitment
- ----------
$45,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Douglas Maher
---------------------------
Title: Vice President
Eurodollar Lending Office:
Nassau Bahamas Office
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19715
Domestic Lending Office:
60 Wall Street
New York, New York 10260-0060
Attention: Bob Osieski
Facsimile: 212-648-5018
Credit Agreement
----------------
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Commitment
- ----------
$30,000,000 THE CHASE MANHATTAN BANK
By /s/ Richard C. Smith
--------------------------
Title: Vice President
Eurodollar Lending Office:
1 Chase Manhattan Plaza
New York, New York 10017
Domestic Lending Office:
1 Chase Manhattan Plaza
New York, New York 10017
Attention: May Fong
Facsimile: 212-552-5650
Credit Agreement
----------------
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Commitment
- ----------
$30,000,000 CREDIT SUISSE FIRST BOSTON
By /s/ Mark A. Sampson
----------------------------
Title: Vice President
By /s/ Thomas G. Muoio
----------------------------
Title: Vice President
Eurodollar Lending Office:
11 Madison Avenue, 20th Floor
New York, New York 10010
Domestic Lending Office:
11 Madison Avenue, 20th Floor
New York, New York 10010
Attention: Jenaro Sarasola
Facsimile: 212-325-6508/6509
Credit Agreement
----------------
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Commitment
- ----------
$30,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Mark A. Isley
-----------------------------
Title: First Vice President
Eurodollar Lending Office:
One First National Plaza
Chicago, Illinois 60670
Domestic Lending Office:
One First National Plaza
Chicago, Illinois 60670
Attention: Sharon Bosch
Facsimile: 312-732-4840
Credit Agreement
----------------
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Commitment
- ----------
$30,000,000 NATIONSBANK OF TEXAS, N.A.
By /s/ Pamela S. Kurtzman
-----------------------------
Title: Vice President
Eurodollar Lending Office:
901 Main Street
14th Floor
Dallas, Texas 75202
Domestic Lending Office:
901 Main Street
14th Floor
Dallas, Texas 75202
Attention: Geri Evans
Facsimile: 214-508-2020
Credit Agreement
----------------
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Commitment
- ----------
$20,000,000 BANCA COMMERCIALE ITALIANA
LOS ANGELES FOREIGN BRANCH
By /s/ E. Bombieri
------------------------------
Title: V.P. & Manager
By /s/ J. Wityak
------------------------------
Title: V.P.
Eurodollar Lending Office:
555 South Flower Street, Suite 4300
Los Angeles, California 90071
Domestic Lending Office:
555 South Flower Street, Suite 4300
Los Angeles, California 90071
Attention: Mr. Elias Afram
Facsimile: 213-624-0457
Credit Agreement
----------------
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Commitment
- ----------
$20,000,000 THE BANK OF NEW YORK
By [Signature Illegible]
--------------------------------
Title: Assistant Vice President
Eurodollar Lending Office:
1 Wall Street
New York, New York 10286
Domestic Lending Office:
1 Wall Street
New York, New York 10286
Attention: Pilar Kinzie
Facsimile: 212-635-8679
Credit Agreement
----------------
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Commitment
- ----------
$20,000,000 BANQUE NATIONALE DE PARIS
By [Signature Illegible]
-------------------------------
Title: Vice President
By [Signature Illegible]
-------------------------------
Title: Vice President
Eurodollar Lending Office:
725 South Figueroa Street
Suite 2090
Los Angeles, California 90017
Domestic Lending Office:
725 South Figueroa Street
Suite 2090
Los Angeles, California 90017
Attention: Treasury Department
Facsimile: 415-989-9041
Credit Agreement
----------------
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Commitment
- ----------
$20,000,000 BARCLAYS BANK PLC
By /s/ R.P. Smithies
----------------------------
Title: Director
Eurodollar Lending Office:
75 Wall Street, 12th Floor
New York, New York 10265
Domestic Lending Office:
75 Wall Street, 12th Floor
New York, New York 10265
Attention: Judy Kwang
Facsimile: 212-412-5307/5308
Credit Agreement
----------------
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-74-
Commitment
- ----------
$20,000,000 BAYERISCHE LANDESBANK GIROZENTRALE,
CAYMAN ISLANDS BRANCH
By /s/ Thomas von Kistowsky
-------------------------------
Title: Senior Vice President
By /s/ Sean O'Sullivan
-------------------------------
Title: Vice President
Eurodollar Lending Office:
560 Lexington Avenue
New York, New York 10022
Domestic Lending Office:
50 Lexington Avenue
New York, New York 10022
Attention: Patricia Sanchez
Facsimile: 212-310-9930
Credit Agreement
----------------
<PAGE>
-75-
Commitment
- ----------
$20,000,000 ING LEASE (IRELAND) B.V.
By [Signature Illegible]
-------------------------------
Title:
By /s/ Leo Hellings
-------------------------------
Title: Senior Vice President
Eurodollar Lending Office:
49 St. Stephens Green
Dublin 2, Ireland
Attention: Ruth Keernan
Facsimile: 011-353-1-662-2240
Domestic Lending Office:
N/A
Credit Agreement
----------------
<PAGE>
-76-
Commitment
- ----------
$20,000,000 ISTITUTO BANCARIO SAN PAOLO DI
TORINO SpA
By [Signature Illegible]
-------------------------------
Title: First Vice President
By [Signature Illegible]
-------------------------------
Title: Vice President
Eurodollar Lending Office:
245 Park Avenue
New York, New York 10167
Domestic Lending Office:
245 Park Avenue
New York, New York 10167
Attention: Carmela Romanello-
Schaden
Facsimile: 212-599-5303
Credit Agreement
----------------
<PAGE>
-77-
Commitment
- ----------
$20,000,000 THE LONG TERM CREDIT BANK OF JAPAN,
LTD.
By /s/ T. Morgan Edwards II
--------------------------------
Title: Deputy General Manager
Eurodollar Lending Office:
350 South Grand Avenue
Suite 3000
Los Angeles, California 90071
Domestic Lending Office:
350 South Grand Avenue
Suite 3000
Los Angeles, California 90071
Attention: Winnie Dutt
Facsimile: 213-626-1067
Credit Agreement
----------------
<PAGE>
-78-
Commitment
- ----------
$20,000,000 MELLON BANK, N.A.
By /s/ Susan A. Dalton
----------------------------
Title: Vice President
Eurodollar Lending Office:
Three Mellon Bank Center
Room 2304
Pittsburgh, Pennsylvania 15254
Domestic Lending Office:
Three Mellon Bank Center
Room 2304
Pittsburgh, Pennsylvania 15254
Attention: Darie Gardell
Facsimile: 412-236-2027
Credit Agreement
----------------
<PAGE>
-79-
Commitment
- ----------
$20,000,000 UNION BANK OF CALIFORNIA, N.A.
By [Signature Illegible]
----------------------------
Title: Vice President
Eurodollar Lending Office:
445 South Figueroa Street
16th Floor
Los Angeles, California 90071
Domestic Lending Office:
445 South Figueroa Street
16th Floor
Los Angeles, California 90071
Attention: S. Jason Kim
Facsimile: 213-236-7636
Credit Agreement
----------------
<PAGE>
-80-
Commitment
- ----------
$20,000,000 UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By /s/ Robert H. Riley III
------------------------------
Title: Managing Director
By /s/ David G. Dickinson, Jr.
------------------------------
Title: Assistant Vice President
Eurodollar Lending Office:
299 Park Avenue
New York, New York 10171
Domestic Lending Office:
299 Park Avenue
New York, New York 10171
Attention: Mike Petersen
Facsimile: 212-821-3259
Credit Agreement
----------------
<PAGE>
-81-
Commitment
- ----------
$20,000,000 WESTDEUTSCHE LANDESBANK
By /s/ Salvatore Battinelli
------------------------------
Title: Vice President
By /s/ Elisabeth R. Wilds
------------------------------
Title: Associate
Eurodollar Lending Office:
1211 Avenue of the Americas
New York, New York 10036
Domestic Lending Office:
1211 Avenue of the Americas
New York, New York 10036
Attention: Cheryl Y. Wilson
Facsimile: 212-302-7946
Credit Agreement
----------------
<PAGE>
-82-
The following Schedules and Exhibits have been omitted:
SCHEDULES
---------
SCHEDULE 4.01(b) Subsidiaries
SCHEDULE 4.01(g) Litigation
SCHEDULE 4.01(m) Existing Debt
EXHIBITS
--------
EXHIBIT A Form of Note
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C Form of Assignment and Acceptance
EXHIBIT D Form of Compliance Certificate
EXHIBIT E Form of Subordination and Amendment
Agreement
EXHIBIT F Form of Opinion of General Counsel of the
Borrower
EXHIBIT G Form of Opinion of Special New York Counsel
to the Borrower
EXHIBIT H Form of Opinion of Assistant General
Counsel of Hughes Electronics
EXHIBIT I Form of Opinion of Special New York Counsel
to the Administrative Agent
<PAGE>
EXHIBIT 10.44
AGREEMENT
THIS AGREEMENT made and entered into effective as of March 21, 1997,
(this Agreement, as the same may hereafter be amended from time to time,
hereinafter referred to as this "Agreement"), by and between PanAmSat
Corporation, a Delaware corporation (hereinafter referred to as the "Company"),
and Patrick J. Costello (hereinafter referred to as "Executive").
W I T N E S S E T H
WHEREAS, Executive is currently serving Company as its Chief Financial
Officer; and
WHEREAS, following the Merger described below, Executive's job duties
will change as described herein; and
WHEREAS, Executive and Company have previously entered into an
Agreement dated May 15, 1996 (the "May 15 Agreement") (capitalized terms used
herein and not otherwise defined shall have the respective meanings assigned to
them in the May 15 Agreement); and
WHEREAS, Company intends to enter into a business combination (the
"Merger") as set forth in the Agreement and Plan or Reorganization among Hughes
Communications, Inc., Hughes Communications Galaxy, Inc., Hughes Communications
Satellite Services, Inc., Hughes Communications Services, Inc., Hughes
Communications Carrier Services, Inc., and Company dated September 20, 1996; and
WHEREAS, Company and Executive believe that it is in their best
interests to enter into this Agreement in connection with Executive's change in
executive capacity;
NOW, THEREFORE, in consideration of the foregoing and the promises,
covenants and agreements hereinafter set forth, Company and Executive hereby
agree as follows:
Section 1. Material Change. Upon the closing of the Merger, a
----------------
Material Change shall be deemed to have occurred for the purposes of the May 15
Agreement.
Section 2. Continued Employment. Without in any way impairing
--------------------
Executive's right to elect to terminate his services following the occurrence of
a Material Change and to receive the benefits described in the May 15 Agreement,
Executive agrees to continue as an employee to assist the Chief Financial
Officer in the transition following the Merger and to perform such other non-
finance related services for up to six months from the date of the Merger as
requested by the Chief Executive Officer; provided, that Executive shall be
--------
given at least thirty (30) days prior written notice of
<PAGE>
termination. For such time as Executive remains an employee of the Company,
Executive shall retain the perquisites and benefits otherwise attendant to his
status in the Company on the date hereof.
Section 3. Employment Duties. After the closing of the Merger,
-----------------
Executive shall be entitled to a Termination Payment as calculated in the May 15
Agreement and subject to Section 4 and 5 of this Agreement.
Section 4. No Notice Necessary. Notwithstanding Section B.2 of the
-------------------
May 15 Agreement, there shall be no obligation on the part of Executive to give
the Company notice of constructive termination and the Company shall have no
right to cure such constructive termination.
Section 5. Right to Termination Payment. The Termination Payment
----------------------------
shall be due and payable within five days following the Merger.
Section 6. No Competing Employment. Section L of the May 15
-----------------------
Agreement is hereby amended by commencing the 18th month period described
therein at the time of the closing of the Merger. Commencing on the date of
this Agreement and during the period that Executive continues to be employed by
the Company in any capacity, Executive may conduct outside business activities
that are not in violation of Section L of the May 15 Agreement, as so amended.
Section 7. Void Absent Merger. Should the Merger not occur, this
------------------
Agreement shall be void and of no further force or effect.
IN WITNESS WHEREOF, Company and Executive have executed this Agreement
as of the day and year first above written.
PANAMSAT CORPORATION
By: Frederick A. Landman
-------------------------------------
Frederick A. Landman
President and Chief Executive Officer
Patrick J. Costello
-------------------------------------
Patrick J. Costello
2
<PAGE>
EXHIBIT 10.50
MAGELLAN INTERNATIONAL, INC.
April 7, 1997
Hughes Electronics Corporation
7200 Hughes Terrace
Bldg. C01
Los Angeles, CA 90080-0028
Attention: Charles H. Noski, Vice Chairman
and Chief Financial Officer
Mr. Kenneth N. Heintz
c/o Hughes Electronics Corporation
7200 Hughes Terrace
Bldg. C01
Los Angeles, CA 90080-0028
RE: TERMS OF ASSIGNMENT OF KENNETH N. HEINTZ ("EXECUTIVE") TO PANAMSAT
CORPORATION
Gentlemen:
This letter will confirm the agreements among Magellan International, Inc.
(to be known as PanAmSat Corporation) ("PanAmSat"), Hughes Electronics
Corporation ("Hughes") and the Executive concerning the Executive's employment
by Hughes and his assignment to PanAmSat. Pursuant to an agreement (the
"Reorganization Agreement") dated September 20, 1996 among Hughes
Communications, Inc. and certain of its affiliates ("HCI"), PanAmSat and a
corporation named PanAmSat Corporation which is to be renamed PanAmSat
International Systems, Inc. ("OldPAS"), the parties will engage in a business
combination (the "Transaction") which will result in the acquisition by PanAmSat
of all the issued and outstanding stock of OldPAS and certain assets of HCI
comprising the Galaxy Business, as defined in the Reorganization Agreement. It
is the desire of the parties that the Executive serve PanAmSat as its Executive
Vice President and Chief Financial Officer, and it is the intention of the
parties that the Executive shall ultimately be employed by PanAmSat in such
capacity. For an interim period of time, it is in the interests of the parties
that the Executive continue to be employed by Hughes and assigned on a full-time
basis to PanAmSat as provided below. Accordingly, it is agreed as follows:
1. EMPLOYMENT OF EXECUTIVE BY HUGHES AND ASSIGNMENT TO PANAMSAT. Hughes
agrees to assign to PanAmSat, and PanAmSat agrees to accept from Hughes, the
full-time services of the Executive who will hold the office and title of
Executive Vice President and Chief Financial Officer of PanAmSat. During the
term of this Agreement, Executive shall
<PAGE>
April 7, 1997 Page 2
continue to be an employee of Hughes, shall be maintained on the payroll of
Hughes and, except as provided herein, shall be maintained on the benefits
programs of Hughes, shall be under the sole direction and control of PanAmSat
and shall report directly to the President and Chief Executive Officer.
Executive accepts the assignment to PanAmSat, will devote all of his business
time and energy to the duties of the office of Executive Vice President and
Chief Financial Officer other than transition matters for HE as agreed to from
time to time by the Chief Executive Officer of PanAmSat, and will be located in
the offices of PanAmSat at Greenwich, Connecticut.
2. TERM. This Agreement shall commence on the closing of the Transaction
and shall continue for a period not to exceed one year (the "Term"). At any
time during the Term, the Executive may elect by written notice to Hughes and
PanAmSat to terminate this assignment and to be employed by PanAmSat directly,
which notice shall be effective on the first day of the next succeeding pay
period. If the assignment of Executive is in effect upon the expiration of the
Term, subject to Section 5, the Executive shall be transferred to the employ of
PanAmSat as provided below and this Agreement shall terminate and expire. The
assignment of Executive to PanAmSat hereunder and any subsequent employment of
Executive by PanAmSat shall be terminable by either party for any reason or no
reason.
3. BASE COMPENSATION AND BENEFITS. PanAmSat shall pay to Hughes monthly
during the Term an amount equal to the following:
a. The sum of $23,222, representing one-twelfth of an annual base salary
of $280,000 (as same may be adjusted upwards by the Compensation Committee of
PanAmSat's Board of Directors at such time as the salaries of other executive
officers of PanAmSat are adjusted);
b. An amount equal to the lesser of (i) Hughes' monthly cost of
providing medical and health insurance, life/disability insurance and other
welfare benefits ("Welfare Benefits") to Executive or (ii) the amount which
PanAmSat would have paid if Executive had elected to receive all Welfare
Benefits for which he would have been eligible had he been a direct employee of
PanAmSat;
c. The amount which Hughes pays into any retirement plan for the benefit
of the Executive as a match against Executive's contribution, not to exceed 4%
of Executive's compensation. Following Executive's direct employment by
PanAmSat, Executive will participate in PanAmSat's 401(k) plan; and
d. All direct expenses paid by Hughes in respect of Executive's
employment, such as the employer's contribution for FICA.
Additionally, PanAmSat will reimburse Hughes for all costs paid by Hughes
in connection with the relocation of Executive to Connecticut consistent with
PanAmSat's relocation policy, a copy of which is attached to this letter as
Exhibit A (the "Relocation
- ---------
<PAGE>
April 7, 1997 Page 3
Policy"), subject to a limit of $100,000. All expenses of Executive in excess of
$100,000 under the Relocation Policy as administered by PanAmSat shall be paid
by Hughes.
Executive's business travel and entertainment expenses incurred in the service
of PanAmSat will be paid or reimbursed directly to Executive upon presentation
of expense reports in accordance with PanAmSat's business expense policies.
4. BONUS COMPENSATION; STOCK OPTIONS; RESIDUAL HUGHES' PLANS.
4.1 PanAmSat Plans. In addition to the sums payable to Hughes under
Section 3 above, PanAmSat shall make a payment to Hughes for the account of the
Executive equal to the amount which would have been paid to Executive if he had
been employed by PanAmSat under PanAmSat's annual incentive plan ("AIP")
applicable to executive officers of PanAmSat for the calendar year 1997, which
payment will be made at the same time as PanAmSat pays bonuses to its executive
officers for 1997. It is anticipated that the target bonus for Executive under
the AIP for 1997 would be $160,000. Hughes will pay any bonus paid to it by
PanAmSat to the Executive. If Executive becomes an employee of PanAmSat during
1998, he will be eligible to participate in the AIP for the entire calendar year
as if he had been an employee from January 1, 1998. Additionally, PanAmSat
shall make an initial award as of the closing of the Transaction of stock
options to Executive directly, as an independent contractor, for 25,000 shares
of PanAmSat common stock which shall be exercisable at the price and upon the
same terms and conditions as shall be applicable to options granted to other
senior executives of PanAmSat as of the closing of the Transaction.
Notwithstanding the foregoing, all stock options so granted to Executive shall
terminate in the event Executive ceases to serve as Executive Vice President and
Chief Financial Officer of PanAmSat.
4.2 Hughes Plans. The parties acknowledge that Executive has residual
benefits under the following Hughes plans which relate to his employment by
Hughes prior to the closing of the Transaction:
a. Stock options for the purchase of GMH stock;
b. Payments under the long term achievement plan ("LTAP") of Hughes
which will be made in 1998, 1999 and 2000 in respect of awards made in 1995,
1996 and 1997 (prior to the closing of the Transaction).
The benefits described in clauses a. and b. of this Section 4.2 shall survive
the execution of this Agreement and Executive's employment with PanAmSat, but
shall terminate in accordance with the plans in the event Executive ceases to be
employed by Hughes or any of its affiliates or PanAmSat. Other than the awards
and incentives referred to in this Section and other than the compensation
referred to in Section 3 of this Agreement, Hughes will not grant further
compensation, bonuses, incentives or awards to Executive following the closing
of the Transaction or with respect to any period during the Term of this
Agreement or Executive's subsequent employment by PanAmSat.
<PAGE>
April 7, 1997 Page 4
5. EMPLOYMENT OF EXECUTIVE BY PANAMSAT. Unless Executive or PanAmSat has
given 30 days' written notice to the other that employment with PanAmSat will
not commence upon the expiration of the Term, then upon the expiration of the
Term, executive shall become an employee of PanAmSat and shall be paid a salary
at an annual rate equal to the annual rate in effect under Section 3a.
Additionally, Executive shall be eligible for participation in all plans and
benefits maintained by PanAmSat for its executive officers including, but not
necessarily limited to the AIP, stock option plan, deferred compensation plan,
401(k) retirement plan and Welfare Benefits.
6. MISCELLANEOUS.
6.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of Connecticut.
6.2 This Agreement constitutes the entire agreement of the parties
concerning its subject matter and all prior agreements and understandings,
whether oral or in writing, are merged herein and superseded hereby. This
Agreement shall be binding upon and enure to the benefit of the parties and
their permitted successors and assigns and may be amended only by a written
instrument signed by the parties.
6.3 This Agreement is personal to the parties and may not be assigned or
delegated without the express written consent of the parties.
6.4 This Agreement may be signed in counterparts all of which when taken
together shall constitute one Agreement.
6.5 If any provision of this Agreement is determined to be illegal or
unenforceable, such provision shall not affect the legality or enforceability of
the remaining provisions, it being the intention of the parties that each
provision is severable from each other provision.
If the foregoing terms and conditions re acceptable, please sign a copy of
this letter where indicated and return it to the undersigned whereupon this
letter shall be a binding agreement between us.
Very truly yours,
MAGELLAN INTERNATIONAL,
INC.
By /s/ Charles H. Noski
--------------------
Accepted and agreed to this April 18, 1997
<PAGE>
April 7, 1997 Page 5
HUGHES ELECTRONICS CORPORATION
By /s/ Robert G. Parke
----------------------------------------
Agreed to and accepted this April 9, 1997
Kenneth N. Heintz
- -----------------------------------------
Kenneth N. Heintz
<PAGE>
EXHIBIT 21.1
PANAMSAT CORPORATION
List of Subsidiaries
PanAmSat Communications Japan, Inc. California
PanAmSat Communications Carrier Services, Inc. California
PanAmSat Communications Services, Inc. California
PanAmSat International Holdings, Inc. Delaware
USHI, Inc. Delaware
PanAmSat International Systems, Inc. Delaware
PAS International Employment, Inc. Delaware
PanAmSat Europe Limited United Kingdom
PanAmSat Asia Pty., Ltd. Australia
PanAmSat FSC, Incorporated Barbados
PanAmSat Africa (Proprietary), Ltd. South Africa
Southern Satellite Licensee Corp. Delaware
PanAmSat Carrier Services, Inc. Delaware
Southern Satellite Corp. Connecticut
PanAmSat Capital Corporation Delaware
PanAmSat Licensee Corp. Delaware
PanAmSat India, Inc. Delaware
PanAmSat Mexico. Inc. Delaware
PanAmSat Asia Carrier Services, Inc. Delaware
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities with respect to
PanAmSat Corporation stated with their respective names below, hereby constitute
and appoint JAMES W. CUMINALE, KENNETH N. HEINTZ, and each of them severally,
the attorneys-in-fact of the undersigned with full power to them and each of
them to sign for and in the name of the undersigned in the capacities indicated
below the Annual Report on Form 10-K of PanAmSat Corporation for the fiscal year
ended December 31, 1997 and any and all amendments thereto:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Michael T. Smith Chairman of the Board of March 20, 1998
- --------------------------------- Directors
Michael T. Smith
Frederick A. Landman President and Chief March 20, 1998
- --------------------------------- Executive Officer (principal
Frederick A. Landman executive officer) and
Director
Patrick J. Costello Director March 20, 1998
- ---------------------------------
Patrick J. Costello
Steven D. Dorfman Director March 20, 1998
- ---------------------------------
Steven D. Dorfman
John J. Higgins Director March 20, 1998
- ---------------------------------
John J. Higgins
Dennis F. Hightower Director March 20, 1998
- ---------------------------------
Dennis F. Hightower
James M. Hoak Director March 20, 1998
- ---------------------------------
James M. Hoak
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Charles H. Noski Director March 20, 1998
- ---------------------------------
Charles H. Noski
Ted G. Westerman Director March 20, 1998
- ---------------------------------
Ted G. Westerman
Joseph R. Wright, Jr. Director March 20, 1998
- ---------------------------------
Joseph R. Wright, Jr.
Kenneth N. Heintz Executive Vice President and March 20, 1998
- --------------------------------- Chief Financial Officer
Kenneth N. Heintz (principal financial officer
and principal accounting
officer)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS OF
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 91,739
<SECURITIES> 0
<RECEIVABLES> 68,787
<ALLOWANCES> 200
<INVENTORY> 0
<CURRENT-ASSETS> 285,357
<PP&E> 2,942,768
<DEPRECIATION> 436,686
<TOTAL-ASSETS> 5,682,434
<CURRENT-LIABILITIES> 104,918
<BONDS> 9,116
0
0
<COMMON> 1,491
<OTHER-SE> 2,559,345
<TOTAL-LIABILITY-AND-EQUITY> 5,682,434
<SALES> 0
<TOTAL-REVENUES> 629,939
<CGS> 20,476
<TOTAL-COSTS> 335,735
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,973
<INCOME-PRETAX> 263,616
<INCOME-TAX> 117,325
<INCOME-CONTINUING> 133,472
<DISCONTINUED> 0
<EXTRAORDINARY> 20,643
<CHANGES> 0
<NET-INCOME> 112,829
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
